FNB Corp (FNB) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to today's FNB Corporation first quarter 2009 earnings conference call. At this time all participants are in a listen-only mode. Following the presentation we will provide 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 would like to turn the conference over to Frank Milano, Investor Relations contact for FNB Corporation. Please go ahead, sir.

Thank you, Laurie. Good morning, everyone. This conference call of FNB 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 FNB Corporation. These forward-looking statements involve certain risks and uncertainties. There are a number of important factors that could cause FNB Corporation's future results to differ materially from historic performance or projected performance.

These factors include but are not limited to: a significant increase in the competitive pressures among financial institutions, changes in the interest rate environment that may redue 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 FNB Corporation is engaged, technology issues which may adversely affect FNB Corporation's financial operations or customers, changes in the securities markets or risk factors mentioned in the reports and registrations statements FNB filed with the Securities and Exchange Commission. FNB Corporation undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this call. It is now my pleasure to turn the call over to Mr. Steve Gurgovits, Chairman, President and CEO of FNB Corporation. Steve.

Thank you, Frank. Good morning, everyone. It is a pleasure to welcome you to our first quarter earnings call. I am Steve Gurgovits, CEO of FNB Corporation, joining me on the call today are Brian Lilly, our Chief Financial Officer, and Gary Guerrieri, Chief Credit Officer. Before I begin, let me update you on our CEO succession process. Our Board has created a succession committee, the committee has been meeting regularly and is expected to continue to do so until the project is completed. In the meantime, neither I nor the search committee are committed to any certain time frame. More importantly they will be deliberate in their work and I am confident in their ultimate success. In the meantime it is business as usual at FNB.

Now to the first quarter. The first quarter was a successful one for FNB Corporation. We earned $0.16 per diluted share, $0.04 per diluted share above the consensus street estimate. Brian Lilly will give you more color on the first quarter earnings later in the presentation. In addition the momentum we established in 2008 has continued into 2009. If you recall last year, we experienced solid organic growth in both loans and deposit including treasury management accounts. I am pleased to report that the latter continued as first quarter deposits include treasury grew organically at an annualized rate of 6.3% year-over-year, excluding the impact of our acquisitions in 2008. We have continued to focus on building our core deposit and treasury relationships with good results demonstrated by solid growth in every category except certificates of deposit. Organic growth and treasury management balances led the way up 46% on a year-over-year basis. The decrease in CDs is by design, given the strong growth in core deposits and treasury management accounts which has allowed us to be less aggressive in pricing CDs.

On the lending side we have reported year-over-year organic growth of 2.6%, which is reflective of the overall economic environment particularly on the commercial side. Commercial loans were up less than 1% on a year-over-year basis reflecting the lower level of activity in our markets give the economy. While business customers may not be borrowing as much during these times, we are actively and aggressively cultivating new relationships. Given the continued competitive disruption in our market, we believe these activities will position us well with business customers, when the economy improves and loan demand picks up. The growth we have seen in our loan portfolio has been driven by home equity lines of credit and indirect installment lending which increased 22% and 24% respectively on a year-over-year basis. The growth in home debt equity reflects the continued execution of our strategies while the growth in indirect loans was opportunistic given weakness among lenders in that business, as we were able to significantly widen spreads while tightening underwriting. Relative to national trends, in terms of the economic environment in Pennsylvania, though not immune from the economic slow down, it has held up reasonably well, based on March statistics from the US Department of Labor, Pennsylvania unemployment is running better than the national average. Now to tell you more about asset quality is Gary Guerrieri, our Chief Credit Officer. Gary?

Thank you, Steve. And good morning, everyone. In looking at the first quarter, credit quality was as expected. For the Pennsylvania and regency portfolios, credit quality metrics were slightly weaker although at continued good levels, while the Florida portfolio performed as expected and continues to reflect a challenging environment. I'd like to review our portfolio in three segments with you, including Florida, Regency Finance and our Pennsylvania portfolios. As it relates to our Florida portfolio, we continue to update our analysis on each credit on a quarterly basis and meet with our borrowings regularly to review project status updates, update financial information, discuss upcoming maturities, obtain new appraisals and evaluate other options to strengthen the bank's position or reduce exposure.

