Glacier Bancorp, Inc. (GBCI) Q1 2012 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to this first quarter earnings call. [Operator Instructions] As a reminder, today's call may be recorded. It is now my pleasure to introduce our speaker for the day, President and CEO, Mr. Mick Blodnick. Please go ahead, sir.

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, who heads up our credit administration; and Angela Dose, who's our Principal Accounting Officer. Yesterday afternoon, we reported earnings for the first quarter of 2012. Earnings for the quarter were $16.3 million compared to $10.3 million in last year's quarter, that's an increase of 59%. Our diluted earnings per share for the quarter were $0.23. That's a 64% increase over last year's first quarter results of $0.14 per share. There were no one-time or extraordinary items, nor did we have any gain or losses on the sale of investments during the quarter. First quarter's performance was straightforward, with core operating earnings continuing to drive our results. We earned an ROA for the quarter of 0.91 and return on tangible equity of 8.91. Those are our best quarterly earnings ratios since March of 2009. The improved earnings were driven primarily by lower credit costs as we continue to see stabilized -- see those costs stabilizing and in some areas, better asset quality trends. As I stated on last quarter's call, 2012 would be the year we provide better returns to our shareholders and we still believe that to be the case. With that said, certain areas of our operations still pose challenges. Loan demand, although showing signs of getting a little better, is still concerning and making it more difficult to grow revenues and maintain margins, although I thought we did a good job of holding our net interest margin and protecting our net interest income this last quarter. Assets grew at only a 3% annualized pace this past quarter as we slowed down our purchases of investment securities. The growth we did experience, however, did come from investments as, once again, our loan portfolio had a small decline. Although there are signs that loan volume is starting to improve, demand is still soft and competition for good loans remains intense. We lost a number of good loan opportunities during the quarter because of our unwillingness to lock rates for an extended period of time. Although our crystal ball isn't any better than anyone else's as to how long rates are going to stay this low, we're not comfortable putting that kind of extension on in this rate environment. We haven't done it with our investment portfolio and don't plan to do it with our loan portfolio. With the announcement we made early in the quarter to restructure the company by converting our banks from charters to divisions, I'm happy to report that the process, scheduled to take effect on April 30, is on track and nearly complete. Although it won't have a measurable impact on the way we transact business, it will greatly reduce our regulatory burden and numerous operational redundancies. The closer we get to the conversion date, the more we're convinced that we'll now have more time to spend pursuing new business opportunities and more importantly, serving our existing customers. By maintaining the independent community bank culture we've built over the years, while at the same time simplifying our regulatory and operational structure, definitely has us excited and looking forward to a more streamlined model. Because loan demand remains marginal at best, we continue to add to our investment portfolio in order to sustain our interest income. In the quarter, the company added $112 million in securities, primarily short-term taxable and tax-exempt municipal bonds. This quarter, we also added to our corporate bond portfolio by purchasing $44 million in this security type. The highest volume of securities purchased this last quarter, however, was once again U.S. agency CMOs. However, because of the short-term nature and the specific structure of this CMO portfolio, the $380 million in purchases was still $11 million short of the amortization and paydowns we received during the quarter. This demonstrates the tremendous amount of cash flow generated each month from the CMO portfolio. And as I've stated before, we're comfortable and accept the impact these lower yielding securities have on our earnings rather than generated additional interest rate risk by extending the terms of these investments. The first quarter was another good one for deposit growth, especially non-interest-bearing deposits, which grew at a 12% annualized clip, which historically this quarter is not known for generating that type of increase. We also posted strong increases, both the number of personal and business checking accounts as our banks continued to commit a great deal of time and effort to growing their customer base. Our interest-bearing deposits grew at an 8% annualized rate during the quarter, with the increase split equally between retail and wholesale accounts. With little