Glacier Bancorp, Inc. (GBCI) Q4 2011 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to today's Fourth Quarter Earnings Call. [Operator Instructions] Please note, this call may be recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Mick Blodnick, President and CEO of Glacier Bancorp. Please go ahead.

Welcome and thank you for joining us this morning. With me this morning is Ron Copher, our Chief Financial Officer; Don Chery, our Chief Administrative Officer; Barry Johnston, our Chief Credit Administrator; and Angela Dose, our Principal Accounting Officer. Yesterday, we reported earnings for the fourth quarter and full year 2011. Earnings for the quarter were $14.3 million compared to $9.6 million in last year's quarter, that's an increase of 50%. Diluted earnings per share for the quarter were $0.20 compared to $0.13 in the prior year's quarter, a 54% increase. There were no extraordinary items or gain on sale of investments during the quarter. Earnings for the year were $17.5 million, that compares to $42.3 million the prior year. That's a decrease of $24.9 million or 59%. In the third quarter of this year, we recorded an after-tax goodwill impairment charge of $32.6 million. Excluding the impairment charge, earnings for the year were $50.1 million, that's an increase of $7.8 million or 18% over the prior year. Aside from the impairment charge, we only recorded $346,000 in non-recurring earnings in the form of gain on sale of investments. That compares to $4.8 million recorded last year. Operationally, there were no other non-recurring income or expense items. Diluted earnings per share for the year were $0.24, down from $0.61 per share last year, that's a 61% decrease. Again, excluding the impairment charge, earnings per share were $0.70, that's an increase of 15%. Further discussion and the rest of my remarks this morning to full year's earnings and performance metrics will be on a non-GAAP operating earnings basis. We earned a return on average assets for the quarter of 80 basis points and return on average equity of 6.69%. For the year, our return on average assets was 72 basis points and return on average equity, 5.78%. From an earnings perspective both the fourth quarter and full year showed progress over last year. However, we still have more work to do in order to return to performance levels that more closely match our expectations. However, after 3 lackluster years, we believe if we can continue to lower our credit cost in 2012, it will be the year we return to better results to our shareholders. Clearly, there are definite challenges on the revenue front. However, our core operating earnings have remained solid the past 3 years. So again, if credit costs are reduced as expected, we can and should deliver better earnings in 2012. Total assets for the year grew 6% primarily due to increases in our investment portfolio. Lack of loan demand continued to pressure our loan portfolio and for the year resulted in a 7.5% reduction. This was greater than the 6% decrease we expected at the beginning of the year. Although still a very competitive and difficult environment to grow loans, there are some early signs that are pointing to better times ahead. With the announcement we made last week changing our organizational structure from bank subsidiaries to bank divisions, there will be more time to be spent pursuing new business opportunities and more importantly, serving our existing customers. By maintaining the independent community bank culture we have built over the years while at the same time simplifying our regulatory and operating structure is definitely the best of both worlds for the company and our banks. With the significant reduction in reporting, regulatory and accounting burden lifted, the banks can now focus on growing their loans and their customer base. This move to convert the internal configuration of our banks was the combination -- culmination of over a year of analysis and study. It combines the best features of our independent bank model without increasing expense of maintaining 11 separate subsidiaries. It will streamline numerous repetitive functions at both the bank and holding company level and allow us to concentrate more of our time and energy on growing our bank franchises. Although we have not quantified the hard and soft dollar cost saves, some of which will happen immediately, others over time, the impact to our operation will be notable. Because loan demand remains weak further decreasing the balance of our loan portfolio, we again increased our investment portfolio during the quarter. In a continued attempt to protect the company's interest income, we added $192 million in securities during the quarter, primarily short-term U.S. agency CMOs. Because of the short-term nature and specific structure of these CMO purchases, the yield currently on new purchases is less than 1%, putting further pressure on our net interest margin. However, rather than adding interest rate risk to the balance sheet, we have chosen to accept the impact of these lower yielding securities and what they have on our margin, rather than gain additional yield by extending the term of these investments. 