Glacier Bancorp Inc (GBCI) 2012 Q1 法說會逐字稿

Good day, everyone, and welcome to this first-quarter earnings call. At this time all sites are now online in a listen only mode, but later there will be an opportunity to ask questions. As a reminder, today's call may be recorded. It is now my pleasure to introduce our speaker for the day, President and CEO Mr. Mick Blodnick. Please go ahead, sir.

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

Yesterday afternoon we reported earnings for the first quarter of 2012. Earnings for the quarter were $16.3 million compared to $10.3 million in last year's quarter. That is an increase of 59%. Our diluted earnings per share for the quarter were $0.23. That is a 64% increase over last year's first-quarter results of $0.14 per share.

There were no one time or extraordinary items, nor do we have any gain or losses on the sale of investments during the quarter. First quarter's performance was straightforward with core operating earnings continuing to drive our results.

We earned an ROA for the quarter of 0.91 and a return on tangible equity of 8.91. Those are our best quarterly earnings ratios since March of 2009. The improved earnings were driven primarily by lower credit costs as we continue to see stabilized -- see those costs stabilizing, and, in some areas, better asset quality trends.

As I stated on last quarter's call, 2012 would be the year we provide better returns to our shareholders, and we still believe that to be the case. With that said, certain areas of our operations still pose challenges. Loan demand, although showing signs of getting a little better, is still concerning, and making it more difficult to grow revenues and maintain margins, although I thought we did a good job of holding our net interest margin and protecting our net interest income this last quarter.

Assets grew at only a 3% annualized pace this past quarter, as we slowed down our purchases of investment securities. The growth we did experience, however, did come from investments as once again our loan portfolio had a small decline.

Although there are signs that loan volume is starting to improve, demand is still soft and competition for good loans remains intense. We lost a number of good loan opportunities during the quarter because of our unwillingness to lock rates for an extended period of time.

Although our crystal ball isn't any better than anyone else's, as to how long rates are going to stay this low, we are not comfortable putting that kind of extension on in this rate environment. We haven't done it with our investment portfolio and don't plan to do it with our loan portfolio.

With the announcement we made early in the quarter to restructure the Company, by converting our banks from charters to divisions, I'm happy to report that the process scheduled to take effect on April 30 is on track and nearly complete. Although it won't have a measurable impact on the way we transact business, it will greatly reduce our regulatory burden and numerous operational redundancies.

The closer we get to the conversion date the more we are convinced that we will now have more time to spend 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 operational structure, definitely has us excited and looking forward to a more streamlined model.

Because loan demand remains marginal at best, we continue to add to our investment portfolio in order to sustain our interest income. In the quarter, the Company added $112 million in securities, primarily short-term taxable and tax-exempt municipal bonds. This quarter we also added to our corporate bond portfolio by purchasing $44 million in this security type. The highest volume of securities purchased this last quarter, however, was once again US agency CMOs.

However, because of the short-term nature and the specific structure of this CMO portfolio, the $380 million in purchases was still $11 million short of the amortization and paydowns we received during the quarter. This demonstrates the tremendous amount of cash flow generated each month from this CMO portfolio, and as I have stated before, we are comfortable and accept the impact these lower yielding securities have on our earnings rather than generate an additional interest rate risk by extending the terms of these investments.

The first quarter was another good one for deposit growth, especially noninterest-bearing deposits, which grew at a 12% annualized clip, which historically this quarter is not known for generating that type of increase. We also posted strong increases to both the number of personal and business checking accounts as our banks continue to commit a great deal of time and effort to growing their customer base.

Our interest-bearing deposits grew at an 8% annualized rate during the quarter, with the increase split equally between retail and wholesale accounts. With little loan demand and excess available funding, our banks continue to reduce the pricing on their retail deposits. Because of their focus on lowering their funding costs, we cut interest expense on deposits by an additional 4 basis points during the quarter, down to 52 basis points. That was a 7% reduction.

