Mercantile Bank Corp (MBWM) 2007 Q4 法說會逐字稿

Welcome to the Mercantile Bank Corporation fourth quarter 2007 earnings conference call. There will be a question and answer period at the end of the presentation. [OPERATOR INSTRUCTIONS].

Before we begin today's call I would like to remind everyone that this call may involve certain forward-looking statements such as projections of revenue, earnings and capital structure as well as statements on the plans and objectives of the Company or its management. statements on economic performance and statements regarding the underlying assumptions of the Company's business.

The Company's actual results could differ materially from any forward-looking statements made today due to important factors described in the Company's latest Securities and Exchange Commission filings. The Company assumes no obligation to update any forward-looking statements made during this call.

If anyone does not already have a copy of this press release issued by Mercantile today, you can access it is at the Company's website, www.mercbank.com. On the conference today for Mercantile Bank Corporation we have Michael H. Price, Chairman, President and Chief Executive Officer, Robert Kaminski, Executive Vice President and Chief Operating Officer, and Chuck Christmas, Senior Vice President and Chief Financial Officer. We will begin today's call with management prepared remarks and then open the call to questions.

At this point I would like to turn the call over to Mr. Price. Mr. Price, you may begin.

Thank you. Good morning everyone. The fourth quarter of 2007 was dominated in the financial world by a continuation of the severe problems in the residential real estate market. During the quarter we continued our extensive search for any borrowers who were showing weakness or could show signs of weakness in the near future.

We took a very agressive approach to downgrading many credits and this, combined with some out right defaults, mandated a significant expense to our loan loss reserve, as we determined whether or not some of these borrowers can survive this depressed real estate market. While our level of nonperforming assets and charge-offs are generally better than many of our Michigan (inaudible), we continue to focus very hard on returning asset quality to our historic levels.

The depth and length of this downturn is hard to estimate, however we do feel comfortable that we have identified the appropriate borrowers for downgrade and or workout action. The other part of the equation, the return of a properly balanced real estate market where supply and demand are somewhat normal, is much harder to predict. Asset quality remains a top focus of our institution.

We continue to make progress on many fronts, but understand that real estate collateral takes time to work through the legal system and marketing repossessed properties has gone slowly in today's environment. On a positive side of things we continue to grow the assets of the bank and our Oakland County location appears to be off to a very solid start. At this time I'll turn it over to Chuck Christmas for a review of the financial statements. As usual we will have a Q&A session at the end of Bob Kaminski's remarks. Chuck.

Thanks, Mike, and good morning, everybody. As typical, what I would like to do this morning is give you an overview of Mercantile's financial condition and operating results for the fourth quarter of 2007 and all of 2007, highlighting the major financial condition and performance, balances and ratios. Our net income for the fourth quarter of 2007 totaled $0.1 million compared to $4.6 million in the fourth quarter of 2006 and for all of 2000 our net income equaled $9 million compared to $19.8 million made in 2006, a decline of $10.8 million or about 55%.

On a diluted earnings per share basis we earned $0.01 in the fourth quarter of 2007 compared to $0.54 in the fourth quarter of '06 and for all of 2007 our diluted earnings per share were $1.06 compared to $2.33 in 2006, or a decline also of about 55%. The declines in the 2007 earnings performance are primarily the result of an increased level of nonperforming assets, which necessitated a higher provision expense and higher operating expenses from the related collection efforts and holding costs.

The increase in nonperforming assets along with a very competitive loan and deposit environment also had a negative impact on asset yield, which when combined with the recent decreases in the prime rate and a flat to inverted yield curve over the last 12 to 18 months resulted in a lower level of net interest income, which more than offset the positive impact of growth and earning assets. Our net interest income from the fourth quarter totaled $13.1 million.

That's a decline of about $2.2 million or 14% from what we earned in the fourth quarter of 2006 and for all of 2007 our net interest income totaled $55.6 million, a decline of $6 million or about 10% from the $61.6 million we had earned in 2006. Our average earning assets during the fourth quarter of 2007 totaled $2.01 billion, an increase of about $69 million or about 4% from average earning assets in the fourth quarter of 2006. Our average loans during the fourth quarter of 2007 totaled $1.79 billion, that's an increase of about $62 million or about 4% from the $1.73 billion outstanding during the fourth quarter of 2006.

