FNB Corp (FNB) 2009 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's F.N.B. Corporation third-quarter 2009 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 would like to turn the conference over to Frank Milano, Investor Relations contact for F.N.B. Corporation. Please go ahead, sir.

Thank you, Mauricie. 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 or to reflect events or circumstances after the date of this call.

As a reminder, a replay of this call will be available until midnight on Thursday, October 29. The replay can be accessed by dialing 888-203-1112 or 719-457-0820. The confirmation number is 2533549. 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. It is now my pleasure to turn the call over to Mr. Steve Gurgovits, President and CEO of F.N.B. Corporation. Steve?

Thank you, Frank. Good morning, everyone. It is a pleasure to welcome you to our third-quarter earnings call. Joining me today on the call are Vincent Calabrese, our CFO and Gary Guerrieri, our Chief Credit Officer. Vince will address our third-quarter performance in more detail later in this presentation and Gary will also provide additional insight into our asset quality.

Also with me today for the question-and-answer session are Brian Lilly, Executive Vice President and Chief Operating Officer and Vince Delie, Executive Vice President and Chief Revenue Officer.

Now to the third quarter. Taking into consideration the non-cash charges associated with our payback of the CPP funds and OTTI charges for TruPS, our earnings were $0.11 per diluted share, which is slightly better than Street estimates. The significant third-quarter development was our announcement of regulatory approval to redeem the $100 million of preferred shares issued under the U.S. Treasury CPP program. Our repayment came without any conditions attached.

During the quarter, the disruption in our market caused by mergers, branch sales and other competitor issues appeared to accelerate. F.N.B. continues to execute its organic growth strategy to take maximum advantage of this market disruption. I am pleased to report that we are executing very well.

As a result of our continued prospect calling, increased marketing activities and our very successful advertising campaign, year-to-date, our middle market commercial banking group generated 74 significant commercial relationships, resulting in over $250 million in total loan commitments. And with our emphasis on relationship banking, this also results in deposit and treasury management growth.

We grew deposits and treasury management balances 2% annualized compared to the second quarter of '09. Transaction balances grew 6.8% annualized compared to the prior quarter and treasury management balances grew 28.4% annualized. Offsetting these gains were lower CD balances, which declined 11.6% annualized compared to the second quarter this year. But this reduction is by design as our primary strategy continues to focus on growing our core transaction accounts.

In this challenging banking environment, we are very encouraged that we are gaining clients by capitalizing on a disrupted marketplace with weakened competitors. We are overcoming decreased line utilization and lower borrowing levels amongst current commercial customers who remain cautious given the near-term outlook for the economy. Offsetting this, however, our commercial loans have grown 5.6% annualized since the end of the second quarter, largely a result of new business we have captured. We are confident that as the economy improves, F.N.B. will experience more normal line usage, as well as increased borrowing demand both from existing, as well as new customers.

Consumer loans, including residential mortgages, were essentially unchanged at $2.54 billion. Changes in the consumer loan portfolio compared to the second quarter reflect growth of $22.2 million, or 23.6% annualized in home equity lines of credit that was partially offset by a decrease of $11.9 million, or 4% annualized in direct installment loans given customer preferences and a low interest rate environment. I will now ask Gary to review our loan portfolio in a little more detail.

Thank you, Steve and good morning, everyone. In looking at the third quarter, our portfolios continued to perform as expected in light of the headwinds of the current economic environment. Charge-offs were down quarter-over-quarter in each of our portfolios as Pennsylvania and Regency continued to post solid results while Florida charge-offs will continue to be choppy as we work that portfolio down.

Delinquency and nonperforming assets are up slightly over the second quarter, but continue to be consistent with our expectations. Once again, I will review each segment of our portfolio with you starting with Florida. At quarter-end, our Florida portfolio was down slightly at $272 million, or 4.7% of F.N.B.'s total loan portfolio. Nonperforming assets at $76 million are up $2.5 million over the prior quarter with charge-offs of $4 million, down $7 million from the second quarter. The portfolio continues to be supported by a healthy reserve of 9.8%, reflecting a 39% coverage ratio of nonperforming loans.

