FNB Corp (FNB) 2010 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to today's F.N.B. Corporation first-quarter 2010 earnings conference call. At this time all participants are in a listen-only mode. Following the presentation we'll 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 Cindy Christopher, Manager of Investor Relations for F.N.B. Corporation. Please go ahead, ma'am.

Thank you, Catharine. 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 and the interest rate environment that may reduce interest margins; changes in prepayment fees, 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 Tuesday, May 4, 2010 by dialing 1-888-203-1112 or 719-457-0820. The confirmation number is 671-0049. A transcript of this 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, Cindy. Good morning, everyone. It's a pleasure to welcome you to our first-quarter earnings call. Joining me today on the call are Vince Calabrese, our CFO, and Gary Guerrieri, our Chief Credit Officer. Vince will highlight our first-quarter performance and Gary will review our asset quality. Also with me today for the question-and-answer session are Brian Lilly, our Chief Operating Officer, and Vince Delie, our Bank President.

Now to the first quarter. We're very pleased with our first-quarter results. Our earnings for the quarter were $0.14 per diluted share; this is $0.02 per share higher than the consensus Street estimate and an 85 basis point return on average tangible assets. Later in this presentation Vince and Gary will elaborate more on these results.

During the quarter we built on the momentum established during 2009 and continued to win new customers and gain market share. We remained focused on organic growth opportunities. In doing so we generated solid loan and deposit growth this quarter. Our core Pennsylvania commercial portfolio grew average loans 6.3% annualized.

This commercial growth continues to represent mainly new client activity with the commercial team generating 39 significant new relationships with nearly $130 million in new commitments during the quarter. We're extremely pleased with these results considering that line usage is very low and existing customer demand still remains soft.

Additionally, we are very pleased with the strong deposit growth we experienced during the first quarter. As a direct result of securing new personal and business relationships we grew total average deposits and treasury management balances 9.4% annualized with transaction balances growing 8.5%. Treasury management balances benefiting from both organic growth and customers maintaining higher balances experienced growth of 45.8% annualized in the first quarter.

We increased our net number of business and personal checking accounts by nearly 1,800 during the quarter. We're very pleased with this and in large part attribute our success in attracting new clients to actions we've taken over the past few years.

For example, we have been firmly committed to improving our sales management process and CRM platform. We have dedicated marketing resources to enhance F.N.B. brand awareness in key markets. These efforts, along with the development of our very good retail and commercial banking teams, drive our growth and allow us to take maximum advantage of the opportunities in our market.

Another contributing factor to this growth was real progress from several earlier initiatives. Last quarter the asset-based lending team began to build a robust pipeline; they worked to build their own book of business as well as making joint calls with commercial bankers. I'm pleased to report that this momentum has continued and they are well on pace to exceed 2010 production goals.

Our private banking initiative is also growing; this group is prospecting an upscale market segment as well as being the recipient of referrals from commercial and retail bankers. They have developed special marketing materials and products for this segment of the market. To date it's been very well received.

These initiatives combined with the efforts of our experience banking team, our increased calling efforts and successful marketing continue to build stronger brand awareness and win customer relationships. We look for this strategy to benefit us throughout the year. Now I'd like to turn the call over to Gary for his remarks on asset quality. Gary?

Thank you, Steve, and good morning, everyone. Looking at the first quarter, our credit metrics continue to trend as expected and are consistent with the guidance delivered during our fourth-quarter call. Both the Pennsylvania and Regency portfolios continue to perform well in light of the current economic environment, while the Florida portfolio remained stable through the period.

Charge-offs reflect very solid results at 48 basis points, the lowest level in the past six quarters. And delinquency improved 9 basis points to stand at 3.19% as both early-stage and 90 plus delinquencies improved. Non-performing loans and OREO increased 20 basis points on a linked-quarter basis, consistent with our expectations for the period.

Additionally, we further strengthened our reserve position for our Pennsylvania and Florida portfolios as we continued through the credit cycle. As in the past, I will break down and review each portfolio with you in detail beginning with the Florida portfolio. At quarter end our Florida portfolio was $240 million or 4% of F.N.B.'s total loans, down $3.5 million on a linked-quarter basis. Non-performing assets at $80 million are down slightly.

