Glacier Bancorp Inc (GBCI) 2011 Q4 法說會逐字稿

Good day, everyone, and welcome to today's fourth-quarter earnings call. At this time all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. (Operator Instructions). 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 conference over to Mr. Mick Blodnick, President and CEO of Glacier Bancorp. Please go ahead.

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

Yesterday we reported earnings for the fourth quarter and full year 2011. Earnings for the quarter were $14,300,000 compared to $9,600,000 in last year's quarter, that's an increase of 50%. Diluted earnings per share for the quarter were $0.20 compared to $0.13 in the prior year's quarter, a 54% increase.

There were no extraordinary items or gain on sale of investments during the quarter. Earnings for the year were $17.5 million, that compares to $42.3 million the prior year, that's a decrease of $24.9 million or 59%.

In the third quarter of this year we recorded an after-tax goodwill impairment charge of $32.6 million. Excluding the impairment charge earnings for the year were $50.1 million, that's an increase of $7.8 million or 18% over the prior year.

Aside from the impairment charge we only recorded $346,000 in nonrecurring earnings in the form of gain on sale of investments. That compares to $4.8 million recorded last year. Operationally there were no other nonrecurring income or expense items.

Diluted earnings per share for the year were $0.24, down from $0.61 per share last year, that's a 61% decrease. Again, excluding the impairment charge, earnings per share were $0.70, that's an increase of 15%.

Further discussion and the rest of my remarks this morning to full-year's earnings and performance metrics will be on a non-GAAP operating earnings basis.

We earned a return on average assets for the quarter of 80 basis points and a return on average equity of 6.69%. For the year our return on average assets was 72 basis points and return on average equity 5.78%.

From an earnings perspective both the fourth quarter and full year showed progress over last year. However, we still have more work to do in order to return to performance levels that more closely match our expectations. However, after three lackluster years we believe if we can continue to lower our credit cost in 2012 it will be the year we return to better results to our shareholders.

Clearly there are definite challenges on the revenue front; however, our core operating earnings have remained solid the past three years. So again, if credit costs are reduced, as expected, as we can and should deliver better earnings in 2012.

Total assets for the year grew 6% primarily due to increases in our investment portfolio. Lack of loan demand continued to pressure our loan portfolio and for the year resulted in a 7.5% reduction. This was greater than the 6% decrease we expected at the beginning of the year.

Although still a very competitive and difficult environment to grow loans, there are some early signs that are pointing to better times ahead. With the announcement we made last week, changing our organizational structure from bank subsidiaries to bank divisions, there will be more time to be spent pursuing new business opportunities and, more importantly, serving our existing customers.

By maintaining the independent community bank culture we have built over the years, while at the same time simplifying our regulatory and operating structure, is definitely the best of both worlds for the Company and our banks. With a significant reduction in reporting, regulatory and accounting burden lifted, the banks can now focus on growing their loans and their customer base.

This move to convert the internal configuration of our banks was the culmination of over a year of analysis and study. It combines the best features of our independent bank model without increasing expense of maintaining 11 separate subsidiaries. It will streamline numerous repetitive functions at both the bank and holding company level and allow us to concentrate more of our time and energy on growing our bank franchises.

Although we have not quantified the hard and soft dollar cost saves, some of which will happen immediately, others over time, the impact to our operation will be notable.

Because loan demand remains weak further decreasing the balance of our length portfolio we again increased our investment portfolio during the quarter. In a continued attempt to protect the Company's interest income we added $192 million in securities during the quarter, primarily short-term US agency CMO's.

Because of the short-term nature and specific structure of these CMO purchases, the yield currently on new purchases is less than 1%, putting further pressure on our net interest margin. However, rather than adding interest rate risk to the balance sheet we have chosen to accept the impact of these lower yielding securities and what they have on our margin rather than gain additional yield by extending the term of these investments.

2011 was another good year for deposit growth. The balance in non-interest-bearing deposits grew 18% for the year, although the pace of growth slowed in the fourth quarter to a 6% annualized rate. We also posted nice additions to both the number of personal and business checking accounts. The total number of checking accounts increased by 6% this past year, a very good number and affirms our commitment to growing our checking account base.

Our interest-bearing deposits grew 4% for the year. With little loan demand and cheaper funding alternatives available to us the banks it did not price retail deposits as aggressively as other institutions in our market. Because of this conservative pricing strategy we reduced our cost of deposits by 30 basis points during the year down to 54 basis points or 36%.

