Washington Trust Bancorp Inc (WASH) 2009 Q4 法說會逐字稿

Hello and welcome to the fourth quarter 2009 Washington Trust Bancorp Inc. earnings conference call. All participants will be in a listen-only mode for this event. (Operator Instructions).

After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded.

I would now like to call over to Ms. Elizabeth Eckel, Senior Vice President. Please go ahead, ma'am.

Thank you. Good morning and welcome to the quarterly earnings conference call for Washington Trust Bancorp Inc., NASDAQ global select market symbol WASH.

This morning's conference call is being recorded, is being Webcast live and a Webcast replay of this conference call will be available shortly after the conclusion of today's call through the Corporation's Website, washtrust.com, in the Investor Relations section under the subhead Presentation. However, the information we provide this morning is accurate only as of this date and you should not rely on any statements after the conclusion of the call.

Hosting this morning's discussion is John C. Warren, Chairman and Chief Executive Officer, Joseph J. MarcAurele, President and Chief Operating Officer and David D. Devault, Executive Vice President, Chief Financial Officer and Secretary.

And now I am pleased to introduce Washington Trust Chairman and CEO, John Warren.

Thanks, Beth. Good morning and thank you all for joining us here today. Yesterday afternoon, we released our earnings for the fourth quarter and the year end 2009. This morning we will provide an overview of our results and then answer any questions you may have.

2009 was obviously a challenging year, to say the least. The economy began the year in crisis as the world was still dealing with the global recession and international banking crisis and unstable financial markets. We were faced with the worst economic period since the Great Depression and as our regional economy continued to struggle, credit tightened and Rhode Island's un-employment rate climbed to record-high levels.

Amidst all of this turmoil and uncertainty, Washington Trust had another solid performance. For the fourth quarter of 2009, net income totaled $4.7 million or $0.30 per diluted share, up from $4.2 million or $0.27 per diluted share for the fourth quarter of 2008. For the year ended December 31, 2009, net income was $16.1 million or $1.00 per diluted share compared to net income of $22.2 million or $1.50 per diluted share for the year 2008. And our key performance in capital ratios remained healthy..

What were the keys to our success in 2009? It wasn't anything new. We built an organization based upon strong core values, disciplined credit criteria and the basic premise that people matter. Our foundation proved rock solid, which was exactly what depositors and borrowers wanted -- a strong stable financial institution with a solid track record and a vision for the future.

As a result, all of our lines of business performed well. Let me turn now to some of the highlights.

On the commercial side, in 2009 our message was loud and clear. We had money to lend and that message resonated with borrowers as we recorded double-digit growth in commercial lending. Commercial loans were up $104 million or 12% from the prior year. We continued to hire quality talent away from big banks, adding to an already experienced team of lenders, and our team performed, booking some great new quality credits which have also been a good source of new deposits and other services for us.

What's most impressive is that, despite this double-digit growth, we haven't sacrificed credit quality. We have stayed true to our credit culture and remained disciplined with our practices. Our asset quality is indeed very good.

While we're pleased with the growth, we have seen an overall slowdown and believe the pace will be more moderate in 2010. Now let me move onto another success story in the Wealth Management area.

Our Wealth Management area also ended 2009 on a high note, with solid fourth-quarter revenues that contributed to non-interest income. Our team continues to do an exceptional job of attracting new business which contributed to fourth-quarter increases in assets under management. And at year end total assets under management stood at $3.8 billion, up 20% from the year end 2008.

On the retail banking front, we also had a banner year. We had strong growth in both mortgage banking and deposits. The low interest rate environment led many to refinance in 2009 and the result was a record year in residential mortgage production, which led to good gains through mortgage sales.

We also saw an increase in the mortgages originated for first-time homebuyers, who took advantage of the special incentives and tax credits to realize their dream of homeownership. As I mentioned last quarter, we opened a new mortgage lending office in Sharon, Massachusetts in the third quarter and we have been very pleased with their performance to date.

On the deposit side, we had exceptional growth as depositors look to us as a safe refuge for their hard-earned dollars. As a result, end market deposits increased $226 million or 14% during the year. Much of the growth was in low-rate core deposits including checking, savings, and money market accounts. And as with the lending side, we attracted new depositors from the big banks, who not only sought the security of a stable institution but appreciated the customer service focus of a local bank.

As we reported on last quarter's call, we opened our second branch in Warwick in November. And in just a few short months it's already exceeded our expectations.

