Glacier Bancorp Inc (GBCI) 2009 Q4 法說會逐字稿

Good day, everyone, and welcome to today's program, Glacier Bancorp's quarterly earnings call. At this time, all participants are in a listen-only mode. Later you may have the opportunity to ask questions during the question-and-answer session. Please note this call may be recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the call over to Mr. Mick Blodnick. Please go ahead, sir.

Thank you. Welcome and thank you for joining us. With me this morning is Ron Copher, our Chief Financial Officer; Don Chery, our Chief Administrative Officer; Barry Johnston, our Chief Credit Administrator; and Angela Dose, our Principal Accounting Officer.

Last night we reported earnings for the fourth quarter of 2009. Earnings for the quarter were $9.474 million, compared to $17.014 million in last year's quarter. That calculates to a decrease of $7.5 million or 44%.

Our diluted earnings per share for the quarter were $0.15 compared to $0.29 in the prior year's quarter, a decrease of 48%. The quarter's numbers had more noise than usual as we booked an after-tax bargain purchase gain of $3.5 million. And in addition, we had a pretax gain on the sale of investments during the quarter of $3.3 million. The investment gains came from the sale of some Z tranches that we purchased back in the summer of 2009. We held them on our books at very low -- at a very, very low basis, not expecting there to be much value in those Z tranches for the next couple of years.

However in October, those Z tranches became far more valuable than what we ever had expected, so we sold those and that was a big part of the gain on sale of investments that we recorded during the quarter. However, we did also have some positive gain in the sale of some of our municipal bonds as we chose to sell some municipals that were getting close to their call dates and we did not want to lose the premium on those. So we chose to sell a few of them, but at the same time, we also sold some municipals that we had losses in.

So overall, we were a little bit more active than we usually are, but the primary reason for the gain again on the investment portfolio came from the Z tranches.

Earnings for the year were $34.374 million versus $65.657 million. That is a decrease of $31.3 million or 48%. Diluted earnings per share for the year were $0.56, down from $1.19 last year or a decrease of 53%.

From an earnings perspective, this is a year we will not soon forget. Disappointing doesn't begin to describe how we feel about our 2009 earnings. There are no excuses and we are not going to make any. For us, the level of earnings we produced is unacceptable. We have to do better and it is imperative for us and for our shareholders that we get back to a more reasonable earnings performance going forward. I believe we can and I believe we will.

Our return on assets for the quarter was 0.62% and our return on average equity was 5.43%. For the year, our return on average assets was 0.60% and our return on average equity was 4.97%. The quarterly earnings numbers include the completion of the transaction with First Company and their subsidiary, First National Bank & Trust of Powell Wyoming. We are excited to add the staff and customers of First National to GBCI. The addition is already demonstrating positive results above our expectations and going forward, we feel First National is going to be an excellent addition to the Company.

Although our earnings for the quarter and year were not close to what we had hoped for, there was some underlying strength in our 2009 earnings. Our pretax preprovision earnings for the fourth quarter and full-year were at record levels. The core earnings the Company generated throughout the year allowed us to not only deal with much higher levels of problem assets but gave us the capacity to maintain strong capital levels throughout the year.

Total assets for the year grew 11%, which exceeded our expectations. The higher asset growth was not only due to the addition of First National but also the result of increases to our investment portfolio during the year but especially in the fourth quarter. If we exclude First National, organic loan growth for the year was flat as demand dropped off precipitously especially as the year progressed. Currently the outlook for loan growth in 2010 looks to be a continuation of last year's trend of little to no loan growth.

2010 was one of the best years we have had this decade for deposit growth. Excluding again the addition of First National, our organic deposits increased significantly last year. Non-interest-bearing deposits, which as many of you know we continually strive to grow and generate more and more of, grew by 8% and interest-bearing deposits grew by 31%. This growth in deposits allowed us to not only lower our overall borrowings but still allowed us to fund the asset growth that we did have during the past year.