Our casual common equity ratio ended the quarter at 10.4%, a slight increase over last year's 10.3%. Tangible stockholder equity in dollars increased by $55 million to $736 million. Tangible book value per share ended the year at $10.23, that's up from $9.47 the prior year. We continue to maintain capital levels that are at or near historic highs.

Although it was great having an abundance of capital during the downturn in the economy and banking crisis, it has also made earning a reasonable return on this amount of equity far more difficult. The last couple of years, because of the size of our capital base, our return on equity has not exceeded our cost of capital. We realize this cannot continue.

We recognize that in order to create shareholder value the return on equity must exceed the cost of that equity. We continue to explore all options to us effectively deploy this excess capital. Our preference is to grow the balance sheet both organically or by acquisition. However, if neither of these preferred alternatives are viable or make sense we'll consider other options which include returning excess capital to our shareholders.

Non-performing assets decreased by 14% during the quarter and 21% for the year to $213 million. The momentum to dispose of troubled assets that began building in the third quarter accelerated even more in the fourth quarter. Unlike a year ago, an unusually warm and dry winter has definitely helped us. But I don't want to diminish all the hard work that's been done by our banks to decrease our NPAs further.

We are hoping to make further progress this quarter. However, we don't expect the same level of reduction that we generated in the fourth quarter. The level of activity for this time of year is particularly encouraging and, as many of these assets have been written down numerous times the past few years, we continue to see far greater interest from buyers for these assets.

Although non-performing assets ended at the lowest level they have been since June of 2009, we recognize that we are still far from where we need to be. We're committed to continue our methodical approach to disposing of these assets. This may not be the quickest way to remove these troubled assets from our balance sheet. Yet we believe that long term this will provide us the greatest economic value with the lowest cost of disposition.

As we have stated previously, a significant proportion of our non-performing assets the past three years have consisted of land development and unimproved land loans. Not only have they accounted for the bulk of the problem assets on our books, but also led to over half of all of our charge-offs.

As we reduce the overall level of land development and unimproved land there are fewer remaining dollars in these two categories that could become problematic. At year end there was only $170 million left in these two categories compared to $269 million last year. And only $78 million of that total has not already been recognized as non-performing assets.

With fewer dollars left in these two categories to migrate into non-performing status is one of the reasons we're encouraged that the amount of troubled assets can continue to decline.

Non-performing assets of $213 million represented 2.92% of assets, that compares to 3.49% the prior quarter and 3.91% a year ago. For the quarter the improvement was broad-based with every category of loans realizing a decrease in the balance of non-performers. The biggest decrease again came from land development loans followed by one to four family residential loans.

Typical for this time of year we did see an uptick in our 30 to 89 day delinquencies with a large seasonal workforce tied to the tourist industry; past dues do ratchet up this time of year. Although some of the increase this past quarter was true delinquencies, over half of the increase was technical in nature.

We do not see anything out of the ordinary or concerning with the higher dollar amount this quarter and expect as spring rolls around delinquency levels should move back down.

We feel we are past the inflection point regarding our credit quality and again expect additional improvement in the numbers in future quarters. If this year's sales activity is as good, or hopefully even a little better than last year's, we believe we are in a position to make excellent progress in further reducing our problem assets.

Net charged-off loans were another positive as we experienced a 51% reduction during the quarter. Net charge-offs for the quarter totaled $9.3 million, that's a decrease of $9.6 million. We hope this favorable trend continues as we enter the new year. For the year net charge-offs were $64 million or 1.85% of loans, a number that is still unacceptably high, but moving in a positive direction compared to the $91 million in net charge-offs last year.

We're definitely seeing stabilization in real estate prices throughout our footprint with some increases in certain locations. In the near term, as we continue to work through these problem assets, we expect net charge-offs to remain elevated by historical standards. But also expect improvement from the amount charged off in 2011.

Our ALLL ended the year at an all-time high of 3.97% compared to 3.6% at the end of 2010. As we stated earlier in the year, our plan was not to do any type of reserve release in 2011 and to provision at least the amount of our net charge-offs.

In 2011 we provisioned $64.5 million which was $400,000 more than our net charge-offs. If the credit quality trends continue to improve, clearly we will be revisiting the amount of the provision required for 2012. I'm not sure we can support a further increase to the ALLL or matching the dollar amount of net charge-offs if we see continued improvement in NPAs and other credit metrics.

