Bryn Mawr Bank Corporation
Q3 2008 Earnings Call Transcript

Published: 12 Nov 2008

[Operator:]

I’d like to welcome everyone to the Bryn Mawr Bank Corporation’s earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator instructions) Thank you. It is now my pleasure to turn the floor over to your host, Duncan Smith, Chief Financial Officer. Sir, you may begin your conference.

[Duncan Smith:]

Thank you, Cathleen [ph]. And thanks everyone for joining us today. I hope you had a chance to review last night’s press release. If you have not received our press release, it is available on our website at bmtc.com or by calling 610-228-2140. Ted Peters, Chairman and CEO of Bryn Mawr Trust Company, will make some introductory comments on the quarter, our strategic initiatives, and our view of the competitive landscape. After that, we’ll take your questions. The archives of this conference call will be available at the Bryn Mawr Bank Corporation website or by calling 800-642-1687 and entering conference PIN number 68041805. A replay will be available approximately two hours after this call concludes. Before we begin, please be advised that during the course of this conference call, management may make forward-looking statements which are not historical facts. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words believe, expect, anticipate, intend, plan, target, estimate or words of similar meaning. Forward-looking statements by their nature are subject to risks and uncertainties, a number of factors, many of which are beyond the Corporation’s control, could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Forward-looking statements speak only as of the date they are made. The Corporation does not undertake to update forward-looking statements. Thanks. Now I'd like to turn the call over to Ted.

[Ted Peters:]

