S&T Bancorp Inc (STBA) 2010 Q2 法說會逐字稿

Greetings and welcome to S&T Bancorp Inc. second-quarter 2010 earnings conference call and webcast. 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, Mark Kochvar, CFO for S&T Bancorp. Thank you. And Mr. Kochvar, you may begin.

Okay. Thank you. Good afternoon and thank you for participating in today's conference call.

Before beginning the presentation, I want to take time to refer you to our statement about forward-looking statements and risk factors, which is on the screen in front of you. This statement provides the cautionary language required by the Securities and Exchange Commission for forward-looking statements that may be included in this presentation.

A copy of the second quarter earnings release can be obtained by clicking on the press release link on your screen or by visiting our investor relations website at stbancorp.com. I would now like to introduce Todd Brice, S&T's President and CEO who will provide an overview of S&T's results for the second quarter.

Thank you, Mark, and good afternoon, everybody. As you've seen in our press release, we earned $7.9 million or $0.28 per share for the second quarter. I would say all and all we're pleased with the results this quarter as we continue to make improvements in our asset quality numbers. While net charge offs of $18.2 million and provision expense of $9.1 million are higher than the first quarter, we've been able to reduce our nonperforming assets from approximately $100 million at the end of the first quarter to $82 million.

As we did indicate in the call last quarter, we're going to have some lumpiness in our provision number this year. But I think again, we are pleased that we are able to reduce our nonperforming numbers.

And I would like to point out that of the $18.2 million in charges, that we did take, we have previously reserved approximately $13 million in prior periods. In addition to the charges that were incurred, we did receive paydowns on a number of accounts that offset basically new accounts that moved into nonperforming status. Pat Haberfield, our new Chief Credit Officer, is going to elaborate on these accounts in more detail in a few moments.

But I would say that overall, the formation of nonperforming loans appears to be slowing at this point. And again, we're also seeing some positive trends in our delinquency numbers.

From an operating perspective, we continue to experience a nice trend in our net interest margin which increased to number 4.05%. I think the expansion is attributed to disciplined deposit pricing, as well as a 3% increase in demand deposit accounts for the quarter.

On the lending side, loan demand is still somewhat sluggish as both consumer and business customers continue to be reluctant to make capital expenditures. We are hearing from customers. What we're hearing is their confidence is down compared to the end of the first quarter. I think there's just a little bit more uncertainty in the business environment. We have seen a slight increase in our C&I utilization this quarter, so we think that's a positive sign.

I think, really, the one bright spot in our region continues to be the growth in the Energy sector, primarily driven by activities in the Marcellus shale play. We cater primarily to companies who provide ancillary services to the industry, and our customers in that space continue to show nice growth patterns. I think all in all, all of our lines of business -- from lending to depository services, wealth management, insurance -- are seeing a lift in business as a result.

As we've discussed in previous calls, we're in the midst of rolling out a new strategic plan, which is focused on taking more of a market-based approach to deliver all of our products and services to our customers. We think we've made good progress in that regard. Our market teams are in place. We're in the process of putting more structure on our cross-selling efforts. And again, we are seeing a lift in referrals across lines of business. So, we feel initial results are very positive, and we are confident this is going to have a big impact on our long-term performance.

Again, it's more of a three-year look forward, but so we still have some work to do to pull together the appropriate measurement systems. We expect to have a more robust system in place to help us manage this process by the end of the fourth quarter.

Before I turn the call over, I would like to mention that we put the final pieces in place with respect to our new management team members. As I previously mentioned, Pat Haberfield is our new Chief Credit Officer.

Pat most recently spent most recently spent several years at Synovus, and prior to that, he spent the majority of his career out in Ohio at First Merit. Also, Malcolm Polley, who has been with our organization for approximately 10 years as our Chief Investment Officer has been promoted to head up our Wealth Management efforts.

So I am pleased to have Pat and Mel assume their new responsibilities on our senior management team and I'm confident that you're going to be enjoying getting to know them a little bit better in the future. And now I would like to turn the call over to Pat Haberfield.

Thank you, Todd, and good afternoon, everyone. Provision expense was $9.1 million for the quarter, resulting in an ending balance in the loan loss reserves of $54 million for 1.59% of total loans as compared to $63 million or 1.85% at March 31, 2010, and $57.9 million and 1.67% at June 30, 2009. Included in the allowance is $8 million of specific reserves as compared to $20.4 million in the first quarter of 2010 and $15 million in the second quarter of 2009.