Throughout 2009, we maintained capital and equity ratios well above regulatory guidelines and at historically high levels. Tangible common equity, the tangible common equity ratio ended the quarter at 8.72%. This compares to 9.59% in last year's fourth quarter. The reduction that we saw in tangible common equity ratio was primarily the result of the addition of First National Bank and the -- on October 2 of 2009.

Tangible common equity in dollars also actually increased by $8.5 million during 2009. We continue to believe that tangible common equity is the highest form of capital and the mound of TCE has served us well during this difficult time.

In addition, all regulatory capital levels also ended the year at or near all-time highs. I don't have those numbers today. We're still formulating the exact numbers, but the preliminary numbers, our regulatory capital looks to continue to be very strong and at or near all-time highs.

For the first time in three quarters, the growth in problem assets showed some signs of stabilizing. However, it is far too early to predict if this trend will continue. Economically, many of our markets have performed much better than the country as a whole, yet the Boise market along with parts of northern Idaho and western Montana have struggled mightily due to excessive inventories of developed lots and residential construction loans. As the banks continue to work through these credit issues, the overall dollars in these two loan categories have decreased significantly.

For example, during 2009, our residential construction portfolio decreased from $309 million to $209 million, with spec construction down to $131 million of that $209 million total. We have been mentioning this the last couple quarters that we are seeing lower balances in some of these most troublesome areas, and that's just a good example of what we have seen on the resi construction front.

Land development loans have gone from $300 million early in $2009 to $229 million at year-end. NPAs increase in the fourth quarter by $18 million to $261 mo or 4.13% of assets. That compares to 4.10% the prior quarter and 1.46% a year ago. Most of the increase this quarter came from commercial real estate and one- to four-family residential loans. Although that is discouraging and we don't like to see any increases, we felt there was one positive during the past quarter.

It was encouraging to see the nonperforming spec residential construction loans decrease by $10 million during the quarter and now we are down to $30 million in NPA spec construction. And nonperforming land development loans only increased $3.5 million to $88.5 million during the quarter. Both of these loan categories have been the main cause of much of the increase in NPAs the prior two quarters, so we're starting to see hopefully some better signs there.

For the second quarter in a row, we had net charge-offs of $19 million and for the year, we charged off $58 million, which for us is an absolute unprecedented level. The $58 million represents 1.4% of total loans. This compares to only 0.2% of net charge-offs in 2008. In the near term as we continue aggressively working through these problem assets, we expect net charge-offs to remain elevated, but hopefully will not have to charge off higher percentage of loans than what we did in 2010.

Our ALLL, our allowance for loan and lease losses, ended the year at 3.46%. That compares to 3.10% the prior quarter and 1.86% at the end of 2008. We have provisioned $37 million to the ALLL in the fourth quarter compared to $12 million in the same quarter last year, but that was down $10 million from the $47 million provision we made in the prior quarter.

In the quarter, we covered our net charge-offs two times and for the year, we provisioned $125 million to the loan-loss reserve. That compares to $28 million the prior year. And with net charge-offs of $58 million, the loan-loss provision for 2009 covered our net charge-offs over two times.

We did see our 30- to 89-day early-stage delinquencies end the year at $87 million. That was an increase of $44 million for the quarter, something we did not want to see especially it was disappointing to see these delinquencies move up by that amount especially since the prior quarter we saw a pretty significant reduction.

However, if there is any good news to that increase, it is that since the end of the year $25 million of the $44 million has been brought current so there's still $19 million that is going to be flowing potentially flowing through to problem assets down the road. But again, it's at least comforting to know that a big chunk of the $44 million increase has been brought current.

Clearly there's still credit issues that will continue requiring our full attention in order to keep the delinquencies and NPAs from moving higher. We expect credit quality to continue to be a challenge for the foreseeable future and are not expecting any turnaround in the near term. So all of our banks are going to have to continue to be diligent in working through these credits and maintain adequate reserves for their problem loans and assets.

One area that has been a bright spot for us this year has been the net interest margin. Although we have had three consecutive quarters of some net interest margin compression, those reductions were off of a decade high net interest margin achieved in the first quarter of 4.92%. Our net interest margin for the fourth quarter was 4.70. That's down from 4.80 the previous quarter. Higher levels of non-accruing loans and a significant increase in lower yielding securities were the main cause for the drop in the margin.

