Glacier Bancorp Inc (GBCI) 2009 Q1 法說會逐字稿

Good day, and thank you for joining today's Glacier Bancorp first quarter earnings call. It is now my pleasure to turn this call over to Mick Blodnick, President and CEO of Glacier Bancorp. Please go ahead, sir.

Thank you. Welcome and thanks for joining us this morning. With me this morning is Ron Copher, our Chief Financial Officer, Barry Johnston, our Chief Credit Administrator and Angela Dulce, our Senior Accountant. Last night we reported earnings for the first quarter of 2009. Earnings for the quarter were $15.779 million, that's down 9% from last year's quarter. Once again, for the second or third quarter in a row, the quarter was pretty straightforward and absent any nonrecurring income and only had a small nonrecurring expense item during the quarter.

We continued to generate good core earnings momentum. Our pretax, preprovision earnings for the first quarter were up 30% over the same quarter last year. Our diluted earnings per share for the quarter were $0.26 a share, that's a decrease of 19% over the prior year's quarter. We did increase the number of average outstanding shares by 14% over last year's first quarter and that was primarily attributed to the follow-on offering we did back in November of 2008. Although not the level of earnings we have achieved during most years, I guess given the current set of circumstances in this industry today, we really do feel pretty fortunate to be able to deliver this type of results. Our ROA for the quarter was 1.15%, that's down from last year's 1.46%. And our ROE was 9.27%, also down from 12.98% last year in the same quarter.

We continued to increase the capital within the Company at a time when capital is very valuable and hard to come by. Our stockholder equity ended the quarter at 12.22%, versus 11.23% in last year's quarter and our tangible common equity ratio increased both during the quarter and the year. Our tangible common equity ended the quarter at 9.65%. That compares to 9.59% the previous quarter, and 8.32% in tangible common equity for the same quarter last year. Right now until we get a clearer picture of what happens with this credit market, we're content to build our capital levels.

In addition, we want to make sure we have the capital resources to take advantage of opportunities that have and will present themselves over the next couple of years. As with most banks, asset quality continues to be our main challenge. In the first quarter we saw an increase in NPAs to 1.97 of total assets versus 1.46% last quarter and 0.57% last year. Our net chargeoffs for the quarter were the highest we've ever experienced at 21 basis points or 84 basis points annualized. We don't see any near term relief from higher levels of NPAs and NCOs in this current environment. Our loan loss reserve ended the quarter at 2.01%, that's up from 1.86% the prior quarter and 1.54 in last year's first quarter.

During the quarter, we provisioned $15.7 million, that's up from $2.5 million in the same quarter last year, and we covered our net chargeoffs during the quarter by about 1.8 times with that provision. The 30 to 89-day delinquencies also increased in the quarter. They went from 54.8 million to 66.5 million. Again, indicating to us that we will probably experience higher NPAs going forward.

However, aside from the challenges in the area of asset quality, there were a number of positive things that took place during the quarter. Our net interest margin continued to move in the right direction. Sequentially, our net interest margin increased 11 basis points in the first quarter, to 4.92 which is one of the highest net interest margins we probably have reported this decade. I think have you to go back to the mid-'90s to have our margin be at that level. And it was also up from 4.54% in the first quarter last year. Loans that we added to nonaccrual status this quarter lowered our net interest margin by 6 basis points. So without the reduction in interest from nonaccrual loans, we would have just about been at a 5% net interest margin. Our net interest income increased 4% on a linked quarter basis and was 24% above the first quarter of last year. The increase to our net interest margin was again a pleasant surprise since we have projected some commission to the margin.

I have to give a lot of credit to each of our banks for the work they did again in this quarter in controlling their funding costs. Interest expense decreased 19% sequentially during the quarter, where we only gave up 1.5% in interest income, so most of what we got as far as improvement in margin came from the funding side. In this current rate environment, it's going to be difficult to expand the margin much further going forward, but it's our hope that we just don't experience any significant amount of contraction over the next few quarters.

