S&T Bancorp Inc (STBA) 2009 Q2 法說會逐字稿

Greetings, and welcome to the S&T Bancorp second quarter 2009 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Rout, Senior Executive Vice President and Chief Financial Officer and Secretary for S&T Bancorp. Please go ahead.

Good afternoon everyone, and thank you for participating in the conference call. Before beginning the presentation, I want to take time to refer you to our statement of forward-looking statements and risk factors in the third slide of our Webcast slide presentation. The statement provides the cautionary language required by the SEC for forward-looking statements that may be included in this presentation. Listeners are also reminded that a copy of the second quarter Earnings Release can be obtained at our Investor Relations website at www.STBancorp.com. A set of financial highlight slides is included with this Webcast that we are about to discuss. We do not plan to review the slides in detail but would be more than happy to respond to any questions concerning them or any other aspect of our financial performance.

Now I'd like to introduce Todd Brice, S&T's President and Chief Executive Officer, who is going to provide an overview of S&T's second quarter results.

Thank you, Bob, and good afternoon, everybody. As you can see from our Earnings Release and financial slides, this was another difficult quarter for us as a result of credit issues. Troubled loans are a concern for everyone today and with the uncertainty of the economy we thought that it would be prudent to be aggressive with loan charge-offs, provision expense and loan loss reserves. In addition, we also had the issues of FDIC Insurance surcharges and some other than temporary impairment charges to deal with this quarter. Our provision expense of $32.2 million was a major factor in our $10.2 million or $0.37 per share loss this quarter.

Of course, provision expense was significantly affected by the $26.5 million charge-off for a natural gas drilling and exploration company. This was a well-established local company that we've had a successful relationship over the last seven years. A significant portion of their success has been with the development of natural gas fields in the Powder River Basin of Wyoming. This is a high cost area for natural gas exploration and development. It was significantly impacted by the decline in energy and commodity prices. Because this company had a number of other issues, we were reluctant to advance the millions of dollars that would be required to keep the operations going until energy prices returned to profitable levels. In this particular case we believe the first loss will be our best loss. It's certainly an expensive lesson and one that we will not soon forget.

The other significant charge-off is again with another local long-term relationship that specialized in single family lot development. Like many companies, diversification into more robust markets led them to Florida. Recent appraisals in the market outlook indicate that a Florida real estate rebound is not likely in the future and we are incurring a $5.3 million charge and provision this quarter for this particular credit.

We continue to see stress in segments of our commercial loan portfolio as a result of this 24 month recession. We are paying particular attention to our out of state loans since some regions of the country are experiencing more intense effects of the recession than we are here in western Pennsylvania. Every area of our commercial real estate portfolio is being carefully scrutinized for early warning signs with a particular focus on the automotive, retail and hospitality segments.

Tony Kallsen, our Chief Credit Officer, is with us today so I will ask him to provide a brief overview of our portfolios and followup with Bob Rout to discuss some of the non-credit issues impacting our performance this quarter. Afterward we can open up the call for any questions that you might have. It's also worth noting that our residential mortgage and home equity loan portfolio continue to perform extremely well as a result of consistent, conservative underwriting and the absence of any subprime products. In fact our residential mortgage and home equity applications hit record levels as consumers took advantage of low rates.

Commercial loan growth was negative this quarter. Most of that decrease of activity is a system wide delevering that is occurring for most businesses. A slowdown in real estate development, and overall hesitancy for customers to assume significant risk until the economic and political pictures become clear. As for our other lines of business, retail, insurance and wealth management, these areas are performing quite well, given the circumstances. The soft market for insurance premiums and of course what's happening in investment markets doesn't help. I'm real proud of how these folks are making the best of a bad market and positioning themselves for when the market does turn.

