IBERIABANK's CEO Presents at Impact of the Accounting Change Conference (Transcript)

| About: IBERIABANK Corporation (IBKC)
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IBERIABANK Corporation (NASDAQ:IBKC) Impact of the Accounting Change Conference Call April 15, 2013 9:00 AM ET

Executives

Daryl G. Byrd – President and Chief Executive Officer

John R. Davis – Senior Executive Vice President, Director of Financial Strategy and Mortgage

Michael J. Brown – Vice Chairman, Chief Operating Officer

J. Randolph Bryan – Executive Vice President, Chief Risk Officer

Anthony J. Restel – Senior Executive Vice President, Chief Financial Officer and Treasurer

Analysts

Emlen Harmon – Jefferies & Co., Inc.

Catherine Mealor – Keefe, Bruyette & Woods, Inc.

Michael Rose – Raymond James

Terry McEvoy – Oppenheimer & Co. Inc.

Kevin B. Reynolds – Wunderlich Securities

Bryce W. Rowe – Robert W. Baird & Co.

Peyton Green – Sterne, Agee & Leach, Inc.

Christopher Marinac – FIG Partners, LLC

Operator

Ladies and gentlemen, thank you for standing by and welcome to the IBERIABANK Corporation FDIC Covered Loan Update. For the conference all the participants are in a listen-only mode. There will be an opportunity for your questions; instructions will be given at that time. (Operator Instructions) As a reminder today’s call is being recorded.

With that being said, I’ll turn the conference now to the Senior Executive Vice President, Mr. John Davis. Please go ahead, sir.

John R. Davis

Good morning and thanks for joining us today for this conference call. My name is John Davis and joining me today is Daryl Byrd, our President and CEO; Michael Brown, our Chief Operating Officer; Randy Bryan, our Chief Risk Officer; and Anthony Restel, our Chief Financial Officer.

If you’re not already obtained a copy of our press release, you may access this document from our website at www.iberiabank.com, under Investor Relations and then Press Releases. We’ve also prepared a PowerPoint presentation as a useful tool for this morning’s discussion. A link to the PowerPoint presentation is available on our website in the Investor Relations section, under Investor Presentations. A replay of this call will be available until midnight on April 22, by dialing 1-800-475-6701 with the same confirmation code as this current call, namely 290960.

Our discussion deals with both historical and forward-looking information. And as a result, I’ll recite our Safe Harbor disclaimer. To the extent the statements in this report relate to the plans, objectives or future performance of IBERIABANK Corporation, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations and the current economic environment. IBERIABANK Corporation’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. A discussion of factors affecting IBERIABANK Corporation’s business and prospects is contained in the Company’s periodic filings with the SEC. (Operator Instructions)

And I’ll now turn it over to Daryl for his introductory comments. Daryl?

Daryl G. Byrd

John thanks and good morning. As many of you would probably agree, the four FDIC assisted acquisitions we completed in 2009 and 2010 were incredible financial and strategic opportunities for our company and our shareholders. The bargain purchase gains from these transactions totaled $243 million, or $7.60 per share on an after-tax basis. These highly accretive acquisitions provided us tremendous franchises in Florida and Alabama with favorable prospects for future growth and significant downside protection.

As evidenced by our credit loss assumptions being $310 million better than we initially expected, we believe we’ve approached these acquisitions in a conservative manner. While there huge benefits for having been early in the FDIC assisted deal process, there have also been drawbacks. The trailing nature of software and accounting for FDIC-assisted transactions and dealing with the overloaded judicial systems in certain states are just a few of these, those drawbacks. All those items remain in a state of flux and as a result have made cash flow estimations, the valuation, amortization estimates of indemnification assets and loss share earnings volatility very challenging for early adopters like us.

A few items we’ll call traditional volatility in first quarter of 2013 and we thought it is imperative to provide you details in that regard as soon as possible. This morning, we issued a press release and 8-K filing along with a small supplemental PowerPoint deck discussing two primary items. First, our adoption of a new accounting standard that had the effect of increasing our projected amortization expense associated with our indemnification assets and therefore is projected to negligibly affect our earnings over the next eight quarters.

Second, we’re experiencing a lengthening of the time to bring some FDIC covered assets to resolution, which has the effect of reducing cash flows, due to the influence of the time value of money. We have been working to improve our operating efficiencies of our Company through expense reductions and clearly identifiable revenue improvements. We will be discussing these opportunities in details at our upcoming first quarter earnings conference call. But I wanted to make you aware of them given what was happening to the FDIC-loss share assets. I’m confident that these initiatives will more than offset the anticipated negative impact of the adoption of the new accounting standard and provide significant annual earnings benefits beyond that eight quarter period.