As it relates to the Florida portfolio composition, it is generally consistent with the second quarter. Our land and land development segment has been reduced to 45%, or $122 million, down $44 million since the third quarter of 2008, representing a 27% reduction year-over-year. Our income-producing segment stands at 32% and construction loans represent 20% of the portfolio with the condo piece of that now down to $5.6 million, or 2.1%. The remaining 3% continues to represent C&I and owner-occupied.

Unfunded commitments continued to decline, now at $16 million, down $8 million over the prior quarter of which 75% are related to existing construction projects. Our weighted average loan-to-value ratio for the portfolio increased to 73%, primarily driven by land values, which continue to experience pressure in the current environment.

As it specifically relates to the land and land development portfolio, our current outstanding balances are being carried at an average of just under 39% of the original appraised value post reserve consistent with the second quarter.

We continue to manage this portfolio very aggressively, conducting formal reviews of each credit on a quarterly basis and meeting with clients regularly to review project status updates, update financial information, obtain new appraisals and evaluate other options to strengthen the bank's position and reduce exposure across the market. This rigorous process has proven beneficial. However, we remain cautious given the continued weakness in the Florida economy.

Moving to Regency Finance, it continues to deliver credit quality metrics consistent with our expectations and remains well within historical asset quality levels. At quarter-end, the portfolio stands at $159 million, representing only 2.7% of our total loan portfolio. Net charge-offs were $1.45 million, annualized at 3.64%, representing our best quarterly loss performance in 2009. Regency's reserve position at 4.1% is consistent with the prior period.

I would now like to turn your attention to our core portfolio in Pennsylvania. At quarter-end, this portfolio stands at $5.4 billion, which represents 92.6% of F.N.B.'s total loan portfolio. As mentioned earlier, our results continue to reflect resilient performance with slightly increasing credit metrics as evidenced by delinquency at 2.02%, up only 5 basis points and nonperforming loans plus OREO to total loans plus OREO still at a good level of 1.28%.

The $9 million increase in nonperforming loans and OREO represents a $6 million increase in two local shared national credits, which we picked up through our acquisitions -- a $2 million increase in restructured mortgages and a $1 million increase in OREO. Charge-off performance continues to reflect strong results with losses of 33 basis points annualized in the third quarter and year-to-date performance through the third quarter of 27 basis points. During the quarter, we increased our reserve position for this portfolio by four basis points, or $3.1 million from 1.31% to 1.35% as the weak economy continues to impact the operating results of many businesses.

Now let me update you on the makeup of the Pennsylvania portfolios. Our Pennsylvania commercial portfolio at $2.96 billion, or 51% of F.N.B.'s total loan portfolio, continues to be well-diversified and breaks down as follows -- 33% C&I, 35% in owner-occupied real estate and 32% in non-owner-occupied real estate -- reflecting a slight increase in our C&I book from prior quarters.

Our non-owner-occupied CRE portfolio at $960 million remains well-diversified both by industry and across our geographic footprint. This portfolio has continued to perform well with only $18 million in nonperforming assets at quarter-end, representing 1.9% of this portfolio. Total delinquency, including nonperforming loans, is 2.46%.

As we have communicated in the past, our construction and land development portfolio is small at $183 million with only $38 million of that related to residential, construction and land development. We remain very pleased with the performance of our consumer-related portfolios, which represent approximately $2.5 billion, or 41% of F.N.B.'s total loan portfolio. You will recall that this portfolio is represented by nearly $1.2 billion in branch-originated home equity loans and lines of credit, which 52% carry a first-mortgage position with an additional 24% carrying second positions to F.N.B. firsts.