During the quarter we strengthened our reserve position by 132 basis points to 9.43% of the Florida portfolio as the environment continues to remain challenging. As it relates to Florida's composition, the land and land development segment remained consistent with the fourth quarter at 40% or $96 million, down $2 million, and is down $51 million year over year, a 35% reduction in exposure since the first quarter of 2009.

The composition of the remaining income producing construction, owner occupied and C&I portfolio segments are also consistent with the prior quarter. Unfunded commitments continue to decline, now at $10 million, down nearly $3 million since year and. Year over year our Florida exposure, including unfunded, has been reduced by 24%. Our weighted average loan to value ratio for the portfolio improved by 1% to stand at 76%.

As it specifically relates to the land and land development portfolio, our current outstanding balances are being carried at an average of 36% of the original appraised value post reserve, consistent with the prior quarter. We continue to aggressively manage this portfolio with an ongoing focus of reducing our exposure.

Investor interest and activity continues with the recent heightened level of focus on finished lot inventories across the market which reflects positively as builders position themselves for the early stages of a Florida recovery.

Moving to Regency Finance, we are very pleased with the strong performance of the portfolio as it delivered solid credit quality metrics during the quarter which exceeded our expectations. At quarter end the portfolio stands at $157 million representing 3% of our total loan portfolio. Net charge-offs improved 34 basis points from the prior quarter to 3.96% annualized and the reserve position remained strong at 4.2%. Delinquency has returned to historically good levels.

Let's now take a look at the Pennsylvania portfolio. At quarter end the portfolio stands at $5.5 billion and represents 93% of F.N.B.'s total loan portfolio. We continue to be pleased with its performance in light of the soft economy as evidenced by strong charge-off performance at 34 basis points annualized, in line at with last year's charge-off rate of 31 basis points. Additionally, delinquency is down slightly by 2 basis points to stand at 2.05% which includes a $3.6 million or 36% reduction in 90 plus delinquencies.

Non-performing loans plus OREO stands at 1.65%, up 26 basis points from the prior quarter driven by a $10.9 million increase in non-accrual loans and a $3.7 million increase in restructured loans, $2 million of which are restructured mortgages representing nearly $500,000 less than the increase over the prior quarter as we continue to assist these customers.

A little more than half of the increase in non-accruals was impacted by two relationships in our easternmost market carrying minimal loss exposure. As it relates to the non-performing loans, $21 million or 29% of the Pennsylvania non-accruals continue to be paid on a current basis. During the quarter we strengthened our reserve position by 3 basis points to 1.46%.

Let's now take a look at each segment of the portfolio. Consistent with our strategy, our Pennsylvania commercial portfolio is up slightly at just over $3 billion, now representing 52% of F.N.B.'s total loan portfolio. The breakdown of the portfolio remains consistent with the prior quarter.

The non-owner occupied portfolio at $1 billion represents one-third of the total Pennsylvania commercial portfolio. While it reflects slightly elevated metrics with non-performing loans and OREO at 2.1%, up 13 basis points, and total delinquency at 2.28%, up 8 basis points, it continues to perform well.

Our total consumer-related portfolio, which represents $2.4 billion, or nearly 42% of F.N.B.'s total loan portfolio, also continues to perform well with solid credit metrics across all categories. Delinquency improved 27 basis points to 1.4% impacted by positive movement in both the consumer and mortgage segments, while losses were up moderately over very solid levels in prior quarter to stand at 47 basis points.

As it relates to the mortgage portfolio, delinquency at 2.35% improved by 57 basis points over the fourth quarter. This continued solid performance is a direct result of our consistent underwriting and diligent oversight of the portfolio. In summary, we continue to be pleased with the resilience of our Pennsylvania and Regency portfolios in what has been a challenging environment.

Our focus in Florida remains unchanged as that market continues to experience the affects of a difficult economy. The first quarter delivered satisfactory results including a number of positive metrics as overall early-stage and 90 plus delinquencies were all down and charge-off activity was better than expected.

Assuming continued improvement in the economy we would expect levels of non-performing assets, net charge-offs and provisioning for credit losses to be lower than 2009 levels, but still elevated compared to historical levels, with the expectation that non-performing loans will crest near mid to late summer and begin to decline thereafter.

