Pacific Continental Corporation Q3 2008 Earnings Call Transcript

| About: Pacific Continental (PCBK)

Pacific Continental Corporation (NASDAQ:PCBK)

Q3 2008 Earnings Call

October 15, 2008 2:00 pm ET


Hal M. Brown – Chief Executive Officer

Roger Busse – President, Chief Operating Officer

Michael Reynolds, Sr. – Chief Financial Officer

[Casey Hogan] – Chief Credit Officer


Jeff Rulis – D.A. Davidson & Company

Kristin Hotti – Howe Barnes Hoefer & Arnett, Inc.

Tim Coffey – Fig Partners, LLC

Ross Haberman – Haberman Value Fund

Michael Reynolds, Sr.

Welcome to Pacific Continental Corporation conference call webcast to discuss our third quarter 2008 results. Presenting today will be Hal Brown Chief Executive Officer, Roger Busse President and Chief Operating Officer and me. We will update you on our recent activities and discuss the financial results reported in our press release distributed after market close October 14, 2008.

At the conclusion of our prepared remarks we will provide analysts and institutional investors with a question and answer opportunity. Where we’ll address any questions and provide additional background information when appropriate. During the Q&A session [Casey Hogan] Executive Vice President and Chief Credit Officer will also be available to answer questions.

Today’s press release is available in the investors relation section of our website at

Before we commence the formal remarks we advise you that this webcast contains forward looking statements. Statements made are factual as of the time of this webcast. Such forward looking statements are subject to risk and uncertainties that may cause actual results to different materially than those projected.

Pacific Continental Corporation undertakes no obligation to publically revise or update the forward looking statements to reflect the events or circumstances that arise after the date of the company’s third quarter 2008 earnings release referenced in this webcast and the date of this webcast.

Participants and listeners should also carefully review any risk factors described in the company’s periodic reports on Forms 10-K, 10-Q, 8-K and any other documents filed or furnished from time to time with the Securities and Exchange Commission. This statement is included for the express purpose of invoking the Safe Harbor Provisions.

Now let me turn and introduce, and turn the call over to Hal Brown, Chief Executive Officer of Pacific Continental Corporation.

Hal Brown

Well you all know these are unprecedented times. And it is not necessary for me to expound on all the issues facing the financial market. The events taking place are way beyond the ability of our bank to influence. And instead we must do what we can to maintain stability on a daily and weekly basis.

On a national and global perspective it is difficult not to be pessimistic. Fortunately at least in the areas through which we can influence and have some control, there is reason to be optimistic. Pacific Continental’s third quarter results are again solid and without surprises.

Earnings remain steady with previous quarters. Our credit quality statistics improved and we’re very much in line with our second quarter conference call discussion. And we again experience good loan and deposit growth. Frankly, these are pretty good results and I’m quite pleased with this performance and the prospects for the future.

With respect to today’s conference call we will continue our practice of being as transparent as possible. Obviously however, the current volatility makes even near term forecasting nearly impossible. And so our comments today will have far fewer forward looking comments.

Roger will discuss the condition of our loan portfolio and Mick will speak to our liquidity status and give you his insights as to our interest rate margin. I hope you also noted that we have expanded the financial details provided in our press release which will eliminate some of the discussion we previously provided in the conference call. We would welcome your comments regarding this added material.

Before I ask Mick to continue let me address a few question and concerns that have surfaced during the quarter. First, we had no equity exposure to either Freddie Mac or Fannie Mae. We do have equity investments in the Federal Home Loan Bank but only to the extent that they are required to fulfill our borrowing obligations.

Our investment portfolio is free of all commercial paper or corporate notes and after extensive evaluation we are comfortable with the credit quality of our mortgage-backed and other investment securities.

Our unsecured overnight credit lines with our correspondent banks remain open and available to us and we test them regularly. In the last few months we have had collateral reviews by the Federal Reserve and the Federal Home Loan Bank and received no material comments, again validating our underwriting practices.

Finally there have been questions regarding the stability of our deposit base. Our bank has been very proactive with our clients, answering questions and discussing the strength of our balance sheet. There have been a few clients who have reduced their deposit levels. But in total we have been the recipient of deposit inflow as people look to make deposits in quality institutions.

So with that as a backdrop to the quarter I’ll ask Mick to continue our discussion.

Michael Reynolds, Sr.

