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First Niagara Financial Group, Inc. (NASDAQ:FNFG)

Q2 2009 Earnings Call

July 17, 2009 10 am ET

Executives

John Koelmel - President and CEO

Mike Harrington - Chief Financial Officer

Kevin O'Bryan - Chief Credit Office

Analysts

Damon DelMonte - KBW

Rick Weiss - Janney Montgomery Scott

John Stewart - Sandler O'Neill Asset Management

Brian Hagler - Kennedy Capital

Collyn Gilbert - Stifel Nicolaus

Tom Alonso - Fox-Pitt Kelton

Operator

Greetings and welcome to the First Niagara Second Quarter 2009 Earnings Call. (Operator Instructions).

It is now my pleasure to introduce your host John Koelmel, President and Chief Executive Officer for First Niagara.

John Koelmel

With me again this morning as always Mike Harrington, our Chief Financial Officer, as well as Kevin O'Bryan who steers the ship from a credit standpoint. We look forward to sharing what we think is continuation of another positive quarter and more good news on our end.

Obviously, this was a very busy quarter for us. Hopefully, as you can see from the results we've posted this morning that we haven't lost our focus or lost our way and we believe are still very much on top of our game.

Results, Mike and Kevin will walk you through in some greater detail. From my perspective, I'm pleased with the top-line growth. It's a combination of both rate and volume. I think the team is doing a very effective job of managing the balance sheet, asset liability tools being effectively utilized, as well as achieving what we think is robust growth on both side, both loans and deposits.

Credit story, as Kevin will recap for you, continues to hold up nicely. Our fee businesses we believe we're making the best or making the most of in spite of a difficult or challenging environment, and as always, are doing our best to stay focused on discipline as to how we manage business and the operations from an expense standpoint. I think we continue to appropriately balance the need for a prudent cost management along with continuing to further reinvest in our business.

So net-net we think we're in a really good place and very much like where we are. 90 days later, start of the quarter, obviously, with the National City branch transaction gets us into Pittsburgh. I'm very pleased to say we are already open for business. So, although the transaction won't close until Labor Day weekend, we're up and running and couldn't be happier with the response and reception we've gotten from all quarters in Pittsburgh and Western Pennsylvania.

Most importantly, I think we've already started to build a really, really solid team, whether those who have joined us directly from the National City organization as a result of the transaction or others who have since signed on to build out the strength of the organization on the ground there, as well as, frankly, to support it back here across upstate New York.

That integration we think is very much on track. We've already have started to build a loan pipeline and book some new and additional good credits. Deposit story is holding up nicely in that market. As we sit here today, our deposit numbers are at least what they were when we announced the transaction back in early April. So, I couldn't be happier about the customer reception, and most importantly, the employee team that's incredibly energized and ready to go once officially we have the starting line come September.

As we have chatted before, very comfortable and very positive about the market response for that transaction and how we were able to leverage that along with our continuing story to raise $380 million in capital 10 days after that announcement in early April. We used to phrase then that we thought it was important and beneficial for us to reload on the fly. The fact that we've been able to raise almost $500 million over a six-month period of time puts us in a position where we can continue to play what we think is some very beneficial offense.

As you're well aware, we utilized a portion of the proceeds of that last capital raise to fully repay the TARP investment. We repaid not only the preferred, but bought back the remaining ones as well, and did so we think as our final poster child moment. I've used that phrase repeatedly over the six months that we were in the program. Frankly, I'm not one who is a member of the Scarlet Letter Club, readily acknowledge the program, got way too political for a while, but do think in concept it was very effective and continues to be so today for those who need it.

We certainly believe we very effectively leverage that investment for the benefit of all, whether it'd be our customers or communities or our shareholders. I think we provided a very nice return to all of us as taxpayers over the six months that we were in the program.

More importantly, all of that enables us to stay very, very focused on our three-prong strategy. One is stretch the core, make more of what we already have, and we think the results that we released this morning provide further evidence of that.

Two, continue to move up market. The customer disruption, dislocation continues on a steady basis and we're certainly we think well positioned to be further beneficiaries of that. Probably most important for us as we sit here today is that we see relationships moving, not just new credit opportunities. So, as you will hear it discussed in a couple minutes, real strong growth on the deposit side as well as the loan side as a function of new customers bringing entire relationships and shaking loose those ever important deposits.

