Integra Bank Corporation Q4 2009 Earnings Call Transcript

Executives

Michael Alley – Interim Chairman and CEO

John Key – EVP, Chief Credit and Risk Officer

Mike Carroll – EVP and CFO

Roger Duncan – EVP, Retail Manager-Community Markets Manager, and President of Evansville Region

Analysts

Stephen Geyen – Stifel Nicolaus

Ross Demmerle – Hilliard Lyons

Integra Bank Corporation (IBNK) Q4 2009 Earnings Call March 5, 2010 11:00 AM ET

Operator

Welcome to Integra Bank Corporation's fourth quarter 2009 earnings conference call. This call is being recorded. Before we proceed, the company would like to note that statements made in the course of this conference call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

The risk factors and cautionary statements in the forward-looking statements are detailed in the company's filings with the Securities and Exchange Commission, and in the press release issued earlier today. The company makes no commitment to update any forward-looking statements based on new information, future events or otherwise. Please note that a replay of this call will be available for 30 days through our website at www.integrabank.com and by telephone at 1-800-642-1687, pass code 58307174.

Today's conference call will be presented by Mr. Michael Alley, Chairman and Chief Executive Officer of Integra Bank Corporation, and other executive officers. Following the presentation, we will open the call to questions.

At this time, I'll turn the call over to Mr. Alley. Please go ahead Mr. Alley.

Michael Alley

Thank you, Anne. Good morning and thank you all for joining us on Integra Bank Corporation's conference call for the fourth quarter of 2009.

I'm Mike Alley, Chairman and CEO of Integra, and with me today are Mike Carroll, Executive Vice President, and Chief Financial Officer; John Key, Executive Vice President, Chief Credit and Risk Officer; and Roger Duncan, Executive Vice President of Retail and Business Banking.

Our comments today will refer to the financial information in our earnings report that we released earlier this morning and our recent branch sale announcements. I will discuss the high level results and share our strategic initiatives. John Key will discuss our asset quality and anticipated trends. Mike Carroll will provide details of our earnings performance and financial condition. Roger Duncan will provide an overview of our core community banking activities, and then we will open the call to questions.

Our fourth quarter results were disappointing, but reflect our realistic assessment of the asset quality issues we face and our efforts to tackle these problems head-on. The net loss for the fourth quarter of 2009 was $96.1 million or $4.64 per diluted share compared to $20.9 million or $1.01 per diluted share for the third quarter of 2009. This loss was driven primarily by our decision to fully reserve our deferred tax asset, which represented a non-cash charge of $75.6 million in the fourth quarter.

As the company returns to profitability, we will be able to reduce this reserve, thereby offsetting any income tax expense that would otherwise be recognized. Another key driver was the provision for loan losses of $30.5 million, up $11.6 million from the third quarter. For the full year, our loss of $195 million or $9.42 per diluted share was driven primarily by the non-cash charge for the deferred tax valuation reserve of $104.1 million, the provision for loan losses of $113.4 million and other than temporary securities impairment of $21.5 million.

Recognizing these charges in 2009 has removed much of the uncertainty of our balance sheet. We believe the level of these charges will moderate significantly in 2010. Non-performing assets were up 14.1% from September 30. Total non-performing assets were $246.9 million at December 31, an increase of 30.6 million from September 30, while delinquency decreased 66 basis points 0.98% [ph] of the total loans.

The increase on our non-performing assets reflect an aggressive identification of problem loans and focused efforts to execute appropriate action plans to minimize potential losses. Later John Key will provide a detailed overview of our credit quality, and discuss our efforts to stabilize and reduce our level of non-performing assets.

Despite these results, we did achieve many positive things during 2009. We completed execution of multiple strategic initiatives, which had previously been defined to strengthen our capital base and prepare us to weather the credit quality challenges facing our company. In 2009, we sold a total of five Kentucky branches with their associated deposits and loans to two buyers.

We increased our capital by approximately by $84 million through participation in the US Treasury Capital Purchase Program, and in May we transitioned to new executive leadership with my assumption of the CEO role. Since that time we have sold another five branches located in the north Kentucky market with their associated deposits and loans, and a significant amount of commercial loans generated by our commercial and industrial loan production group based in Covington, Kentucky. This C&I loan production office or LPO was then closed and the entire staff was hired by the purchaser.

