FNB Corp (FNB) 2008 Q4 法說會逐字稿

Good day and welcome to the F.N.B. Corporation fourth-quarter 2008 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. As a reminder, today's conference is being recorded. And now I'd like to turn the conference over to Frank Milano, Investor Relations contact for F.N.B. Corporation. Please go ahead, sir.

Thank you. Good morning, everyone. This conference call of F.N.B. Corporation and the reports it files with the Securities and Exchange Commission often contain forward-looking statements relating to present or future trends or factors affecting the banking industry and specifically the financial operations, markets and products of F.N.B. Corporation. These forward-looking statements involve certain risks and uncertainties.

There are a number of important factors that could cause F.N.B. Corporation's future results to differ materially from historical performance or projected performance. These factors include, but are not limited to, a significant increase in competitive pressures among financial institutions, changes in the interest rate environment that may reduce interest margins, changes in prepayment speeds, loan sale volumes, charge-offs and loan loss provisions, general economic conditions, legislative or regulatory changes that may adversely affect the businesses in which F.N.B. Corporation is engaged, technological issues, which may adversely affect F.N.B. Corporation's financial operations or customers, changes in the securities markets or risk factors mentioned in the reports and registration statements F.N.B. Corporation files with the Securities and Exchange Commission. F.N.B. Corporation undertakes no obligation to revise these forward-looking statements to reflect events or circumstances after the date of this call. It is now my pleasure to turn the call over to Mr. Bob New, President and CEO of F.N.B. Corporation. Bob?

Thank you, Frank and good morning, everyone. Thank you for joining us. With me today is Brian Lilly, who is our Chief Financial Officer, as well as Gary Guerrieri, our Chief Credit Officer and other members of our senior leadership team.

I would like to begin our call this morning by recognizing the contribution of Steve Gurgovits. As you may recall, Steve turned over the role of CEO to me back in April. But he stayed on with us for the remainder of the year to assist with that transition for which I'm grateful. Steve formally retired from the Company on December 31 after 47 years of service. He will remain associated with F.N.B. Corporation as a paid consultant and also will serve as Chairman of our Board.

As I said in our press release, our 2008 financial results fell short of our expectations. We reported a net loss of $18.9 million, or $0.21 per share for the quarter. For the full year, we reported a profit of $35.6 million, or $0.44 a share.

Our biggest challenge this year has been Florida. Even though it represents only 5% of our total loans, the impact on our 2008 results was significant. We took a series of actions this year to improve our processes to better manage the risk inherent in Florida and build our loan loss reserves accordingly, much of it in the fourth quarter. We also added to F.N.B.'s overall loan loss reserve in light of the challenges facing the economy. In a few moments, Gary will talk more about Florida and what we did with our reserves. He will also share with you details about our Pennsylvania and Ohio portfolios, as well as Regency Finance.

Also this quarter, we took a charge for other than temporary impairment on investments. Brian will cover the details of these charges when he reviews the Company's financial results and also provide guidance for 2009. Following Brian's comments, I'll talk briefly about our view of the challenges facing us, how we intend to manage through those challenges, where we see opportunity, and our efforts to improve our performance to take advantage of those opportunities. At this time, I would like to turn the call over to Gary Guerrieri, F.N.B.'s Chief Credit Officer.

Thank you, Bob and good morning, everyone. I would like to cover this in three segments with you, including Florida, our Pennsylvania and Ohio banking portfolios and Regency Finance. We took some aggressive action against our Florida portfolio during the fourth quarter. The $32 million provision covered $13.7 million in charge-offs, but more importantly allowed us to build our reserves by $18 million to a level that now covers 9.69% of the total Florida portfolio, up from the 3.32% figure at the end of the third quarter. The portfolio declined by about $14 million to stand at $294 million, still only 5% of F.N.B.'s total loan portfolio.

As we have discussed in the past, our process continues to focus on reviewing each individual credit every quarter, which includes meeting with our borrowers to update financial information, review project status updates, discuss upcoming maturities, obtain updated appraisals and review other alternatives that may include rightsizing the loan, providing additional collateral or moving the loan in total if possible.

During the quarter, we were able to eliminate another $12 million or 7% of our land and condo-related portfolio from our balance sheet through sales or paydowns from our borrowers. As of year-end, we have updated appraisals on all of our non-income producing exposures to within one year with 77% being within 120 days and 91% within six months, reflecting extremely current collateral valuations at this most difficult time in the Florida economy.

