Sandy Spring Bancorp, Inc.
Q2 2008 Earnings Call Transcript

Published: 25 Aug 2008

[Operator:]

Hello and welcome to the Sandy Spring Bancorp 2008 second quarter earnings conference call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. (Operator Instructions) Please note this conference is being recorded. Now, I’d like to turn the conference over to the, Chairman and Chief Executive Officer, Mr. Hunter Hollar.

[Hunter Hollar:]

Thanks, good afternoon. Welcome, everyone to Sandy Spring Bancorp’s conference call to discuss our second quarter and first half performance. Joining me here today is Phil Mantua, our Chief Financial Officer, Dan Schrider, our Chief Credit Officer and President, and Ron Kuykendall, General Counsel, for Sandy Spring Bancorp. As always the call is open to investors, analysts, and the news media. There’ll be a live webcast of today’s call and there will be a replay of the call available at our website, beginning later today. We can take your questions after a brief review of the key highlights. Before we make our remarks and take your questions, Ron will give the Safe Harbor Statement.

[Ron Kuykendall:]

Thank you, Hunter. Good afternoon. (Technical Difficulty) statements in this webcast that are subject to risks and uncertainties. These forward-looking statements include statements of goals, intentions, earnings and other expectations, estimates of risks and future cost and benefits, assessments of probable loan and lease losses, assessments of market risk and statements of the ability to achieve financial and other goals. These forward-looking statements are subject to significant uncertainties because they are based upon or affected by Management’s estimates and projections of future interest rates, market behavior and other economic conditions, future laws and regulations, and a variety of other matters which, by their nature, are subject to significant uncertainties. Because of these uncertainties Sandy Spring Bancorp’s actual future results may differ materially from those indicated. In addition the Company’s past results of operation do not necessarily indicate its future results.

[Hunter Hollar:]

Thanks Ron. I’ll just recap a few of the key financial performance highlights and then we’ll move on to Dan Schrider’s discussion of credit quality, because we know that certainly continues to be an important topic for you on the call and for us here. Total loans and leases increased 12% to $2.4 billion compared to the prior year. Compared to the linked first quarter of 2008 total loans increased 3%. We could probably grow loans faster but we’re just not going to change the conservative approach that we’ve been using or change the underwriting criteria. So, with that said, we think the 3% linked quarter growth is decent. In this economic environment, even having stuck to our traditional conservative loan origination standards, we still felt it imperative that we set aside a provision for loan and lease losses that totaled $6.2 million for the second quarter of 2008, compared to $600,000 for the second quarter of 2007 and $2.7 million for the linked first quarter of 2008. These increases were primarily due to a higher level of nonperforming loans, specifically in the residential real estate development portfolio. More about that shortly. The allowance for loan and lease losses represented 1.38% of total outstanding loans and leases at June 30th, 2008, which we think will be in line with our peers and is a good level of reserve coverage for us in light of the current market conditions. Nonperforming assets totaled $64.9 million at June 30th, 2008 compared to $46.9 million at March 31st, 2008, and $22.2 million at June 30th, 2007, a year ago. The increase over the linked first quarter of 2008 was due primarily to two commercial construction loans totaling $10.6 million, which we believe are adequately reserved or well secured. On the expense side, non interest expenses virtually leveled after three consecutive quarters of decline, as we continue to emphasize control over salary and benefits and other discretionary expenses. Much of this is due to the success of our project lift effort which are ongoing and that we’ve talked about in previous conference calls and press releases. I think it’s important to note that with the emphasis on controlling non-interest expenses, together with an 8% increase in non-interest income for the quarter, we had an efficiency ratio of 59.7%, compared to 62.3% for the prior year quarter and 59.2% for the linked first quarter of 2008. So, we continue to work the efficiency ratio down and expect to continue to do so, or at least keep a tight rein on it as we operate in a pretty tough environment including pressure on net interest income, which works in an opposite direction on the efficiency ratio. Just to recap some of the key statistics, having to do with our capital strength, let me say that our total common equity available to share holders currently stands at $320.2 million with total average equity to average assets at 10.25%. Our total risk base capital ratio is 10.95% and is well in excess of regulatory minimums for an institution to be considered well capitalized. We don’t intend to do anything to compromise that capital strength. Also we think that once all the numbers are in for the second quarter, our measures of capital strength will compare very favorably to both local peer institutions and to community banks of our size nationally. Let me ask at this point, for Dan to talk about some of the specifics of credit quality and then we’ll jump into your questions.

