Question-and-Answer Session
Operator
Thank you. [Operator Instructions]. Our first question is coming Charlie Ernst of Sandler O'Neil.
Charles Ernst - Sandler O'Neil Asset Management
Good morning.
Ted T. Cecala - Chairman and Chief Executive Officer
Morning.
Charles Ernst - Sandler O'Neil Asset Management
Can you guys talk about your NIM outlook and also put it in context if possibly getting further rate cuts?
David R. Gibson - Chief Financial Officer
Charlie, Dave Gibson here, how are you?
Charles Ernst - Sandler O'Neil Asset Management
Good.
David R. Gibson - Chief Financial Officer
I think, as we've talked about in our Qs were slightly asset sensitive in the down 250, that means about there a 3.8% decline in net interest income, it's not exactly linear for each movement, but it's close. What happens structurally is that as the said news our assets re-priced a little bit ahead of our liabilities, 30 to 90 days ahead of time, so a little bit of a dip as Ted mentioned and then it rebalanced after that. So, obviously another Fed rate cut will put slight pressure on our margin.
Charles Ernst - Sandler O'Neil Asset Management
So the assumption in the first quarter of a snap back in the margin could actually be further down if we get more cuts?
David R. Gibson - Chief Financial Officer
Yes, an additional cut would... could cause that snap back to, not snap back as quickly obviously.
Charles Ernst - Sandler O'Neil Asset Management
Okay. And then the tax rate it looks a little late in the quarter, is there... can you shed any light on the and ...?
David R. Gibson - Chief Financial Officer
Yes, we had a tax debt credit this quarter of about $2.7 million was offset by the Shares tax that we reported in the expense line just from an accounting perspective while there we considered both taxes on an accounting basis. The shares taxes reported as expense rather than income tax.
Charles Ernst - Sandler O'Neil Asset Management
Okay. Great thanks a lot.
Ted T. Cecala - Chairman and Chief Executive Officer
Thank you.
Operator
Our next question is coming from Mr. Rob Rutschow of Deutsche Bank.
Robert Rutschow - Deutsche Bank Securities
Hi good morning.
Ted T. Cecala - Chairman and Chief Executive Officer
Good morning
Robert Rutschow - Deutsche Bank Securities
I guess the first question is on the reserve you built it fairly aggressively this quarter and I am just wondering if you can tell us, does that reflect a much more negative view on the credit outlook going forward and what sort of normalized level would look like if credit is normalizing?
Ted T. Cecala - Chairman and Chief Executive Officer
Well we build our provision based upon what our reserves should look like. Essentially the provision pops out of we believe the reserve would be. And as I said, as we look at our credit exposure we moved some loans down to other categories which requires us to raise the level of reserves against those loans. It's a fairly automatic process. When you step back and look at our historical charge off's... you are going to think I am nuts but, while I am concerned about non-performing is what really, what the thing is that I look at is what we end up charging off at the end of the day because that's the real money that goes back and forth. And when we look at charge offs, we are 6 basis points for the quarter up from 4 basis points in the first and second quarter and that's still at the kind of the lower end of our historical range. So, I just look at us returning to a more normal credit profile; obviously what we had in '05 and '06, I don't think any of the financial institutions could sustain that for a long period of time which is what we continue to say in many of these conference calls.
Robert Rutschow - Deutsche Bank Securities
Okay. Can you just, kind of give us the factor or factors that led to the change in the categorization of those loans? That went in?
Ted T. Cecala - Chairman and Chief Executive Officer
Yes, in some of the real estate projects, so the first one is the non-accruing loan that I mentioned that represented about 60 odd percent of the increase in non-performing. That was just a tragic situation where the client has a terminal illness and really can't continue to develop the project, had very little depth behind them. So, we are going to end up probably taking over that project and then ultimately selling the underlying assets. So that's one, so that's kind of an unusual situation, we really are running to that very often. The increase in non-performing is... a renegotiated loans is the credit in the southern part of that state and it's related more to the slowdown in sales than anything else.
Robert Rutschow - Deutsche Bank Securities
Okay, that's helpful. If I can associate a little bit, could you just tell us how much of the capital market services beeline is related to CDOs versus a securitizations of credit cards or is that worth?