We realized early repayment of approximately $31 million of commercial real estate loans through an early repayment incentive program. We closed our Louisville, Kentucky, and our Nashville, Tennessee commercial real estate LPO offices in 2009, and our Cleveland, Ohio LPO in January of this year.

We negotiated the sale of approximately $65 million of bank-owned life insurance and further completed the repositioning of our investment securities to reduce the credit risk in that portfolio. Finally, we executed a profit improvement initiative, which has resulted in a significant reduction in non-interest expense, and enhancement of our non-interest income.

During the fourth quarter, our new management team and the board of directors clearly defined our future vision and execution strategies that will drive short-term actions and position us for long-term success. Our future vision calls for a disciplined focus on community banking within a narrow geographic footprint. Accordingly, we are pursuing multiple execution strategies as follows.

First, we are exiting the commercial real estate lending line of business, not just for the short-term in these challenging economic times, but for the long term as well. We will manage our current commercial real estate exposure downward through the sale of performing and non-performing loans discontinue the generation of any new commitments and provide incentives to our customers and relationship managers to prepay their outstanding loans and increase our yields as pricing opportunities arise.

Our remaining CRE relationship managers have been reassigned under new leadership to emphasize our strategy and desired outcome. Second, we will narrow our geographic operating footprint through the sale of multiple branch clusters. The Northern Kentucky sale completed in December of 2009 was the first transaction executed under this strategy, and definitive agreements for the sale of three branches in eastern Indiana announced on February 1, two branches in central Kentucky announced February 17, and eight branches in western Kentucky and central Indiana announced on March 3 are expected to close by June 30, 2010.

These additional divestitures for 13 branches represent approximately $287 million in deposits, and will be cash liquidity neutral by selling approximately $129 million in branch-related loans and $133 million in non-branch related loans, including $68 million in CRE loans. These sales will add approximately 180 basis points to Integra Bank’s Tier 1 and total risk-based capital and approximately 80 basis points to the company’s tangible common equity to tangible assets ratio. We continue to have discussions with multiple other parties for further branch sales, and I anticipate announcing definitive agreements for these additional transactions within the next 90 days.

Third, the addition of capital generated from these asset divestitures, both from the gain on sale, as well as reduced risk-weighted assets, will allow us to increase sales of both performing and non-performing assets, ensuring adequate levels of liquidity and improving our credit quality measures.

Finally, as we execute branch and asset divestitures, we will aggressively reduce our cost structure to match our core earning capacity, aggressively market our services to community relationship customers, and return to profitability. Throughout this process, we will continue to focus on delivering exceptional customer service, and transitioning our customers in a seamless fashion. The plan we have outlined encompasses the divestiture of multiple strong branch franchises, and requires painful decisions, and disciplined execution.

I genuinely believe our management team and staff are committed to this strategy, and have rededicated themselves to returning to our roots, as a smaller yet more focused community banking organization.

During the fourth quarter, we announced the appointment of Mike Carroll to the CFO position, and John Key to the chief credit and risk officer position. Mike and John were appointed to those positions to replace Martin Zorn and Ray Beck, who resigned to pursue other opportunities. Mike has filled several roles for Integra, and has been in Integra since 2002, most recently serving as our controller, while John has 28 years of banking experience and joined Integra in 2007, previously serving as executive vice president of corporate banking.

Both are located in Evansville, and both have been outstanding additions to our senior leadership team. I have increased confidence in our understanding of the challenges we face and greater comfort that our team is working together to execute our strategic initiatives to return to profitability.

Our core community markets and C&I businesses has continued to perform very well. The NPL ratio for these segments was 1.79%. These segments represent 50% of total loans, but only 8.9% of non-performing loans. Total deposits excluding brokerage CDs and the deposits sold in the bank of Kentucky transaction was stable, decreasing 62.3 million or only 2.9%. Despite the branch sale, the average balance of low-cost deposit, which include non-interest-bearing demand now and savings accounts, increased $17 million during the quarter.

The board and I are pleased with our progress in implementing procedures outlined in our formal agreement entered into with the OCC in May. We believe we are addressing the credit and liquidity issues confronting our company, and continue to have close and positive dialogue with both the OCC, and the Federal Reserve Bank of St. Louis.

As previously announced, we suspended cash dividends on the treasury preferred stock and deferred interest payments on our trust preferred debt during the fourth quarter. This enhanced the cash liquidity of the parent and allowed the cash to be available for additional support of the bank as needed.

