Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Brad Milsaps of Sandler O'Neill.
Brad Milsaps - Sandler O'Neill & Partners
Hey good morning.
Jim Giancola
Good morning.
Brad Milsaps - Sandler O'Neill & Partners
Jim, just curious if you could quantify the amount of loans in the watch list? Kind of how that compared to March 31? And then I know there were a couple of larger ones that you guys were watching closely. I think maybe a larger condo project and maybe one large homebuilder. Obviously that didn't show up in the numbers this quarter, but just curious if you have any additional color there?
Jim Giancola
Yes, there was no significant movement into the most severe classifications. I am happy to report that the condo we talked about on the last call has experienced its first closings. We are beginning to get pay downs on two of the big condo developers that we have that we are watching closely. And so I expect that those will continue to pay down. The watch list is not a number we have reported in detail. But it is, you know, because everybody sort of grades credits differently. And I think everybody likes to think they are the most aggressive in terms of early identification and grading. I will tell you it's up significantly more than 30% or 40%. But these are the again credits that are graded 5 would be in that category and we are trying to get our eyes on these credits as early as we can and encourage our officers to service these things as early as we can. So we can deal with them when they are 5s. When they are 7s they are an awful lot harder to deal with.
Brad Milsaps - Sandler O'Neill & Partners
And you talked something about the margin there. I think the last time we met you were talking about maybe since the end of the first quarter getting six basis points a month in expansion. Is that still in fact kind of what you are seeing? It didn't necessarily translate. You didn't quite get all that in the second quarter. Just kind of curious what your thoughts are there going forward?
Jim Giancola
You know we benefit in a flat to rising rate environment. And we saw seven points of margin improvement, more of that margin improvement was in June than in April. As JoAnn said, we had a prime change in April, which didn't do us any favors. So we think that we are stable to rising going forward. Six basis points a month would be too aggressive a number, but we are again optimistic that we can continue to move that number up. Part of what drives this is the relationship between Fed funds and LIBOR and prime, and those relationships are coming back into a more normal pattern and that helps us.
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