William J. Farrell II - Head, Corporate Client Services Business
Rob, this is Bill Farrell. At this point of time we just started this business last fall, and for most of the year we were building infrastructure, the technology, the staff, the controls and procedures in place. So, still at this point in time there is... the amount revenue is fairly small from a CDO perspective. However, we expect that to continue to grow through the fourth quarter of this year and into 2008. The bread and butter for our business over the long term was normal ABS, all the asset backed securitization it's going on whether it be mortgage credit cards. Lease receivables obviously, that slowed down some... however, all the businesses that were involved in Tender Option Bonds, the fees have picked up a lot of flak there along with Fixed Income Investment Management. So, the one area of our business has slowed down, and that's the asset-backed securitization area. We have other areas that have really not stepped up and have improved their performance and again, we expect over a period time for the CDO business to grow.
Robert Rutschow - Deutsche Bank Securities
Okay, if I could ask just one more question, housekeeping item, the other income down on a sequential basis. Was there anything outstanding there that caused that decline?
Ted T. Cecala - Chairman and Chief Executive Officer
Yes, there was a couple of things. One we had a little bit of gain in the second quarter on since the real estate sales, and in the third quarter there is small write down in some investments we have for CRA purposes.
Robert Rutschow - Deutsche Bank Securities
Can you size up for us?
David R. Gibson - Chief Financial Officer
The total was around $1 million.
Robert Rutschow - Deutsche Bank Securities
Okay. Thank you.
Operator
Thank you. Our next question is coming from Andrea Jao of Lehman Brothers.
Andrea Jao - Lehman Brothers
Good morning, everyone.
Ted T. Cecala - Chairman and Chief Executive Officer
Good morning.
Andrea Jao - Lehman Brothers
First with regards to the margin, could you talk about if the disparity between LIBOR and the Fed funds rate has had any impact?
Ted T. Cecala - Chairman and Chief Executive Officer
Andrea, the simple answer is yes, to the extent we do have some loans that are priced off LIBOR as opposed to prime or hedge funds, so to extent that there is a disparity there, we do get some pick up. We haven't that sized that for anybody, but we are not anticipating that to be sustained.
Andrea Jao - Lehman Brothers
Okay. And then moving on to credit, could you remind us like historically what normalized ranges for your non-performing asset ratios and your net charge-off ratios?
Ted T. Cecala - Chairman and Chief Executive Officer
If you look at the five years from say '04 back, I think our non-performing asset ratio is averaged around 80 basis points, the high was 91, so we are not really out of this range there. Our charge-offs were in the 24 to 30 basis points range.
Andrea Jao - Lehman Brothers
And these are reasonable ranges to anticipate in coming, in the coming days?
David R. Gibson - Chief Financial Officer
As Ted said where we were in the last couple of years we just didn't think of sustainable, and where we see the numbers are just moving back to our historic averages.
Andrea Jao - Lehman Brothers
Okay. Now with respect to loan loss provisioning the anticipate to gaining elevated levels in coming quarters or should we anticipate just covering net charge-offs and growth?
Ted T. Cecala - Chairman and Chief Executive Officer
Andrea as I mentioned earlier when we do our quarterly evaluation of the loan portfolio that drives the calculation for what our total reserve is and ultimately it pops out a provision for loan losses. So the... and the provision is going to be determined based on recoveries and charge offs obviously. So if our credit quality remains where it is, I don't see continued increases in our reserve.
Andrea Jao - Lehman Brothers
Okay. I guess another way to approach the question is the factors that led to the downgrade in certain credit. Do you see them further deteriorating?
Ted T. Cecala - Chairman and Chief Executive Officer
Well if you have a better... it's kind of like looking at six or seven months and then things are going to look a lot different than they are today. Obviously things will change and I can't predict how it will change, but yes we feel like we are in pretty good positions. We have a well diversified portfolio. So I don't know what else to add to that.
Andrea Jao - Lehman Brothers
No, that's good. Thank you very much.
Operator
Thank you. Our next question is coming from Jared Shaw of KBW.
Jared Shaw - Keefe, Bruyette & Woods
Hi. Good morning
Ted T. Cecala - Chairman and Chief Executive Officer
Good morning
Jared Shaw - Keefe, Bruyette & Woods
I guess just to follow up, not to beat a dead horse but on the risk rating when you had the change in the internal ratings, was that due to specific issues of specific loans or is it more of a revaluation by management of the lending segment that those loans may have been in.
Ted T. Cecala - Chairman and Chief Executive Officer
No, no. There was nothing systemic about that whatsoever. We look at these things individually. And like I said there are a couple of big ones that move the number for us.
Jared Shaw - Keefe, Bruyette & Woods
Okay and then the ones that weren't put on to NPA were those moved more of like one or two numbers or is it a major shift in the rating?
