Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Christopher Marinac - Fig Partners.
Christopher Marinac - Fig Partners
I wanted to ask about the statement you made in the press release about the internal critics of assets coming off. Can you give us I guess a little more thought about what may occur with that just in the next couple of months? Do you see that trend continuing? Is it a little bit early to make too much of it at this point?
Dennis Hudson
It’s possible it maybe too early. I think the central point is that we have been hard at work since late ’06, during all of ?07 and during all of ?08 to make certain that we properly identify our risk in the portfolio and as we undertook that activity and that monitoring, market conditions continue to deteriorate and they deteriorated frankly very rapidly in terms of the impact on some of our credit exposures.
Those internally identified issues grew rapidly over the last two years, as we brought to bear enhanced monitoring, and as the marketplace deteriorated significantly. Its effect was most severe on some of our largest exposures in the portfolio and our most troublesome exposures related to clearly, residential development loans. No surprise to anybody that we would see that.
What we have seen since the middle of this year is a clear cut stabilization and actually some decline in those numbers and I think that probably we believe, we hope that that is a function of our early indication; our realistic understanding of where those credits are and most importantly, a lack of additional credits coming in to that part of the portfolio. Said another way, if you’re aggressive on the front end, understanding where our problems are, we will likely deal with things far more realistically and up front as we try to resolve things.
So Chris, to answer your question, it’s uncertain as to whether it’s time to call that a trend. We debated whether to talk about it this quarter. It’s been two quarters now that we’ve seen it decline. It’s not a massive decline, but there’s a definite change in trend and I think it’s a function of the things that I just talked about and very clearly, lack of additional assets feeding into those buckets over the last six months. So that’s somewhat encouraging.
Having said that, market conditions remain very stressed and our outlook is that if you’re in the residential development business, there’s no end in sight in the near term for things turning around, so. I hope that answers your question.
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