As of quarter end, the Florida portfolio stands at $302 million, still 5% of our total portfolio up $8 million over year-end with nonperforming loans and OREO up $2 million has at $96.2 million. Unfunded commitments totaled $27 million of which 82% are related to existing construction projects. As it relates to composition, Florida remains consistent with what we reported last quarter, with land and land development representing nearly 49%, income producing at 28%, and construction loans representing 20% of the portfolio, with the condo piece of that now down to 4.5%. The remaining 3% continuing to represent C&I and owner occupied. At quarter end our weighted average loan to value ratio for the portfolio stands at 71%, down 2.7% over year-end. You will recall the action that we took in the fourth quarter increasing our reserves against the Florida portfolio to $28.5 million or 9.6% of the total portfolio.

During the quarter, we recognized charge-offs of $8.2 million on two Florida credits, and provided $7 million to the reserve bringing the total allowance against the Florida portfolio to $27.3 million or a little over 9% down slightly due to the net activity in the quarter. Included in charge-off is nearly $7 million related to a land loan whereby the bank reached an agreement with the borrowers to restructure the loan at $16.3 million based upon the borrowers capacity and commitment to support the project. In doing so, the borrowers posted contractual payments for one year in conjunction with the remargining of the collateral position, supporting performing status on the loan. While the market continues to remain difficult, we've experienced slightly elevated interest in activity across all asset classes which should lead to additional reductions in higher risk exposures in the Florida portfolio. Moving to Regency Finance, we recently experienced slightly weaker metrics through the first quarter but remain well within historical asset quality levels. At quarter-end, the portfolio stands at $153 million, only 2.6% of our total portfolio. Delinquency and loss levels were as expected at 4.36% and 4.24% respectively.

Regarding the portfolio, $52 million or 34% are secured by first mortgages averaging $36,000. We remain confident that our traditional underwriting practices and strong history of operations will benefit us throughout this cycle. I would now like to turn your attention to our core portfolio in Pennsylvania. While our results reflect slightly weaker metrics, our portfolios continue to withstand the challenges of the current economic environment. At quarter end the portfolio stood at $5.3 billion, and represented 92% of total loans. While nonperforming loans and OREO as a percentage of total loans in OREO and total delinquency were up 17 and six basis point respectively over the prior quarter at 1.15% and 1.84%, still at good levels, net charge offs were solid at $2.3 million or 17 basis points annualized.

Our reserve position at 1.3% of total loans is consistent with year-end levels and covers nonperforming loans by 133%. At $2.9 billion or 50% of our total loans, our Pennsylvania commercial portfolio breaks down as follows: 36% in owner occupied real estate, 33% in nonowner occupied real estate, and 31% C&I. The nonowner occupied portfolio is well diversified with only $40 million or 4% related to residential construction and land development. Of this amount, approximately 6% is nonperforming, with half of that represented by one loan. In addition our exposure to the automobile industry is limited with approximately $33 million in direct exposure and $27 million of exposure to the supply chain manufacturers at quarter-end with an additional $25 million unfunded. Of that total, approximately 35% are linked to the domestic manufacturers. In total, only $2.3 million or 3.8% of our automobile exposure is nonperforming.

We continue to be pleased with the performance of our consumer related portfolios which include direct installments, mainly home equity loans, consumer lines of credit, indirect installments and residential mortgages. This portfolio represents $2.4 billion or 42% of total loans at quarter end, and is centered in home equity loans of $1.3 billion, indirect installments of $512 million and mortgages of $575 million. Delinquency and losses relating to the total consumer portfolio continued to perform well through the first quarter at 1.34% and 27 basis points respectively. Specifically, relating to the indirect portfolios, delinquency and losses are slightly better than four-year averages at 1.04% and 36 basis points respectively. We attribute this steady performance to our fundamentally sound underwriting as well as our decision not to participant in the subprime and brokered business arena. While we do anticipate slightly elevated delinquency and loss rates as we move through this cycle, we expect these portfolios to continue to perform relatively well. At this time, I would like to turn the call over to Brian Lilly our Chief Financial Officer.