Loans added to nonaccrual status cost us 8 basis points of net interest margin for the quarter. For the year, our net interest margin averaged 4.82% versus 4.7% in 2008. Our expectations going into the year was for a much lower margin. Actually our plan was calling for a margin of around 4.25% to 4.30% for the year 2009. However, if loan volume remains subdued, it will continue to have a negative impact on the margin as we replace those assets with lower yielding securities.

In addition, because our funding costs can't go much lower, it's hard to imagine how we will see any noticeable improvement in the net interest margin in the near term.

The banks did a great job throughout the year of expanding their net interest income. They protected the yields on their earning assets in a very difficult environment and recorded less than $500,000 reduction in interest income for the year. And at the same time, we are very proactive in adjusting to the lower interest rates on the funding side and as a result, our interest expense decreased $33 million or 37%.

Our efficiency ratio decreased to 51% for 2009 from 52% the prior year. Even with a dramatic increase in the FDIC insurance premiums and much higher OREO expense, the banks demonstrated the ability to overcome these higher expenses with even greater revenue growth. Although increased revenues especially net interest income played a big part in improving efficiency, I thought the 11 banks did a stellar job of controlling their expenses.

Non-interest income was $26 million for the quarter. That is an increase of $4 million or 20%. However, excluding the one-time bargain purchase gain, non-interest income was up $900,000 or 4% with $660,000 attributable to the increase on the gain on sale of investments during the quarter. For the year, non-interest income was $86 million. That is an increase of $25 million over the prior year. The gain on the sale of loans accounted for nearly half of the increase as 2009 was a strong year for mortgage refinances and purchases.

By now you've all heard hundreds of times how bad the economy is and the struggles the banking industry is going through. There is no argument that these are tough times and we also face our fair challenges here at GBCI. Nevertheless, we continue to move forward, trying not to dwell on the past and instead focus on the issues at hand and what we can do to fix the problems and get better.

However, we have achieved a number of positive things this past year. We have maintained a strong capital base. We have been one of a minority of banks nationwide that kept their dividend in place. We did not rely on TARP or other programs to shore up our balance sheet. We were able to continue to generate significant operating earnings. Although we did not achieve the level of earnings per share we had planned or hoped for, we are still thankful to be in the position we are in.

I have said it countless times. We have over 1700 very smart and dedicated bankers and directors that give their all for the continued success of GBCI and are proud of every one of them and what they have accomplished. This was never more evident than this past year and in the situation and the struggles that not only we but the industry had to face. We don't expect it to get any easier anytime soon, but we are committed to keep grinding and persevere until things start to get better.

And with that, I would like the operator to open up the phones for questions and we will be more than happy to answer questions regarding the fourth quarter and full year 2009.

(Operator Instructions) Matthew Clark.

Good morning, Mick. Can you maybe start with the here loan growth comment related to your expectation to see little to no loan growth. Does that -- is it fair to assume that we're going to see construction loan balances continue to shrink so it's going to cause the overall portfolio to shrink this year?

Yes, I mean if you look at our loan portfolio from December to December, the loan portfolio ended 2009 exactly where it started, at $4.130 billion. However, you've got to take into consideration that we had $153 million in the form of loans coming up from First National in Powell. So from an organic perspective, we were down about that $153 million. It took the acquisition of the bank to bring us back to even.

And as we continued to push out and have pay downs and do everything we can in the land development section, as we said last quarter, we continued to make residential construction loans but nowhere near the pace that we were in prior years. And you can see that even that balance has decreased dramatically over the last year and we are not seeing a lot of signs that that is going to necessarily pick up steam in the near-term at least.

So yes, our expectations, Matthew, are that we will see some growth and I am sure we will especially in some markets, we will take advantage of our strength and the ability to lend money. But at best I think it's going to be an offset to some of the run off. So our expectations are not much if any loan growth and we actually could see loans shrink somewhat during the course of 2010.