Now I will have John Key update you on our credit quality.

John Key

Thanks Mike. As Mike indicated we continued to experience stress in our credit quality in the fourth quarter, principally in residential construction development, and the commercial real estate portfolio. As we restructured our commercial real estate lending group, and reassigned multiple borrower relationships, we aggressively assessed our credit quality, and identified several relationships that have been added to our non-performing classification.

The continued rigorous assessment of our Cincinnati-based CRE portfolio is providing us with a much clearer view of the conditions surrounding these assets. Our strategy will be to monitor the stabilization of the remaining portfolio in an effort to stay ahead of any issues that present themselves. Property values within Chicago and the Cincinnati-based commercial real estate group did show some signs of stabilization. Recent appraisals reflect this trend, and is welcome as we continue to work through these issues.

In addition to these concerns, it is notable that elements within our core Evansville and community bank portfolio continued to perform extremely well. This portfolio represents a billion dollars of loan outstandings with a delinquency rate of 83 basis points, and non-performing loans at a very manageable level of 19 million.

It was recently reported that unemployment rates in the south-western Indiana, including Evansville were significantly below those of state and national averages. Another positive indicator was that home sales within this market were up 19.5% in the last six months of 2009 compared to those in the first six months of the year.

Non-performing loans increased by $25 million to $214.9 million of 10.64% of total loans primarily through the addition of several larger loans, managed by our commercial real estate group based in greater Cincinnati. In addition, the fourth-quarter sale of performing loans to the Bank of Kentucky cost our percentage measure of NPLs to increase based upon the lower smaller loan base.

Non-performing assets increased 30.8 million to 246.9 million or 12.03% of total loans, plus OREO, as OREO increased by 5.5 million to 32 million at December 31.

Included in the non-performing loans are 193.4 million of commercial real estate loans, 14.1 million of C&I loans, 4.6 million of one to four family residential loans, and 2.7 million of consumer loans. Of the 193.4 million in commercial real estate loans, 117.1 million are tied to residential development and construction, and 30.2 million are tied to retail construction projects. Finally, non-performing loans include $9.2 million of loans that are considered shared national credits. These non-performing loans represent 22% of our shared national credit total of 41.8 million.

Non-performing assets for the CRE portfolio in greater Cincinnati increased 35.1 million in the fourth quarter, while NPAs for the Chicago portfolio decreased 9.3 million. Net charge-offs for the quarter were 21.2 million or 386 basis points annualized. Net charge-offs for commercial real estate totaled $19.2 million, while net charge-offs from C&I were 830,000. Net charge-offs in our one to four family residential portfolio were 94,000 and charge-offs on the consumer loans, excluding overdrafts were 827,000.

Delinquencies decreased during the quarter with 30 to 89 days delinquent at 20.6 million or 98 basis points compared to 36.1 million or 164 basis points at September 30. This represents four successive quarters in which 30 to 89 day delinquencies were under 175 basis points, which was our internal goal for 2009. Delinquent loans include 9.7 million or 80 basis points of commercial real estate loans, a million dollars or 28 basis points of C&I loans, 5.4 million or 351 basis points of owner occupied residential loans, 4.4 million or 118 basis points of consumer loans.

Of the 9.7 million in delinquent commercial real estate loans, 4 million of 41.2% are located in our Chicago region. We are encouraged by this continued trend in our delinquency levels, although there is no guarantee that this trend will continue. In response to our high level of non-performing loans, we again continued to provide heavily with fourth-quarter provision of $30.5 million or $9.3 million more than we charged off at 21.2 million. With the reduction in our loan portfolio, our coverage of total loans increased as the allowance ended the quarter at 88.7 million or 4.39% of total loans compared to 79.4 million or 3.6% of total loans at September 30.

The allowance to NPLs entered the quarter at 41.3% of total non-performing loans, down slightly from 41.8% at September 30. We continue to believe that we have adequate coverage of risk of loss in this portfolio. We believe that changes in the management in our Chicago region we made earlier have continued to yield positive results as evidence by the sale previously mentioned. The Chicago loan portfolio has continued to decline and now stands at 278.4 million compared to 305.6 million at September 30 and 324.7 million at June 30.

We are confident that the efforts our teams in Chicago and Cincinnati will pay off in the form of continued portfolio reductions over the next several quarters. Previously Mike discussed our strategy for the management of our Cincinnati-based CRE portfolio. Let me provide some additional color on this initiative.