Thanks, Gary. Good morning, everyone. We have included many of the first quarter details in the earnings release and within Gary's comments. Therefore I will focus my comments on the topic of other than temporary impairment and updating our guidance for 2009. In the quarter we recognized a small amount of OTTI, a couple of hundred thousand dollars on a few equity holdings and our bank stock portfolio. Otherwise the investment portfolio did not have any significant deterioration, and the pool trust preferred securities performed within our year-end assumption. Relative to the original cost basis, at quarter end we have carried the pool trust preferred securities at $0.30 on the dollar and the single name holdings are carried at $0.56 on the dollar. We expect to adopt the new fair value accounting rules in the second quarter. We have estimated that we will reclass and retain earning to other comprehensive income, approximately $8 million of the $10 million after tax OTTI charge that we took for the pool trust securities in the fourth quarter. This reclass will add approximately 10 basis points to the regulatory leverage capital ratio.

Now let me turn to the first quarter review and an update of the 2009 guidance. I will start with some of our economic assumptions before touching on loans and deposit, the income statement categories and finishing with capital. Many key economic indicators worsened in the first quarter , but were generally in line with our forecast from earlier this year. As Steve mentioned, Pennsylvania markets are generally at levels better than the national averages, regarding unemployment and housing prices. The economists consensus view is that the recession will continue through 2009. As a result, we anticipate unemployment will remain elevated and that the fed will maintain the unprecedented low levels of interest rates. All of this presents a challenging 2009 operating environment.

Turning to the balance sheet, we are reaffirming our guidance for flat to low single digit average loan growth. Incorporated into this assumption is that business demand will be slow, consumer refinance activity will reduce the mortgage and home equity install balances and that we will gradually exit some of our troubled loans over the course of 2009. We expect to continue the momentum that we have built in gathering core deposits and treasury management balances. Based on our success in 2008, and the first quarter of 2009, we are targeting core deposit growth in the mid-single digits. Given our strong loan to deposit ratio we will use our wholesale borrowing and retail certificates of deposit as levers if necessary as we did in the first quarter.

On a lien quarter basis, the net interest margin narrowed as we had anticipated. However, the decline of 18 basis points to 3.70% was a bit more than we had projected. Half of this narrowing was driven by the purchase accounting marks to the rate paid on the Omega certificates of deposit. At the acquisition date, Omega certificates of deposit had historical rates that were above what could be issued on April 1st of 2008. The rate difference was recorded as a purchase accounting adjustment and spread over the average remaining life of the CDs of nine months. The other nine basis points decline was driven by the aggressive fed interest rate actions in the fourth quarter, and the inability to pass this along in lower deposit rates. We have planned for the margin top rate in the existing range for 2009, but will look for opportunities to widen.

Gary provided an excellent overview of the credit quality. We do expect to continue with elevated levels of nonperforming asset, net charge-offs and provisioning for credit losses. The first quarter came in as expected, but we are cautious for 2009 to unfold. As you know, many of these assumption are driven by the economy and could worsen with the longer and/or deeper recession. Regarding noninterest income, we expect service charge income to bounce back from the seasonally slower first quarter, and we expect higher mortgage origination volumes will provide some benefits in future periods. Our market related fees will be more challenged in this environment, all totaled we expect low to mid single digit growth.

We are pleased with our cost management, as expenses increased only $2.6 million over the course quarter, despite approximately $4.5 million in higher costs. The lien quarter increase was driven by seasonally higher occupancy expenses, $1.7 million in higher FDIC deposit insurance assessments, and approximately $1 million each for higher pension costs and an executive departure. Going forward, in total we have forecast the expense levels to be slightly higher than the first quarter, as one-time expenses are more than offset by even higher FDIC deposit insurance rates and seasonally higher marketing and operating expenses.

And finally, we enhanced the quarter-end capital ratios through a 75% pay out ratio and previously reported $100 million participation in the treasury's capital purchase program. We continue to evaluate the prospects of paying back the CPP money early, but have not yet reached a decision. Although we have the liquidity to pay back the preferred shares, we are not comfortable reducing our regulatory capital due to the lack of visibility in this uncertain economic environment. Steve, that completes my

Thanks, Brian. In closing, let me say that I am quite pleased with many FNB finds itself today from a competitive view. As I mentioned earlier, we expect to have increased opportunities to attract both retail and commercial business from competitors like National City. We would expect this activity to further increase now that the certainty of the sale has occurred. We have targeted activity and planned marketing to take advantage of this market disruption, and will focus on acquiring as much market share as possible from this significant disruption in our core market. As I look at the competitive landscape in addition to the national Citi sale and branch sell-off, most of our competitors who, by the way, are headquartered out of state, are internally focused on their own financial issues. I believe we are best positioned to capitalize on this market disruption. That concludes our formal remarks. I will now ask the operator to poll the audience for any questions.