loan demand and excess available funding, our banks continue to reduce the pricing on their retail deposits. Because of their focus on lowering their funding cost, we cut interest expense on deposits by an additional 4 basis points during the quarter, down to 52 basis points. That was a 7% reduction. Our tangible common equity ended the quarter at 10.52%, an increase over last year's 10.12%. Tangible stockholder equity in dollars increased by $67 million or 10%. Tangible book value per share ended the quarter at $10.43. That's also up from $9.51 last year. We continue to maintain capital levels that are at or near historic highs. As I stated last quarter, our goal is to grow the balance sheet organically or through acquisitions. Absent those preferred methods, we will entertain other alternatives, which would include a stock repurchase, an increase to our cash dividend or a combination of both. There does appear to be more activity in the M&A arena, which is encouraging. We believe the long anticipated wave of consolidation could be gathering momentum and we think we have the right model and financial strength to participate, yet any transaction has to be a good fit and transparent that it is priced and structured right. As expected and predicted during last quarter's earnings call, we didn't see much change in our nonperforming assets in the recent quarter. In fact, nonperforming assets actually ticked up this last quarter by $1 million. During the quarter, we had 4 loans totaling $15 million move into nonperforming status. And although we did dispose of a few problem credits, it was not enough to offset the in migration. Even though we didn't make as much progress as we would have liked, we are encouraged by the activity level and transactions currently being worked on. Hopefully, this will transcend into further reductions in our problem loans as we enter the spring and summer months. We think it will. Nonperforming assets of $215 million represented 2.91% of total assets. That's down slightly from the prior quarter. Both nonaccrual loans and OREO decreased during the quarter by a total of $7 million. Unfortunately, 90-day past-due loans still accruing were up almost $8 million and were the reason for the overall increase in NPAs. One of these larger credits has already been brought current. In addition, our banks are currently working on a number of transactions that, if they materialize, will further reduce our level of nonperforming assets. The level of interest among prospective buyers seems to be getting better, and the offers that we are receiving are more realistic than the past couple of years. Collectively, we hope it will add up to further reduction in OREO and nonperforming loans. Nevertheless, it's still a challenge and hard work to move these distressed assets all the way through to their final disposition. But we think we'll have some success and regain the momentum we had at the final 2 quarters of last year. 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. As these 2 categories of loans continue to decrease, so does the dollar amount of net charge-offs associated with them. This is good news as the losses we have taken the past 3 years from these 2 loan categories have far exceeded all other categories combined. Key to lowering our credit cost going forward is in no small measure to reduced exposure to these A&D loans. However, for the first time in a couple of years, the 2 categories that caused the increase to overall NPAs were residential construction and 1-to-4 family mortgage loans. We always are concerned to have any increase in nonperforming loans. Our losses have been smaller if the assets we're disposing of are not made up of raw land or land that's been developed. We also have no plans to move away from our strategy of methodically and patiently selling our OREO properties. A number of these projects, we believe, have value that might not be realized in a fire sale, so we are content to continue to work them in order to achieve a price that we feel is fair. Time will tell if this was the appropriate course of action and economically the right thing to do. We believe it is. Somewhat surprising for this time of the year was the improvement in our early-stage delinquencies. Normally, we experience a ratcheting up of past dues during this time of year. However, this quarter, we saw improvement in the dollar amount of delinquencies compared to both the previous and prior year's quarter, which is encouraging. Also, our accruing TDRs declined by 10% during the quarter. So we did see a couple of positive credit trends. As spring and summer approaches, we hope delinquency levels will continue to improve. Net charged-off loans were basically unchanged from the prior quarter and down 39% from last year's first quarter. Net charge-offs for the quarter totaled $9.6 million, a decrease of $6.2 million from last year's quarter. We hope this trend continues throughout the rest of the year. It would be nice to get our charge-offs again below 1%. At the current