The remaining categories are consistent with the prior quarter with indirect installments of $525 million, mortgages of $550 million and direct installments and lines of credit of $130 million. Delinquency at 1.58% and losses of 32 basis points continued to reflect solid performance for the third quarter and are very similar to our second-quarter results, reflecting the consistent performance across this portfolio. As it specifically relates to the mortgage portfolio, delinquency improved to 2.9% with losses at 8 basis points, reflecting the more stable real estate market across our footprint.

In summary, we continue to be pleased with the credit performance of our Pennsylvania and Regency portfolios in what we deem to be a very challenging economic environment. Our focus in Florida will be to continue to reduce our exposure in the market. We remain confident that our consistent and thorough approach to underwriting, our seasoned banking team, knowledge of our markets and customers and attentive risk management practices will continue to serve us well as the economy moves toward recovery. I would now like to turn the call over to Vince Calabrese, our Chief Financial Officer.

Thanks, Gary and good morning, everyone. Since we have addressed many of the third-quarter details between last night's earnings release and the comments provided by Steve and Gary, I will focus my remarks on a few additional highlights of our operating results and an update to our guidance.

Consistent with the trend of looking at earnings on a pretext precredit run rate basis, we also monitor our performance on this basis to focus on the fundamental relationship, core revenue to expense. This quarter, in addition to adjusting for provision and OREO expense as far as credit costs, we adjusted for CPP costs and the OTTI charges as non-run rate items. Our return on tangible assets on this basis was a strong 1.86% for the third quarter, essentially unchanged from the prior quarter as better net interest income was offset by lower fee income.

Now regarding the business drivers for the fourth quarter, let me start with loans. We look to continue mid-single-digit commercial loan growth in Pennsylvania during the fourth quarter. Given the economic environment, this growth is more a reflection of marketshare gains than expanding existing customer relationships. The pipelines continue to be healthy. Many companies have become more deliberate in their decision-making. Offsetting this success, we have forecasted the continued exiting of Florida problem credits, which is expected to flatten the overall commercial loan growth.

The consumer finance activity, or refinance activity, will continue to reduce the mortgage and home equity installment loan portfolios while the home equity lines of credit will continue to show good growth given customer preferences in this low-rate environment. For total loans, we are reaffirming our prior guidance of flat to small increases for the fourth quarter given these dynamics.

Looking ahead on the funding side, we expect to continue our momentum in growing core transaction deposits and treasury management balances. Given our success in the first nine months of this year, we are reaffirming mid-single-digit growth for the fourth quarter with a continued focus on adding new customer relationships, further enhancing the mix of deposits by growing the lower-cost deposit products instead of the higher-cost, more price-sensitive CDs. And with our loans to deposit and treasury management balances ratio at 87%, we are very well-positioned to fund loan growth once demand picks up.

We were pleased to expand the net interest margin to 3.78% for this quarter, an 8 basis point widening after adjusting the prior quarter for a 3 basis point pickup on a few loans returning from non-accrual status that we mentioned in last quarter's conference call. Our success in improving the mix of deposits and generating solid loan and deposit growth drove the improved margin.

The yield on earning assets and rates paid on liabilities are expected to continue lower next quarter given the current rate environment with movements in these components expected to be closely matched resulting in a stable net interest margin for the fourth quarter.

Now regarding non-interest income, excluding the impairment charges, we saw a $1.9 million overall reduction compared to the prior quarter. We saw an expected seasonal lift in deposit service charge income and insurance income compared to the prior quarter. Offsetting these increases, we experienced declines in the other categories of fee income. We realized lower gains on the sale of residential mortgage loans compared to a very high level last quarter. Still healthy, but lower than last quarter given the reduced level of refinancings.

Our wealth management businesses of trusts and security sales came down from last quarter, reflecting the overall performance of the financial markets and the impact of the low level of interest rates on annuity sales, although we are starting to see some lift in market-based fees in our trust business and are in the midst of our annual fall sales campaign in our securities business, which should provide some positive movement in the fourth quarter.