Loans grew by $31 million or 3% annualized in the first quarter. This is slightly below what we are projecting for the entire year, however, considering this was the first quarter which is usually softer, we were okay with that number. We hope that volumes will pick up some over the next couple of quarters. Historically and traditionally, are better lending months. But still, we feel that 5% loan growth, which is our projection for the year, is a good number to shoot for. Noninterest income of $17.4 million increased 11% during a linked quarter basis and was up 7% from last year's quarter. Much of the increase can be directly attributed to the gain on sale of loans during the quarter as a result of the increased volume of refinance activity. Another area that showed excellent progress was our efficiency ratio which decreased to 51% from 55% in the prior year quarter.

The banks continued to do a stellar job of controlling expenses both operationally -- or both operational as well as funding costs. This against a back drop of already higher FDIC insurance premiums which will surely increase further as our banks pay the special assessment sometime yet this year. During the quarter, we announced the definitive agreement to add First National Bank & Trust of Powell, Wyoming to our family of banks. We're excited and looking forward to complete the transaction in the second quarter, and feel they're going to be and make a great addition to the Company.

In summation, we like how we are positioned. Credit quality will continue to be a challenge that will require our full attention. However, we built a very strong and growing capital base. We have solid operating earnings and pretty good markets and economies to do business. As we move through the rest of the year, we're fortunate to have these things working in our favor.

And with that, I will open it up for questions and answer any concerns or any questions anyone has out there.

(Operator Instructions). And it does look like our first question for today comes from the line of Matthew Clark. Please go ahead, your line is open.

Good morning, Mick.

Hi, Matthew.

On the deposit side this quarter, it looked like you saved a bunch on the -- in the money market, on the money market side of things. Can you give us a sense for what you did there in terms of pricing and whether or not that was some runoff from some premium account or was it just lowering the rate more drastically this quarter?

Well, I think that all the banks, Matthew, lowered their rate to some degree again and tried to stay in front of the curve when it came to pricing. But, also this quarter, one of our banks, Mountain West, they have a specific account that only -- it's a money market account, but it only reprices the first of each quarter and January 1 they repriced that account and that's a -- that's a pretty large account. That's got about $0.25 billion in it. So that helps, also, as I suspect it's going to help us, in the second quarter, too. Obviously that probably -- I'm sure -- I know it did, it got repriced again on April 1. So, on the money market side, that's what you're probably seeing and that probably is what added to the -- or made up the biggest difference, but I just think all the banks have really been cognizant of their funding costs and that coupled with what we have done on the wholesale funding side, it's definitely helped, there's no doubt about it.

And along those lines, are you -- those borrowings, at least at the discount window have grown significantly over the last year and we've seen your loan to deposit ratio creep up fairly quickly. I mean what's your strategy in trying to get those balances back down and your ability to replace that?

Well, I think it's kind of twofold. I mean number one we're seeing less loan growth and more deposit growth as we've moved into this year. And I don't see anything that's going to really stop that trend too much. But we've always been -- I mean for decades, we've always used wholesale funding to some degree, whether it's FHLB or some of the newer programs available to us now. In the quarter, we did start to lengthen out some of these wholesale borrowings and we've started to extend maturities as we've had opportunities with rates dropping -- we're monitoring it every day.

I'm not so sure that we're going to see huge increases in retail type deposits. We have seen some. Our deposits more than matched our loan growth in the first quarter, but we've never been a huge interest rate payer in any of our markets. So our expectation is that the wholesale funding will be there. We've got multiple, multiple sources and right now every day we're looking at -- we did some of this during the quarter, probably look to do some more in the second quarter as far as extension of some of those borrowings. But I mean even over the last ten years, we've always had a fair amount of our wholesale borrowings left short.

Okay. And do you see opportunities to do some just deposit only fed assisted type deals to maybe solve that loan to deposit ratio overnight?