For my portion of the presentation I will be covering our net interest margin, liquidity position, non-interest income and non-interest expense. I will be making year-over-year comparisons and when appropriate I will discuss comparisons on a linked quarter basis. Also when appropriate and as best possible I will provide listeners and analysts with fourth quarter 2008 expectations.

In line with our projections in our second quarter 2008 conference call our third quarter net interest margin of 5.08% was down 15 basis points from our second quarter margin of 5.24%. The factors that contributed to the late quarter decline in the bank's net interest margin in the third quarter were as we discussed last quarter, and included the higher competitive market for core deposits, the continued high cost of alternative funding sources, the extension of the maturities structure of liabilities for the use of local time deposit promotion and broker time deposits. And a core deposit promotion that attracted money market deposit at an average rate of 3.3%.

While historically our guidance on the bank's future net interest margin has been on target, as Hal mentioned in his opening remarks in light of the daily volatility and diSr.uption in the financial markets. It is becoming increasingly difficult to provide forward looking projections in some areas and this includes the bank's margins.

An illustration of the daily volatility we are seeing affecting the banks margin would be in the area of our overnight and short-term borrowing. We maintain secure borrowing relationships with both the FHLB at Seattle and the Federal Reserve Bank of San Francisco, plus unsecured borrowing lines with six correspondent banks.

During the last four weeks and on any given day, quoted daily overnight rates from these sources have ranged between four tenths of one percent to as high as 3.75%. This daily volatility along with many other factors have caused the bank’s net interest margin to fluctuate in a wide range. As evidenced by the monthly net interest margin recorded during the last three months, which ranged from 4.94% to 5.27%.

Looking forward there are some factors suggesting some improvement in the bank’s net interest margin in fourth quarter 2008 including the fact that with the recent 50 basis point emergency reduction in market interest rates approximately $233 million of the bank's variable rate loans again have active floors.

In addition we are seeing loan pricing opportunities due to the lower level of credit availability in our market as indicated by improved loan yields during the month of September.

On the funding side, while we have experienced significant volatility in overnight funding rates, to date our multiple sources of overnight funding have allowed the bank to consistently use the lowest cost provider for short term funding, which has in turn led to an average cost overnight borrowing at approximately 1% in the past two to three weeks.

In addition the 100 basis point drop in the 91 day Treasury bill that has lowered the rate on approximately $160 million of the bank's index money market account. On the other hand, certain factors point to a flat and lower fourth quarter margin when compared to third quarter.

First, all of the banks reached a core deposit promotion was concluded on October 10th, 2009. The 3.09% promotional rate on approximately $60 million money market deposits is effective through January 9, 2009.

Second, the extension of liability maturities during the late second quarter and third quarter through our local time deposit promotion, while improving the bank's liquidity position came at the expense of the banks margin.

Third, while we were able to lower rates on much of the bank’s core deposit base with the recent 50 basis point decline in market interest rates, a portion of the bank's core deposits were already as stated or virtual floors thus not fully offsetting the effect of drop in yields on variable rate loans not at floors.

Fourth, while to date the bank has been able to take advantage of volatility in the short-term funding market to lower its cost of funds, there is no guarantee such conditions will continue to exist during the entire fourth quarter. I guess we do expect to continue to see a highly competitive market for core deposits in terms of rates as many banks continue to face liquidity issues.

And last, the 91 day Treasury bill rates which had a precipitous drop during September 2009 during the flight to quality and should this key rate return to normal level in the 1.3 to 1.5 range rates would increase on the bank's indexed money market accounts.

It is virtually impossible to model all of the combinations, possible combinations of variables to get an entirely clear picture of the direction of the bank’s net interest margin. However if the bank continues to have opportunities for better loan pricing, continues to have access to very low cost overnight funding, similar to the past two to four weeks and the bank experiences its typical seasonal increase in core deposits, then my outlook would be for a somewhat improved net interest margin in the fourth quarter.

However in this rapidly and changing economic environment and with the possibility of a number of factors that occur, that might negatively affect the margin, including a further reduction in market interest rates, less reliability should be placed on this outlook than in our past presentations.

Now I would like to discuss the bank's current liquidity position. During the third quarter 2008 due to the strong growth in core deposits and an increase in collateral pledge on the bank's secured borrowing lines, the bank's liquidity position improved over the prior period.