2011 was another good year for deposit growth. The balance in non-interest bearing deposits grew 18% for the year although the pace of growth slowed in the fourth quarter to a 6% annualized rate. We also posted nice additions to both the number of personal and business checking accounts. The total number of checking accounts increased by 6% this past year, a very good number and affirms our commitment to growing our checking account base. Our interest-bearing deposits grew 4% for the year. With little loan demand and cheaper funding alternatives available to us, the banks did not price retail deposits as aggressively as other institutions in our market. Because of this conservative pricing strategy, we reduced our cost to deposits by 30 basis points during the year, down to 54 basis points or 36%. Our casual common equity ratio ended the quarter at 10.4%, a slight increase over last year's 10.3%. Tangible stockholder equity in dollars increased by $55 million to $736 million. Tangible book value per share ended the year at $10.23, that's up from $9.47 the prior year. We continue to maintain capital levels that are at or near historic highs. Although it was great having an abundance of capital during the downturn in the economy and banking crisis, it's also made earning a reasonable return on this amount of equity far more difficult. The last couple of years, because of the size of our capital base, our return on equity has not exceeded our cost of capital. We realize this cannot continue. We recognize that in order to create shareholder value, the return on equity must exceed the cost of that equity. We continue to explore all options to effectively deploy this excess capital. Our preference is to grow the balance sheet both organically or by acquisition. However, if neither of these preferred alternatives are viable or make sense, we'll consider other options, which include returning excess capital to our shareholders. Nonperforming assets decreased by 14% during the quarter and 21% for the year to $213 million. The momentum to dispose of troubled assets that began building in the third quarter accelerated even more in the fourth quarter. Unlike a year ago, an unusually warm and dry winter has definitely helped us, but I don't want to diminish all the hard work that's been done by our banks to decrease our NPAs further. We are hoping to make further progress this quarter. However, we don't expect the same level of reduction that we generated in the fourth quarter. The level of activity for this time of year is particularly encouraging and as many of these assets have been written down numerous times the past few years, we continue to see far greater interest from buyers for these assets. Although nonperforming assets ended at the lowest level they have been since June of 2009, we recognize that we are still far from where we need to be. We're committed to continue our methodical approach to disposing of these assets. This may not be the quickest way to remove these troubled assets from our balance sheet, yet we believe that long term this will provide us the greatest economic value with the lowest cost of disposition. As we have stated previously, a significant portion of our nonperforming assets the past 3 years have consisted of land development and unimproved land loans. Not only have they accounted for the bulk of the problem assets on our books, but also led to over half of all of our charge-offs. As we reduced the overall level of land development and unimproved land, there are fewer remaining dollars in these 2 categories that could become problematic. At year end, there was only $170 million left in these 2 categories compared to $269 million last year. And only $78 million of that total has not already been recognized as nonperforming assets. With fewer dollars left in these 2 categories to migrate in the nonperforming status, it is one of the reasons we're encouraged that the amount of troubled assets continue to decline. Nonperforming assets of $213 million represented 2.92% of assets. That compares to 3.49% the prior quarter and 3.91% a year ago. For the quarter, the improvement was broad-based with every category of loans realizing a decrease in the balance of nonperformers. The biggest decrease, again, came from land development loans followed by 1-4 family residential loans. Typical for this time of year, we did see an uptick in our 30-89 days delinquencies. With a large seasonal workforce tied to the tourist industry, past dues do ratchet up this time of year. Although some of the increase this past quarter was true delinquencies, over half of the increase was technical in nature. We did not see anything out of the ordinary or concerning with the higher dollar amount this quarter and expect as spring rolls around, delinquency levels should move back down. We feel we are past the inflection point regarding our credit quality, and again, expect additional improvement in the numbers in future quarters. If this year's sales activity is as good, or hopefully even a little better than last year's, we believe we are in a position to make excellent progress in further reducing our problem assets. Net charged-off loans were another positive as we experienced a 51% reduction during the quarter. Net charge-offs for the quarter totaled $9.3 million, that's a decrease of $9.6 million. We hope this favorable trend continues as we enter the new year. For the year, net charge-offs were $64 million or 1.85% of loans, a number that is still unacceptably high but moving in a positive direction compared to the $91 million in net charge-offs last year. We're definitely seeing stabilization in real estate prices throughout our footprint, with some increases in certain locations. In the near term, as we continue to work through these problem assets, we expect net charge-offs to remain elevated by historical standards but also expect improvement from the amount charged off in 2011. Our ALLL ended the year at an all-time high of 3.97% compared to 3.6% at the end of 2010. As we stated earlier in the year, our plan was not to do any type of reserve release in 2011 and to provision at least the amount of