Okay. And then in the construction book, problems seem to be in the land development area and raw land and presold spec construction. Can you give us a sense in terms of what the new disclosure, the $228 million of land development, the $192 million of consumer land lot, the $114 million of unimproved land, we've got the non-accruals there. Can you just give us I guess better visibility as to maybe what is in criticized classified, just try to cast a wider net?

Now, as far as what is in criticized classified?

Yes, within those categories, maybe on a percentage basis of each of those portfolios.

Matthew, this is Barry. You know, that planned acquisition of development portfolio frankly all of it is stressed. When you haven't sold a lot for two and half years, at least from -- it's stressed from the lack of sales. Some of those developers and builders if you want to include the spec construction are suffering given the lack of sales.

The only -- so we consider all -- that whole portfolio to be -- we have concerns with it. The thing that we are fortunate is that on the acquisition and development side of it we have some of those guys that have deep pockets. They are going into basically a wait-and-see mode. They can continue to carry the projects from outside resources. And fortunately, we just haven't had a huge amount of new additions this quarter. We did have the $18 million increase and primarily that came from not only acquisition development but we're starting to see some spill -- spill over into the commercial real estate and single family residential.

So why we don't like the totals, I don't think our new concern is, if you will, is the other portfolios that we are seeing some increases in NPAs. So --

Let me add one thing though, Matthew. One of our concerns all along to the land development component was the marks that we were going to take on that. I mean, we did this last quarter. As I said, most of our increase in NPAs actually came from commercial real estate and one- to four-family and a little bit in C&I and that's troublesome. Nobody likes to see those increases.

But so far we haven't seen the marks on those kinds of loans that we saw in land development and in some of the raw land that we saw or that we have seen in those particular loan categories. Not to say that there's still not some potential charge-offs in that, but, you know, we would -- we were talking yesterday, Barry and myself, and if a lot of those, if most of our NPAs were in one- to four-family residential rather than the makeup of where they are, we would probably feel a lot better about what the net charge off and what those marks are coming onto that portfolio.

So it was somewhat encouraging that the increase didn't come from those loan types and those loan categories that have really been stressed and that we feel you are going to be subject to greater losses.

Okay, then the incremental increase in delinquencies even on just prior to that portion that became current, can you give us a better sense for the nature of those types of situations that deteriorated in the delinquency bucket?

Then as a follow-on, same thing in CRE -- the types of properties that are seeing some stress?

Yes, we were disappointed to see about $45 million increase in what we call those early-stage delinquencies. It's about a third, third, and third. About one-third of it was in spec and land development. We continue to see some delinquencies there especially there were two large projects in our Idaho market that came on in that land government. One of them which as Mick mentioned in his announcement that has since been cured about $25 million of that.

But another part of it was in the commercial real estate side and the large part of it was in single-family residential. So that's where that -- those increases were centered. Then the second part of your question had to do with --

The property tax within CRE where you are seeing weakness.

It comes right down and kind of follows the first -- it's three sections in there that we're seeing. One is anything that was related to the single-family residential construction industry. You know, we are seeing some past dues there. We're seeing some stress. We are seeing some recreational property type of entities and we feel that probably has something to do with discretionary income and that end of it.

And then the last part is just some commercial real estate properties just across the board. Nothing, we only have one large credit that we would consider large, about a $4 million credit. The rest of it is just smaller balances that are just having some difficulty due to the challenges that we are facing. So --

I'm sorry, last one just can you give us -- do you have a TDR number -- TDRs on accrual?

Yes, we do. It's $14.9 million.

(Operator Instructions) Brett Rabatin.

Good morning, Mick. How are you?

Good.

I wanted to ask first on the other real estate and all RE. What -- obviously you had some inflows and outflows to that bucket this quarter, but it didn't really change a whole lot. Can you talk about what you have in there now in terms of have those properties undergone appraisals recently? Are you on a six-month type cycle on ORE or can you give us some more color on generally what's going on in that bucket?

Obviously everything that has placed in there has got a current appraisal on it if it's going new into OREO. And we've got some properties that have been in there for a while now, but even some of those properties have had additional appraisals done if the particular bank was coming into an exam or felt they needed to -- if there was some interest in the property.