We are encouraged by the signs of economic activity that have been reported by a number of clients confirming that the recovery is underway. We remain confident that our experienced team, consistent approach to underwriting and attentive risk management practices will continue to serve us well. I'd now like to turn the call over to Vince Calabrese, our Chief Financial Officer.

Thanks, Gary. Good morning, everyone. We've addressed many of the first-quarter details between last night's earnings release and the comments provided by Steve and Gary. Therefore I'll focus my remarks on a few additional highlights of our operating results and an update of our guidance.

First, we were pleased to report earnings that exceeded our quarterly dividend this quarter. In looking at our performance ratios, we're also pleased to have made good progress towards what we would consider normalized levels. While we are not declaring victory with return on tangible common equity of 14.43% and a return on tangible assets of 85 basis points, these ratios reflect meaningful improvements over the last three quarters of 2009 and are what we would consider reasonable levels at this point in the economic cycle.

Now regarding the business drivers and turning to the balance sheet let's begin with loans. As Steve mentioned, we are pleased with the commercial loan growth we generated in the first quarter of 2010 and we look to continue building on the momentum we generated last year in our commercial business. Commercial pipelines at the end of the first quarter are at healthy levels supporting our growth expectations.

Now on the consumer loan front, while home equity products declined slightly in the first quarter, we do expect to see some growth in these products in the second quarter. Additionally, we expect some growth in residential mortgages as we anticipate our private banking initiative will contribute to both residential mortgage and home equity loans.

That being said, for total loans we are reaffirming our guidance from mid single digits growth excluding the impact of continued reductions in the Florida portfolio. This is based on consensus forecast for maintaining the economic recovery and that line utilization among existing customers will begin to trend upward later this year.

Looking at the funding side, we are very pleased with the first-quarter total annualized growth in deposits and treasury management balances of 9.4% compared to the fourth quarter. We expect to continue growing both transaction deposits and treasury management balances, further enhancing our funding mix. While current quarter growth is running close to 10%, for the year as a whole we're reaffirming our guidance for mid single digit growth.

On a linked-quarter basis the margin narrowed by 3 basis points in the first quarter, (inaudible) growth in cash balances held at the Fed and lower investment yields reflecting current reinvestment rates and impacts from the mortgage agencies buying back delinquent loans. Given our success in improving our overall funding mix and generating solid loan and deposit growth we expect continued growth in net interest income and look for the full-year margin to be stable at current levels given our relatively neutral interest rate risk position.

I should also point out that we made a change in the components of the net interest margin calculation. With the Federal Reserve paying 25 basis points on balances held in our Fed account and with the prospect of the Fed increasing the rate paid on these balances, we have reclassified our Fed account into short-term investments.

In the past these balances were always included in cash (inaudible) for banks on the balance sheet which is not part of the margin calculation. We've also reclassified this account for the four quarters of 2009 so that we have an apples-to-apples comparison. No impact on bottom-line earnings, but just reclassification within the line items. On this basis the first-quarter 2010 margin of 3.74% is 9 basis points higher than the first quarter of 2009 level of 3.65%.

Regarding an interest income, excluding the impairment charges, we saw a $3 million overall increase in the first quarter compared to the fourth quarter. This increase primarily reflects the gain on securities and recoveries on impaired loans previously acquired through acquisitions. These items were partially offset by seasonally lower service charge income and lower swap fee revenue.

In the first quarter our insurance income increased because of seasonal contingent fee revenue while our securities commissions declined due to the continued impact of low interest rates on sales of annuities while the fourth quarter had benefited from our annual fall sales campaign.

Looking at the OTTI charges for the quarter, the impairment charges included in non-interest income were entirely due to pool trust preferred securities with 83% of the charge related to two securities. These two securities experienced additional deterioration in collateral performance that accelerated faster than what was projected, triggering the additional credit impairment charges.

At the end of the quarter we have 13 pools with an original cost of $41 million, a book value of $24 million and a fair value of $7 million. The difference between the book value and fair value is reflected in equity at quarter end on an after-tax basis, that totaled $10.1 million.