Thank you. (Operator Instructions) We will pause for a moment. We will go first to Frank Schiraldi with Sandler O'Neill. Please go ahead.

Morning.

Morning, Frank.

Hi, Frank.

Just a couple or a few questions here. I guess the first one is probably best answered by Gary. I am just trying to get a sense of, in obtaining the new appraisals down in Florida, is there a sense that the pricing is bottoming out down there or turning, any sort of positive trends you are seeing down there?

Frank, during the first quarter we obtained five updated appraisals on our existing portfolio, and those appraisal declines ranged from 0% decline in one instance, we had no decline, to 9% on the high end. The average was in the 5% rate. So we are seeing a stabilization from an updated appraisal standpoint in that market. Hopefully we will see that continue as we move forward, but that is a positive sign at this point.

And then breaking down those five appraisals is there any sort of geographical within Florida itself?

They're just within our core markets in Florida, yes.

Okay. And just follow up on that, that 71% number you gave, that was the average LTV of --

That is correct, Frank. That's weighted average LTV across that whole portfolio at this time.

And that's before -- what if you look at what you specifically reserved against as well?

Yes. I can break that down for you in a couple of buckets, primarily focusing on the land buckets. The residential plan post-reserve positioning, today we have that marked down to $0.37 on a dollar from the original appraisal. The commercial land at $0.44 on the dollar from the original appraisal. And the land development which is a $20 million piece of that at about 29% of the original appraisal at this point in time.

I'm sorry. What was the third bucket, residential?

It was land development.

Land development.

Residential land development. And it is at $0.29 on the dollar.

Okay. Thanks. And I guess Brian, on -- you mentioned the new FAS guidance or rule taking -- adopting them in the second quarter. How about FAS are as far as the FAS 157, the inactive versus active market, do you foresee any reversal of unrealized losses given that new guidance?

Frank, I think we are going to take a hard look at that. Quite frankly I have seen a couple of different interpretations out there already that has caught my attention. The conservative view is that you continue to value the way you had in the past, $0.30 on the dollar and then just reverse within the retained earnings and OCI. I have actually seen an interpretation which is what we were all more hopeful of that you value based on your cash flows, because there's no doubt in my mind that we are going to realize more than $0.30 on the dollar on those securities. And if we were able to value based on the cash flow, that would be a reversal. And Frank, I think FASB tried to clarify that. But I have seen in the early releases, that's still a little bit unclear. So, we will take the second quarter to take a hard look at it. But I don't have a specific answer on that, Frank.

Okay. And then just finally if I could, I just wondered on the margin, Brian you mentioned about the nine basis points purchase accounting from Omega. So we shall expect that to come back out next quarter or the next couple of quarters?

No, no. I think that's a one-time drop, and in this rate environment, it didn't have the benefit of resetting it to lower spreads. So it is more of a permanent if you will. The guidance we gave is at the current margin of $3.70. We are looking for that to continue but we'll look for opportunities to widen that.

Great. Thank you.

We will go next to Andy Stapp with B. Riley and Company. Please go ahead.

Good morning.

Hey, Andy.

One of your competitors reported a spike in NPAs. Are you seeing any disturbing developments in your western Pennsylvania markets?

Andy, we are very pleased with how the portfolio has held at this point of the cycle. We had a slight increase in NPAs, as you saw in the results. But at this point, we are continuing to manage those portfolios very aggressively, and staying on top of our client base, across our whole footprint. And at this point we are pleased with how the Pennsylvania portfolio has held.

Okay. And in your earnings release you mentioned that the reserves coverage in Florida was down. Have you reached a point in Florida where you don't, where there's no longer a need to continue to build reserves?