For us to continue to be successful, certainly we need to further reinvest and strengthen our foundation. So while we are stretching the corner, moving up market, we want to make sure that we are even better positioned for the future and are very pleased with the progress we can continue to make internally, most importantly further expanding and upgrading the strength of our branch and our talent pool on both the front as well the back of the house. So, we think all of that positions us nicely and opportunistically to continue to build franchise value for years to come.

The economy, you've heard us talk before. Our view is this is going to continue to bounce along the bottom for a while. There's no questioning. We are continuing to see the softening here, but it's not a doom and gloom environment by any stretch, never went boom, so hasn't gone bust, continues to hold up. Given in particular the context in which we work and the competitive environment, the ramifications of the broader based economy and the larger players with whom we most directly compete that we'll continue to incrementally benefit as the economy bounces along and has a more extended recovery timeline.

That carries over into the M&A world. Part of liking the position we're in is that we think we're well positioned to opportunistically pursue what I remain confident will be additional opportunities to further strengthen and stretch our franchise; confident that over the next couple of years the market will continue to present opportunities. We clearly hold ourselves out there, very direct fashion as a buyer, and one that we think can effectively convert and integrate and do so for the benefit of all and remain certainly poised and ready to move.

So, put all of that together, I'll reiterate from my perspective, we very much like the position we're in and have an organization that's not only focused on the day-to-day opportunities demonstrated by the outcomes that we're reporting today, as well as equally energized with an upside that we see down the road.

So, with all of that, very pleased to let Michael and Kevin walk you through the nitty-gritty.

Mike Harrington

Before I start my review, please note that all balances will be stated in averages unless I indicate otherwise and the percentage growth figures I'll reference will be annualized.

As John just stated, we're very pleased with the quarterly results in what continues to be a challenging operating environment for the financial services industry. Despite these challenges, we've demonstrated our ability to post strong, consistent earnings, all while we continue to fund our growth strategies, including the integration of the pending branch acquisition.

Let me take a few moments to review the key drivers of our second quarter results. On the loan side, we continued our track record of growth, as total commercial balances increased by 8% for the quarter, slightly ahead of last quarter's pace of 7%, with growth driven by higher overall commercial loan originations, which were up by $40 million from last quarter and the lower level of commercial mortgage payoffs.

Business activity by segment was also higher across the board, most notably in our branch-based lending balances, which grew by 17%. Consumer lending was strong with home equity balances increasing 9%, capping successful spring promotion that generated over $68 million in new line commitments.

Overall loan demand remained solid with total originations, including residential loans, of close to $750 million for the quarter. Our pipelines or new business prospects continue to increase, finishing the second quarter 11% better than the previous quarter and over 30% above last year's levels.

Looking ahead, we expect pipelines to continue to be robust, an indication of our strong market position and the ongoing dislocation in the marketplace that John referenced earlier.

Moving to credit quality. Trends remain solid in compared favorable to peers despite the continued weakness in the overall economy. Non-performing loans remain stable at $52 million and charge-offs declined the second straight quarter falling by $1 million.

Further, given the evolution of our portfolio, it's a commercial mix. We added to reserves by providing $9 million for the quarter.

With that, I'll pause and let Kevin O'Bryan, our Chief Credit Officer, give you some color, commentary on the economy and our portfolios credit trends. Kevin?

Kevin O'Bryan

We take great pride in the fact that our overall strong credit quality trends continued through the second quarter. As Mike stated in his comments, charge-offs were down quarter-over-quarter, while delinquencies and non-performers were largely unchanged. Our residential non-performing ratio was roughly half the New York State peer number, and overall non-performers and charge-off ratios are much better than peers.

All of our allowance for loan loss ratios, coverage of total loans, coverage of charge-offs, coverage of non-performers are improved over last quarter. This performance didn't happened by accident. We have a very seasoned C&I team. Commercial real estate has long been a core competency and we've taken great pain to avoid wholesale product exposures and specialties that have plagued others.

As we've said repeatedly, our footprint, while economically challenged, has not been so to the same degree as other regions. Last but certainly not least, we have adhered to several core principles. Chief among them is that our largest loan should be our safest. We believe these practices have resulted in the performance metrics that differentiate us.

We continue to experience risk rating migration due to overall market turmoil impact on the real estate dynamics and on the operating statements of our C&I customers. As we have observed in previous call, the headwinds in our footprint while not as severe as those nationally still present challenges. As recently as today it was announced that unemployment in the Albany area was at a 20-year high. Troubling as that is, the number remains below the national average.