While there are a lot of moving parts in non-interest income, we reaffirm an expected run rate increase in the low single digits. We continue to expect to see an increase in wealth management revenue due to improved market conditions and some lift in service charge income resulting from continued growth in business and consumer deposits.

Lastly, regarding non-interest income, we did execute a strategy to enhance the balance sheet positioning for 2010. We sold $56 million in investment securities with a book yield of 3.96% and a gain of $2.3 million and we prepaid $59 million in federal home loan bank borrowings at an effective rate of 3.93% at a charge of $2.3 million. These items are included in non-interest income and security gains and other non-interest expense.

Non-interest expense for the first quarter, excluding OREO cost, FHLB prepayment penalties and fourth-quarter net litigation costs, increased slightly reflecting the effect of seasonally higher benefits and occupancy costs. We continue to focus on expense control and reaffirm projected efficiency ratio in the low 60% level for the remainder of the year.

Gary provided an excellent overview of our credit quality. We're pleased with the first quarter, delivering credit quality results in line with our expectations. Lastly, regarding our capital position, capital ratios are expected to exceed well capitalized thresholds throughout the year at levels consistent with year end 2009 levels. Steve, that completes my remarks.

Thank you, Vince. We are pleased with our solid first-quarter results. Our experienced team remains focused on excellent customer service and new client acquisitions. And the results are very real, as a proof point

I'm pleased to share with you that F.N.B. has received both regional and national awards from Greenwich Associates, the leading research-based consulting firm. F.N.B. is a winner of the Regional Middle-Market Banking Excellence award and, additionally, we received the National and Regional Excellence awards for small business banking. These prestigious awards are determined through Greenwich's independent interviews of thousands of companies and demonstrate the knowledge, experience and commitment of our bankers to serve their clients.

Greenwich also interviewed business decision-makers about F.N.B. and competitors across our footprint. The results show that during 2009 F.N.B. firmly established our brand, grew considerable market share and that we are well positioned across leadership categories and other important attributes.

In fact, out of the lead relationships interviewed, 95% responded that they are likely to continue to conduct business in the future with F.N.B. and the majority stated they would recommend F.N.B. We were pleased to see that these specific results are significantly higher than other large competitor banks presented in the study.

Nothing breeds success like success and our staff is certainly experiencing significant wins. We are positioned to continue this momentum throughout 2010. I will now ask the operator to poll the audience for any questions.

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

Good morning. Just a few quick questions. I was wondering and I'm -- Gary, you might have mentioned it in your comments, but I may have missed it. But in terms of Florida and appraisals and recent appraisals, what are you seeing in terms of -- are you continuing to see -- are you seeing some stabilization now?

Frank, you'll recall that during the fourth quarter we updated basically all of the non-income producing properties in that portfolio. So during the first quarter, because we had just updated that whole group, we only had the need to update one transaction and we were pleased to see that that appraisal came in exactly the same as it did four months prior. So we did see some stabilization from the one that was ordered.

Okay. In a broader sense, just in your talks I guess with guys down there and -- have they seen stabilization a little bit more broadly in the first quarter? Do know or do you have any --?

During the first quarter there has been some stabilization. I think it's property specific when you look at it from that perspective. You will have to recall that that Florida market continues to see pressure and it will take some time to unwind itself. And from that perspective, we're continuing with our focus on our position with that portfolio to liquidate assets from an economic standpoint where they're beneficial from the Bank's perspective, Frank.

And that one that you mentioned that you saw a reappraisal on, was that -- I'm sorry, was that a land loan or no?

It was a land loan, yes, it was.

Okay, great. Maybe -- well, I'll ask it anyway. It might not be -- well, in terms of Florida I know it's been a big headache in terms of NPAs and losses, but given how attractive some of these FDIC assisted deals look, is there any possibility that you guys look to jump back into Florida?

Well, you know, Frank, that's an interesting question. No one knows the future obviously, but when we originally went down and opened the LPOs it was the early stage of our strategy.

You recall after this spin we wanted to concentrate on Pittsburgh and to gain a presence out in the middle part of the state and hopefully move east from there. But a lot of that activity hadn't occurred yet. And so Florida provided us the opportunity to reunite with some of our former employees in markets they were familiar with and, in fact, with customers who we did business with earlier on.

