Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Brian Foran - Goldman Sachs
Brian Foran - Goldman Sachs
On capital, if you did end up raising preferreds you could be in a position where you have 9 to 10% Tier 1 and 5% tangible common so Tier 1 would obviously be high relative to your targets but are you comfortable staying at that level of tangible common from here?
Daniel Poston
Yes, I think in the short-run that would be a situation that would be acceptable. Obviously the additional buffer of that level of Tier 1 capital would provide sufficient cushion and get us through the credit environment that we’re in. I think on a longer-term basis we and likely others who would avail themselves of the government program for additional Tier 1 capital would seek to secure additional sources of common equity over time and over the relative short-run.
Brian Foran - Goldman Sachs
If you’re in that position where you’re thick on Tier 1 but thin on tangible common, would you be comfortable redeploying any capital via lending or acquisitions or is this really just about strengthening ratios and the core outlook for what you’re willing to do on the loan side doesn’t change much?
Daniel Poston
I think the size of the potential Tier 1 infusions are large enough that I think we would look at it as both a source of providing additional cushion for potential continued deterioration on the credit but also provide for the opportunity to return to more normal lending levels of activity as well as potentially provide some additional capital for other business opportunities if the become available.
Brian Foran - Goldman Sachs
NPAs plus delinquent loans as a percentage of tangible common is a metric that more people are starting to talk about and it screams pretty high for you at about 60% right now, is that a metric that you view as relevant and whether it is or it isn’t how would you get comfortable or make common equity shareholders comfortable that there’s enough common equity to cover the level of credit risk that we’re seeing right now?
Mary Tuuk
One of the things that we monitor closely is the level of change in the composition of NPAs that we’re seeing in this cycle relative to what you might expect to see in a more normalized type of credit cycle and if you look at the composition of our NPAs we think that there are a couple of key characteristics that really differentiate that composition and would provide a situation where we wouldn’t look at it on quite a normalized basis.
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