The other non-interest income category decreased $1.1 million compared to last quarter, mainly due to an $800,000 decrease in swap fee income, which tends to be uneven as we go through the year. The OTTI impairment charges for the quarter were almost entirely due to pooled trust preferred securities with only $90,000 related to bank stock holdings. The remaining bank stock portfolio is comprised of only 24 holdings today totaling $2.8 million. After taking this quarter's impairment charge, the remaining portfolio was slightly above water at 9/30 with a single largest unrealized loss of only $47,000.

Regarding the impairment charges on pooled trust preferred securities, 85% of the charge was related to three securities. For these securities, the amount of projected deferrals and defaults for the 550 banks to collateralize these securities is pushed past the prior quarter assumptions to trigger additional credit impairment charges. We have 13 pools with an original cost of $41 million and a book value of $29 million at the end of the third quarter. And while there are a lot of moving parts in non-interest income, we expect growth from our fee businesses to be relatively flat given varying seasonal factors for the components.

As you know, the linked-quarter expenses decreased $3.9 million and were driven by the $4 million FDIC's special assessment last quarter. We continue to focus on expense control while making some investments in marketing and key hires to take advantage of the market opportunities in Pennsylvania. For example, we recently lifted out an asset based lending group that is already adding value. That said, we have projected expense levels to be consistent with the third quarter.

Gary provided an excellent overview of our credit quality. As we look ahead to the fourth quarter, we continue to expect elevated levels in nonperforming assets, net charge-offs and provisioning for credit losses, particularly as we continue to pursue opportunities to reduce our Florida exposure. As you know, many of our assumptions are driven by the economy and could worsen with a prolonged recession.

Regarding our capital position, all of our ratios are now based on the post CPP levels and are consistent with the pro forma levels we had previously estimated. This is also the first quarter where we have a full impact of the shares issued in June with the capital raise. With the total risk-based capital level at 13% and a tangible common equity ratio at 6%, we are at much higher levels than where we started the year, which positions us well for 2010. Steve, that completes my remarks.

Thanks, Vince. As Vince and Gary have indicated, we continue to make progress in many areas of our business. I cannot close without a comment about the disruption in our market. I first mentioned this on our first-quarter conference call and again in our second-quarter call, but the fact of the matter is it is happening. We are winning new customers every day and we are pleased now to be able to show you the proof points of our success. We have the products, we have an experienced, skilled staff, but we will now take advantage of this market opportunity. I will now ask the operator to poll the audience for any questions.

(OPERATOR INSTRUCTIONS). Andy Stapp, B. Riley & Co.

Good morning. Do you have your level of 30 day to 90-day delinquencies at quarter-end?

We do, Andy. The level is $49 million, which is consistent with the second quarter. It also was $49 million.

And Andy, this is Vince Calabrese. That is included in our press release.

Oh, it is? I had missed it then.

It is broken out between PA, Florida and Regency.

I'm sorry.

No, that's okay. Just for future reference.

Yes. And how did your watchlist and risk ratings compare with Q2?

Andy, as the economy continues to extend the weakness that we are all experiencing, we did experience some migration in risk ratings through our portfolio, but nothing out of the -- nothing out of the ordinary.

Okay. And where do you stand with regard to your marks on your TruPS?

Regarding the TruPS portfolio, just to kind of remind you what we have. In total, we have $55 million worth of TruPS. $14 million of those are related to single name well-known issuers and that relays an original cost of $41 million on the pulled deals. We have written those down to to $29 million. So as we sit here at the end of September, we are carrying those kind of from a book value standpoint at $0.71 on the dollar and then market price at $0.25 on the dollar with that difference being sitting in OCI and equity. We have written them down through the income statement to the $0.71 on the dollar.

Okay. And could you refresh my memory on the pooled TruPS, what tranches are these in?