Today with the results we're having, having now advanced our development of the Pittsburgh market including building teams and building our presence, as well as eastern -- moving east in Pennsylvania, Central Pennsylvania with the Omega acquisition in particular -- I don't know that we have the need today that we had several years ago when we went there.

But having said that, I don't know what the future brings, but I will tell you that in the near-term our focus is twofold -- one, continuing to liquidate our exposure in Florida; and more importantly, continuing to develop the market opportunities that we have in Pennsylvania.

Okay, great. Thanks. And then just finally, Vince, I thought I heard you say that deposits so far this quarter -- are those -- did you say 10%? Is that annualized 10% since the first month of the quarter basically?

It was 9.5% annualized, yes. Deposits and treasurer management balances combined.

Right, okay.

That's annualized first quarter to fourth quarter.

Annualized first quarter to fourth quarter?

Right.

I'm sorry, that was -- okay, so now you're just talking about the -- I'm wondering second quarter to date, just the first month here, what you've seen, if you've seen a big inflow into cash management accounts?

Yes, I'd say we continue to see normal flow there. My guidance is more about where we think for the year as a whole we're going to come in. I think still coming in at that mid single digits growth -- the point I was trying to make is we came in very fast in the fourth quarter and I don't think we're going to continue at that rate as we go throughout the year.

Got you, okay. All right, thank you.

Jason O'Donnell, Boenning & Scattergood.

Good morning. Can you just give us a little more color with respect to your asset base lending business and how much is the ABL balance currently and how large you expect to grow that portfolio?

The ABL portfolio is currently sitting at about $40 million funded. We put that strategy in place to take advantage of opportunities that existed in the marketplace given we're a C&I lender and we were moving through the economic cycle. So we would expect more moderate growth moving forward in that space. But there are lots of opportunities given where we play in the market.

Okay, is there a percentage though in mind in terms of the total portfolio you'd like to grow to?

We don't have a percentage in mind at this point.

Okay, fair enough. And then in terms of the -- just switching gears, in terms of credit quality, it looks like restructured loans balance in Pennsylvania increased this quarter. Can you just give us a sense of the types of loans you're restructuring and what types of concessions you're making?

Yes, those restructureds increased $3.7 million during the quarter and $2 million of those were residential mortgages. Once again, Jason, that had a lesser pace than it increased in the fourth quarter when we saw a $2.5 million increase.

So $2 million of it is mortgages and the remainder was a $1.6 million transaction that we got through an acquisition. We were in the A note which got restructured, the B note, which other participants were in, experienced a loss. We did not experience a loss in the credit and it was restructured because of the total participation there.

Okay, great. That's great, that's helpful. And then finally, I guess just switching gears again. On your deposit service charges, can you just give us an update on how much of those are overdraft fees and how much do you think you could lose in the back half of the year? I know that you were out at the conferences, you were talking about some of the analysis you've been doing and can you just can give us an update on your expectations?

Well, we continue to follow what's going on and we've developed a plan to minimize the impact. And as you've probably heard from other calls, the 80-20 principle applies here -- 20% of the accounts generate the majority of the revenue in that category. So we're focused on it and we're devising a plan and we're getting ready to roll that out shortly.

I think, Jason -- this is Brian. Last quarter we decided that as $9 million related to the Reg E changes and we're looking to minimize that to the extent possible. It will add a lot more at the and of the second quarter.

Okay, great. Thank you.

Andy Stapp, B. Riley.

Good morning, nice quarter. Has there been any change in the Company's interest rate sensitivity position from what was disclosed in the K?

No, Andy, I would say we're still really right at that neutral position. We're slightly liability sensitive or it's really right on neutral and that's really the way we manage it as we go through quarter by quarter so that we're not going to be subject to swings in the interest rate. So I'd say very similar to where we were. If anything maybe a little bit more asset sensitive, but right on neutral.

Okay. And do you expect the reserve coverage of loans to remain relatively stable for the balance of the year or could that go up a tad?

Andy, in reference to -- I would move you towards our guidance. Our guidance is that non-performers will crest in mid to late summer and the reserve would be consistent with any movement there.

Okay, that's what I thought. And last question and I'll get back in the queue. But I think you guided last quarter to 20% runoff in Florida. Is that still reasonable?