And at this point, I would now like to ask David Devault to provide more detail on our third-quarter financials. David?

Thank you, John. Good morning, everyone, and thanks for joining us in our call today.

I will be reviewing the fourth-quarter operating results and financial position as described in our press release yesterday afternoon.

Net income for the fourth quarter of 2009 was $4.7 million or $0.30 per diluted share compared to $4.2 million or $0.27 per diluted share reported in the fourth quarter of 2008. The return on average equity in the fourth quarter of '09 was 7.47% compared to 7.31% in the fourth quarter of the prior year.

Net income for the full year 2009 was $16.1 million or $1.00 per diluted share compared to $22.2 million or $1.57 per diluted share for 2008.

Net interest income in the fourth quarter of 2009 increased $220,000 or 1% from the third quarter of 2009 level. It was down by $640,000 or 4% compared to the fourth quarter a year earlier. Net interest income on a year-to-date basis was 1% higher than 2008. And I would note that no dividend was received in 2009 on our holding of Federal Home Loan Bank of Boston capital stock compared to dividend income of $264,000 and $1.3 million, respectively, for the quarter and year ended December 31, 2008.

The net interest margin for the fourth quarter of 2009 was 2.56%, up 5 basis points from the third quarter, primarily due to a 16 basis point decline and the effective rate paid on interest-bearing deposits. The net interest margin on a full-year basis for 2009 was 2.48%, down 16 basis points from 2008. That decrease reflects margin compression in general on core deposit rates as well as the impact of higher levels of non-accrual loans in 2009 compared to 2008, and in addition the elimination of the Federal Home Loan Bank dividend accounted for about 4 basis points in the year-over-year margin decline.

In the fourth quarter the loan lost provision charge to earnings was $2 million, compared to $1.9 million for the fourth quarter a year earlier and $1.8 million in the third quarter of 2009. Credit-related impairment losses of $679,000 were charged to earnings in the fourth quarter of 2009 on a pooled trust preferred investment security gain to be other than temporarily impaired. On an after-tax basis that amounted to $438,000 or $0.03 per diluted share.

Impairment losses of $2.9 million were recognized in the fourth quarter of 2008, which equated to $0.12 per diluted share on an after-tax basis in that period.

There were no net realized gains on sales of securities in the fourth quarter of 2009 while there were $315,000 recognized in the fourth quarter a year earlier. On a year-to-date basis in 2009, net realized gains on sales of securities amounted to $314,000 compared to $2.2 million in 2008.

Turning to Wealth Management revenues, we see that they totaled $6.4 million in the fourth quarter, up 5% over the third quarter and up 3% from the fourth quarter of the previous year. Wealth Management assets under administration stood at $3.8 billion at the end of 2009, up 5% in the fourth quarter and up $623 million, or 20%, from the end of 2008.

The fourth-quarter increase in assets under administration reflects net market value appreciation and income of the $89 million and net client cash inflows of $78 million.

Residential mortgage refinancing and sales activity continued at a strong pace in the fourth quarter. Gains on loan sales and commissions on loans originated for others totaled $1.2 million in the fourth quarter, up $574,000 from the third quarter, and up by $932,000 over the fourth quarter of 2008.

Net unrealized gains on interest rate swap contracts amounted to $204,000 in the fourth quarter and $697,000 for the full-year 2009. In 2008, we had net unrealized losses of $663,000 in the fourth quarter and $542,000 for the full year.

Non-interest expenses amounted to $19.3 million in the fourth quarter of 2009, essentially flat compared to the third quarter, and up $1.2 million per from the same quarter in 2008. Included in that $1.2 million increase from 2008 was $523,000 in higher FDIC deposit insurance premiums reflecting, for the most part, higher assessment rates.

On a year-to-date basis non-interest expenses rose by $5.4 million or 8% over the year 2008. More than half of that increase or $3.4 million was in FDIC deposit insurance costs due to the higher assessment rates, as well as the special assessment of $1.4 million recognized in the second quarter.

The effective tax rate for the fourth quarter of 2009 was 28.7% and that brought the full-year effective rate to 28.3%.

Looking out at the balance sheet, total loans grew $13 million or 1% in the fourth quarter. $8.2 million of that occurred in commercial and commercial real estate loans. While residential mortgage origination activity was strong, much of this was sold into the secondary market and on balance sheet footings were essentially flat.

Consumer loan balances increased by $4 million or 1.2% in the quarter. For the full year, loans rose by $81 million, 4%. This included an increase of $104 million or 12% in commercial and commercial real estate loans.

