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Susquehanna Bancshares, Inc. (NASDAQ:SUSQ)

Q2 2009 Earnings Call

July 23, 2009 11:00 AM ET

Executives

Abram G. Koser - Vice President

William J. Reuter - Chairman & Chief Executive Officer

Drew K. Hostetter - Executive Vice President and Chief Financial Officer

Michael M. Quick - Executive Vice President and Chief Corporate Credit Officer

Analysts

Matthew Clark - KBW

Thomas Alonso - Foxx-Pitt Kelton

Stephen Moss - Janney Montgomery Scott LLC

Mac Hodgson - SunTrust Robinson Humphrey

Robert Lewis - UBS

Operator

Good morning and welcome to the Susquehanna Bancshares Third Quarter 2008 Earnings Conference Call. Today's call is being recorded. And at this time, participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions) Thank you.

And I would now like to turn the call over to Mr. Koser. Mr. Koser, you may begin your conference.

Abram G. Koser

Thank you. Good morning and welcome. I'm Abe Koser, Vice President, Investor Relations at Susquehanna Bancshares. By now, you should've all received a copy of the press release about our second quarter 2009 financial results, which we made available yesterday. If anyone still needs a copy, please call us at 717-625-6311 and we'll fax it to you.

Our financial releases are also posted in the Investor Relations section of our website at www.susquehanna.net. Certain statements made during this conference call maybe considered to be forward-looking statements. In particular, certain statements made on this call may include forward-looking statements relating to our credit quality and projected loan losses, projected cost savings, capital sufficiency, net interest margins and financial goals for 2009. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties. The factors that may affect these statements and our financial performance include but are not limited to continued levels of our loan and lease quality and origination volume, changes in consumer confidence, spending and saving habits, continued relationships with major customers , compliance and applicable laws and regulations, competition from other financial institutions in originating loans and attracting deposits. The ability to hedge certain risks, economically, adverse changes in the economy generally and in particular, adverse changes relating to the risks set forth in our SEC filings, including our most recent Annual Report on Form 10-K and our success in managing the risks involved in the foregoing.

Forward-looking statements speak only as of the date they are made. We do not intend to update publicly any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events, except as required by law.

I will now turn the meeting over to your host, William J. Reuter, Chairman and Chief Executive Officer.

William J. Reuter

Thank you, Abe. I'd like to welcome everyone, who has joined us this morning to learn more about our second quarter results for 2009. Also participating in today's call will be Drew K. Hostetter, Executive Vice President and Chief Financial Officer and Michael M. Quick, Executive Vice President and Chief Corporate Credit Officer.

As we noted in our press release earlier this month, the unprecedented economic environment has had a significant impact on our performance in recent quarters. In the midst of this downturn however, we believe the fundamentals of our core banking operations remain strong. During the first portion of this call, I will review the financial results that we announced yesterday and discuss the economic forces that impacted them.

Following Drew's additional financial review, I will discuss how such Susquehanna is positioned to withstand the current weak economic environment and emerge as a strong player as the economy recovers. For the second quarter of 2009, we reported a net loss applicable to common shareholders of 11.9 million or $0.14 per diluted share compared to net income 29.2 million or $0.34 per diluted share for the second quarter of 2008.

Looking at the first six months of 2009, we had a net loss of $10.1 million or $0.12 per diluted share compared to net income of 57.2 million or $0.67 per share for the first half of 2008.

The first significant factor affecting these results is the impact that the rescission has had on our customers. We increased our provision for loan loses to 50 million compared to 13.8 million in the second quarter of 2008. To build a stronger reserve position and to cover charge offs of the quarter.

We increased our reserves to loan ratios to 1.59% from 1.35% in the first quarter of 2009 and 1.04% in the second quarter 2008.

The state of the economy continues to impact our credit quality ratios, net charge offs as a percent of average loans and leases for the second quarter of 2009 were 1.01% compared to 70 basis points in the first quarter 2009 and 48 basis points for the second quarter of 2008.

For the most recent quarter, charge offs totaled 24.6 million, of the charge offs 54% were construction loans, 23% were in commercial and industrial area and 11% were in commercial real estate.

Focusing in on the construction loan charge offs, 92% of these charge offs are represented by six credits. Non performing assets as a percent of loans, leases and other real estate owned were 2.57% at June 30th, 2009 compared to 1.73% at March 31st, 2009 and 99 basis points at June 30th, 2008.