pace, with an improving real estate market, that goal is definitely achievable this year. Even if we can't get to the 1% level, we expect to post a significant reduction in net charge-offs compared to the past 3 years. Our ALLL ended the quarter at an all-time high at 3.98% versus 3.86% in last year's quarter. During the quarter, we provisioned $8.6 million for loan losses. If credit trends continue to improve and we make the type of progress we are projecting in lowering our NPAs, it will be difficult to maintain the loan loss reserve at this level. This past quarter, our net interest margin was basically flat, which in this environment we considered a win since our expectations for our net interest margin was to contract more than it did. The margin for the quarter was 3.73%, down 1 basis point from the prior quarter and 18 basis points lower than the same quarter last year. The stabilization in the margin was a pleasant surprise, considering premium amortization during the quarter exceeded the fourth quarter's number by $1.3 million and was $3.2 million above last year's first quarter. Eventually, refinances will slow down and when that occurs, we will get a reduction in premium amortization, which should definitely help lend further support to our margin. Helping to offset the additional premium amortization was the great job our banks and our treasury department did in lowering our overall funding cost. As competitive forces continue to push loan yields lower, the reduction in our funding cost, again this quarter, was what allowed us to maintain our net interest margin at approximately the same level. Our total funding cost dropped 5 basis points during the quarter. Net interest income was down slightly on a linked-quarter basis, again due to the additional premium amortization we booked in the quarter. We were, however, able to increase net interest income by $1.6 million over the same quarter last year. We continue to attempt to protect our net interest income by adding to our investment portfolio and this past year had some success on that front. Although the higher level of investments helped, the key this past year has been the reduction in interest expense, which has more than compensated for the additional premium expense. Non-interest income decreased by $1.7 million from the prior quarter due to lower fee income on deposit accounts. This is not unusual in the first quarter of the year. We also experienced a small reduction in mortgage origination fees and gains on the sale of OREO properties. Compared to last year's first quarter, I thought the banks did a nice job of generating higher fee income, especially in mortgage origination fees. Total non-interest income increased $2.9 million or 17%. The gain on the sale of loans, both mortgage and SBA, accounted for $2.1 million of that increase. Refinanced volume and some of the highest premiums ever on SBA loan sales were the primary reasons for the better performance. We do expect refinanced activity to slow down in the second half of the year, although we think purchase transactions could increase as we head into the spring and summer months with attractive financing rates still available. Our non-interest expense, on a linked-quarter basis, decreased by $6.1 million due to the $6.1 million decrease in OREO expense. Compared to the year-ago quarter, our non-interest expense increased $6.6 million as OREO expense was $4.7 million higher this year. Normal operating expenses were well contained and within plan. Excluding OREO, I thought our banks continued to do a nice job of controlling all other operating expenses under their control. In summation, it's been a good start to the year. We're hopeful and expectant that the remaining 3 quarters will continue to show improvement in credit quality and credit cost. We believe there is a substantial amount of credit leverage to be released over the next year to 18 months, which should be a catalyst for better earnings in 2012. Loan growth is still a concern, so hopefully, the new operating structure will free up our staff to get out and generate more loan and deposit business. We recognize that revenue growth and especially growing our loan portfolio is not going to be easy. At the same time, a significant amount of the regulatory burden goes away and we simplify many aspects of our operation. We expect to be more efficient and our staff can once again focus on far more productive and profitable pursuits. M&A activity seems to be picking up across the country. And with our capital strength and operating model, we believe there are a number of attractive franchises worthy of our pursuit. Even without an acquisition, we continue to gain more and more customers to sell products and services to. So through the first quarter of 2012, we're more optimistic than we have been in some time that we will continue to improve our overall performance and increase our earnings again this year. And those are the end of my formal remarks and we can now open up the lines for questions.