Our tangible common equity ended the quarter at 10.52%, an increase over last year's 10.12%. Tangible stockholder equity in dollars increased by $67 million or 10%. Tangible book value per share ended the quarter at $10.43. That is also up from $9.51 last year.

We continue to maintain capital levels that are at or near historic highs. As I stated last quarter, our goal is to grow the balance sheet organically or through acquisitions. Absent those preferred methods, we will entertain other alternatives, which would include a stock repurchase, an increase to our cash dividend, or a combination of both.

There does appear to be more activity in the M&A arena, which is encouraging. We believe the long anticipated wave of consolidation could be gathering momentum, and we think we have the right model and financial strength to participate. Yet any transaction has to be a good fit and transparent -- that it is priced and structured right.

As expected and predicted during last quarter's earnings call, we didn't see much change in our nonperforming assets in the recent quarter. In fact, nonperforming assets actually ticked up this past quarter by $1 million. During the quarter we had four loans totaling $15 million move into nonperforming status, and although we did dispose of a few problem credits, it was not enough to offset the in migration.

Even though we didn't make as much progress as we would have liked, we are encouraged by the activity level and transactions currently being worked on. Hopefully this will transcend into further reductions in our problem loans as we enter the spring and summer months. We think it will.

Nonperforming assets of $215 million represented 2.91% of total assets. That is down slightly from the prior quarter. Both nonaccrual loans and OREO decreased during the quarter by a total of $7 million. Unfortunately, 90 day past due loans still accruing were up almost $8 million, and were the reason for the overall increase in NPAs.

One of these larger credits has already been brought current. In addition, our banks are currently working on a number of transactions that, if they materialize, will further reduce our level of nonperforming assets.

The level of interest among prospective buyers seems to be getting better and the offers that we are receiving are more realistic than the past couple of years. Collectively, we hope it will add up to further reduction in OREO and nonperforming loans. Nevertheless, it is still a challenge and hard work to move these distressed assets all the way through to their final disposition, but we think we will have some success and regain the momentum we had the final two quarters of last year.

As we have stated previously, a significant portion of our nonperforming assets the past three years have consisted of land development and unimproved land loans. As these two categories of loans continue to decrease, so does the dollar amount of net charge-offs associated with them. This is good news as the losses we have taken the past three years from these two loan categories have far exceeded all other categories combined.

Key to lowering our credit costs going forward is in no small measure the reduced exposure to these A&D loans. However, for the first time in a couple of years, the two categories that caused the increase to overall NPAs were residential construction and 1- to 4-family mortgage loans. Though always a concern to have any increase in nonperforming loans, our losses have been smaller if the assets we are disposing of are not made up of raw land or land that has been developed.

We also have no plans to move away from our strategy of methodically and patiently selling our OREO properties. A number of these projects, we believe, have value that might not be realized in a fire sale. So we are content to continue to work them in order to achieve a price that we feel is fair. Time will tell if this was the appropriate course of action and economically the right thing to do. We believe it is.

Somewhat surprising for this time of year was the improvement in our early-stage delinquencies. Normally we experience a ratcheting up of past dues during this time of year. However, this quarter we saw improvement in the dollar amount of delinquencies compared to both the previous and prior year's quarters, which is encouraging.

Also, our accruing TDRs declined by 10% during the quarter. So we did see a couple of positive credit trends. As spring and summer approaches we hope delinquency levels will continue to improve.

Net charged-off loans were basically unchanged from the prior quarter, and down 39% from last year's first quarter. Net charge-offs for the quarter totaled $9.6 million, a decrease of $6.2 million from last year's quarter. We hope this trend continues throughout the rest of the year.

It would be nice to get our charge-offs again below 1%. At the current pace, with an improving real estate market, that goal is definitely achievable this year. Even if we can't get to the 1% level, we expect to post a significant reduction in net charge-offs compared to the past three years.

Our ALLL ended the quarter at an all-time high of 3.98% versus 3.86% in last year's quarter. During the quarter we provisioned $8.6 million for loan losses. If credit trends continue to improve and we make the type of progress we are projecting in lowering our NPAs, it will be difficult to maintain the loan loss reserve at this level.