Our net interest margin during the fourth quarter of '07 equaled 2.64% down about 22 basis points from the third quarter of '07 and down 55 basis points from the fourth quarter of '06. The primary contributing factor of the decline in net interest margin during the first nine months of 2007 was a continuation of an increased cost of funds reflecting the maturity and repricing of fixed rate CDs and borrowed funds that were originally obtained in periods of lower interest rate environment.

The increased cost of funds and corresponding decline in the net interest margin for the most part reflects a reversal of a increasing net interest margin we enjoyed back in the latter part of 2004 and 2005. During the fourth quarter the net interest margin was negatively impacted by the decline in the prime rate. With about 58% of our loans tied to floating rates, our asset yield declined at a much faster rate than our cost of funds during the quarter.

Other contributing factors to the declining net interest margin include a higher level of nonperforming assets , a very competitive loan to deposit environment and a flat to inverted yield curve. Due to the recent 25 basis point cut in the prime rate during December and a likely additional prime rate reduction, we expect a further compressed net interest margin heading into the first and likely second quarters of 2008.

As we move forward throughout 2008 into 2009 we have fixed rate CDs and borrowed funds that should reprice downwards but our net interest margin will likely remain under pressure until the prime rate levels off. Given the multitude of factors that impact the net interest margin, for example, Federal Reserve decisions, corresponding changes in interest rates for deposits and borrowed funds, shape of the yield curve, loan and deposit competitive environment, changes in balance sheet structure, level of nonperforming assets and potential changes in interest rate risk management strategies just to name a few, it is difficult to predict future net interest margins.

However, under the current interest rate environment it appears that it will be at least the late second quarter into the third quarter before net interest margins begins (inaudible). Our loan loss provision expense for the fourth quarter of '07 totaled $4.9 million, an increase of $3.2 million over all the expense in the fourth quarter of 2006. And for all of 2007 our provision expense totaled $11.1 million, an increase of $5.3 million over the $5.8 million that we expense in all of 2006.

The increase in provision expense during 2007 primarily results from a higher level of nonperforming loans and other downgrades within our commercial loan portfolio, which has necessitated a higher reserve coverage ratio. Defined as the allowance for loan loss as a percent of total loans, the reserve coverage ratio is 1.43% at year-end '07 compared to 1.38% as of September 30th of '07 and 1.23% as of December 31, 2006.

For the fourth quarter of '07 our fee income totaled $1.5 million, up about 11% from the fourth quarter of '06. And for all of 2007 our fee income or non-interest income totaled $5.9 million, also an increase of 11% from all of 2006. We recorded increases in virtually all fee income categories with the exception of a modest decline in mortgage banking activity during both time periods.

Our overhead costs totaled $10 million during the fourth quarter of '07, an increase of about $1.8 million or 22% from the expense in the fourth quarter of '06. And on a year-to-date basis we expensed $38.4 million, an increase of $6.1 million or 19% from what we had expensed in 2006. Of the $6.1 million increase year-over-year, $3.9 million or about 64% was in salaries and benefits, included in that is the former chairman's retirement package of $1.2 million and our FTE has increased about 5% year-over-year.

Our occupancy and equipment costs were up normally at about $200,000 year-over-year and our other operating costs were also up primarily due to increased costs associated with higher level of nonperforming assets, increased FDIC insurance premiums, software and systems enhancements and the overall increased size of the Company. With regard to asset growth during the last 12 months, both assets and loans were up about $54 million or about 3% and again there are no major changes in our asset composition.

With regards to funding, our funding strategy continues to stay very steady growing our local deposits and bridging the funding gap with wholesale funds, that being broker CDs and Federal Home Bank advances. Our average wholesale funds to total funds in the fourth quarter of 2007 equaled 59%, down from the 61% in the third quarter of '07 and down from 63% in the fourth quarter of '06. As you recall, we've been as high as 69%.

Given the lower interest rate environment on Federal Home Loan Bank advances when compared to the brokers CD market, we have recently replaced some maturing broker CDs with Federal Home Loan Bank advances and will continue to so if current interest rate environments remain unchanged. And lastly with regard to capital, we remain in a well capitalized position per bank regulatory definitions with a total risk-based capital ratio at the end of '07 of 11.4%. That's my prepared remarks. Certainly be happy to answer any questions in the question and answer session. I will now turn it over to Bob.