Thanks, Duncan, and thank you everyone for joining us today. As you have probably read by now, last night we reported third quarter 2008 diluted earnings per share of $0.26 and net income of $2.3 million compared to diluted earnings per share of $0.40 and net income of $3.5 million in the same period last year. Return on average equity and return on average assets for the quarter ended September 30, 2008 were 9.55 and 0.83 respectively, while ROE was 15.9 and ROA was 1.56 in the same period last year. The quarter was a mix of both strong results in making progress towards our long-term strategic goals frustrated by the challenges of today’s market conditions. The most important messages today are that Bryn Mawr remains well capitalized at both the corporate and bank level, has not experienced any material deterioration in the overall credit quality, has not suffered any permanent impairment to our investment portfolio, and is open for business as usual. With our strong financial position, we will continue to execute our strategy and capitalize our competitive advantages at a time when unprecedented market conditions are creating attractive growth opportunities. We are already seeing evidence that our strong financial condition is enhancing our competitive position. This quarter we experienced an influx of new accounts from depositors who are mostly coming to us from larger banks. In the near-term, higher loan loss provisions and leasing portfolio; expenses associated with the surrender of our bank owned life insurance contract, which is known as BOLI; a slight dip in the net interest margin; the financial market’s impact on our wealth management revenues; and the cost of evaluating several acquisition opportunities, all weighed negatively on third quarter results. Beyond the noise [ph] of our numbers the strength of our franchise is shining throughout the most fundamental level. In the third quarter, our loan and lease portfolio continued to grow at double-digit rates. Total portfolio loans and leases at September 30, 2008 were $878 million, up over 13% from the previous year and also up $24.8 million sequentially. We have seen good demand for our traditional loan products from both our local retail and business markets. Compared to a year ago, home equity loans and lines increased over 30% and residential mortgage balances were up 12.4%, reflecting continued demand in our affluent market of relatively stable real estate values. Commercial and industrial loans increased 10.8% and commercial mortgages grew by 8.9% over the past year. At the same time, we intentionally scaled back the construction loan portfolio. While we are closely monitoring the economy, it is times like these when we believe our highly respected brand, our focus on Philadelphia’s more affluent western suburbs provide us the greatest value. We have complemented our strong brand in enviable location by maintaining our well capitalized status, providing us with both the capital and liquidity to originate new loans at a time when many of our competitors don’t have that ability. In addition, we are only weeks away from the opening of our new West Chester regional office. We will be entering this attractive new market at a time when many of the lenders with the greatest share of that market are experiencing some financing difficulties. While we remain diligent in our risk management and pricing discipline, market conditions are very supportive of high quality loan growth. Leasing portfolio balances at the end of the quarter were also up from a year ago, although they were up less than $3 million sequentially from June 30, 2008. Through tighter underwriting standards and lower marketing expenditures, we are achieving our goal of roughly $1 million per month net increase in the leasing portfolio. The net interest margin for the third quarter of 2008 was 3.90%, a slight decrease compared to the second quarter of 2008. Fed actions and competition have limited opportunities to expand margins. There are still a number of healthy institutions competing for high quality loans while it seems that some of the weaker institutions in our area, especially Sovereign and Wachovia, are bidding up deposit rates. Fortunately, we’ve managed to stabilize margins over the last few quarters and will continue to exercise discipline in both our deposit gathering and lending activities to optimize margins. Overall credit quality remained strong. Although we have not experienced any appreciable deterioration in the credit quality of the loan portfolio, the provision was marginally increased relative to the last quarter and is consistent with this higher risk economic environment. Charge-offs rose in the quarter almost entirely due to the experience in the lease portfolio. Late in 2007, we implemented a number of remedial actions in the leasing area, including the tightening of underwriting standards to accelerate improvement in our leasing loss experience. Even with higher charge-offs, because the leasing business offers better spreads through the first three quarters of 2008 on a consolidated after-tax basis, leasing has lost less than $150,000 for the corporation. As our charge-off experience normalizes, we believe leasing can make a meaningful contribution to our bottom line. We have always maintained a conservative investment strategy. Our current portfolios comprised of a diversified portfolio of US agency bonds, mortgage-backed securities, municipal bonds, US treasury securities, and corporate bonds. On September 30, the portfolio had an amortized cost of $117 million, which represented a little over 10% of total assets. The portfolio had a market value that was $3 million, or $2.6 million below amortized cost at September 30, most of which was attributable to the corporate bond portfolio. Since the end of our third quarter, the market value of the corporate bond portfolio has improved sharply. Though competition remains intense, our funding strategy is exceeding in providing liquidity to support loan growth at competitive rates. Third quarter 2008 aggregate average quarterly balances of interest-bearing checking, money market, and savings account balances rose to $313 million from $307 million in the second quarter of 2008. Average third quarter 2008 non-interest bearing balances were also up sequentially from the second quarter 2008 averages. This quarter we further diversified our sources of funds through the IND [ph] program, which places brokerage company money market accounts in FDIC insured banks. In addition, it’s estimated that there are over $1 billion of deposit balances in competitive branches within a few miles of our soon to open West Chester regional office. Non-interest income also increased in the third quarter compared to the second quarter of 2008, primarily due to $712,000 of Lau Associates wealth management revenue in the quarter. The integration of Lau Associates is going very well, helping to build scale, increase the geographic and product diversification of our wealth management operations. In the third quarter, our application to establish the Bryn Mawr Trust Company of Delaware, we see formal approval. We expect this Bryn Mawr Trust Company of Delaware to open next week, which should lead to growth in both individual institutional trust assets managed and administered. At September 30, 2008, total asset under management administration were $2.7 billion. Although the weak market has been a drag on the entire wealth management industry, including our Bryn Mawr Trust Company assets and revenues, this is a business we know and manage well. So we will continue to evaluate additional wealth management acquisition opportunities that further lever our strong brand and reputation. Non-interest expense for the third quarter of 2008 was $10.1 million, an increase of $1.3 million or 15.6% over the $8.8 million in the third quarter of 2007. Expenses rose due to increases in salaries and benefits, which were primarily additions to staff associated with new growth initiatives and the Lau Associates acquisition. Third quarter non-interest expenses also include the higher cost of FDIC insurance, cost relating to the cancellation of our bank owned life insurance policy, stock-based compensation and the cost of evaluating various acquisitions. We work hard to limit the growth of our non-interest expenses. However, as we saw with FDIC insurance this year, there are a number of regulatory and other items beyond our control. In fact, our regulatory expenses, including FDIC insurance cost, will be up next year, with FDIC insurance rising at least 7 basis points from what we are currently paying, which is 5 basis points. In addition, due to the weakness of the financial markets and its effect on the value of our frozen defined benefit plan assets, we may incur costs between $400,000 and $800,000 in the plan next year. And the opening of our West Chester regional office and the Delaware trust company will also increase non-interest cost in 2009 relative to 2008. Before summarizing our results and opening the call to questions, let me take a minute to review our capital ratios and financial position. The Bryn Mawr Trust Company and Bryn Mawr Bank Corporation are both well capitalized according to all federal and state regulatory standards. A table of the applicable ratios for both the bank and the corporation is included in our press release. And you will note that we enjoy a healthy cushion relative to the well-capitalized regulatory minimums. In light of the turmoil and the government’s impending further intervention in our financial markets, we believe a strong financial position is essential. We are proud of the discipline we have exhibited over the years that has enabled us to easily sidestep the temptation of risky lending and investing practices that have now come back to haunt some of our competitors. In July and August of this year, we were able to enhance our capital decision by issuing $15 million in subordinated debt, something I’m sure we cannot do today, especially with the favorable terms and conditions, which we negotiate. It is also reassuring to know that through this process, the capital markets have essentially agreed with the regulator’s favorable evaluation of our strong financial position and track record of steady profitability. In addition to our capital strength, we are also liquid, providing the corporation with even further flexibility and resilience in these uncertain times. Our capital ratios and credit culture have positioned us to execute our long-term growth strategy and to build shareholder value at a time of disruption in today’s financial markets. We have all of our resources and energy available to capitalize on opportunities in the marketplace, to grow market share, and maintain Bryn Mawr’s pricing and asset quality discipline. While we remain diligent in our management of risk and control of cost, we believe the current market climate provides us favorable competitive environment for both our existing business and growth initiatives. Before closing, I am pleased to announce that the Corporation’s Board of Directors declared a quarterly dividend of $0.14 per share, payable December 1, 2008 to shareholders of record of November 10. This is our 64th consecutive quarterly dividend. With that, we will open the lines for any questions. Operator, would you please compile the Q&A roster?