This past quarter our net interest margin was basically flat, which in this environment we considered a win, since our expectations for our net interest margin was to contract more than it did. The margin for the quarter was 3.73%, down 1 basis point from the prior quarter and 18 basis points lower than the same quarter last year.

The stabilization in the margin was a pleasant surprise, considering premium amortization during the quarter exceeded the fourth quarter's number by $1.3 million and was $3.2 million above last year's first quarter. Eventually refinances will slow down. And when that occurs, we will get a reduction in premium amortization, which should definitely help lend further support to our margin.

Helping to offset the additional premium amortization was the great job our banks and our Treasury Department did in lowering our overall funding costs. As competitive forces continue to push loan yields lower, the reduction in our funding costs again this quarter was what allowed us to maintain our net interest margin at approximately the same level. Our total funding costs dropped 5 basis points during the quarter.

Net interest income was down slightly on a linked quarter basis, again due to the additional premium amortization we booked in the quarter. We were, however, able to increase net interest income by $1.6 million over the same quarter last year. We continue to attempt to protect our net interest income by adding to our investment portfolio and this past year had some success on that front.

Although the higher level of investments helped, the key this past year has been the reduction in interest expense, which has more than compensated for the additional premium expense.

Noninterest income decreased by $1.7 million from the prior quarter due to lower fee income on deposit accounts. This is not unusual in the first quarter of the year. We also experienced a small reduction in mortgage origination fees and gains on the sale of OREO properties. Compared to last year's first quarter, I thought the banks did a nice job of generating higher fee income, especially in mortgage origination fees.

Total noninterest income increased $2.9 million or 17%. The gain on the sale of loans, both mortgage and SBA, accounted for $2.1 million of that increase. Refinance volume and some of the highest premiums ever on SBA loan sales were the primary reasons for the better performance.

We do expect refinance activity to slow down in the second half of the year, although we think purchase transactions could increase as we head into the spring and summer months with attractive financing rates still available.

Our noninterest expense on a linked quarter basis decreased by $6.1 million due to the $6.1 million decrease in OREO expense. Compared to the year-ago quarter our noninterest expense increased $6.6 million as OREO expense was $4.7 million higher this year. Normal operating expenses were well contained and within plan. Excluding OREO, I thought our banks continued to do a nice job of controlling all other operating expenses under their control.

In summation, it has been a good start to the year. We are hopeful and expectant that the remaining three quarters will continue to show improvement in credit quality and credit costs. We believe there is a substantial amount of credit leverage to be released over the next year to 18 months, which should be a catalyst for better earnings in 2012.

Loan growth is still a concern, so hopefully the new operating structure will free up our staff to get out and generate more loan and deposit business. We recognize that revenue growth, especially growing our loan portfolio, is not going to be easy.

At the same time a significant amount of the regulatory burden goes away and we simplified many aspects of our operation. We expect to be more efficient and our staff can once again focus on far more productive and profitable pursuits.

M&A activity seems to be picking up across the country, and with our capital strength and operating model we believe there are a number of attractive franchises worthy of our pursuit. Even without an acquisition, we continue to gain more and more customers to sell products and services to. So through the first quarter of 2012 we are more optimistic than we have been in some time that we will continue to improve our overall performance and increase our earnings again this year.

And those are the end of my formal remarks and we can now open up the line for questions.

(Operator Instructions). Jeff Rulis.

A question -- a couple on operating expenses, the first being in the press release you talked about some accrual -- well, compensation expense changes. Is that -- the number this quarter, is that one-time accruals or is this a base level that we should grow off of going forward?

That would be a base level. It is probably a little bit higher, Jeff, simply because of the activity on the mortgage origination front.

Got you.

Which, obviously, those salaries are variable. But we have incorporated some new compensation programs and incentive programs this year which probably, especially if we can continue to perform at the level we are and increase that level, that is probably a better baseline for you.