[Dan Schrider:]

Thank you, Hunter. No one would disagree that we’re working in a very different economic environment today compared to the climate we’ve operated over the past several years. Even here in what’s traditionally a very strong metropolitan and suburban area around Washington, we’re not immune from the same factors that are challenging community banks across the country. And as I step back and take an objective view of our situation, I think that the Management team at Sandy Spring does have a clear view of today’s economic reality. We do understand that our traditionally above average market place is not immune to problems and we’re trying to be as forward-looking as we can to anticipate what might impact us next. While we may not be able to totally avoid potential problems in all cases I’m confident that we’re well-positioned to recognize our trouble spots early on. And we’re definitely not afraid to deal with these issues proactively. My background with the Company is intentionally grounded in credit. So it’s important that my associates be focused on early warning systems. That means recognizing any signs of weakness within our retail or commercial portfolios very early. We try to do this with a very disciplined approach, day in and day out. The impact of the economic downturn on our credit quality, for the most part, has been in areas directly or indirectly related to the residential real estate markets. We operate in a footprint that is a very fluent demographics and it naturally follows that real estate is a big economic driver. To a lesser extent the economic downturn has also hit our small business customers. Specifically ones who lack longevity in the market place. In other words, the less established segment of the overall small business base. Ours is a very vibrant market for small businesses and we see a very solid contingent of small business startups all the time. And for the most part, these small business have a very viable future. But the early years for many of these businesses are the toughest, especially in the current economic cycle. So it’s the less seasoned, small business borrowers who are driving some of the increases and are criticized in classified loan portfolios. We try to work proactively with these borrowers because we want to help them succeed. As this is happening we’ve done a good job of anticipating how these relationships will work out and we’ve continued to maintain adequate provision levels and a solid reserve position. This is the basic rationale for the increase in our allowance for loan and lease loss coverage to total loans of 1.38 as Hunter mentioned at the end of the second quarter of this year. I’d like to jump into a discussion of our preannouncement and provide you with some additional details. There are basically two components relating to our need to increase our reserve allocation at the end of the second quarter. First, the reserve increase comes as a result of internal risk rating downgrades to existing credits, primarily in our residential real estate development portfolio. Our nonperforming assets totaled $64.9 million, at June 30, 2008 compared to $46.9 million at March 31st. As Hunter mentioned driven by two residential construction loans totaling $10.6 million. The general observation is that we think we’re doing a good job, aggressively managing our builder-related assets. And we’re trying to be very quick to recognize potential problems. I’d like to break down our nonperforming assets a bit by portfolio. 67.4% or $43 million are from that residential building segment. Clearly, the largest chunk. 18% are coming from our retail residential portfolio, that’s $12 million. And just to be clear the difference between our residential builder portfolio and our basic residential portfolio is that borrowers are builder developers and not individual property owners. 14% of our nonperforming assets are from our C&I portfolio for a total of $9 million and only 1% of our MPAs originated in our home equity loan portfolio. It’s also important to note that a provision also reflects our recognition of the impact that the current economic downturn is having in general on our loan portfolios. So what I’m saying is that we also try to take a high altitude overview perspective when we’re analyzing the amount we should set aside. All that said, we feel that our credit portfolios are well managed with continuous reviews and updates of appraisals and we believe that our current level of reserves for troubled loans is adequate. Now I’d like to take a minute to give you some further details on the status of a couple of areas that might be most affected by the current economic climate. 9.5% or $230 million of our total loan portfolio represents our residential construction or builder portfolio at the end of the second quarter. This portfolio is spread over 73 builders. And as we would expect given the state of new home construction, this portfolio is relatively static with only limited number of loans being originated. And we’re making these loans only to seasoned borrowers who have liquidity and staying power. Additionally our Company has been very active in the lot and construction loan business for individual home owners through our residential mortgage division. While overall delinquencies are within acceptable historical levels, we’re experiencing some stress in our retail lot loan portfolio, mainly involving borrowers whose source of income is directly or indirectly related to residential building. Now this lot loan portfolio or loans to individual borrowers to finance the acquisition of a residential lot to ultimately build a home on for their own use. Our lot loan portfolio is slightly over $147 million or 6% of our total loan portfolio at quarter end. As we’ve stated previously, we do not hold any subprime or Alt-A product in any of our portfolios. And we’re continuing to aggressively work the lot loan segment of our portfolio. And our reserve levels do take into account that challenges that specific borrowers face as well as the values of underlying collateral. Home equity portfolios are getting a lot of press these days, so let me comment on the quality of ours. This portfolio of lines and term loans was $324 million or just north of 13% of our total portfolio at quarter end compared to $312 million at March 31st, 2008. The usage rate on home equity alliance has remained constant at approximately 37% and the level of delinquency in the portfolio has remained very consistent as well. We think we’re in good shape here considering our conservative underwriting, the moderate usage and our ongoing monitoring process. Across the home equity loan portfolio our average credit score is 741. Average loan devalue at origination at 61.4% and we do not have any brokered loans in our home equity portfolio. That wraps up my comments today on credit quality. Glad to get into more detail as we take your questions. I believe that wraps up our comments for today. We can expand on any of these as we take your questions.

