WesBanco Inc (WSBCP) 2010 Q3 法說會逐字稿

Good morning and welcome to WesBanco's conference call. My name is Jamie and I will be your conference facilitator today. Today's call will cover WesBanco's discussion of results of operations for the quarter ending September 30, 2010. Please be advised that all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period.

This call is also being recorded. If you object to the recording, we ask that you please disconnect at this time.

Forward-looking statements in this presentation relating to WesBanco's plans, strategies, objectives, expectations, intentions, and adequacy of resources are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained herein should be read in conjunction with WesBanco's 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission, including WesBanco's Form 10-Q's as of March 31, 2010 and June 30, 2010, which is available on the SEC's website, www.SEC.gov or at WesBanco's website, www.WesBanco.com.

Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties, including those detailed in WesBanco's 2009 Annual Report on Form 10-K filed with the SEC under the section Risk Factors, in Part 1, Item 1A. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements.

WesBanco does not assume any duty to update any forward-looking statements. WesBanco's third-quarter 2010 earnings release was issued yesterday afternoon and is available at WesBanco.com.

This call will include about 15 minutes of prepared commentary followed by a question-and-answer period, which I will facilitate. An archived webcast of this call will be available at WesBanco.com.

WesBanco's participants in today's call will be Paul Limbert, President and Chief Executive Officer; Jim Gardill, Chairman of the Board; and Bob Young, Executive Vice President and Chief Financial Officer. All will be available for questions following opening statements.

Mr. Limbert, you may begin your conference.

Thank you, Jamie. Good morning, everyone. Thank you for participating in WesBanco's first quarterly earnings conference call. We are pleased to be able to provide this information to all interested parties. I would like to make some opening comments. Bob Young will provide financial highlights of the third quarter, and then Jim Gardill will moderate the question-and-answer period.

A press release was issued last evening, which has more details than the accompanying slides which we are presenting today. A copy of the entire press release is available on our website, which includes those slides.

For those of you who are not familiar with WesBanco, we've included several slides which provide a context for today's discussion. WesBanco was founded in 1870 in Wheeling, West Virginia; has approximately $5.4 billion in assets with 112 banking offices. Our services include wealth management, securities brokerage, insurance, and a proprietary family of mutual funds. Our franchise extends from western Pennsylvania, south to Charleston, West Virginia, and west to Cincinnati, Ohio. In order to maintain our community bank culture, we are divided into seven regions, each with their own market president.

Yesterday, WesBanco reported third-quarter earnings of $9.2 million or $0.34 per share as compared to $2.3 million or $0.09 per share for the third quarter of 2009 when we incurred a one-time charge for repayment of TARP. Our year-to-date reported earnings were $25.3 million or $0.95 per share, which represents a 122% increase over the same period in the prior year. Those earnings were $11.4 million.

We are pleased with the financial performance of WesBanco as compared to the prior year. This is the fourth consecutive quarter of growth in net income on a linked quarter basis. The growth in net income was achieved by improving our net interest income; a reduced loan loss provision; improving revenues from the trust, securities, and insurance business units; and a concerted effort to control costs without affecting either the quality of our operations or our revenue-generating capabilities.

We are also pleased with our capital position. WesBanco's capital at the end of the quarter exceeds well-capitalized levels, and based upon our preliminary computations, we should have no problem complying with the Basel III 2019 guidelines, even without the trust preferred securities on our balance sheet.

Last year, WesBanco was able to acquire $600 million in deposits, repay TARP, and repurchase outstanding stock warrants without issuing additional common stock, which would have diluted our existing shareholders. After those events, as of December 31, 2009, our tangible equity ratio was 5.9%. However, based upon earnings retained and additional investment market gains, tangible equity has grown to 6.3%, a nice improvement since the end of last year. Based upon strong capital levels and the proven ability to increase equity, we believe WesBanco is well-positioned for the current economic climate and future growth.