One area that has been a challenge for us during the year and again in the fourth quarter was our net interest margin. This is not a big surprise as we expected a reduction in net interest margin, especially since the level of refinance activity, which kicked in late in the third quarter and stayed with us throughout the fourth quarter, would probably significantly increase our premium amortization which in turn reduces our interest income.

This past quarter's increase of $4 million in premium amortization over the prior quarter definitely had a negative impact on the net interest margin. Our net interest margin ended the quarter at 3.74%, that's down from 3.92% the prior quarter.

However, we did an excellent job of decreasing our funding cost which dropped 10 basis points during the quarter. But the impact from the premium amortization was too much to overcome. Clearly the net interest margin is also pressured by competitive forces that lead to lower loan yields, yet the reduction in funding costs has been able to offset those reductions so far.

The net interest margin is one area that's going to continue to be an issue especially after this week's announcement coming from the recent Fed open market committee meeting that short-term rates could stay at historically low levels for an even longer period of time. This could potentially extend the current refinance wave that is the main reason for our premium amortization.

However, at some point this will also begin to dissipate and as it does we will also see a simultaneous decrease in premium amortization similar to what took place in the second quarter of 2011, which also led to an increase in our net interest margin.

Total net interest income declined by $1.6 million during the fourth quarter, however increased by $1.9 million over the same quarter last year. We continue to attempt to protect our net interest income by adding to our investment portfolio and for the most part this past year we were successful. In the fourth quarter, however, the premium discount was just too great to offset.

The banks did a nice job this quarter of generating fee income, especially in the area of mortgage originations. Total non-interest income increased $1 million for the quarter or 5% sequentially. Mortgage origination income was up $1.9 million over the prior quarter but down $2.8 million from the fourth quarter of last year.

For the full year non-interest income was down $9.3 million or 11%. Although the latest refinance wave did help boost fee income for the year, it was still far below the fee income we produced last year in the quarter and for the full year, both of which benefited from an even greater refinance boom plus the first time homebuyers tax credit program.

Also last year reported $4.5 million more in security gains than this year. Again, this year our fee income included security gains of only $346,000.

Our net interest expense for the quarter, excluding goodwill impairment, increased by $7 million, primarily due to a $5.7 million increase in OREO expense. Most of the $12.9 million in OREO expense this past quarter came in the form of write-downs. The loss on the sale of OREO accounted for $1.7 million of the total for the quarter.

For the year, however, our non-interest expense, again excluding goodwill impairment, only increased $4 million or 2% over 2010. Once again OREO expense of $27.3 million was $5 million greater for the year and made up most of the increase in non-interest expense.

Normal operating expenses were well contained in 2011 with compensation and benefit expense down 2%, occupancy expense down 3% and marketing and advertising expense decreasing by 5%. Excluding OREO I thought our banks did a nice job of controlling all other operating expenses under their control.

It's been less than a stellar three years and, although we remained profitable every year of this downturn, it has not been the performance we expect to deliver. With that said, we're more optimistic than we've been in years. We recognize that revenue growth, especially growing our loan portfolio, is not going to be easy.

At the same time we're excited that our new structure should free up considerable time and resources to actively seek out new business as well as further engage all our existing customers. The significant amount of the regulatory burden goes away and we simplify our entire operation. We'll be more efficient and our staff can once again focus on more productive and profitable pursuits.

We're excited to see the progress we continue to make on reducing credit cost, which could be a huge catalyst for greater earnings next year. Our balance sheet is as strong as ever as we have made great strides to reduce our risk profile.

We continue to generate a larger and larger customer base to sell more and more products and services to. And most important is the level of talent inside this Company that will now be free to focus their attention on growing their banks.

This is hardly a perfect banking environment that we're currently operating in, and yet we think we've positioned the Company to continue to improve earnings and our performance as we begin 2012. And those are my formal remarks for the quarter. We'll now open up the lines and take questions.

(Operator Instructions). Joe Morford.

Mick, I guess I see you took borrowings up again this quarter. I just wanted to -- I mean to supplement deposit growth and help grow the investment portfolio. Should we expect to see you continue to do that here in the near term until loan growth picks up? And then just in general, how do you feel about your ability to hold net interest income levels or possibly grow them given the challenging rate and pricing environment?

Well, I think that you might see, Joe, some additional borrowing increases. We are, again, and we've been saying this the last year, we are dedicated to supporting the net interest income, especially interest income, in the form of doing whatever we have to.