They are all mezzanine except for one. We have a AAA tranche. But the rest of them -- 12 of the 13 are mezzanine tranches.

Meaning BBB?

No, those are really all in the C category now.

They were A.

They were A when we purchased them.

Okay. All right. I will get back in the queue. Thank you.

Damon DelMonte, KBW.

Hi, good morning, guys. How are you? I was wondering if you could just give us a little color on your exit strategy for the Florida portfolio. Are you looking to shop some of these credits or are you just letting them sort of run their course or what is the approach down there?

Damon, we are exploring every opportunity with each individual credit as we have over the course of the last 12 to 18 months. We are continuing to work with our clients to explore opportunities to move assets into the market. Price points have been hit in some instances. We are seeing an increase in activity near the end of the third quarter, which we are very excited about. We are hopeful that that continues as we move into the selling season. But we are not taking an approach whereby we are just going to package these things up and sell them at discounts that are severe. We are very comfortable with values in these assets and we are going to continue to work through them on a case-by-case one-on-one basis.

Okay, that's helpful. Thank you. Could you also give us some color on your commercial real estate portfolio as far as the average size of the loans, typical LTV, debt service coverage ratio, things like that?

A typical LTV across that portfolio is in the 75% range naturally at underwriting and as those things start to amortize, they come down from there. Our minimum LTV -- I'm sorry -- our minimum debt service coverage ratio, Damon is 1.2 and we are looking at some stronger debt service coverage ratios at this time. But those range anywhere from a low of 1-2 upwards into the 1.5s and 1.6s. Not to say that we don't have some transactions that debt service over two times.

Okay, great. And then lastly -- I'm sorry if I missed this, but what is your total shared national credit exposure?

The total shared national credit exposure is right at $192 million and one of the focuses of our portfolio, which is important to understand, is the requirements that we place on a credit classified as a shared national credit. We require that company to be a local company, a company that we either do business with today, which we have business relationships and significant deposit relationships with about half of that pool at this point. If we don't have a relationship with them today, we feel very strongly going into that opportunity that we can obtain additional business. That is our focus from a shared national credit perspective and it will continue to be our focus.

Okay. So then would it be safe to say that most of those shared national credits are in the Pennsylvania marketplace then?

That's correct.

They are in our footprint, Damon.

Okay, excellent. Thank you very much, guys.

Mac Hodgson, SunTrust Robinson Humphrey.

Hey, good morning. Steve, you talked about, at the end of the prepared remarks, kind of the opportunities out there and the disruption. Can you provide any color to that? I know you mentioned hiring a new ABL group. Just kind of what are you generally seeing competitors do and where do you feel like F.N.B. can really I guess grow or gain share?

Okay, I will make a couple of remarks on that and then I would ask Vincent Delie, our Chief Revenue Officer, to comment as well. First of all, if you go back, Mac, we began to assemble a team, particularly in our Pittsburgh market, several years ago. It wasn't in anticipation of this disruption. We didn't see some of these transactions occurring, but we were looking for opportunities to grow share in this market.

As it turns out, we had the team in place, we had upgraded a lot of our products, treasury management services is one that comes to mind and Mark Sullivan who is the man we hired several years ago to head that up, that process was in place. The team was on the field when the disruption began to occur. So that was a real advantage to us.

And there is no question in this marketplace between the Nat City/PNC merger and the subsequent branch sales to First Niagara, which is an out-of-state competitor and then some of our other competitors who are having issues and they are pretty well-publicized. There are a lot of businesses and consumers that are, for the first time, looking for a bank that they can go with, particularly the business customers because these are largely nonpublic companies and their access to capital markets is very limited and so the bank becomes one of the key providers of capital. And they are looking for that stable provider and they are looking for somebody who will take the time to understand their business and help them when they need it. But as far as the specifics happening in the field, I would like Vince to make a comment on that.