Got it. And then the second question on the expenses was regarding the conversion of the subsidiaries. Do you have yet a tangible number of either upfront costs of that or, going forward, cost savings? You have talked about efficiencies, but I didn't know if you had a number that you are assigning that would impact the financials.

We don't yet. And maybe by -- I shouldn't promise it -- but maybe by next quarter -- we are going to be about halfway through the quarter when the restructure is done. We may have some dollars to disclose maybe next quarter. We just really -- to be quite honest, we really haven't even focused on that yet.

As I said last quarter, so much -- in our mind, so much of the benefit of doing this is to reduce the redundancy, primarily regulatory redundancy, and I just struggle, Jeff, to put a figure to all the time that we are freeing up that used to be taken up with exams and regulatory issues that are now free to go out and generate new customers, new business.

But to try to calculate what that means to us, I guess, we would be someone guessing. So maybe if we can get through a quarter or two under the new structure we might have a little bit better idea.

Now, as I did say, there are some things that we know are going to save. We haven't necessarily seen any of those savings yet, but again, maybe at the end of the second, third quarter we might have a better handle on that.

Okay, and then just a last one on the tax rate. Is there expectation that that will creep higher as profitability improves? Maybe just for the full year 2012 do you expect to stay in this 22% range, any thoughts on that?

It should creep higher. If performance continues to move higher, that will continue to creep higher too.

Okay, more towards historical?

Yes. I don't know if we will quite get there, but that -- that is quite a leap, Jeff. But I guess the new run rate might be -- you know, we were -- I think we were king of guiding -- not guiding, we were saying -- assuming that maybe we were going to be in that 15%. We are closer to 22%. I would probably use the 22% to 25% going forward.

Okay, thank you.

Brett Rabatin.

I wanted to -- I have got quite a few questions, but let me ask one or two here. I guess the first thing I wanted to ask was on the buyback/increased dividend language you discussed during the prepared commentary. Should we expect some kind of an announcement in the next couple of quarters or so, in terms of your updated thoughts on using capital?

I wouldn't say next -- for the next quarter, but our discussions the last three to six months have centered around waiting to see just what materializes on the M&A front. The activity level has been better. We've had some discussion, but really it didn't go anywhere, but we have had more discussions recently.

And so I think our preference, Brett, is to keep our powder dry right now and see how the next couple of quarters turn out as far as opportunities from an M&A side. If we start to get towards the end of the year and nothing has materialized, then I think you could look at those comments I made as something that we would be taking a much closer look at.

Okay. And then, secondarily, I wanted to ask about credit leverage. It seems like your reserve is really high relative to the loan portfolio. And I guess I am just wondering about the potential for negative provisions going forward, assuming your credit leverage -- or assuming you are able to get some problem assets off the balance sheet.

And then also I was -- you mentioned ORE potentially being lower, and you had some projects in the works to get off. Can you give a little more color around the size and scope of those?

We look at a number of -- you are right, I mean our -- and this is a good problem to have -- I think we have been very, very conservative over the last couple of years in making sure we were building up the reserve to make sure it was fully adequate.

And, obviously, with loan growth still an issue, and as you can tell from my remarks, we are still not confident that we're going to see any real breakout in loan growth, it is becoming much more of a challenge for us to continue to support that kind of a provision.

So I don't want to say specifically, but the credit leverage, I think, is going to be a strong catalyst over the next three quarters. And whether that means that we just are not able to justify covering charge-offs going forward, that may be a direction that we go.

As you know, through -- even through this quarter we have tried to cover -- and that was what we told the Street, that we were going to cover charge-offs pretty much 1 to 1. Well, we -- you just can't keep doing that, especially if your loan portfolio continues to shrink.

And this is probably the quarter where we are going to have to break away from what we have been doing the last two or three years as covering all of our charge-offs plus some. I just don't think we are going to be able to continue to do that.

Okay. And then I don't know if Barry had any color on the projects that you guys are looking to potentially exit maybe in the near term.

As far as all the things that are being worked on right now, specifically we can't, but there is a lot.