As Hal mentioned we are seeing a net inflow of core deposits from businesses and individuals seeking safety and soundness and we typically expect to see an increase in our core deposit base during the fourth quarter.

The bank continues to have full access to a number of alternative funding sources. Presently the bank has secured borrowing lines with the Federal Home Loan Bank of Seattle, the Federal Reserve Bank of San Francisco, totaling $299.3 million. The bank also had unsecured borrowing lines with six correspondent banks totaling $118 million. The unsecured lines remain unchanged and fully intact when compared to a year ago and are regularly tested.

In addition Pacific Continental has full access to the brokerage CD market and has had no issues in using this funding source. And as of September 30th 2008 the bank was using approximately $40.4 million in brokerage CDs for funding.

Continental Bank has approximately $34.5 million of short-term funding available through the State of Oregon and Washington CD programs for community banks. With these multiple alternative funding sources the bank has ample access to liquidity and more important is able to manage the use of these sources in a manner that maximizes the bank's net interest margin.

Turning to non-interest income, on a linked quarter basis non-interest income was $1 million in the third quarter 2008, down approximately $116,000 from the second quarter. On a year-over-year basis the bank continued to experience solid increases in the account service charges on analyzed business accounts, due the lower earnings credit on deposits and increased merchant bank card fees due to both higher sales volumes and better margins.

Looking forward in the fourth quarter 2008, the bank expects non-interest income will be similar to or up on third quarter as service charges on analyzed accounts are expected to increase and due to an historical seasonal increase in merchant bank card fees in the fourth quarter.

Last I will report on our non-interest expense. On a linked quarter basis non-interest expense of $7.5 million in third quarter 2008 was virtually unchanged from second quarter 2008. For the first nine months of the year non-interest expense was $22.1 million and increased up $2.9 million or 15% over the same period last year.

Personnel expense accounted for the majority of the increase, up $1.9 million on a year-over-year basis. Increased salary expense and increased benefits and taxes accounted for $1.3 million and $705,000 respectively. Approximately $400,000 of the increase in salaries was due to lower loan origination costs which are a direct offset to salary expense and the remaining $900,000 was related to staff additions and performance increases.

The increase in benefits and taxes was primarily attributed to higher group insurance costs up $266,000 over last year and increase accrual for incentive compensation and 401K contributions up 327 last year. Looking forward to the fourth quarter 2008 we expect non-interest expense will be comparable with third quarter expense levels.

That concludes my prepared remarks and now Roger will continue the presentation.

Roger Busse

With the addition of market-specific data to our press release my portion of the presentation will now focus on credit quality and provisioning.

After our formal comments are completed, [Casey Hogan], Chief Credit Officer will join us to answer any additional questions you may have.

In line with our expectations in previous conference call comments. The bank's credit quality improved as of September 30th, 2008, evidence by all key ratios. Non-performing assets net of government guarantees improved, decreasing to 0.60% of total assets from 0.74% last quarter.

Net charge offs for the first nine months of 2008 remained low at $552.2 thousand or 0.08%. And the allowances of percentage of net non-performing loans increased to 347%. Loans past due less than 90 days also improved over the previous quarter end and were 0.64%. Despite these solid results management prudently elected to increase the bank's allowances of percentage of period end loans to 1.15% at quarter end from the 1.0% held at June 30th, 2008.

This is primarily due to concerns over the increasingly unsettled economic trends. Market conditions continue to call for conservative provisioning and the maintenance of unallocated reserves at the higher levels of the acceptable range, which at quarter end was 7.8% of the total allowance. This amount is deemed satisfactory at this time.

I would like to provide more insight into why we believe the level of unallocated reserve is satisfactory, and more, how it continues to reflect conservative and forward looking credit practices, in an accurate and timely risk rating process.

A significant part of the $2.55 million year to day contribution to the allowance for loan loss was in response to our loan growth of almost $100 million. This of course accounts for approximately $1.1 million of that provision. Additional contributions offset year-to-date low level net charge offs of $552, 000 thereby leaving approximately $848,000 in residual reserve contributions.

As noted, management's concern over current market uncertainties prudently led to an increase in allowance to 1.15% of total loans from the 1.10% in last quarter end. This five basis point change required an additional $461,000 of the total allocation.

Finally based on the proven forward looking credit disciplines embedded in our credit culture and practices, our commercial banking offices conservatively lowered a handful of commercial and industrial credit, down one risk grade to our past watch rating. None of these credits are anticipated to deteriorate further to lower grades. And in fact are expected to upgrade into higher pass ratings in the near term.