When comparing second quarter to first quarter 2009 results, non accrual loans increased by 30%, half the increase was in our real estate residential construction, while non accrual in C&I loans declined 10%.

Trouble Debt Restructuring or TDR's increased from the previous quarter by 28 million with one credit representing about 82% of that increase. The bank and the company involved entered in to a full balance agreement during the quarter.

The company is a family owned business serving the construction industry and existed for over a 100 year. The principles have recapitalized the company but the ultimate outcome will depend on the recovery of their industry.

Although, non performing assets increased during the quarter; we continue to pursue initiatives that could result in improvement in these numbers over the next three quarters. Other real estate owned property increased by almost a 100% in the first quarter due to the banks continued efforts to resolve non performing assets.

A second factor that impacted the results for the quarter was a special assessment paid to the FDIC. Like banks across the country, we made this payment to help deal with the ongoing process of recapitalizing the deposit insurance fund. For us, this special assessment amounted to 6.2 million in the second quarter.

Third, we recorded a pre tax charge of 2.9 million related to a consolidation initiative that will combine certain branches in Central Pennsylvania market that are in close proximity to each other. Annual cost savings associated with this initiative are approximately $8 million.

Finally, we had an, other than temporary impairment pre tax charge of 900,000 on our two remaining corporate synthetic CDOs; now, on a book value of 1.5 million.

Despite the ongoing challenges in these, this economic environment, we do see some encouraging signs for the second quarter including margin expansion and a loan growth. Net loans and leases grew 7% to 9.9 billion from June 30th, 2008. This included a 23% increase in leases, 14% increase in commercial loans and smaller percentage increases of 8% in residential real estate loans and 7% in commercial real estate loans.

Loans and leases increased 2% from March 31st, 2009. Our portfolio increases showing across the board, just as it did in year-over-year comparison, expect for construction loans, which declined 2%. From first to second quarter 2009, we had an increase of 2% in commercial real estate and residential real estate categories. Commercial loans were up 1% and leases increased 5%.

Turning to the deposit side, we can see that some of our key initiatives for this year are showing results, including our efforts to attract and retain core deposits and improve net interest margin. While deposits remained flat from June 30th, 2008 at 9 billion; deposit mix improved. Looking at different categories of deposits, we had an increase in core deposits of 5% offset by a decrease in CDs greater than a $100,000 of 19%. Compared to March 31st, 2009, total deposits decreased 1% to 9 billion. However, this was largely due to a planned effort to change our deposit mix and reduce the number of high cost, single service CDs. We did see growth in core deposits compared to March 31st, 2009 including a 1% increase in non interest bearing demand deposits and a 2% increase in interest bearing demand deposits and savings deposits.

Strong profitable loan growth coupled with the improved deposit mix resulted in net interest margin increase of 12 basis points to 3.52% compared to the first quarter of 2009. In the third quarter of 2009, we have $830 million of CDs maturing at 3.07%. And in the fourth quarter of 2009, we have 1.1 billion of CDs maturing at 3.41%. This should further improve our net interest margin in the second half of the year.

Our mortgage division also continued to achieve strong performance in the second quarter, nearly doubling production compared to the same period last year. In addition, our recent home equity line of credit promotion produced a $105 million of new lines with an average FICO score of 762 and an average loan to value ratio of 64%.

I will now turn the call over to Drew for his additional financial review.

Drew K. Hostetter

Thank you, Will. In my presentation, I want to focus on second quarter results for 2009 and our 2009 financial targets.

Net interest income increased $4.8 million or 5% from the first quarter of 2009 due to an increase in net interest margin of 12 basis points and an increase in average earning assets of $44 million. The increase in margin was due primarily to the roll off of a $190 million in higher cost CDs to the lower cost core deposits and short term borrowings.

Non interest income decreased $7.4 million or 18% from the first quarter of 2009 due primarily, to a $6.9 million gain on the sale of our merchant processing business in the first quarter, a $1 million fixed asset write off from branch consolidation in the second quarter and then OTTI charge of $900,000 on our two remaining corporate synthetic CDOs in the second quarter offset by an increase in mortgage gains of $1 million and an SBA gain of $500,000.

Non interest expense increased $8.3 million or 9% from the first quarter of 2009 due primarily to an increase in FDIC insurance of $3.9 million, an increase in pension cost of $1.4 million, an increase in credit cost of $1 million and consolidation cost of $1.9 million in the second quarter.