The last area that I want to discuss before turning it over to Tony Kallsen is our participation in the TARP program. As announced earlier this quarter we received $109 million of CPP funds in exchange for preferred stock and common stock warrants. This was a difficult decision for us at the time since we were already well-capitalized and our pro forma shock analysis showed that we could incur up to $105 million of losses and still remain well capitalized. So our decision was made to participate based on the fact that the preferred shares would provide added insurance against a deeper and prolonged credit downturn, the potential change in regulatory capital rules, which we're already seeing signs of occurring, and additional capital for potential growth opportunities that are sure to come in this environment. Our decision to participate was the right one at the time and it still is given the uncertainty of the economic environment and the cost of capital raises in the current market today. Governmental restrictions in the program are sometimes annoying but we feel they are very manageable for us. It will be our intent to seek regulatory approval to pay back the funds once the economic and regulatory direction becomes more clear.

So with that I'll turn the discussion over to Tony Kallsen, our Chief Credit Officer.

As Todd alluded to, this quarter's performance was driven primarily by provision expense, $32 million. This marks the second consecutive quarter of relatively large provision expense as the bank continues to observe deterioration in its commercial loan portfolios as a result of the economic recession. The loan loss model was significantly impacted by two large charges. The first is a $26.5 million charge on the energy credit that was mentioned in the earnings announcement. You may recall last quarter that the bank established a specific reserve of $9.3 million on this credit. Implicit in this original estimate was an assumption that the Company had a going concern value. To support this concept, the Company engaged a chief restructuring officer at the bank's request. At the end of May, the chief restructuring officer presented the details of its proposed restructuring plan which included extensive additional capital.

The bank elected not to fund the restructuring plan for many reasons including the fact that the wells had been shut in due to the borrower's liquidity issues continued softness in the energy commodity prices, and the uncertainty regarding the timing of an industry recovery. Given this decision, management believes it appropriate to assume that the energy company has no going concern value. The bank did realize approximately $2 million from liquidating a brokerage account held as collateral. The residual balance of this relationship is $3.8 million which is secured primarily with real property owned by the principals. The bank is in the process of recovering these assets.

The second is a $5.3 million charge on multiple single family development projects in Florida. The bank followed a significant customer to Florida and financed five such projects. Of these five, three were placed on non-accrual when the bank realized that interest reserves would be insufficient to carry the project to completion. Simultaneously, updated appraisals suggested that the projects lost significant value. Accordingly, the bank recognized a charge based on a discount of these new values. The relationship with this customer exceeds $20 million after the charge with about $17 million in performing loans, primarily based on development projects in Pennsylvania. The bank is currently negotiating a restructure.

Total reserves are $57.8 million or 1.67% of total loans. Specific reserves total $15 million, which is a net decrease of $4.1 million from Q1 primarily due to the aforementioned charges. The most significant changes in specific reserves include a $9.3 million decrease associated with the energy company charge, a $2 million increase on a condo development project located in New York, based on the first unit sales price which is in line with an updated appraisal, a $1.8 million increase on a significant relationship secured with several apartments in the Pittsburgh market. While the properties are in good rental locations, the units have suffered from a lack of capital expenditures as the owner diverted cash flows to benefit unrelated projects. A $1.2 million increase on a commercial project in Connecticut. The project is undeveloped and given market conditions, commencement of the project is uncertain in the near term.

As a result of the charges total NPL decreased by $21 million or 22% over last quarter. To be sure, this is not an ideal way to reduce NPL. However, it does represent the first decline we've seen over the last 12 months.

Given the charges I talked about in Florida, I thought it would be prudent to share an update on the out-of-state portfolio discussed last quarter. Out-of-state loans are defined as commercial real estate or commercial real estate construction loans with project locations outside of Pennsylvania. The bank has $352 million of out-of-state loans. That represents just under 20% of the commercial real estate portfolio and about 10% of total loans. Out-of-state concentrations over 10% include retail, apartments and hospitality. Geographic concentrations include New York 29%, Ohio 21%, Florida 7%, and Arizona at 5%. Total delinquency in this portfolio was 7.48%. However, loans past due under 90 days accruing were only 2 basis points so the majority of past due loans are recognized as NPL.

Out-of-state NPL was $26 million and remained flat compared with last quarter. Out-of-state NPL represents 37% of total NPL. Over half of the deterioration experienced in the out-of-state lending has been in single family lot development. The bank has invested $28 million in this segment and $16 million or 57% of that is NPL.