We're still targeting those levels. We're hopeful that we can get there during this year. And that's something that we continue to focus on. We'll continue to inform the group as we move forward there, Andy.

Andy, let me just -- this is Brian, that's a goal that we have internally. But certainly the economics of what's out there will dictate some of that. We'll be able to move properties and credits on our own. But getting some of those levels might be selling and certainly the attractiveness of that option we've explored very deeply and are monitoring that. It just doesn't make economic sense today.

Yes, okay, thank you.

Damon DelMonte, KBW.

Good morning, guys, how are you?

Good morning, Damon.

Great. The first question I have is kind of more broader-based. Could you guys provide a little color as to what you're seeing in your western markets versus the central markets of Pennsylvania, specifically the Omega franchise that you acquired? Are you seeing more signs of stress in the central part than you are the western part, or are you seeing more signs of recovery in one over the other?

Go ahead, Gary.

In terms of asset quality, Damon, I would say to you that the western side of the state is slightly ahead of that eastern most portion at this point. Central Pennsylvania has held up fairly well in addition to the western part of the state. The eastern most segment I believe is where we've seen slightly increased stress.

Okay, great. And then with regard to the asset-based lending, from a geography standpoint are these loans typically in Pennsylvania or are they extending outside of Pennsylvania?

Well, Damon, they're largely on our footprint which is largely western Pennsylvania. And we have an exposure in eastern Ohio as well because we have 11 offices along the border of Ohio. So, we're not looking to roam too far from home with the asset (inaudible) spending because we're looking for relationship banking here.

Okay, great. And then I guess lastly, Vince, from a tax rate perspective -- if you said this already I apologize -- but do you have any guidance going forward?

The tax rate the next few quarters should be between 26% and 27%.

Okay, great. That's all I had for now. Thank you.

Damon -- that's on a GAAP basis, Damon, too, just to clarify.

Okay, great, thank you.

(Operator Instructions). Mac Hodgson, SunTrust Robinson Humphrey.

Good morning. Just a couple credit-related questions. In Florida I know there was a slight decline in non-accrual loans, but you did build the reserve a little bit. And I'm assuming that's just because maybe updated appraisals and you still showed some valuation declines. Was that mainly the reason for the reserve build in Florida despite (multiple speakers) and non-performers?

It actually was not in terms of appraisals that were ordered. As I mentioned earlier, Mac, we only updated one appraisal during the quarter. The market continues to be soft and from that perspective we felt it prudent to slightly increase that reserve position based on the softness that continues there.

Okay, got you. And the belief that NPAs will peak and begin coming down in the back half of the year, is that really driven by the thought that resolutions or dispositions will pick up, what's maybe the -- I mean, obviously the inflows have kind of slowed and it seems like you've got some stability in credit. But just the idea that they'll come down, does the Company feel like they'll be more aggressive on dispositions?

It is a reduction in inflows as well as some dispositions. Naturally the dispositions take some time to get through, but we are seeing some of that at this point in the cycle.

And even -- and Mac, it can be just upgrades. As companies have gone through 2009 with weakness, back half of the year we're seeing some positive activity in our client base that could justify upgrades as we go forward.

Okay, great. And you-all might have mentioned this and I know it's in the press release -- the other non-interest income increase related to recoveries on impaired loans required through an acquisition, can you give any more color on that? What that was (multiple speakers)?

We had one sizable transaction that we have been working for better part of two years. We positioned that asset under purchase accounting SOP 03-3 at time of the acquisition, Mac. And that has been a two-year workout situation. Our special lending team did a very solid job working through that credit relationship and brought it to a resolution here at the end of the first quarter that was significantly stronger from a recovery standpoint than we had originally expected. We were very pleased with those results.

And, Mac, that credit was acquired through the Omega acquisition.

Okay, got you. And that recovery was $3.3 million?

Just under that, about $3.25 million.

Got you. Do you have the percent line usage for your commercial borrowers? I think you talked about line usage being down, I didn't know if you had the percent and maybe how it compared to history.

The utilization rate has declined slightly; it's sitting around 30% to 35% for the Company. And that is historically low. And I think we expect that to change over time as the economy comes back. Remember, we're largely a C&I lender.