Credit issues do remain in our market areas. Our quarterly loan loss provision remains at an unacceptably high level. We are continuing to work with our borrowers, assisting them in working through this recession. Our historical community bank philosophy has been to work with and assist borrows to make it through difficult economic times.

We have shared the challenges of this recession with our customers, but believe that when economic times improve, these customers will emerge stronger and drive economic growth in our communities. The impact of this community bank philosophy has resulted in a higher than peer group loan restructurings but lower overall nonperforming assets. We are confident that as the economy grows, our impaired loans will also decline.

I would like Bob Young, our CFO, to discuss with you the financial results of the third quarter. Bob?

Thank you, Paul. Good morning to all of those attending our first earnings conference call.

Third-quarter improvements in net income were primarily the result of an increase in the net interest margin and reductions in non-interest expense, as well as a lower provision for loan losses. Our net interest income improved by some $6 million year-to-date due to higher levels of investment securities, partially as a result of the cash received last year from the $600 million branch deposit acquisition, as well as a reduction in the rates paid on deposits, and significantly lower levels of higher costing borrowings.

The net interest margin improved to 3.61% in the third quarter from 3.35% in the same period last year, and for year-to-date, it was 3.58% versus 3.32% last year. We have successfully managed net interest income through tighter control of loan pricing; repaying our higher cost borrowings as they have matured; and reducing rates paid on deposit accounts while improving the mix towards a higher transaction account base.

Our net interest margin and efficiency ratios have both improved substantially over the past six quarters, as we note in the posted slide deck.

During the second quarter of 2009, all financial institutions experienced a special FDIC assessment, which affected the efficiency ratio of our institution as well as everybody else's. And we incurred certain additional merger-related expenses for the branch acquisition in the first part of last year as well. Subsequent to mid-2009, our efforts to reduce expenses has resulted in an improving efficiency ratio.

Our net interest margin was also impacted by the branch acquisition. As you can imagine, receiving $600 million of cash to invest all at one time might result in a temporary decline to margin, which it did into the second quarter last year. As we have been able to restructure the balance sheet and use those funds to pay down higher costs liabilities or invest in higher returns, our margin has consistently improved.

As further explanation of the improvement in the efficiency ratio, non-interest expense has decreased $6.4 million year-to-date, with the decline in FDIC insurance costs of $2 million making up about one-third of this decline. We have also been able to decrease salary costs through a reduction in staffing levels, as well as pension and other fringe benefit expenses, which have been cut by some $1.8 million.

Full-time equivalent employees have declined by some 57 during the past year. We've also been successfully able to reduce most other discretionary expense categories, as can be seen in the earnings release.

Our earnings for the nine-month period were $25.3 million, or $0.95 per share compared to $11.4 million or $0.43 per share in the comparable time period last year. The trends I previously discussed as applicable to the third quarter were similar for the nine months, with the exception that the loan loss provision was significantly lower for the quarter and was relatively similar to last year for the nine-month period.

WesBanco remains in a strong regulatory capital position with a total risk-based capital ratio of some 12.9% at the end of the quarter. Our tangible equity ratio was 6.34%, an increase of 46 basis points from year-end and up from 6.27% at the end of the second quarter. The increase in shareholders equity and our benchmark capital ratios were the result of improved earnings, higher unrealized security gains, which were accounted for as part of other comprehensive income on an after-tax basis; and the deleveraging of the balance sheet over the past year.

Our overall balance sheet has declined 3.5% since year-end, primarily due to a planned reduction in non-relationship CD's, primarily from the branch acquisition in early 2009; and Federal Home Loan Bank and other borrowings. We have used cash flows from a relatively short duration investment portfolio and reductions in longer-term residential mortgages to fund these maturities.

Also of note during the past year, we were able to repay our TARP preferred stock in September of 2009 from existing liquidity resources, which at the time did reduce shareholders equity by some $75 million. As Paul noted previously, we did not need to raise common equity to repay TARP.