In light of the bankruptcy petitions of Chrysler and General Motors, I wanted to provide you with some information on financing activities in this segment. Activity can be split between real estate loans and floor plans. As of June 30, real estate loans to dealers totaled $51 million. Loans to GM and Chrysler dealers were $13.8 million and $900,000 respectively. To date, none of these dealers have had franchise agreements terminated and they are working through the details of the restructuring. As to floor plans, the bank has $33.7 million in commitments with $7.5 million and $3.8 million to GM and Chrysler dealers, respectively. One of the Chrysler dealers did lose their franchise agreement and has been wholesaling vehicles, significantly reducing the floor plan. We do not expect any loss associated with this customer at this time.

Finally, everyone always seems curious about shared national credits. S&T is relatively inactive on the buy side. Usually we will participate in companies that operate in our footprint and in most cases we have ancillary relationships with these companies. As of June 30, the bank had a portfolio of participations purchased totaling $100 million, $25 million of which are shared national credits comprised of three relationships. $3.5 million of the shared national credits are classified but continue to perform.

Before I turn it over to Bob to discuss the financials, I'd like to address some questions that were received just an hour or two before the call regarding asset quality. The first question, it asks, "Of the loans that have been charged off and are on non-accrual, can you differentiate which ones were originated versus which ones were the result of a participation?" Of the two large charges I just talked about, the $26.5 million charge and the $5.3 million charge, both of these are relationships that we originated and had direct dealings with and there were no participants involved. Of the $26 million in NPL in the out-of-state portfolio that I referenced, only one credit in the $26 million of NPL is a participation. That is $7.3 million and we did have a relationship with that client prior to that participation.

Then the question is, to be more specific, apply the same question to the out-of-market credits -- Florida, New York and Connecticut. For the most part we may look at loans that are referred to us, either through other customers that we have local relationships with, in some cases we do look at transactions that brokers have referred to us. But for the most part these relationships are developed by us, underwritten by us and not part of participations. The second question is if the out-of-market credits were originated, was there an existing local banking relationship with the client that led to the funding of these loans? And again, if it's not a direct relationship, it's usually the result of a referral or a broker.

"How much of your remaining commercial loan portfolio contains out-of-market loans?" As I mentioned, the way we define out-of-market, we have $352 million in that portfolio.

The next question was, "Is the $26.5 million charge, the same credit that was identified in the first quarter?" The answer is yes and we had established at that time a $9.3 million specific reserve.

"Do you feel that your loss reserves are adequate, given the heavy percentage of loans that are commercial-based?" The answer to that question is yes, at this time. Although as you know, the reserve model and setting specific reserves is subject to economic fluctuations, so we believe it's adequate at this time based on the visibility that we have for anticipated charges but that could change as the economy changes.

And then finally, "Are delinquency trends tracking to non-performing assets?" And just to give you some more color on our delinquency trends, we certainly have seen an increase in delinquencies in commercial. That's most of what we're talking about here. It was 1.85% 12 months ago and it's 3.7% today. 1.12% of that is under 90 days. So again, the largest weight that we have here is commercial real estate. That delinquency rate is 3.56% and about half of that is in NPL.

On the consumer side, our portfolios are holding up pretty well. We have seen some deterioration. Again, our total consumer delinquency rate was about 70 basis points 12 months ago. It's 1.16% today. And most of the deterioration that we've seen is in the mortgage loan portfolio. However, that delinquency rate is well under 2% at this time. Our foreclosure pipeline is perhaps a little heavier than it was last year but local home prices appear fairly stable. We feel pretty good about our underwriting. I think it's conservative. And very manageable and within the industry experience.

With that, I'll turn it over to Bob.

Good afternoon, everyone. Certainly been another busy and interesting quarter for us with of course credit dominating most of the discussion. I want to quickly go through some of the other issues affecting our performance this quarter and the first is net interest income. Net interest income expanded slightly to 3.86% as compared to the linked quarter, through higher loan spreads and reduced funding costs. Earning asset levels on the other hand declined primarily due to reduced loans in the (inaudible) commercial loans.

