Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Matt Olney – Stephens, Inc.
Matt Olney – Stephens, Inc.
You may have mentioned this and I missed it but did you reiterate your net charge off guidance of around 70 basis points in 2009?
George G. Gleason, II
We did. We said that we believe that 70 basis points plus or minus is good guidance for the remaining two quarters of the year. That’s the guidance we gave in January and if you segmented the charge offs for the first half of the year of course, the majority of them relate to that $10.5 million of net charge offs and all of the others combined are somewhere I think between 71 and 72 basis points annualized of that net charge off ratio. So, apart from that bump in Northwest Arkansas we’re pretty much on track for where we thought we would be and we’ve reiterated that guidance of 70 basis points plus or minus for the remaining two quarters.
Matt Olney – Stephens, Inc.
As far as Northwest Arkansas can you give us an idea of your loan exposure up there currently as well as the allocated provision for that market?
George G. Gleason, II
Yes, I’ll be happy too. As we’ve discussed many times the Fayetteville, Springdale, Rogers Arkansas MSA which for those not in Arkansas we commonly refer to that as Northwest Arkansas has been our largest source of problem loans and net charge offs over the past several years. We have significantly reduced our total loans and particularly total real estate loans in that market. That number was down to $76 million at June 30 which is left than half of our previous high watermark for total real estate loans in that market.
Now, with the large charge off that we took in that market in the past quarter, and it was certainly painful, there’s a flip side to that and that is that I’m pleased to report that many of our remaining loans there are performing very well and are not expected to be a problem. The other loans which remain in that market which we consider to be currently problems or that may become problems in the future I’m pleased to report have either already been written down to estimated impaired value or already have special reserves established for that estimated potential exposure.
Therefore, we believe that our remaining loan portfolio in Northwest Arkansas does not pose any significant risk to future net income results. We think we’ve pretty much with the provisions that we’ve already got built for loans there, have pretty much got a fence around the total exposure in that market. Another point that I want to make, while we’ve reduced our exposure in Northwest Arkansas a lot over the last three years, that is and will be a very important market for us in the future but certainly with the present real estate market conditions there, we’ve been wise to reduce our total exposure to the current level.
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