[Operator:]

(Operator Instructions) Our first question is from Jennifer Demba of SunTrust Robinson Humphrey.

[Jennifer Demba:]

Good afternoon.

[Hunter Hollar:]

Hello.

[Jennifer Demba:]

Couple of questions. One, your loan growth 12% annualized. Do you anticipate keeping the double-digit type rate of loan growth and do you feel comfortable with that in this environment? You seemed to indicate earlier in your opening remarks that you felt like that was pretty conservative.

[Dan Schrider:]

Jennifer this is Dan. We’re finding that in today’s market, when we’re -- a couple of things converge. One is the underwriting standards and what’s happening around us. Which will find some -- that will provide some pressure against growth. And the other is some of the margin pressure that folks are facing, because of the impact of the credit market. So, to answer your question I think that 3% quarterly growth is a reasonable trend for us. We continue to model that out in terms of how it impacts our balance sheet as well as our capital levels. But I would say that we would be satisfied with that level of growth. But without compromising credit quality and with probably a sharper pencil on margin.

[Jennifer Demba:]

Another question. You’ve had-- right now you have pretty substantial nonperforming assets. But your net charge-offs over the last couple of years have been obviously negligible. What kind of level of charge-off do you anticipate in future quarters now that your MPAs are substantially higher than they’ve been in recent years?

[Hunter Hollar:]

Well, we certainly as we’ve stated think we’re reserved appropriately for that level of nonperforming assets. So, there’s little doubt that our charge-offs will increase as some of those non-performers move through the pipeline. And of course, they almost have to increase since our history as you noted is, is pretty minimal. So I think it’s kind of difficult to put a precise number on that. The important thing from our standpoint is that, that we’re reserving for them appropriately, for those nonperforming assets.

[Jennifer Demba:]

If we look at your non-performers geographically would they be weighted towards Virginia or Maryland?

[Hunter Hollar:]

Non-performers would be weighted toward Maryland.

[Jennifer Demba:]

It would. Okay. Any specific counties or -- can you give us any idea of submarket there? Where you’re seeing weakness?

[Dan Schrider:]

Jennifer, this is Dan. I think what we’ve commented on previously and it holds true through the second quarter is that it tends to be the, the markets that are away from D.C. and Baltimore. So those outlying suburban areas that are being impacted by the residential slowdown a little quicker than our close-in markets like Montgomery county.

[Jennifer Demba:]

How much of your residential construction and development book and your retail lots or outer markets versus not?

[Dan Schrider:]

Retail lots is tends to all be within our footprint. The residential building market, I mean, the building business is, is on the outskirts of our market and I would say the majority of that is, as opposed to our core market of Montgomery and Howard and Arundel County.

[Hunter Hollar:]

Jennifer, this is Hunter. Let me make sure we’re getting at your question there. Our total acquisition development and construction loans are disproportionately in what we kind of called our "home counties." In other words the counties that we’re in and have been in for a long time. Like Montgomery County, Maryland, Howard County, Maryland and Anne Arundel County. I think what Dan was trying to describe is that our non-performers are disproportionately outside of those areas. But Howard, Montgomery and Anne Arundel make up roughly 50%, a little over 50% of our total acquisition development and construction loans. Within the other 50% spread in other counties, none of which are real high percentages. So I hope that helps give you -- you’re trying to get at sort of a concentration question there and we understand that. Our, largest nonperforming loan that we’ve been talking about for a number of quarters here is in Sussex County, Delaware. So yes that one’s a little outside of our normal footprint. But a little over 50% of our acquisition and development and construction loans are right in our home territory.