Consumers and businesses throughout the country are going through a deleveraging process in response to slower business activity and increased economic risk. We too are deleveraging to some extent, involuntarily from a loan perspective but maybe voluntarily from a securities perspective. The decrease in loans and securities, along with the funds received in the TARP program, provided a significant opportunity to pay down borrowings and reduce the need to aggressively solicit deposits. We believe that a high liquidity and a high capital position is not only the place to ride out the recession, but it also positions us well for when the economy does begin an upturn.

During the second quarter we also took a $1.3 million other than temporary impairment charge in our equity portfolio. This portfolio primarily consists of local bank stocks where we may have a future merger interest. And as we all well know, bank stocks have not been a particularly strong performer recently. Our current exposure in this portfolio is $12.5 million market value, and that includes $2.7 million of unrealized losses that may represent potential future impairment risk, again, depending how bank stocks perform going forward.

In the fee revenue area, of course the bright spot is mortgage banking revenues which totaled $1.8 million for the first six months of this year. Our other fee areas such as insurance and wealth management are showing slightly negative growth. As Todd mentioned, this is a tough market for both of these areas. Year-over-year improvements in deposit fees are positively affected by higher customer base resulting from the Irwin bank acquisition that occurred last year at this time.

Another other than temporary impairment issue relates to our affordable housing, consisting of limited partnerships. Seven of these partnerships had exhausted the tax benefits but still had a remaining book balance of $2.8 million. Typically under EITF 94-1, book balances would be fully amortized upon completion of the tax credit benefits period. These seven projects, however, had fairly unique arrangements where a significant amount of future sales proceeds would benefit S&T. And these values were supported by recent appraisals. However, in our recent experience with commercial real estate resolutions over the past two quarters, we are finding that appraised values are not holding in this market. Therefore, we thought it prudent to reduce the values of these projects by $2 million, and that charge is in other operating expense. Some of the other items worthy of note in this quarter's results would include a $3 million increase to our reserve for unfunded commitments. Nothing specific to this increase other than the deterioration of credit quality metrics which are a significant input into that model. The FDIC Insurance surcharge of $2 million, our legal and consulting costs for troubled loans, and of course our year-over-year comparisons once again impacted by the Irwin acquisition.

The last area that I want to touch on is capital. I mentioned previously despite the governmental restrictions, which again we believe are currently manageable, we believe the recessionary affects to credit quality and the trend toward higher regulatory capital levels continues to validate our participation decision. We recently went through our own S cap type of analysis to determine how quickly we can pay back TARP, utilizing various credit scenarios, and without tapping into the very expensive external capital markets. And also in this analysis we wanted to make sure that we maintained a comfortable, tangible, common equity cushion at the same time. And of course the biggest variable to all that analyses is loan losses and the potential severity of a looming commercial real estate market correction. That is our number one organizational focus at this time.

So again, we believe the high liquidity and high capital position provides us with the most flexibility to effectively respond to economic shifts. Along with that flexibility is patience. That's patience to allow the future economic direction to become more clear. Before we rush into any external capital raise, we want to make sure that we have a good handle on future credit risk, nothing else will have a more significant impact on the timing of our TARP payback. And we also want to make sure that we have fully exhausted all internal sources of capital which would include reducing the dividend, which we've already done some of that, and that results in $18 million of capital savings annually. We are also adjusting our dividend reinvestment in 401(k) plans to issue S&T shares from treasury stock and that should produce another $3 million to $5 million per year. We're considering a discounted direct stock purchase program with of course understanding that these programs thus far have had mixed results.

Looking hard on the denominator side of the equation with the balance sheet, there's another capital retention strategy and keeping our core business growing, which are currently generating $90 million to $100 million of profit before provisioning impact annually.