Ted T. Cecala - Chairman and Chief Executive Officer
No they weren't major shifts. They just may have slipped into one of the other categories and as I said there is an automatic assignment to our allocation of the reserve to those ones as soon as they go into different category.
Jared Shaw - Keefe, Bruyette & Woods
Alright and then following up on the development residential projects up in Pennsylvania. Do you have an idea of how long the timeframe will be on resolving that if and since you are taking it over?
Ted T. Cecala - Chairman and Chief Executive Officer
Well, I don't. Typically what would happen in this situation is that you would go through foreclosure, clean up all the winds it would come on as all would and then we would remarket the thing.
Jared Shaw - Keefe, Bruyette & Woods
Okay. And then can you finally just comment on the strength of the local area or are what you are seeing, are you still seeing the inflows that you are talking about in the past, is the sort of the geographic shifts going on?
David R. Gibson - Chief Financial Officer
The on point of ratio is still very, very low. We really don't have a concentration... an industry concentration. So if there is a good mix we still see people coming to Delaware for the benefits of the great tax environment is far more attractive to live here than in the surrounding states just because of the income tax level and the lack of sales tax and the lower real estate tax.
Jared Shaw - Keefe, Bruyette & Woods
Okay and then so I guess the... and has that changed your view on how aggressive you want to be on a residential development lending or is that sensing that this loan was more specific very much to the borrower and you are still seeing good trends, is this still an area that you want to continue to grow or you think that you are carrying backlog?
Ted T. Cecala - Chairman and Chief Executive Officer
You have to step back a little bit and think about our typical loan client, which is... these are people that we have been doing business with for many, many years. They are not the large national builders. Our clients have been very successful over the last five years have very strong balance sheets, and quite frankly this is that point in the cycle where they are looking for opportunities, because of some price dislocation so. We're still seeing demand.
Jared Shaw - Keefe, Bruyette & Woods
Okay. Thank you very much.
Operator
Thank you. Our next question is coming from K.C. Ambrecht of Millennium.
Kenneth C. Ambrecht - Millennium Management, LLC
Hi, thanks very much for taking my question. So, just one follow-up on the CDO, the build out in Europe. What happens if that market kind of shuts down?
Ted T. Cecala - Chairman and Chief Executive Officer
Well if the market shuts down and I think I stated in the beginning we...
Kenneth C. Ambrecht - Millennium Management, LLC
Okay, I am sorry, I was on one another call, so.
Ted T. Cecala - Chairman and Chief Executive Officer
Okay, sorry. When we were developing our product, we try to develop our CDO services to all different types of asset classes and quite frankly the mortgage side of the CDO world has pretty much closed down and it's been very slow. However, we still think demand in the commercial loans side of CDO welled in both U.S. and Europe, so at this point in time and we have started to gain a good client base. We'll continue to staff and build out as the business opportunities arise, but we're still seeing opportunities in the business.
Kenneth C. Ambrecht - Millennium Management, LLC
Okay.
Ted T. Cecala - Chairman and Chief Executive Officer
And when you look at the business... so far as securitization is concerned if unless the whole world shuts down, banks or financial institutions are going to have to securitize asset. They can't hold these things on their balance sheets forever.
Kenneth C. Ambrecht - Millennium Management, LLC
Okay. Okay. And then a question for you on the... can you talk about your residential construction book, how big is it? Can you talk about how the interest covers works of your bank? What the NPAs are right now in that particular book?
David R. Gibson - Chief Financial Officer
Yes. Our construction portfolio, it is about $1.3 billion.
Kenneth C. Ambrecht - Millennium Management, LLC
$1.3 billion?
David R. Gibson - Chief Financial Officer
Yes.
Kenneth C. Ambrecht - Millennium Management, LLC
And you have about a little over $8 billion in loans outstanding, am I correct?
David R. Gibson - Chief Financial Officer
The majority of that construction is single-family residential. It's all in the... it's called a tri-state area of Delaware and north in the Pennsylvania, and little bit in New Jersey and Eastern Shore of Maryland. As Ted talked about our core borrower is locally owned business. We don't lend to the large national builders, so these are local builders that we've known for a long time, have strong balance sheets. Yes, underwriting is typical loan-to-value interest coverage. We... generally, interest rate shock those projects to make sure that they can handle both changes in the interest rates as well as absorption rates of projects. So, we are as Ted said our underwriting is pretty conservative and we have recourse to the borrower and personal guarantees, so it's...