Thank you, Chuck. For my remarks this morning I will focus primarily on various aspects of the loan portfolio and nonperforming assets. Net loan growth during the quarter was about $4 million. While the Grand Rapids region declined by about $22 million, $26 million was generated on a combined basis in the offices in Holland, Lansing, Washtenaw and Oakland County. Nonperforming assets increased a net $10 million from $26 million in September to $36 million at year-end. Please note that of this total of $36 million it does include other real estate owned of approximately $5.9 million. Total additions to the nonperforming list of $16 million were partially offset by paydowns, O.R.E. sales, other reductions totaling $2.5 million as well as charge-offs of $3.9 million.

To give some further color to these numbers, I would offer the following information as to some of the larger credit downgrades to nonperforming status in the fourth quarter -- A $1.7 million credit to a residential land development loan in the Washtenaw County market; $1.2 million to a construction supplier in the Grand Rapids market; $4 million on five commercial real estate credits in Grand Rapids; $3.5 million on five C&I related loans in the Grand Rapids portfolio. With regard to overall nonperforming assets, I want to briefly walk through a summary of some of the specific components as of December 31st and compare those nonperforming totals to the related segments' totals in the portfolio.

First land development and lot loans. We had $8.6 million in nonperforming loans and related foreclosed assets compared to a total land development lot portfolio of approximately $142 million. Residential construction $3.1 million in nonperforming loans and related foreclosed assets compared to total portfolio of $53 million.

Lessors of residential real estate $3.2 million in nonperforming loans and related foreclosed assets compared to a total portfolio of approximately $70 million. Commercial real estate $13.8 million in nonperforming loans and related foreclosed assets compared to a total portfolio of approximately $900 million. Finally, commercial industrial loans. We had $7.1 million in nonperforming loans and related assets compared to a total portfolio of approximately $525 million.

As an additional point of note, of the $29.8 million in nonperforming loans, approximately $13 million was contractually current as of December 31st. Mercantile loan review and lending personnel reviewed the residential land development and construction portfolio in fourth quarter and as a result approximately $10.5 million, which consists of ten relationships and credit, was downgraded to watch list status. Please notes these are not nonperforming loans at this time.

Regarding charge-offs, during the fourth quarter Mercantile had gross loan losses just under $4 million. Of that total $1.5 million was residential real estate and land development related. Approximately $700 million was related to owner occupied commercial real estate coming off foreclosure redemption with impaired losses charged and $1.4 million was related to realizing impaired losses on non-owner occupied commercial real estate sold or engaged in the foreclosure process. Mercantile lending personnel continue to work closely with customers to identify struggling real estate projects and assess the ongoing risk to the bank, continuing to assess the financial capacity of principals and guarantors. In some cases these individuals financial capacity is being stressed due to the over supply of housing stock in this market and the resulting need for the guarantors to tap their liquidity and income to carry projects.

One final update, Mercantile Oakland County office opened for business on December 10th. At the end of the month that office had loans totaling $4.5 million with a good pipeline and total deposits of about $1.1 million. That's it for my prepared remarks. I will now turn it back over to Mike.

Thank you, Chuck, and thank you, Bob. We would now like to open up for a Q&A session.

Thank you. [OPERATOR INSTRUCTIONS]. Our first question comes from the line of Brad Vander Ploeg with Raymond James. Please proceed with your question.

Thanks, good morning. Typically in a credit cycle like this you'd expect that maybe competition would ease off a little bit with credit quality deteriorating so much and growth slowing, but it doesn't sound like that's the case.

This is Mike, Brad. A little bit, certainly, it's not the same as it was out there a year ago. But conversely what does happen is because a lot of good credit requests are hard to come by, there is still plenty of competitors out there that are looking for, looking for that kind of business. One thing we have seen is that some of the crazy structuring where some of our competitors were doing a ton of stuff with no guarantees or limited collateral, that has really, really abated, which has been, which has been nice because we are able to put some more sense into the marketplace as far as credit structure goes. But the rate competition is still pretty heavy out there.

Right. I know you said that it's almost impossible to handicap sort of where we are in the cycle, but just given what you've seen in terms of migration into nonperformers and charge-offs and so forth, is there any way to handicap what inning we are in here?