[Operator Instructions] And we will take our first question from the side of Jeff Rulis.

A question, a couple on operating expenses, the first being, in the press release, you talked about sort of some -- well, compensation expense changes. Is that the number this quarter? Is that sort of one-time accruals? Or is this a base level that we should grow off of going forward?

That would be a base level. It's probably a little bit higher, Jeff, simply because of the activity on the mortgage origination front, which obviously those salaries are variable. But we have incorporated some new compensation programs and incentive programs this year, which probably, especially if we can continue to perform at the level we are and increase that level, that's probably a better baseline for you.

Got it. And then the second question on the expenses was regarding the conversion of the subsidiaries. Do you have a sort of a tangible number of either upfront cost of that or, going forward, cost savings? You've talked about efficiencies, but I didn't know if you had a number that you're assigning that would impact the financials.

We don't yet. And maybe by -- I shouldn't promise it, but maybe by next quarter, we're going to be about halfway through the quarter when the restructure is done. We may have some dollars to disclose maybe next quarter. We just really -- to be quite honest, we really haven't even focused on that yet. As I said, last quarter, so much -- in our mind, so much of the benefit of doing this is to reduce the redundancy, primarily regulatory redundancy. And I just struggle, Jeff, to put a figure to all the time that we're freeing up that used to be taken up with exams and regulatory issues that are now free to go out and generate new customers, new business. But to try to calculate what that means to us, I guess we'd be somewhat guessing. So maybe if we can get through a quarter to under the new structure, we might have a little bit better of idea. Now as I did say, there are some things that we know are going to save. We haven't necessarily seen any of those savings yet, but again, maybe at the end of the second, third quarter, we might have a better handle on that.

Okay. And then just the last one on the tax rate. Is there expectation that, that will creep higher as profitability improves? Maybe just for the full year 2012, do you expect to kind of stay in this 22% range? Any thoughts on it?

It should creep higher. I mean, if performance continues to move higher, that will continue to creep higher too.

Okay. More towards historical?

Yes. I don't feel quite yet there, but that's quite a leap, Jeff. But I guess the new run rate might be -- we were -- I think we're kind of guiding -- not guiding. We were saying -- assuming that maybe, we were going to be in that 15%. We are closer to 22%. I'd probably use the 22% to 25% going forward.

Next, we will go to the side of Brett Rabatin.

I wanted to -- I've got quite a few questions, but let me ask 1 or 2 here. I guess the first thing I wanted to ask was on the buyback, increased dividend language you discussed during the prepared commentary. Should we expect some kind of announcement in the next couple of quarters or so in terms of your updated thoughts on using capital?

I wouldn't say necessarily the next quarter, but our discussions the last 3 to 6 months have centered around kind of waiting to see just what materializes on the M&A front. The activity level has been better. We've had some discussions that really didn't go anywhere, but we've had more discussions recently. And so I think our preference spread is to keep our powder dry right now and see how the next couple of quarters turn out as far as opportunities from an M&A side. If we start to get towards the end of the year and nothing has materialized, then I think you could look at those comments I made as something that we'd be taking a much closer look at.

Okay. And then secondarily, I wanted to ask about credit leverage, just it seems like your reserve is really high relative to the loan portfolio. And I guess I'm just wondering about the potential for negative provisions going forward, assuming your credit leverage -- assuming you are able to get some problem assets off the balance sheet. And then also, I was -- you mentioned ORE potentially being lower and you had some projects in the works kicking off. Can you give a little more color around the size and scope of those?

We look at a number of -- you're right, I mean, our -- and that's a good problem to have. I mean, we -- I think we've been very, very conservative over the last couple of years in making sure we were building up the reserve to make sure it was fully adequate. And obviously, with loan growth still an issue and as you could tell from my remarks, we're still not confident that we're going to see any real breakout in loan growth. It's becoming much more of a challenge for us to continue to support that kind of a provision. So I don't want to say specifically, but the credit leverage, I think, is going to be a strong catalyst over the next 3 quarters. And whether that means that we just are not able to justify covering charge-offs going forward, that may be a direction that we go. Yet as you know, through -- even through this quarter, we've tried to cover, and that was what we told the Street, that we were going to cover charge-offs pretty much one to one. Well, we just can't keep doing that, especially if your loan portfolio continues to shrink. And this is probably the quarter where we're going to have to break away from what we have been doing the last 2 or 3 years as covering all of our charge-offs plus some. I just don't think we're going to be able to continue to do that.

Okay, and I don't know if Barry had any color on the projects that you guys are looking to potentially exit maybe in the near term.

As far as all the things that are being worked on right now, specifically we can't, but there's a lot.