[Operator:]

(Operator instructions) Your first question is coming from David Darst from FTN.

[David Darst:]

Good morning.

[Ted Peters:]

Good morning, David.

[David Darst:]

Congratulations on your baseball win.

[Ted Peters:]

Thank you. I think we are a little sleepy today, but thank you.

[David Darst:]

Could you go over some of the issues in the leasing portfolio? I know we talked about it in last quarter, but I wonder if geographically your asset class is the same that you don’t want last quarter but is creeping in other parts of that portfolio.

[Ted Peters:]

Good. That’s a good question, David. We have Joe Keefer with us who is the Chief Credit Officer of the Bank. So I’ll turn it over to Joe for that question.

[Joe Keefer:]

David, we tightened up our underwriting standards towards the end of ’07 and into ’08. And on those mid-leases that we have written, they performed very well. In fact, the delinquency or problems there are de-minimus, and we’re pleased with that success. If you look at the portfolio by state or by equipment type, we don’t see any trends where one particular state or equipment type is performing worse than the other, but we do look at that monthly. And if we see that, we will adjust. I will say that we probably have a larger percentage of medical leases in our portfolio that have zero delinquency right now. So – hope that answers your question.

[David Darst:]

Yes. Are those the type of assets you’re pursuing more going forward?

[Joe Keefer:]

We would do – we’re looking to do more medical leases because historically they perform better.

[David Darst:]

Okay. And so the annualized charge-off the rate is close to 6% this quarter. Do you think – based on the volume that you had prior to changing underwriting standards, how many more quarters do you think we see our provision have provision expense and charge-offs?

