Glacier Bancorp Inc (GBCI) 2011 Q1 法說會逐字稿

Good day and welcome to the Glacier Bancorp First Quarter Earnings Call. Today's call is in listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session, and please note, the call is being recorded. It is now my pleasure to turn the conference over to President and CEO, Mick Blodnick. Please go ahead, sir.

Thank you. Welcome and thank your for joining us this afternoon. With me is Ron Copher, our Chief Financial Officer, Barry Johnston, our Chief Credit Officer and Don Cherry, our Chief Administrative Officer.

Yesterday morning at our annual shareholder meeting, we reported earnings for the first quarter of 2011. Earnings for the quarter were $10,285,000. That was up 2% from last year's quarter. The quarter had little noise in the numbers. It was pretty straight forward, with the only non-recurring item being a small $124,000 pre-tax gain on the sale of investments. Aside from that, there were no other notable non-recurring income or expense items during the quarter.

Diluted earnings per share for the quarter were $0.14. That's a decrease of 12.5% over the prior year's quarter. However, the average share count was 15% higher than last year's first quarter. First quarter earnings were about what we expected. Our loan loss provision was still a sizable $19.5 million, but $7.9 million less than the prior quarter or 29%. It was also $1.4 million less than last year's first quarter or 7%. We continue to provision based on the analysis conducted at each of our 11 banks. For the quarter, our gain on sale of loans was $4.7 million. That's a considerable reduction from last quarter's $9.8 million or a drop of 52%. The drop from the prior quarter was exclusively the result of a significant decrease in refinance activity. However, compared to last year's first quarter, gain on sale of loans increased $800,000 or 21%. Thankfully, purchase volume has remained reasonably stable, especially considering the winter, which is a very slow time for purchase transactions. Although it's always disappointing to have this kind of drop in revenue, we did not plan or budget for the same level of mortgage origination activity this year, knowing refis would be down dramatically.

OREO expense continued to moderate in the first quarter. Although we increased the amount of loans moved to OREO as we took possession of more assets, our OREO expense of $2.1 million for the quarter was down from both the previous quarter's $2.8 million and $2.3 million in last year's quarter. The dollar amount of OREO increased by $9.1 million to $82.6 million. With these properties now in our control, disposition becomes more straightforward and allows us to determine the appropriate course of action to take.

Our return on assets for the quarter was 0.62%. That's down from last year's 0.67%. Return on equity was 4.95%, also down from 5.75% in last year's first quarter. Our return on equity continues to be impacted by the historical high levels of capital within the company. With loan demand still subdued, we have leveraged our capital somewhat the last two quarters by purchasing securities. However, the earnings we're generating from these types of assets are currently not enough to materially improve return on equity. In the near term, we do not expect our return on equity to move up much. Over the longer term, we believe there will be more and more opportunities to effectively leverage and utilize our capital, both organically and by acquisition.

Our tangible equity ratio of 10.12% is down from 10.52% the prior quarter and 11.19% in last year's quarter. Again, our capital position continues to be one of the real strengths of the company. It gives us the ability to strategically grow the franchise the next couple of years.

Credit quality did show improvement in a couple of different areas this past quarter, and yet, we're still not to the point where all credit trends are moving in the right direction. Credit costs were down both sequentially and from the year ago period as both net charge offs and net OREO expense were lower. NPAs decreased 1% sequentially and were basically flat compared to the prior year. The weather so far this year has not been conducive to moving these distressed properties. So we're hopeful that once the weather improves, and the spring/summer selling season arrives, the activity level will also improve. Lately, it's been encouraging to see these properties attracting more interest from both investors and perspective buyers. Now, we have to hope that this heightened level of interest translates into more sales.