WesBanco's securities portfolio remains a source of strength for the Bank. We have no significant exposure to either trust preferred securities or non-agency mortgage-backed securities. Overall, the portfolio had unrealized pretax net security gains of approximately $32 million pretax at 9/30.

While approximately 31% of the portfolio is in state municipal bonds, we have monitored those credit ratings, and overall, this investment class has seen a rise in value over the past few quarters, as a new global investment scale was first applied to these securities, and as rates have dropped and spreads have increased in the market. Also of note, the average portfolio yield is some 4.02% as of the end of the quarter.

We will report on the portfolio's credit quality and other metrics in our Form 10-Q to be filed later in the week, but approximately 90% of these state municipal bonds are at or above an A rating; only 6% of the portfolio is not rated; and there are no rated bonds that are below investment grade.

Earlier this year, we transferred approximately $427 million in securities from the available for sale portion of the investment portfolios to the held to maturity portfolio. The transfer was completed at that time in order to mitigate the potential effect of interest rate volatility upon total unrealized security gains included in capital.

Finally, there is plenty of liquidity in this portfolio, as over half is currently unpledged and the duration is relatively low at below or right around three years.

We have experienced a slowdown, as Paul noted, in loan originations during the first nine months of the year, as our customer demand has remained relatively weak due to the slow economic recovery, and we have been focused on improving the portfolio's credit quality. We are now starting to see residential mortgage pipelines building, as rates have remained low for an extended period of time. As I stated earlier, cash flows from investment and loan portfolio runoff have been used to further deleverage the balance sheet.

WesBanco's loan portfolio includes approximately 52% in commercial real estate loans. The remaining portions of the portfolio represent a variety of consumer loan products and C&I lending. The total portfolio decreased by 4.4% due to the continued intentional reduction of residential real estate loans through sales of most due loans into the secondary market.

Consumer loans declined due to reduced demand. Commercial real estate loans declined due to repayments, sales, and charge-offs or foreclosures. Home equity loans have slightly increased despite tightened credit underwriting standards, due to marketing strategies and sales incentives.

We do continue to focus on improving the overall profitability of the loan portfolio through disciplined underwriting and pricing practices. We have also taken action to improve the quality of the portfolio by implementing additional review processes and by providing additional education for our loan officers and credit underwriters. More recently, several new commercial lenders have been added, primarily in our Ohio regions, in anticipation of better lending opportunities as we move beyond the recession to a more moderate growth environment.

Loan quality was, again, the big question this quarter for most banks. While we were not an exception to that trend, we did experience a significant reduction in nonaccrual loans, due to a sale in September of approximately $20 million in face value of commercial loans that had carrying values approximating $15 million. As a result, WesBanco's nonaccrual loans decreased by $11.5 million from a June 30, 2010 balance of $65.1 million to $53.6 million as of September 30.

Proceeds from the sale totaled approximately $4 million or about 27% of principle due. Prior specific and general reserves related to the loans sold and included in the loan loss reserve were $5.4 million at the time of the sale.

Lower early-stage delinquencies at quarter-end, combined with the improvement in nonaccrual and other classified loans, despite the higher charge-offs from the loan sale, allowed the provision to be decreased as compared to last year and flat as compared to the second quarter.

Nonperforming loans and loans past due 90 days or more as of 9/30 remained the same at 2.9%, as they were at the end of the second quarter. For the year-to-date, the nonperforming loan increase is attributable to a $20.5 million increase in renegotiated loans, as nonaccrual loans are down from year-end due to the aforementioned loan sale.

Net charge-offs increased $3.7 million in the third quarter compared to last year, and year-to-date, they were $36.8 million as compared to $25.2 million last year, with most of the difference relating to the charge-offs in the loan sale, which totaled $10.5 million. The year-to-date provision, net of charge-offs, increased the allowance to [1.78%] of total loans at 9/30 as compared to 1.76% at 12/31/09, although it is slightly down from the 1.92% as of June 30.

As an overall summary of the quarter, management was pleased with the operating results. Pretax pre-provision income is improved to 1.67% of total average assets. We have had four quarters in a row which have shown increases in net income despite of the effects of a lingering recession.