Well, we started about two years ago we deployed a proprietary sales management system that focused the commercial bankers on certain Tier 1 prospects, centers of influence and cross-selling opportunities. So we have the infrastructure in place inside of our Company to focus on specific opportunities across the commercial bank. And we really targeted heavily new client acquisition knowing going into this cycle that there would be a reduction in loan demand within our existing portfolio.

So we have people keenly focused on pursuing those opportunities and as Steve indicated, we are way ahead of the curve in terms of making ourselves known to those borrowers and we have a great deal of folks in the field that came from some of those institutions that had long-term relationships with the companies that we have been able to convert. And I don't see that changing in the future. I think we have become one of the preferred commercial banks in the market, particularly in the Pittsburgh market and in the new markets that we have entered. So we should continue to see those transactions flow.

It sounds like the Pittsburgh market is the one where obviously the most disruption is occurring. What about interest in expanding further east or elsewhere through hires, etc. or M&A, etc.?

We have had great success in the Erie market. We have had great success in, believe it or not, Johnstown and in the new markets that we have entered, there is quite a bit of disruption in the East as well. There are competitors that are returning capital, they are capital-constrained, there are exiting commercial relationships and we have been able to step in and fill that void. And as I have said earlier, we have been very focused on particular opportunities that we feel are Tier 1 opportunities for our organization. So we have been able to cherry pick those.

And you know, Mac, to Vince's point, most recently over in the Youngstown, Ohio market, which is a pretty good-sized market, you have got the Nat City to PNC transaction there and then our other competitors there are Huntington and First Place and Home Savings and lately, we have begun to see -- to make quite a few -- quite a bit of inroads into the commercial side of that market. And we are encouraged by that plan to spend a lot more time and focus in that area as well.

Okay, great. Trying to think of anything else I had. Any color -- I know the increase was small, but any color on the types of SNCs that moved into nonperforming? I think you said 6 million was two SNCs. Any color on just the type of borrower or type of industry they are in?

The industries that those two encompassed, Mac, were the assisted-living industry, as well as the restaurant industry.

Great. I think that's it. Thanks.

Tom Alonso, FPK.

Good morning, guys. Most of my questions have sort of already been answered here. Just -- on the provision this quarter, I am just trying to get a sense -- since credit -- I mean the numbers looked okay, right? It wasn't a dramatic increase. I am just trying to get a sense of why the uptick in the provision this quarter.

In terms of the provision, Tom, it is up $6.5 million. About half of that were specific reserves and the other half was basically a general economic weakness based on the conditions in the marketplace. But really a nominal increase when you look at the economic period at this moment.

Okay, so that's the specific reserves on stuff that is not already on nonperforming? That is sort of the watchlist loans, if you will?

The specific reserves included loans that are on non-accrual at this point.

Okay, okay, fair enough. Great. Then just sort of a quick modeling question here. Tax rate going back towards 24% next quarter. Is that a fair assumption?

I think the tax rate, Tom, should be right around between this quarter and last quarter.

Okay, that helps.

Yes, with the pretax income movement, we are kind of swinging in that range.

So right around 20%, 21%-ish, in that area?

No, more like 27% to 29% would be the range.

Okay.

We show a tax equivalent adjustment that you have to include with the taxes.

Okay, got you. Okay.

To get the rate.

Got you. Okay. Terrific. And then on your CRE commentary when you were talking about LTVs, you said that, because of the amortization, those LTVs were down. Are all of your CRE loans amortizing? There is no interest-only in that portfolio?

The CRE loans are amortizing, Tom.

Okay, great. And then just one last one, which I guess is more of a bigger picture question. You mentioned that you expect to see some good, an improvement in line usage and some better demand when things start to stabilize. Are you willing to hazard a guess as to maybe when that might be and put your economist hat on?

Well, I wish I had a crystal ball here, Tom; it would come in handy. But there is no question our line usage is almost at historical lows and that is understandable because our borrowers -- they read the same papers we do, watch the same news and their business has been affected. So they are not building inventories or carrying higher working asset levels and they are not doing CapEx. So they are hunkered down here to make sure that they survive this recession.