The investment securities portfolio at the end of 2009 stood at $691 million, down $41 million in the fourth quarter and a decrease of $175 million from the end of 2008. Total deposits amounted to $1.923 billion at the end of 2009, an increase of $29 million in the fourth quarter and $132 million for the year.

Excluding out of market wholesale brokerage certificates of deposit, end market deposits rose by $38 million or 2% in the fourth quarter with growth in NOW and money market accounts. And for the full year, end market deposits grew by a very sound 14% with growth in all categories of deposits.

Let me now turn to asset quality. Nonperforming assets stood at $30.5 million or 1.06% of total assets at the end of 2009, compared to $27.9 million or .97% of total assets at the end of the third quarter. Our definition of nonperforming assets includes non-accrual loans, non-accrual investment securities and property acquired through foreclosures.

Non-accrual loans amounted to $27.5 million at the end of 2009, an increase of $2.3 million in the fourth quarter. Net increase includes net increases of $1.6 million in non-accrual commercial loans. The $725,000 in non-accrual residential mortgages.

Property acquired through foreclosure amounted to $1.9 million at December 31, 2009 -- up from $1.2 million at the end of the third quarter. The balance at December 31 includes two residential properties and one commercial property.

At the end of December 2009, total loans 30 days or more past due amounted to $30.7 million or 1.6% of total loans. That was a net increase of $739,000 in the fourth quarter. That increase in delinquencies in the fourth quarter compares to average quarterly increases of over $4 million in each of the previous three quarters. Commercial loan delinquencies where the majority of it with $21.7 million of delinquent commercial loans, 2.21% of that category at the end of the fourth quarter, and that was down by $422,000 from the end of the third quarter.

In residential mortgage and consumer loans, total delinquencies amounted to $9 million or .96% of those categories at December 31, an increase of $1.2 million during the quarter. This increase is primarily in the category of home equity lines of credit, although the absolute amount of delinquencies remains at very manageable levels.

Net chargeoffs were $1 million in the fourth quarter, compared to $1.4 million in the third quarter to $756,000 in the fourth quarter a year earlier. $960,000 of that $1 million net chargeoff amount was in commercial and commercial real estate categories.

For the year 2009, net chargeoffs amounted to $4.8 million compared to $1.4 million in 2008. The ratio of net chargeoffs to average loans for 2009 was 25 basis points compared to 8 basis points in 2008.

The loan loss provision charge to earnings was $2 million in the fourth quarter of 2009 and that compares to $1.8 million in the third quarter and $1.9 million in the fourth quarter of 2008. The allowance for loan losses stands at $27.4 million, 1.43% of total loans at the end of 2009 up from $23.7 million or 1.29% of total loans at the end of 2008.

Total shareholder's equity amounts to $255 million at the end of 2009. Both the corporation and its subsidiary bank are well capitalized. Our estimated total risk-based capital ratio at the corporate level was 12.4% at the end of 2009.

Finally we declared a quarterly dividend of $0.21 per share in December which was paid on January 14. And at this time I will turn the call back to our President and Chief Operating Officer Joe MarcAurele.

Thanks, David. John and David have provided a great overview of our accomplishments in 2009 and while I joined the team in midseason, I knew that Washington Trust had a solid game plan, and one that really has stood up, stood over the test of time.

Over the last several months I've been very impressed with the quality of the organization, the management, the strategy and the true sense of ownership really at every level of the organization. To tell the truth it's being very refreshing and it's definitely what sets Washington Trust apart from our competition, particularly the larger banks.

They contributed to our double-digit growth in commercial loans of Wealth Management assets under management and really the terrific growth in end market deposits in 2009. We really believe that 2010 will be another challenging year. We are not necessarily in the crisis mode that the country was in a year ago and we do see signs that the economy is stabilizing.

However, given the levels of unemployment in Rhode Island and in the nation, it's going to take some time to turn some things around. We have already started to see a slowdown in commercial loan demand and believe it will continue in 2010.

The deals and the credits are out there but we plan to maintain a disciplined approach. And we will not sacrifice quality to build our balance sheet.

There continues to be a concern over potential devaluation in commercial real estate. And, again, that is something that we will continue to monitor.

On the residential side, there are some signs that property values have stabilized in our area. There's still plenty of inventory so if the economy picks up, perhaps those who are waiting on the sidelines will take advantage of what is out there.