Clearly we'd love to see loans start to pick up, we're starting to see some already signs of that. But I can't guarantee as we move through 2012 what that's actually going to do for us. So we are going to continue to add securities.

We are reshuffling the mix of our securities somewhat though. And we're moving a little bit more away from the US agency CMO's and we are in the process of buying a few more corporate bonds. Obviously they won't have the hurdle of having to reinvest all that cash flow all the time, plus the yield is a little bit better.

Now we haven't been willing to extend much on those corporates; that may be something that we do take another look at based on the comments made two days ago by Chairman Bernanke regarding interest rates and how much they're going to lower -- how much they're planning on lowering their -- trying to lower long-term rates.

So whatever -- we've had great deposit growth, as I mentioned in my comments. And if we find the need that the investment portfolio still has to grow beyond just a reshuffling of the mix, then, yes, probably some of that will come in the form of borrowings.

Okay. And then just one other question was just -- have the OREO expense -- a lot of it seem to be still valuation hits. Where -- I know it's hard to tell, but just where do you think we are in that process and getting through the worst of it?

Well, I'll let Barry chime in here too, but I -- some of these legacy OREOs that we have further write-downs, I mean they've been on our books for two or three years now. We would have liked to have thought a year ago that that was the -- that we were getting to the end of it.

In some cases we are. We are seeing some properties in some locations where the reduction in value is really minimized or it hasn't changed much at all. Still on a few of the larger projects in certain other locations, as you could tell, we took further write-downs of that OREO.

I would like to think, Joe, that at this point now, especially with one of those credits going through three years and three separate appraisals, that we are definitely getting down to the bottom. But I guess we maybe thought that last year.

Although the reduction this year was nothing like the write-downs that we took the last couple of years. So I think we are getting near the bottom and, again, in some locations I believe we've reached the bottom. Barry, have you got any other thoughts?

Yes, it's not so much the write-downs, I think it's more the other side of it is just volume. We started the year with about $73 million in OREO and we took in an additional $79 million. So what you're seeing is kind of the culmination of the peak of that.

So total, that's about $147 million. We had write-downs of about $16 million this year. So it's about 11%, which has been right in line. But as just the sheer volume of OREO diminishes those write-downs should be going down.

One of the big indicators that we saw -- that we're seeing, and it's really positive, is last year at this time we had about $67 million of loans in foreclosure and of course we took in $79 million, which means a few of those -- a few new loans came in during the year that we foreclosed on, took them into bank owned property.

This year at this time we're at $20 million, which is -- that's a precursor to better things to come, we're hoping so. So we anticipate what we're going to bring into OREO in 2012 will be significantly lower than what we did in 2011.

Okay, thanks.

Jeff Rulis.

Barry, maybe you could comment on the non-performing loan inflows this quarter versus last?

Well, we definitely had some really improvement in reducing both NPLs and OREO this past quarter. We just -- we really aren't seeing -- I guess overall with the improvement in the credit metrics and the fact that we've been -- this is our fourth year in this cycle.

Actually if you look back to June of 2006 when we moved out of the Boise market with A&D loans, we've been in this cycle six and a half years now or almost six years. So we fully anticipate that the increase in NPLs specifically is going to start tapering off as we saw in this last quarter. So we're feeling positive about it.

I mean, Jeff, we're looking at quarter by quarter the in migration of NPLs. And as Barry said, it's definitely slowing down as you would expect. I mean going back to my comments, I mean when you look at where the bulk of our NPLs have come from in the form of unimproved land and land development, I mean there was only $78 million left in those two categories that isn't already in NPLs or OREO.

So that number is so, so much smaller than what it was two or three years ago. Now I guess one could make an argument that if commercial real estate or one to four family or something like that starts to really ramp up and we start seeing more problems, which to date we have not, that could cause some additional in migration. But, boy, with the small level of dollars left in those problematic categories we just really think that the in migration of NPLs is going to be much lower.

I guess one follow up on the OREO costs; it's still kind of a head scratcher on Q4. Was anything seasonal in that jump? I'm trying to get some confidence into -- Mike, you mentioned $27 million in OREO costs this year versus $22 million last. And then into 2012 the numbers point to lower cost there. But sequentially -- I guess the question is, anything seasonal in the Q4 jump in OREO or is it just a group of properties?