Consequently these changes along with other internal adjustments led to the additional allocations. Clearly accurate and conservative risk rating of our portfolio provides assurance as to sufficiency of the unallocated reserve at 7.8%. It is important to recall that all third parties continue to confirm the accuracy and timeliness of our risk rating process, which includes the results of our last safety and soundness examination in May.

It is expected that future allocations or additions to loan loss reserves will be related primarily to loan growth. While loan growth is anticipated to moderate during the fourth quarter, as outstanding balances for commercial and residential properties continue to decline.

Our dental niche and our activity there will likely expand in line with third quarter results. Currently the dental segment of our portfolio now represents 12.22% of total loans. Also we continue to see solid opportunities for selective growth in commercial and industrial lending.

Many banks are inwardly focused on credit issues. Clients become disenfranchised and concerned about access to credit. And many have approached Pacific Continental Bank. As noted we will be very selective and also price conscious.

That concludes my presentation, I’ll now turn it back over to Hal who will conclude our prepared remarks.

Hal Brown

As you’ve just heard we remain optimistic and comfortable that we will continue to perform as a top tier institution. You will also have noted the degree of caution as evidenced by the number of factors that could affect our margin and Roger’s comments about the declining economy and the potential risk to the wider loan portfolio.

I want you to understand that the purpose and tone of these comments is not to imply an impending deterioration, but instead a commitment to the continuation of our practice of full transparency. In difficult environments it is especially important for us to continue this practice.

For Pacific Continental the immediate outlook is indeed positive. We have the capital to meet the needs of our existing clients and to selectively serve additional businesses as the clients and credit availability become more apparent.

Similarly we have been attracting new deposit relationships as people seek out the stronger institutions. The business model we have employed and the practices we adhere to are being increasingly and positively recognized in our free market. I refer to this as the blocking and tackling strategy, sticking to the basics and doing more of what we already do well. We will be successful with this strategy.

At the same time we realize that the current conditions may present other opportunities. We are now witnessing the separation between institutions that practice solid and consistent underwriting disciplines from those institutions that look for a short-term gain at the expense of sound banking practices.

This differentiation will continue in subsequent quarters and may result in some unique opportunities. Should these opportunities materialize we will employ a disciplined best practice approach when evaluating the impact on the company, its earnings and resultant shareholder value.

In concluding our prepared remarks I’d like to recognize the exceptional work of our employees and Board of Directors. Everyone has worked long hours and contributed in multiple ways. It is comforting to know that our company culture is just as effective in times of stress as will be in the better times to come.

And with that we’d like to entertain your questions.

Question-and-Answer Session


(Operator instructions) Your first question comes from Jeff Rulis – D.A. Davidson & Company.

Jeff Rulis – D.A. Davidson & Company

Wanted to know if you guys would consider using the TARP tackle purchase program, and if so do you have any reason to believe that you wouldn’t be eligible for that?

Hal Brown

Well Jeff, we’re still investigating this program and our real quick initial review of that asks the question why would we do it? Why would we give warrants to the government? And frankly, I think we still have access to other sources of capital. Mick, you have some thoughts on that as well?

Michael Reynolds, Sr.

Yes, Jeff. I mean, I think first and foremost I believe that we don’t need the additional capital given our current solid capital levels, or low levels of non-performing assets and our outlook.

In addition, our forecast for the fourth quarter indicates that an even stronger capital position than we have in the third quarter. And as Hal just mentioned, just due to the strength of our balance sheet and financial performance, we believe that capital would be available to us in the open market.

Jeff Rulis – D.A. Davidson & Company

Do you have any expected time frame on unloading your other real estate owned or other factors that you’d want to be hanging to that in terms of maybe the projects are in construction or you’re just holding out for better prices or if you could provide any color on that?

Casey Hogan

We are very active as we’ve mentioned in our press release. What we have in our [inaudible] properties right now is about 20 individual residential homes, or lots, undeveloped unimproved lots. We’re very aggressive at moving those out as quickly as possible at reasonable values, and we’ll continue to be very aggressive in getting those lifted and moved.

We’re not in a hurry to take low market prices necessarily, but we certainly are aggressively marketing those and pushing them out.