On the deposit side, we've again had great success as David and John have outlined and there still is plenty of market share to be had in Rhode Island, southeastern Connecticut, and Massachusetts. We continue to have a good branch network but there is certainly room to grow within the Rhode Island market.

Looking forward, we believe that Washington Trust is in a position to continue to grow. We are big enough to deliver the same products and services as the larger players while small enough to provide a personalized service of a smaller organization. I believe that this will prove to be a desirable proposition for our customers. Thank you.

Thank you, Joe. As Joe mentioned there are challenges ahead but we believe Washington Trust is well-positioned to take advantage of the opportunities that exist. In my 30 plus years in banking, I've seen a lot of change, but never more than what we have experienced in the last couple of years.

What's more striking is how Washington Trust has survived and succeeded over its 209 years -- close to 210 now. And we will continue to do so. We are excited about the opportunities ahead of us and are looking forward to 2010.

At this time, I'd like to thank all of you for taking the time to join us here this morning and Joe, David, and I will be happy to answer any questions you might have. Thank you.

(Operator Instructions). Laurie Hunsicker from Stifel Nicolaus.

Good morning. Just wondered if we could get a little bit more color on the credit side with respect to commercial real estate? You had given us some good detail on the last call, but do you have a breakdown with respect to nearly $12 million in commercial real estate nonperformers and then how much of your $2 million and REO is commercial real estate? And then, with -- on the troubled debt restructured side not included and nonperformers that $5.5 million CREs, what is that?

I know you had mentioned on the last call that your largest CRE non-performer was the hotel. Just wondered maybe if you could even give us a breakdown of the larger credits that are in there? Any update on that hotel? Any other color would be great. Thanks.

That hotel is still in there. We are working through the legal process of extracting ourselves from that. And we continue to believe that the -- we have taken a chargeoff on that much earlier in 2009 and the value that we have in that is still very realizable.

Another portion of what's in non-accrual commercial real estate is a relationship I think we have described in the past that has multiple properties with a single developer operator. And we've got about -- let's see 5.6 -- $5.3 million related to that borrower in non-accrual commercial loans.

We have looked very closely at values there. We have a cooperative borrower. And again we think that the reserve allocations that we have on that are very adequate.

The question on what is in foreclosed properties for commercial real estate. Really none of that is a loan that -- or a property that started out as a commercial real estate loan. There were two residential properties and one commercial property, but that commercial property was really the collateral for a C&I loan. So we have not had any foreclosures in the CRE category.

And then what about on the $5.5 million side in your accrued and troubled debt restructure? What's in there? Is there anything related to that single developer that you mentioned?

No. No. We are working on getting the detail right here, but let me talk about the theory of what we put in there.

Again it's borrowers that have had what we believe to be temporary issues that have created some difficulty in repayment. We have deemed them to be creditworthy enough to accomplish a restructuring that is in their best interest and our best interest and our experience in doing those restructurings and leaving them in accruing status, A, it's based on our assessment of the adequacy of collateral and the borrower's ability to repay in accordance with the restructured terms. And B, we've had very little fallout of loans that have been restructured and remained nonaccruing.

We've only had really one charge-off of a relatively small amount in 2009 from that category. We've had a $1 million payoff of a loan that was restructured and left on accruing.

So, again, we have tried to be very conservative in the way that we approach that. And some TDRs end up in our classified as non-accrual. They may be non-accrual at the time it happens and we are appropriately conservative with that, I think.

There is, included in that category is a relationship of about $3.5 million where we worked with the borrower to -- for a forbearance. And it went into TDR status. It was never significantly delinquent in the first place and it continues to pay in accordance with the restructured terms. And if that continues we would be able to take it out of that TDR category after sufficient time has elapsed and they've demonstrated their compliance with the repayment terms.

And what type of commercial real estate property is that? The $3.5 million?

It's a variety of properties -- retail and other types of properties -- and it has a variety of cash flow sources.

Okay and then remind me. The hotel nonperformer, what's the --? What's the balance on that?

Our carrying value of that I believe is about $2.3 million, $2.2 million. And we have taken a substantial charge-off in that earlier in the year to get down to that value and we continue to believe that that is realizable.

Okay. And I think you had mentioned in the last call the average LCD origination on your CRE book is around 75%. Is that still a good number or do you have a firmer number than that? Or did I catch that wrong from the last call?

I think that had been our general target over time and exceptions to that would have been relatively infrequent. And that underwriting standard has -- is one of the reasons we've had I believe relatively low losses in that category over time.