Core pre provision, pre tax income improved 14% from $35.8 million in the first quarter to $40.9 million in the second quarter. Our updated financial targets for 2009 are as follows; FTE margin 3.50%, loan growth 5%, deposit growth 1%, non interest income growth 1%, non interest expense growth 3%, the tax rate not meaningful and the deferred dividend $16.7 billion. These financial goals include no securitization activity in 2009.

I will now turn the conference call back to Will for his closing remark.

William J. Reuter

Thank you, Drew. Given we're continuing to focus on banks and their capital positions. I'd like to take a moment to review our own capital ratios.

As of June 30th, 2009, Susquehanna Bancshares had a leverage ratio of 9.62%, a Tier I capital ratio of 10.69% and a total risk based capital ratio of 13.23%. Each of these ratios exceeds Federal Government regulatory standards for well capitalized financial institutions by over 300 basis points.

In addition, our tangible common equity ratio increased from 4.53% in the first quarter 2009 to 4.62% in the second quarter. We certainly recognize that the recession and the related economic fallout continue to create a highly volatile environment. Therefore, we have completed a comprehensive review of our loan portfolio under a number of scenarios for possible deterioration and loss levels.

Our most stressed scenario projects that losses between now and the end of 2010 will be over three times greater than our second quarter 2009 net charge off. Even under this unlikely scenario, our capital levels remain more than 200 basis points above the well capitalized thresholds, showing that we have more than sufficient capital to navigate a more severe economic downturn.

However, we understand that the current environment, could get materially worse and therefore, we are continually evaluating our capital position, in the context of both the macro environment and the updated view of losses we're obtaining from our credit department.

We are also actively managing our loan portfolio, to try to mitigate further deterioration in credit quality. When the economy first showed signs of weakening, we somewhat obtained to aggressively review our portfolio and work with potentially troubled borrowers that initiative has been ongoing and will continue, in order to minimize losses as much as possible. Although, we have seen weakness in credit quality, the performance of our loan portfolio is consistent with what we would expect during a downturn of this magnitude.

Going forward, we'll also be working to further diversify our loan portfolio to enhance its stability. We fully recognize the challenges that confront our banks and others in our industry, even though, some economists believe the downturn has bottomed out, we believe that residual impact of recession will continue to create a harsh environment for many of our customers and we'll work in a continuing way on our quarter results in the near term.

However, we've always managed this company with an eye to long term shareholder value. Looking beyond the implicit immediate economic challenge, we believe that our core bank operations are performing solidly. We also, as we mentioned earlier for the first to second quarter 2009, we improved net interest margin and increased core savings in demand deposits as well as loans. As Drew noted in his presentation, our core pre provision, pre tax income improved from 35.8 million in the first quarter to 40.9 million in the second quarter.

Now, in addition, our employees' efforts to build relationships with customers are being recognized in the marketplace. In May, J.D. Powers and Associates reported the results of its 2009 Retail Banking Satisfaction Study. We are pleased to see that Susquehanna Bank ranked highly in the Mid-Atlantic region. The study analyzed customer satisfaction with the retail banking experience in a number of areas including transactions, account statements, account opening, product offerings, convenience fees and resolution of issues.

I offer my thanks and congratulations to our employees for their efforts to help us provide exceptional service to our customers. Going in to the second half of this year, our team will remain focused on our key goals; core deposit retention in growth, improving net interest margin and managing credit borrowing.

At this point, I'd like to open the call for your questions and comments.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And we will take our first question from Matthew Clark with KPW.

Matthew Clark - KBW

Good morning, guys.

Michael Quick

Good morning Matt.

William Reuter

Good morning Matt.

Matthew Clark - KBW

Can you first touch on your construction balances and maybe just give us some better color behind the scenes in what you're seeing in the way on your pay downs and what you might be advanced, additionally advancing on, just trying to get color.

And maybe as of follow-on, why we might not be seeing a larger decline in those balances yet?

William Reuter

Mike Quick will answer that.

Michael Quick

We presently have in construction, commercial construction, we have approximately 390 million, one to four family constructions, we have 515 million, land approved unimproved, we have 121 million and we have raw land approximately 91 million.

We continue to work with our customers to build out these projects as we go through the cycle and I think what you're seeing is there has been in some of our markets an uptick in sales. In other markets, it's still flat or decreasing but that's why you haven't seen a more greater decrease.

Matthew Clark - KBW

Okay. And then I guess it sounds like you're obviously working with your customers, any desire to do any type of note sales or anything like that?