In the first quarter NPAs as a percentage of assets were 3.78% versus 3.91% the prior quarter and 4.19% last year. Non-performing loans to gross loans also decreased from both the sequential and year ago period. Although the dollar of NPAs have not moved much the past year, I believe we have made some progress by moving more credits to OREO and charging down the residual balance on many of our problem credits to dollar amounts that should make it easier to dispose of them and more attractive to prospective buyers. These next two quarters will be the key if we expect to make material progress in reducing these problem assets and assuring our credit quality trends continue to move in the right direction. Those subsidiary banks that own most of our troubled assets have spent a great deal of time and effort preparing these properties for disposition. Now, it's important to start generating more sales.

The past two years most of our credit issues centered around land development and unimproved land. These same two loan categories made up the majority of our loan losses. Even though the weather inhibited sales this past quarter, we were able to make some progress in reducing our exposure to these loan categories and further reducing their balances. Unimproved land specifically saw a 17% drop in outstanding balances during the quarter. Another area where we saw improvement was in the net charge offs. For the quarter net charge offs totaled $15.8 million or 1.7% annualized. Although this figure is still too high and not at a level that's acceptable, it was a decrease of 365 from the prior quarter and down 22% from last year's first quarter. The reduction in net charge offs coupled with lower write downs and charge offs of OREO are giving us a little more confidence that after two or in some cases three appraisal cycles, the valuation of these properties is beginning to sync up with true market values. Our goal for the year was to keep net charge offs at or below 1.5%. So we have some work to do if we hope to reach that level. Obviously, our success holding down net charge offs is somewhat dependent upon the volume of troubled assets we dispose of this year. If we can move a greater amount of problem assets, then net charge offs will also likely be greater. So it's going to be a function of volume.

So even though there is some reason for optimism on the credit quality front, we still have a lot of work to do. By no means do we like where we are, and know we have to start to make a bigger dent in lowering our NPAs and make further headway in decreasing our delinquencies. Unfortunately, even though we've made progress in resolving numerous non-performing assets, we're still seeing a fair amount of loans move to NPA status. That has to slow down in order for us to achieve the progress we need to make.

One area of credit quality that moved in the wrong direction this quarter was our early stage delinquencies, which increased to $52.4 million or 15% above where they were at year end, yet they were still 14% less than the same quarter last year. Fortunately, most of the increase was more the result of administrative issues, and this figure is currently back to about where they were last quarter. Seasonality does impact our delinquencies, and they historically run higher during the winter months. As employment from the seasonal industries ratchets up, we think it should help some of our customers catch back up on their payments, and off the delinquency list.

The dollar amount of troubled debt restructuring declined by 9% in the recent quarter to $62 million, with 60% of that total still on non-accrual. We've utilized TDRs -- we haven't really utilized TDRs much the past few years and when we did, most of them remain as non-performing assets. We haven't relied much on TDRs to lower our NPAs during this downturn in credit nor do we foresee a change in our approach going forward. With this quarter's $19.5 million loan loss provision, our loan loss reserve end of the quarter at an all time high of 3.86% up from 3.66% the prior quarter and 3.58% in last year's first quarter. The loan loss provision covered net charge offs 1.2 times in the quarter. Each of the 11 banks continues to do an independent analysis to confirm the appropriateness of their allowance for loan loss and to assure that that reserve is adequate.

Our net interest margin after seven consecutive quarters of contraction finally stabilized this past quarter and was unchanged from year end at 3.91%. However, this is down significantly from 4.43% in last year's quarter. Net interest income increased slightly on a linked quarter basis and declined 5% over the first quarter of last year. We believe the net interest margin should stabilize near this range, but don't expect it to increase without loan demand picking up or an increase in the interest rates, neither of which appear to be likely in the near term. Loans added to non-accrual status this quarter only lowered or margin by 2 basis points. So it wasn't the drag it has been in previous quarters.

We continued our purchases of short duration agency securities this past quarter, although we also bought some essential service municipal bonds at very attractive yields, taking advantage of what we think was an overreaction to the fear of widespread defaults in the municipal bond market. Nonetheless, it's difficult if not impossible to replace loan run off with investment securities at anywhere near the same yield. This past quarter I thought our banks, again, did an excellent job of finding ways to lower their funding costs. However, as we move forward, we don't expect much further reduction in interest expense. So in the interim, our expectations are for the net interest margin to remain range bound at or near its current level.