As we’ve demonstrated many times in the past, whenever we’re confronted with unforeseen challenges, we deal with those challenges head on and in the conservative manner and we do it on an expedited basis. Therefore, the actions described today are consistent with our cultural and philosophical approach to our business, it has served us well over the last 126 years and we expect it to continue to do so over the next 126 years.

At this point, I’m going to turn the call over to Anthony to kind of discuss the matters at hand. Anthony?

Anthony J. Restel

Thanks, Daryl. Our press release this morning outlines some changes for the loss share accounting that can easily, almost simply be broken into few distinct parts. I will describe them in the most simplistic way that I can think of given that this accounting can take you down on many different paths and can be quite complex on the surface. The first issue is the adoption of the new accounting standard. The adoption requires IBERIABANK to amortize the remaining uncollectible portion of the IA related to our non-single family portfolio, over the next eight quarters versus our originally planned remaining period of approximately 20 quarters. As a reminder, the under collectible indemnification asset is simply the dollar amount we expect to collect from our customers versus collecting from the FDIC.

Our loss estimates are $310 million, less than originally expected. The impact of this change is to accelerate amortization of the IA beyond previously anticipated amounts by $17 million in 2013 and $7 million in 2014. Keep in mind, this acceleration is simply to pulling forward a future amortization. So as a result, we will now have $17 million of incremental income beyond 2014 that we would have not had otherwise.

The increase to amortization will result in approximately 2% decline in the portfolio yield for the next eight quarters. Therefore, yields will revert back to 2012 levels in 2015 and beyond. The second issue is the $32 million indemnification asset valuation allowance for charge. During March of this year, we updated our timing and credit assumptions based on the most current economic conditions in the areas where the covered loans reside. As a result of that review, we noticed some recurring themes.

First, overall economic condition in Florida, where the majority of our covered assets reside, continues to improve and that improvement continues to be reflected in an overall improvement in credit quality of the covered loan portfolio. Second, timing of expected cash flows continues to extend. This is due to a number of factors including more performing credits and years agreed, and unfortunately the foreclosure process not improving.

Third, the inability to bulk sale assets in the near-term and recent challenges on selected note sales over the last few months have required us to extend the timing of cash flows on selected loans. As a result of the extended cash flow changes that I just described, we now have $32 million in expected loses that have new beyond the collection period of the agreements. Accordingly, the Bank expects to realize a non-cash pre-tax valuation allowance of $32 million tied to these timing-related items in the first quarter. The $32 million charge is expected to equate to $0.70 per share on an after-tax basis and reduce our capital ratios by approximately 25 basis points.

In an effort to provide greater transparency on this portfolio and the impact of the accounting, we’ve included in the PowerPoint presentation four graphs showing the projected balance of the portfolio over the next few years, projected future net covered loan income, the corresponding expected yield, and the projected IA amortization expense. I know a number of equity analysts have recently asked me to provide more information on the expected balance and income on the portfolio. I hope everyone finds the attached graphs helpful on achieving those requests.

Before we head into questions, I want to remind everyone that this particular accounting is driven by estimates of cash flow and undoubtedly will change as we move towards the expiration of the agreement. I can assure you that some of the future changes will be positive and unfortunately some will be negative as circumstances change. We continue to do our best, accurately reflect as we’ve always done the assumptions that derive the expected cash flows on this portfolio.

Now, I’ll turn the call back over to Daryl.

Daryl G. Byrd

Anthony thanks. And, John, we’ll do at this point. So, let’s just open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And we’ll go to the line of Emlen Harmon with Jefferies. Please go ahead.

Emlen Harmon – Jefferies & Co., Inc.

Hey, good morning guys. Thanks for taking my call. Maybe if you kick it off, you noted the remaining indemnification asset, could you give us a sense of just I guess how much of that is commercial versus how much is residential and just I guess a portion that’s expected to run down over the next two years versus over the next seven?

Daryl G. Byrd

Anthony?

Anthony J. Restel

Yeah. Emlen, I’ll get you the breakdown, I’m not, and we have to come back, I don’t want to give the wrong number here. So I’ll get that before we exit the call.

Emlen Harmon – Jefferies & Co., Inc.

It’s okay.

Anthony J. Restel

I’ll come back when we get that number.

Emlen Harmon – Jefferies & Co., Inc.