our net charge-offs. In 2011, we provisioned $64.5 million, which was $400,000 more than our net charge-offs. If the credit quality trends continue to improve, clearly, we will be revisiting the amount of the provision required for 2012. I'm not sure we can support a further increase to the ALLL or matching the dollar amount of net charge-offs if we see continued improvement in NPAs and other credit metrics. One area that has been a challenge for us during the year, and again in the fourth quarter, was our net interest margin. This is not a big surprise as we expected a reduction in net interest margin especially since the level of refinance activity which kicked in late in the third quarter and stayed with us throughout the fourth quarter, would probably significantly increase our premium amortization, which in turn reduces our interest income. This past quarter's increase of $4 million in premium amortization over the prior quarter definitely had a negative impact on the net interest margin. Our net interest margin ended the quarter at 3.74%, that's down from 3.92% the prior quarter. However, we did an excellent job of decreasing our funding costs, which dropped 10 basis points during the quarter but the impact from the premium amortization was too much to overcome. Clearly, the net interest margin is also pressured by competitive forces that lead to lower loan yields, yet the reduction in funding costs has been able to offset those reductions so far. The net interest margin is one area that is going to continue to be an issue especially after this week's announcement coming from the recent Fed open market committee meeting, that short-term rates could stay at historically low levels for an even longer period of time. This could potentially extend the current refinance wave, that is the main reason for our premium amortization. However, at some point, this will also begin to dissipate, and as it does, we will also see a simultaneous decrease in premium amortization similar to what took place in the second quarter of 2011, which also led to an increase in our net interest margin. Total net interest income declined by $1.6 million during the fourth quarter, however, increased by $1.9 million over the same quarter last year. We continue to attempt to protect our net interest income by adding to our investment portfolio, and for the most part this past year, we were successful. In the fourth quarter, however, the premium discount was just too great to offset. The banks did a nice job this quarter of generating fee income especially in the area of mortgage originations. Total non-interest income increased $1 million for the quarter or 5% sequentially. Mortgage origination income was up $1.9 million over the prior quarter, but down $2.8 million from the fourth quarter of last year. For the full year, non-interest income was down $9.3 million or 11%. Although the latest refinance wave did help boost fee income for the year, it was still far below the fee income we produced last year in the quarter and for the full year, both of which benefited from an even greater refinance boom plus the first-time homebuyers tax credit program. Also last year, we reported $4.5 million more in security gains than this year. Again this year, our fee income included security gains of only $346,000. Our net interest expense for the quarter, excluding goodwill impairment, increased by $7 million primarily due to a $5.7 million increase in OREO expense. Most of the $12.9 million in OREO expense this past quarter came in the form of write-downs. The loss on the sale of OREO accounted for $1.7 million of the total for the quarter. For the year, however, our non-interest expense, again, excluding goodwill impairment, only increased $4 million or 2% over 2010. Once again, OREO expense of $27.3 million was $5 million greater for the year and made up most of the increase in non-interest expense. Normal operating expenses were well contained in 2011 with compensation and benefit expense down 2%, occupancy expense down 3% and marketing and advertising expense decreasing by 5%. Excluding OREO, I thought our banks did a nice job of controlling all other operating expenses under their control. It's been less than a stellar 3 years and although we remained profitable every year of this downturn, it has not been the performance we expect to deliver. With that said, we're more optimistic than we've been in years. We recognize that revenue growth, especially growing our loan portfolio, is not going to be easy. At the same time, we're excited that our new structure should free up considerable time and resources to actively seek out new business, as well as further engage all our existing customers. The significant amount of the regulatory burden goes away and we simplify our entire operation. We'll be more efficient and our staff can once again focus on more productive and profitable pursuits. We're excited to see the progress we continue to make on reducing credit cost, which could be a huge catalyst for greater earnings next year. Our balance sheet is as strong as ever as we have made great strides to reduce our risk profile. We continue to generate a larger and larger customer base to sell more and more products and services to. And most important is the level of talent inside this company that will now be free to focus their attention on growing their banks. This is hardly a perfect banking environment that we're currently operating in and yet we think we've positioned the company to continue to improve earnings and our performance as we begin 2012. And those are my formal remarks for the quarter. We'll now open up the lines and take questions.