During the quarter loans excluding loans held for sale declined by $102 million or 3%. This was a greater drop than we expected, even factoring in that the first quarter is usually a slow time of year for loan production. Unfortunately it remains very difficult to grow loans when loan demand remains anemic. During the past 12 months, our loan portfolio decreased by $368 million or 9%. Even if you exclude the $86 million in net charge offs, it's still a significant dollar amount of high yield earning assets that have been really a challenge to replace. We hope that maybe with spring and summer still ahead, we can build some momentum and generate some increased loan volume. The next two quarters will be crucial if we have any hope to slow down the decrease to our loan portfolio.

Unlike the loan portfolio, we continue to enjoy better success in generating deposits, especially non-interest bearing deposits, which increased 4% just during the quarter. These low cost funds will serve us well at some point in the future when rates start to move higher. Interest bearing deposits declined slightly this quarter due primarily to a decrease in wholesale deposits. Since last year's first quarter, total deposits increased by $387 million or 9%. Our non-interest income this quarter of $17.4 million was a decrease of $8.6 million or 33% from the prior quarter as all the major fee income categories declined. The biggest drop, as I mentioned previously, was in fees on sold loans. We also had a steep drop in gain on the sale of investments of $2.1 million compared to the prior quarter with very little activity in this area. Comparing this quarter to last year's first quarter, the results are much better. Non-interest income increased by $1.2 million or 7%. Non-interest expense was well contained as the banks did a terrific job of controlling costs. On a link quarter basis, total non-interest expense was down $3.3 million or 7%, as every major expense category declined with the exception of FDIC insurance premiums which increased due to more deposits.

Compensation and OREO expense were the main contributors to the reduction in costs for the quarter. Probably just as noteworthy is how well we contained our expenses compared to the first quarter last year. Non-interest expense only increased 1% from the year ago period, with compensation up only 1% and OREO expense down 9%. The number of full time equivalents was unchanged from the year ago period, a testament to the entire staff's willingness to do whatever it took to make us more productive and efficient. They have not only worked extremely hard this past year, they've also shown tremendous dedication.

Our efficiency ratio increased this quarter to 52% versus last year's 50%, although up slightly from last year, the company continues to operate very efficiently. A $5 million decrease in interest income this past quarter was the main reason in the kick up in our efficiency ratio. With that said, the banks continue to do a stellar job of controlling those expenses, both operational as well as funding that are under their direct oversight.

With the first quarter of 2011 in the books, it feels like things are continuing to get better. I'm confident that as the year progresses, we'll continue to put more and more of our credit issues behind us, which should allow for a reduction in credit costs. However, we also recognize that our credit issues are not going to go away over night. In fact, we expect for the rest of this year and next, credit quality issues will absorb a fair amount of our time until they move back to more normal historical levels. Yet, it is still our intent to make considerable progress this year on a number of these troubled assets.

Our net interest margin should hold steady, albeit at lower levels than the last couple of years as we maintain our focus on protecting the net interest income line, not necessarily our net interest margin. All of our banks are committed to tightly managing their operating expenses, especially those under their direct control. We've had some real success in this area and want to make sure this remains one of our top priorities.

I believe revenue growth, especially non-interest income is going to continue to be challenging to us the rest of this year. I can't imagine a scenario where mortgage origination volume will approach the levels of the last two years. However, I am more hopeful that legislation can be passed to delay the implementation of the Durbin Amendment on interchange fees until the ramifications and impact of that legislation can be better understood.

Overall, I think it was an okay quarter. Credit costs remain elevated, but hopefully, will continue to decline the rest of this year. Again, the next six months will be telling if we hope to lower our NPAs and improve our earnings. And that is the end of my comments. And so we will now open up the lines and take direct questions.

Thank you. At this time if you would like to ask a question, please press the star then, one on your Touch-Tone phone. You may withdraw your question at any time by pressing the pound key. Once again, it is star, one to ask a question. We'll take our first question from David King. Please go ahead.