Commercial vacancy ratios across our lending area continue to be at levels that serve to contribute to the sluggishness. We take these signals very seriously. Classified and watch-list loans are the obvious subject of rigorous scrutiny. All troubled loans are appropriately risk-rated, and where necessary, reserved.

Our various portfolio exposures in those industry segments viewed as presenting a greater degree of risk, acquisition and development loans, commercial construction and retail, for example, are periodically reviewed for consistency with our credit tolerances. We have very little speculative exposure.

We are both upbeat and circumstance about our credit performance in these very difficult times. We believe that we know our region, our borrowers and our portfolio characteristics very well and that our performance bares this out. Rather than tightening lending standards, we have tried to be consistent to lend smart and to adhere to the basic principles that got us here. We are confident that this approach will continue to serve us well.

With that, I'll turn things back to Mike.

Mike Harrington

Turning to our deposit growth story, the second quarter proved the point that we're firing in all cylinders, especially when it comes to gathering deposits. For the quarter, our total deposits rose sharply by 16%. This increase is coming from retail, commercial and municipal channels, adding over $340 million to our all important core deposit totals.

Our pricing strategy of letting higher priced CDs run-off while we build up our base of more relationship-based deposit customers has moved our percentage of core deposits to total deposits from 65% to 72% in just one year. Along the way, the strategy has significantly lowered our deposit funding cost.

On the retail front, we added balances in every upstate region this quarter and almost $90 million in total. Commercial municipal relationships grew by over $150 million balances that are $300 million higher than the year ago, and clearly a positive sign that we are viewed as a trusted partner by both businesses and government entities alike.

On the subject of pushing productivity higher, net new checking per FTE, a key metric, rose by over 100% for the quarter. This increase was a function of both new account growth as well as improved account retention, demonstrating our focus on doing a better job of attracting new customers through improved sales management as well as hanging on to what we have by providing top-notch customer service.

Cross-sell, another key measure of customer satisfaction and profitability, also continue to move in the right direction, with total products sold per FTE rising again in the second quarter and now 70% higher than fourth quarter levels.

Now, on to the revenue story. Growing top-line revenue to produce bottom-line results instead of cutting expense is another trend that separates us from many competitors in this environment. Far and away, our largest component of revenue net interest income saw an exceptionally strong 10% increase from the first quarter, a function of our proactive style of managing funding cost and positioning our balance sheet for the branch purchase in September.

As noted earlier, we continue to swap CD funding for lower cost, core balances and fund incremental growth with borrowings as needed. The net result of this activity was a 30 basis point decrease in funding cost during the quarter, a strategy we can't pursue due to our superior liquidity position.

Also, we began pre-buying investment securities in the second quarter in anticipation of the September closing of the Nat City branch deal. As you will recall, this deal will bring $4 billion in deposits and approximately $3 billion in liquidity through our balance sheet on the closing date.

As of the closing, we will replace the borrowings we are using to fund these investment purchases, which are short term, with deposits from the deal, which have a higher cost. The effect of this switch will be a decrease in margin, but with an improved asset and liability profile, that being that the duration of the assets will more closely match the funding of the duration of the liabilities.

Another benefit of our pre-buy strategy is the additional income derived from pre-buying has and will continue to offset the cost of the investments we are making in our infrastructure as we prepare for the Nat City branch's coming on board in September.

All-in-all, we strive to counterbalance the downward pressure on our margin caused by our sizeable securities buying by staying committed to our disciplined pricing model and taking advantage of lower cost wholesale borrowings. In fact, our actions led to an improvement of our net interest margin, up 2 basis points from the prior quarter despite the growth in our securities portfolio.

Looking ahead for the remainder of the year, we expect the margin to decrease with the closing of the branch deal, as I noted earlier, and averaged somewhere in the 320 to 330 range in the fourth quarter. Overtime, we expect the margin to expand as we redeploy the cash flows from the securities portfolio into loans.

On the capital front, Tier 1 and total risk-based ratios reflect the proceeds from our recent stock offering, as well as the previously mentioned earning asset buildup in anticipation of the branch acquisition and a repayment of TARP to the government.

Our tangible common equity ratio as of quarter end is well above our long range target of 5% to 7% and will continue to be so after the closing of the branch deal, positioning us to continue to explore additional strategic opportunities.