Jeff Rulis – D.A. Davidson & Company

And, Casey, the point loss, are those centered in any one area in your market?

Casey Hogan

No, we’ve talked before about the kind of a concentration we would see in southern Oregon, southern Washington, you know, a couple in Bend, a couple in Boise area, just, but no concentrated effort, or concentrated geographic area per se.

Roger Busse

It’s just as a reminder, these are private consumer construction portfolio that had a 20% cash guarantee involved in it, all of these are, so there’s minimal loss expected. That’s also why we can be more patient, and we’re taking minimal losses on those as we move them through. And those numbers are reducing each time we report to you.

Jeff Rulis – D.A. Davidson & Company

Thank you for the added information in the release. It was helpful.


Your next question is from Kristi Hotti – Howe Barnes Hoefer & Arnett.

Kristin Hotti – Howe Barnes Hoefer & Arnett, Inc.

I have a question regarding the, I believe you said it was C&I loans that were low in terms of your risk rating, is there any particular concentration in terms of a buyer business sector, or regions, for those down-graded credit, and I was wondering whether you can comment on transcending on your 30 to 90 days past due for the quarter?

Roger Busse

First of all, with regards to the C&I loans that I referenced, I can tell you that there is no concentration, and these are just a handful of credits with the lenders that have raised their hand and said, you know, we’re real concerned about this deal and here’s why.

I’ll give you one example how strong these deals really are. We have one deal where the individual took a leave and to supplement their cash flow, they were using part of their proceeds at a business to finish their higher degree and so diverted some of the cash flow.

The cash flows were strong and he’s assigning the rents over to us, so the cash flows are back and they’re paying on time, and he’s going to finish up his degree and come back and that credit will be upgraded.

So that’s the kind of thing we’re talking about. Very conservative indications of possible cash flow issues, nothing systemic, nothing significantly material or concentration related, and as a result we just want to be conservative.

And then with regard to the 90-day trend, I’ll let Casey speak to that.

Casey Hogan

Sure, our 90-day trend primarily relates to those loans in non-performing status, but our 60 and under continues to be performing very well. I think Roger mentioned that we were at 0.64% as far as total loans that were 60 or under days past due, which is a pretty good number in today’s economy we believe.

We continue to work those very aggressively, and to Roger’s point earlier, if and when a borrower gets 30 days past due, we’re immediately putting those on the watch list or making certain that we understand that there’s no systemic or significant issues on moving forward.

So very aggressive and working all this, our lenders are doing a great job of staying on top of potential issues that are out there.

Roger Busse

Yes, so to that point our 90 day trend is continuing to contract nicely.


Your next call is from Tim Coffey – Fig Partners.

Tim Coffey – Fig Partners, LLC

I just had a question regarding Washington Mutual. Have you seen any kind of decrease in an overall deposit cost or an outflow of deposits?

Michael Reynolds, Sr.

In our bank, an outflow of deposits?

Tim Coffey – Fig Partners, LLC

No, within the markets the bank markets.

Michael Reynolds, Sr.

No, we’ve actually had a net inflow of deposits, I would say, as a result of Washington Mutual, and I’m not sure what your question is.

Unidentified Corporate Participant

Because we’ve seen rates start fall.

Michael Reynolds, Sr.

In some cases some banks may be a little less aggressive, but there’s still an awful lot of promotions going on in our market right now, Tim. A number of institutions, clearly with some of the rates that are being advertised, seem to be suggesting that there are still some liquidity issues at certain banks that operate in our market, so I say the competitive pressures are still present for in terms of rates.

Tim Coffey – Fig Partners, LLC

And then on the C&I loans, the issues with those loans, is that just the cash flow able to service the interest on the debt service?

Roger Busse

Oh, yes, that’s not an issue. These are watch credits. Those are all pass rated credits. There’s just an indication that there might be an individualized change with the borrower, or there might be some kind of trend that we’re seeing, but nothing where there’s insufficient cash flows. If that was the case, we would have a lower risk rating to a seven or an eight, a sub-standard, because that’s our profit.

Tim Coffey – Fig Partners, LLC

Well, give do an example of an individualized issue.

Roger Busse

Well it’s like the one I just mentioned. You might have a borrower that has become distracted, which was the case in one of our loans, and so he was using some of the proceeds and cash flow to business to support his higher degree and completion of that.