Yes. We have a lot of things in the pipeline that we've been working on, and we anticipated to have some of those done this quarter. But due to primarily legal issues and bankruptcy issues, some of those assets just didn't move as we have anticipated. We have -- we fully anticipate that will happen in this next quarter as we work through that -- those legal issues. And as Mick mentioned, we already have one of the 90-plus secured this past week. We have another one that's projected. So I can't say exactly for sure, but we anticipate that we're going to have some decrease in nonperforming assets this next quarter, both the combination of loans and sale of OREO. Something -- I don't know if it will be to the level that we were in the fourth quarter of last year, but we do feel that is going to be moving in the right direction.

One other thing, Brett, is we have had a -- I didn't make any comments about this in my formal remarks, but we really did have a great winter. And not that we moved a lot of projects, like Barry said, there was a few that we expected to move this quarter that just got tied up in legal issues and that, but it absolutely was not the weather that deterred us from making the progress. We had pretty good, really nice winter up here. And what it did allow us, the banks, to do, is to continue to work and show properties. And I think that we should see the benefit of that better winter in the next -- in the second and third quarter in these next couple of quarters because like I say, there is a fair amount of transactions that are in some stage now -- there's never a guarantee. Believe me, we have learned that over the last 2 or 3 years and until you've cleared the check, these deals are never done. But we're -- we sure like the level of activity and we also like the fact that it seems like values or at least where we have written down these credits so far, that the losses are just not quite what they were before, either. So it's given us some level of encouragement for sure.

Next, we will go to the side of Jennifer Demba.

Do you think it's possible to sort of make a 20% or 25% progress in reducing NPAs over this year? Or do you think the progress will sort of slow from here or work out in '11?

I think that if you're talking 20% to 25%, you're talking somewhere in that $40 million to $50 million. In the next 3 quarters, I think that's doable. I really do. I mean, I guess I'd be somewhat disappointed at the end of the year if we couldn't lower it by at least 20%.

And you said you guys have entered into a few merger discussions or at least that's what you've intimated. What -- if that's true, has it just been pricing? This would have been the roadblock. Can you just kind of give us a sense of what's been going on?

No, it has -- well, I guess, ultimately, it's always -- somehow comes out pricing. The low marks have been really a huge detriment. I mean, bottom line, that still seems to be a real issue. In another discussion, there was other issues too, but I think that's going to be one of the big hurdles.

[Operator Instructions] And we will next go to the side of Tim Coffey.

Mick, I was wondering -- can you give me an idea of where the raw land that's in OREO right now, where that's marked up?

Go ahead, Barry.

Almost all of our raw land is -- we have valued on a bulk discount sale. If it's raw land or if it's even A&D, we're holding it in OREO. Or if we have a nonperforming loan and we have evaluated that as part of our allowance for loan or lease losses, we usually get an appraisal scope of work, a discounted bulk sale to a single individual. And those appraisals usually, for an A&D dealer, are usually based on a projection of a 15-year sellout, probably with a 20% to 30% discount rate. So that's -- it's fairly conservative underwriting. We've had most of our properties and loans now valued to -- through probably 3, maybe even 4 cycles. So we're carrying those at some pretty either heavily discounted values or have reserved accordingly as part of our allowance devaluation.

Okay, and about the optimism that Mick, when he talked about potentially lowering some of these NPAs, is that just a function of the market firming up? Or just that you've written down to the point that they're much easier to dispose of now?

I think it's a combination of those 2 things, Tim. I mean in some cases, we've seen some -- we've got a big geographic area. And in some of the markets we're in, there is no doubt that valuations have firmed up. In other instances, Tim, we have written things down so low that we're -- if an offer comes and it's close, we'll take it. And we're not having to take the significant hits we would have taken 2 years ago for moving that.

Yes, you know what...

You could say we still took some of those hits anyway by writing some of these down over the last couple of years.

Yes. Tim, if you look, our loss on sale actually was offset by our gain on sale this quarter. So we have at least the OREO asset that we're selling, which we're pretty much selling at book. So it's -- I think we're at that point now where it is a combination of carrying them at going market prices. And then also, I think a lot of the inventory out there, a lot of the deals that were there in the past, the last 3 years, have been there. So the potential buyers are starting the payout. So...

