First Financial Holdings Inc. (NASDAQ:FFCH)
F4Q 2008 Earnings Call
October 24, 2008 2:00 pm ET
Dorothy B. Wright – Vice President Investor Relations and Corporate Secretary
Thomas A. Hood – President and Chief Executive Officer
R. Wayne Hall – Executive Vice President and Chief Financial Officer
Mark Adelson – Senior Vice President and Treasurer
Cary Morris – BB&T Capital Markets
Ladies and gentlemen thank you for standing by. Welcome to the First Financial Holding’s year end earnings conference call. (Operator Instructions) I would now like to turn the conference over to D. B. Wright, Vice President and Corporate Secretary. Please go ahead ma’am.
Dorothy B. Wright
Thank you Tina. Good afternoon and thank you for participating in our fourth quarter 2008 earnings conference call. Before we begin, I have several brief administrative items to address.
You should have received our fourth quarter fiscal 2008 earnings release along with supplemental information earlier today. For those who did not both are available on our website and that address is firstfinancialholdings.com. In addition to this teleconference call we have a listen only live webcast available. This webcast will be available for the next 90 days. Both the live and archived webcast may be accessed via a link on our home page and again that address is firstfinancialholdings.com.
Our President and Chief Executive Officer A. Thomas Hood will make opening remarks on our call today. Wayne Hall, Executive Vice President and Chief Financial Officer will follow and both along with Mark Adelson, Senior Vice President and Treasurer will take questions at the end.
Our presentation today discusses the company’s business outlook and will include forward-looking statements. Those statements include descriptions of management’s plans, objectives or goals for future operations, products or services; forecast of financial and other performance measures; and statements about the company’s general outlook for economic and business conditions. We also may make forward-looking statements during the Question-and-Answer period following management’s presentation.
These forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ is available from the earnings release that was distributed today and from the Form 10-K for the year ended September 30, 2007. Forward-looking statements are effective only as of the date they are made and the company assumes no obligation to update this information. I will now turn the call over to Tom.
A. Thomas Hood
Thanks D.B. Good afternoon everyone. Thanks for joining us today. We want to thank you obviously for your continued interest in First Financial. We hope you’ve had a chance to read the fourth quarter earnings release and the information for fiscal 2008 that we issued this morning. If not, D.B.’s given you a website where you can gain access to that and we certainly encourage you to do so.
I’ll provide you with some key details as we discuss operations for the quarter as well as the year ended September 30, 2008. After commenting on highlights from the quarter and the year I’ll comment on some continuing strategic initiatives and report on some other results.
As a snapshot for our fourth quarter, net income was $6.3 million compared to our linked quarter of $5.9 million and compared to the 9/30/07 quarter $5.2 million. Earnings per share diluted were $0.54 for the 9/30/08 quarter, $0.44 from the comparative quarter in ’07 and $0.51 to our linked quarter 6/30/08.
Our return on equity was 13.59% for the current quarter. That compares to 11.09% to 9/30/07 quarter and 12.6% compared to this 6/30/08 quarter, our linked quarter. Earnings increased 6.9% over the linked quarter. Earnings were up 21.5% from the comparative quarter in fiscal ’07.
Earnings compared to our June ’08 quarter, the linked quarter were favorably impacted by higher net interest income and an interest margin of 3.48%. Strong loan growth for the quarter, loans increased some $67.8 million. We had lower operating expenses for the quarter, higher service charges on deposit accounts.
The September quarter compared to our linked June quarter were negatively impacted by a higher loan loss provision in response to a higher level of charge-offs and a higher level of problem loans. We increased our loan loss reserve to $24 million or 102 basis points of total loans.
We also had lower mortgage banking income in September for the September quarter compared to the June quarter. And insurance revenues were a bit lower for the September quarter.