With that, I'll turn it back over to John to wrap things up.

John Koelmel

Just before we open it up for questions, I reiterate couple of things I said upfront. Why do we like where we are today. One, we think we are as focused and disciplined as ever. I think our execution continues to improve and the operating results that Mike and Kevin just recapped I think will bear that out.

Two, the quarter well demonstrates our ability to opportunistically take advantage of the circumstance, whether it's the position we've been able to put ourselves in, or whether it's the market environment, we feel very positive and very proud of what we are able to do.

I think it bodes well for opportunities in the months and years ahead that we can continue to opportunistically pursue and take full advantage of, which underscores, again, why we not only feel good about where we are, where we've been, but all the more excited about what the future holds.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Damon DelMonte of KBW. Please state your question.

Damon DelMonte - KBW

With regards to the Nat City branches, how are the loans that you will be acquiring, how are they performing right now? Any change in quality there?

Kevin O'Bryan

There has been some risk rating migrations not inconsistent with our expectations and not really inconsistent with our own. That's the only real observable phenomenon on this. We've also seen some new product come through that is very, very good. So it's nothing unexpected.

John Koelmel

The only thing I guess I'd add to that, Damon, just to confirm what I think you already know is that we're only picking up current stuff at closing. So to the extent there is any onerous deterioration, it doesn't come over. So, we'll have good clean portfolio when we close the deal on Labor Day.

Damon DelMonte - KBW

Mike, with regard to the securities that you guys have been buying, what types of yields are you getting on this?

Mike Harrington

350 range, little bit more than that.

Damon DelMonte - KBW

You're buying just general MBS securities?

Mike Harrington

Yes. Well, CMO is agency-backed structured product, all agency. Maybe 60% of that is actually Ginnie Mae backed.

Damon DelMonte - KBW

As far as your provision, you've built the reserve up a little bit this quarter. Given that you have a very commercial like balance sheet and loan portfolio, what are your thoughts of the provision going forward in your reserve level?

Mike Harrington

Provisions and reserves will be a function of circumstances at that time. We would expect to continue on the pace we're at now, especially if we continue to grow the portfolio at the pace we're growing it. So, it will be a mix of growth and just what the trends are at that point in time.

Damon DelMonte - KBW

So a level like we saw this quarter isn't out of the question in the coming quarter?

Mike Harrington

No.

Operator

Our next question comes from Rick Weiss with Janney Montgomery Scott. Please state your question.

Rick Weiss - Janney Montgomery Scott

John, I was wondering if I could follow-up on your comments regarding M&A Company. A little bit by surprise, is there kind of anything that you are seeing out there that's maybe better opportunities for you or maybe specific areas that you would like to expand a franchise in turn?

John Koelmel

No surprise intended, really just to reaffirm what we have messaging, Rick, that we see the next couple of years as being opportunistic for us. We've been very directive about the regional focus that we have expanding a little further east, whether that's across Pennsylvania into southern portion of New England, whatever the case maybe around the metro market.

We just continue to monitor and evaluate the landscape, just listen to and look at what general speculation is about what the future holds. Our message is, we think there will be a reasonable number of opportunities for us to further plan our flag and stretch the footprint to add more and otherwise to strengthen all the market penetration that we have.

Rick Weiss - Janney Montgomery Scott

Would you say you expected to become more of a buyers market then sellers?

John Koelmel

I think as a buyer I like the position we're in. I don't mean you have to be too coy. I think the realities of this environment will continue to take hold whether that being the macroeconomic pressures that the industry will feel. Obviously, the regulatory perspective, those screws will continue to tighten as well.

And I think you put the combination of that together and institutions will continue to have to make strategic decisions and albeit, probably sooner or under terms and conditions that they haven't had historically had to deal with. So I think that plays to the advantage of the buyers, yes.

Rick Weiss - Janney Montgomery Scott

Then let me just move on to non-interest expense. I guess two things. First would be, is there anything you are hearing or that would lead you maybe to think at the FDIC special assessment could it occur again? And also, would you be able to give us some kind of run rate for non-interest expense again excluding the FDIC?

Mike Harrington

We don't know any more than you do about whether or not there is going to be another special assessment.

John Koelmel

We got the rosary beads out. We're hoping for the best.

Mike Harrington

And our core expenses are what we discussed we took out some of the one-timers related to core expenses. So, if you strip out the FDIC and then the one non-recurring related to the Nat City branch deal, it's about $1.5 plus what we reported.