Let me remind you that of the total $294 million portfolio, approximately $150 million, or about half, is comprised of land and land development. 46% of that being commercial in nature while our condo construction portfolio is now down to $17 million.

With the exception of one credit related to the hospitality industry that we discussed last quarter, our income-producing portfolio continues to perform well with outstandings of $79 million. The balance of our Florida portfolio includes construction loans of approximately $40 million and C&I owner-occupied of $9 million. At year-end, our weighted average loan-to-value for the entire portfolio stands at 73.7% versus 71% for the third quarter. During the quarter, we made one loan on an income-producing property and continued to be extremely cautious regarding any new lending opportunities across that market.

Now let me turn our attention to Pennsylvania. As it relates to our commercial portfolio, we experienced slightly elevated delinquency levels from the third quarter, but they remain well within tolerance at this point of the economic cycle. We recognized charge-offs on a number of credits that we were monitoring closely during the year resulting in net charge-offs in our Pennsylvania commercial portfolio of 21 basis points. In addition, we built our reserve by nearly $12 million to strengthen our allowance as we move into 2009.

In reference to our consumer portfolio, it continues to perform very well in this environment. While delinquencies are up slightly at 1.08%, losses continue to track near historical low levels at 31 basis points year-to-date. Losses across the mortgage portfolio continue to be minimal at one basis point. These portfolios continue to perform very well due to our disciplined underwriting and our decisions to stay away from subprime, stated income and brokered business opportunities. These decisions have proven to be sound as reflected in the performance of these portfolios. While we do anticipate slightly elevated delinquencies and losses as we move through the economic downturn, we expect these portfolios to continue to perform relatively well.

Taking a quick look at Regency Finance, the loan portfolio has remained relatively unchanged since the third quarter at $157 million. We continue to experience normal delinquency and loss levels at 4.23% and 3.78% respectively, which is consistent with levels experienced over the last couple of years. I would now like to turn the call over to Brian Lilly, our Chief Financial Officer.

Thank you, Gary and good morning, everyone. The fourth-quarter loss of $0.21 included a $0.47 impact from the increased provision for credit losses and other than temporary impairment charges. Without these charges, the EPS would have been $0.26, which is reflective of a good underlying profitability picture. We are currently in a down credit cycle, but this will pass over time and we believe that it is important to manage the core trends for the long-term performance.

Let me add a few details to the other than temporary impairment charge that we took against the trust preferred pooled securities. As we shared with you in the past, we have a total of $55 million in trust preferred securities. Single name holdings comprise $14 million, represents six names and all continue to be investment-grade rated by Moody's. These are valued at $0.64 on the dollar as the spreads are very wide in this illiquid market. The remaining $41 million are in 13 pools, representing 12 mezzanine and one senior debt tranche and had a fair market value of $18 million at year-end. We deemed eight of these pools to be other than temporarily impaired and realized a pretax loss of $16 million. We made this determination based on a cash flow analysis that considered the current levels and trends in the deferrals and defaults, an analytical review of the 500 plus companies that make up the pools and an assumption that all deferrals and defaults will recover virtually nothing.

It is worth noting that none of these pools have currently breached the collateralization levels and in fact, on a weighted basis, these eight pools must increase the current deferrals and defaults in an additional 1.4 times to reach the collateral support levels.

Now let me to the fourth-quarter review and 2009 guidance. I will start with some of our economic assumptions before we touch on loans and deposits followed with the income statement categories and then finish with capital. As usual, I assume that you have had a chance to review the release details from yesterday.

Many key economic indicators worsened in the fourth quarter, officially being recognized as a recession. The economist consensus view is that the recession will continue well into 2009. As a result, unemployment has increased significantly and is expected to remain elevated in 2009 and the Fed's interest rate policy has dropped rates to unprecedented levels and are expected to stay low. All this presents a more challenging 2009 operating environment. We believe that these challenges demand more than ever that we continue our focus on liquidity, capital, risk management and the enhancement of our franchise.