Kenneth C. Ambrecht - Millennium Management, LLC
Okay
David R. Gibson - Chief Financial Officer
That business we've been in for a long, long time.
Kenneth C. Ambrecht - Millennium Management, LLC
What are the... how the interest rate reserve worked there, I mean you followed a certain amount of money till the homes done?
David R. Gibson - Chief Financial Officer
Well typically an interest reserve would cover a construction phase of a project till such time that they are actually a product to sell and at that point the projects have self sustained itself going forward, so it's not a overly aggressive interest reserve. We do like equity upfront as well.
Kenneth C. Ambrecht - Millennium Management, LLC
But how big... how big was this book in say, 2005 and 2006, just trying to see advantage of this 1.3 billion.
David R. Gibson - Chief Financial Officer
Well, you're... now you are challenging me to... it might, bare with me, so I can sort it out.
Ted T. Cecala - Chairman and Chief Executive Officer
Well, a year a year ago, 2006 to September 30, it was up $1.2 billion.
Kenneth C. Ambrecht - Millennium Management, LLC
All right.
Ted T. Cecala - Chairman and Chief Executive Officer
We just reported that it was a $1.3 billion.
David R. Gibson - Chief Financial Officer
It's been growing, 15% per year. It's been... this has been a very strong economy in the local area.
Kenneth C. Ambrecht - Millennium Management, LLC
So are you guys worried about this book?
Robert V.A. Harra Jr. - President and Chief Operating Officer
Yes, this is Bob Harra. This is an important part of the suburb to the loan portfolio and before I answered your question, I'd just like to embellish Dave's comments with one remark and that is that, our builders are typically not beginning construction of homes until there's a buyer executing a non-contingent contract was approved and loan financing. So we monitored the construction of homes pretty tightly in suburbs and don't like builders get too far ahead of us. And so, I mean what we are experiencing, is slowing. But kind of what we are not experiencing, which apparently some of the nationals are, is potential buyers were walking away from contracts. We haven't seen that, what we are seeing is it may take more individuals, more potential buyers to come through a sample house before a contract is generated. But we are still seeing traffic. So are we, your question are we worried about it, I think we are concerned about. It's an important part of our portfolio, we don't deal with the nationals. Dave mentioned the builders we deal with are principally family owned and closely held, some of them are second, third generation. We know them well and we've financed them through various cycles.
Kenneth C. Ambrecht - Millennium Management, LLC
Okay, one last question that for you on this question, on this topic. What are the NPAs in this book, right now? In this $1.3 billion portfolio?
David R. Gibson - Chief Financial Officer
We are, we are all kind of doing the math in our head.
Kenneth C. Ambrecht - Millennium Management, LLC
So what's the dollar amount of the NPA?
David R. Gibson - Chief Financial Officer
It's relatively small in terms of the NPAs we have. And it's most recently just projects that Ted talked about. We have a... at this point I am going to go have to hold back an answer because I don't want to just grab something out of thin air, we can certainly get back to you with that specifics on that?
Kenneth C. Ambrecht - Millennium Management, LLC
Okay, I may not have the theory, I understand you get a sense of direction here. Do you see a small, but maturing modestly?
David R. Gibson - Chief Financial Officer
I don't think as Ted said that we don't see a systemic change in our risk ratings of the portfolio. We've had a couple of individual projects that for various reasons have been downgraded but nothing systemic across that would be used.
Kenneth C. Ambrecht - Millennium Management, LLC
Okay, okay. Thank you very much.
Operator
Thank you. Our next question is coming from Steve Moss of Janney Montgomery.
Stephen Moss - Janney Montgomery Scott LLC
Good morning.
Ted T. Cecala - Chairman and Chief Executive Officer
Good morning.
Stephen Moss - Janney Montgomery Scott LLC
Just following up on the construction loan portfolio. What is your expectation for growth going forward here, obviously with strong last couple of years?
Ted T. Cecala - Chairman and Chief Executive Officer
Yes, I think all the indications are that is, this growth is going to slow down. Just look at absorption rates, pretty frenetic over the last couple of years, so we are... I think seeing a more return to normalcy there so, I wouldn't expect that kind of the intense double-digits growth that we've had in the past in the near term.
David R. Gibson - Chief Financial Officer
And while the growth for residential mortgages, residential housing like slowed a little bit, do you still have a lot of the infrastructure to support the building that has taken place over the last several years, is still under way such as for some of the shopping centers, professional buildings and things like that.