[Jennifer Demba:]

And can you talk about your work out process and how big your staff is that’s dedicated to this and what your approach is there?

[Dan Schrider:]

I’ll be happy to. For the most part, our commercial real estate staff that has over the course of time been focused on originating and managing builder relationships, as you might imagine, is totally dedicated to, to working out and managing the relationships that are on our books today. In addition to that, we’ve brought in some special asset expertise into that group. In the-- and the banking company we brought in three FTEs to focus on credit quality, related issues. And, and that process is, is pretty robust. We are hitting the portfolio on a loan-by-loan basis, identifying weaknesses or the potential of weaknesses. I believe we’re recognizing that from a risk ratings standpoint very early on any signs of deterioration. And I think we’re taking a very aggressive approach to when we recognize something as a non-performer. That is, not always waiting for the borrower to default. Not always waiting for an interest reserve to be exhausted. But if we see the project, particularly in the builder related business slowing or signs of slowing we’ll take action. The internal process around that again on a loan-by-loan basis, but we sit down and we look at this portfolio from a broad perspective and then a credit-by-credit perspective on a very regular basis through a committee process.

[Hunter Hollar:]

Jennifer just to add, the people that we have added that Dan mentioned the three, are people with significant experience in workouts.

[Jennifer Demba:]

They’re out-- from outside the Company?

[Dan Schrider:]

Yes.

[Jennifer Demba:]

And where did they come from?

[Dan Schrider:]

They came from other local banking institutions.

[Jennifer Demba:]

Thank you.

[Operator:]

Our next question comes from Allan Bach of Davenport & Company.

[Dave West:]

Thank you, it’s Dave West with Davenport. First, I wondered if you could outline for us what exposure you may have to the GSEs beyond typical mortgage back holdings and I guess unsecured debt or common or preferred holdings?

[Phil Mantua:]

David, this is Phil. That exposure would be basically zero. The only thing that we do hold is as you just mentioned the traditional mortgage-backed type assets that are in our investment portfolio.

[Dave West:]

Okay. Very good. And I guess this question is kind of driven by your stock price given that you’re below stated book above tangible book it would seem the market is perhaps bracing itself for the potentiality [LAD] or some goodwill impairment. I wonder if you could maybe broadly comment on your thoughts about the likelihood of that?

[Phil Mantua:]

This is Phil again, Dave. From the perspective of the banking component of the franchise, I don’t anticipate that is something that is likely based on our analysis. So I don’t believe we would see any impairment there. And as you probably know, at least annually we go through and impairment test of all the different business segments of our Company and that would certainly include the other non-bank subsidiaries that we own, which are the equipment leasing company and our insurance business as well as our asset management area. And we’ll certainly look at those again here shortly to see if there’s any potential impairment in any of those as well.

[Dave West:]

Okay, but the goodwill that came out of Potomac and Athenian were probably predominantly in the banking segment, is that correct?

[Phil Mantua:]

Absolutely. It was all in the banking segment, 100%.

[Dave West:]

Okay, very good. And lastly and again I ask this question knowing that it’s a very difficult capital environment out there but given the stock price, has there been any internal discussion about possible buyback authorization or activity?

[Hunter Hollar:]

Yes. We have a buyback authorization in place. We have not used it over recent months. But we recognize on a day-to-day basis this is a tool that we have, we’ll continue to consider that in the total context of earnings and capital levels and so forth. But I think your question is a good one. It’s a tool we have in our quiver. We haven’t used it at this point. We’ll continue to evaluate whether we think we should or not.

[Dave West:]

Very good. Thanks very much.

[Dan Schrider:]

Thank you.

[Operator:]

(Operator Instructions) Our next question is from Mark Hughes of Lafayette Investments.

[Mark Hughes:]

Good afternoon. Can you hear me?

[Hunter Hollar:]

Hey, Mark, yes, sure I can.

[Mark Hughes:]

Congratulations on bringing the efficiency ratio down some and hopefully we still got further to go on that. Just a question. And I don’t know how integrated everything is these days but could you comment on the loan quality for the two banks that you’ve recently purchased verses the core Sandy Spring bank? How are they faring verses what you’ve been in forever?