In addition to various collateral [securing] nonperforming loans, two impaired credits are supported by approximately $6.8 million in the United States Department of Agriculture or USDA guaranties. Nonperforming assets ended the quarter at $82 million or 2.4% of total loans plus ORE, as compared to $99.8 million or 2.94% last quarter and $73.7 million or 2.13% in the second quarter of 2009.

The decrease of $17.8 million includes a resolution of several large relationships that were moved through foreclosure or liquidation by auctioning. Two significant commercial relationships added additions included a $2.2 million multi-family apartment complex in Western Pennsylvania, a $1.4 million hotel in western Pennsylvania also entered PL NPL status. These properties were written down to current market value and specific reserves were established for relationships for $1.4 million and $200,000, respectively. The bank is currently working with the owners of each project in an effort to reach a satisfactory payment plan.

Additionally, a $1.8 million residential mortgage moved to nonperforming status at the end of the second quarter. Based on a current market appraisal, a specific reserve was established for $700,000.

In general, our NPAs have been charged down as appropriate or have reserves or are carried at book value if the collateral is sufficient to retire our outstanding balances, which are supported by appraisals or valuations.

Our reserves to NPL are at 70% as compared to 65% in the trailing quarter.

During the second quarter of 2010, the bank experienced net charge-offs of $18.2 million. Of this amount, approximately $13 million had a specific reserve from previous quarters.

The most significant charge-off loans were contained in four different properties totaling $14.1 million. These are the same credits as outlined in our press release.

Total [credit size] and classified assets decreased 5.4% from last quarter. Our disciplined approach to portfolio management and the identification of potential problems has aided us in being able to be proactive in our management of and early identification of potential problem situations.

We maintain the philosophy to work closely with our customers in an effort to work out of these issues and to maintain performance within our loan portfolio, while maintaining a disciplined approach to portfolio management and a quick resolution of our problem loans.

Delinquency for the second quarter of 2010 showed improvement over the first quarter of 2010 as evidenced by our reduction in the 30 plus day delinquency of approximately 92 basis points. We believe our delinquency has stabilized overall, as we remain diligent in our management or past due loans. Further, we continue to see stabilization in our over 90 day category with plans in place to rectify several problem loan situations.

The out-of-state portfolio totaled $356 million. This represents approximately 10.5% of total loans and 20% of the total CRE portfolio. New York represents 30% and Ohio represents 22% of this portfolio. The remaining portfolio is spread out over 25 states with no one state concentration of more than 6%. 6%.

The segmentation of the out-of-state portfolio is represented by retail strip at 27%, rental properties at 16%, and hotels at 11%. We were also able to reduce our criticized and classified out-of-state relationships and, in addition, our out-of-state nonperforming assets have also been reduced from last quarter, again, showing our commitment to quicker resolution on these credits.

At quarter end, the bank had exposure of $106 million of purchase participation loans. Of this amount, $32 million are subject to shared national credits. $5.5 million of these are adversely criticized. Now, Mark Kochvar will provide more detailed financial information.

Thanks, Pat. Our performance in the second quarter was largely influenced by increased provision offset by some one-time expenses taken in the first quarter. Revenue was up just under $1 million for the quarter, about 2%. A slight decrease in earning assets primarily in securities was more than offset by a 5 basis point increase in our margin rate.

This was driven by CD and borrowing repricings, along with higher net prefunds which reduce borrowings and improve the funding mix. There's also an extra day in the second quarter versus the first.

Core deposits continue to show good growth, particularly in DDA. A lack of sensitivity to rates in this low rate environment, strong sales efforts, and our continued participation in the tag program all play a role. The period end decline in interest-bearing deposits was primarily due to our use of favorably priced CRs one-way buys at the end of the first quarter, which shifted to short federal home loan bank borrowings at the end of the second quarter.

Noninterest income was up slightly in the second quarter versus the first. Consumer-related fees, mainly NSF and debit card, rebounded somewhat from low levels in the first quarter.

Offsetting this increase, we had some timing-related items in insurance, which had annual bonus payments in the first quarter. The favorable variance in other is related to timing differences in merchant and letter of credit fees offset somewhat by a higher mortgage servicing impairment.