Operator

Our next question comes from John Stewart with Sandler O'Neill Asset Management. Please state your question.

John Stewart - Sandler O'Neill Asset Management

I guess, Mike, just a couple of quick follow-up questions about the bond purchases in the quarter. Was the total dollar amount of that roughly $2 billion?

Mike Harrington

Yes, a little bit less than that, but...

John Stewart - Sandler O'Neill Asset Management

And how much was in the average balance for the quarter. Looked like it maybe about $800 million. Is that about right?

Mike Harrington

I don't have that off the top of my head, but I thought the number that sounds light to me. I could get back to you on that after the call.

John Stewart - Sandler O'Neill Asset Management

And then the net spread on that for the quarter was probably roughly around like 3.25%, is that okay?

Mike Harrington

Yes, that's correct. We are funding it short-term as I noted earlier, so we're borrowing money at 40 basis points and funding at 350 to 360 percent yield. So, what will happen there is, when we repay the borrowings and bring on the funding cost that will, of course, decrease that margin.

John Stewart - Sandler O'Neill Asset Management

Right. And the cost of the deposits coming over, is that roughly in line with sort of your average?

Mike Harrington

It will probably be a little bit higher initially, but it should be pretty close to our average, just given the purchase accounting adjustments that'll happen at the time of closing.

John Stewart - Sandler O'Neill Asset Management

So, just as we look into the third quarter on the margins, you know just optically there'll be a mathematical compression with the full run rate in the average for this quarter's buying. Do you guys have any thoughts you want to share just on the, sort of, underlying margin for the third quarter?

Mike Harrington

Yes. We only have less than a month there on the third quarter, so we would expect there'll be some compression in the third quarter going from the 363, I would say that's probably in the 350 range, given the one-month at the lower margin.

And on a go-forward basis, the fourth quarter, we expect that to settle in at between 320 and 330. And again, we expect that to be the low point of the margin as we redeploy the cash flow from the investments. We would expect that margin to improve as we redeploy that in the loans.

Operator

Our next question comes from Brian Hagler with Kennedy Capital. Please state your question.

Brian Hagler - Kennedy Capital

I was wondering, if you could just, first of all, update us on what your tangible common equity ratio will be after the branch purchase. I know its 10.5 now, but what will that go too roughly.

Mike Harrington

Its north of 7.5.

Brian Hagler - Kennedy Capital

Okay. And then following up onto the question earlier about the loans at the National City branches, can you just talk about what the deposits trends have looked like in those branches or at least on the deposits, I guess that you hope to keep?

Mike Harrington

Well, the deposit, total have been very stable since we announced the deal. So, there hasn't been a whole lot of change here. It hasn't been a real change in mix. We're seeing the CD book, which was the high cost book, that's beginning to reprice has started to reprice downward. It has a longer maturity, so it will still be a higher price book of business. We'll market, of course, when we bring it over.

So that will reprice over the next couple of years, but we really haven't seen a whole lot of change either on the asset side or the liability side. As Kevin noted earlier, we've had some new credits that are still, relationship managers that are coming with us as part of the divestiture or are still continuing to do business and we are originating new loans in that market. And the other credit quality as holding me as a pretty well on the book of business that we are buying.

Brian Hagler - Kennedy Capital

And then lastly, on your wealth management revenue decline about 17% sequentially. Can you just walk me through that? Is that just a lag in fee collection or that's seasonally weak?

Mike Harrington

I think the primary story that assist the marketplace, the capital markets, a lot of the product that was sold there, it's traditionally sold there and will be sold there in the future. I am sure as I mean it. Mutual funds and those types of products and people, I think opted to put their money in the bank instead of going into the capital markets and we're seeing the effect of that on our fee revenue just on a short-term basis. I think all of us expect that to bounce back once people get comfortable and start to move back into the market.

Operator

Our next question comes from Collyn Gilbert with Stifel Nicolaus. Please state your question.

Collyn Gilbert - Stifel Nicolaus

Just a couple questions. John, in terms of the growth and Mike, obviously if you feel free to comment. But maybe if you could just talk a little bit how you're managing the profitability and pricing of this new growth. Maybe big picture John for you and then maybe more specifically on the pricing side, what you're seeing in some of these commercial loans that are coming through?