When we compare our September ’08 quarter with the September ’07 quarter, and look at quarterly earnings, we were positively impacted by a higher net interest income, higher service charges on deposit accounts, and higher insurance revenues. Earnings for the September ’08 quarter when compared again to the ’07 quarter were negatively impacted by a higher loan loss provision, higher operating expense, primarily related to the Somers-Pardue Agency acquisition.
And I want to add that we couldn’t be more pleased with the contributions of Somers-Pardue that they’re making to our insurance business. They’re some of the very best professionals in our business. We’re really grateful to have them as part of our insurance group.
Reporting for the fiscal year 2008, the 12 months ended, net income for the year was
$22.6 million. That’s compared to $25.1 million fiscal year ’07. Earnings per share diluted for ’08 was $1.94 compared to $2.07. Net income was down $2.4 million or 9.7% and diluted earnings per share were down $0.13 or 6.3%.
And I want to remind everyone that we did have a pretty significant charge in our first quarter for our early retirement program. The impact of that charge was $1.1 million after tax. The program obviously has had a very favorable impact on operating costs throughout the year.
For the current year earnings, we were positively impacted by higher net interest income, strong loan growth, higher earnings from our mortgage banking operation and higher insurance revenues. Fiscal year earnings were negatively impacted by our higher loan loss provision and higher operating expenses.
Next I’ll comment on some more areas that had very positive effects for our quarter. As to net interest margin, although down slightly, we’re still very pleased with our net interest margin. On a linked quarter basis the net interest margin was 3.48% compared to 3.56% for the June ’08 quarter. Considering the interest rate environment which we’ve been operating we could not be more pleased.
We have continued to enjoy a reduction in our funding costs over the last year, both in deposit pricing and wholesale funding. With that said we continue to face very competitive deposit pricing markets. Some larger institutions have continued to offer deposit rates well above normal rates in the marketplace. As we’ve commented in the past, we continue to focus on increases in core deposits, checking accounts, and making sound decisions on our loan origination and pricing.
The next area I’ll comment on is credit quality. We continue to see increased levels of delinquencies, net charge-offs, and non-accrual loans. At the end of the September quarter, we experienced an increase in delinquencies in several categories. Net charge-offs for the quarter were 39 basis points compared to 32 basis points for the linked quarter. We have been providing data to the market on a quarterly basis on our charge-offs, excluding charge-offs on our manufactured housing loan portfolio.
As we pointed out in the past, manufactured housing loans have obviously higher charge-offs and delinquencies, and obviously that is compensated for by much higher yields. Now the net charge-offs excluding manufactured housing were 30 basis points annualized for the fourth quarter of fiscal 2008, compared to 26 basis points in the June ’08 quarter.
The manufactured housing charge-off rate was 122 basis points for the quarter in comparison to the 86 basis points of charge-offs in the June ’08 quarter. Although manufactured housing charge-offs increased with an average yield on this portfolio of 9.38% we still feel that this sector is a very profitable sector of our loan portfolio.
Our reserve coverage to problem loans is at 116% versus 126% at June ’08 quarter, the linked quarter, and 251% at the September 30, 2007 quarter. Quarter ended with higher non-accrual loans but a lower level of real estate owned than the linked quarter. Approximately 41% of non-accrual loans are single family or home equity loans.
And I’ll go through a bit of a categorical group in terms of loan delinquencies for 30 days or more in these several categories. As of 9/30/08 our real estate one to four delinquencies were
$13.9 million. At June 30, ’08 the linked quarter they were $9.5 million. The ratio for the 9/30/08 quarter is a delinquency ratio of 1.56% or all real estate one to four family loans.
As to home equity at 9/30/08 the total delinquencies were $4.9 million compared to the June 30 number of $2.3 million. Home equity overall ratio of delinquencies 30 days or more is 1.58%.
And I think both of those ratios stand up extremely well to national averages.
In the marine and manufactured housing sector at 9/30/08 30 day and more delinquencies were
$5.2 million compared to $4.2 million at 6/30/08. And again a delinquency rate of 2.34% on manufactured housing is quite a very good ratio.