Michael Quick

We are exploring all options as we speak included in that is one of the options we're looking at as well as talking to people, who provide mezzanine financing to come in and talk with our customers. We're having interaction on a weekly basis with those customers that are struggling or capital strapped.

As Bill said in his comments, we just formed what we call special assets group, which will be working with our watched loans or OAEM and our sun-standard accruing loans to find solutions to that. The team has been assembled and they will be taking on portfolio away from the regular lenders to help speed up that process to resolve those issues.

William Reuter

Yeah. The point as we're Bill Reuter speaking, we've devoted already committed resources to credit quality side of the house whether it's how we do loan work out, how we manage other real state loan, special unit to deal with loan less than a million, special unit to stop migration patterns.

So we throw lot of resources out of it. I do also want to mentioned something that Mike alluded to we have obviously numerous customers that are still being -- are still selling homes, still drawing their lines of homes and equity. That's why you have seen a real significant decrease in the construction loan balances.

Matthew Clark - KBW

That's helpful. And I guess along those lines, can you just give us maybe some visibility into what might be criticized in that construction book. And we know the non-accruals, but just curious as to come what's behind that?

William Reuter

Sure. We've got flaws in information here, so just bear with us till we get the right page.

Matthew Clark - KBW

No problem. Sure.

Drew Hostetter

Matt, I have to get back to you because I normally have that information in front of me and I can't put my fingers on it at this point in time.

Matthew Clark - KBW

Okay.

William Reuter

So I'll get back to you this afternoon.

Matthew Clark - KBW

Great.

William Reuter

I think it's also worth mentioning, however, as the terms of the deep dive we've done on the portfolio in general, we've done special reviews of our exposure to one of our bill dealers, our exposure to any things that support other bill dealers, our exposure to strip shopping centers and all our conclusions on all those credits is that we're pretty good shape on those credits.

Matthew Clark - KBW

Great. And then just lastly on the incremental increase in non-accruals in the CRE bucket. Can you give us better understanding of what types of properties are driving that increase?

Michael Quick

The non-accruals in the CRE bucket; correct. It basically revolves around what we consider our I-81 and our I-95 quarter, where bulk of the increase came in the non-accrual. It was approximately 4.8 on the I-89 quarter on one credit, I-95 of that 800,000, I95 of 4.3 million; I95, 5.3 million; I95, 4.6 million and in I95, 3.6 million.

We also had two deals in the western suburbs of Philadelphia one for approximately 16 million and the other one for approximately $9 million. And that contributed to the increase.

Drew Hostetter

They had commercial real estate as well construction, he's talking about both there.

Matthew Clark - KBW

Those two are commercial construction. Of course, we will seek instruction there but I guess about the other types of property that you were fully as you mentioned along those various accounts?

Drew Hostetter

On the commercial accounts?

Matthew Clark - KBW

On the theory, still just the types of projects, is it all commercial real-estate construction?

Drew Hostetter

We had a couple of mini-storages that went on accrual in this quarter. And the rest was really small properties, owner-occupied like car washes and repair auto bodies et cetera.

Matthew Clark - KBW

Got it, thank you.

Drew Hostetter

And I can answer your question, in substandard accounts, which we had 378 million; in OEM, we had 434 million and watch, we had 576 million at the end of the quarter.

Matthew Clark - KBW

And I guess compared to the prior quarter?

Drew Hostetter

Prior quarter, we had substandard a 198 million, OEM, we had 318 million and watch was 541 million.

Matthew Clark - KBW

Okay. Thank you.

Operator

And we'll take our next question from Tom Alonso with Foxx-Pitt Kelton.

Thomas Alonso - Foxx-Pitt Kelton

Good morning guys.

William Reuter

Hey Tom.

Drew Hostetter

Good mornings Tom.

Thomas Alonso - Foxx-Pitt Kelton

Just a real quick, if you can sort of just go through with tax rate, your sort of just for modeling purposes, did it goes to non-material sort of what's driving the strange effective tax rate this quarter?

Drew Hostetter

Sure, Tom. Basically, we are anticipating we're going to have $24 million in permanent differences for the year. So at June 30th, for the year to-date, tax provision in June 30th, you have take our pretax loss, which I believe it was about $10 million and after this permanent differences because we have like through the year of 12 million and get you to about a $22 million loss, tax loss for the six months and apply a 39% rate to that and that will get you our benefit.