So with that, I'll go ahead and open up the calls for any questions. Throughout this Webcast, we do open up our e-mail for questions from shareholders and we did have one here, which is certainly a good one. And the question is, "There haven't been perennial assertions that management's interests are identical to those of shareholders. May we expect salary cuts for senior officers commensurate with the dividend cut suffered by shareholders?" And I think that's a very fair question, even though the wording makes it a little difficult to respond to. Interests that are identical and commensurate with the dividend cut are fairly precise terminology. But let me just say that all of our previous statements concerning executive compensation have been described as being aligned, management's interest with those of the shareholders. We're certainly an organization that philosophically pays for performance with a substantial amount of all employee compensation tied to earnings and stock valuations. As such, at the end of last year when the results weren't very robust, we had a substantial reduction in those incentive payouts and for this year we have discontinued them completely. And some of these can be fairly significant and represents as high as 50% to 60% of total compensation.

Also, as substantial shareholders in the S&T organization, I can assure you that all employees or officers share in the economic financial pain, poor stock performance and reduced dividends and that is as it should be. And hopefully that responds to that question.

We did have one other question that came in as well. The question was, "what was the purpose of the $30 million loan and what was the money used for?" And I addressed these in my opening comments. In case you missed it but the proceeds were to support the working capital requirements for an energy company related to the natural gas industry and their production needs.

Now we'd be happy to open it up for questions.

Thank you. We'll now be conducting a question-and-answer session. (Operator Instructions). Our first question comes from Gerard Cassidy from RBC Capital Markets.

Thank you. Good afternoon. Your comments about the Shared National Credit exam or the Shared National Credit Portfolio, I should say, do those reflect the exam that was just completed in June or does it not?

I don't have the results from June but I can tell you that we rate our own credits and I don't think we've ever had any discrepancies between the SNC results and our own rating.

The other point I would like to make to that, Gerard, is these are companies that are in our backyard so we know the management and we know the folks involved and just a little bit bigger than what we wanted to handle on our own. So we just bought small pieces.

Okay. The reason I ask is JPMorgan Chase in their results, as with Banc of America, both indicated that the SNC exam results were in their numbers and because they're the agent they know what's going on more so than the participants. And in JPMorgan Chase's case the corporate loan net charge-offs skyrocketed directly due to the Shared National Credit exam. So we're anticipating a lot of people are going to have this problem in the third quarter for participants. But going back to your oil and gas loan, what was the collateral? Was there any collateral? Was it unsecured working line of credit that you mentioned or was there collateral behind that line of credit?

There was collateral. It was leasehold interest in the wells. We had personal residences. We had other working assets of the Company. But the issue is it just came down, it was going to be very expensive to maintain these wells on an annual basis and we didn't want to -- the other thing we didn't want to do was assume any liability by trying to liquidate the collateral.

On the leasehold interest, they were obviously owned by the Company which pledges them as collateral?

Technically they were assignments of partnership interests, but yes.

Okay. And the assignment, the Company owned those partnership interests, I gather?

That is correct.

Okay. And then finally, just two quick questions on your real estate. Where's the project located in New York? I think you said the last time it was somewhere on Long Island, that's out of market. And where was the project located in Connecticut?

I don't know if we want to identify the actual location or the MSA. I think we have some difficulty with that, getting too specific.

I think the concern is, Gerard, is if we get too specific, these are still in workout mode and we wouldn't want to draw any attention to a specific project that might hurt its value as we try to go through those workouts.

Okay. Thank you very much.

Thank you. Our next question is coming from Mike Shafir from Sterne Agee and Leach. Please pose your question.

Good afternoon, guys. I was wondering, maybe you could just give me that breakdown again on out-of-market exposure percentage-wise from New York, Ohio, Florida and Arizona.

Sure, this is Tony. I would be happy to. It's $352 million in the out-of-state portfolio. And from a geographic perspective, then out of that $352 million, 29% of that is in New York, 21% is in Ohio, 7% is in Florida, and 5% is in Arizona.

Okay. So that's pretty similar to the very detailed table you guys provided last quarter.

Other than the table that you probably see in the slides, I'm not sure what we may have presented. Usually we present the segmentation for the total commercial real estate portfolio and I'm talking specifically about the out-of-state portfolio.

Okay. And then as we think about potential expensing going forward, I know you said that you guys have run through your own stress case scenarios. And I was wondering would you be willing to share was kind of assumptions you guys are looking at when running through that stress case scenario.