Okay, great. That's very helpful. And then Mick, are potential securities purchases in the coming quarters more heavily weighted towards the GSE types of securities or corporate?

It will still be more heavily weighted to GSEs. That's a really good question, Tim. I mean, we were hopeful at the last conference call and definitely the quarter before that, that we would have significantly increased our corporate bond portfolio by far greater dollars than what we've done. Unfortunately, as you know probably and everybody else that tracks this closely that those corporates have gotten so expensive and we had a specific disciplined approach that we took going in that we needed to have a certain duration or maturity at a certain yield. And that's just not there right now. So we haven't been able to put the corporates on. So we've kind of gone back to just relying on the GSEs and accepting the lower yields, although finally, the yields we're putting on are similar to the ones coming off. I mean, we went through a lot of pain over in 2009 and 2010 and early 2011 because we had so much amortization, but that amortization was coming off at much higher yields than what we were putting it back on. That's changed now. We're not seeing that big disconnect that we were seeing earlier. But I would say that right now, it's going to primarily be the GSEs. There's no doubt, volume wise, that's what's going to rule the day.

Next, we will go back to the side of Brett Rabatin.

Mick, I was curious, I wanted to ask -- you obviously haven't been able to keep the margin up, but loan growth has been lacking as you've been running off the construction book and just haven't had the ton of originations. How should we think about your prospect, margin versus average balances and the potential for spread revenue growth this year? You obviously had some growth this quarter given what you added to the securities book.

So -- come again now? Let me...

I'm just -- Mick, I'm just trying to figure out like you are obviously trying to improve credit and you haven't been able to grow the loan portfolio, just kind of given a lack of demand and then you run off in the construction book. And let's just say that the loan portfolio is up or down, I don't know, a couple of percent or something this year. Can you grow spread revenues in the next few quarters based on kind of your outlook for the margin and then just the overall balance sheet?

I think the only way that would happen -- let me back up to the first points you made on the loans. We've been beating ourselves up pretty good that we haven't been able to drive much in the way of loan growth because -- I mean, let's face it, that is the case. This last quarter, there was a few signs of hope in the fact that if you take out the charge-offs and the loans that we moved to OREO and the reduction in loans held for sale, loan growth was actually a couple million dollars positive. Now that hasn't happened much the last 3 years. And I'm not one to put any spin on anything but, hey, after 3 years of not having much loan growth, you look for whatever positives you can find out there. And so maybe we are kind of turning the corner. That would be a huge -- I mean, for us, to see even low single-digit loan growth would be a real positive. Now is that still likely to happen? Maybe not because of what we've been talking about the better part of the call and that is we still have got $215 million of NPAs that we want to push off the book and roughly $130 million of that is in NPLs that when we move those NPLs, I mean, it's -- at the end of the day, even though we weren't earning anything, there are still loans that we have to make up by creating that much more volume. With all that said, I still think we're going to be putting on securities. We didn't do a lot of it this quarter primarily because we couldn't find kind of a product that we'd like. We definitely couldn't find the corporates that we wanted to buy and we couldn't even find the structures that we really need on the GSE front. So as far as spread revenue, the only way that's going to increase is if we decide to further leverage up the investment portfolio a little bit more. I will tell you though, there is a little bit of a gain to be made on lowering some of our CD costs. We still -- I think the banks have done a fabulous job on some of the transactional kinds of expenses. But CDs, I think our CDs are still a little bit higher than what we're seeing out there in the markets. And not only that -- I mean, but you can't take that cost away tomorrow. Those CDs have to mature and over time, I think we will ramp that down a little bit, Brett. But as far as what's going to really drive net interest income, I really do -- probably in the near term, at least the next quarter or 2, I'm seeing that probably being a little higher investment portfolio.

And next, we will go to the side of Joe Morford.