Yes. We would always look at those. We haven't seen too many in our markets yet and then a few that were in our markets, we didn't -- we didn't see where it was going to be any kind of a great deal. Yes, it probably would have changed the mix, Matthew, of deposits to -- I mean from wholesale to core deposits, but when you looked at some of these deposit bases, I can't really say that they were that core. And they were too expensive for us to even want to take a look at them. So, given the right circumstances with the right bank and the right core deposit base, we would be interested in doing something like that. We just -- of the ones we analyzed so far and looked at, we just haven't seen it.

Okay. Would you say, though, that those types of opportunities have picked up relative to last quarter or have they slowed?

As far as what we're seeing?

Yes.

Oh, they've definitely picked up.

Okay. Okay. And then lastly, can you just -- maybe I'll get the breakdown from Barry after the call, but your construction balances embedded within those loan categories, could you give us the end of period total construction loan balance for the first quarter?

Okay. Matthew, single family residential construction was about -- from the call reports was $299 million, right around $300 million. Of that -- of that total, $185 million was presold and specked, the rest was custom owner occupied and other. In the other construction and land development total was $792 million and the big bullet points in there is commercial developed loss is $30 million, the consumer land or lot is $169 million, developed lots for builders is $54 million and land development is $300 million are the big bullet points in there.

Just to note, land development went up this quarter over last quarter and part of that change was a $35 million transfer out of -- or out of single family residential. We have some developments where it was anticipated they were going to go vertical on it and they were going to build single family residences, so that's where those loans were placed. That did not occur, so this quarter we transferred those back out of that category into land development. So that category actually did not -- the volumes did not go up, it was just to transfer out of single family residential into that category. So that's why the increase happened there.

Actually, that category stayed -- it would have been down if it wasn't for the -- I mean it would have been down about $35 million, but it was about the same as the fourth quarter.

No, it was $270 million last quarter, it's $300 million. So it would have went down about $5 million without the transfer.

Okay. And that suggests that there was some incremental growth in construction?

Yes. There was about 25 million and we would anticipate that this time of year as we -- you know, we're still in that business, we're still financing customs, owner occupied construction. So that went up about $25 million.

And we continue to see some contractors who are doing pretty well. I mean --

Especially in entry level.

Yes. If there is the right price point, some of these builders in 2008 and even so far this year are doing -- are doing pretty well, so, yes, we're still in that business for sure.

Okay. And then lastly, maybe, Barry, if you could just give us the split between resi and commercial construction in terms of nonaccruals.

Oh, okay. Of the 92 million in nonaccruals, single family residential is 21 million, land lot acquisition development and other construction is $43.9 million, single family residential one to four first lien is $7.8 million, commercial real estate, owner occupied, is 2.9, commercial real estate nonowner occupied is 5.5 and the remainder is commercial and industrial is 8.7.

Okay.

And there's some smaller stuff in there, so --

Okay. Thank you.

And it looks like our next question is going to come from the site of Brett Rabatin. Please go ahead.

Good morning, Mick, how are you?

Hi, Brett.

Wanted to ask on the chargeoffs this quarter, can you walk us through what those were mostly a reflection of in terms of geography and then obviously I'm sure it was mostly construction related, but give us some color on that.

You bet. I'll just do a quick breakdown by call code and then I'll give you a little color on exactly where it was at. One to four single family residential construction was $998,000, our construction and land development was $5,748,000, one to four family revolving was $821,000, first lien one to four family first lien was $89,000, one to four family junior lien was $166,000, commercial and industrial was $645,000 and consumer was $505,000. The big totals, of course, is the other construction and land development, that was centered in three credits.

Okay.

$3 million in an A&D loan in the Bozeman area, $1.4 million in an A&D credit in the Kalispell area and $1.3 million credit in Boise, A& D loan.

Okay. And then I was just curious, Barry, what are you seeing in the markets? I know last quarter we talked about, I was concerned that you had more cash, more equity, so to speak in your deals, but as the markets were weakening, there was a question of what happens when you needed to reup or extend the loans and maybe they didn't have a huge amount of additional liquidity to be able to add back to the loan. What are you seeing so far this year in terms of just these projects as they mature?