In marine lending, at 9/30 we had $1 million of 30 day or more delinquencies in that portfolio compared to $0.4 million in the June 30, ’08 quarter. And that represents a 1.26% delinquency rate.
Commercial real estate we had $12.6 million of delinquent real estate loans 30 days or more in the 9/30 quarter compared to $9 million in the 6/30 quarter. And that’s a 3.51% delinquency rate for commercial real estate.
In the land sector we had $2.8 million of delinquencies compared to $2.3 million of delinquencies in the June quarter for a ratio of 1.11% on land. On real estate construction we had a $5.8 million of 30 day or more delinquencies in September and in June we had $5 million of delinquencies. The delinquency rate on real estate construction is high. It’s about 8.25%.
We do have in real estate construction the $5.1 million includes about four borrowers and we’re working very, very closely with each of those and we don’t expect any significant loss on the disposition of those loans. We’ve been working with them, helping them find buyers and find finance for the homes. We have sold – I think they’ve sold three homes thus far and they have some additional homes that are under contract presently.
In the commercial real estate, one large loan dominates those delinquencies and it already has a specific reserve of $800,000. I think that loan is very, very close to the $5 million increase in that portfolio.
The total consumer delinquency rates have increased to 1.75% that’s all consumer loans – 1.75% from 1.16% June 30, 2008. Increases have occurred in most categories, manufactured housing increased at 2.34% from 1.93 and I think the ABA at least the June 30, ’08 numbers for manufactured housing delinquencies were at least 3.03%. And that’s likely higher since most of these trends are moving higher, likely higher than what the ABA reported in June and now September.
While home equity loans increased from 0.81% to 1.58%, our breakdown there in terms of the ABA’s numbers was around 2.56% at June 30 compared to the 9/30 of 1.58% in our portfolio. So we still think that the major brackets of these categories of delinquencies are still low in comparison to national standards.
Our breakdown of home equity loans indicated that we are in the first mortgage position or second lien position to our own first lien position in 71% of these loans. We have never focused this product on customers that were not in our service markets. Overall drawn lines to the full remaining line are approximately 54% and we believe our underwriting on this product remains very strong.
The average line is under $75,000 and the average home value is approximately $294,000. In a difficult economy we would expect to experience increases of both charge-offs and delinquencies on our manufactured housing portfolio. And again excluding manufactured housing delinquencies, the total consumer delinquencies were $7.5 million for a rate of 1.49 basis points at September 30 compared to $3.9 or 82 basis points at June 30, 2008.
I would add that on the basis of the number of loans, currently only 0.93% of the number of our consumer loans is delinquent. I want to emphasize again too also that we do not categorize any portion of our residential real estates that we hold in portfolio as sub-prime.
We expected foreclosures to increase and we have experienced a slight increase in foreclosures. For fiscal 2008 we completed only 18 foreclosures for approximately $5.8 million for the year. Three loans represented about $4 million of this total, with $450,000 in charge-offs. For the remaining 15 foreclosures, we’ve recognized approximately $362,000 in losses or approximately $24,000 per foreclosure including attorney fees and other costs.
We’ve always considered any number of alternatives to resolve significant delinquent loans and avoid foreclosure obviously. And we continue to do so. Foreclosures are also an indication of the quality of the one to four residential loan portfolios. It is a billion dollar portfolio with only a very, very few delinquencies and very, very few ultimate foreclosures. While delinquencies may be higher, foreclosures continue to be very, very manageable for the company.
Reporting on other operations, mortgage banking operations were not as successful this quarter as they had been in recent quarters. Total revenues for the fourth fiscal quarter of the year were $818,000 which compares to $1.8 million in the linked quarter and $922,000 in the same quarter last year.
Following my comments, Wayne is going to address some additional details about our mortgage banking operations. The vast majority of our residential borrowers continue to choose to finance their home purchases with fixed rate mortgages rather than variable rate mortgages.