Sure. And then I guess the question related to that is just I guess what’s the kind of biggest factor that can lead that kind of swings and I guess additional swings in timing of recovery? Then I mean you noted a few different areas between kinds of the difficulty in bulk sale? And then what’s going on the economic environment? Just I guess what’s the factor that put the greatest risk of pushing other recovery beyond the timing agreement?

Anthony J. Restel

Emlen, it truthfully is our ability to either to foreclose on property, and we ensure that for those who visit Florida, it’s very easy to have attorneys help you find ways to avoid the foreclosure process. It’s all over billboards, if you drive around down in Florida. So if you ask me what’s the greatest thing and I’m worried about. I’m not particularly too worried on the commercial loans I think that we’ve made all the adjustments I think that we’re going to have to do there. It would be more I would say on the single family side. It will give me the greatest concern.

Emlen Harmon – Jefferies & Co., Inc.

I got you. And then Daryl maybe just one quick last one, it sounds like we’re going to get more, more detail obviously on the profitability enhancements on the actual earnings call that comes up here. But could you give us a sense maybe of how much is coming from the expense versus the revenue side, as your press release indicated there was a little bit of both, a little bit of both there?

Anthony J. Restel

I think you’ll find it pretty heavily, weighted on the expense side. And I’m not going to give you number this morning. We’re going to give you a pretty significant amount of detail. We’ve been working on this for a while and had planned on just putting this out of the call regardless. I think the best way to describe it for those of you who kind of remember what we’ve done historically. When we had a situation where we had some construction and land development loans, up in Arkansas that we had to deal with, we developed a fairly detailed process that we gave information at every quarter for like a couple of three years, and I think we provided a lot of detail. You should expect something like that. So when you see the quarterly call, we’ll have a lot of details for you and we’ll show you exactly where the expenses and revenues are coming from.

Emlen Harmon – Jefferies & Co., Inc.

Okay, great. Thanks for taking my questions guys.

Operator

Our next question is from Catherine Mealor with KBW. Please go ahead.

Catherine Mealor – Keefe, Bruyette & Woods, Inc.

All right, thank you and good morning.

Anthony J. Restel

Good morning, Catherine.

Catherine Mealor – Keefe, Bruyette & Woods, Inc.

All right, so I’m just trying to take good pictures. So Anthony, I think you said that the accelerated amortization is going to be basically a negative to your earnings for about $17 million in 2013, $7 million in 2014, but we’ve got basically about $20 million efficiency initiatives and revenue enhancements basically coming in which probably be fully reflected in 2014, would that be a fair, I guess a fair conclusion? So basically, we’re kind of thinking about net, net our 2014 estimate.

Anthony J. Restel

Yeah. So, we’ll…

Catherine Mealor – Keefe, Bruyette & Woods, Inc.

That could be around said still $30 million higher.

Anthony J. Restel

Right, so what we’re going to provide is, I’ve done in the first quarter call, is we’ll announce these initiatives which Daryl indicated will be at least $20 million on a run rate basis. And so yes, our intent would be that we’d have the full impact of that in 2014.

Daryl G. Byrd

And Catherine, we’re going to give you enough details that you would be able to see the quarters that shows up and as best as we can.

Catherine Mealor – Keefe, Bruyette & Woods, Inc.

Okay, all right great. And then commercial versus residential piece, I would love to see shares Emlen asked, and oftenly the one thing just to help us think about just delays of the creation from the covered loan portfolio of favorite time, and the detail you gave, Anthony, is really helpful in the charts. So how should we think about, I guess I’m asking I guess even beyond what you’re giving but how should even delays of the covered loan portfolio and how long we’ll see the benefit, particularly the benefit of your credits $300 million better than you originally expected? What kind of delays that we’ll be able to see the benefit of that coming through earnings over time? And at what point of future do you think that – basically your covered loan portfolio is going to become really a very small piece of your overall EPS?

Anthony J. Restel

Okay, so just a couple of things. One is, I guess the questions is at what point in the future do we think the covered portfolio really becomes de minimis in size and really doesn’t make up a significant part of the income statement. What I’ll tell you is if you look at the trending on the portfolio that we show really on slide six, what happens is the portfolio kind of moves down, and keep in mind that these graphs really show all the loans running to maturity and then we expect it will be paid out. The reality is, a number of these loans will be renewed and so the portfolio is never actually going to go to zero. I would say the portfolio on all likelihood kind of hangs out above – between $200 million and $300 million kind of hangs out in that range.