What we're seeing is not good. And it's primarily based on the fact that lots just aren't selling. There seems to be -- there's a lot of lookers, people kicking the tires, nobody's slapping the leather and the lots just aren't selling. For example, in 2006, we sold about 2500 lots in the Flathead Valley. First quarter of this year we've sold 21.

So what we're seeing is a lot of these developments, developers, have just -- are running out of cash, running out of alternative sources to bring some additional equity to the table and what we're starting to see now is basically the program that they're trying to liquidate these properties just with the debt against them, either with a bulk sale or bringing in equity investors, which in some cases they have been successful, but more than not, they have not been successful. And we fully anticipate, as Mick made the comment in his opening -- opening presentation that we will continue to see NPEs increase and resultingly a direct correlation with chargeoffs through the remainder of the year.

Do you guys have any kind of calculation as to how much of the portfolio is coming up for renewal and how much of that is what you would call criticized, stressed, potential problem, whatever you want to call it?

I've never -- we haven't put a maturity report on all of those loans, but generally we underwrote them with 18 -- one year to 18-month maturities, so my guess is almost the entire 300 million of A& D portfolio will be reviewed or will mature within the next year to 18 months.

Okay. Maybe we can follow up offline on that. And just last question, Mick, I was curious, I know in the past you've had really strong growth in checking accounts and just generally account growth and, I know that from a retail perspective, you've had lower balances just given what's happened with consumers. Can you update us on what the trends were in the account growth this quarter or what you were seeing generally from that perspective?

Yes. In 2008, we experienced a little over 6% growth in the number of accounts and yet our dollars were down. So far in the first quarter, we're up -- and again -- now, there's a lot of seasonality to originating checking accounts, too. But through the first quarter, our number of accounts were up about 2%, but as you can see, we were -- we were down in dollars and that just seems to be a constant theme over the last almost 18 months now where even though we're adding more customers, the -- both businesses and individuals are just not keeping the same level of deposits. And that really differs from the last rate -- last time we went through a very low rate environment back in '03 and '04, we saw huge increases in DBA accounts during those years, but it was a whole different climate. Obviously back then the consumers were not stressed, businesses were not stressed to the level that they are today and we're just not seeing the same average balance -- average balances kept that we did the last time rates came way down and we -- some thought maybe as rates came way down and there wasn't much difference between interest-bearing accounts and noninterest bearing, maybe more people would park it, but I truly think, Brett, it's more a function of just the stress on a lot of individuals right now and businesses, that they're just not keeping the same level of dollars.

Okay. Great. Thanks for all the color.

You bet.

And it does look like our next question is going to come from the line of Chris Stulpin. Please go ahead, your line is open.

Good morning.

Hi, Chris.

Hi. In this environment, Mick, is 50 basis points still reasonable for net chargeoffs?

No. I mean I think that right now -- as we were talking about that in the fourth quarter, I guess that was our hope that we could maintain somewhere in that and I think what we said was in the 50 to 75 basis point range coming off of a year where, we had about not quite 25 basis points, but I really believe that right now a better guess is that chargeoffs are going to end up right about where -- on average where that first quarter was. I think we're going to be somewhere in that 0.85 to 1% in chargeoffs and I don't know, maybe that could even -- you know, if things continue to get worse or we start to see issues coming from some of these other portions of the loan portfolio, which we haven't seen yet, if those would start to really escalate, then it could go higher than that. Barry, you got any other thoughts?

No. I think we're pretty much right on line with what the estimates are out there and if we can hold it -- hold chargeoffs underneath 1%, I think we would be pleased, pleased with that.

Yes. But we are going to continue to pour the coals to the reserve because we want to make sure that we're covering chargeoffs more than adequately and, again, taking into account all the other things going on in all ten banks' loan portfolio in order to make sure that that reserve continues to be adequate.