The one thing we are seeing and we have mentioned this to a number of investors over the last quarter, and that is prior to the fourth quarter of the year especially the prior two quarters, three quarters, four quarters for that matter, we were just basically seeing nothing. There was just no interest. I think it's a fact nationwide that when credits go into OREO maybe the interest level gets a little greater because potential investors, private equity firms, whoever feel they can now deal directly with the bank.

But we did and I think Berry would concur with this, we definitely saw a higher level of tire kickers, if nothing else. I am not saying that there was strong interest but there was a lot more people snooping around and asking and looking into some of the OREO properties that we have had.

Now again, it didn't -- as you can see from the numbers, it didn't spill over into a significant reduction, but we do feel that for the most part the OREO at least coming in has been valued properly based on appraisals. We also though were not naive and we did see during the course of 2009, as I said, we saw higher OREO expense. We saw even though we did what we felt was a very good job up front, still when it came down to moving properties, we did see some further write-downs and charge-offs on OREO. But it was more based on a lot of volume. It was a lot of one- to four-family residential construction loans and not so much major projects that we had in OREO.

So the good news there, Brett, I think looks like maybe the activity or the interest level out there is picking up a little bit of strength. We are right in the middle of winter. If you look outside, there's snow on the ground. So maybe it's going to take until March or April of the year to start getting more excitement along that line, but it's been somewhat encouraging to us to see a little bit heightened level of activity.

Barry, you got anything to add to that?

No, definitely we have seen the trend and we have had some success as soon as the bank takes ownership, that's when the phone starts ringing. Up until that point, it's pretty quiet. And we have had some small success in liquidating some of these properties that we thought we were just going to have to hold on to for a while. So there is no panacea out there by any means, and I don't want to give anybody that impression. But it's at least, as Mick said, there are a few people making inquiries as to the status of our properties.

Another thing we did is we listed all our properties out on our websites and that has generated quite a bit of activity. We have had some success there too from that communication venue.

Yes, I saw that on the website the other day and there was a couple of properties there that looked pretty interesting.

Get your checkbook out.

Anyway, and then wanted to just talk about the current NPAs a little bit. It sounds like -- I guess one is can you give us a number for what you've charged down the current non-performers? I don't know if you've been able to disclose that in the past. I was just curious if you might have that number, Barry.

I do not. But let's see, I think I can put it together. It would take some doing because we have some -- we have quite a list of loans, but if you need that, Brett, I will put it together and email it to you.

Okay, I'd appreciate it. Then I'll just skip the resi asset quality questions I have. Maybe we can talk off-line on that, but I do want to ask really quick just it sounds like if the balance sheet growth or maybe balance sheet abatement would be a better word in 2010, does this give you an opportunity to pay down some of the borrowings (inaudible) borrowings, and maybe (technical difficulty) position yourself for more asset sensitivity as rates presumably go higher at some point?

Barry Johnston: Yes, in fact Ron and myself are talking about that continually and my guess would be that you would see in subsequent or in the next few quarters that we will probably be looking more and more into doing some further extension, not relying as much on borrowings. And I mentioned that. We have had very good success on the deposit side this past year.

And our ratios, I didn't calculate a loan to deposit ratio at the end of the year. I guess I should have, but it continues to -- obviously as loans continue to come way off and bleed down and deposits are growing, our reliance on borrowings and other wholesale funding continues to dissipate.

And the next thing is that we are very cognizant of the potential of rates moving up and when they do move up of what that's going to do. We can continue to model extensively our exposure and all I can tell you, Brett, is I think we will be doing the right thing. But that probably will come with some liability extension as we move forward into 2010.

Okay, makes sense. Thanks a lot.

Jeff Rulis.

Good morning. Just a follow-on on the delinquencies, given that I guess two-thirds of the delinquencies were related to residential properties and that's not necessarily late cycle type stuff. I was wondering if that sort of surprises you that your new delinquencies are in that sector. As Barry mentioned, it was a couple big projects perhaps in that spec land, but if you could comment on that.