First the high end, you would want to use the same guidelines that were used by the S Cap which we've done, that would be a worst case scenario.

In terms of the adverse case?

Sure, that 8% to 9% loss period end. We took a five year look perspective at it since that would be the time frame that you would certainly want to repay your TARP monies. And we ran four or five different scenarios and the loan loss reserve that we have, we think is more than adequate at this point in time. We're now 24 months into a recession. If this recession goes on another 12 or 18 months there's going to be continued stress in every segment of the portfolio.

As we're looking through potential loss content, then ourselves, and try to make assumptions on our provisioning items, would you consider this quarter to be a very aggressive way of treating the stuff that's gone awry, especially the $26 million?

Yes.

So then it would be safe to assume that that's going to come in quite a bit over the next couple of quarters?

I don't think we can make any assumptions at this point, Mike. That's all driven by the economy at this point. I can tell you that we were very aggressive in classifications and charge-offs and the loan loss reserve and I think anything short of that in this particular environment would be short-sighted. We'll continue to do it until we see a change in the economy.

I would say that we don't have right now a large exposure to one credit. This one particular case at this point in time.

This is Tony. One thing I would add to that, when we talk about provisioning and we talk about our experience, one thing to keep in mind is that we do not have any loans over 90 days that are on accrual status. So we're very aggressive in putting loans into non-accrual status. We are very quick to recognize any differences between current appraisal values and that balance. So we're pretty quick at recognizing charges too.

I think it's also fair to say that the gas and drilling charge-off this quarter, that particular loan relationship is not representative of what else is in the portfolio. There are no other ones like that.

Okay. And then just finally, as we think about the margin moving forward, how much more benefit do you think you can get on the deposit repricing side?

Not a whole lot. I think eventually you'll see deposit pricing begin to get pressured upwards as a lot of banks we see now trying to strive to put some earning assets on the books. And also the drag from delinquent interest is going to be fairly substantial to our net interest margin over the next couple of quarters. So I don't think we see any large movements upward and probably not much downward as well. We're pretty well-balanced for any interest rate scenario at this point.

All right. Thanks a lot. I appreciate your time, guys.

Thank you. Our next question is coming from Damon DelMonte from KBW.

Hi, good afternoon, guys, how are you. Could you just remind us, do you have any other energy related loan exposure?

We do. We certainly don't have, as Bob mentioned, we don't have any that would be the size or the scope of this particular energy credit but I think we have about $80 million in other exposures to that industry.

That would be gas and coal and oil.

Yes. All of that.

Are all those local or are those a part of the out-of-state loans?

They're all in market.

In market. Okay. With respect to the out-of-state loans, I think you referenced that delinquencies are around 7.5%.

Yes.

In that portfolio. Could you identify how the delinquencies shake out in each state?

I don't know if I have that with me but I could certainly follow up with you.

Okay. That would be great. And also, from a concentration risk standpoint, what are your largest exposures?

Certainly commercial real estate would be our largest.

I mean individual loan size.

You mean, you're talking about the aggregate amount of our largest loans?

Yes.

We are looking for the loans over house limit. We have 20 relationships or so that would be over $24 million in total relationship size. That does not mean that there's a single note for that amount. So there's about 20 relationships that would exceed that $24 million, and the largest of that would be --

This is Dave Antolik, Chief Lending Officer. Our largest exposure would be just over $50 million, and it would be to an entity that has 10 or 12 developments and commercial real estate rental properties. The second largest credit would be another apartment developer. And then we have in addition, we have one large credit that's fully secured by marketable securities. But the 20 that Tony mentioned would have various assets that collateralize them.

Okay. And then just the last question, on expenses, Bob, I think you referenced there was a $2 million charge related to a revaluation in your other management expense, is that correct?

Yes.

And if you back that out, that puts you at about $10 million for the quarter which is up from $7.3 million last quarter. Is there anything else in there we should consider removing for modeling sake?

You have the FDIC surcharge, $2 million.

Is that part of the FDIC assessment line which is $3.5 million?