Yes, we have a lot of things in the pipeline that we've been working on, and we anticipated to have some of those done this quarter, but due to primarily legal issues and bankruptcy issues, some of those assets just didn't move as we had anticipated.

We have -- we fully anticipate that will happen in this next quarter as we work through that -- those legal issues. And as Mick mentioned, we already had one of the 90 pluses cure this past week. We have another one that is projected.

So I can't say exactly for sure, but we anticipate that we're going to have some decrease in nonperforming assets this next quarter, both a combination of loans and sale of OREO. Something -- I don't know if we will be to the level that we were in the fourth quarter of last year, but we feel that it is going to be a move in the right direction.

Okay, thanks for the color. I will step back.

One other thing, Brett, is we have had a -- I didn't make any comments about this in my formal remarks, but we really did have a great winter. And not that we moved a lot of projects, like Barry said, there was a few that we expected to move this quarter that just got tied up in legal issues and that, but it absolutely was not the weather that deterred us from making the progress.

We had a pretty good, really nice, winter up here. And what it did allow us, the banks, to do is to continue to work and show properties. And I think that we should see the benefit of that better winter in the next -- in the second and third quarter in these next couple of quarters. Because, like I say, there is a fair amount of transactions that are in some stage.

Now, there is never a guarantee, believe me, we have learned that over the last two or three years. And until you cleared the check, these deals are never done. But we sure like the level of activity and we also like the fact that it seems like values, or at least where we have written down these credits so far, that the losses are just not quite what they were before either. So it has given us some level of encouragement for sure.

Okay, great. Thanks.

Jennifer Demba.

Do you think it is possible to make a 20% or 25% progress in reducing NPAs over this year? Or do you think the progress will slow from here (multiple speakers) 2011?

I think that if you're talking 20% to 25%, you're talking somewhere in that $40 million to $50 million. In the next three quarters, I think that is doable.

Okay.

I really do. I guess I would be somewhat disappointed at the end of the year if we couldn't lower it by at least 20%.

Okay. And you said you guys have entered into a few merger discussions, or at least that is what you intimated. What -- if that is true, is it just been pricing that has been the road block? Can you just give us a sense of what has been going on?

No, it hasn't -- well, I guess ultimately it is always somehow comes down to pricing. The loan marks have been really a huge detriment. I mean, bottom line, that still seems to be a real issue. In another discussion there was other issues too, but I think that is going to be one of the big hurdles.

Okay, thank you.

(Operator Instructions). Tim Coffey.

Hey, Mick, I was wondering, can you give me an idea of where the raw land that is in OREO right now, where that is marked at?

Go ahead, Barry.

Almost all of our raw land is -- we have a -- valued on a bulk discount sale. If it is raw land or if it is even A&D, if we are holding it in OREO, or if we have a nonperforming loan and we have evaluated that as part of our allowance for loan or lease losses, we usually get an appraisal of scope of work as a discounted bulk sale to a single individual. And those appraisals usually -- for an A&D deal are usually based on a projection of a 15-year sellout, probably with a 20% to 30% discount rate.

So that is -- it is fairly conservative underwriting. We have had most of our properties and loans now valued to -- through probably three, maybe even four cycles. So we are carrying those at some pretty either heavily discounted values or have reserved accordingly as part of our allowance evaluation.

Okay. And then (inaudible) the optimism that Mick that has been talking about potentially lowering some of these NPAs, is that just a function of the market firming up or just that you have written it down to a point that they are much easier to dispose of now?

I think it is a combination of those two things, Tim. In some cases we have seen some -- we got a big geographic area, and in some of the markets we are in, there is no doubt that valuations have firmed up.

In other instances, Tim, we have written things down so low that we are -- if an offer comes and it is close, we will take it. And we are not having to take the significant hits we would have taken two years ago for moving that. You could say we still took some of those hits anyway by writing some of these down over the last couple of years.

Tim, if you look, our loss on sale actually was offset by our gain on sale this quarter. So we have -- at least the OREO assets that we are selling, we are pretty much selling at book. So it is -- I think we are at that point now where it is a combination of carrying them at going market prices, and then also I think a lot of the inventory out there -- a lot of the deals that were there in the past in the last three years haven't been there, so the potential buyers are starting to pay up.

