Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Steve Alexopoulos - J.P. Morgan.
Steve Alexopoulos - J.P. Morgan
Can you clarify, is your credit outlook suggesting you're going to match provision to chargeoffs in the first half of the year? Is that what you're saying?
Bryan Jordan
Steve, this is Bryan, and I'll let Greg expand on it. He walked through a fair amount of detail by portfolio. In some portfolios we're likely to build reserves over the course of the first part of the year and other portfolios, like the one-time closed portfolio and the residential CRE, we expect that those will come down.
I think what Greg tried to signal is that over the course of 2009 we would expect that the level of reserves would come down, particularly as we finish working through the one-time close and the homebuilder portfolios and realize those losses.
Greg Olivier
Yes, I think that's right. I think we have a pretty good degree of confidence provision expense will - the impact of having reserved for the OTC losses in Q3 will allow some provision release. And we feel that on the home equity portfolio and the commercial portfolios are the ones where there's a potential for increase that may or may not offset that release we get from OTC, depending on what we experience in the environment.
If the view of the portfolio gets worse and the migration increases - and that migration has slowed on the commercial side - we should be fine on commercial, but we are vulnerable there. And we're further vulnerable to additional deterioration and delinquency in home equity quarter to quarter.
Steve Alexopoulos - J.P. Morgan
Maybe I could just follow up on that. When we look at the chargeoffs in C&I and income CRE, they were both up this quarter. When you think through 2009 for loss content there, which of those do you think could be more of a pressure point?
Greg Olivier
I think in terms of absolute dollars, C&I because the portfolio's so much larger for us. It's two or three times the size of our income CRE book.
Steve Alexopoulos - J.P. Morgan
What about loss rate?
Greg Olivier
I think what we see is income CRE, that cycle following res CRE as furthest along through the portfolio, so we expect - I think we're communicating that we'd have income CRE losses elevate in the first half and moderate in the second half. On the C&I side, we see more of a steady build in deterioration through the year, but we do expect to start the first half of the year in a better position than we were in fourth quarter because of a lot of the portfolio management activities we instituted over the past 15 months flushed out a number of issues that we dealt with, we think, pretty effectively in 2008.
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