Thanks. Good afternoon, everyone.

Hi, Dave.

I guess, first off Mick, for the last couple quarters you've been talking about holding reserves flat or at one point even brining them down modestly. Can you talk about what drove the increase this quarter? Was it related to the seasonal increase in delinquencies that you talked about or was it an increase in classifieds? And then, I guess, general thoughts on the pace of reserve build bleed going forward.

Well, as I've said before in numerous other calls, I mean, we are somewhat of a different animal in the fact that what you see at the allowance level is a combination of all 11 of our banks doing their analysis. And yes, I would say that probably the amount of the provision and the amount of the allowance was probably moving up a little higher than necessarily what we expected, and we have said in prior quarters, that we were going to probably keep that more in line with where we were at year end. But again, we, on a consolidated basis, we don't necessarily always drive to a specific number or to a specific range. I think that psychologically probably the winter, Dave, did have something to do with it. I mean, it was a slow winter. We did still see some migration of NPAs coming in, although NPAs were down overall for the quarter. And that probably also lent to some of the hither provisioning that took place in the 11 banks. And I'll also let Barry -- see if Barry has any additional comments along that line.

Yes, given that again all of our banks do their own independent evaluation and it rolls up to the holding company, calculating the reserve is more an art that a science It is not precise, and we allow the banks to maintain a reserve within a range, a low and a high based on our methodology. Several of the banks determine that given what has been a fairly slow season. Not a lot of movement in some of their non-performing loans. And the ability to maybe move those off the books going forward either through sale of notes, deeds in lieu and trading deficiency notes in order to that. The potential impact to the reserve could be greater. So as we anticipate trying to get more aggressive to move non-performing loans off the balance sheet, several of those banks chose to end up at the high end of the allocation range.

Okay, that's helpful.

And what we traditionally stay at the middle of or they may have been at the low range.

Okay, that's helpful. And then, so maybe with the conversation that you've had with them recently is it thought that maybe the reserve could hold at this level now going forward? Could it tick up a little more you think or are you expecting maybe some lead then, Barry?

Well, the percentage, Dave, obviously, part of the function of the allowances and percentage of loans going up is strictly a function of the denominator. I mean, the loans keep going down. So wish we had little bit more control over that piece of it. But I would think where we're at, I think we feel very comfortable with where the reserve is and going forward, I think that if it stayed in this range for the near term. That would be a good guide post for all on the call to focus towards.

Okay. That's really helpful. And then, just a follow-up question then on M&A at this point, Mick, I think you've talked about endless opportunities in Utah and Colorado. I guess can you just maybe talk about some of the opportunities you're looking at. I think you're interested in good deposit franchises, but maybe more along the lines of what kind of lenders? Is it portfolios that look a lot like your own or maybe just more true commercial oriented stuff, and what's the kind of minimum assets that you might be looking at?

Well, as far as I think we've said that historically, from an asset size, I mean, we've been interested in banks if they're good banks with good management teams. I think that's what's driving it more than anything, is not just the location and the market, but the management team. I mean, we are -- still even though we're approaching $7 billion in assets, I mean, the right deal, a $200 million, $300 million bank would be still something we would look at. The states that you mentioned, Dave, Colorado, Utah, yes they are intriguing to us. We're not seeing a lot of and I don't believe we're going to now. I mean, I've done a fair amount of analysis. I don't think FDIC assisted deals are probably in the cards because the ones that we track are the ones that potentially could occur in some of the states that we're operating within, they don't appear for the most part to be in markets where we could collapse those transactions into an existing bank of ours. So I think we're holding out for a better and a stronger whole bank M&A market. Still not really seeing it. Still having conversations with banks. Seems like a number of the banks that have called the last quarter were banks that had far more stress than probably we're interested in pursuing or taking a lot of time with. I wish I had more to report on the M&A front, but I just say what I said last quarter, we're just biding our time, keeping our powder dry knowing that if not in the next couple quarters, probably by the end of the year or first part of 2012 that activity level is going to pick up.