Expenses are down due to high one-time items in the first quarter in legal and consulting. One-time expenses also dominated the year ago quarter with FDIC assessments, low income housing losses and provision for underfunded commitments adding ever $7 million to expenses in that quarter.

Overall, both fees and expenses for the quarter represent reasonable run rates. We have accelerated our 2011 annual salary merit increase to start in July of 2010.

Due to our performance in 2009, no increases were awarded at the beginning of this year. Implementing the merit increases now recognizes our employees' hard work and improving conditions at the bank.

We will not have another merit increase at the beginning of 2011. This change will add approximately $350,000 per quarter of expense going forward.

Our capital ratios continue to improve as risk weighted assets remain stable and we're able to increase retained earnings. We're monitoring the situation with a Capital Purchase Program. We continue to -- we intend to be patient to ensure that we are through the crisis and that our regulators are comfortable with our plans, and also that any actions we take are accomplished in a shareholder-friendly manner.

Thank you very much. At this time, I would like to turn it over to the Operator to provide instructions for asking questions.

(Operator Instructions). Mike Shafir. Sterne Agee.

Good afternoon, guys. I was just wondering if I could -- if we could maybe get a little bit more detail on some of the specific charges that you guys outlined in the quarter. It seems like some of those are then related to loans that you guys have given detail on before. I'm just trying to get an idea of what kind of the severity has been in terms of the writedowns you're taking on the loans.

Yes, let me just dig those out, Mike, if you don't mind. The big charge was the $5.3 million at a mixed use property that we had over in western Pennsylvania. The property never really -- failed to stabilize.

We do have a USDA guarantee of about $3.9 million. Did we take -- we took some provision in prior quarters and we took some additional provision this quarter as well.

Was that original balance? That was the loan that went into nonperforming status in the fourth quarter of 2009 at $9.7 million?

Yes, it was in that range. And we took about -- we took an additional charge of like three -- (multiple speakers). Yes, this quarter of additional expense because we had updated appraisals that finally -- we finally got in, Mike, when we put it in into nonperforming and we went ahead and ordered [order] appraisals.

And then the other $4.1 million was on the relationship that tripped into nonperforming last quarter, the $15 million apartment project. And that was the amount that we had previously reserved on that.

And then we had -- the third one is $2.8 million on the warehouse in North Carolina. And that has -- it is under contract, and we do anticipate closing this quarter. It's on track. And we've basically just taken the charge down to the level of what we are going to realize on sales proceeds.

And then the final one is an office building in Western PA. And that was a new addition to the NPAs this quarter.

The North Carolina loan -- that was originally $5.2 million?

That's correct.

And that has a $1.5 million reserve against it now? Or had a specific reserve at one point in time?

Yes. Yes.

Okay.

Yes, we took some additional write-down this quarter.

And then, the loan that went into nonperforming this quarter, the $2.2 million loan on the multi-family property -- what's the specific reserve on that particular loan.

It's 1.4.

Okay.

And the one thing -- two on two of those accounts, on that one and also the hotel that went went in, like, we've had payments on the hotel subsequent to the earnings being released. So we expect to have that current even though we will still have to carry it in nonperforming, but we expect to have that current by the end of the month. And also, we've had some positive movement on the $2.2 million loan, too.

So we're hoping that we're able to minimize our exposure on those couple of accounts.

Okay. Thanks a lot for that detail, guys. And I was just wondering if I could get the 30 day past due -- 30 to 90 day past due balances for the last two quarters?

Yes, I'll let Pat handle that.

Absolutely. At the end of March of 2010, the 30 day number was about [26,799]. As compared to a 30 day number at the end of June of 2010 of [17,112].

So, 26,799 to 17,112.

Yes.

Thanks a lot, guys. I appreciate that detail.

And also, Mike, I think more importantly, the 60 day numbers -- down a little bit, too.

Okay. I'm sorry, that's just a 30 day number -- not the (multiple speakers).

That's just a 30-day. (multiple speakers) The 60-day number was around $12 million. And almost $13 million versus right around $11 million. So we've seen about a $2 million lift in or improvement in our 60 day numbers as well. And then the 90 day is down about $19.5 million. So for the quarter, we're down about $31 million in -- we made about $31 million in improvement and delinquency numbers.

Now of course, $18.2 million of that is recognized through charges. But you know, again, we're seeing good trends against.