Now in terms of life of the loans, right, we’ve got obviously a commercial portfolio, which probably has remaining average life of about three to five years left to it. And then on our single family residential, we’ve got some fairly long life to those assets still remaining. And as everybody is I’m sure well aware and probably not unexpected, we’ve got a lot of homeowners, who’ve got some negative equity in their, for the residential mortgages and haven’t been able to refinance despite the fact that those yields are fairly high. And some of those loans actually, Orion Bank actually had 50 year mortgages. So we’ve got some fairly lengthy mortgages on the book. So it’s got a fairly long tail to mortgage side.

Catherine Mealor – Keefe, Bruyette & Woods, Inc.

Got it. And how should we think that the covered loan portfolio you’ve disclosed in the fourth quarter had a yield of 17.5% and that’s before you net out the loss share receivable. How should we think about how much of that 17% is just get all principal and interest payments on these loans? And how much is due to improved credit from your original mark?

Anthony J. Restel

So our original marks, Catherine on all and blended basis were just shy of 7%, I won’t say it averaged 6.82% in terms of original mark. So the differential between those two would be the impact of improving credit coming through.

Catherine Mealor – Keefe, Bruyette & Woods, Inc.

Okay, great. That’s helpful. Thank you.

Operator

Our next question is from Michael Rose with Raymond James. Please go ahead.

Michael Rose – Raymond James

Hey, this question is for Anthony and I’m not sure if you can answer this. But this accounting change, can you maybe, just broadly speaking, comment on maybe if other banks have kind of used a five year outlook like you’re now kind of required to use under the standard? Or are we going to see more of this coming from other banks you’ve done fair amount of FDIC-assisted acquisitions?

Anthony J. Restel

Michael, unfortunately I can’t really exactly tell you what other banks were doing. I won’t tell you that that we reached out to some of the accounting professional ask them as we were kind of looking at it to get some advice from them in which we way we should go in terms of where the industry was headed. Based on those conversations, it implied to me that other people who are having the same debate, but again, I have no concrete other than just some ancillary conversations with the accounting professionals that I could give you a concrete answer on.

Michael Rose – Raymond James

Okay and then just a follow-up on the revenue and efficiency enhancements. Any sense for, and I know you’re not going to prepared to discuss some detail today, but any sense for how much of that would be in the run rate in 2013? Thanks.

Daryl G. Byrd

Anthony, I think we had a hold off on the ‘13 run rate question until we get to the conference call. And we’ll provide plenty of detail on that, Michael, when we get to the call.

Michael Rose – Raymond James

Okay. Thanks for taking my questions.

Operator

And next we’ll go to Terry McEvoy with Oppenheimer. Please go ahead.

Terry McEvoy – Oppenheimer & Co. Inc.

Thanks. Good morning. I have a question on the impairment charge on the indemnification assets. You’re saying that in the presentation of the ability to entertain sales continues to be challenged. Now, I’m just wondering on the commercial side, where everything does have a price, are there prices in the market that you think are acceptable and then prices where need to be FDIC are acceptable, and is there a gap there that has created any conflict in terms of recovering on certain assets?

John R. Davis

So, the answer to that question is clearly there is prices in your eye really this is reflective on the commercial portfolio. We’ve entertained and completed numerous note sales over the sets over the last couple of years. Today, what we’re seeing is a desire for us to achieve a higher level of recovery on the note sales than what we’re actually able to achieve in the market and so there is a gap. And so because of that gap, we’re having some challenges actually getting note sales completed.

Terry McEvoy – Oppenheimer & Co. Inc.

And then thank you for slide six and seven. The projected average loan balance run-off a little bit, the slope is steeper. It’s a faster run-off than we have had in our model. Have you guys released this before? And if so or maybe internally, did that the slope is the run-off faster than you previously expected?

Daryl G. Byrd

We have not. Two questions or two answers. One is we have not released these graphs. In terms of the slope, yes, we are projecting a heightened level of increased on the cash that we’re going to see on this portfolio somewhat we maybe would have thought kind of heading into at the end of 2011 entirely 2012.

Terry McEvoy – Oppenheimer & Co. Inc.

And then just one last question in order to help us to calculate Q1 kind of capital position and book value. Will there be a one-time expense taken in the first quarter related to the efficiency improvement program?

Daryl G. Byrd

There will not be anything in the first quarter tied to that particular program. In the increased amortization, it’s about $5.5 million in the first quarter, $5 to the changing accounting.

Terry McEvoy – Oppenheimer & Co. Inc.