I'm encouraged that M&A activity is perhaps picking up, and I recognize that you all will be opportunistic. But in the ideal world, where is your real focus? And I guess in other words, can you review again kind of what markets are of most interest right now or strategic priorities? What size banks are the best fits? And are you just as comfortable buying a distressed bank as a healthier one?

We're -- I'd be lying if I said we were as comfortable buying the distressed bank as a good one. That's not the case. I mean, we would absolutely gravitate to looking for good, solid banks. Ideally, with the new model now, it's a little different game changer for us. We wouldn't have some of the expenses even if we allowed that new -- that bank to run pretty much independent. We would probably do, but we -- there is not probably. We would do what we've done. We would collapse charters and get rid of some of the regulatory burden that, that bank would face. As far as geographic locations, we're still focused on the states that we're in right now. I mean, clearly, we would certainly like to see a bigger presence in Utah, Colorado, Wyoming, even parts of Idaho. Certain parts of Idaho, we're not as enamored with, obviously, because we still got some issues there. Montana is going to be a little bit tougher for us. I mean, we just got too much market share in most of the markets that we want to be in. And so that will be a little bit more challenging. Eastern Washington is another area that, obviously, we have some definite interest in. But I would say that for the most part, it's the stronger banks and companies that have got us -- got our attention. Now regarding the question you had, Joe, as far as the size, one of the things we are probably looking at -- and we, over the last 15, 20 years, have made a great business in buying very, very small banks, some of them $30 million, $40 million, $50 million. Just go back a few years and ratcheting those banks up in size, I'd say that for us, to do the $100 million bank, it's not optimal for us. I think we'd like a little bit more size, peers, just in looking at the numbers and what it takes to really move the needle anymore. And if you're going to go through all the work, sometimes, it takes as much work and as much cost to buy $100 million bank as it does a $500 million bank. I'd have to -- I'd be lying if I didn't say that our asset size is ratcheted up a little bit. And I'm thinking more in that $300 million range is more the minimum that we want to look at. I mean, I think we could exert a lot of time and effort on $100 million or $125 million bank and it's not going to do much for us. So as far as size goes, I think that we've kind of elevated our expectations there, to that probably, that $300 million asset range.

Okay, that's great color and very helpful. Just a quick one. Any comments on just kind of that pace of loan sale activity or kind of how should we maybe thinking about that gain on sale of loan line item going forward here?

I think it's holding in pretty well this quarter still. As I mentioned, SBA premiums are -- I don't know if I've ever -- Barry, have you ever seen it this good?

They are nice.

I mean -- yes, they're really good. And of course, Mountain West Bank, our one bank in Coeur d'Alene, they do an incredible job of creating SBA volume and they had a really, really strong quarter this last -- in this first quarter on SBA sales. All the other banks have done a really nice job on the mortgage origination, and I think it's the going to hold in okay for this quarter. But as I said in my remarks, I don't know -- I mean, we're not planning on refis carrying the day through the third and fourth quarter. We think we're going to be more reliant on purchase transactions and getting out there and really getting after it. But with that said, I feel really good about the mortgage origination staffs we have out there. I think we've really -- we've added some resources in the last year or 2. Obviously, competition has changed pretty significantly in that arena, so kind of like where we're at. So I -- again, I'm pretty confident for one more quarter. After that, it's a little bit more dicey.

There are no further questions at this time. So I'd like to turn it back over you, Mr. Blodnick, for any closing remarks.

Okay, well, thank you all very much for participating today. And again, I think we're starting to feel a little bit better about where we're going in the direction. There is no question far better than the last couple of years, but we'll look forward to getting the reorg done here in about another week, 1.5 weeks. Again, as I mentioned, I think we feel that it's really going to be a benefit to our banks. And the time and effort that they have to spend on things, it truly creates shareholder value. So with that, hopefully, everybody will have a great weekend. I think we're in for a spectacular weekend, weather-wise. So we're looking forward to it around here. And with that, I'd like to again, thank you all, and have a great day. Bye now.

This does conclude your teleconference. Thanks for your participation. You may now disconnect.