We have continued our practice of selling most of the fixed rate mortgages into the secondary market and we’ve not seen any slowdown in the acceptance of those loans. Certainly the underwriting is more significant for individual borrowers but we’ve been able to place what we believe are very high quality loans in the secondary market. We do expect the real estate market to continue to be sluggish into the foreseeable future.
As to service charges and fees on deposit accounts, we expect our strong focus on growth and core checking products will continue to benefit deposit fees and card related revenues, both very significantly increasing fees for the company. Fees on deposit accounts were $6.1 million for the quarter with increases principally due to growth in demand account relationships, which increased approximately 6,000 accounts or 5.9% during fiscal 2008.
As to our insurance operations, insurance operation showed a significant improvement from the same quarter in 2007 mainly related to the Somers-Pardue acquisition which we completed in April 1, 2008. This acquisition added $1.4 million to insurance revenues during the current quarter and $3.2 million for the year.
While we continue to be very pleased with the performance of our insurance operations, we also expect the current soft market, particularly in the commercial insurance area, to continue. And the general insurance market continues to be a very, very competitive market. I’ll now ask Wayne to comment on some other highlights of operations for the quarter and also focus on some balance sheet changes, then we’ll add some additional commentary on market expansion followed by some questions. Thank you.
R. Wayne Hall
Thanks Tom. Tom described some of the details of the deposit and loan environment confronting First Financial during our fourth quarter. We believe the bank demonstrated strong fundamentals in almost all areas of operations.
In the midst of strong deposit and loan competition we continued making progress and growing our customer base. Our credit status remained steady and insurance operations continued to add significant revenues.
Let’s talk briefly about net interest income. What we’ll do first is discuss the financial impact of the balance sheet dynamics of the linked quarter for our net interest income. We are pleased with the growth in our margin over the year and that we were able to maintain a strong margin over this last quarter. Our margin for the current quarter was 3.48% compared to 3.56% June quarter and 3.31% from the same quarter last year.
We expect pricing pressures to moderate due to the acquisition of Wachovia by Wells Fargo and the Feds commercial paper facility. This should allow the large regionals to access funds at a much lower rate than the CD market. These changes in the competitive environment along with the Feds rate cut should allow us to maintain or grow our margin over time.
Our average loans increased by approximately $48 million in the current quarter, while our average deposits fell approximately $9 million from the linked quarter. In addition, our average cost of deposits declined 12 basis points along with a decline in cost of borrowing of approximately seven basis points, which is more than offset by the decline in yield earning assets of 14 basis points.
Our product managers continue to work very hard with campaigns to keep and attract CD, money market and checking account customers. We experienced growth in most loan categories compared to the linked quarter on an annualized basis, manufactured housing loans increased 10.9%, home equity loans rose 33.8% and commercial real estate loans were up 20.1%. Land loans were up 1.7% and one to four family up 7.3% and all other consumer loans were flat.
Construction loans declined 16.1 and commercial business loans down 1.4%. Overall, loans grew at an annualized rate of 10.6% from June 30, 2008. We anticipate loan growth to moderate during fiscal 2009.
The market value of available for sale investment portfolio at September 30 was below book value by approximately $25 million. There is one investment we determined to be other than temporarily impaired and we recorded a $486,000 charge against earnings for this investment. There have been no downgrades below the investment rate in the investment portfolio.
We do own 13 CDO’s made up of 100% bank trust preferred securities, totaling $11.1 million that had been placed on credit watch. We also have one re-preferred whose current bank has been placed on credit watch for $1.4 million. We consider the decline in the balance of the CDO portfolio to be temporary. Our private label mortgage and CMO portfolios are all double A or above and include none with loans originating after 2005.