[Operator Instructions] And we'll take our first question from Joe Morford.

Hey, Mick, I guess I see you took borrowings up again this quarter. I just want to -- I mean, to supplement deposit growth and help grow the investment portfolio. Should we expect to see you continue to do that here in the near term until loan growth picks up? And then just in general, how do you feel about your ability to hold net interest income levels or possibly grow them given the challenging rate and pricing environment?

Well, I think that you might see, Joe, some additional borrowing increases. I mean, we are, again, and we've been saying this the last year, we are dedicated to supporting the net interest income especially interest income in the form of doing whatever we have to. Clearly, we'd love to see loans start to pick up. We're starting to see some early signs of that but I can't guarantee as we move through 2012 what that's actually going to do for us. So we are going to continue to add securities. We are reshuffling the mix of our security somewhat, though. And we're moving a little bit more away from the U.S. agency CMOs and we are in the process of buying a few more corporate bonds. Obviously, they won't have the hurdle of having to reinvest all that cash flow all the time, plus the yield's a little bit better. Now we haven't been willing to extend much on those corporates. That may be something that we do take another look at based on the comments made 2 days ago by Chairman Bernanke regarding interest rates and how much they're going to lower, how much they're planning on lowering. They're trying to lower long-term rates. So whatever -- I mean, we've had great deposit growth as I mentioned in my comments and if we find a need that the investment portfolio still has to grow beyond just a reshuffling of the mix, then, yes, probably some of that will come in the form of borrowings.

Okay. And then just one other question is just of the OREO expense, a lot of it seems to be still valuation hits. Where -- I know it's hard to tell, but just kind of where you think we are in that process in getting through the worst of it?

Well, I’ll let Barry chime in here, too, but I -- some of these legacy OREOs that we have further write-downs, I mean, they've been on our books for 2 or 3 years now. And we would have liked to have thought a year ago but that was the -- that we were getting to the end of it. In some cases, we are. I mean, we are seeing some properties in some locations where the reduction in value is really minimized or it hasn't changed much at all. Still on a few of the larger projects in certain other locations, as you can tell, we took further write-downs of that OREO. I would like to think, Joe, that at this point now especially with one of those credits going through like 3 years in 3 separate appraisals that we are definitely getting down to the bottom. But I guess, we maybe kind of thought that last year although the reduction this year was nothing like the write-downs that we took the last couple of years. So I think we are getting near the bottom. And again in some locations, I believe we've reached the bottom. Barry, you've got any other thoughts?

Yes. It's not so much the write-downs. I think it's more of the other side of it. It's just volume. We started the year with about $73 million in OREO and we took in additional $79 million. So what you're seeing is kind of the culmination of the peak of that. So in total, that's about $147 million. We have write-downs of about $16 million this year. So it's about 11% which isn't -- is, been right in line. So -- but as just the sheer volume of OREO diminishes, those write-downs should be going down. One of the big indicators that we saw -- that we're seeing, and it's really positive, is last year at this time, we had about $67 million of loans in foreclosure and, of course, we took in $79 million, which means a few of those -- a few new loans came in during the year that we foreclosed on, took them in the bank-owned property. This year at this time, we're at $20 million which is -- that's a precursor to better things to come. We're hoping so. So we anticipate what we're going to bring in to OREO in 2012 will be significantly lower than what we did in 2011.

And we'll go next to Jeff Rulis.

Barry, maybe if you could comment on the nonperforming loan inflows this quarter versus last?

Well, we definitely had some really improvement in reducing both NPLs and OREO this past quarter. We just -- we really aren't seeing -- I guess overall with the improvement in the credit metrics and the fact that we've been -- this is our fourth year in this cycle. Actually, if you look back to June of 2006 when we moved out of the Boise markets with A&D loans, we've been in this cycle 6.5 years now or almost 6 years. So we fully anticipate that the increase in NPLs specifically is going to start tapering off as we saw in this last quarter. So we're feeling positive about it.

I mean, Jeff, we're looking at quarter-by-quarter the in-migration of NPLs and, as Barry said, it's definitely slowing down. As -- if you would expect, I mean, going back to my comments, I mean when you look at where the bulk of our NPLs have come from in the form of unimproved land and land development, I mean, there is only $78 million left in those 2 categories that isn't already in NPLs or OREO, so that number is so, so much smaller than what it was 2 or 3 years ago. Now I guess, one can make an argument that if commercial real estate or 1-4 family or something like that starts to really ramp up and we start seeing more problems, which to date we have not, that could cause some additional in-migration. But, boy, with the small level of dollars left in those problematic categories, we just really think that the in-migration of NPLs is going to be much slower.

And I guess one follow-up on the OREO cost, I'm still kind of a head-scratcher on Q4, was anything seasonal in that jump or I'm trying to get some confidence into, Mick, you mentioned $27 million in OREO cost this year versus $22 million last?

Correct.

And then into 2012, the numbers pointed to lower cost there, but sequentially, I guess the question is, anything seasonal in the Q4 jump in OREOs, is it just a group of properties?