[Dan Schrider:]

Mark, this is Dan. I’ll be happy to comment on that. The acquired institutions were predominantly small business focused. So the exposure that both county and Potomac had in the builder business where clearly a lot of our MPAs are zeroed in on did not come from those portfolios. So traditionally small business. On the, on the Virginia side, that franchise clearly more focused in the government-related sectors and performance has been very good. At least as good if not a little better than the core bank because of our concentration in real estate. Not a concentration, per se, but our focus in that line of business. And I would say the same thing for county in terms of Northern Anne Arundel market. Again, small business focused. And nothing out-- from those two portfolios that are causing any issues.

[Mark Hughes:]

Great. One final question, where are you on the Sussex county property and working that out?

[Dan Schrider:]

We are continuing to move through a very deliberate legal process and working with our borrower to solve that. Unfortunately, I can’t comment a whole lot more about the specifics of that, but I can tell that you we’re diligently working to solve that one.

[Mark Hughes:]

Good. Okay. Thank you for the information.

[Dan Schrider:]

Thank you, Mark.

[Operator:]

Our next question comes from Bryce Rowe of Robert W Baird.

[Bryce Rowe:]

Thanks. Good afternoon.

[Hunter Hollar:]

Hey, Bryce.

[Dan Schrider:]

Bryce.

[Bryce Rowe:]

Dan, I was wondering if you could speak to the collateral of the builder MPAs, meaning what is -- what percentage or -- I don’t know how you want to think about it, but what percentage is raw land, what percentage is developed land, unfinished tones and then finished tones?

[Dan Schrider:]

Okay. I’ll break it into four pieces for you, which I think may answer your question. I hope it will. Of that portfolio, approximately 40% is in what we consider a site development phase. So it has it’s entitlements, it’s lot yields and it’s going through a site development process of improving the project. 27% is in what we would consider -- what we call an entitlement process. So it has some level of approval from local jurisdictions, as to lot yield, and it’s moving through that approval process. And as you know from, from county to county, or jurisdiction to jurisdiction, the process is a little bit different and can take different periods of time. 29% of that portfolio is in vertical construction. So we’re either building homes, town homes or we have a very small exposure in the condo market, local condo market. And then that leaves approximately 4% in raw land, which would be undeveloped residential lots.

[Bryce Rowe:]

Okay. And Dan as far as the updated appraisals go, what kind of I guess decline value have you seen, relative to origination value or perceived origination value?

[Dan Schrider:]

That’s a tough one because the -- to answer from a broad perspective because of the markets we operate in vary quite a bit. For instance, in our -- in those counties that Hunter mentioned a little bit earlier of Montgomery, Howard, Anne Arundel, there’s been a great preservation of value in those just because of the availability of lots and the slow growth initiatives that some of those counties have placed on residential development. So we’re not seeing a significant value deterioration at all. In some of the markets that surround those, that that core area and really driven by the slowness of lot takedowns where there is an abundance of lots. Again, on a project-by-project basis, but we’re seeing some values decline anywhere from 10% to 25% on average in those markets.

[Bryce Rowe:]

Exactly. And Dan, is that values on finished homes or, or homes being sold or is that, is that values on the raw land or developed land?

[Dan Schrider:]

It’s values on the developed land simply because of the slowing. Slowing takedown schedule is when you discount the present value of that back to present value. Because it’s taking longer you’re having a deterioration in value. But we’re not seeing significant deterioration in the value of the home that’s being sold. It’s just that they’re selling fewer and it’s going to take longer to build out a project.

[Bryce Rowe:]

Okay. One more question on the margin. So what was the impact in the non-accruals to the margin this quarter?

[Phil Mantua:]

Probably the best way to look at that Bryce going forward is it’s roughly around 14 basis points of affect on our margin on annualized basis. The increase in the MPAs this quarter probably added to get to that point may be three or four basis points.

[Bryce Rowe:]

Okay. And then from a deposit competition perspective, you guys mentioned it in the release, as it being very competitive. Do you see any further ability to cut the average cost of CDC? Or is it going to stay where it was in the second quarter?

[Phil Mantua:]

Average cost of CDs, Bryce is that what you said?

[Bryce Rowe:]

That’s right, yes.

[Phil Mantua:]

I would doubt that we’re going to have an opportunity to cut that. And in fact, we may even have to be more competitive here to raise the funding that’s necessary, given that the market has gotten even somewhat crazier here in more recent times in terms of pricing on those types of products.

[Bryce Rowe:]

Okay. Thanks, Phil.

[Phil Mantua:]

You’re welcome.