Now let me turn to the fourth-quarter results and 2009's guidance. Average fourth-quarter loan balances grew 1% annualized over the third quarter and reflect the smaller commercial pipeline that we shared with you last quarter's call. We are very pleased with the year-over-year fourth-quarter organic growth of 4.4% reflected in both the commercial and the consumer portfolios.

As we look to 2009, we are forecasting low single digit loan growth. Incorporated into these expectations is the assumption that businesses and consumers will reduce their debts and that we will exit some of our troubled loans.

We expect total deposits and treasury management balances to match the loan growth in the low single digits and to maintain the loan to deposit and treasury management balances at a very good level of 90%. We have planned for our team to continue to add core transaction accounts and we'll use our wholesale borrowings and retail certificate deposits as offsets if necessary.

We expect the net interest margin to be lower in 2009 given the late 2008 Fed interest rate actions, the unprecedented low level of these rates, higher nonperforming assets, and continued competition from banks that are not as well-positioned with their deposit funding. We have planned for the margin to narrow to approximately 375 to 380 in the first quarter and to remain there for the rest of the year.

Gary provided an excellent overview of the credit quality and this will be a continued area of focus in 2009. Versus a more normal year, we do expect the coming year will contain elevated levels of nonperforming assets, net charge-offs and provisioning for credit losses. As you know, many of these assumptions are driven by the economy and could worsen with a longer and/or deeper recession.

Fourth-quarter noninterest income included good performance in our retail security sales and loan swap-related income. The OTTI charges impacted this category with the TruPS and the bank stock impairments shown in impairment losses on securities and the $3 million impairment for the Capital Corp. investments were shown as a contra in other income.

We have taken some pricing actions to increase banking service charges and expect to benefit from a hardening of the insurance market and the sales of annuity contracts, which have a relatively attractive rate. Our trust team is focused on adding new business that will have headwinds given the market-sensitive fees. In total, we are targeting a run rate increase in the mid single digits. Of course, any additional OTTI charges would be included here.

Given our view for revenues in 2009, we are focused on maintaining a strong expense culture and taking incremental actions where appropriate. However, there will be unfavorable impacts from higher FDIC insurance, credit workout expenses and employee benefit costs. These increases are more than offsetting the expense savings that we have included in our 2009 plan. In total, we expect the efficiency ratio run near the 60% level as the previously mentioned expense increases are not entirely offset by revenue gains.

With regards to capital, we saw that, even with the fourth-quarter loss, we ended the year in a regulatory well-capitalized position. In early January, we closed on our participation in the Treasury's capital purchase program through the issuance of $100 million in preferred shares. This strengthens our capital position and provides the ability to increase lending and deposits as the economy recovers over time.

We also took a hard look at our capital strategy given the recessionary economy, elevated credit costs, narrower margin and the higher regulatory costs. This review led the Board of Directors to reduce the quarterly payout to $0.12 per share. This was not an easy decision given F.N.B.'s 36-year history of increasing dividends, but we believe the decision was prudent given the environment. Bob, that completes my comments.

Thank you, Brian. During the fourth quarter, we continued to build bench strength adding John Williams to the position of Pittsburgh market executive and President of our Pittsburgh region. John spent more than 38 years in his banking career in Pennsylvania and previously served as Executive Vice President of Commercial Banking for Huntington. Prior to that, he held executive management positions with National City and Mellon Bank.

In addition, we appointed Dave Yates to the new position of Corporate Strategies Coordinator. In this role, Dave will oversee a number of high-level strategic initiatives, including process improvement and efficiency, product development and customer service.

As Brian said in his remarks, many economists see the world and the US economy as continuing to slow in 2009, with a leveling sometime in the second half of the year, then followed by a slow and gradual recovery as consumers and businesses continue to deleverage. These conditions will challenge bank profitability again in 2009. We believe that our conservative operating model, efficient use of capital and the lower volatility of our traditional markets position F.N.B. to outperform many of our competitors in 2009.

As a reminder, back in April, I reported that F.N.B.'s management and Board of Directors reaffirmed our conservative operating strategy that functions well in both good times and bad. Our operating strategy is designed to manage our business for profitability and the components of that strategy require us to operate our businesses in markets that we know and understand, maintain a low-risk profile, drive organic revenue growth through relationship banking, fund loan growth with core deposits, target a neutral asset liability posture to manage interest rate risk, build fee income sources and maintain rigid control of expenses.

