Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Matt Olney.
Matt Olney - Stephens Inc.
I wanted to ask you about CD repricing. It seemed like it was very favorable during the quarter. Can you give us kind of a rough idea of the pricing of some of the CDs that will be maturing during the remaining part of the year and what’s the pricing on some of the new CDs that will be replacing some of the old CDs?
George Gleason
We’ve got CDs maturing Matt at all sorts of pricing from very low pricing to very high pricing and we will be replacing those with CDs that will be pricing from very low to moderately high pricing. Generally there are a few phenomena going on that probably merit a comment in that regard. Number one is we still have quite a few CDs that were issued 12, 15, 18 months ago that we’ll be rolling off in the fourth quarter and even the early part of 2009 that should, based on where CDs are pricing today, should result in those CDs repricing at a lower level. So the trend that we’ve experienced should continue to occur to some degree of higher pricing CDs rolling down to a lower level of pricing. The second force that is muting the benefit of that somewhat at this time and I think will continue to mute the benefit of that in Q4 and into the first part of ’09 is we’ve seen a number of institutions who appear to be significantly stressed for liquidity and as a result are pricing up very aggressively and I saw another banker making a comment about Countryside and of course with them going away and WaMu and with them going away, hoping that some of the guys that have been under more significant stress for funds would moderate that pricing. But with commercial paper markets seized up as they are and other sources it seems like even a lot of the large banks, we’ve seen a lot of the large national banks in regionals being very aggressive on pricing CDs and that is tending to hold up the cost of CDs and not give us further relief that I would have hoped we would be getting at this point. So our general expectation is that we think the cost of funds will continue to go down somewhat because of repricing older, higher rate deposits down, but I don’t think we’re going to get as much of a bump there as we would like to the margin just because I would think there is a very aggressive need for deposits out there. Now what is helping us really good in that regard is even though 54.8% of our loan portfolio is variable rate, at September 30, 56.8% of those variable rate loans, a little more than half of those variable rate loans that we had, are at their floor rate so over half of our variable rate loans did not adjust downward in rate as a result of the last move in the Fed funds target rate and prime rate and a large percentage of those loans that were not at their floor rate are LIBOR based loans and LIBOR hasn’t moved too much and in fact has moved in a positive spread, so it is a very dynamic market in trying to manage and predict what’s going to go on with your net interest margin because there are a lot of unusual forces at play there but with all that said, we feel pretty comfortable with the guidance that I just gave that we think our Q4 margin will be in the 3.82% range or somewhat higher and that takes into account what we think will be a somewhat dilutive effect on our net interest margin this quarter from the remaining balances of our temporary investments and tax exempt securities.
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