[Joe Keefer:]

That’s a very good question. It’s hard to determine. When we scope the portfolio where we had most of the problems released is that we’ve written in excess of $50,000. And if we did 220 leases last year in that amount, we probably did under 50 this year. And when you scope that portfolio, the level of problems that we had are cut in half. So we actually anticipated that we would see some improvement in the fourth quarter, but we probably won’t see that until sometime in 2009 where we expect that the leasing portfolio will start contributing to earnings.

[David Darst:]

Okay. And Ted, could you – looking at the investments that you’ve outlined for Chester County, Delaware, and a few other things, do we begin to see the expenses from those in the first quarter and just – and FDIC or – some of that in the fourth quarter as well?

[Ted Peters:]

Well, we’re going to see – I mean, we’ve been sparing [ph] some of this FDIC costs already certainly through this year, the startup expenses for Delaware, the legal expenses and so forth we’re seeing in the fourth quarter. We’re going to – both Delaware and obviously opening up in West Chester will be dilutive to earnings certainly through the early part of 2009. We are pretty optimistic about Delaware. The new trust company in Delaware that we turn that around pretty quickly and get that into a profitable mode. We are staffing it with people, quite frankly. We’re transferring down from Bryn Mawr. So we’re not going to have a huge personnel expense down there, incremental expense. And we were hopeful that we can bring in some significant business during the first year. The West Chester office is a fairly large regional office for us. It’s 4,200 square feet. We’ll have a commercial lending department in it. We’ll have a trust officer in it. So it’s a fairly big commitment for us, David, but we think that’s a great market to be in. Obviously, we’ve made a major commitment there, so it will show a larger loss. So – one of the things that’s affected the bank in general is that we have had, as you know, for the last seven or eight years a lot of growth initiatives. And we’ve built four branches, we started four different businesses, now the Trust Company in Delaware is the fifth business we acquired while down in Wilmington, Delaware last year. So we had a lot of initiatives growing a lot of things and our overhead has grown probably a little bit faster than we’ve been growing the resulting income and profitability of it. The leasing company is a prime example. We felt the leasing company was going to be a significant contributor to earnings this year and it’s not. It’s going to break even or lose some money this year, and that’s very disappointing. However, we feel very good that we can flush this thing through in the fourth quarter of 2008, the first quarter of 2009 and make that company nice and profitable. So we’re watching – our efficiency ratio is not as low as it would be. But on the other hand, the money that we’ve been spending has been in new initiatives and things to enhance future revenue and profitability.

[David Darst:]

Okay. That sounds good. How about capital and the TARP program?

[Ted Peters:]

We are looking at that right now. We are not sure what we’re going to do. We’ve had extensive meetings. We participated in some of those webinars that are out there and so forth. We certainly see some advantages, but we see some disadvantages as well. So we’ve not made a decision we have until November 14, as you know, to file our application with government, and we’re evaluating it right now.

[David Darst:]

Okay. And then on the sub-debt, your initial first quarter was prices of September 15, the 655?

[Ted Peters:]

Correct.

[David Darst:]

Okay.

[Ted Peters:]

And that resets (inaudible).

[Duncan Smith:]

Every quarter, so December 15.

[Ted Peters:]

So we set December 15th. Fortunately LIBOR – it’s priced of LIBOR. And fortunately, LIBOR is settling down to a more realistic number. As you know, it really pumped the way up there for a while. But as the markets have settled down, LIBOR has become a little more realistic.

[David Darst:]

Okay. So the margin will have the impact of sub-debt and then the rate cuts?

[Ted Peters:]

That’s true.

[David Darst:]

In the fourth quarter?

[Ted Peters:]

That’s true.

[David Darst:]

Okay. Are you getting any better loan pricing?

[Ted Peters:]

We are trying to – some of the larger banks in the Philadelphia markets have stopped lending Wachovia in particular. So we’re seeing actually very good loan demand. You always have to be very careful when someone comes in the door and tells us this is [ph] why are they there. So we’re being – we are watching things very closely. But loans this year are increasing at a nice rate. So our loan demand has been strong. We tried to be selective. And to answer your question, yes, we see a little better pricing on the loan side.