As Tom mentioned earlier we continue to experience a higher level of net charge-offs. The charge-offs at September 30, 2008 quarter were $2.25 million or 39 basis points compared to
$1.8 million or 32 basis points from the linked quarter. A breakdown of the $2.25 million net charge-offs is $216,000 in the one to four real estate, $286,000 for commercial real estate,
$350,000 for commercial business and $1.4 million for the consumer portfolio.
The $1.4 million in consumer charge-offs is primarily in manufactured housing, marine and credit cards. Over the last five quarters, net charge-offs have ranged between 30 and 43 basis points. We are committed to strong underwriting standards and we believe the higher than normal charge-offs are due to economic conditions rather than underwriting.
We continue to place an increased emphasis on the monitoring of problem assets in addition to aggressive collection and disposition of these assets. The absolute level of the allowance for loan losses has increased 14% or $3.0 million and allowance as percentage alone ended the quarter at
102 basis points, up from 92 base points at 6/30/08.
I’d like to add that we have a very detailed, analytical process that we go through to determine what our allowance and loan losses should be. This process takes into account past charge-offs, trends in those charge-offs and trends in economic conditions as we also look forward to anticipate what those conditions may be. During this process we determine what our allowance should be and we record our allowance to that number.
Non-accrual loans increased to $20.6 million, up from $16.6 million at 6/30/08. This increase in non-accruals is concentrated on construction with an increase of $2.7 million and single family also increased $2.7 million. We did experience decreases of non-accrual balances of commercial real estate, manufactured housing and home equity loans. We continue to expect a higher level of charge-offs in the foreseeable future and are paying particular attention to our spec residential construction loans.
Although we have not experienced any significant increase in charge-offs, we do believe there’s the greater risk of loss in this loan category. As Tom mentioned earlier we are working very closely with our builders to understand the potential for sales as well as working with them to help facilitate sales. Our exposure to speculative residential construction loans at September 30, 2008 is approximately $62.5 million, down from $75 million at June 30, 2008.
Let’s now talk briefly about non-interest income and non-interest expense. Although our non-interest income declined this quarter, we continued to emphasize diversifying revenues and reducing reliance on net interest income. Non-interest income for the quarter was $15.1 million down from $16.4 million from the linked quarter but a $1.7 million increase for the same quarter last year. Non-interest income represents greater than 38% of total revenues.
Our mortgage banking operations declined during our fourth quarter, contributing only
$818,000 compared to $1.8 million from the linked quarter. A large part of this change can be attributed to the hedging program as treasure based instruments are used to hedge the change in value on mortgage servicing rights. This spread between ten year treasury yields and 30 year mortgage rates narrowed significantly during the quarter, causing a net loss of $720,000 for the quarter compared to a net loss of $123,000 for the linked quarter.
We also experienced lower late charges during the fourth quarter. These fees were approximately
$212,000 lower than linked quarter where we experienced a higher level of collections. For the year mortgage banking contributed $7.5 million compared to $4.3 million for 2007 as the mortgage servicing hedge program was not affected in fiscal year 2007.
Insurance revenues decreased $1.1 million from the linked quarter and increased $1.2 million from the same quarter last year. The Somers-Pardue acquisition added $1.4 million to revenues during the current quarter compared to $1.8 million for the linked quarter. The additional shortfall on insurance revenues is mostly related to seasonal trends, but we are experiencing continuing softening, particularly in the commercial sector.
Service charges and fees on deposit accounts are up slightly from the linked and prior year quarter. NSF and overdraft fees were up approximately $260,000 from the linked quarter.
Now as far as operating expenses which were reported at $23.9 million, down $1.8 from the linked quarter? Salaries and employee benefits were the main contributors to this reduction, down approximately $1.9 million for the quarter. This decline was aided by the reversal of par by management and incentive accrual as we did not meet our goals for full [peg].