Okay. So, a $31 million reduction in 30 to 89 day with $18 million coming from the NCOs.

That's total.

$31 million is total. 30 plus delinquency.

Okay. Great. Thanks a lot for the detail, guys.

Thank you. Our next question comes from Matt Schultheis from Boenning and Scattergood.

Good afternoon. Quick question for you. You mentioned purchased participations. I think you said you had $32 million in [SNICs]. 5.5 was criticized. And what was the total balance on purchase participations?

$106 million.

$106 million. Okay. Can you give us -- I know you said you're looking at TARP, etc., etc. Can you give us some guidelines as to what you would be looking for, for yourselves, before you repaid TARP? What do you think it would take before you just said yes, let's do it.

The first thing I think internally we would want to feel comfortable that our credit situations are is mostly behind this. And also that the economy is on a more stable footing. Exactly when that is, I'm not sure -- whether there's no certain numbers are indicators of. Would be more just a consensus among management and the Board that we've reached that point.

And the second, I guess, I'm still looking for at least some clarity -- a little bit more clarity of how the regulators are going to interpret some of the new regs, and what the impact on that capital ratios that they're going to require -- whether it's going to be the ratios themselves or maybe a different way of looking at the risk weighted asset numbers, and how those are developed.

So, you might have to wait for Basel iii finalization?

Well, I'm thinking we'll -- maybe we'll get some indication before that. I would hope anyway, in how that's going to trickle-down.

Okay. As far as what you are seeing with the energy lending, when you say ancillary services, are you talking about earth movers, road builders? Or are you talking about hotel providers or everything along the way?

Yes, Matt, it's kind of the whole spectrum. Hotels are full. You're seeing conference centers or restaurants or parking lots are full of service trucks. We've had some people open up some quarry, quarry fuel providers are seeing increased demands because of the fuel requirements on the frac jobs.

Electrical contractors are busy. Engineering companies are seeing a list in their service needs. The companies that seed the roads when they're done, they've doubled or tripled their volumes and water haul.

So really it's just a whole across-the-board that we're seeing a pretty positive impact. The auto dealers, they are selling trucks, pickup trucks for all the increased service levels.

I think the other area that's really having an impact on is in your commercial real estate. If you look at the region, the office vacancy rate is about -- right around 12%, which is I think well below kind of national averages. And a lot of it, in different parts of the area, is attributed to new companies moving into the area and sucking up a lot of office space. And also on the industrial side, you're seeing users come in and needing to build yards or places for the equipment and everything.

So it really -- I think it's having a pretty positive impact on the overall in the region.

What do you think your -- can you quantify what you think your potential is there over the next couple of years?

Right now, we think are well positioned with the lending staff that we have in place. The folks on our insurance side are certainly have a pretty good pipeline of energy business. And on our well side, we're seeing some opportunities created there as well.

So we think it's going to continue to provide a lift to the organization. But as far as quantifying it, we don't have a handle on that yet.

Okay. So in your opinion, this Marcellus shale play has been talked about and it seems to be accelerating in the development of that area here recently -- I would say in the last nine months or so. So, would you -- it sounds like you feel confident that you are fairly early stage in the exploitation of the natural resource there.

Just, if you look at it, a lot of the activity right now is south down in Washington County. Or north up around Clearfield or even ever east up around [Williamsford]. It's kind of moving this way. But we still need to put some infrastructure in place from -- particularly a pipeline so they can kind of handle some of it, but the grounds are leased up and they are going to -- it will eventually hit here.

We are seeing -- like I said, were probably on the front end of it right now. But it's going to continue to migrate right into the heart of our markets.

Okay. I think that's it for me. Think you.

Andy Stapp. B. Riley & Co.

Could you talk about the opportunities for further net energy margin expansion?

I think we have -- modest opportunities, but not a whole lot more. Our CDs are very -- we don't have a whole lot of CDs left that have half higher rates to reprice. We do have a little bit left this year. But then we jump to next year before anything with higher rates, anything above 2.5 or 3% come off.

Our core deposit products are priced pretty aggressively now. So I don't anticipate that there's a whole lot of improvement that is going to come there.

And we had some borrowings that matured -- longer-term borrowings that were higher rate that matured in the first part of this year. Those are pretty much done. We have just one more that matured in July, as a $10 million piece at a 3.5% rate. But other than that we don't have a whole lot left.