Thanks very much. That's very helpful.

Thank you. Well take our next question from Brian Zabora. Please go ahead.

Thanks. Good evening.

Hi, Brian.

Yes, just a question on loan balances, the decline. You mentioned that it was a little more than you expected. Can you give us any sense, I know it's probably difficult, of seasonality versus maybe what you thought was a core decline?

Well, I think that it is a tough one. That's a tough one because I think when we were looking at what the year would bring and what the first quarter would bring and doing some of our initial budgeting and planning, we didn't expect that kind of a drop. Now, part of that could have been, Brian, that and we know this to be the case, there was a couple of operating lines that were larger at year end that got paid down very early in the quarter, probably increased the level of loans towards the end of last year and absolutely had an impact on decreasing our loan volume in the first quarter. But still, I mean, the demand's just not there. I think we probably expected that maybe the economy would pick up a little bit more steam. And yet, we also didn't expect to have the winter that we had either when we were doing this planning and budgeting back in October. So yes, I think it took us all a little bit by surprise that loans were down to the level they were, and yet, I'm not going to sit here and say we've go any magic bullet or any great answer to what it's going to take to increase. I mean, I don't see and we just had a meeting with all our presidents. We don't see where we're losing any real opportunities. And we're not losing good credits to bigger banks or anything like that for the most part. I just think it's a lack of demand. And until that demand starts to pick up, and we're hoping that maybe now that the winter is over we'll see a little bit better demand. I just think it's going to be a tough environment on the loan front. And I'm not going to sugar coat it because I just don't see too many things right now that are going to turn loan demand around on a dime and increase it any time soon.

That's great color. And second question on expenses, do you think you have maybe anymore cost saving potentials or could this be the run rate going forward?

Well, I think that we benefitted -- on the one hand, the real negative for the quarter was the loss of mortgage origination fee income. But with that, a lot of that is a variable cost, and we end up benefitting on the other side, on the cost side because those commissions and that compensation goes down, and that was part of why our overall costs were down in the first quarter, and especially our compensation costs. Is there more room to move costs down? Yes. I mean, I think that everyone of our presidents would agree that in some line items they could further cut, but I'll tell you they have done an admirable job, not just all of last year, but in this first quarter of really looking and controlling those operating expenses. I mean, for us to be over $3 million in sequential quarters in operating expenses, that was a very good and a very big number for us. There's always probably some more room to cut, but I'd say that if you're looking as we move forward here, I would say, Brian, that if we can even hold this level, we're doing extremely well.

Well, thanks for taking my questions.

Thank you. We'll take our next question from Brad Milsaps. Please go ahead.

Hey, good afternoon.

Hi, Brad.

Hey Mick, I know last summer you pursued some kind of different alternatives to dispose of some assets. I know at one point did an auction. The OREO cost bumped up quite a bit in the middle part of the year. Just kind of curious what your plans are for this summer. I know those OREO evaluation adjustments are difficult to predict, but do you think you have things marked kind of at the levels from last summer or just kind of curious, any additional color in regards to that.

Well, I think some of the -- from last summer to now, I mean, OREO it's a bigger number. We've go more properties; we've got more projects in OREO. I think that part of what we did throughout the second half of last year and even to some degree this quarter of writing down loans before they got moved in OREO, I think that bodes well for us having the marks on these properties and these projects at something that's much more reasonable. Some of the OREO property laws on our books over year ago and as we went through a 12 month cycle, those appraisals got redone again in some cases and got further written down. So that was one of the points I was trying to make that I think whether you're talking about some of the residual piece on non-performing loans or what we've recently moved into OREO maybe the last two or three quarters, I think the hits to those projects have been pretty significant, thus the much higher charge offs, especially last year. And yet, at almost $16 million, that's still for us, in our minds that's a huge number. So the charge offs are still there, but we do feel that the marks that we have on these properties should be much more conducive to moving these things. Now, you still got to create demand for some of these and that's where we're really hoping that we now enter the middle two quarters of the year that that demand will really start to pick up, because we've moved a few properties in the first quarter. I think Barry, what did you say, OREO, we sold about $7 million?