Yes, it is hard, Brad, and one of the things that makes it really difficult is that in all of our years of collective wisdom around the table here at the bank what we typically can estimate is by looking at our past dues you can kind of watch them migrate and you have a pattern of, okay, this is what's going to end up as a nonperformer or charge off. What's really been difficult at this point is that there's been such a severe and deep downturn that, and I think Bob gave you the numbers, is that a lot of our nonperformers are actually contractually current, so we have skipped passed the 30, 60, 90 day past due. And part of that's us being very, very conservative and saying, okay, the payments are up to date but we see, given what's going on out there in the residential real estate market, we know that the only way they are making the payments are by hook or by crook, or in a lot of cases the guarantors have done a valiant job of pouring their liquidity into these things to keep it going, but we could see that three, six, nine months down the road, unless things change out there, they are going to run out of cash.

It makes it really difficult to handicap it. And of course, what happens out there nationwide and statewide, are we going into a recession in 2008, are we not. I think there's opinions on both sides of that, that factors in. But as far as our portfolio goes, we finally said that during the beginning of the fourth quarter, as Bob said, we looked through every one of our residential real estate development deals, 10% of them are already classified or not performing and there is additional number that are on the watchlist. But if it had anything at all that we thought was showing any kind of weakness, we put it on either the watchlist or non-accrual. So we think we are in the latter innings as far as what's going on in our portfolio with our bank, but we also understand that we are at somewhat of the mercy of what the rest of the market forces bring to us in 2008.

Right. And obviously residential real estate is very weak. Is that bleeding over at all, as far as you can tell, into true commercial real estate and then maybe further into just unsecured lending and cash flow lines or how does that feel?

A couple of things about that. Bob gave you the breakdown of all of our nonperformers and what industry they are in. And if you listen to those numbers you'll see that, while they are somewhat spread out among C&I and commercial real estate and residential real estate, as a percentage the residential real estate is inordinately represented in those numbers. Where we are seeing it, it really isn't bleeding into other areas that aren't related but we are seeing it bleed into areas that are related. For example, Bob mentioned there was a, I think it is $1.2 million credit, it was a commercial credit but this Company's job was supplying drywall and lumber and that kind of stuff to the residential real estate builders. So we are seeing that kind of bleed over.

And then your final part of the question, we have traditionally done very, very little unsecured lending here at the bank, so that's holding us in good stead. So we are not seeing anything at all as far as those types of loans becoming a problem for us or I know nationally people are asking the question, are home equity loans the next big problem and we are seeing very, very little trouble in that portfolio. It's not a big portfolio for us, anyway, but for us it's really a deep problem on residential real estate and it's directly related credits.

Right. Okay. Thank you very much.

Our next question comes from the line of [Jeff Ignalo] with JPMorgan. Please proceed with your question.

I just wanted to kind of ask some higher level strategic and kind of philosophical questions. When you are in the credit cycle, like you are now, and the operating environment you see and some of the structural challenges that you face with your balance sheet and funding, why be expanding the bank at this point, either operationally or balance sheet wise and have your stock trading at 50% of book value? Why would you use your capital to expand your exposure to what's basically appears to be an environment economically that you're unsure about? Can you just walk me through that thought process when you could be buying back your stock, quite frankly?

We always consider that, obviously, before starting and I guess, this is Mike and I will let Bob or Chuck add on to this answer, but (inaudible) we look at this -- yes, the credit cycle is tough out there. We have a couple of options of what we want to do. We can think very, very short term and say, okay we are not going to do anything except hunker down, we are going to let good business walk away, we are not going to take advantage of prosecuting our game plan, which has always been to take advantage of when we get good bankers putting them in place and allowing them to build the bank for the future. We've talked about stock buyback and we just don't feel that that's the proper use of our capital right now. I think as time goes on and no one can put a finger on how deep this issue is going to be, as far as residential real estate and its related impact, it's thoroughly, we think, an intelligent idea to stay pretty well capitalized.

And finally, I have got to point out to you, the amount of money, the amount of capital that it's taken us to start Oakland County and bring a good team of people in there and start to build a good piece of business there, is miniscule compared to what the incremental increase in our asset quality or fee income or that type of thing that we know we can build going forward. I mean it's not like if this was a major impact to our financial results at this point. I mean to give you an example, if we had spent $350,000 in December to pay the past-due taxes on properties that we either own or will own through the foreclosure process pretty soon, that's a far bigger issue than the couple hundred thousand dollars that we've spent to expand in Oakland County. Maybe that can give you a little bit of color of our thinking.