[David Darst:]

Okay, thank you.

[Ted Peters:]

Operator, is there another call?

[Operator:]

I did have Mr. Mince [ph]. Okay, he’s back. Your next –

[Chris Mince:]

Congrats and thank you for taking my call.

[Ted Peters:]

Sure. Hi, Chris, how are you?

[Chris Mince:]

Good, thanks. I’m going to – I just have a few questions on the loan portfolio, particularly in the home equity products. And I was wondering if you could give us some color as to whether that’s function of new business or is that more of a function of higher utilization rates in your existing lines?

[Ted Peters:]

Okay. I’ll let Joe Keefer answer that then Chris.

[Joe Keefer:]

Hi, Chris.

[Chris Mince:]

Hi.

[Joe Keefer:]

It’s a combination. If you went back historically our larger credit, the usage is about 40% of the commitments. And it’s ticked up to about 45%, 46%. As prime comes down, those rates flow down. So people are utilization them more. Also we’re attracting more customers in our nice affluent area. I’ll point out that these are direct retail HELOCs, they are not through brokers. So there are folks that live and work in our trade area. And we think it’s a good business for us.

[Chris Mince:]

Okay, great. Thank you. And also with respect to the strong residential mortgage growth, I was wondering if you could tell us what you are seeing in the housing market in your particular area and should perhaps we expect to see a normalization in originations as we look forward?

[Ted Peters:]

Well, originations have definitely softened because of the marketplace and people just aren’t buying homes right now. I am happy to report though that our gain on sale income for the first nine months is ahead of last year in a very difficult environment. So I’d have to congratulate our mortgage folks for doing that. I think we’re getting better pricing. We’ve seen growth in our residential mortgage portfolio, and that was planned because, as everyone knows, the jumbo market for residential mortgage has really bottomed out or crated. And we use that as an advantage to attract more fluent borrowers and we held them in portfolio at what we think were attractive rates. And those are mostly three, five, and seven-year adjustable rate mortgages.

[Chris Mince:]

Great. Thank you very much for taking my questions.

[Ted Peters:]

Thank you, Chris.

[Operator:]

Your next call is coming from Gerry Heffernan from Lord Abbett.

[Ted Peters:]

Hi, Gerry, Good morning.

[Gerry Heffernan:]

Good morning, everyone there. First question, can you assure us that given the difficulties of the large banks in the area that the difficulties will not be playing at Bryn Mawr Trust part?

[Ted Peters:]

Right. I wish we could afford to put our name on it.

[Gerry Heffernan:]

Let’s just not go there. And certainly very happy about that Phillies win being an ex-Philly [ph] myself.

[Ted Peters:]

(inaudible)

[Gerry Heffernan:]

Going back to the question about loan pricing, you indicated that some of the bigger players in the market have staff lending certainly is bringing more traffic by that you have to be more careful other than that loan pricing is improving. I was hoping that if you could be a little bit more definitive on that. From my view, from my expectations, I was little bit disappointed as to the continued decline in the net interest margin. I was hoping that we would start to see a little bit of an improvement there with what I would have thought was a better ability to get higher yields, given the tough lending environment. So if we look out by quarter over the next four quarters, how would you imagine the net interest margin to move there?

