Question-and-Answer Session
Operator
(Operator Instructions). And it looks like we'll take our first question from Matthew Clark of KBW Please go ahead.
Matthew Clark – KBW
Good morning
Mick Blodnick
Hi! Matthew
Matthew Clark – KBW
How are you doing. Can you first touch on or just discuss how your commercial loan yields were able to hold up or just keep to that 4 basis points decline, and maybe just touch on the overall outlook for loan yields that the Fed has cut quickly here 125 basis points, just wondering, I guess if there is a lot of loans embedded in than that commercial line, that might be hitting floors or if there is a higher component of commercial construction in there?
Mick Blodnick
I'm not sure that a lot of our loans have hit floors yet. I mean obviously many of our banks have floors embedded in their rate structures, in their pricing structures. I think that to answer you very first question, every one of the banks get together on a weekly basis, and not that pricing is the number one topic each and every week, but
I know it's discussed by Barry and the group of Senior Credit Officers. And I think there is a level of competition to try to maintain pricing at adequate levels. And for most of 2007, I mean it wasn’t until the fourth quarter when we saw a real drop off in interest rates. We were able to do that.
Yeah, I think part of that could be a construction component that makes up a part of those higher yields, but we've had that construction component out there for a lot of quarters prior to this, and we've just been able to maintain. And I think one of the reasons that the margins probably did hold up better, is maybe not even so much on, while the yield on earning did hold up, you are right, it didn't go down much. The margin probably held up well because we tried to do the best job possible on our funding side. I think the banks really do a good job in that respect, and with some of our wholesale funding, we've tried to maintain levels of pricing and looking around on the wholesale front to make sure that we are funding these banks at the lowest levels possible.
I would expect now that we have seen the rate reductions over the last 10, 12 days; that it is probably going to move more and more of our commercial loans closer to floors. But that doesn’t mean a lot anyway, because they move to the floor still doesn’t stop customers from coming in and wanting to negotiate or change rates or change the deal structure. So we are going to have to be prepared for that.
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