This is Bob, if you look at -- we are very pleased with the performance of our regional markets for 2007. If you look at year-to-date numbers for the whole year, those markets contribute about $60 million of loan growth for the corporation. So we are very pleased with what they have contributed, especially if you compare to what monies were spent to start those locations.

I understand that but I guess just it's not a rounding error, your stock is trading at 50% of book value, so it's a pretty compelling -- it just seems pretty compelling to me.

We appreciate that and we've had lots of conversations and I'm sure you can do some research yourself, we know a lot of our competitors have announced stock buybacks over the last year. As we look at the numbers that they file on a quarterly basis, most of them aren't buying a whole lot of the stock back any more because I think they are taking the same approach that we are. We appreciate. We look at it. We discuss it as a management and a board team quite often, but at this point that hasn't been the direction we want to go.

All right, thanks, guys.

Our next question comes from the line of John Rowan with Sidoti & Company. Please proceed with your question.

Mike, just to follow up kind of on the last question, how safe do you think the dividend is if the current credit trends don't improve?

Well, we have not given any consideration to a dividend cut. But we always, we are very careful in guaranteeing or predicting dividends into the future. But at this point that hasn't been a point of discussion among our group. We certainly hope that this quarter, as tough a quarter as it has been, we think we've got our arms around the asset quality issue and we look for certainly better quarters in the first, second, third and fourth quarters of 2008 for sure.

And I guess for Bob, how much percentage-wise of your loan portfolio have you now reviewed?

As I mentioned in the commentary, we reviewed all of our residential development loans related to that industry, the loans that, as we said, have given us the most trouble from a nonperforming standpoint. Where we will caution you though is that reviews take place at a point in time and we continue to assess all of the portfolio on an ongoing basis,because as we stress, things haven't gotten any better. And as the economic situation continues to worsen here or does not get better, continues to add stress to borrowers, guarantors that may have been strong at a point in time, but continue to tap resources that were once a lot stronger. So it's a really, it's an ongoing process. It's something that we will continue to do continually to make sure that we have our arms around the portfolio.

One last question for Chuck. What's a reasonable tax rate to use going forward?

Somewhere, John, probably between 28% and 30% dependent on the level of provision.

Thank you.

Our next question comes from the line of Eileen Rooney with KBW. Please proceed with your question.

Hi, guys, I just had one question. I guess related to reserves, I just wanted to get a sense of your comfort level with where reserves are now, not really as a percent of the loan portfolio but more as a percent of nonperforming loans. It's only about 87% this quarter given the big increase that you guys had in N.P.L., so I was just wondering what your thoughts were on that?

Eileen, this is Bob. Really, when a loan goes to nonperforming status you become less worried about the percentages necessarily as opposed to analysis of what you actually have in terms of collateral and support for that loan as a total and you do a specific analysis of that breakdown and any shortfall that you have you reserve specifically against that loan and that's a dynamic process that takes place every month and those numbers change from month to month. As real estates values were to decline, those impaired losses become higher. So that's really what we are look at. We look at when loans get to impaired status is very specifically what collateral do you have and you get away from a pooled approach of reserve allocation.

So all, pretty much all of the reserves then are specifically allocated.

No, no, no. Of our loan loss reserve, a roughly small percentage is allocated specifically to nonperforming loans. The far greater percentage is consistent of our pool allocation against our performing portfolio and that's normal operating status for any bank.

Okay. All right. Thanks.

There are no questions in queue at this time. [OPERATOR INSTRUCTIONS]. Our next question comes from the line of Ben Crabtree, Stifel Nicolaus. Please proceed with your question.

Can you hear me?

Yes, hi, Ben.

I guess I'd like to talk about the margin. This is a little bit of a follow on to the strategic question. At a margin solidly under 300 basis points, even were charge-offs and provisions to move to a more normal level, it would, and I haven't done the numbers, it would seem to me as though you're locked into a return on equity that's well below double digits. And that kind of leads back to that same question about why grow the balance sheet at such skinny profitability ratios? Why not basically hunker down and focus on the ones where you can make a decent spread and which again would create some additional capital that you could use to buyback stock? I mean, it's nice to talk about good loans out there but if you don't make a decent spread on it how good of loans are they really?