We will continue to work on improving the quality of the loan portfolio and have instituted changes which we believe over time will reflect in improved credit quality ratios. The institution continues to be very liquid; our loan to deposit ratio is 80%; we have $1.3 billion in investment securities, with most of it unpledged in a low duration; and we have an excess of $1 billion in available borrowing capacity. All of this liquidity positions WesBanco to be able to move beyond the recent recession and be able to participate in the recovery as it occurs.

This does conclude our prepared commentary and we will now open the call for questions. Mr. Gardill, Chairman of the Board, will moderate the Q&A session, and we'll now turn the call back to the facilitator for questions.

(Operator Instructions). [Dave Papar], Janney Montgomery Scott.

Nice quarter. I just had a few questions to broadly cover -- Reg. E appears to have impacted service charges on deposits. Could you maybe talk about what's going on there and what you're seeing for future quarters?

Dave, I'll let Bob speak to the specifics of it, but we have seen some impact from the Reg. E changes. In our press release, we noted a $1.8 million decline in service charges on deposits, and so we have seen some impact on our non-interest income.

Bob, would you like to follow-up with that?

Sure. Relative to Reg. E income, we began noticing changes in customer behavior earlier this year, around the March timeframe, as the media began focusing on the larger banks and the enormous amount of income that was earned from this particular category of service charges.

So I do think some of this is a shift in customer behavior. We have noted throughout the industry higher personal savings rates. I believe Chairman Bernanke actually mentioned that in his speech here a week or so ago. In our case, we've seen higher transaction accounts, higher average balances per customer, and we've noted that relative to our new campaigns for checking accounts as well.

So I think there's a number of factors beyond just the implementation of the new Reg. E overdraft rules in the middle of August. I would say that most of our heaviest users did opt in to the program. And that's similar to the trends that we've seen throughout the rest of the industry.

Are you picking up fees somewhere else to make up for it in the new programs you were just mentioning?

Well, Dave, I think in the income statement, you'll see that trust income was up and also our electronic banking fees were up, so we're continuing to grow.

The other thing I think is that in our situation, though it has an impact, it's not a significant portion of our income. And we have a little bit more diversified income source that helps offset and helps mitigate some of the impact of the Reg. E changes.

Got you.

This is Paul Limbert, just to add one point to this discussion. We are going through and taking a look at all of the product offerings that we have, and we will be trying to determine if there is any adjustments that we can make in any of our existing products to assist us in making up for some of the declines in fee income. So, we are not through that process yet, but we are taking a look and see what else we can do.

And finally, I would note that we do expect that in the fourth quarter, seasonal patterns for customer usage typically are much higher, as people spend more for the holidays.

Got you. Thank you. Just switching to a different area, could you maybe frame the capital management strategy for me a little bit with regard to dividend increase, stock buyback program, maybe M&A strategy, what you're seeing out there? If you could explain that for me, that would be great.

Dave, I'll let Paul speak to this in more detail, but basically, we have been focused on growing our net income, rebuilding capital as we've gone through transactions. As you will recall, we did the branch transaction in '09 without raising capital. We also repurchased the TARP without raising capital. So we've been able to generate capital with our strong earnings and continue to do so.

We did reduce our dividend last year in the third quarter by 50%, which we thought was prudent, given the opportunities in the marketplace. And we've continued to be prudent, we believe, in our payout policies.

We are interested in M&A activity; that's how we have grown the bank historically. I think as the market turns, there may be additional opportunities in the future and we will continue to look for those opportunities when and if they present themselves.

Paul, any further elaboration?

Not really. We are simply trying to accumulate capital so that we can be participants in the economic recovery, Dave. We've not forgotten to get back to some of the basics and do the things that management needs to do to make sure that WesBanco is positioned to move into the future and take advantage of whatever comes our way here.

Got you. Alright, thank you, guys. Again, nice quarter.

Thank you. We appreciate your participation.