Okay, great. That is very helpful. And then, Mick, potential securities purchases in the coming quarters, more heavily weighted towards GSE type securities or corporate?

It will still be more heavily weighted to GSEs. That is a really good question, Tim. We were hopeful at the last conference call, and definitely the quarter before that, that we would have significantly increased our corporate bond portfolio by far greater dollars than what we have done.

Unfortunately, as you know probably and everybody else that tracks this closely, that those corporates have gotten so expensive. And we had a specific, disciplined approach that we took going in that we needed to have a certain duration or maturity at a certain yield, and that is just not there right now. So we haven't been able to put the corporates on.

So we have gone back to just relying on the GSEs and accepting the lower yields, although finally the yields we are putting on are similar to the ones coming off. We went through a lot of pain over in 2009 and 2010 and early 2011, because we had so much amortization, but that amortization was coming off at much higher yields than what we were putting it back on. That has changed now. We are not seeing that big disconnect that we were seeing earlier.

But I would say that right now it is going to primarily be the GSEs. There is no doubt, volume-wise, that is what is going to rule the day.

Okay, sounds good. That was all my questions.

Brett Rabatin.

Hey, Mick, I was curious, wanted to ask -- you obviously have been able to keep the margin up, but loan growth has been lacking as you have been running off the construction book and just haven't had a ton of originations. How should we think about your prospect margin versus average balances and the potential for spread revenue growth this year? You obviously had some growth this quarter given what you have added to the securities book.

So, come again now. Let me (multiple speakers).

I am just trying to figure out -- you are obviously trying to improve credit and you haven't been able to grow the loan portfolio, just given a lack of demand, and then your run off on the construction book. And let's just say that the loan portfolio is up or down -- I don't know, a couple of percent or something this year, can you grow straight revenues in the next few quarters based on your outlook for the margin and then just the overall balance sheet?

I think the only way that would happen -- and let me back up to the first point you made on the loans. We have been beating ourselves up pretty good that we haven't been able to drive much in the way of loan growth, because let's face it, that is the case.

This last quarter there was a few signs of hope in the fact that if you take out the charge-offs and the loans that we moved to OREO, and the reduction in loans held for sale, loan growth was actually a couple of million dollars positive. Now that hasn't happened much in the last three years.

And I am not one to put any spin on anything but, hey, after three years of not having much loan growth, you look for whatever positives you can find out there. And so maybe we are kind of turning the corner. That would be a huge -- I mean, for us to see even low-single-digit loan growth would be a real positive.

Now, is that still likely to happen? Maybe not, because of what we've have been talking about the better part of the call, and that is we still have got $215 million of NPAs that we want to push off the books. And roughly $130 million of that is in NPLs, that when we move those NPLs, it is -- at the end of the day, even though they weren't earning anything, they are still loans that we have to make up by creating that much more volume.

With all that said, I still think we are going to be putting on securities. We didn't do a lot of it this quarter primarily because we couldn't find a product that we liked. We definitely couldn't find the corporates that we wanted to buy. And we couldn't even find the structures that we really need on the GSE front.

So as far as spread revenue, the only way that is going to increase is if we decide to further leverage up the investment portfolio a little bit more. I will tell you though there is a little bit of gain to be made on lowering some of our CD costs.

We still -- I think the banks have done a fabulous job on some of the transactional kinds of expenses, but CDS -- I think our CDs are still a little bit higher than what we are seeing out there in the markets. And not only that, but you can't take that cost away tomorrow. Those CDs have to mature, and over time I think we will ramp that down a little bit, Brett.

But as far as what is going to really drive net interest income, I really do -- probably in the near-term, at least the next quarter or two -- I am seeing that probably being a little higher investment portfolio.

Okay, great. Thanks for the color.

Joe Morford.