As we continue to assess the risk within this portfolio, our efforts will be centered on dividing the credit exposure into smaller segmented groups. We will separate the completed performing projects into one pool. Those credits that are fully supported by verified guarantor analysis into a second, and lastly those relationships that are still completing the construction phase into a third.

With this stratification, we will be able to separate out the non-performing portion of the portfolio, and isolate the issues more effectively utilizing our more experienced commercial real estate workout team to efficiently work down these exposures. This strategy has proven to be very effective in our Chicago delivery and these same field sets transfer nicely within this program.

Now let me turn it over to Mike Carroll.

Mike Carroll

Thanks John. Looking first to quarter-over-quarter changes in the balance sheet, average total assets decreased $234 million from the third quarter of 2009 driven by a reduction in net loans of 139 million, cash and short-term investments of 48.7 million and securities of 27.9 million. The loan and branch sales to Bank of Kentucky during the third and fourth quarters resulted in fourth-quarter reductions in total loans and deposits of 57.6 and 76.4 million. When combined with the third quarter loan sales, which resulted in reductions in total loans of 107.6 million.

Fourth-quarter earnings included 5.3 million deposit premium from this transaction, as well as a 1.6 million write-down on the Florence and Union facilities to the recently apprise values less estimated selling cost. Those facilities are currently listed for sale.

Average commercial loan balances declined 118.9 million. Construction loans declined 17.3 million, while CRE loans decreased 32.2 million. The remaining decrease in average loan balances is primarily from the third and fourth quarter sales of commercial loans to the Bank of Kentucky.

On a net basis, commercial real estate plus construction and land development loan average balances declined 49.6 million. Consumer loans declined by 11.3 million and residential mortgage loans were down 9.4 million. The first quarter 2010 balances will be impacted by the Bank of Kentucky transactions which occurred in mid-December. On the liability side of the balance sheet, non-interest bearing deposit average balances increased $12.2 million or approximately 4.2%.

Average interest-bearing deposits were down by 87.1 million or 3.9% driven primarily by decreases in money market funds, broker deposits, public fund time deposits, and retail CDs. Declines in wholesale borrowing included reductions in term auction facility borrowings of 76.9 million and FHLB advances of 46.3 million. We continue to see very solid performance from our core bank and would like Roger Duncan to provide you with an overview of our community markets prior to completing my financial report.

Roger Duncan

Thank you Mike. Our focus on drawing low-cost deposits and expanding customer relationships within the core bank has not changed from the previous quarter. Through this tough economic environment, we have been extremely pleased with the overall stability we have achieved in the core bank. As a result of much hard work by our entire sales desk, the fourth-quarter did produce many victories for us. Let me touch upon a few.

Our staff remains aggressive in growing and retaining our business accounts. Our regular sales blitzes remain one of the most rewarding strategies in getting the business. This effort by our sales staff continues to reap higher rewards in getting new business and retaining existing relationships.

Over the fourth quarter, we saw an increase of 12.2 million in non-interest-bearing deposit average balances. The majority of this increase was in nonpersonal deposits. Business checking accounts continue to be a bright spot as we saw a positive net account growth in 2009 as a result of our calling efforts.

On the retail side, the introduction of new accounts and services like checking for everyone, and bank any time mobile alerts coupled with the addition of approximately 300 more participating merchants in our debit cards rewards program, which brings our total to over 800 continues to keep our retail banking program highly competitive.

The 2009 launch of our debit card rewards program has helped us grow gross debit card revenue to 5.4 million for the year, an increase of 2%. This growth was accomplished even with the reduction of 11 branch offices during 2009 and a reduction in consumer spending. A few other noteworthy accomplishments include ATM income increasing to 1.2 million or 11% better than the previous year.

An increase in credit card income of 5.7% over 2008 and our annuity sales remaining strong in 2009 adding 939,000 of income to the bottom line. Based on the increases we have seen in debit card issuance and usage, credit card income and mortgage loans closed, as well as the number of new personal checking accounts we continue to open and the continued strength of our annuity sales, we feel we continue to make progress in building new and deeper relationships.

Going forward into the first half of 2010, we will remain focused on gathering deposits and creating new lending relationships both on the consumer and business fronts. As we reduced our number of branch offices, we realized we must also decrease our operating expenses. We have tightened our belts even more by reducing personnel expense, marketing vendor agreements and travel expenses.