As the financial services industry restructures, I believe we will see investment banks dramatically delever, nontraditional consumer lending will largely disappear and wholesale funding models give way to more traditional funding models such as ours.

As these events unfold, traditional banks such as F.N.B. will become more important to credit creation. Furthermore, a constrained supply of deposit funding should require loan pricing to better reflect risk, which helps improve net interest income.

These things won't happen overnight. They will take time. So before we can enjoy the good times ahead, we have to successfully manage through the tough times we are in today. That means preserving our capital and maintaining our liquidity. It is for these reasons that we decided to reduce our dividend.

As we deal with today's challenges, it is critically important that we not lose sight of the promise of the future and prepare for it. We must strategically invest in our people, products and processes to improve profitability and continue to improve our sales and service culture to ensure we retain our current customer base, attract new customers to F.N.B. and meet more of our customers' needs with F.N.B. products and services. We reaffirm our commitment to manage our business to create long-term value for shareholders and position F.N.B. Corporation as a strong competitor in the communities where we do business. That completes our prepared remarks. I would like to ask Allan if he would please open the call for questions.

(Operator Instructions). Frank Schiraldi, Sandler O'Neill.

Good morning, guys.

Good morning, Frank.

I wondered if you could give us a little further breakdown maybe on Florida as far as NPA growth and net charge-off growth within that portfolio. Is it mostly the land loans that have gone on to nonperforming status?

Frank, this is Gary Guerrieri and we have moved some of those land loans to nonperforming status. During the quarter, we increased nonperformers $60 million across the organization and all but $1.4 million of that was in Florida.

Okay. And then as far as the length of the loan down there, I mean what's sort of length of that loan and how much stress are you seeing from developers?

We are seeing continued stress across all of the asset categories from a developer perspective. As we broke down the Florida portfolio for you, our land and land-related portfolio is about $150 million and the stress does continue across that asset class across the state of Florida.

Okay. But in terms of what sorts of things you are doing to clean up those loans, I mean are you facing issues where you have to sort of extend terms or are you just -- instead of doing that, are you just taking an aggressive stance and charging them off immediately? I mean how is that sort of working itself out?

Yes, Frank, this is Bob. We have talked over the last couple of quarters about a process that we have in place where we get out and talk to customers six months before these loans come due and go armed with current appraisals. A good number of these loans were made in late 2006. They were done for anywhere from a year to two years, so they came due really in the second half of this year. And many of these projects had development associated with it whether it was commercial or retail. But as the economy soured in 2007, most of these folks ended up not executing their development plans. So effectively what we had was the land portion of that loan.

What we have done over the past year is make sure we had good current appraisals on these things so that we knew what the underlying collateral value was and then go out and visit with the borrowers. Some of these folks have some pretty strong financial statements and were able to put up cash reserves for the interest and size the loans down and that is our preference. We will renew that loan for another year if they provide an interest reserve and then hopefully something will break in the next 12 months where either the developer decides to go develop the property or whether they move the loan or do something different. But the reality is as long as they continue to pay the interest and size the loan down to the current value of the collateral, we will extend it.

In cases where we don't think that is happening, that is where we took specific reserves. The natural progression is that if borrowers can't make interest payments and make the reductions that are required, we will eventually have to take them into [ORE].

Okay. So as far as the land loans, is there any way to get a breakdown or just maybe anecdotally sort of how much and within your portfolio down there, you have seen raw land fall in value, how much you've seen the appraisals come down say in the last year?

I can tell you, Frank, that since origination and these loans, as Bob has mentioned, were originated in late '05 and throughout '06, across that portfolio, residential land prices on average have come down about 44% across our portfolio based on the information on each transaction. Commercial have held up much better. They have come down about 22% and on the development transactions, they have come down right around 40% as well.

Okay. And do you have a breakdown of loan-to-value within the land loans or no that you could give us? I know you gave the loan-to-value or the average loan-to-value of the entire portfolio.

We do. Across that portfolio, the developed piece at this point is 80%. The commercial land is 65% and the residential land is 91% and both the residential land and commercial land are carrying heavy reserves at this point. The commercial land carrying about half of the reserve that the residential land portfolio is carrying. So the residential land is carrying the heaviest piece of that reserve.

And these are all, as you said, new appraisals, right? Do you have a post-reserve appraisal?