Andy, that market continues to be very difficult, as we all know, and we will continue to monitor that and provide reserves as needed. The reserve being down that you mentioned was down very minimally, and that was a specific reserve that we charged down. So from that standpoint that was really the only difference in the Florida position at this point.

Okay. And a lot of people are concerned that CRE will be the next shoe to drop. Are you seeing any disturbing trends there?

At this point of the cycle, we, we are very pleased with the performance of our CRE across the Pennsylvania footprint. We are watching that very closely and monitoring the marketplace. But at this point, we have not seen, seen any major concerns across the state and in our portfolio.

Okay. Other noninterest income was higher than I thought it would be. Is there any one-timers or anything there, or is it just the sense lumpiness that can occur in that line item?

I think you have seen over time, Andy. This is Brian Lilly, that it is somewhat lumpy. There is a couple of items that flow through that are generally classified as nonrecurring but we ten to have those on a recurring basis. If you look at the number, we look at a run rate in the $3 million plus range as being a core number that it has a [bully] and some dividend income and some swap treaty income and some of those types of activities that are there on a run rate basis and then there are some choppiness.

And is that the same thing in other noninterest expense was down quarter despite the increase in deposit insurance, again just way general lumpiness, I presume?

Well, I think you will see that we have a normal slowing down of expenses from fourth quarter to first quarter because of the market expenses, lower, business development expenses, lower and those are primary categories if there. I think we had some higher OREO expense in the fourth quarter, that we didn't have in this first quarter. But that can come back to us. So I think that particular category has some seasonality plus some activities of this environment.

Okay. Thank you.

And we will go to Tom Alonso with Fox-Pitt Kelton. Please go ahead.

Morning, gentlemen.

Morning, Tom.

Just a couple of follow ups here. On the auto exposure, the numbers you gave, I am trying to find it in my notes here now. What's the difference -- what is direct exposure? Is that to GM or Chrysler per se? Or how do you define direct?

Tom, the direct exposure is exposure directly to automobile dealers.

Okay. So that is like floor-plan loans, stuff like that?

Yes. We have very, very little in floor plan, actually only $6 million in direct floor plans. So we are really not in that end of the business. These would be mortgages on their facilities, and any term financing that we would have for them primarily, we do have some lines of credit to some of the automobile dealers as well. But that's not a large number either.

Okay, so then, then it was $22 million to the -- that's outside of the $33 million, the $22 million to the supply chain manufacturers?

$27 million of exposure at this point to the supply chain.

And that is, out of I guess if it is $25 million is unfunded, that's out of a total compliment commitment of $52 million.

Well, the total commitment would be $60 million plus the $25 million unfunded. So the total commitment to both the dealers as well as the supply chain is $85 million.

Got you. Okay. Okay. Understood. Okay. And then back to the new appraisals on the Florida, because I missed some of that. You said you five this quarter.

We updated five appraisals this quarter and I think they touched all of our asset classes. So it was a full range of the asset classes that we have there.

Okay. And on those, so that 0% to 9% decline, when was the last time these were appraised? Like how old was the prior value that is now down 0% to 9%.

It ranged, Tom, from six out to 12 months, most of them in the six to nine month range.

Okay. Got you. Okay. That's all I had. Thank you.

We will go to Mac Hodgson with SunTrust Robinson Humphrey, please go ahead.

Hey, good morning.

Morning.

Some of my questions have already been answered. Gary, I wonder if you could maybe elaborate a little on I think your commence about Florida just in general seeing some elevated interest. Is that with regards to potentially selling some of these properties or are you talking about home sales? Any color there would be helpful.

Actually, Mac, it is in reference to interest in our properties. Actually, we had one pay off yesterday, and it was a $2.5 million transaction. We have got some interest in some of the condo projects. We do have one condo project that we expect to pay down significantly over the next month or so, due to an auction that is scheduled. We feel we have that positioned quite nicely at this point. So there is interest across not only the condo categories, but also the land developments as well as we are seeing but also the land developments, as well as we are seeing interest in land at this point. We are having some discussions there also.

Who are the, I am curious who the buyers are. Are these generally local investors, or more institutional type money?

Some of the ones we are talking with are local investors.