For the third quarter, you will do the same process. You would take which are -- with our pre-tax either income or loss estimate is through the nine months then you would subtract 18 million worth of primary difference, because your three quarters are late through the year and they apply a 39% tax rate to that and subtract that from your 630 result that will give you a third quarter.

William Reuter

Yeah, you got that Tom?

Drew Hostetter

Its worth before you make the same calculation, we subtract 24 million in permanents differences.

Thomas Alonso - Foxx-Pitt Kelton

Got you. So there is really no way to sort of to just, you just have to go to the calculations that is inside of tax rate, you can't just apply some kind of rate.

Drew Hostetter

Yes, the growth with taxable income first by subtracting a permanent difference, then apply a 39% rate.

Thomas Alonso - Foxx-Pitt Kelton

Understood. Okay. Great.

William Reuter

Good question.

Thomas Alonso - Foxx-Pitt Kelton

Any color on 30 to 89 day past dues? I don't think I saw that anywhere in the release?

Drew Hostetter

Bear with me. On just our commercial portfolio 30 to 59 was 0.74% of the entire portfolio, 60 to 89 was 0.40 and 90 days was 0.28, just the commercial portfolio.

Thomas Alonso - Foxx-Pitt Kelton

Okay. Just any kind of forward-looking commentary on what you're expecting on the mortgage banking side, I know rates have picked back up, do you expect a similar quarter as you had here or do you kind of see that swelling down a little bit with the move back up and maybe some of the people who could have refund have already refund, you've had a bit of burn through or burn off, is there?

Abram Koser

Yeah, I think my guess will be relatively flat with the previous quarter. Yeah, I think the performance was pretty close to what it was in the second quarter, we've a pretty good pipeline that we can live off of for at least 45 to 60 days, provided there continues to be pretty good activity. We get, we're seeing a lot of activity for the first time home buyers also with the special tax credit, that's allowed to them so we are seeing some pretty good volumes in that also.

Thomas Alonso - Foxx-Pitt Kelton

Do you have the volume, of what you have, what you originated in the second quarter or maybe a split between what was re buy and what was purchased?

Drew Hostetter

Again, I don't have, it here with me but I believe, hold on for one second.

Thomas Alonso - Foxx-Pitt Kelton

Sure.

Drew Hostetter

Okay, we had strong purchase in construction closings at 49% with revised and 51%, I am sorry, 49% was construction purchase and 51% revised.

Thomas Alonso - Foxx-Pitt Kelton

Okay.

Drew Hostetter

Second quarter production at 75%, the sold the secondary market, so the balance was portfolio.

Thomas Alonso - Foxx-Pitt Kelton

Okay, great and then just lastly, just your, the expected cost savings from the consolidation efforts this quarter, on a go forward basis?

Drew Hostetter

About, one million.

Thomas Alonso - Foxx-Pitt Kelton

One million annual?

Drew Hostetter

I'm sorry, no, two million a quarter.

Thomas Alonso - Foxx-Pitt Kelton

For the next

Drew Hostetter

3 million annually, 2 million a quarter; and now I'll start right away.

Thomas Alonso - Foxx-Pitt Kelton

Okay. Great. Okay. Thanks. That's all I had.

Operator

(Operator Instructions) We will go next to Steve Moss with Janney Montgomery Scott.

Stephen Moss - Janney Montgomery Scott LLC

Hi. Good morning, guys.

William Reuter

Hi, Steve.

Drew Hostetter

Hi, Steve. Good morning.

Stephen Moss - Janney Montgomery Scott LLC

Most of my questions here, have been answered. I still want to follow up. Will, you've mentioned to conduct a stress test scenario. What were the details and assumptions within the most stressed scenario?

William Reuter

What we did Steve, is, we ran three scenarios, I recall. Two scenarios were internal, which we call, a base case and a stress case. And then, we also did what we called a modified SCAP test, okay. And what we did with the modified SCAP test is, we looked at all the SCAP banks and took the mid point of the adverse losses on a percentage basis and applied them to our loan portfolio. And when you do that, it comes up with even a 844 million of losses, okay.

What we did though, is we looked at and said okay, we took the eight banks that were similar to us, regular commercial banks and the SCAP banks, people like SunTrust and PNC and BB&T and Regions, and Key. And we looked at where, their non-performers were compared to ours. And we were 58% of theirs on a percentage basis. And our charge offs were 42% of theirs on a percentage basis. So, we felt that probably non performance is a better future predictor of losses than what previous charge offs are. So, we took 58% of that 844 million and applied about 500 million to the stress test. And that's the result as Bill described was still being over 200 basis points over well capitalized. Our own stress test came in with significantly less losses than the 500 million.