So are you -- Jeff, maybe you could -- were you saying that because most of the delinquencies are in that one- to four-family --?

Being that about a third is spec land, a third single-family residential, I guess kind of the increase in NPAs is more CRE type later cycle, but I guess couch that your delinquency increase was more maybe some early cycle type stuff that -- again would you I guess characterize that as it was a couple big projects? And I guess going forward, what would new delinquencies if they were to occur, where would you expect those?

I think that we are starting -- everybody has been saying that our markets are late into this whole cycle and there may be some validity to that, and yet I still look around at the states with the exception of Idaho, I still look at the states that we are doing business in and unemployment rates and that are still very good compared to the national averages and compared to most states out west. And yet every one of those states that we are in continue to experience higher and higher unemployment levels.

I think it's a function of partly of that. There are more stress. We've seen a couple -- and I'm talking primarily about the one- to four-family and maybe some of the land, the one- to four-family land development type loans. You know, I think we are starting to see a few.

We have had a few significant layoffs in western Montana that have been announced over the last month or two. I'm not sure if we've got huge exposure to those particular employee bases, but as you know, it's that trickle-down effect that affects everyone else. And yes, we are definitely seeing higher delinquency rates on the traditional one- to four-family termed out mortgage loans.

And I think what we could -- the hope there is did we underwrite those properly? Because these are the ones -- remember a lot of the one- to four-family, about 80%, 85%, 90% of our all of our one- to four-family production gets sold in the secondary market. So I am hoping that -- and I think this is the case -- that a lot of the ones that we kept we kept because loan to values were low, because borrowers at the time had good jobs or had capacity.

Now that can change though and I think that some of what we are experiencing and we have seen a couple of higher-end homes, jumbo homes that have definitely gone into that delinquency status. These were some people that were pretty well heeled and either some event or something has changed their circumstances dramatically.

So yes, late stage early stage, I think we look at it as just problems that we are going to have to continue to deal with that we're going to have to continue potentially to reserve against.

Okay, then just kind of switching gears a bit on the charge-off pace, and maybe it was misguided on the last call from my part but I got the indication that maybe that charge-off level would increase going forward. But it was I guess flat quarter-to-quarter. Any reason there that that was held flat or wasn't a bigger number?

No, in fact I think we were somewhat disappointed that it was where it was. I think we were hoping that we could have kept that just a little bit lower. But I think you bring up an excellent point, Jeff, and that is that this coming year I'm not so sure that the provision is -- I hope the provision isn't going to have to be what it was in 2009. But as I said in my remarks, we could very easily hit that same 1.5% net charge off. I hope we don't, but if we're really going to start to lower these overall NPAs and get these off the books, I think our plan is to be more aggressive on the charge-off and writing down some of these.

We have built up, as you can see, we have built up a large reserve and now I think it's time for us to really start to show some progress on the NPA front. Barry, you got anything to add?

Yes, we went through the cycle this past fall and we anticipated the charge-offs overall when we sat here a year or so ago, we were hoping to hold them underneath 1%. That definitely didn't happen. I think we might've been a little aggressive in that. I would guess at where they were going to be at so we are anticipating that this year is going to look similar to where we were last year.

I don't know if now that we've increased the reserve up to that 3%, 3.5% level that we will continue to reserve at the level we did in 2009 given that we are there. So -- but it will still depend on -- we have to maintain directional consistency so if our NPAs continue to increase, we see some deterioration in collateral values and this economy stays at the level it is at, we will continue to provision accordingly.

So my thoughts are we is we would at least cover charge-offs if not a little bit more. So that is where we anticipate we are going to be at this year.

The one headwind, Jeff, we are not seeing is obviously we are not provisioning for much loan growth because we just don't see right now much in the way of that. It would be nice if there was some good quality demand out there, but at least right now, we are in the middle of winter. Things can change when spring hits, but right now we are not expecting much there.

Okay, I appreciate it. Thanks, guys.

Brad Milsaps.