You're looking at specifically the other operating expense. Is that what you're looking at?

Yes. Exactly.

Okay. You would need to back out the $2 million impairment charge on the affordable housing partnerships and also take into consideration that there was a $3 million increase for the reserve for unfunded commitments in that line item. So those would be the biggest pieces.

Perfect. Thank you very much.

Our next question is coming from Rick Weiss from Janney.

Good afternoon. Actually I'm good, Damon got all my questions, so I'm fine. Thanks.

Good to hear from you anyhow.

Our next question is coming from Andy Stapp from B. Riley.

How are you?

Good.

The increase in your compensation expense was large and that's sequentially. Was a large part of that related to your pension? And if so, is this a one-time adjustment?

You're talking about nine quarters, Andy?

Yes

In the first, we have a substantial stock appreciation rights program for employees that is tied to the stock price. As the stock price goes up, the expense goes up and as the stock price goes down. And the adjustment that was made in the first quarter this year was much more substantial downward than the downward adjustment in the second quarter. That was the primary driver of that. Also have a little bit of noise with the valuation in the deferred compensation plans with those valuations, they get classified between other income and staff expense. The only thing really unusual in staff expense, we might have seen a little bit of increase in our medical plan. We had a couple of soft cases to our self-funded medical plan.

Okay. And do you have your dollar amount of 30 to 89 delinquencies at quarter end?

Yes. Are you looking for dollar amount or percent?

Yes, dollar amount's fine.

Sure. The 30 days was $27.4 million, 60 days, $8.1 million, 90 days, $71.4 million, for a total of $107 million.

Okay. Great. All my other questions have been asked.

Have a good day, Andy.

You too.

Thank you. Our next question is coming from Collyn Gilbert from Stifel Nicolaus.

Thanks, good afternoon, guys. Just a quick follow-up to what Andy just asked. What was the 30 to 89 day bucket in the first quarter? Do you have that number?

Again, in dollar or in percent?

In dollar.

Okay. It would be the $27.4 million.

No, no, in the first quarter.

Oh, in the first quarter?

Yes.

Yes. 30 days was $13.7 million, 60 days was $25 million, and 90 days was $15.9 million for a total of $54.7 million. I'm sorry. You know what? That was last year. I don't think I've got last quarter with me.

Okay. I can follow up with you on that. Do you look at or do you know what the LTV is on average for your non-performing assets or some of the larger components of the non-performing assets right now?

Actually, if you factor in the specific reserves, they would be in line because typically what we'll do when it goes into a non-performing loan status is we will order an updated appraisal if we don't take the charge immediately, we will establish a reserve.

Are you talking about currently, Collyn, or are you talking about originally?

Current.

Currently, I think we're mark-to-market.

Typically we'll take a margin of 75% of whatever the current appraisals are and that would be your provision, the difference between that and your outstanding balance.

Okay. So that when you went through that $15 million of the specific reserves, so the $2 million you set aside for the condo project in New York, the $1.8 million, the $1.2 million, that's to get those projects to fair value as it stands today?

Yes, correct.

Did you want to add to that, Bob.

This is Bob. Just back to your question. Overall delinquency at the end of the first quarter was 366 and it's down to 309, I don't have the dollar numbers.

She was looking for the 30, 60, 90 days which I don't happen to have but I'd be happy to provide that.

Okay. That's fine. And in general, did you guys give what the LTVs are at origination of your CRE portfolio? Both your in market portfolio and then your out-of-state portfolio?

Typically the out-of-state would be about 75% and in-market would be 75% to 80%.

And that was at origination?

Yes.

And do you know what the origination, the buckets are of these loans when they were originated and when they're set to reprice or reappraise?

No, I don't think we really looked at it in that light.

Okay. Okay. And then Bob, can you just quickly run you through again what you were saying on the capital front in terms of opportunities to raise capital. Did you mention you would do it through the DRIP program?

I said we would -- we have already implemented issuing shares from Treasury for our DRIP program and also any activity in our 401(k)s and we think that should add $3 million to $5 million of capital annually, common equity. This reduction in dividend's going to save $18 million a year. So those two pieces alone gives you enough capital to repay.