Stephen Moss - Janney Montgomery Scott LLC

Okay. Thank you very much.

Drew Hostetter

And I think Steve, it's fair to say; we stressed ourselves a thousand way to study amongst everyway you can imagine from a calculation standpoint.

Stephen Moss - Janney Montgomery Scott LLC

Okay, thanks. Thanks, guys.

Operator

And we'll take our next question from Mac Hodgson with SunTrust Robinson Humphrey.

Mac Hodgson - SunTrust Robinson Humphrey

Hey, good morning.

Michael Quick

Hey Mac.

Drew Hostetter

Good morning.

Mac Hodgson - SunTrust Robinson Humphrey

Just a follow up Drew, on the stress analysis you did. I guess under the most stressed scenario, where did the, tangible common equity ratio shake out? And maybe the follow up, what's kind of a target for the company and where is the comfort level on the low end?

Drew Hostetter

In the most stressful situation, it goes down to 3.5%; tangible common equity to intangible assets. We want to, we're targeting to get the ratio above 5%, right now.

Mac Hodgson - SunTrust Robinson Humphrey

And would you be comfortable about it, 3.5. Is that kind of what you are saying?

Drew Hostetter

Yeah. At the end of the worst case scenario, we're comfortable with 3.5.

Mac Hodgson - SunTrust Robinson Humphrey

Okay.

William Reuter

Especially with the regulatory ratio still being 200 basis points above, above the minimally well capitalized levels.

Mac Hodgson - SunTrust Robinson Humphrey

Great. Right. Okay. A question Mike for you on credit; and you might have given us this stuff before but I didn't know if you could provide a breakout of the commercial real estate portfolio that's close to 3 billion, I guess, and asking more about kind of asset type as opposed to geography, how much of it is office versus retail versus hotel, et cetera?

Michael Quick

Yes. Our hotel portfolio is approximately 286 million. Retail consumer goods, hold on, a second, retail consumer goods, which would include real estate a 184 million, recreational facilities 101 million. That's primarily the breakout besides real estate commercial, which is approximately 1.6 billion.

Mac Hodgson - SunTrust Robinson Humphrey

Is it fair to say that the 1.6 billion is owner occupied?

Michael Quick

It's owner occupied, it's, runs a gamut, there's a warehouse station there, there's a, automobile facilities, there's the warehouses, there's office buildings, small office buildings, there's what I call flex buildings, there are car washes in there, it runs a gamut.

Mac Hodgson - SunTrust Robinson Humphrey

Right. Okay. So the 1.6 would be owner occupied and then the balance, I guess it'd be close to 1.4 billion that would be on Investor property?

William Reuter

Yes.

Mac Hodgson - SunTrust Robinson Humphrey

Okay. And I guess you gave the mix of about 600 million of that, is it, is there something on some, actually makes up the difference in that, over the 1.4?

William Reuter

Hold on a second.

Mac Hodgson - SunTrust Robinson Humphrey

We can follow up offline, if you don't have it handy?

William Reuter

1.9 is CRE permitted, C&I is 1.2, commercial construction is 396, 1.9 is the total, I believe the remaining portion of that would be owner occupied, the difference in that number.

Mac Hodgson - SunTrust Robinson Humphrey

Okay, great, thank you. I might be confused. But I'll follow up afterwards.

William Reuter

Okay, Okay.

Operator

(Operator Instructions) And we will take our question from Robert Lewis with UBS.

Robert Lewis - UBS

How many shares are closely held by management at this time?

William Reuter

Okay, let me take that for a second, I think at our annual shareholder meeting, we indicated about 6.5%.

Robert Lewis - UBS

Okay.

William Reuter

When you consider the Board, our subsidiary Boards, our employees and the management team.

Robert Lewis - UBS

Okay, thank you.

Operator

And Mr. Reuter, there are no more questions at this time. I would like to turn the call back over to you for any additional closing remark.

William Reuter

Okay our next, first of all, thank you for your, for listening and your questions. Our next quarterly conference call will be held on Thursday, October 29th, 11 AM Eastern Time. It'll be available via web cast on our website www.susquehan.net. Thank you for your time today and for your continued interest in Susquehanna Bancshares.

Operator

And that concludes today's conference. Thank you for your participation.

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