Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Matt Olney - Stephens Inc.
Matt Olney - Stephens Inc.
Did you provide guidance on levels of NPAs and non accruals in 2009?
George Gleason
We did not, the only thing I said on that is that we wouldn’t be surprised to see one or all of those four asset quality ratios increase. We did give guidance on charge-offs at an expectation of 70 basis points of loans and leases plus or minus. But I think the important guidance and I think it is a very good guidance is within the relevant ranges that we consider plausible for growth in nonperformers and charge-offs we still think that we can generate a good level of net income and very possibly, very probably even record levels of net income in each quarter.
We see 2009 as providing more asset quality challenges because obviously in the fourth quarter the economy took a significant step down and that’s effected a lot of people. Read any newspaper in the country and that’s very evident. But at the same time our revenue has grown in a very robust sort of way and our allowance has grown very significantly so we think we’re very well positioned to effectively manage through any challenges that the economy presents.
Matt Olney - Stephens Inc.
As far as the jump in delinquent credits during 4Q can you give some more details in terms of location.
George Gleason
That’s primarily due to two credits, and one of those credits is in Texas in the Metro Dallas area. It’s a $20 million credit so obviously that created a 100 basis points of the past dues right there. It’s a credit in which we have about a 65% loan to cost basis. We’ve got I think $20.2 or $20.3 million loaned. The customer has almost $11 million invested cash equity in it. At the time we originated the loan it was a 65% loan to value and 65% loan to cost transaction. In just the last few weeks we’ve had two appraisers reappraise the project and one appraiser on the low side each gave a value range but taking the low value from each appraiser, one would indicate a 64% loan to value currently, one would indicate an 86% loan to value.
So if you average those the assumption is 75% loan to value. This customer a very big national player in their sector and has just simply run into problems on a lot of other projects that has rendered them unable to make a payment. They went 30 days past due on the 31st day of December so they just got into the ratio about one day.
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