We will not lose sight of the regulatory challenges that we face in the coming months. A committee of our most talented people are currently working through the issues associated with the implementation and compliance of Regulation E, which changes how we earn our overdraft and debit card interchange revenue for point of sale and ATM transactions.

We will manage through those changes, while keeping our customer relationships first and foremost in our minds. We are here to serve our communities, knowing that while changes will occur in 2010, we must be dedicated to providing the absolute best service to our customers.

I will now turn it back over to Mike Carroll.

Mike Carroll

Thanks Roger. I will now provide additional details on our financial review. During the quarter, we sold $12.8 million of treasuries classified as trading securities and reinvested those proceeds in available for sale Ginnie Mae and treasury securities. Outside of that there was very little change in both total securities, and the composition of the portfolio. Our available for sale portfolio of 361.7 million includes 162.5 million of 0% risk weighted Ginnie Mae and treasury securities, and was 12.1% of total assets at December 31.

There was no other than temporary impairment charge taken in the third and the fourth quarters as values remain stable. We thoroughly believe the worst of this is behind us. Within the trust preferred portfolio, we continue to watch two full trust preferred securities totaling $1.6 million very closely. The underlying collateral performance remains satisfactory in a non-agency CMO portfolio, which totals $23.2 million. We continue to stress test these portfolios both internally as well as through third-party stress tests.

The gross unrealized loss in the portfolio increased from 8.9 million at September 30 to 11.2 million at December 31, and the net unrealized loss was 7.4 million. Assuming real estate values remain at or above current levels, we do not expect material OTTI charges in 2010. Our net interest margin was 2.40% for the quarter, up 5 basis points from the third quarter. The change was largely driven by improved funding costs, offset by the increase in non-performing assets.

Net interest income declined 321,000 largely due to a decline in average earning assets of 144.6 million. Non-performing assets reduced the margin by 46 basis points during the quarter and by 44 basis points for the year. Despite the increase non-accrual loans, our yield on commercial loans remained stable at 3.62%. This is largely due to our ongoing efforts to increase pricing by adding floors to new credits as well as existing credits, when the opportunity arises.

Approximately $236 million of our commercial loans had a floor of at least 4% at December 31, up from only 4 million a year ago. Our asset sensitivity continues to be concentrated in three areas. We have net asset sensitivity of 519 million to prime, net asset sensitivity of 790 million to one month LIBOR, and then liability sensitivity of 139 million to three months LIBOR. Our asset sensitive position means we should benefit immediately from any increase in short-term rates.

At this point, we expect the net interest margin run rate to be flat between 2.30 and 2.40% for 2010 assuming static rates. This does not include the impact of additional branch or loan sales, which would impact the margin. Near-term improvements in the margin would come from an increase in short-term rates, a reduction in non-performing loans, and continued repricing of floating rate loans.

Non-interest income was 13.8 million for the fourth quarter 2009 compared to 14.8 million for the third quarter of 2009. The fourth quarter 2009 includes 5.3 million in deposit premium for the branch sale, a decrease of 1.1 million in loan sale gains, and a 623,000 increase in bank loan life-insurance income.

The third quarter of 2009 included 6.6 million of securities gains and 1.2 million of trading losses, as well as $788,000 loss reflected when we reclassified our bank loan life-insurance as available for sale or surrender, and a gain on the sale of loans of 676,000.

Deposit service charges decreased 240,000 during the fourth quarter of 2009, largely due to the branch sale, while debit card interchange income was 1.4 million for both quarters. Non-interest expense was 23.2 million for the fourth quarter of 2009 compared to 24.4 million for the third quarter. Decreases during the fourth quarter of 2009 compared to the third quarter, included personnel expense of 1.8 million, and OREO expense of 1.4 million, partially offset by increases in FDIC insurance of 283,000 and professional fees of 269,000.

The decrease in personnel expense included a $626,000 stock-based compensation for future adjustment that reduced expense as well as $1 million reduction of post-retirement benefit expense that resulted from a change to our benefit plans. The $1.6 million more right down on the Florence and Union locations deferred value is also included in non-interest expense in the fourth quarter.