Great, I appreciate that. Thank you.

Operator

And next go to Kevin Reynolds with Wunderlich Securities. Please go ahead.

Kevin B. Reynolds – Wunderlich Securities

Good morning everybody. Most of my questions have been answered, but I’m not sure if you can answer this or not [desert] the table until next week. But have you noticed any change, any material change in the attitude of your competitors out there in Atlanta, particularly on the commercial side? I know this isn’t related specifically to today’s announcements, but just the idea of we know that there is a sense that the economy has slowed in first quarter, but have you noticed that your competitors attitudes have changed in terms of how they’re either holding on to business or they still letting it go from a market share gaining perspective for you guys?

Daryl G. Byrd

Michael, are you on?

Michael J. Brown

Yeah, yeah, I’m here. In previous conversations, we talked about the market is getting more competitive as I would suggest in the last three to six months. The level of competition has picked up significantly. I think it’s a function of what you just described. I think the market is putting pressure on thanks to share revenue growth and the only thing I’m going to do that at this particular junction I mean for ways to move along this. So as a result that’s what people trying to do. And the pricing discipline that exists in the market historically in the last couple of years doesn’t exist today. It is very, very competitive.

Kevin B. Reynolds – Wunderlich Securities

Okay. Is there any sense that I would say sort of larger banks or smaller banks or is it across the board?

Michael J. Brown

I would suggest the larger banks are a little bit more rationale relative to pricing discipline, the smaller banks absolutely no discipline whatsoever.

Kevin B. Reynolds – Wunderlich Securities

Okay. No surprise here. Thank you.

Operator

Our next question is from Bryce Rowe with Robert W. Baird. Please go ahead.

Bryce W. Rowe – Robert W. Baird & Co.

Thanks. Good morning. I wanted to ask about one of the metrics you show in the press release talking about a net yield for the covered portfolio of 7.45% in the fourth quarter of 2012. I thought we had a number in the mid-size of 5.55% for the covered portfolio. Just, Anthony, if you could help us….

Anthony J. Restel

Yeah…

Bryce W. Rowe – Robert W. Baird & Co.

To understand that 7.45% number?

Anthony J. Restel

Yeah, Bryce, what we did is we’re taking the net income I believe we may just shy of $22 million in the fourth quarter on a net basis and we’re dividing that back by the actually assets that we actually have. So we’re excluding the IA. So that if you take that same math and you run it out, you’re into about 7.45% in the fourth quarter. So we put it all on an apples-to-apples basis…

Bryce W. Rowe – Robert W. Baird & Co.

Okay.

Anthony J. Restel

But that’s what it is. The net covered income divided by just the covered loans themselves.

Bryce W. Rowe – Robert W. Baird & Co.

Okay, thank you.

Operator

And we’ll go to Peyton Green with Sterne Agee. Please go ahead.

Peyton Green – Sterne, Agee & Leach, Inc.

Hey, yes, good morning. It seems like you’ve got, you’ve had about 15% decline on the covered loans over the past couple of years and now you’re expecting an acceleration in that. And I’m just wondered is that from loans that are able to be refinanced out of the bank by others that you would have maybe ordinarily wanted to keep? Or I guess I’m just a little confused that the collection process is taking longer? How do you expect cash flow to improve?

Anthony J. Restel

Somehow we’ve got, Peyton, is obviously – a number of our performing commercial stuff that extended is expected to mature. And so thoroughly on obviously we bought the portfolio with portfolio had a longer life. So we continue to make good progress on the bad loans, so we’ve also got a performing portfolio. Obviously as we moved through time, we get closer and closer to the maturity of those loans. So what we’re modeling is that we’ve got a maturity to those particular loans.

Peyton Green – Sterne, Agee & Leach, Inc.

Okay. So I mean, they’re effectively, you would expect a lot of these to go away for the bank not necessarily to get renewed and moved into the uncovered portfolio? So that’s fair.

Anthony J. Restel

What I’ll tell you is some of them are being renewed and removed; some of them will leave the bank. Obviously, our intent is we’ve got a good (inaudible) that we want to keep. In Florida, we didn’t. We always expect that some level of portfolio left in Florida. So if we got a client that we think fits the portfolio of what we want then we’ll renew it.

Peyton Green – Sterne, Agee & Leach, Inc.

Okay. And I mean I guess is there any sense or cage I mean out of the $1.157 billion, how much of it is tied to residential and how much of it is commercial? And then, out of the commercial, I mean, how much would you consider core high quality customers?