So I think it -- at the most, it'd be pretty modest, may be in the range of five or so basis points more, but not a whole lot more than that.

Okay. And, your salary and benefits number came in lower than I expected. Just wondering, is that a good run rate with the merit increase that you mentioned on top of that?

You might see that particular line item a little bit higher. The reason it was down is, we have this -- we call it the [Rabbi Trust] where we have to mark that to market in the salary line. That was lowered just because the net goes with the performance in the stock market pretty much.

So that was down about $450,000. And also, we have a little bit better activity on the lending side. And that generated some deferred origination offsets or deferrals. So those two combined were about almost $700,000.

Okay. And, what was the merit increase? When was that implemented?

It will be effective July 1.

And, could you talk about the progress you're making in getting customers to opt in and accept overdraft charges on debit card transactions?

Sure. Ed Hauck's here, kind of manages the operations side of the house for us. So I'm going to let him address up for you, Andy.

What we did, Andy, is was we had segmented our customer base and took kind of heavy uses of that feature and that's been our target. That's about 17,000 customers. We're at a 37% opt in rate.

And the other thing we expect to happen come August 15, we think there will be a heavy move from customers opting in who hadn't. So we're fairly placed in terms of our opt in rate at this point.

I would say right now, with what we've -- the success we've had getting people to opt back in, right now we've cut that number to --. Our potential exposure, we feel, is about $2.2 million on an annual basis.

That's total exposure?

Yes.

Assuming no offense.

Assuming no more opt ins, right.

Yes. Okay. And your reserve coverage of loans came down quite a bit during the quarter. Do you get the sense that the reserve coverage may have peaked and you will release more reserves in future quarters?

It's hard to tell right now. I mean, our -- the drop in the reserve is mainly related to the drop in the specific reserve. Our general reserve was actually about $3 million higher.

Okay. All right. Thank you.

Rick Weiss. Janney Montgomery Scott.

I was wondering, just a broader picture, how you would describe the economy in western Pennsylvania. Has there been any change at all since the first quarter?

No, I don't think so. You know, kind of the sentiment that we are hearing though is people are not quite as positive at the end of this quarter as they were at the end of the first quarter. I think there was some momentum, but at the end of the first quarter and you had some people out building inventory, which was, you know, positive for our manufacturers and everything. But I think things have kind of settled in a little bit, and again, people are just kind of -- there's a lot of uncertainty out there right now on rules and regulations and tax rates and how those are often going to impact their businesses as well.

What are your lending officers telling you? About the customers? Are they saying people do not want to borrow at any price? Or are rates just too competitive? Because I see again, it's -- really, loans were pretty flat.

Yes, it's still -- demand is still very challenging, Rick, and again, at the end of the first quarter, we were seeing some left in our pipeline. And then, at the end of this quarter, that's back down or was back down.

And again, it's just -- I think it's just some uncertainty out there. And it's not that I don't think they were missing opportunities, but just that they're not a lot of opportunities out there right now. And we're seeing it both on the consumer and on the business side.

So that's pretty much what you would expect to see from your competitors too, Todd, just not much loan growth?

I think so.

Okay.

Now, there is -- and the business that's out there, the other comment that I will make to that, Rick, is I think everyone's kind of trying to diversify their portfolios somewhat. So on any C&I loans that are in the market, it's pretty competitive from a pricing standpoint.

Got it. And would you expect more M&A activity to pick up as a result of pressure to grow revenue?

I think it's going to be a combination of growing revenue, as well as just keeping up with the cost to comply with some of the new regs that ultimately get implemented.

Okay. Thank you very much.

Collyn Gilbert. Stifel Nicolaus.

Just to follow up to Rick's question, just I guess in a little bit more detail. And I hear what you're saying, Todd, in the environment.

That being said, you did see some good C&I growth in the quarter. And that this was going to ask, kind of maybe a little bit more detail as to the types of loans. Maybe how they've been structured or the pricing, and where are they coming from? Maybe just a little bit more color on the specifics of (multiple speakers).

I would say some of the growth is just internal. It's -- it was some increased line utilization from just across the board. But, we're seeing a little bit of -- and Dave Antolik is here too, so he can shed some color. But we've seen some manufacturers out in the marketplace with some new opportunities.

And again, there's been some customers that we've -- have in the energy industry that have needed to expand some of their lending needs and terms that in some of those things to make capital expenditures.