Yes, I do, Bob. And I can give that to the group. If you look at the reserves and take a post reserve look at these groupings, the residential land post-reserve is a 65% LTV. The commercial land, 49% LTV and the developed land, 68% LTV. So you can see that we have positioned those portfolios with very updated appraisals, once again, margined quite well.

Okay, thank you.

(Operator Instructions). David Darst, FTN Midwest.

Good morning. So I guess within the $96 million nonperforming in Florida, could you give us -- I guess what percentage of that is actually current with reserves and then placed on nonperforming status?

In terms of our current non-accruals that are less than 30 days, across the bank, we have a total of $51 million in that category.

How much of that is -- do we have it for Florida?

David, we will get that if you want to -- we will follow up with that.

At some point, you would have recognized that your borrowers were not building the project. Could you have been more aggressive in recognizing issues then or exiting some of those loans as they were not going through with the project?

David, that's a great question. Remember when these loans were booked and I think I have said this in prior calls, the developers, particularly on the loans that were just secured by land, had put up cash reserves in advance -- had these interest payments taken out of the loan. The cash reserves were set up to pay the interest. So we have had current loans that haven't been past due and borrowers who had substantial financial statements or at least financial statements when we made the loans.

So could we have been more aggressive? Probably so, but I don't know that -- I don't know that we have any right to go into a borrower as they were going through this process of getting their permitting and the steps that they had to go through to get to the construction phase to call those loans. So again I think the -- I think the answer to your question is maybe on an isolated basis if you looked at one or two of these things, could we have been more aggressive? Maybe so, but on a whole, I think our team handled them about as well as they could handle them.

David, back to your question in reference to the Florida non-accruals that are less than 30 days past due, that number is $26 million of the $94 million total nonperforming asset grouping there.

And how has the Omega transaction gone and asset quality within that franchise and does anything in this environment lead you to feel like you may have to take an impairment charge on that goodwill?

The Omega portfolio.

There's two pieces to that question. If you can (multiple speakers).

Let's address the portfolio -- how the Omega portfolio is performing first.

The Omega portfolio is reflecting performance exactly as we expected during the due diligence. It continues to move along quarter by quarter and we took the marks that were necessary to take in that portfolio at the time -- at the time of bringing it on board. We have not seen it alter its performance as per our original expectations.

And David, if I could add, this is Brian Lilly. The goodwill impairment charge, of course, is the accounting measurement that we take a look at periodically and we are completing that work for year-end and not seeing any issue. But I would also remind you that some companies that seem to announce it have different operating structures where when they buy a company, they maintain that legal entity and that goodwill gets pushed and measured against that legal entity. Our philosophy is that we have consolidated all of these acquisitions into one entity, so we measure that against the total enterprise value of F.N.B. and not on an individual acquisition basis.

Okay. And then how about just with your TARP funding, what would be the mechanics of that cash and how you use it in the near term as you receive it?

I'm sorry. Could you say that again?

The TARP cash that you receive, will you use that just going into the securities portfolio or pay down borrowings?

Certainly as we took that, our plan is to put that into some investment securities for a period of time here and then lend that out as the opportunity rises. And we believe that's going to be a longer-term proposition. And so we currently just received it and are looking to get past the earnings season here. The interest rate opportunities, as you well know, are not as attractive and so we are taking our time, putting that money to work in the investment securities and laddering it out a little bit.

Thanks.

(Operator Instructions). Jonathan Katz, BMO Capital Markets.

Hi, good morning, guys. In regards to the Florida portfolio, where are you currently carrying the $94 million in nonperforming assets?

I am not sure --

I guess what percentage on the dollar has been charged off on the nonperformers?

Well, the nonperformers would reflect on that charge-off amount, only an allowance. Any charge-off comes right through into the balances, Jonathan.

Okay. Do you have a dollar amount? I mean we have heard some banks carrying nonperformers in Florida at $0.33 on the dollar or possibly $0.50 on the dollar.

What you are talking about there is how much reserve we have positioned against these categories. And I think when Gary was talking about the residential and the commercial land portfolios in particular where he was talking about netted reserves, the $0.65 at this time, around that $0.60, that is the best I can think that you would be referring to.

Okay. All right. And I guess the second question is on the tangible common equity ratio, do you guys have a specific target or where do you become concerned and maybe look at raising additional capital?