Ed Timmons, Sterne, Agee.

I guess on the margin, it looked like there was, on some of the deposit products, a pretty significant reduction in rates, specifically money market and CD's. I'm just wondering how much more room you have there to move rates down to kind of offset some of this loan runoff?

I guess it's probably like the Fed -- they have a limited horizon. We certainly have a limited horizon, but I think the management of our cost structure has been important from both the expense side and the interest rate side. And I'll let Paul speak to the specifics of that policy, but we have moved from the acquisitions that we did last year, the branch acquisitions, eliminated some higher costs, single service deposit customers that were primarily CD customers. So that has given us an opportunity to reduce our cost fairly significantly.

We have some room to move our liability side of the balance sheet down as far as rates are concerned. We are constantly monitoring our competitors. We are in the range that our competitors are in right now, and as our competitors reduce deposit rates, we will be able to do that also.

But we're also looking at other liabilities on our balance sheet. One of the big reasons we've been deleveraging our balance sheet is to get some of the Federal Home Loan Bank borrowings off of our balance sheet and get the costs of those particular types of borrowings down.

And you may note that we also pre-paid a $5 million trust preferred security. The idea there was to help reduce our cost of funds. And we are continuing to look at those kinds of areas and do believe we've got some room to move interest rates down on the liability side of the balance sheet.

I think it's important that we've been able to reduce borrowing costs, particularly that's been by both rate and volume. On average, we have reduced total borrowings by over $300 million over the last year. And the rates have gone on that category average 3.63% September of last year down to 3.08%. Meanwhile, interest-bearing deposits have dropped some 52 basis points over that same timeframe.

Okay. Alright, thanks. That's good info. Switching gears a little bit, on the OREO sales, it looks like this quarter was about half of what it was in second quarter. Can you just give us an idea how the number of sales compare linked quarter and maybe the discounts you're seeing versus last quarter?

We continue to work through the portfolio. I guess most of this is a strategy perspective of -- and I'll let Bob speak to the numbers here in a minute, but -- Ed, the idea I was trying to assess of the bottom of the cycle and maximize the recoveries. So as we have worked through some of the -- primarily, the commercial credit issues, we've tried to identify those credits that have the least probability of recovery, and move them through our recovery process as quickly and as efficiently as possible.

And Bob, do you have some numbers on those?

Yes, relatively speaking, we have about 65 or so properties in REO at this point in time. But at any one time, we have a number of properties that are in past due status of over 90 days. And it does take quite awhile, particularly in the state of Ohio, to get those from past due status into foreclosed status. Of course, there's been some news stories on that recently as well.

So the number hasn't really gone up any, relative to the number of properties. And it's relatively evenly split between our East and West region as to where those properties are located. We did note an increase of about $2 million in REO this quarter over last, and that was one nonaccrual loan that moved in Ohio into foreclosed real estate -- one commercial loan.

Last question, just (multiple speakers) -- go ahead. I'm sorry.

I was just going to say that in West Virginia, we're a nontraditional foreclosure state, and so we can move things through fairly efficiently. In Ohio, we have a judicial foreclosure process, and so they are a little bit more time-consuming to bring to market.

Okay. Last question, just kind of building on the M&A question. It kind of sounded like from your comments, that was more of a longer-term, maybe a year or two out, but I'm wondering, with the stock where it's at today, I mean, would you guys consider doing a capital raise and maybe look to be opportunistic to supplement some of the loan growth or lack of loan growth?

We've been managing our capital efficiently, we believe and we have no plans to raise capital. What we would look at is if we have a transaction that required that, certainly we would then consider it. But at the present time, we think we are both well-capitalized for regulatory purposes, and we have adequate capital for future growth.

Okay. Appreciate the color and you guys having the call. Thanks.

Okay and thanks for your participation.

Carter Bundy, Stifel Nicolaus.

Could you talk a little bit more about on the Reg. E side of things, Bob? Were you seeing your opt-in rates continue to move up going into the end of the quarter? Where perhaps (multiple speakers) you had some customers that didn't opt-in that might be opting in today?