Okay. How about the pricing? I know you said it's competitive. Can you just kind of give an example of what types of pricing you are seeing on a decent credit?

Yes, we're getting 300 basis point spreads on good credits. Although recently, First Niagara, who obviously made a large investment in the Pittsburgh region, has been staffing up and going aggressively after some of our customers.

So we've in certain cases had to, in order to defend those customers, have moved some rates. To counter that, we've added to our lending staff. We added two gentlemen and we have one other lender who were going to add to staff here in the third quarter. So we still continue to see opportunity.

And as Todd mentioned, the C&I utilization quarter over quarter was up about 5.5% with regard to outstandings under our line commitments. So we are seeing some growth. But most customers who got through the tough period are living with the cuts. And I think those are have cut too close to the bone are struggling and those who had a little bit too much fat realize that now. And they are moving forward without that.

Okay. That's helpful. And then just a question on the specific reserves. Pat, so the big drop this quarter, so you've got $7.8 million left. And then, of the loans that came on this quarter, it was $1.6 million were -- so of that $7.8 million, $1.6 million was accounted for the credits that came on this quarter. Is that right?

That's right.

Okay. How did that $7.8 million compared to say a year ago?

It was about $15 million a year ago. And I think it was $20 million at the end of the quarter.

Okay. So that number is -- I guess my question is --

Have to verify that, but I think that --

It bounces around.

It was $15 million -- yes, at the end of the second quarter 2009, yes.

Okay. Okay. I guess, and maybe this follows up a little bit to Mike asking for some more detail on the credit front. How should we be looking at you all and really ascertaining the improvement in credit? And trying to get our arms around -- I mean, I know, Todd, on the outset, you said the provisions are going to be lumpy.

Is there a way that we can -- is there a range of provision we should think about -- whether it's a percent of average loans or -- I'm just -- I don't know. I'm struggling with trying to project what the credit picture is going to look like for you guys.

I would say last quarter was probably a little bit light. And this quarter was probably a little bit heavy. And we would expect probably somewhere in the middle would be --.

But again, if you get one account that it's a large account, it's going to impact you and I think if you kind of look, we look at it on an annual basis. And we have some targets that we try and hit, and right now I would say we're a little bit below where we thought we were going to be going into the year.

So, that's a positive thing. The other I guess positive note is we were just looking the other day. We've had some good movement in the second quarter on getting some of these things fleshed out. We probably have $8 million to $9 million of scheduled sales and/or paydowns. This quarter it marks at or above where were carrying that. So again, we think that's going to be a positive story to tell.

So hopefully that will help to offset any potential accounts that may roll into nonperforming status. So again, we want to continue to drive -- show progress and drive that number down.

Okay. Do you, for the loans that were disposed of through the asset sales or the auctions this quarter, what were the total sort of lost severities that you saw on those loans? Or the comprehensive writedown?

Yes, I don't have that here in front of me. I don't know if we can get that number. We can get that over to you.

I will say, the accounts that we had in Florida, we took a little bit of additional provision in charge versus what we had previously recorded. And also the account in North Carolina, we took, I think it was an additional $500,000 this quarter over and above what we had previously recorded in prior quarters.

Okay.

So the out-of-state stuff, we're probably a little bit -- we probably had a little bit more negative experience. But the stuff we've have had in market, we've -- we tried to be aggressive, get card appraisals and be conservative on our marks.

And I would say we've been on the in state stuff, we've been pretty consistent with that. And so Florida, that now is -- we don't have any of the nonperforming loans left down there. And then, and hopefully the end of this quarter, we're going to be out of our nonperforming category over in North Carolina, too, when we get the paydown on that warehouse.

Okay. I'll leave it there. Thanks.

Damon DelMonte. From Keefe, Bruyette, & Wood (sic).

Pretty much all my questions have been answered. I just had one modeling question. Could you just help us think about the tax rate for the next quarter or two?

I think for a full year, we're looking around 26.

Okay. Yes. Everything was answered so I am all set. Thank you.

(Operator Instructions). Mike Shafir. Sterne Agee.

I just was wondering if maybe you could give us a little bit more detail on the NSF fees. So as compared to the annual number last year, as the reg started to go in and whatever you were experiencing with the opt in rate, what are you seeing there? And then also, kind of potential for the interchange as well.