I am encouraged that M&A activity is perhaps picking up, and I recognize that you all will be opportunistic, but in the ideal world where is your real focus? I guess in other words, can you review again what markets are of most interest right now or strategic priorities? What size banks are the best fits? And are you just as comfortable buying a distressed bank as a healthier one, or (multiple speakers).

We are -- I would be lying if I said we were as comfortable buying a distressed bank as a good one; that is not the case. We would absolutely gravitate to looking for good, solid banks. Ideally, with the new model now, it is a little different game changer for us. We wouldn't have some of the expenses. Even if we allowed that new -- that bank to run pretty much independent, we would probably do -- well, there is not probably -- we would do what we have done. We would collapse charters and get rid of some of the regulatory burden that that bank would face.

As far as geographic locations, we are still focused on the states that we're in right now. Clearly, we would certainly like to see a bigger presence in Utah, Colorado, Wyoming, even parts of Idaho. Certain parts of Idaho we are not as enamored with, obviously, because we still got some issues there.

Montana is going to be a little bit tougher for us. We just got too much market share in most of the markets that we want to be in, and so that would be a little bit -- that would be a little bit more challenging. Eastern Washington is another area that, obviously, we have some definite interest in. But I would say that for the most part it is the stronger banks and companies that have got us -- got our attention.

Regarding the question you had, Joe, as far as the size, one of the things we are probably looking at -- and we over the last 15, 20 years have made a great -- you know, great business in buying very, very small banks. Some of them $30 million, $40 million, $50 million -- now those go back a few years -- and ratcheting those banks up in size.

I would say that for us to do the $100 million bank, it is not optimal for us. I think we would like a little bit more size. It appears just in looking at the numbers and what it takes to really move the needle anymore -- and if you're going to go through all the work, sometimes it takes as much work and as much cost to buy a $100 million bank as it does a $500 million bank.

I would have to -- I would be lying if I didn't say that our asset size has ratcheted up a little bit. And I am thinking more in that $300 million range is more the minimum that we want to look at. I think we could exert a lot of time and effort on $100 million or $125 million bank and it is not going to do much for us. So as far as size goes, I think that we have elevated our expectations there to that -- probably that $300 million asset range.

Okay, that is great, great color, very helpful. Just a quick one, any comments on just that pace of loan sale activity or how should we maybe think about that gain on sale loan line item going forward here?

I think it's that it is holding in pretty well this quarter, still. As I mentioned, SBA premiums are -- I don't know if I have ever -- Barry, have you ever seen them this good?

They are the highest I have ever seen.

Yes, they are really good. And, of course, Mountain West Bank, our one bank in Coeur d'Alene, they do an incredible job of creating SBA volume. And they had a really, really strong quarter this last -- in this first-quarter on SBA sales.

All the other banks have done a really nice job on the mortgage origination, and I think that is going to hold in okay for this quarter. But as I said in my remarks, I don't know -- we are not planning on refis carrying the day through the third and fourth quarter.

We think we are going to have to be more reliant on purchase transactions and getting out there and really getting after it. But with that said, I feel really good about the mortgage origination staffs we have out there. I think we have really -- we have added some resources in the last year or two. Obviously, competition has changed pretty significantly in that arena. So I kind of like where we are at. I -- again, I am pretty confident for one more quarter, after that it is a little bit more dicey.

Okay, fair enough. Thanks, Mick.

There are no further questions at this time, so I would like to turn it back over to you, Mr. Blodnick, for any closing remarks.

Okay, well, thank you all very much for participating today. And, again, I think we are starting to feel a little bit better about where we are going and the direction -- there is no question far better than the last couple of years.

But we will look forward to getting the reorg done here in about another week, week and a half. Again, as I mentioned, I think we feel that it is really going to be of benefit to our banks, and the time and effort that they have to spend on things that truly create shareholder value.

So with that, hopefully everybody will have a great weekend. I think we are in for a spectacular weekend, weather-wise, so we are looking forward to it around here. And with that, I would like to again thank you all, and have a great day. Bye now.

This does conclude your teleconference. Thanks for your participation. You may now (audio ends).