Yes. And without question, your losses have been low. Okay. Jumping over the income statement, just two quick questions.

Your other, other in non-interest expense is -- I'm assuming that's a tradable contribution?

Yes. We had about a $300,000 charitable contribution in the fourth quarter. It was similar to an amount that we had recognized maybe a little bit higher in the fourth quarter of 2008.

Was there anything else substantial that was nonrecurring in that line?

No.

And then your tax rate, obviously a little bit lower for the quarter. Should we be using 30% or is there a better number to use?

30% is a fair assumption for 2010.

And then your assets under management. Obviously nice growth, nice client, cash inflows, nice growth again in the fourth quarter. You're up at $3.8 billion.

What is your target for next year? The year out as you look at this?

Our target is obviously to grow that business organically as much as we can. I think there's probably a 7 to 10% growth assumption in our budgeting process for 2010 and, obviously, it's a function of what happens in the financial markets. And meanwhile, we keep plugging away with business development efforts. We have a high-quality business development staff. We added to that staff very nicely during 2009, attracting some very good talent from some other organizations. So we think we are in good shape there.

Nice quarter. Just one last more macro question. I know you said your Warwick branch continues to perform. I wondered if you had the deposits on balance at December 31 and then maybe sort of even from a more macro viewpoint, if you could comment on your thoughts on acquisition and how you are looking at different geographies and I guess what markets you would pay a premium to get into since there don't seem to be or probably will not really be a lot of FDIC-assisted deals in New England.

This is Joe. I think I would comment on that. I think, first of all, the Warwick branch is tracking somewhat ahead of the pro forma that was put together when that was done. I think my overall comments and feelings on growth and actually the deposits in that branch at this point are roughly $10 million. I think it was that at year-end. So that is a pretty good start for that branch. It only opened in November.

I think our feeling right now is that obviously we are always interested in things that make sense from an acquisition perspective, particularly the things that are contiguous. But I think our feeling is that there's still a lot to be had in Rhode Island. You know at some point when it becomes financially appropriate for us to do so, we anticipate continuing on a de novo branching strategy.

I think one of the things and one of the accomplishments over the last several years for the Company is the development of what I would consider to be certainly at least a statewide brand. And I think given the market position and the relative position of some of the larger competition and our ability to continue to attract quality people from other institutions, I think, will prove out to be a good solid strategy over time.

And how many branches, de novo branches roughly do you plan out of this year?

We are not -- we don't have anything on the drawing board currently for this year, for '10. I think we -- again I think '010 is a year to make sure we solidify the plan that we have. We have a brand-new fairly elaborate branch in Warwick that we need to assure ourselves is tracking well although we feel good about it today, but I think that going forward after that, I would see us developing locations and obviously being strategic about where we would put additional branches.

Okay, great, and then, Joe, maybe one last comment if you will, on actually doing premium M&A. Is that on the horizon for you?

I don't think I have any particular comments on that other than we would always be looking at things. I think in today's world, you would have to be cautious about these -- certainly the asset quality of anything that you would look at.

Great. Thank you very much.

Frank Schiraldi from Santoro Mill. Please go ahead.

Good morning. Just a few questions. I wondered on the single developer that you talked about in your non-nonaccrual that totals about $5.3 million, do you have or can you give the reserve that's against that? And I'm just wondering, if there is any increase in that reserve -- specifically against that relationship in this quarter?

The -- we have an 8% reserve allocation which is, what we feel is appropriate for that. It's really formula-driven, more than specific loss allocation. We have looked at the values very closely there to get comfortable with our reserve position on that. And we have a cooperative borrower who is working with us to work through these issues.

Yes, Frank. On this, what you're saying is really the cash flow from the multiple properties. I mean, these properties are occupied and a series of different buildings and that's part of the valuation process that we look at.

Okay. So these are cash flow and so they're still paying, it's just that the cash flows or future cash flows are questionable or something like that? I mean, are they actually still paying on those loans?

They're not all the same. The essential issue here is that this borrower's problems are largely related to other credits and other properties that it has. They are not flaws with our loans, but there are global issues affecting this borrower. And we are working with him to work through these issues.

Okay. I wondered if you could just talk maybe, David, if you could talk a little bit about how the flow works in TDRs as far as like the accrual TDRs? Is there -- how long do you generally have to keep something on there? Is there a certain amount of time you have to keep something on there and have you seen anything come off already or have you taken anything off already and then it's back and just regular you know performance status?