The NSF, the debit NSF stream was about $400 million going into the year. So we think we've -- on an annual basis. And I think that -- .

The overall total NSF including checks and point-of-sale is about $8.5 million to $9 million. And we think the point-of-sale part is about $4 million [of that]. So when we were saying before that we estimate of that $4 million at risk might be about half of that, little bit more than half.

So, $2 million on an annual basis?

Right.

Yes.

Yes. Today. And again, we continue to -- we have some calling campaigns and a big push to try and continue to get people to often.

Right. And the real proof will be after the switch is flipped in mid-August, how people respond when they get those first couple declines.

So, just to kind of put this in perspective, in 2009, the service charges and deposit accounts line was right around $13 million. You are saying for that is related to kind of NSF fees.

To point-of-sale NSF fees.

Point-of-sale NSF fees.

But the check part is not impacted by this.

Okay. And then you feel that about $2 million of that currently with your current opt in rate is at risk?

That's right.

Okay. Thanks a lot, guys.

At this time we have no further questions. I would like to turn the call back over to the speakers for any closing comments.

Thank you. We did have a couple of questions that were e-mailed end from one of our investors, so we will try and address those as well. Some of them I think we have touched base on.

But first question was, how do you expect the financial regulation to affect S&T Bank with respect to leverage requirements, regulatory compliance and consumer regulations? What impact will this have on profit and are there smaller banks which S&T could absorb because of the regulatory burden imposed on them?

So, where I think we are right now, is it's very early in the process. I think until the rules are ultimately written, it's going to be kind of difficult to make a determination until we get some further guidance on the direction they're going to go with some of the language.

But to the general theme, we did know that there's going to be pressure on revenues, and also they're going to be increased compliant costs. So, it's certainly going to impact not only us, but I think the industry in general.

That being said, as far as M&A, I think you are going to see some people. And we think smaller banks, it's going to just be the cost of compliance are going to become very high. And we're hoping that we are going to see some M&A activity.

Second question, I noticed the series of promotions and new hires. Are these the result of financial regulation? Why are these necessary and what are they at this anticipated rewards of the increased expenses?

I will say, we've had some turnover on senior management staff for several reasons. But I think the folks we put in in place, we're very, very comfortable with the new management team that we have. And I think overall, that salary expenses at the senior management level are actually down because there's been a couple of positions that we have not replaced to. So, from an expense standpoint, it's really not a big impact to the organization.

And then the third one was the 30, 60, a 90 day delinquencies and how they compare to the second quarter of 2008. We talked a little bit in the call on how those compared to the first-quarter 2010. But I will let Pat address that as well.

Yes, the difference between the delinquency buckets between June 30, 2010 and June 30, 2008, if you look, overall delinquency dollarwise and actually increased about $15 million from June 30, 2008 to June 30, 2010.

A large majority of that of course was stuff that we saw bleed in last year into the over 90 day category. But the good news is is that, overall, the 30 and 60 day delinquency, when you look at the comparative periods, it was actually down about $11 million in that category.

And again, I think you all heard the numbers between the first and second quarter of this year, and those delinquency categories we endowed as well. And I think that speaks volumes to where the portfolio is.

And then, the next question was impact are we seeing from First Niagara? As we said, as Dave said, they are getting a little bit more active on the commercial side, on the lending side.

I think from a regional perspective, it's been pretty neutral. And then, we talked a little bit about economic conditions in western Pennsylvania.

The next question was please provide detail on loans outside of Western Pennsylvania, Ohio, and western New York. I think if you do look in our earnings release, we do have a pretty detailed breakdown by state, by type, and by nonperforming accounts in those regions. So that would be in the back of the press release.

And then, finally, what increase in new accounts has S&T experienced because of the (inaudible) BBQ promotion? So, I would just like to kind of address that and it really, the promotion, [Drone] has been our spokesperson or ambassador for about four years. But it's more just a continued brand awareness campaign.

I would say we have seen some increase in home equity activities as a result, but it's kind of tough to measure because when we started the campaign, rates have declined a little bit since the beginning of it. So you don't know what impact that the rates coming down will have on people people's willingness to refinance. But we are satisfied with the campaign so far.

Operator, were there any other further questions?

We have no further questions at this time.

So again, we just want to thank everybody for participating in today's conference call. And Mark and Pat and the rest of the management team and myself appreciate the opportunity to discuss this quarter's results. And we doing 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.