Is what you're doing on the DRIP side, are you familiar at all with what Nat Penn did?

Yes, that would be the direct purchase.

Same type of program?

We're considering that but as I said in my comments, there have been mixed results with those programs.

So you're DRIP isn't -- because they defined it as a DRIP but it really wasn't a DRIP. You recognize a difference. You're still contemplating a direct purchase plan.

We'rel thinking about it, it's one of the things we're evaluating. We haven't done it to this point. We just think it provides a much more reasonable alternative than some of the pricing we're seeing on direct issuance common in the market today. Discounts are very risky.

Okay. And then just a question on the SNC portfolio, you had said $25 million and you said about $3.5 million are classified but still performing. What is it about those credits that are making you classify them?

Like many other companies, they're facing some industry hurdles. I couldn't speak to it specifically because I don't have it in front of me, but typically if earnings are off, we would look to classify it. I'm sure it's an industry issue.

Okay. Okay. And just wanted to get clarity. I think Mike had asked the provision question. So maybe I'll just ask it again. Any guidance as to what we can assume on the provision in terms of loss migration of MPAs into net charge-offs. You would assume reading into your comments, the economy's not getting any better, we would assume probably given that fact that net charge-offs could potentially continue to rise, which therefore would indicate a rise in the provision. Is that a logical way to look at this?

I think it's our conservative way of positioning ourselves for the worst, Collyn. But also, you need to take into effect that the gas drilling and exploration I think was a one-off, I think.

You strip out that, and you just look at the rest of the portfolio, yes, we're definitely seeing stress in every segment. And we still don't know how this whole commercial real estate correction is going to fall out. So those are the variables right now. We're just going to make sure that we're prepared for whatever comes down the pike.

Okay. Okay. Just one last question. I know you didn't want to comment on the specific MSAs of New York or Connecticut project but can you just say whether it was upstate New York versus more the southern part of New York? And the only reason I'm asking that is because obviously the values for properties are very different in upstate New York versus southern New York.

It's right in the middle. No, I'm just kidding.

I didn't know there was such a thing.

We did say Long Island.

I don't recall saying that. If that's been said -- I'll just confirm that.

I think you did reference that last quarter. Okay. That's helpful. That's all I had. Thank you.

We have a difference in the $100-some million dollars that we have in New York. We don't have a number on how much is upstate versus -- I know eight of the ten largest exposures we have in New York are central or Western New York.

Okay. Okay. That's helpful. Thank you.

I do have the delinquency information from Q1.

Great. Okay.

So I'll rattle that off. The 30 days was $25.2 million, 60 days was $11.5 million, 90 days was $92 million, for a total of $128.7 million or 3.66%.

Okay. That's helpful. Thank you very much.

Thank you. We do have a follow-up question coming from Mike Shafir.

I was just wondering, if you could just go through the one time items and the non-interest expense, the other non-interest expense, just one more time for modeling purpose. Out of that $11.7 million, what would you consider non-recurring?

$2 million in the FDIC. That's a separate line item. And you would hope that's non-recurring but you just don't know these days either. $2 million charged on the affordable housing projects would definitely be a non-recurring. And the $3 million increase to our reserve for unfunded commitments, I don't know if you could argue that's non-recurring because that could recur too depending what happens with credit quality. We put $3 million in this quarter and I think the balance previous to that was $1 million. So there's a fairly highly unusual amount and again reflective of our conservative approach on that valuation as well as the loan loss reserve this quarter.

Okay. Thanks a lot, guys. Appreciate it.

Thank you. At this time, we have no further questions.

Operator, operator?

Yes.

We did have one other question that came through via the Internet and I would just like to address that. The question is did we participate in the capital Purchase Program from the Treasury, and as we disclosed in our first quarter press release, and again today, we did issue $109 million of preferred shares to the United States Treasury. And if there are no further questions, I would just like to thank everybody for participating in today's conference call and I know Bob and Tony and I appreciate the opportunity to discuss this quarter's results and we look forward to hearing from you at our next conference call.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.