[Operator:]

(Operator Instructions) We have a question from Greg Vennett of Smith Barney.

[Greg Vennett:]

Good afternoon.

[Hunter Hollar:]

Good afternoon.

[Dan Schrider:]

Hi, Greg.

[Greg Vennett:]

Hi, how are you? Do you anticipate that you all may have to raise capital? I was off the call maybe you had said something about that, but a number of banks are talking about coming out with like trust prefers or something like that in order to raise capital. Do you feel that you might have to do that?

[Hunter Hollar:]

Yes, good question. And we included some capital ratios in the -- in my comments in the beginning here, but our best intelligence right at this point is we don’t think raising capital is going to be necessary. Again, we’re constantly balancing all the factors that go into that the loan growth and deposit growth, and the growth of non-performers, which as Dan said we think we have a good handle on. Our buyback, stock buyback plan, but we don’t think a capital raise is going to be necessary.

[Greg Vennett:]

Okay. Second question is, on the four pieces of the nonperforming loan portfolio, the outlying properties, I guess the Sussex County properties, is that considered a site development or an entitlement processor or vertical construction or raw land? Which category do they fall into?

[Dan Schrider:]

The non-performers as a whole fall into really all of those categories, depending upon the specific project.

[Greg Vennett:]

No I’m talking about the specific, you have two specific loans that are in Delaware.

[Dan Schrider:]

We have -- the largest, that Hunter referred to, is the largest MPA in Delaware is an entitlement process loan. It’s a fully recorded lot, subdivision, but the infrastructure has not begun to be built out yet.

[Greg Vennett:]

Is there still --

[Hunter Hollar:]

Let me just add to make sure we’re clear on that because we think this is significant as to the value on that. And we’ve said that we believe our loan is secured. And one of the reasons that’s true is that it has reached the end of the entitlement process. So this is not a, a more raw state kind of a development, the entitlement process is finished, the lot yield is set so that we know how many lots that the public authorities have approved. So that adds significantly we think to the value even though the site development part has not started. So it is in that entitlement portion of the 27% of our portfolio that we referred to earlier, but it’s at the end of that process.

[Greg Vennett:]

Do you know how many lots or you do know how many lots are there?

[Hunter Hollar:]

It’s somewhere in excess of a thousand lots, now that is single family, townhouse, and I am looking at Dan, there may even be a few condos.

[Dan Schrider:]

Yes, there are a few condos and there also is some retail component to that in addition to the lots. It’s a town center concept.

[Greg Vennett:]

It’s a town center? Could you share with us the location of that town center?

[Dan Schrider:]

No, we really can’t. Sussex County, Delaware is where that’s located.

[Greg Vennett:]

So, you can’t name the town that it’s in Sussex county?

[Dan Schrider:]

No, we cannot. It would -- Sussex County, Delaware is full of small towns. It would be kind of obvious what we’re talking about. So for our clients’ sake we really owe it to them not to comment any further on that.

[Greg Vennett:]

Okay one final question I think and that’s you mention several times that you feel like you’re fully reserved. When it comes to your strategy of loan of this type where it’s a site development or an entitlement process, is your collateral only the property based on a loan to value? Or do you require other security, personal guarantees, that type of thing for these type of developments?

[Dan Schrider:]

It is very customary in this lending, our underwriting standards would obviously have the underlying property as the primary collateral as well as the principals that are part of that, that business to also offer their and lend their support. But every project is structured slightly different based upon the risks of that particular transaction. But very safe to say that the principals as well as the underlying collateral support the loan.

[Greg Vennett:]

So the nonperforming loans that you have right now are not only securitized by the real property, but are also -- there’s also personal guarantees behind this?

[Hunter Hollar:]

Yes.

[Greg Vennett:]

All right. So the, the borrower has a lot to lose in other words?

[Hunter Hollar:]

Yes.

[Greg Vennett:]

Okay. Thank you.

[Operator:]

(Operator Instructions) Mr. Hollar, at this time I’m showing no further questions.

[Hunter Hollar:]

Okay, that wraps up our questions. We certainly want to thank everybody for participating and, and for your questions. We really do appreciate the opportunity to respond to these questions and we know that many of those were around asset quality and so we appreciate that opportunity. We’ll remind you that we’d appreciate receiving your feedback to help us evaluate our call. You can e-mail us your comments at IR as in investor relations [e-mail]. Thanks again and that completes our call.