John Koelmel

Well, everything we attempt to do is relationship profitability driven. So, we're very sensitive to ensuring that as we take a bigger slice of the pie, move up market that we don't lose that focus and discipline, Collyn. So, that's again where the environment is frankly playing to our advantage, again getting paid to take relative risk or better paid to take relative risk. In general, the competition for quality credits is spottier than it was before.

Again, our focus on markets primarily relative to the bigger guys that are trying to reposition their own balance sheet in their own organizations. So while it be at their service levels or their ability to handle continuing relationships or on growing relationships, they've made some conscious business decisions to either diminish rates to focus on markets like us. So, we're able to pick up quality business. Then from a relationship standpoint is incrementally profitable for us.

Mike Harrington

And just add to the spread question. Spreads are better than I've ever seen. So, our average spread on our new business is north of 3% and like we don't see that abating. There is plenty of demand out there for lending because of what John just described and we've been able to get pricing, that's very good for the credits that we're willing to make, but we're willing to extend credits, but we're in a good position.

Collyn Gilbert - Stifel Nicolaus

Given the competitive environment, do you see that pricing improving? Let's keep interest rates, putting interest rates aside and direction the rates go but just, kind of on the core business and the pricing power that you're seeing with these new credits, do you think it can improve?

Mike Harrington

In my opinion, not in the near term, but its interesting where it is. If I had to say where it's more competitive, it's in the smaller deals. So, the smaller you go in deal size, I'm talking business banking, the smaller $0.5 million to $1.5 million range, it's probably the most competitive in that arena. And as you move up into doing higher credit amounts, actually spreads widened. So where there is a lack of credits actually in the larger credits.

John Koelmel

I think longer term, Collyn, we just have to see how the collect of market settles down, the regulatory and how much capital we are all expected to hold relative to the business we do. That's a wildcard today and it's frankly we're unable to predict where that goes, how you balance that against the types of returns that shareholders will expect. That's an ongoing wrestling match for debate that we will have to work our way through.

So, we're committed to ensuring we're appropriately paid and can generate the appropriate returns and rewards for our shareholders. We need to do that in a regulated environment where those involved are tightening the screws on the industry at large and how we balance all of that, how that settles down, we'll just have to wait and see a tad.

Collyn Gilbert - Stifel Nicolaus

Is there a certain compensation structure, kind of incentive-based competition structure at all for the Nat City employees that are coming over, either on the loan or deposit side?

John Koelmel

We're bringing them into our plans and our programs, so they are incented just as our people are to grow their book, but do so profitably. And they'll be integrated into our plans and programs really from a get-go.

Collyn Gilbert - Stifel Nicolaus

And then just a quick question on the commercial vacancy rate comment that you guys had made. Do you have some specifics in terms of what the commercial vacancy rates are in your market? And then if you drill down even further as to what the rates might be with those credits that are performing or non-performing, if you're seeing a variation there?

Kevin O'Bryan

It's very difficult to generalize. Across the upstate footprint, the vacancy rates vary from individual region to individual region, but they are approaching and sometime some cases surpassing double-digits across a variety of segments and types of property.

But when it gets down to individual troubled loans, there is a variety of circumstances that come to play there, and a vacancy can be one of them, but sometimes its other factors as well. So it's very hard to generalize in the second part of your question.

And there are a lot of borrowers continue to just weather the storm and work through these things, and that's why our statistics hold up.

Operator

[Operator Instructions]. Our next question comes from Tom Alonso with Fox-Pitt Kelton. Please state your question.

Tom Alonso - Fox-Pitt Kelton

Just a real quick one. Given sort of the move back up in rates here, I would assume that the mortgage origination has kind of slowed. Any kind of commentary you could give us on that?

Mike Harrington

Yes, the refinance wave that came through has slowed. The purchase activity actually has been holding up pretty well. But, certainly, we've seen some slowdown in just the application volume, although our pipelines are still pretty strong moving into the third quarter.

Tom Alonso - Fox-Pitt Kelton

And then sort of, just one housekeeping. What was the FDIC's special assessment this quarter pre-tax?

John Koelmel

5.4.

Operator

Thank you, Mr. Koelmel, we have no further request for questions at this time. I'll turn the conference back over to you for any closing remarks.

John Koelmel

Thanks very much, Diego. Thanks everyone as always for the time. I appreciate your continuing interest, and we look forward to giving you an additional update in another three months. Have a great day, great weekend.

Operator

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you all for your participation.

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