Yes. The one positive thing is why the level of chargeoffs has definitely increased this quarter and we anticipate will remain at those levels throughout the year, the positive thing is that there was no surprises in that first quarter. These are credits that have been adversely graded for a year or two, been working with the borrowers trying to resolve the issues and at the end of the day, the market never came back and so resultingly, we took the chargeoffs and transferred balances into OREO.

You know , we still like where we're at on so many of these projects just on equity, just the way they were underwritten to begin with. That doesn't mean that we're not going to have some pain and we're not going to have to continue to take chargeoffs maybe at this current level, which is tough for us because it's levels that we've never seen before in this -- in this Company, but you know, it's a totally different world. We've never been through a time like this before either. But, we're just working and plowing through every one of those. I think the banks are doing an excellent job, like Barry said, of staying on top of everything. There's been zero surprises so far and as we continue to work through higher levels of NPAs and higher levels of chargeoffs than we've seen in the past, I would hope that we don't see any surprises either. I mean I think those -- those banks out there are really focused on this

Thank you. And just one additional question, please. I know you mentioned last quarter you touched upon your acquisition strategy and you mentioned that you were possibly focused on western Colorado and rural markets. Is that still the case or is that even on a hold a little longer because you want to, as they say, keep your powder dry for a while in this environment?

Well, I think that if something just fabulous came down the pike, we would -- we would act, just haven't seen any of those deals. And maybe -- I wouldn't say necessarily that it's a matter of keeping our powder dry, but maybe we have just gotten even more selective as to the type of deal we're willing to do and what we expect to get out of that deal versus maybe what we would have looked at two or three years ago. Granted, when you do a deal today, the margin of error has gone up. You are taking more risk and in order to be compensated for that risk, we just haven't seen the deals or we haven't seen the willingness of sellers to meet, I guess, our disciplined approach or our demands and I don't know if that's going to change any, Chris, in the near term. I guess maybe our -- again, our expectation levels on these M&As has gone up and ratcheted up a couple of notches and maybe that's too much for sellers to agree to. And if they don't, I mean, that's fine. I mean we're just fine where we're at and if we have to sit on a higher level of capital over the next year, that's not the end of the world.

Thank you very much.

And it does look like our next question is going to come from the line of Jennifer Demba. Please go ahead, your line is open.

Thank you. Mick, at this point, what level of borrowings would you feel comfortable going to over the next year or so? Would you see your level of borrowings increasing meaningfully from this level?

I don't think they would increase, Jennifer, I don't think they would increase meaningfully. I don't know if there would really be a need to. I mean I don't see a lot of huge loan growth over the -- over the short-term and I guess for us, we are starting to see better deposit growth than we have seen before and that's probably a function of a lot of the competitors are really starting to ratchet down their rates now as times have gotten difficult for them. For so long we were always leading probably in most of our markets, we were leading rates down and probably being pretty aggressive trying to just maintain margins and not willing to do anything irrational from a pricing perspective. I do believe that we're seeing a number of other competitors that are starting to take that same approach. Now, does that again, like I said earlier, Jennifer, does that mean that you're meaningfully going to be able to increase deposits from a retail perspective? No, probably not meaningfully, but again, I don't see that we're really going to have in the short-term or at least through the rest of this year a lot of demand for a lot more funding either because I just don't see loan demand being like I said earlier much greater than about 5% this year.

Okay. Would you envision your reserve building to over 3% in this cycle based on what you're seeing today?

Yes. That could be.

Okay. What would cause you to think differently about your dividend over the next year?

Well, I think that over the year you'd have to -- I mean we look at that and we analyze it every quarter, we do a lot of stress testing in that and I think that a part of the dividend goal is there would have to be a number of things, what's our earnings, what portion of our earnings are we using to cover the dividend, what's happening to our capital levels? I mean right now, I mean, capital is not a real concern. And based on all of our stress, based on all of our burn down analysis and everything, boy, we would have to really see some -- some unbelievable things happen here before we got into a problem from a capital perspective, but, again, we need to be good stewards of -- and we worked very hard to build up that capital over the last three or four years and so I don't have -- I can't tell you that we'll have -- earnings went to this. All I can say, Jennifer, is it's a topic that comes up every quarter. We have done a significant amount of analysis on it and I just think that we are obviously going to do the right thing. If -- you know, if the earnings comes under a lot of pressure, I think you'd have to really sit back and take a look. Even though you had very adequate capital levels, I think still you'd have to take a look at the level of your dividend going forward.