Okay. Great. If you could provide anymore color on the kind of larger land loan charge-off in Florida, you mentioned it was restructured at $16 million, I think after a $7 million charge-off. I'm assuming you have just a piece of that $16 million or is that --

No, that is the whole loan. There are no participants in it.

Okay. Got you. So you basically wrote it down and modified the terms, so it's sitting in nonaccrual, but as a restructured credit?

No. It is a restructured performing credit.

Okay.

At this point.

Got you. So it is not in the nonaccrual bucket.

It was not.

Then I guess maybe just one last question, Brian, you were talking about TARP, and it seems like you wanted to see more clarity on the economy before you -- you want to pay it back but you want to see a clear picture on the economy. What sort of things would you look to see, is it unemployment to start coming down, is it nonaccruals to start coming down? What sort of things would give the Company confidence that we are through the worst of it?

I think it is all of that, Mac, plus we are still early in seeing the impact of job losses we saw at the back end of 2008 and continue through this year. I think time. Time is probably the key element that will show a lot of the resilience we believe we have in our business and consumers as we work through the quarters here.

Okay. Great. I appreciate it.

We will go next to David Darst with FTN Midwest Equity. Please go ahead.

Morning. Steve, are you still seeing the opportunities to take business from the [CNC net Citi] transaction still as strong as they were in the second half of 2008?

Yes, David, I think it is. I think we are going to have that opportunity for most of 2009 for sure because the integration on the sale of those branches for instance is going to be a major undertaking. And create a fair amount of customer and business disruption for them. And frankly we have been in this market our legacy goes back 150 years or so. I think we have a good reputation in the marketplace. We have been able to attract, first, a lot of talent from these competitors for the last 12 months, teams now in place, it's a local team. And as the customers look around these other company banks that we compete with you including our new competitors coming in are all out of state, relatively unknown locally, and I think that provides opportunity for us.

Have you thought about a capital raise maybe to be a little more proactive and give you the opportunity to grow the balance sheet to take some more of the business?

Well, the markets aren't necessarily a very welcome market at this particular time for capital raises, but I think it is safe to say we have a plan in place to try to build market share, capital is a topic we always talk about. It is something our board is heavily involved in discussions as well. And at this particular time, we think we are okay to execute the plan that we have in place.

So I guess given your capital level, given your outlook for loan or deposit growth, you've got to do a fair amount of remixing or letting wholesale funding or other deposits run off --

Well --

-- to accommodate that new business.

It is a combination of a number of levers that we have. We have a fairly sizable indirect portfolio, for instance. That is -- you see we grew that pretty well because we had the opportunity to do so, including wider spreads, even though we tightened up substantially the underwriting standards, so the quality is probably as good as we've ever had. But having said that, that's purely transaction l and one could come to the conclusion that those funds might be better used over time into relationship lending. So there are a number of levers we have that we can work with as we go forward.

Okay. And Brian, is the pension cost one-time expense or will you amortize that over the course of the year?

It is a cost that's actually amortized over many years.

I'm sorry, just what's attributed to 2009 or the actual spend?

Yes. The $1 million will be something we will see each quarter in 2009 and for many years after that. It is arisen from the unperformance of investment of returns in 2008 which the economy says you have to back that to your OCI. If you look at our OCI, it is almost denominated by the pension performance mark of $22 million, I think. That gets amortized and back in subsequent years. So it will be there for a while.

Okay. And then does your guidance include a one-time assessment?

No. Until we get some clarity on that the discussion has been in the 10 to 20 bips, and the numbers that roll through my head pretax is $6 million to $12 million. And that will be accrued up as soon as those decisions are final. And the discussion was a 9/30 payment. So if they make some decision here in the second quarter we will start accruing that immediately, or they will make until the day before 9/30 and it will just become one big hit. They have to make those decisions before we accrue it and before I would provide the guidance on it.

Okay. And can you give us a description of what the nonperforming investments are that you have broken out in the release?

Okay. That would be the [trumps] that we took at year end, that we impaired and determined it was other than temporary impairment.

Thank you.

(Operator Instructions) We will go to Jason O'Donnell with Boenning & Scattergood. Please go ahead.

Morning, guys.

Morning, Jason.