It was just a group of properties. There was nothing really, Jeff, seasonal. I mean, there was a lot of things being worked on. As Barry mentioned, OREO has really -- I mean, we have worked through a lot of NPLs this year and taking control of a lot of properties through a lot of hard work. And those distressed properties just ended up the last half of the year in a much, much bigger dollar amount of OREO. And as we work through those, especially in the fourth quarter, some of those, like I said, there was part of those was a loss, but yet a big part was still write-downs. We still made some progress during the quarter in OREO but I don't think there was anything necessarily seasonal about the write-down for the charge-offs. I think it was more just volume-driven and the fact that -- there was one other thing that we always go through. Our appraisal cycle tends to be back half of the year weighted. So I mean, we are -- and that’s just the way it's been for the last -- maybe that’s the way the credit cycle developed or the way that dollar amounts of NPAs or NPLs and OREOs have come into those buckets but that just seems to be the weighting that we have and it's heavily weighted on the back half of the year. And as you get those additional valuations and appraisals in that, that's when you take those charges and I think that also had something to do with why in the fourth quarter especially, we had more write-downs of OREO.

Yes. I can just add to that. It's really a function of our regulatory examination cycle. We always want to ensure that all of our OREO and nonperforming loans are properly evaluated, and generally for our 4 or 5 biggest banks those examination cycles came in October and November, so we have tended to update valuations just prior to that to ensure that we don't have any issues there so that those write-downs usually come in the fourth quarter.

And we'll go next to Matthew Clark.

Just as a follow-on to the OREO, I guess, just trying to get some magnitude of potential write-downs and loss on sale. I mean, you have $78 million. Gone through that same exercise, I think, Barry, that you went through, having $78 million of OREO going into '12 and your backlog, it sounded like $20 million or so. And obviously, you'll have -- you may have some more flow in but is it $50 million of additions this year you think, maybe or...?

I think that would be on the high side.

Okay. And I guess the other question is, what do you currently have your OREO written down by? So on that $78 million, what is the carrying value of that OREO, do you think?

Okay. We have $78 million. We ended the year with $78 million. Just to break it down, we started with $73 million. We took in about $79 million. We sold $58 million and we took a $16 million in write-down and about $3.5 million loss on sale. I can shoot you those numbers.

I got it. Okay, that's helpful. And then I guess on the securities portfolio, I think I know 2/3 of it is just CMOs and you got, I think, 1/3 in munis. But I guess, can you update us on the duration of that overall book and then maybe isolate the CMOs? I'm just trying to get a sense for the magnitude of yield compression we could see in the securities portfolio over the course of the next year assuming pre-pays temper a little bit.

Well, I mean as far as the amount of compression, I'm not sure that we're looking -- I mean -- well, when you look at 2/3 of that portfolio and that, I think, their current rate on that entire CMO portfolio is about 1.6%. So if you think, Matthew, that we're -- and this is the case, I mean, currently what we're booking in at the margin type of new investments is slightly less than 1%, yes. I mean, there's 60 more basis points of compression there. Now one of the things that's going to make that type of analysis a little bit difficult is we're not necessarily going to continue to roll all of those CMOs directly back into CMOs. Currently, we're in the process of moving some of those dollars into corporates. In which case, the uptick in corporates is probably an additional 1.5%. So you've got 2 things, you've got 2 forces going on. Yes, I would agree that we would see some pretty significant compression if our goal was to take all of these CMO dollars and all the amortization on that portfolio and just continue to plunk it in to new CMOS, but that's not the case. We're starting to roll a portion of that in the higher-yielding corporates. So that is definitely going to offset some of that compression. But I've not stopped to try to calculate exactly what that is. But it's not like we're going to replace every dollar every month in corporates. That's not going to be the case. So there is still going to be some CMOs that get purchased at a lower yield level than what we have as a weighted average of that portfolio.

Okay. That makes sense. And I guess on the duration on the CMO, that 1.6%, I guess what would be the weighted average of the duration there?

1.2.

Yes, 1.2. This is Ron, Matthew.

Okay. And I guess in terms of how much you have in corporates at the end of the year, and I guess, how much you might want to take that up to in terms of contribution to the overall portfolio?

Yes. So far, I mean, our only commitment is to take that to -- we've currently got about $50 million, maybe $60 million purchased right now. Our commitment is to take that to about $0.25 billion. So there could be approximately $200 million more in purchases. But again, that's not going to be net-net. That's going to be taking cash flow off of the CMO portfolio and redeploying it into corporates.