Thanks. I appreciate it.

You bet.

And it does look like our last question today is going to come from the line of Brad Milsaps. Please go ahead, your line is open.

Hey, good morning.

Hi, Brad.

Barry, just a question along the lines of the renewals on the A& D loans. Have you guys completed any sort of exhaustive review of sort of the existing credits or are you just taking a look at those as they do come up for renewal?

We're doing a combination of both. Some of the banks that have a higher concentration in the A& D portfolio are actually internally stress tested those portfolios, they went out and took a look at the properties, the collateral values versus the outstanding debt, looked at respective absorption periods, discounts for holding and marketing costs and discounts for entrepreneurial profit and we've come back with some stress testing on a lot of those portfolios. And as you can well imagine, there is some exposure in some of those credits, but in some -- in most -- in our very large credits, we feel that we still have some equity there when we're looking at those.

In addition to that, on an annual basis, we have an independent third party consultant that stress tests all of our A& D portfolios along with a lot of our commercial term credits and those reports are generated annually. We have that and in addition -- in addition to that, we look at all these app renewals. So we're looking at this portfolio very closely and on a very frequent basis. And frankly, a lot of them we're looking at monthly just to see what the sales have been, what's going on with the properties, that sort of thing. Because a lot of them are adversely graded and so in preparing monthly problem loan reports we're looking at these properties, also.

If I recall, you guys haven't originated a lot of these loans in the last 12 months, so I would think that the preponderance of them would be coming up for renewal either in this quarter or the third quarter, do you think that's pretty fair?

Yes. I'd say pretty much all of them. We're going it take -- probably seeing all of them through the end of this year.

And I know it's early, but given what's going on in unemployment, the housing market and some of your markets, what kind of plan do you guys have sort of in place to move some of them out of the bank?

We've been talking a lot about that and actually we've been meeting with some out side vendors potentially to sell some notes. We were also meeting with some outside vendors to manage the OREO properties, potentially outsource that and so we don't impact the current revenue generation side of the bank. But it comes right down to, we're going to have to pick the specific properties and loans that we feel we can resolve quickly or if it's -- if it's a high quality project do we want to hold -- hold the asset and wait for the market to recover and we're doing that on an individual basis with all these properties. Where we have a real dog, we're going to blow it out, sell and suffer, but where we have a high quality development that I think will have some value when the market does improve, we're going to hold and hope.

And that's one of the things that the capital level gives us, it really gives us a lot of flexibility with the capital level that we have that if -- like Barry says, if some of these projects are high quality we think that there's some real value in those and it doesn't make a lot of sense just to blow them out and get rid of them, then we've got that capacity if we choose to do that. On the other hand, I mean, for those that we just think are dogs, I mean we're just probably going to get rid of them and take the hit and move on.

Either that or just charge them off entirely and carry them at a dollar and then ultimately wait for the --

Market to --

-- the market to improve and we're looking at a couple of properties that we're considering doing that.

Okay. And, Mick, final question, you mentioned that some of the entry level home builders were actually doing pretty well. Was curious if you could maybe tell us maybe what percentage of your construction book would be in that entry level market and then just maybe give a little commentary on some of your larger markets, kind of what you think is going on with the economy there.

Well, I'll let Barry -- I'll answer the second part of that question while Barry looks up -- you know, I don't know if we have that broken down. We might have to get back to you, Brad, on exactly how much of that -- I think you were talking about the -- primarily the spec and the -- of the presales, how much of that is a function of this entry level low end construction?

That's right. Or even some of the A& D loans that could have been slated for a higher neighborhood that now might not pencil like they did before.