And, Mac, let me point out that that is low because we haven't seen our companies begin to build inventories at least broadly across the portfolio. But I will remind you that what's helping drive that lower is we're putting on a lot of additional lines of credit with these new relationships that we're getting. And some of those line usages aren't really that active at this point. So that's helping to lower the overall percentage.

Okay, great. Thanks a lot.

Mike Shafir, Sterne, Agee.

Good morning, guys. I was just wondering if we can get a little bit more clarity, if you could just quantify some of the potential NSF runoff. I know that you guys have a plan in mind, but if we could just take the first quarter, as an example the $13.7 million in service charges, how much of that is actually related to the overdraft?

It's going to be about $2.25 million.

Yes, total NSFs are about 45% of that figure and then about $2.25 million for the piece when you peel down to the overdrafts related to the point of sale and ATM.

But, Mike, let me be quick to point out that obviously we're aware of the changes in the regulation, some begin in July for new accounts, some in August for existing accounts. And to Vince Delie's point earlier, we think we have some tactics and a plan in place that we're going to roll out.

It's interesting, when you talk to a lot of the customers who use the privilege of being overdrawn; these people aren't the ones, to us, that are complaining about it. We really feel strongly that the plan we have in place will have positive results for us. A lot of these people were will really opt in to have the opportunity to overdraw when they need to.

Okay. So I mean, could you at all quantify maybe the percentage or dollar amount that you think you could have a potential dip of before you recover as the plan comes to fruition in terms of (multiple speakers)?

You know, that's difficult to do because it's really speculation at this point. But I can tell you that we are confident that, as Vince mentioned earlier, about 80% of the overdraft fees come from about 20% of the customers. And those customers seem to enjoy the fact that when they need to they can overdraw their account. And we're confident that with the plan we have in place that a lot of those people will continue to opt in. But it's difficult to speculate a number.

No, I appreciate that detail. Thank you.

Andy Stapp, B. Riley.

Yes, I just had a question on the OTTI charges. Do you have any feel as to where you think you are in getting these charges behind you?

Well, Andy, this is Vince. I mean, if you look at the charges that we've had, the amounts definitely -- this quarter is about half of what it was the prior quarter. I'd like to be able to say that it's all finished; it's hard to say that because it is a function of what happens every quarter. But I think part of what we're starting to see is that we're starting to see some of the banks improve that in the underlying collateral where default rates are starting to go down as opposed to going up.

But there's still a good 20%, 7% of the collaterals in deferral or default as we sit here today. And as the economy starts to improve more we expect to see first-quarter results for banks generally being better than where they were in the fourth quarter, that's going to help. So, I think we're on a path of it continuing to reduce. And when it gets to zero it's hard for me to say. But the signs are there that the trend that we're on should continue where it really should start to keep coming down from this level.

Okay, thank you.

(Operator Instructions). Tom Alonso, Macquarie.

Good morning, guys. As you might imagine, most of my questions have been answered. Just real briefly on the credit side, your earlier comments on the reserve. I mean, is it safe to assume that provision then will just match charge-offs in the back half of the year, is that a good way to think about it?

I would say to you that they will approximate charge-offs as we move through the remainder of the year, Tom. That would be a fair assumption.

Okay, terrific.

Hey, Tom, this is Vince. I would just add that in Florida, charge-offs there that will come will be lumpy. Those are going to come in pieces and a lot of that's already going to be reserved for us. So the provision charge-off relationship, it can be off quarter to quarter depending on what rolls through on charge-offs.

Yes, that's a very good point, Tom. Specifically reserved transactions which already have a provision against them will make things lumpy to that point.

Okay, understood.

And I would add, Tom, this is Steve, that we do expect the provision to be less in 2010 than we experienced in 2009.

Okay, okay, fair enough. Understood. I think that's pretty much all I had. Thanks, guys.

And that does conclude today's question-and-answer session. I'll now turn the conference back to our speakers for any additional or closing remarks.

Okay, I want to thank everyone for joining us this morning and for your continued interest in F.N.B. Corporation. We've enjoyed the call and we hope you have a good day. Thank you.

And that does conclude today's conference call. We want to thank you for your participation.