Marketing decreased $226,000, furniture and equipment increased $186,000 and occupants’ expense increased $165,000 from the linked quarter. We are working hard to control operating expenses as can be seen in our efficiency ratio of 61.39% for the quarter compared to 63.47 for the linked quarter and 67.81 for the same quarter last year. I will now turn it back over to Tom.
A. Thomas Hood
You know I might add to this delinquency discussion that where a month falls really does have a pretty significant impact on the collections, particularly retail loans, single family and home equity. And of course the end of September was a Tuesday and we generally wind up with poorer collections as a result of that, not being close to the Thursday, Friday paydays for most of the people in the markets that we serve.
And I did a bit of research with a couple of our collectors taking a look at their specific collection queue as it stood at the end of September and their collection queue today. And clearly there’s been some improvement in both residential and home equity collections.
We’ll get back to the topic at hand. We’ve always considered our distribution system to be a great strength of our company. We continue to have some great results in our in-store locations and our in-store expansion and diversification. And that continued this year. We opened an additional in-store sales center in Lowe’s Food Stores during our fourth quarter. And we’re on schedule to open two additional Wal-Mart in-store sales centers in late calendar 2008 and in fiscal 2009.
As we’ve reported many times about our in-store operations they produce very significant amounts of our new deposit account relationships. During fiscal 2008, for instance, 60% of our new retail demand deposit accounts were opened on in-store platforms. Our overall checking account growth rate during fiscal 2008 was 5.9%, with our in-store locations with a growth rate of on demand accounts of over 21%. Our in-store locations now represent more than 25% of our total sales offices.
Technology initiatives that we are now working on, we are actually putting some of our merchant capture systems, deploying those with some of our commercial customers. We’ve had a very, very good response to the initiation of that product with new enhancements to our customer experience of retail sales offices very, very soon. Those will include teller assisted and self service systems available to those branches that we initiate that service in.
We’ll be rolling out the systems we hope very, very soon. Many of these initiatives, once fully implemented, should create a new sense of convenience for customers and additional operating efficiencies for the company.
As to our outlook, we expect that our interest spreads will be relatively steady, although credit quality will continue to be under increased pressure. We believe our historical and continued strong underwriting standards will lessen the impact. We’re working very closely with our home builders as I’ve commented on and as Wayne has already commented on. And working very closely with other borrowers to help facilitate home sales and lessen the impact of credit problems, particularly in the real estate portfolio.
As to loan growth, it’s very, very difficult to predict, although we were very pleased with our growth in fiscal 2008, particularly in the single family home lending area. The present slower conditions for residential real estate in the markets, although we had a very favorable number released just recently in terms of a pickup in sales, we still for the foreseeable future really believe that they’ll continue in a sort of moderated level in terms of sales.
We’re well staffed and we intend to take advantage of any disruption in the mortgage banking or the banking community. We also remain focused on a number of retention strategies that have been quite effective for our existing loan portfolio. We’re keeping our borrowers longer because we’re paying very, very close attention to those borrowers.
We believe great opportunities continue to exist in our markets in North Carolina and in South Carolina. In our nearby markets, including opportunities to gain share from other financial institutions, surely as we go through this TARP process there will be institutions that will be qualifying institutions and institutions that will not, so there may be additional opportunities to gain customers, to gain market share.
Our markets in North Carolina and South Carolina continue to be more stable unemployment markets. Currently our major market in the Charleston area, the Charleston MSA has an unemployment rate of 6.1%. That’s probably one of the lowest of all of the major markets in South Carolina. We believe that quality of life, our growing workforce here, we’ve had good job growth over the last several years, and particularly the growth of our technology sector, increasing foreign investments, will serve us we think very, very well into the future.
We continued to expand our market presence in fiscal 2008. We also examined some opportunities to continue refining our branch distribution system. Just recently we repositioned an entire branch office to a new location, closing down the existing location. And I think we’ve had some very favorable results from that. We’ll continue to take a look at the efficiency of our distribution system and make sure that we’re in growing markets and effective markets.