We actually did see an increase in opt-ins towards the end of the quarter. As we went out with another marketing mailing, to those who had not responded, that we had identified in the first users group that were the ones that had had or used the service earlier this year over the first four months.

And that was a subset where we have approximately 135,000 checking account customers that are not business customers and that are eligible. And there was a subset of that that we marketed to originally and we had over 50% opt-ins from that original subset. And we had over 90% opt-in from the heaviest user group of that particular set of customers.

But we did go back and we were successful in garnering some additional opt-ins towards the end of the year. Those who we have gotten to in the opt-in rate has been plus 90%. Obviously, there are a lot of folks that did not respond.

Okay. So what I suspect that a lot of this has been more of a customer behavior issue where we've seen deposit balances up year-over-year just from the savings rate being up?

We do believe that, yes.

Okay. And Paul, did I hear you say that you all are looking at potentially implementing some fees on accounts or some sort of strategy to offset some of that?

I didn't say that.

Okay.

All I said is we are continuing to review the different types of customer deposit accounts that we have. And we are looking at our accounts and trying to determine if we want to make any adjustments to those accounts -- the terms and conditions.

Okay. Moving onto credit, if you could just sort of -- if you provide some color on where you feel today versus a quarter ago and how you think about your reserves, where you are today from a credit perspective.

Yes, Carter, just briefly, obviously, we feel comfortable with our reserve and the provision. What we are looking at and you saw the significant sale of loans that we did in the third quarter here, we would like to think that we have hit the bottom in the recession and that things were coming back. That seems to be evident in what we're seeing in some of our markets.

We have seen some stabilization in our markets. So I think from the perspective of credit quality -- we started a process back in October of last year of really drilling down into our commercial loan portfolio and trying to get a real handle on potential credit risk.

So that process, which continues, has been really about 12 months now of effort to ensure that we understand the risk profile of our loan portfolio in much more depth than we have before, and also to try to get a more current view of that portfolio as we went through the recession.

So I think all of those efforts have paid off to where we feel comfortable with where we are today. We moved a fair amount of nonaccrual loans out of the portfolio because we had the opportunity to do that and we thought the timing was appropriate for that. The marketplace seems to have stabilized, so it was an opportunity to reduce nonaccrual loans fairly significantly. And we're hopeful that we'll be moving in a more positive direction from an economic perspective over the next several quarters.

Okay. And on that front, from a lending perspective, Bob, you had commented that you saw more demand on the one-to-four side. What is your outlook here on loan expectations?

I really think it depends upon the economy as we move forward, Carter. In some markets, we have seen an increase in our commercial pipelines. I would not say that's across the board; although I think throughout 2010, we have been relatively on-plan in our eastern markets, primarily the northern panhandle of West Virginia and north-central West Virginia -- those have been strong markets for us. So they have continued to reflect a fair amount of new loan business.

Ohio, we think with the new lenders that we've added over there that we've got an opportunity. We're already starting to take a look at some loans those individuals are bringing to us. And I think in terms of market recovery, Columbus is probably a little bit ahead of the Cincinnati and Dayton areas. So, the jury is still out on those particular markets.

Our new markets tax credit business in South Central and Southeastern Ohio, the [old] Jackson core markets have also been helpful because we can offer lower rates and other below-market terms, courtesy of the new market tax credit program.

Okay. And a final question and then I'll hop off, I appreciate all the color. On the tax rate in the quarter, Bob -- it dropped down to about an 18% run rate on fully tax equivalent from about 25%. Could you provide some color there and does that return to more of a normal run rate?

Well, I look at it in terms of the total effective tax rate, where you look at it on a tax equivalent basis, Carter, so we did reduce it by about 1% in the quarter. That was as a result of what we saw for the first nine months as actual pretax income combined with our expectations in the fourth quarter.