$7.1 million.

Yes, $7.1 million of OREO in the first quarter, but clearly, if we're going to make a bigger dent, we're going to have to move more than that. But yet, we're coming into the six month period where some of that should happen. And so, no matter how we slice or dice it the one thing we know for sure is most of the NPLs and most of the OREO is priced better than it was a year ago, at least lower, and we're hoping that that in and of itself should be an attraction that generates more interest this summer.

Okay, great. Thanks, Mick.

Thank you. We'll take our next question from Jennifer Demba. Please go ahead.

Thanks. Hi, Mick.

Hi, Jennifer.

A follow up on Brad's question. Are you going to be employing any different strategies to try and reduce the problem assets in the next couple quarters? And I know you've done auctions in the past and I think you've been sort of luke warm on the results.

Yes, Jennifer we're not going to -- I don't see auctions. I mean, right now, one of our banks is exploring with an idea similar to EBay where we do some things with some of the homes and properties that we own by doing more of an EBay type auction. The changes of us doing auctions like we did last year, the three that we did last year, I don't believe that we're going to try in the near term anything like that again. You're absolutely right, I mean, we were not thrilled with the success of any of those three when it all came down to it, especially the first two. So I don't think that auctions are in the cards. We are going to test this one approach and see how it works. I think more than anything this year, we're going to do -- I think we've got our arms around a lot of, especially the OREO problems. We've moved a lot of property into OREO, and I think that that's going to be one of the real focuses this year is to try to push that OREO out. And again, we're leaving it up to a lot of the banks to determine their own strategies, but yet, I think we've done a fair -- a pretty decent job at the holding company of assisting them because we're the ones who get to see what each of the banks are doing. So I'd say that we're going to be more aggressive this year than maybe we have been the last two years. I think we've done a pretty good job of moving a lot of the distressed properties into OREO, as I said earlier, where we have more control over what gets done and when it gets done. And then, we're going to try a few things. The one that just comes to mind is somewhat like this EBay auction just to see if we stumble across something that works. If it works, I guarantee you, we'll do a lot more of it.

Thank you.

You bet.

Thank you. We'll take our next question from Tim Coffey. Please go ahead.

Good. Thank you. Afternoon, Mick.

Hi, Tim.

Hi, been a lot of conference calls today. So to follow up on the last question, are you actually going to list some of these properties on EBay?

No, no, no. It's not listed on EBay. No. No, this is going to be a site that we're creating and it will be somewhat of a -- it's going to be a system that looks similar to how EBay works. But this is only going to be more of a regional type of approach, Tim. No, we're not going to list these directly on EBay.

Okay. I just wanted to make sure on that one. The question had to do with kind of a securities portfolio. Right around 40% of assets, how do you feel about that level and would you feel comfortable if that were to go higher?

I don't think that it's -- part of the reason that the investment portfolio is at that level is that the last two quarters we have absolutely applied some leverage or put on some leverage to the balance sheet. And right now, Tim, that 40% as far as having that number go higher because we go out and further leverage the balance sheet with investments, no I don't think that's going to be happening anymore. I think we're comfortable with the amount of leverage we've applied. Now, getting back to your question though, is 40% of the investments where that number of 40% of the balance sheet in investments, is that where that number is going to stay? Not necessarily, because even if we don't grow the balance sheet at all, if loan volume doesn't pick up and yet, the yield curve still remains steep enough where we feel comfortable in buying short tem agencies and making some kind of a spread, that would be better than just having the cash come back and the amortization come back from our loan portfolio and just applying off borrowings. So the only reason that I believe you'll see a higher percentage of overall assets in the form of investments is if we have to continue to supplant investments from further reduction in the loan portfolio. So that could, overall the balance sheet could be made -- could have a higher make up of investments than what it does currently right now. But it won't be because we're going to go out there and further leverage the balance sheet through the investment portfolio.