Sure. First of all, let's back up a little bit of history. The phenomenon of having TDRs was they were very infrequent for a long period of time. Obviously, in this economy, that has led to a number of situations where renegotiating terms and working to restructure terms with qualified borrowers has been something that we have deemed is in our best interest and the borrowers' best interest to try to work through whatever problems they have had.

And essentially when that type of restructuring occurs and the definition would be if you are making a concession that you would not normally make in the ordinary course of business to a borrower, then you must call it a troubled debt restructuring. So we have that in on selected case-by-case basis, commercial restructurings.

We also have had a number of residential loan restructurings where we work with borrowers to help them out. And when that happens, we look at the sufficiency of the collateral, if it is a collateral-dependent loan. Or at the borrowers' ability to generate cash flow for future repayment and if we think either or both of those is appropriate or sufficient then we would -- that could lead to a decision to do a troubled debt restructuring.

I believe that essentially after one year or four reported quarters, if the borrower is still performing in accordance with the terms and is not in default or not in compliance with the restructured terms, we would take it out of troubled debt restructuring. Now we have had really very little of that, out in 2009 because the vast majority of what is in troubled debt restructurings or TDR status went in there in 2009.

So we really haven't gotten past the four quarter reported test yet. We will look at that on a quarter-by-quarter basis as 2010 and future quarters unfold. And the other thing I would add and I probably said this earlier in the call is that, again, if there is sufficient collateral and if we believe the borrower has the ability to make the restructured payments -- and it was not already on non-accrual then we would not put it on non-accrual and leave it in accruing status, but report it as a TDR. So there are both nonaccrual TDRs and accruing TDRs for that reason.

Okay and when you give -- you break it out -- TDRs and you break out just nonaccrual loans, the non-accruing TDRs are already in that total of nonaccrual loans?

Absolutely. And the other thing I would point out in nonperforming assets are nonaccrual investment securities, essentially the pool trust preferred securities and that is $1.1 million of carrying value in nonperforming assets at the end of 2009.

So when you mention nonperforming assets, you really need to back that out if you are comparing it to loans.

Right. Okay. And then on finally just for modeling purposes, I'm wondering if you could sort of give us the expenses that you would call us or one-time expenses in the quarter to open up the war at branch? About how much was in the quarter?

There really aren't a lot of one-time expenses associated with that. I mean, there is an increase in ongoing non-interest expenses as it's been staffed and depreciation begins and operating costs of the branch. So there really isn't a lot of nonrecurring type of the expenses associated with that. Really the only significant thing that's -- is not regular, I guess, would be the charitable contribution of $300,000 in the quarter.

And where did that fall again? In which bucket? What line item?

Other.

Other items in expense?

Yes.

Okay. Thank you.

Damon DelMonte from KBW. Please go ahead.

Good morning. Could you guys discuss the outlook for the NIM a little bit and we saw a nice increase this quarter and kind of what your thoughts are going into 2010?

Yes. The margin improved by 5 basis points from the third quarter, primarily due to our ability to successfully lower deposit rates. That process is continuing. I would say our outlook as we begin 2010 is that there should be some margin improvement as we enter into 2010.

Okay, great. And then with regard to mortgage banking activities, how is your outlook for that? You know, you had good growth quarter over quarter and where do you see that business with your outlook on rates and everything?

Sure. The pipeline has been very steady and at a higher level than it was a year ago. It is rate-sensitive. 30-year rates back up much above 5% is some noticeable falloff in origination volume and particularly in the refinancing side.

That said, again, the pipeline is pretty good. We are looking at -- I don't think we are planning on the kind of volume we saw in 2009. We just can't do that. But all signs are pretty good right now.

This afternoon with the verbiage that the Fed puts together will probably include some comment on their -- either decision to stop by March 31 any mortgage purchases or to be open to continuing it later in the year and that could impact some of the spreads in the longer end on the mortgage market.

Great. Thank you. And then with respect to the TDRs you have, how many of those are in nonperforming right now?

We have $10.3 million in TDRs at 12/31/09. $9.7 million of that is accruing. $609,000 is in non-accruing.

Thank you for the clarification. I appreciate that. And I think that pretty much covers all my questions. Everybody else asked a lot of other good questions. Thank you.

We show no further questions at this time. I would like to turn the conference back over to our hosts for any closing remarks.

Once again, we thank all of you for taking the time to join us today and as usual if you have any follow-up questions feel free to give any of us a call, David, Joe, myself, Beth and thank you very much. Have a great year.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.