Good morning, guys. Mick, I think my notes are correct here, but if I recall I think some of your banks were going through kind of annual regulatory exams in the fourth quarter. Were you guys able to get full reports back by the time -- in conjunction with the earnings announcement? I assume everything went as planned there but just thought you might give us an update.

Yes, obviously you can't say anything about regulatory exams but I can tell you that they are all pretty much all completed for 2009. We had a fair number of them in the second half of the year. We do have on some of our smaller banks that are on 18-month cycles, we've got a few of them already scheduled and on the docket for 2010. But we are completely through that cycle now.

Okay. And then just kind of a housekeeping question maybe for Ron. Just kind of curious on the tax rate going forward. Ron, is there a certain level of kind of pretax earning that you guys need to get to to have a -- to provide for taxes in any given quarter? And just maybe comment on the tax benefit that you had in the fourth quarter of last year.

Let me start with the tax benefits. A large chunk of our investment portfolio, just about a third of it is invested in municipal bonds, and so as our earnings come down, that -- the percentage that the muni bond income represents as a percentage of that goes up dramatically. So you saw that in our third quarter in particular and a continuing effect though to a lesser degree in the fourth quarter.

It is principally related to the tax-exempt muni bond. But in addition as you guys saw in the third quarter 10-Q, we are having more federal income tax credit in various forms that we are taking advantage of and so that had an impact in the fourth quarter, but certainly will have an impact going forward in 2010 as we continue to take advantage of tax credit opportunities.

So I'm just going to mention that going forward, our effective tax rate will certainly come down. I'm going to just estimate at this point 30% would be a very good place to start. And so to your first part as to the precise level, that is going to change and I don't want to put a number out there because as we continue to invest in these tax credit opportunities, that number that you were talking about changes. So hopefully the 30% addresses what you guys would need to know.

Okay, thank you. Just one final question. Mick, you've talked a lot about it in the past but now that you guys have worked through '09, I'm just kind of curious what your thoughts are, updated thoughts are on FDIC-assisted deals or other types of M&A opportunities that are out there? Just curious if you've changed your tune at all or what you are thinking?

No, it really hasn't changed too much. It's pretty much what we said last quarter, that if there was an FDIC-assisted deal that was in our market that could be folded in, it would be something that we would take a look at. But right now we don't -- maybe this is a good thing. We don't see a lot in some of the markets that we are currently in especially like a Montana, Wyoming, Idaho.

There has been a few in some of the other states that we at least have a small presence in, but we were just not that -- I guess at the end of the day, we were just not that interested or didn't feel that there was much franchise value in those particular banks.

So we are just -- just move along, we will look at those but I would say that our tone and our approach hasn't really changed dramatically since the last quarter, Brad.

Okay, great. Thank you.

Jennifer Demba.

My questions have been asked, thanks.

(Operator Instructions) A follow-up from Matthew Clark.

Just a quick follow-up on the comp line. You guys tend to see a pretty decent increase I'm sure for the typical seasonal accruals in the first quarter. I just wanted to know whether or not you guys had any plans to delay some of those accruals or not, whether or not we are going to see a typical increase this coming quarter on the comp line?

On comp line. Yes, we -- you will see just your traditional merit raises this year that merit raise is right at 2%. So you'll see that increase to comp. But outside of that, I wouldn't expect you are going to see anything significant outside if that, Matthew.

Okay, great.

It does appear at this time that we have no further questions.

Okay, well I will wrap up by just thanking everyone for being on the phone this morning. If you have any other further questions, we are always around. So you can give us a call and see if we can get some more of those questions answered.

Again, thank you very much for your interest in GBCI and your support of GBCI. Again, like I said earlier, we're going to do everything we can. It's a new year and we are going to continue to grind and plow our way through this thing. I do believe better times are on the horizon and we are -- we are going to do everything we can to take advantage of it and get our performance back to the level that as shareholders all of you have become accustomed to from this Company over many, many years.

So that is our goal and that is the plan and we're going to do everything to make that become reality. And with that, thank you all very much and have a great weekend.

Once again, this does conclude today's teleconference. You may now disconnect and please enjoy the rest of your day. Thank you.