It was just a group of properties; there was nothing really, Jeff, seasonal. I mean there was a lot of things being worked on. As Barry mentioned, OREO has really -- I mean we've worked through a lot of NPLs this year and taken control of a lot of properties through a lot of hard work. And those distressed properties just ended up the last half of the year in a much, much bigger dollar amount of OREO.

And as we worked through those, especially in the fourth quarter, some of those -- like I said, there was -- part of those was a lot, but yet a big part was still write-downs. We still made some progress during the quarter in OREO, but I don't think there was anything necessary seasonal about the write-down for the charge-offs. I think it was more just volume driven and the fact that --.

There's one other thing that we always go through. Our appraisal cycle tends to be back half of the year weighted. So I mean we are -- that's just the way it's been for the last -- maybe that's the way the credit cycle developed or the way that dollar amounts of NPAs or NPLs and OREO's have come in to those buckets. But that just seems to be the weighting that we have and it's heavily weighted on the back half of the year.

And as you get those additional valuations and appraisals and that, that's when you take those charges. And I think that also had something to do with why in the fourth quarter especially we had more write-downs of OREO.

Yes, I can just add to that. It's really a function of our regulatory examination cycle. We always want to ensure that all of our OREO and non-performing loans are properly valuated. And generally for our four or five biggest banks those examination cycles came in October/November. So we have tended to update valuations just prior to that to ensure that we don't have any issues there. So those write-downs usually come in the fourth quarter.

Okay, thanks.

Matthew Clark.

Just as a follow-on to the OREO, just trying to get some magnitude of potential write-downs and loss on sale. You have 78 -- going through that same exercise I think, Barry, that you went through, having $78 million of OREO going into '12 and your backlog, it sounded like $20 million or so. Obviously you'll have -- you may have some more flow in, but is it $50 million of additions this year you think maybe or --?

I think that would be on the high side, Matt.

Okay. And I guess the other question is where you currently have your OREO written down by. So on that $78 million, what is the carrying value of that OREO do you think?

We have $78 million -- we ended the year with $78 million. Just to break it down, we started with $73 million, we took in about $79 million, we sold $58 million and we took a $16 million in write-down and about $3.5 million loss on sale. I can shoot you those numbers.

Okay. That's helpful, thank you. And then I guess on the securities portfolio, I think -- I know two-thirds of it is (inaudible) CMO's and you've got I think a third in munis. But I guess can you update us on the duration of that overall book and then maybe isolate the CMO? I'm just trying to get a sense for the magnitude of yield compression we could see in the securities portfolio over the course of the next year assuming pre-pays temper a little bit.

Well, I mean, as far as the amount of compression I'm not sure that we're looking -- I mean -- well, when you look at two-thirds of that portfolio and that -- I think the current rate on that entire CMO portfolio is about 1.6%. So if you think, Matthew, that we're -- and this is the case. I mean, currently what we're booking in at the margin type of new investment is slightly less than 1%, yes. I mean there's 60 more basis points of compression there.

Now one of the things that's going to make that type of analysis a little bit difficult is we're not necessarily going to continue to roll all of those CMO's directly back into CMO's. Currently we're in the process of moving some of those dollars into corporates in which case the uptick in corporates is probably an additional 1.5%.

So, you've got two things; you've got two forces at going on. Yes, I would agree that we would see some pretty significant compression if our goal was to take all of these CMO dollars and all the amortization on that portfolio, just continue to plunk it into new CMO's, but that's not the case. We're starting to roll a portion of that into higher yielding corporates.

So that is definitely going to offset some of that compression. But I've not stopped to try to calculate exactly what that is. But it's not like we're going to replace every dollar every month in corporates, that's not going to be the case. So there is still going to be some CMO's that get purchased at a lower yield level than what we have as a weighted average of that portfolio.

Okay, that makes sense. And I guess on the duration on the CMO, that 1.6%, guess what would be the weighted average of that duration there?

1.2%.

Yes.

1.2%. This is Ron, Matthew.

Okay. And I guess in terms of -- how much do you have in corporates at the end of the year. And I guess how much you might want to take that up to in terms of contribution to the overall portfolio.

So far our only commitment is to take that to -- we've currently got about $50 million, maybe $60 million purchased right now. Our commitment is to take that to about $250 million. So there could be approximately $200 million more in purchases. But again, that's not going to be net-net, that's going to be taking cash flow off of the CMO portfolio and redeploying it into corporates.

Right. Okay, great. And then on the mortgage revenue line, I guess anything -- I guess just curious about the pipeline going in to 1Q applications and your sense for the level of activity there, I don't know if that number can hold up in the near term or not.