We saw the stress there and we told him that was inappropriate and was still servicing his debt, but he assigned the proceeds of some rent to us to make sure the cash flow continued to be sufficient on the debt service side and it is. And then once he finishes he won’t be distracted, so it’s a kind of an individualized issue.

Another business might just be experiencing some stress to a loss of a client, but they’re just forming their company around that cash flow, for example. Those are individualized things that you’ll see and any kind of a slow down that would take place, but nothing significant. No insufficient 1.25 to one debt service position or anything like that.

Tim Coffey – Fig Partners, LLC

Not to beat on the C&I, but were these issues you were seeing all quarter long, or is it something that came up in the second half of the quarter?

Roger Busse

No, they’re developing during the quarter. I would say in the last month or so we asked people to be very conservative and tell us if they saw anything at all that concerned them, and we just went ahead and accepted those into our into the process of our watch category.

So we want to be really conservative right now and make sure that we have our best early warning practices in place and that’s what we see here. So in every case, as I mentioned a few minutes ago, every case, every one of these credits, we expect to see upgraded in the short term


Your next question come from Ross Haberman – Haberman Value Fund.

Ross Haberman – Haberman Value Fund

Two quick questions. You’re mix, what you deem residential construction of 86 million, and other construction of 155. How much of that combined number would you deem spec?

Michael Reynolds, Sr.

I think Roger and Casey have that information, so just hang on just a second, Ross.

Ross Haberman – Haberman Value Fund

Well while they’re looking for that, a quick question for Hal. Hal, have you looked at the government TARP Plan, and is that 5% preferred offering interesting to you, and do you think you might take a piece of it?

Hal Brown

Ross, we talked about that just a little bit earlier. We’re still investigating all of the pieces of that, but our very quick overview, we question why we would do that. As Mick said, we have lots of capital, our projections for fourth quarter capital levels actually increased, and I’m not certain that’s beneficial to our existing shareholders to provide the warrants that come with that as well.

So we’re still investigating and we’ll make that decision before any escalation of availability takes place.

Roger Busse

Ross, on the residential construction, spec construction, fall into about 4.61% of the portfolio, about $42 million; it’s coming down nicely. Last time we talked it was about 5%, and it was about $45 million, $44.5, $45 million, right in there, so it’s come down nicely, it continues to roll down. We don’t really have any purely construction spec projects that I’m aware of. I don’t if Casey has any.

Casey Hogan

We probably have one that you’d consider spec that’s under active negotiations right now up in the Seattle area, but other than that.

Ross Haberman – Haberman Value Fund

And that 42 which you referred to, is part of both the 86 as well as the 155 number?

Roger Busse

That would represent the residential construction pieces in total.

Ross Haberman – Haberman Value Fund

And just one other question. Of that 42, is any of that what they call the two-step construction loans like West Coast has?

Roger Busse

No, there’s none of that. These are pure in-fill builders that are developed in established locations. These aren’t tract deals. They’re all selling out. They’re proceeding normally. I don’t know how to say it.

You know, we’ve talked about Charlotte Boxer and to the excellent work she’s done in identifying these projects, and as in-fill builders in small developments in well-established communities, she avoided a lot of the county issues that other banks experienced, and so we continue to see the sell-out of our specs moving along pretty nicely.

If there’s a prolonged recession, of course, we’ll have to keep an eye on that, but right now I think things are moving along pretty well.

Ross Haberman – Haberman Value Fund

And did you have any exposure to a number of large bankruptcies, I think in the last couple of quarters, in and around your area, did you have any exposure to those?

Roger Busse

No, Ross, we don’t. We weren’t involved in any of those projects.

Ross Haberman – Haberman Value Fund

Maybe you guys ought to give some lending seminars to some of your competitors.


At this time I have no other callers.

Hal Brown

Well let me just add a little more color to some of the questions that we’ve been hearing with respect to C&I migration. I just want to reiterate that this is part of our practices of being accurate and timely with our risk ratings.

And as Casey and Roger noted, the economy is showing signs of weakness, and so we have heightened our review of our credit and where they are. So what we’re really seeing is this, the practice of early warning.

You should not read into this a systemic deterioration of our credit portfolio. This is just a realization that the economy is not as strong as it was in the past and that we should be very forward as we review the credit, so please don’t interpret this as something very large or negative migration earnings stamp.

So with that, I’d like to thank everybody for attending today’s conference call, and we look forward to the fourth quarter.

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