Anthony J. Restel

Well, I guess we go back to how much of the portfolio that we think stays around the end probably somewhere between around $300 million is kind of our early estimate. But keep in mind that’s there’s really not a whole lot behind this at this point, just our best idea at this point in time. In terms of the flip between the portfolios today, we’re about 50-50 between the commercial and the residential.

Peyton Green – Sterne, Agee & Leach, Inc.

Okay. And so the big turn again though this year in terms of the declining portfolio would be not from the residential, but really from the commercial, is that right?

Anthony J. Restel

Yes. And well that end just keep in mind that when we started this process in a lot of our more challenged residential properties where people did engage through the games and the foreclosure process to extend our terms that those that that game has a limited life to it. And so as we see people being able to extend out foreclosure beyond the 1,000 days, their ability to do much more kind of goes away. And so we’ll be able actually to get those properties some of that stuff in the house as well as (inaudible)

Peyton Green – Sterne, Agee & Leach, Inc.

Okay, great. Thank you.

Anthony J. Restel

Yep.

Operator

(Operator Instructions) And we’ll go to Christopher Marinac with FIG Partners. Please go ahead.

Christopher Marinac – FIG Partners, LLC

Thanks. Good morning. What’s the chance that you have to revise your loss a number again before, either the end of this year or at some point between now when the loss share expires? I mean is there a risk that that happens again just because you have more and more inputs that is coming each, each month?

Daryl G. Byrd

Chris, obviously there is a good chance that we’ll be revising I mean the numbers are going to change right, so all the assumptions on cash flow are going to change. But keep in mind we’re establishing the valuation allowance. There is a possibility that we actually do better than what we’re thinking. And so we could have to – we might have some recovery there. On the flip side of that is we’re still dealing with a fairly large portfolio. We’ve got about 20% of that portfolio is what could be deemed a substandard type portfolio still. And so we’re going to see stuff move around. I think that what we’re doing today in the assumptions and the changes we made in our cash flow projections that we’ve kind of tried to take a lot of that volatility out, is there an ability to absolutely tell you there can’t be anything else, no there is not. Hopefully by doing what we’re doing here, we’ll do greatly to do some of the future volatility that we think we’ll see in this portfolio.

Christopher Marinac – FIG Partners, LLC

Okay. And then that’s helpful, thank you. And I guess one related question is, is there I guess to what extent does the assets staying on your books longer? Do you wish those to happen for the higher yield purposes as you mentioned in some of the charts? Or would you rather have them off sooner? I guess if there is a preference on how that is managed?

Anthony J. Restel

It’s kind of a double-edged sword and there is probably is more of that counterintuitive parts that we have to spend a lot of time talking to folks about. This accounting is really impacted by time value of money. And so there is a fine balance between. We do want to maintain good clients and keep income out there that that makes sense for the bank conversely, sometimes keeping that out there for future, (inaudible) because of time value of money. So there is not, I hate to say every credit has got to be looked at individually and then you have to make a determination on that credit about what’s best for the long-term income stream of the bank and that’s where you go.

Christopher Marinac – FIG Partners, LLC

Okay. Very good. Thanks Anthony.

Anthony J. Restel

Yeah.

Operator

And we do have a follow-up from Peyton Green. Please go ahead.

Peyton Green – Sterne, Agee & Leach, Inc.

Yes. I was just wondered if there is pricing pushback in terms of note sales, how much of the note sales are you seeing pricing pushback, is it more commercial or is there residential on the mix? To what degree does this worry about you selling paper within the last six months of the agreement on the commercial?

Anthony J. Restel

So, it’s been more on a commercial side, Peyton. In terms of, so we’ve adjusted basically our assumptions to reflect this new, let’s call it a little bit more time to resolve our credits. So I think we’ve got that particular thing, [kind of dealt with] in our modeling.

Peyton Green – Sterne, Agee & Leach, Inc.

Okay. Thank you.

Operator

And to the presenters on the call, we have no further questions in queue.

Daryl G. Byrd

Gentlemen thanks for…

Anthony J. Restel

Daryl, a quick before you go, Emlen, the question between, the split between the commercial and the residential, it’s about 50-50. And so with that Daryl, I’ll go ahead and turn it over to you. Sorry.

Daryl G. Byrd

Anthony, thanks. I want to thank everybody for listening to our call today and for your confidence in the organization. Hope everybody has a great day. Thank you.

Operator

And to participants that does conclude your conference. Thank you for your participation. We’ll now disconnect.

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