Well, we certainly are very strong from a regulatory capital and we do watch the tangible equity ratio and we had conversations of that as part of our consideration in the dividend reset that we just announced. We have operated since the spin in the 4.50% to 5% range basically and I would say that we have been comfortable there. Certainly the fair market value accounting is one of the considerations that we had when we reset the dividend to build that, but we are not looking -- the philosophy of the Company has been to maintain the capital that is needed to run the business and to execute the operating strategies and not to maintain anymore. And so I would say the Board is comfortable at our current levels, but certainly something that we're monitoring as we go forward.

Okay, thanks a lot.

Damon Delmonte, KBW.

Good morning, guys. How are you?

Good morning, Damon.

Great. Just a quick question regarding the provisioning as we look out into '09. We did see a meaningful reserve build this quarter. Any way we can kind of balance out charge-offs in the coming year with reserve build and provision levels?

Maybe if you could be a little more specific, Damon.

I guess where are you going to be comfortable with your loan loss reserve level? You are at 180 right now. Do you see that growing materially more in the coming quarters or do you think that, for right now, that is an adequate level?

I think we took a hard look given all the actions in the fourth quarter to our model and the assumptions and the qualitative, quantitative, inputs to that model. And I think as we have shared with you in the overall scheme of things, we are not projecting a recovery in 2009. We are adopting really the economic consensus that says we are in a recession and it is going to continue into 2009. And we reflected those in our qualitative and quantitative measures in our allowance. So I think we built the reserve build that took place at the end of the year and got us to the 180 I think is reflective of an environment that is not going to be the optimal operating environment for banking.

Okay. And then just with respect to the Pennsylvania franchise, in which loan categories are you seeing the most stress or the most weakening in credit trends?

Damon, it is just a spattering across the board just based on the general weakness in the economy.

But I would say, Damon, that just rephrasing your question, I think if you looked at our credit quality, our past dues of the Pennsylvania portfolio as it sits at year-end, without the views of 2009 and really where it came off of very strong, it is very normal. So we are not seeing -- we wouldn't categorize where we sit at the fourth quarter in Pennsylvania as being abnormal or being stressed in any way. But certainly we are mindful that things can play out in 2009 and that risk management is important.

Okay, great. And then lastly, if you already answered this, I apologize, but what were your initial use of the TARP proceeds. Were you going to try to leverage that up to minimize the dilutive effect of that or are you just going to reinvest that in short-term securities until lending opportunities present themselves?

Damon, the response that Brian gave you earlier, we are putting it in securities until those lending opportunities come up. And if you think of -- if you kind of look at the amount that we took, we took $100 million of the $180 million we were approved for. Our normal growth pattern, and we have stated this in the past, we try to grow our assets somewhere around 5% a year. That meets our investment thesis and to do that, that is about a $200 million increase every year. So if you don't have much increase in 2009 as a function of the recession, and you look out five years, we would be able to fully leverage that $100 million over that period of time. And that was really some of our thought process as we started to really work our model and decide how much of the capital we needed and that is one of the reasons we didn't take the whole thing. We just didn't think we needed it.

Great. That's very helpful. Thank you.

Mac Hodgson, SunTrust Robinson Humphrey.

Good morning. I had more of a big picture question on Florida. I know historically the strategy there had made sense because you knew the market and knew the people and it was a good way to supplement loan growth because Pennsylvania had been a slower growth market. How do you think about Florida as it fits into your strategy long term now given what we are going through?

I think in the last quarter's call, we answered a similar question, Mac. We have left our options open in Florida. The options range from not being in Florida at all to going into Florida in a bigger way. And we have done that for a couple reasons. One, we believe in the team that we have down there. They are good people and they really do understand the market. Our timing was terrible when we got back in it, so most of the loans we made in '05 were when prices were at or when sales were at their highest and then prices were at their peaks in '06. So our timing was really lousy.

So we have really kind of left that open. Whether it is a brand strategy where you collect deposits or whether it is a strategy similar to Texas Capital for example where it is just strictly a commercial operation, we really haven't made that decision and we won't come to that decision until we get a sense for when Florida is going to turn.