Okay. The decision not to further leverage the balance sheet, is that a result of you think you've maximized the potential profit potential on the book or is it more from a risk --?

It's a risk. It's strictly a risk. I mean, I think there would be more profit potential, truly, if we felt like okay let's add another $300 million of securities. I mean, I think that would absolutely increase the earnings, but your question is a great one because of one we've talked about. I think our comfort level risk wise is about where we're at right where we're at right now. And so from that perspective, and really only from that perspective, is what's got us saying that I think this is about where we're going to stay.

Okay. And then, look at the seasonality within the economies that you serve, how concerned are you with current gasoline prices and the potential impact it might have on tourism this summer?

Well, we're concerned. I mean, you got to be concerned, but at the same time, Tim, I go back to 2008 and 2008 the last time we saw $4 a gallon gas, but Glacier, Yellowstone and the tourist industry in our footprint did very, very well. Now, those were vacations that tended to be more regional. People didn't have the money so they would jump in the car, they'd cringe, but they'd pay the $4 gasoline price, but they would go to one of the parks or they would go to one of the resorts locally here. And we really had a very good year tourist wise in 2008, and we had $4 a gallon gasoline that year. Now, last year, obviously gasoline prices were lower and we really had a very, very good tourist season. I guess we're just keeping our fingers crossed at this point in time, hoping that even though gasoline prices during the tourist season appear that they're going to be right in that $4 range again, that people will maybe skinny down where they're going to go. What we saw in '08 was we didn't see people necessarily going to Disneyworld or flying somewhere or taking these long, long vacations somewhere. It was more of a local type of vacation. But still from the region that we draw a lot of tourists from, that local nature of the tourist that year really did help us. The other ting that I think helps a lot is the fact that, especially in a couple of our larger banks, we have -- we're right next to Canada. Canada is doing very, very well. I mean, there's a lot of money up there. They love to come down to the states. And I think that two of our biggest banks, they really benefit form that. And then, we continued all winter long. I mean, although there wasn't a lot of retail or real estate sales during the winter I'll tell you the retailers in this market that we're headquartered in as well as along the highline of Montana and Idaho, those retailers did extremely well from the Canadian influence coming across the border. So if they continue to come down in the numbers and the levels that they have during the winter, I mean, the ski resorts did very, very well, and not that gas was at $4 all winter long, but I'm somewhat hoping again, that we see a repeat of what happened in 2008. Vacations are much more regional and that we don't see a big drop.

Okay, great. I appreciate it. Those were all my questions.

Thanks.

And once again, it is star, one to ask a question. And we'll pause a moment for questions to queue. We'll take our next question from Jeff Rulis. Please go ahead.

Good afternoon.

Hi, Jeff.

Jeff Rulis. Hey Mick, I apologize if this has been asked, but was there a reclassification on the real estate balance quarter to quarter, even Q4 and Q1?

Yes, there was. Yes, there was a reclass where obviously, loans got moved out of real estate, one to four family real estate and into consumer.

Yes Jeff, this is Barry. What we realized, some of the banks had been classified loans secured by consumer lots as consumer loans. Other banks had been including them in the single family residential area, and based on the advice of our accountants in our internal accounting department, we wanted to make sure that was all uniform. So we did move 50 some, $50 million, $60 million out of the single family residential general ledger accounts into the consumer.

Great. Thank you. That's all I had. Thanks.

That's a good catch though. We didn't think we'd ever get that question.

Thank you. And it appears that we have no further questions at this time.

Okay, well, thank you all very much. I'll look forward to talking to all of you again in about three months, and let's hope that again, for us it's critical that the next six months during the selling season that we can really make some inroads and some progress on our non-performing assets. I think that's -- we're going to have all hands on deck to see if we can keep some of the trends that I talked about earlier moving in the right direction and maybe even accelerate some of those trends on the credit side going forward.

So with that, thank you all for joining us this afternoon and we'll talk with you later. Bye now.

This concludes today's teleconference. You may disconnect your lines and have a wonderful day.