I’d also like to comment briefly on our announcement today that we have filed a shelf registration and Form S-3 with the Securities Exchange Commission. We declared it effective by – it’s been declared effective by the SEC. The shelf registration statement will allow First Financial to raise capital from time to time up to $135 million through the sale of common or preferred stock or subordinated debt or trusts preferred or other sources. Specific terms and prices would be determined, obviously, at the time of each of the offerings under a separate prospectus supplement, which will be filed with the SEC at the time of the offering.
By filing the shelf registration and taking advantage of the Treasury’s capital purchase program, we are increasingly focused on capital flexibility. It puts us in a position to take advantage of potential opportunities that we do anticipate in today’s and tomorrows financial services markets.
You should also consider, I believe, I’ve certainly made a very strong point of that at our board meeting recently, the experience of our management team. Most of them have experienced several previous credit downturns in the 80’s and 90’s, and obviously also a devastating hurricane in 1989. So this is a group of people that are ready to tackle lots of problems in our marketplace and do that effectively, efficiently and to the benefit of our shareholders.
I think those are my last remarks. I don’t whether anybody wanted to add some additional remarks to that? We’re okay. Then let’s go to the questions. Thank you.
(Operator Instructions) Your first question comes from Cary Morris – BB&T Capital Markets.
Cary Morris – BB&T Capital Markets
Could you talk a little bit about the TARP money and what your thoughts are there? Also could you tell us with regards to if any REO or you guys have sold anything recently, what kinds of pricing are you seeing from your original values?
A. Thomas Hood
Well we’re I think like the vast majority of other companies that are well rated by supervisors; we’re very, very interested in the TARP program. We have made application. We intend to be a participant. We estimate that the company would qualify at the 3% of risk based capital for approximately $65 million. So we are intent upon using that facility. We think that the cost of that capital is very advantageous. The reason for perhaps a larger facility that we’re putting in place is in anticipation that the TARP funds would be part of that facility.
As to the other question, I don’t think that we’ve seen much of a haircut presently. I think we probably in looking at the foreclosure area and commenting on the foreclosure area, I think there’s probably a good indication of what kinds of costs or losses we would incur on the single family area.
If you look at the commercial area, we haven’t had many properties that we have had or basically created a sale opportunity for, but we are in our process of measuring reserves and the – we go through each one of those properties on a case by case basis. And we have about 15 or 16 of our senior collections, lenders and other people in the room who are very engaged and understand what’s going on in those specific markets for those specific kinds of properties.
We get frequent appraisals of those properties and updates of appraisals of those properties and we clearly have seen some change in the value of the properties over a period of time. But certainly not as significant in the consumer area, the single family area, and maybe not as significant as one might imagine in the commercial area. Although there are some larger commercial loans where we have created some specific reserves. Again I expect the marketplace, once it gets to a particular value, there are people in the marketplace that are obviously anticipating the opportunity of buying properties in the market.
Dorothy B. Wright
Tina we’re ready for the next question.
And there are no questions at this time. I will now turn the call back to you. Please continue with your presentation or closing remarks.
A. Thomas Hood
Well we are very, very grateful for your participation in the call this afternoon. As always, we are anxious to hear from you, your questions about anything pertaining to the operations of First Financial. We’re very, very happy to respond in any possible way we can. We really do appreciate the interest in the company. We obviously think that we’ve had a pretty good quarter and a pretty good fiscal year and although there are lots of challenges ahead of us, we also see some terrific opportunities that we think are going to benefit our company for a long time in the future.
So we’re anxious to what will be tomorrow and the next day and these markets are moving very quickly and changing very, very quickly and we’re very certain that opportunities will avail us to improve our reach throughout the Carolinas and increase our customer holdings and increase the benefits associated with that and deliver those to shareholders. So we appreciate your being with us on the call this afternoon very much.
Dorothy B. Wright
Tina I believe that concludes our remarks.
Thank you. Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
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