Having said that, we mentioned the annualized growth in commercial lending, which is attributable to the new business that we are booking. Now when the economy makes the turn, we expect to get more demand from our new customers, as well as more demand from our existing customers and then higher line usage.

Now as to when that is going to occur, I would like to believe -- obviously, I don't know the answer specifically -- but I would like to believe the worst of this recession perhaps is behind us and people are starting to be a little more cautiously optimistic that they are seeing some green shoots here and there. If you talk to our borrowers, my impression is they are not nearly as worried as perhaps they were at this time last year, or this time nine months ago, but yet a lot of them haven't seen the proof points coming through their books that things are really on the uptick. But hopefully, it is not in the too distant future we will begin to see those types of proof points.

Okay, sounds good. Thanks.

Frank Schiraldi, Sandler O'Neill.

Good morning, guys. Just a few follow-up questions on credit. I was wondering if -- I guess this question would be for Gary -- if you had -- maybe you could give a little color on specific sales out of the Florida portfolio, stuff that moved out of the Florida portfolio and where those were sort of moved out at in terms of from costs?

Frank, we have not sold any assets into the secondary market at this point. So we have not had to go down that path as we talked earlier. We are considering any options, as I mentioned, but have not had to use that avenue at this point.

So then these are credits that the reduction in the total number, total balance of the portfolio just represent loans cleaning up?

They are representative of loans that the borrowers were able to get paid out from our positions in them.

Okay. So the charge-offs represent what? In terms of -- they were paid back at a discount?

Some of those transactions were paid off in full. Some of them were paid off at 90% or 95% of carrying balance and a couple of them were charge-offs that we had some shortfalls in.

Got you. Okay.

And Frank, that is our approach. We are doing an individualized approach to each and every credit [down there]. First of all, not all the credits are nonperforming. Some of them are really performing and amortizing, but those that we have to focus on, we are just trying to do the best we can given the circumstances surrounding each individual credit.

Okay. And then just to follow up on that, I don't know if you have it, Gary, but a breakout of the reserve for Florida in terms of what is for specific credits and what is just a general reserve?

That reserve is $26.6 million, Frank and I don't have that breakout at my fingertips here.

But the total reserve is just under 10% for that portfolio.

Right. Okay. And then just in Pennsylvania, I apologize if I missed this, but did you mention where -- the increase in nonperformers I know it wasn't too large, but the increase in nonperformers in Florida, in Pennsylvania rather, where that came from in terms of loan category?

Sure, Frank. There were two local shared national credits totaling $6 million that came through a couple of our acquisitions -- a $2 million increase in restructured mortgages and $1 million in OREO.

Okay, thanks for that. And then as you said, the SNC exposure you have is really -- it is all local loans. Is the total delinquency level there sort of similar to what you see in the portfolio at large?

Actually it is better. There is no delinquency other than the couple that we mentioned.

Okay, great. Thank you.

Frank, before you leave, what is interesting on our SNC portfolio is a lot of those qualify by definition as a shared national credit because they have grown in size and we have brought -- with our very conservative house limit, we have brought other participants into the credit. But in a number of cases, these are just our borrowers, sometimes they are companies we started in business that have grown significantly and now just meet the definition of a shared national credit. That's substantially different than one might think of us just going out and participating in syndicated deals.

Right. So this $100 million, $200 million number that Gary gave, that includes a certain number that are -- you are the lead on?

Yes.

Frank, if I can add to your question, the two that I mentioned for $6 million that are in non-accrual, they are carried in non-accrual and carried in delinquency, but they are both current. They are not in delinquent status.

So they are still paying. Okay, thank you.

(OPERATOR INSTRUCTIONS). Mike Shafir, Sterne Agee.