I think part of it is, Ben, is that right now you look at it and you say, yes, we are in a, because we are an asset sensitive bank, we are in a position where you say, yes, -- and it is a thin margin, there's no question about it. And our model has always been to operate on a fairly thin margin with low expenses and good asset quality. Obviously, we haven't been able to do the last two, the last three quarters because asset quality has become a problem that we normally don't have. But the other part of it is that, as Chuck said earlier, starting in the third or fourth quarter that margin is going to start turnaround the other way and those numbers are going to improve and we'll be able to take advantage of as it works its way through the liabilities, the repricing opportunities that we get.

So I think that's the one thing that we try to avoid is that you can look at it today and say, oh, my God we ought to fundamentally change what we are doing as a bank. It worked really well for nine and a half years or nine years, whatever, and this is a quarter where it doesn't work, abandon ship, pull the anchors up and change ourselves fundamentally. I think if we have to do that some day, the management team is willing to do it, the board is willing to do it. But I think we want to make sure that that needs to be done and is done in a very thoughtful process and not under the reaction of, boy, right now today at today's margin we really should stop doing what we have been very good at doing.

I guess my thought process here is that you seem to be so subject to whatever the Fed is going to do and that in effect you end up having a fair amount of interest rate risk in your earnings model that perhaps if you really were fully balanced in terms of rate sensitivity, the profitability would be, just wouldn't be attractive enough to be putting some of those loans on the books.

Ben, a big part of where the margin is, where it is today is certainly timing and you've already talked to that and we've always known that we have historically been a very asset sensitive bank in the short term. And as Mike mentioned and as I mentioned in my prepared remarks, when the prime levels off, and it's obviously going to apparently take awhile to get there, we are going to get some of those reversals. Like I said, we just don't live with what happens in the margin in the short term. We try to do some things to counteract that. But it is a cycle that we've always gone through. You saw it several years ago when our margin basically skyrocketed because rates were going up. It helps us when rates are going up, but it hurts us short-term when rates are going down but it all cycles through. But I think to add to that, we will never get to zero nonperforming assets, but I was doing some calculations today. Our current nonperforming assets has about, in total has about a 15 to 18 basis point hit to our margin.

Again, we can't get down to zero, obviously we'd all love to get there, but we won't be there. But there is certainly some basis points in there that are nonperforming and also as I mentioned and this is obviously hurting all banks, we just don't have a yield curve. And when you look at the loans that we're put on the books, if you just kind of isolate them, certainly the spreads are a little bit skinnier than what we have gotten historically. Part of that is yield curve and a lot of it has to do with competition. But it's certainly not like we are out there and we are not growing a lot, certainly, but even the growth we do have, it is fairly profitable to us. It's not certainly great spreads that we would get if we had a normal yield curve and more of a normalized competitive operating environment. But they are profitable and, as Mike mentioned, we have opportunities and we look at this as a long-term strategic plan of not just looking at the current economic or rate cycle, but obviously longer term than that and eventually we will come out of this and we think that the strategic moves we do now will play out very well as we move forward.

Bank from a business perspective, what you're suggesting it's done quite a bit and it's exactly what our large competitor banks do all the time and allows us to, that is really what allowed us to get into business and do so well.

In other words, to put the mandate out there, well, boy, if it doesn't make sense to make good loans today, doesn't make sense to add new relationships, so we are not lending anybody, we are going to shrink the balance sheet, we are going to layoff a whole bunch of people and then three quarter later when you look and say, oh, margins improved, it look better, let's go and hirer some people back, we are back in business folks, hey, everybody in the marketplace, we are back, we are really interested in doing business with you now.

So that's, I think you can look at the balance sheet and try to manage the business totally that way, but I think you'd also need to understand the fundamental element of what we do as a bank and the minute we start to send, at least in our opinion right now, the minute we start to send the signals out there to all the good customers who are trying to gain into the relationships of the bank, hey, it doesn't make sense for us as Mercantile to make loans right now. We are going to be pretty much dead in the water for a much longer period of time.

Okay. Yes. All right. Thank you.

You're welcome.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Thank you very much. We appreciate everyone's interest in our Company. We understand that we are in very challenging times right now and want to reiterate to everyone who follows us that we are working extremely hard to return ourselves back to the levels of profitability, especially in the asset quality area, that we are well known for. So thank you again.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.