[Ted Peters:]

Let me just – this is Ted, Gerry. Let me make up comments and I’ll turn it over to perhaps Duncan on the margin and Joe. Basically, our net interest margin has been contracting slightly largely because we’ve been growing loans faster than core deposits. And we are making up the difference in funding through wholesale funding sources which are much more expensive. So therefore, when we grow the loan portfolio, we’ve been growing it, as you know, pretty healthily over the last couple of years. Last year it was – we grew it at 17.9%, year before 15%. What happens when we put a new loan on, incrementally it hurts the margin. However, it does help net interest income. So that’s just sort of the paradox there because we’re not getting the spread that we would normally get. So that has been one of the reasons for some of the shrinkage in the margin. The other reason, of course, is as rates drop, even though we are GAAP-ed neutrally on our GAAP analysis, when rates drop, deposit rates will drop slower than loan rates will. So the loan rates drop two points, deposit rates sometimes just don’t drop that much or they will drop that commensurately. Also in the (inaudible) we have in our market a couple of banks that have been on the ropes. I think the Wachovia and Sovereign, and our market had been bidding up rates pretty aggressively. I mean, Sovereign is in our – it was in the paper yesterday and for a quarter for 12-month CD [ph]. I mean, that’s probably 50, 60, 70 basis points over where the market is here. So that’s helped to kind of push up pricing a little bit too. But our margin has stabilized a little bit even though it is still coming down somewhat. So, Duncan, I’ll turn it over to you. I think Gerry’s question is looking forward for the next number of quarters, where do we see the margin going.

[Duncan Smith:]

Thanks, Ted. I think that’s a tough call to make. Obviously, it’s going to depend on the growth rate and the pricing that we can get on the loan side and also how our competitive environment will react to these prices changes. And when Wachovia gets taken over by Wells Fargo, will they put in more better pricing discipline out there? So, I hesitate to guess on that, but I think the trend is slightly down over the near term. And I really don’t want to just be guessing beyond that.

[Joe Keefer:]

Yes, it will be a rate volume issues there, Gerry, where we certainly expect net interest income to expand. We certainly think that is going to happen. It’s the question of the margin and how much we can hold it. While we are getting some improved pricing, you got to remember that’s first of all on incremental deals, which we’re doing, not on the existing portfolio. In addition, we do have floors on a lot of our home equity lines of credit and we are enforcing those floors. So we’re trying to – on a case-by-case basis, we’re enforcing them. And so that’s one thing we’re trying to hold up. We’re trying to protect this on the downside there. On the liability side, we are really looking for funding sources, which continue to be attractive. We mentioned in my little talk there that we are now doing this thing called IND, which is part of the same group that does Cedars [ph], the promontory group, and we’re also involved in the Cedars program. And the IND deposits have been very helpful to us. I think we’re up to $30 million in that, and that’s priced at Fed funds of plus 20 basis points. That’s has been pretty attractive to us. So we’re looking at everything we can do obviously to decrease our funding cost and to hold our pricing on the asset side. We do hope, as Duncan mentioned, that with Wachovia now being taken over and Sovereign also now being taken over by the Spanish company, we hope that there is a little more rationalization in pricing in the marketplace.

[Ted Peters:]

And Gerry, when we opened our West Chester branch, there are a large number of deposits from Wachovia, TD Banknorth Commerce and some of the other competitors out there in large balances that we think, if we can get our share out there, could grow quite nicely. So we’re optimistic of the core deposit growth we can get in West Chester.

[Gerry Heffernan:]

In regards to the core deposit growth you have seen in this last period, the statement I believe was that with the disruption of the large banks, some of the fewer in the market that you had people coming to you, did I hear that right? Is that how you wanted to say it? Or did you go on to some new account marketing campaigns? Have you guys done anything different? And if this traffic is just coming to you and you haven’t done anything differently, is it an indication that, hey, there is some opportunity out there we better start making people know where our address is?

[Ted Peters:]

Yes. First of all, our new accounts in September and October, and even in August, were up sharply in new account openings, largely coming from the larger banks, a couple of whom are perceived to have some problems. I can’t remember whether there are something in the press release or some actual figures or not, but they were up pretty sharply. We expect it to continue. Of course, our marketing department would like to take credit for it all being a marketing thing and they have done a great job on our marketing with a lot of special promotions in the checking and business checking especially. But a large part of it is that we are perceived in the marketplace as a strong stable bank, which we are. And therefore, we and some other banks in the area are also, like us strong and stable have been attracting deposits nicely. I think we are up probably three times – (inaudible) open in September three times a number of core accounts than we normally open in a month. I don’t have the exact figures in front of me. How long this will continue? We’re not sure. But it’s been very good for us.