Congratulations on a good quarter. Just had a few couple of questions here. First with respect to the consumer line of credit portfolio, what is the line utilization look like in that portfolio?

Line -- excuse me, line utilization there, Jason, is just slightly over 50%.

Okay. And how does that compare to the prior quarter?

I can't give you an exact number but it has run from 49% to 50%, to 51% pretty tight range there.

Yes, it was.

Okay, there's not a dramatic prove in that utilization.

No, there isn't.

At year-end it was 49%.

Yes. There is not.

Okay. Great. Sticking with the loan book, how much do you current have in the way of shared national credits?

In terms of shared national credits at quarter end, we have $192 million in our shared national credit book, only $10 million of that, three very small transactions, are out of market. These companies are all local companies that we know the management, we've banked the management over the course of time, and we maintain significant deposit relationships and other ancillary business with, Jason. Their management teams that we have worked with over time. All of these loans are performing and continue to perform well at this point in the cycle. We also have $25 million of the credits in Florida are also classified as [snicks] due to the size of them, but we've talked about those credits already.

Okay.

Is our policy on shared national credits, is if it is a customer we have a relationship with, obviously we are going to try to help them when we can, or if it is a local prospect we feel will lead to business down the road we may consider participating, but otherwise that's not a category that we are really trying to cultivate.

Sure. Do you break out the -- can you tell me how much of that portfolio is kind of participated out versus loans originated by other banks?

Of that snick portfolio I would say to you that the majority of them are purchased transactions from that perspective, Jason.

Jason, let me again add, we, I can, I think I can think of a couple. These are business -- the typical shared national credit we have is a business we started banking that grew and grew and grew, and I will remind you our legal lending limits probably slightly over $100 million. But our house limits about 1/3 of that max. And we have very few at that limit. So again it is a customer that grows and at some point we will introduce another bank in the credit, because we can see that this is going to be a rather large exposure over time. So in those cases often time the lead bank will become some other bank in the credit. But it is still our customer and we still have the biggest part of the relationship in terms of ancillary services. So it will end up showing a purchase participation, but I think that's misleading because that's a customer we took to another bank to help us out with financing.

Understood. Great. Thanks. And then finally just in terms of fee income this quarter, how much did mortgage banking/refinance activity contribute to the total?

The category we have on our income statement that says gain on sale of loans is our mortgage origination fees.

Okay. So it is all basically in line.

Yes, now there's other fees that come up that are in other places, but the gains are -- is the $536,000.

Okay. Okay. And then actually one more. In terms of the special FDIC expense, the one-time assessment coming down the pike here, in the event that we can get clarity on that and we know it is going to be 10 basis points or six or 20 or whatever the number is, is that something that if we discover that in the second quarter are you going to accrue for that over the course of the second and third quarters, or is that something that becomes entirely accrued for in the second quarter?

GAAP would you say accrue up to the date of payment. So if they determine the payment date is 6/30 it would all be second quarter. If they determine the date is later than that, you would accrue for that period. From the date of the decision of certainty to the date of the payment it would be spread.

Okay. Great. Thanks very much.

We do have time for one more question. Our final question is from Damon DelMonte with KBW. Please go ahead.

Hi. Good morning, guys. How are you.

Good morning, Damon.

Pretty much all of my questions have been answered, but if I could just circle back with you Brian, on the other noninterest income item of $4.2 million this quarter. Could you break out what the bully gains were this quarter?

It is not a gain. It is income.

Right. The bully income then.

It is probably about $1.6 million, $1.7 million, it sits in that line item.

Okay. I'm asking for modeling purposes, so we can have an accurate number on that line category. That's all that I had. Thank you.

Thanks.

I will turn the conference back over to Mr. Gurgovits for any additional or closing comments.

Okay. Thank you for your interest and participation in today's earnings call. I'll remind you that a replay of this call will be available from 11:00 AM eastern standard time today until midnight on Friday, May 1st. The replay can be accessed by dialing 888-203-1112, the confirmation number is 1564034. A transcript of this call will also be posted to the shareholder and Investor Relations section of FNB Corporation's website at www.FNBCorporation.com. Again, thank you for your interest and for joining us today, and have a great weekend.

That does conclude today's conference. We thank you for your participation.