Good morning, guys. Actually I was just wondering if maybe we could get a little bit more detail on the margin. I know you gave some guidance, but as we kind of look out through some of my other companies, it certainly seems like the margins have been moving up everywhere and kind of what are you seeing there?

Well, I guess when you look at our numbers, we have seen that same kind of trend. We started the year with a 370 to 373 and then 378 this quarter. And I think that part of what is going on is, on the cost of funding side, we have not been aggressively going after CDs and we have a good amount of CDs that are rolling every quarter on $350 million if we kind of look ahead to the next three months. And we are not pricing those to try to grow that portfolio, so our cost of deposits is benefiting from that.

As we go forward, probably a little cautious on just our projection for the margin for next quarter, but there is still more of those CDs to reprice. The question is really, with rates coming down a little bit in the last couple of weeks, the rest of the pieces kind of balancing out. So I mean there is definitely a potential for that margin to go up, but as we sit here today, we are looking more for it to be flat from that 378, which is up quite a bit from the first quarter.

Hey, Mike. This is Brian Lilly, Mike. Let me just add on the margin that what we have seen over time is that we have operated in the top quartile of the peers that we monitor. And the other side of it is we don't have as much volatility. So as it goes down, we are not dropping at the same level of bps and as it goes up, we are not accelerating at the same level of bps, but we are happy to be consistently in the top quartile. And that is a big part of our ALCO philosophy.

And on the commercial side, are you guys putting floors in some of the new deals?

We are seeing floors. We try to get a floor when we can and competition has pretty much started deploying floors, so you are seeing it more frequently. And the credit spreads have broadened and appear to be stable at a higher level. So you see a little bit of lift on the earning asset side.

Okay, thanks a lot, guys. I appreciate it.

Greg Tomlinson, FTN Equity Capital.

Hey, good morning, guys. Just regarding the shift in the funding mix, could you maybe provide I guess some detailed statistics on what percentage of the core growth was from new customers and what percentage of that was from current customers maybe shifting or growing balances?

This is Brian Lilly. As we -- we are not tracking it that fine, but what we are doing is we do an analysis to make sure that we understand what is account growth, relationships growth versus average balance impacts that then drive the outstanding balances. And we are real pleased with the activity this year that both the personal account side and in the business relationships are increasing at a good steady pace that are clearly outside of what the market will provide, low single digits account growth.

We have also had some pickup in average balances, as you would expect, from a number of the market disruption and some of the money coming out of the equity markets, but we are really focused on growing the relationships and that is what you have seen in the deposits.

Okay, so you would say primarily from new accounts, but also a little bit from current customers?

We actually track net new transaction accounts. So we know that we are up.

Right. Okay, well, thank you for the detail.

Andy Stapp, B. Riley & Co.

In your prepared remarks, did you mention the loan-to-value ratio in Florida?

Yes, Andy, it's 73%.

And that is after write-downs and with updated appraisals?

No, that is not. That is just the true loan to value prior to any reserves against that total portfolio.

But it does reflect the appraisals and --.

Yes, it does. It reflects the current appraisals that we have on the portfolio at 73%, Andy, yes.

Okay. Do you happen to have what it is after markdowns?

Well, we do in terms of the land portfolio, which is the portfolio that we have talked with you about. That number is just a little under 39% of original appraisal post reserves.

Okay. Original --? You don't have it at current appraisal?

Don't have that at my fingertips, Andy.

I think in the past, Andy -- this is Brian Lilly -- that is something closer to 10% difference between that 73% and another 10%.

That is about right.

Ballpark.

Ballpark.

Okay, thank you.

It appears there are no further questions at this time. Mr. Gurgovits, I would like to turn the conference back over to you for any additional or closing remarks.

Thank you. Well, I would like to thank all of you for joining us today on our third-quarter conference call and a special thanks for your continued interest in F.N.B. This will conclude our call and I hope everybody has a good weekend. Thank you for participating.

That concludes today's conference. Thank you for your participation.