But in addition to that, there were filed tax return changes -- or filed tax return adjustments as a result of us filing our federal and some of our state tax returns. And in addition, reserves calculated under FIN 48 as a result of the expiration of the statute of limitations from the 2006 year, also resulted in a one-time adjustment to that.

Those amounts totaled just over $300,000. So that's the other element of the impact on the effective tax rate for the quarter.

So in terms of a total nonrecurring sort of adjustment, what would that be?

$300,000.

$300,000 was the total, okay. Well, thank you all very much. Appreciate it.

Stephen Scinicariello, Macquarie.

Thanks for having the call. Just wanted to get a little more color on the loan sale and two things. One, I was wondering if there's more opportunities for you guys to continue down that path? And secondly, just hoping you could characterize the quality of what you sold? Was this the worst stuff that you had and you're clearing the decks or -- any color on those two fronts would be much appreciated. Thanks.

Thanks for the question, Stephen. Let me turn to Bob here for a second to give you some additional detail. But basically, as I mentioned earlier, we started this process in October of last year and we've been working pretty diligently with both our special assets group and our lenders to identify credit issues in advance of credit default, and also to assess the prospects for some of our nonaccrual loans.

So as we worked through that process, we were filtering our nonaccrual loans to identify those that had the potential for workout and those that didn't. Of the ones that we have identified for sale, we felt were the ones that we should get out of the portfolio either because we didn't think they had good long-term prospects for recovery or we felt we had maximized our ability to recover those assets.

So with that background in mind, I'll let Bob give you some of the details on that loan sale.

Yes, I mentioned some of this in my script, but I'll just highlight it again. We had 22 relationships that were sold, primarily commercial real estate -- the actual balance and commercial real estate was $11.6 million; C&I was $3 million. So the total net carrying value was just under $15 million. On loan balances, $20 million. We'd had prior write-downs for the difference between those two numbers or SOPO3-3 adjustments.

As I said in my earlier remarks, it was about a 25% price achievement level -- some were in the 30% category; one was even higher than that, and some were obviously lower. So our total loss was $10.2 million. We had had allocated specific or general reserves related to those loans of $5.4 million, leaving an unreserved additional loss of some $4.8 million.

That's a way to look at the provision. That's the amount that really had to be included in our provision this quarter. What it does indicate in the provision is that other charge-offs were below our expectations, allowing us to maintain the provision at approximately the same level as in the second quarter. Almost all of those loans were on nonaccrual. There was just one relationship, just over $1 million that was classified status or past due as opposed to nonaccrual.

So Stephen, as part of our community bank effort, we continue to work with our borrowers. And we will restructure credits where we think there is good long-term prospects for recovery. And you'll see that manifested in the financial statements for the quarter on the renegotiated classification.

The ones, though, that we feel we have maximized recovery, where we feel that there are no long-term prospects for recovery, we have been fairly aggressive in moving them out of the portfolio. This is one method for doing that, and we believe that the timing was appropriate for those transactions.

Okay. Is it fair to say that there's further opportunities for you guys to pursue additional loan sales from here?

You know, we're going to look at that. I think a lot of it will depend on both the economic cycle and how quickly it recovers, and also our continuing process of not only working with our borrowers but assessing their realistic capabilities and future prospects. So those probably will be the key drivers in those decisions.

This group of loans, we felt looking at the cycle that we were in and assuming we are at the bottom of that cycle, it seemed like an appropriate time to move them out of the portfolio and reduce our nonaccruals.

Great. Thanks very much. Appreciate the color.

(Operator Instructions). And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the conference back over to management for any closing remarks.

First of all, I'd like to thank you, Jamie, and I'd like to thank everybody who participated in the call. We appreciate the opportunity to provide this additional detail on our quarterly earnings.

And we are pleased with the quarter. We think, given the recession and where we are in the world today, these are positive numbers. We're showing positive trends and we think that bodes well for the future. So we're very pleased to present the third-quarter numbers. And thank everyone, again, for your time and participation today. Thank you, Jamie.

This concludes today's conference call. We thank you for attending. You may now disconnect your telephone lines.