Right. Okay, great. And then on the mortgage revenue line, I guess, anything -- I guess, just curious about the pipeline going into 1Q applications and your sense for the level of activity there. If that number can hold up in the near term or not?

The pipeline going in was almost exactly where we ended the latter part of the fourth quarter. So at least for probably the next 2 months or 2 months of this quarter, which is about as far out as you can really see, 60 days is about the most we look forward. It looks as though that pipeline is relatively stable with where we were in the fourth quarter. So yes, we're expecting especially on a year-over-year comparison, we're expecting probably mortgage origination fee income to be better in this first quarter than where it was in the first quarter of last year, hopefully comparable to what we recorded in the fourth quarter.

[Operator Instructions] We'll go next to Jennifer Demba.

If you covered this I apologize, but in terms of the restructuring and the consolidating of the charters, how much cost do you anticipate saving per year with that move?

Jennifer, we have not quantified that yet. Yes, and I know I've been asked that question a lot and clearly there are definite cost saves. I mean, some of those that we'll be recognizing immediately, as I said in my remarks. Some that we will recognize over time. But it's really difficult because so much of the cost saves -- I mean, there are specific cost saves. There's cost saves with various vendors. There's cost saves with certain fees and things like that, that we pay. But the biggest cost saves is just in the reallocation of time among our entire staff in all 11 banks to hopefully be able to pursue, as we said earlier, more productive endeavors. In other words, getting out, reengaging with customers, going out, hustling a lot more loans rather than being required to spend a lot of that time on regulatory, statutory, legal and compliance types of issues. So, which many of those we continue to do 11x. We're going to simplify much of that by doing it one time and that's absolutely going to free up a lot of resources within the company. I think our staff, especially our bank presidents, are very, very excited about this new structure. I think they recognize that it's really going to allow them to really get back into the business of banking and not be so tied down to so many of the other, again, regulatory issues and that, that they had to deal with in the past. But we have not put a dollar and cents figure on it, Jen.

And we'll go next to the site of Joe Gladue.

I think most of my questions have been answered, I guess really just have one quick one left. Where did the performing TDRs end the year at?

The total is $164,541,000. And it's broken out to nonaccrual, those nonperforming, there are $65,583,000, or 584 rounded, and accruing are $98,957,000.

That was basically about the same as the third quarter. There's a change from quarter-to-quarter.

They're up about $12,115,000 somewhere.

And we'll go next to David King.

Forgive me if I missed this, I jumped on late and if so we can probably just talk about it off line but the main question I had was on the outlook for improvement in credit going forward. I think you had a comment in the release that you expect to make additional headway as we head into 2012. Mick, maybe can you just comment on what you've done so far in the year and how to think about the paces of problem asset reductions going forward based on everything you see today?

Yes. I mean, based on my comments on what we talked about, Dave, we certainly could cover this off line but we have said that our expectations are that our credit metrics are going to continue to improve. We've built up some nice momentum in the second half of 2011. We don't necessarily expect that the first quarter is necessarily going to be like the fourth quarter of the year because the fourth quarter was far better than what we were really expecting as we went into the fourth quarter. But yes, for this time of year we've had a great winter. The first quarter is looking better than many other times when you enter the first part of the year. We still have a number of transactions that we're working hard on hoping that those will close up, if not in the first quarter, hopefully early in the second quarter. So just the overall momentum is far better. We talked a little bit earlier about the in-migration of problem credits, especially from the areas that we have had the most concerns and issues with. That definitely is looking far, far better. So I mean, the bottom line is we're excited. We think that if we continue to see a stabilization in values in prices that we will make further headway in 2012 and with the ALLL where it is, I mean, I think we feel very, very comfortable that we've got -- we're very adequately reserved at this point in time.

And it appears we have no further questions at this time.

Okay. Well, very good. Well, we'd like to thank all of you who participated this morning. Again, we're -- start of a new year. We're excited both for the new structure that we're putting in place. That should finish up right around April 30. So we're working hard on getting that put together. And with credit looking better these days, we're feeling that 2012 and the earnings that we can deliver should be better. So again, a lot of things going on right now but we're excited and think that we're going to have a year in 2012 that gets us a little bit closer back to the type of performance that we delivered for many, many years. So with that, I'd like to thank all of you again for your participation this morning and you all have a great weekend.

This does conclude today's teleconference. You may now disconnect. And have a wonderful day.