So again, just I think we have made a decision to leave our options open. Right now, the people who are down there know all of the borrowers that are in our portfolio. And the last thing I want to do is run them off. They are going to help us collect these. And we are also seeing an occasional opportunity to make a loan down there that makes sense. So we are in a hold pattern on it is probably the best way to put it.

That makes sense. I appreciate it. Thanks.

Frank Schiraldi, Sandler O'Neill.

Thanks. Just a couple quick, if I could, two quick follow-up questions. I know it is only 5% of the portfolio so I hate to talk about it this much, but on Florida, when you are making your provisioning assumptions in terms of how that is going to hold, how Florida is going to hold up as a whole, I mean to you have sort of assumptions you are making in terms of values coming down further? Do you think we are sort of close to a bottom down there in terms of residential land and commercial land values or do you think there is a bit more to go?

I wish my crystal ball was that clear, Frank, but I will tell you, here is how I feel about it. If you have ever watched a rodeo and seen the calf roping, they let the calf out before they let the roper out so he moves away from the cowboy and the cowboy ends up chasing this calf until he finally gets a rope around it. When he finally gets a rope around it, he goes and he wrestles this thing to the ground and starts to tie the legs. That's where we are in our process. We finally feel like we have got a rope around the calf. We got it on the ground and we are trying to get the legs tied.

Remember that the key to rodeo is to make sure that it stays tied. So what we hope is that we do a good job with our borrowers down there and make sure that we tie these things up pretty close. If we get another 20% or 30% or 40% decline in values in Florida, there are going to be more losses in this portfolio. If we see that the decline down there, given that we have had current values on these things in the last three or four months as 10% to 15%, then I think we come out a lot better. But I can't really tell you specifically whether we have it behind us or not. But at least we have it on the ground and a rope around its neck. So that is about the best I can give you.

Okay. That's a good analogy. Have you seen any sort of positive trends, anything to hang your hat on? Has the inventory gotten -- has anything turned around down there yet where you would say, hey, that is something positive that we can hang our hat on for the future?

Well, the answer to that is yes. We have sold a good number of our condo portfolio that was on non-accrual.

Right. So you have seen that market pick up a bit?

We have seen some and we continue to see some payoffs and paydowns in this market as well, but I don't think the -- I don't think the bottom fishers are reaching for their wallet quite yet, but we hope they are getting close.

Frank, we have also experienced, with some of the marks that we are taking in the fourth quarter, we have also experienced a couple of instances where we reordered appraisals on properties in the last four, five, or six months and we have seen some stabilization in those updated appraisals as well.

If I could add, Frank, just one other -- analytically, I think about it just a little bit differently and through your eyes. We have already experienced, as Gary mentioned, in the residential portfolio a 44% decrease in the appraisal and after reserve, we are still carrying these at 65%. There is a point of which the diminishing laws of numbers that the next hits, even if it is 10%, 20%, how low can the land actually go before you get to zero and we have already experienced quite a bit. We have a lot built in the reserve and that is part of, as we looked at our methodology and the valuation at year-end, that gives us some comfort that, okay, we have considered a lot of factors here. We might not be done, but the numbers get smaller going forward.

Okay, thanks. And then just from a modeling perspective, I'm just looking at other noninterest income. That line item fell dramatically linked quarter. Is there something I am missing there as far as linked quarter? It looked like it was down from about $2.5 million down to $800,000.

Yes, what happens in there, Frank, is that is where part of the other than temporary impairment charge -- if you look at the fee, the noninterest income section, there is one line that is impairments on securities and that contains the $16 million for the TruPS and the $700,000 for the bank stock portfolio and the $3 million plus amount was a contra in the other income line.

Okay. The Capital Corp., right? Okay, thank you.

That concludes the question-and-answer session today. At this time, Mr. New, I'll turn the conference back over to you for any additional or closing remarks.

Thank you, once again, for joining us today. A replay of this call will be available from 11 a.m. Eastern time today until midnight on Tuesday, February 3. The replay can be accessed by dialing 888-203-1112 and the confirmation number is 7951124. A transcript of the call will be posted to the shareholder and investor relations section of F.N.B. Corporation's website at www.fnbcorporation.com. Also on our website under the shareholder and investor relations section is a letter I drafted to shareholders and you can access that by clicking on the link Letter to Shareholders January 2009. Thank you once again. This concludes our call.

That concludes today's conference. We thank you for your participation and have a good day.