Stephen Moss - Janney Montgomery Scott LLC
How much do you have in commitment to the construction currently?
David R. Gibson - Chief Financial Officer
I don't have that number in front of me. I am sorry.
Stephen Moss - Janney Montgomery Scott LLC
Okay. And with regard to the indirect order seems to be growing here at a pretty fast pace, should we expect that to continue and what are the FICO scores as well?
Robert V.A. Harra Jr. - President and Chief Operating Officer
It's Bob Harra. I just think you can expect to see that it will continue. I can't say that it may continue with the exact pace that you've seen last couple of quarters, but the business we've been in for about 50 or 60 years and what we know well the, as you've seen in the press release the typical buyer for us would be a late model, used car purchaser. FICO scores are, I won't say typical buyers, this is not any closed sub-prime and the dealerships by the way are all within the tri-state area here of actually New Jersey. I should say of course there is New Jersey, Pennsylvania, Delaware, and Maryland, and the dealerships that we know well and we had long-term relationships with.
Stephen Moss - Janney Montgomery Scott LLC
Okay. And lastly moving on to the non-performers that came on this quarter, were there any specific reserves allocated to the loans?
David R. Gibson - Chief Financial Officer
Yes, in time our loan is downgraded, we... our independent review group does an evaluation and we just on a specific reserves for each one of those. We haven't disclosed what those specific reserves are, but each one is evaluated independently.
Stephen Moss - Janney Montgomery Scott LLC
Okay. Could you quantify please, what the specific reserve are?
David R. Gibson - Chief Financial Officer
No, we have not.... We have not quantified that.
Stephen Moss - Janney Montgomery Scott LLC
Okay. Thank you very much.
Operator
Thank you. Our next question is coming from Matt Ackermann of American Banker.
Matt Ackermann - American Banker and SourceMedia, Inc
Yes. Hi, I was wondering if you could lend some color as to the Wealth Advisory Services businesses and what the strategy and growth opportunity maybe for those going forward?
Ted T. Cecala - Chairman and Chief Executive Officer
Well actually the Wealth business for us is the cornerstone of the company, and when we look at the demographics of the country, when we look at our position in that market segment, we are very, very positive. I mentioned in the, my comments, our family office capabilities and these are things that we've searched, that we've begun to offer and it's being well received and we do it a lot differently than others and that seems to develop a lot of traction. So when I will get to the market place and look at our opportunity given our reputation, scope of our product, the independence of our company, these things really rings in terms of the marketplace, it really rings a bell for us.
Matt Ackermann - American Banker and SourceMedia, Inc
Now, are there plans to continue to make acquisitions and you guys made a couple, you mentioned the one at Boston, Luxembourg. Are there opportunities still for more acquisitions or continue to develop this business?
Ted T. Cecala - Chairman and Chief Executive Officer
If you in fact I'm assuming that your question is on the Wealth Advisory Business?
Matt Ackermann - American Banker and SourceMedia, Inc
Yes.
Ted T. Cecala - Chairman and Chief Executive Officer
And the acquisition in Luxembourg is really for Corporate Client Services business, not Welath Advisory.
Matt Ackermann - American Banker and SourceMedia, Inc
Right.
Ted T. Cecala - Chairman and Chief Executive Officer
With the Wealth Advisory business we continued to look for opportunities to expand our footprint, it's probably a lot easier said than done. You really need to make sure that when you do an acquisition, we have the right match of people and culture, so while we look at things and many, many times, I will be afraid to tell you how many trips we have had to Boston before we had success in identifying the Bingham Legg firm, but that may... we will always look for opportunities to expand that business through acquisition.
Matt Ackermann - American Banker and SourceMedia, Inc
Despite what everything with Roxbury et cetera still lot of that.
Unidentified Company Representative
Roxbury is... Roxbury is an investment management firm and that really... we tried to add product when we didn't have as good investment platform that we have today. We stated in the past, at many analyst presentations that, most of that we would not invest to other investment management firms.
Matt Ackermann - American Banker and SourceMedia, Inc
Excellent. Thank you.
Operator
Thank you. There appears to be no further questions at this time.
Ted T. Cecala - Chairman and Chief Executive Officer
Okay. Well thank you for joining us. Again if you have any questions or if want to follow up to us, please give us a call.
Ellen J. Roberts - Vice President of Investor Relations
Thanks everybody. Good bye.
Operator
Thank you. This does conclude today's Wilmington Trust Third Quarter Earnings Conference Call. You may disconnect your lines at this time and have a wonderful day.
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