Yes, Brad, on a quarterly basis, I get a list of all the spec and presold home construction loans from all of the banks and I also get a list of all of the acquisition and development loans and with a little scrubbing, I think I can get you some pretty good numbers what developments are low entry and then how much of that spec and presold is low entry. I can just do that by loan balance.

Okay.

So I can get that information to you.

Okay. Okay. Great. Thank you.

But getting back to the second part of your question, Brad, regarding -- I mean overall, I mean, on -- at the 30,000-foot level, I still believe that the six states that we have operations in and the four states that we're domiciled in, economically they're still probably -- there may be one outlier, but for the most part these states economically are still doing pretty well. But I take the state of Montana for example, like up here in the flat head, I mean unemployment now is at over 11% and that's one of the highest levels in the state, yet you go to Billings and we've got a pretty large bank in Billings and their unemployment is not at 5% yet, it's below 5%. So, I mean, even within the state of Montana, you've got wide variations in what's going on. You know, clearly Wyoming's got one of the lowest unemployment rates in the country, Montana is still -- we're still right at about 2% below the latest numbers I saw, we're right about 2% below the national average, Wyoming is lower than that, Colorado is in line with that, Idaho has seen higher unemployment, Washington has seen higher unemployment, but that's primarily been more predicated on the west side of the state versus that Spokane and eastern part of Washington.

Utah, another one, very, very lope unemployment -- low unemployment. So none of these states have high per capita income, though with the exception of Washington and there again, I think Washington's per capita income, the higher levels are west of the Cascade where we have no presence. Wyoming is a good state, people make good money in the state of Wyoming, but Idaho, Utah, Montana have always been traditionally low. It's going to be interest, even if you take someplace like Kalispell and flat head county where the unemployment rate is -- has been over this last quarter moving up to a very high level, you're still probably now as we're coming into the summer, you are going to see some seasonal employment simply because once the park opens up, once tourism starts to go at full tilt, you are going to see some job creation and that should help some of those numbers at least -- at least for six months we should see some reprieve in some of those unemployment numbers, even in this part of the state. Again, this is part -- probably one of the highest levels.

Now, Flathead county has always historically been one of the highest because of the temper industry, because of tourism and because of some of the things that -- some of the main industries that we've always relied on, but this latest round, I mean, with some of the further reductions in the timber manufacturing area and another large employer here in town more of a high tech employer, you've still seen higher levels of unemployment than we have in past cycles. You just don't see that same thing down in Billings or Helena or even in Bozeman, Missoula, some of these places in the state, their unemployment rate has hovered either below 5 or in that 5 or low 6% range. Again, Wyoming's is even lower than that. So there are definitely some pockets and in some of these pockets we do have a large bank. I mean like in the flag ship bank here in Kalispell that's our largest bank and it's centered up in this part of the state, so it's definitely a concern that we have that if this economy doesn't start to bounce back, that you are going to have more stress and strain from the consumer and the business side of it. So far, knock on wood, we just haven't seen much of that even with that higher unemployment rate.

Again, like we said earlier, most of our stress has come from the land development and acquisition portfolio and when you take -- I think when you take our NPAs and I think the same holds true with chargeoffs, about 60% of our chargeoffs and 60% of our NPAs are -- and those numbers are pretty close, are in that construction and land development area and going forward over the next two, three quarters, that's where we continue to see the stress. Again, we've been pretty fortunate that we haven't seen much at all on the CRE side, a little bit in commercial, industrial, but that isn't even necessarily predicated up here in the flat head valley, that's kind of been spread around the franchise. So bottom line, I guess, I could think of a lot of other places that I'd rather not be running a bank than in this part of the country right now.

And, sir, I am showing that there are no further questions at this time.

Okay. Well, thank everyone for being with us this morning and we'll be, I guess, talking to everybody at the end of the second quarter. Thank you.

Once again, we'd like to thank you for joining us today. This does conclude your teleconference and you may disconnect at any time.