[Gerry Heffernan:]

Okay. When marketing has been active, did they do any new programs or were they just doing what they always do?

[Ted Peters:]

Well, we did a couple of new programs. We did a thing where we were doing one of those GSP things. You can put on your dashboard of your car and we are giving that with a new account, and that actually was extremely successful. We’ve been doing a number of promotions on our small business checking. We love those accounts. The average account balance on the checking account is over 200,000 of those, and we’ve been very successful in opening up a lot of new accounts with some special calling efforts and some promotions in that area as well. So once again, what we’re trying to do is win the battle of the units. The Philadelphia is not a great growth area. Therefore, it’s a zero sum game. So for every account we pick up, someone loses one. So it’s kind of guerilla work there out there on the deposit side (inaudible) seriously hand-to-hand cost out on those. And we have been a winner. I mean, if you look at our numbers in the past few years on the number of accounts opened and whatever, it’s been great. However, it’s not, as I mentioned earlier, commensurate equal to our loan growth. So if our loans are growing at a double-digit rate, our core deposits, not our wholesale funding [ph] but our core deposits, even though they are growing, are growing at single-digit rate And that’s a little bit of – that’s part of the conundrum.

[Gerry Heffernan:]

Okay. Given the turmoil in the competitive market out there, is it time to make some changes to the compensation plans of your loan originators to make grabbing the deposits of those accounts a more important piece of their personal income?

[Ted Peters:]

I think that’s an excellent point. I mean, when we make a loan, we will make the loan without getting the deposit account. But I think enhancing an incentive plan where it’s more beneficial for the relationship manager to bring in deposits, it’s something we’re looking at for 2009.

[Gerry Heffernan:]

Okay, great. And lastly, you may have mentioned this in your preamble, I was distracted for a moment. Can you talk about any intentions that you may have regarding the federal government TARP loan, the capital opportunity there?

[Ted Peters:]

Yes, we just mentioned briefly, Gerry, that we are looking at it. We’ve had a number of meetings. We participate in some of these webcasts about the issue. And I should mention that the TARP program seems to be changing a little bit every day and are more explanations on how it’s going to work. We are not sure we’re going to do it. We’ve put – there are certainly some positives. There are some negatives. And the negatives certainly are the warrants and the dilution, and you have to expense those warrants. So it’s you are not really paying 5%, you are really paying close to 7%. So there is a bunch of things that are on the table. We are fortunate that we are in a well capitalized position right now in large part because we did the subordinated debt I think about 60 or 70 days ago, which was before (inaudible). So we’re fortunate on that. So, to answer your question, we are examining this, but we don’t know what we are going to do.

[Gerry Heffernan:]

Okay. Thank you very much.

[Ted Peters:]

Thanks, Gerry.

[Operator:]

(Operator instructions) There appears to be no further questions at this time.

[Duncan Smith:]

Okay. I have one closing comment. This is Duncan Smith. We wanted to thank everybody for joining us this morning. But before we close the call, I want to make a note on a small cosmetic change to our investor communications, which we’ll implement going forward next quarter. We are going to continue to provide all the detailed schedules in tables that are included in our press release, but we are going to reduce the narrative component of the release on a go-forward basis. There will be a commentary from Ted and a brief description of the quarter, but we’ll save all that detail for the conference call. Thank you very much for your time today. And I’ll turn it back over to Ted.

[Ted Peters:]

Good, yes. Thank you. We appreciate you following us and your great questions. And clearly we’re going to keep working hard, and hopefully we look forward to talking to you in January at our next conference call.

[Operator:]

Thank you. This concludes today’s Bryn Mawr Bank Corporation earnings conference call. You may now disconnect. And have a great day.