The pipeline going in was almost exactly where we ended the latter part of the fourth quarter. So at least for probably the next two months or two months of this quarter, which is about as far out as you can really see. 60 days is about the most we look forward. It looks as though that pipeline is relatively stable with where we were in the fourth quarter.

So we're expecting -- especially on a year-over-year comparison, we're expecting probably mortgage origination fee income to be better in this first quarter than where it was in the first quarter last year, hopefully comparable to what we recorded in the fourth quarter.

Okay. Okay, thanks. That's it; that's it for me, thanks.

(Operator Instructions). Jennifer Demba.

If you covered this I apologize, but in terms of the restructuring and the consolidating of the charters, how much cost do you anticipate saving per year with that move?

Jennifer, we have not quantified that yet. I know I've been asked that question a lot. And clearly there are definite cost saves. I mean, some of those that we'll be recognizing immediately, as I said in my remarks; some that we will recognize over time.

But it's really difficult because so much of the cost saves -- I mean, there are specific cost saves. There's cost saves with various vendors, there's cost saves with certain fees and things like that that we pay. But the biggest cost saves is just in the reallocation of time among our entire staff and all 11 banks to hopefully be able to pursue, as we said earlier, more productive endeavors.

In other words, getting out, reengaging with customers, going out, hustling a lot more loans rather than being required to spend a lot of that time on regulatory, statutory, legal and compliance types of issues. So -- which many of those we continue to do 11 times; we're going to simplify much of that by doing it one time. And that's absolutely going to free up a lot of resources within the Company.

I think our staff, especially our bank presidents, are very, very excited about this new structure. I think they recognize that it's really going to allow them to really get back into the business of banking and not be so tied down to so many of the other, again, regulatory issues and that that they had to deal with in the past. But we have not put a dollar and cents figure on it, Jen.

Thank you.

Joe Gladue.

I think most of my questions have been answered, I guess I really just have one quick one left. Where did performing TDR's end the year at?

The total is $164,541,000 and it's broken out non-accrual, those non-performing are $65,583,000 -- or $65,584,000 rounded. And accruing are $98,957,000.

All right, thank you.

You're welcome.

That was basically about the same as the third quarter.

Yes, they're --.

There was a change from quarter to quarter?

Yes, they're up about $12 million -- $11.5 million, somewhere in there.

Okay.

David King.

Forgive me if I missed this, I jumped on late. And if so we can probably just talk about it off line. The main question I had was on the outlook for improvement in credit going forward. I think you had a comment in the release that you expect to make additional headway as we head into 2012.

Mick, maybe can you just comment on what you've done so far in the year and how to think about the pace of problem asset reductions going forward based on everything you see today?

Yes, I mean, based on my comments and what we talked about, Dave, we certainly could cover this off-line. But we have said that our expectations are that our credit metrics are going to continue to improve. We built up some nice momentum in the second half of 2011.

We don't necessarily expect that the first quarter is necessarily going to be like the fourth quarter of the year because the fourth quarter was far better than what we were -- than what we were really expecting as we went into the fourth quarter.

But yet for this time of year we've had a great winter. The first quarter is looking better than many other times when you enter the first part of the year. We still have a number of transactions that we're working hard on, hoping that those will close up if not in the first quarter hopefully early in the second quarter. So just the overall momentum is far better.

We talked a little bit earlier about the in-migration of problem credits, especially from the areas that we have had the most concerns and issues with. That definitely is looking far, far better.

So the bottom line is we're excited. We think that if we continue to see a stabilization in values and prices that we will make further headway into 2012. And with the ALLL where it is, I think we feel very, very comfortable that we've got -- we're very adequately reserved at this point in time.

Fantastic. That's all great news. Appreciate you covering that again for me.

You bet.

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

Okay, well, very good. Well, we'd like to thank all of you who participated this morning. Again, we're -- start of a new year. We're excited both for the new structure that we're putting in place, that should finish up right around April 30, so we're working hard on getting that put together. And with credit looking better these days we're feeling that 2012 and the earnings that we can deliver should be better.

So again, a lot of things going on right now, but we're excited and think that we're going to have a year in 2012 that gets us a little bit closer back to the type of performance that we delivered for many, many years. So with that I'd like to thank all of you again for your participation this morning and you all have a great weekend.

This does conclude today's teleconference. You may now disconnect and have a wonderful day.