Income tax expense was 70.8 million for the fourth quarter of 2009. This includes an addition to our valuation allowance during the quarter that increased that accounting estimate to 100% of our net deferred tax asset. We decided to establish the full reserve after considering several factors. Those included higher-than-expected credit losses for the fourth quarter of 2009, as well as expectation of continued losses in 2010, meaning lower than previously expected earnings forecast.

As Mike stated earlier, we have a defined strategy in place to return to profitability. When that occurs the tax expense generated by positive earnings will be entirely offset for quite some time by the benefit of reversing the same amount from our valuation allowance to our income statement. Given the higher than expected credit losses, and given that we are already recognizing only those tax benefits we expected to claim over a very short time horizon as compared to the statutory time periods for usage of net operating loss carry forwards and tax credits we felt at full reserve was prudent at this time.

Integra Bank’s total risk-based capital ratio was 10.05%, a decrease of 15 basis points on September 30. The decrease resulted from the impact of the quarter’s net loss, partially offset by the branch divestiture, other declines in loan balances, the reduction of bank owned life insurance, and capital infusion from the parent company of $6 million.

Integra Bank’s Tier 1 risk-based capital ratio decreased 16 basis points to 8.76% and as Tier I leverage ratio decreased 31 basis points to 6.30%. All of Integra Bank’s regulatory capital ratios are above the minimums for well capitalized status. The bank continues to work on an internal plan that has as its goals increasing total risk-based capital ratio to at least 11.5% and its Tier 1 leverage ratio to 8%.

The company’s tangible common equity to intangible asset ratio declined 302 basis points to 0.42%. Approximately 78% of this decline resulted from addition to our income tax valuation allowance. We expect the strategies we are executing in 2010 to increase this important ratio, that are likely not until the second quarter when branch sale transactions are expected to close.

We continue to look for opportunities to reduce targeted loan categories, especially construction and development, and will look for opportunities to sell non-core assets. We expect our pending branch sales and the sale of additional loans to United Community Bank, the Cecilian Bank, and First Security Bank of Owensboro to add about 180 basis points of total risk-based capital to the bank upon completion of these transactions, as well as 55 basis points to the company’s tangible common equity to tangible accounts ratio.

We expect to complete these transactions in the second quarter of 2010. Additional sales are also expected to provide additional capital. It is our intent to maintain cash levels at or above current levels during the first quarter of 2010. Our access to additional liquidity through both the Federal Reserve and Federal Home Loan banks, as well as other sources continues to remain sufficient in the event we experience a decline in retail and public fund deposits. Any near-term branch or loan sales are expected to have a negligible impact on liquidity, as we are insisting that interested parties balance out any transactions by taking additional loans, so that the impact of those transactions on liquidity is neutral. Our tangible book value per common share was $4.51 at December 31.

Let me turn the call back to Mike Alley.

Michael Alley

Thanks Mike. In conclusion, we remain disappointed with our performance. However, we now have a defined business strategy and are rapidly executing that strategy. We have clearly conveyed our plan to aggressively exit non-core lines of business, and sell selected branch clusters to narrow our geographic operating footprint.

Our credit administration team is positioned to work aggressively to stabilize and then reduce our level of non-performing assets. Asset divestitures and reduction in risk-weighted assets will strengthen our capital, and enhance the parent company’s and bank’s liquidity, and disciplined attention to reducing our cost structure will help to increase our core pre-provision, pre-tax operating income.

We believe the components of our strategy we implemented during the fourth quarter of 2009, and those we have announced so far in 2010 to reflect the commitment to execution of these strategic priorities. We expect additional announcements shortly that will provide further evidence of our efforts to improve performance and sustain ourselves through these challenges.

We will now be happy to answer any questions. Anne, I will turn it back to you.

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from Stephen Geyen of Stifel Nicolaus. Please go ahead.

Stephen Geyen - Stifel Nicolaus

Yes good morning. Just wondering if you have already received approval from your regulators to complete the potential or additional branch sales, asset sales, maybe are expected over the next 90 days or so.

Michael Alley

We have not yet received formal approval. However, those are sales, talking to our regulators as well as the acquiring banks talking to their regulators have had preliminary discussions with regulators, and at this point we have no indications that they will not be approved. However, it still is very early in the process of getting that formal approval, but I do anticipate Stephen that that will occur.

Stephen Geyen - Stifel Nicolaus

Okay, thank you.

Operator

Our next question comes from Ross Demmerle of Hilliard Lyons. Please go ahead.