Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from John Pancari – J. P. Morgan.
John Pancari – J. P. Morgan
Can you talk a little bit about the inflows in to non-performing loans? I know you mentioned I think $28 million there that $17 million was real estate and $11 million was C&I. Can you give us a little more granularity on that like what types of real estate credits and the same thing on the C&I.
George F. Jones, Jr.
It’s primarily in the market risk real estate side John. It relates to commercial real estate. The C&I portfolio is really pretty much broad based. There’s no one particularly industry or no one particular region, just a general weakening in a few commercial credits that you would expect to see in this environment. As I mentioned before 75% of our existing non-performers are real estate related and we still see that kind of ratio and moving in to the NPA category we still think it will be more heavily weighted to the real estate side, the commercial side.
We have lowered our exposure to the residential real estate market, that’s moved down somewhat in the last quarter in terms of outstanding credit and we haven’t seen a lot of movement from the residential real estate side in to the NPAs, it’s been more of the commercial tracts, possibly small office category or something like that.
John Pancari – J. P. Morgan
Can you talk about your provisioning around your oil and gas exposure? Have you upped your loss provisioning around that at all? Can you just comment in general on your expectations?
George F. Jones, Jr.
No, we have not because we have not needed to. In the last 30 days we’ve done two extensive energy loan reviews and we came away very, very pleased with what we saw. The portfolio is holding up extremely well. Why is that? Really, our long term projections for oil never really exceed $60 a barrel and gas at that $6.50 range at the highest point. We’re not booking transactions at those very high prices.
100% of the credits that showed any sensitivity to prices, oil particularly at $50 or below we’re required to hedge. Any properties with short economic lives or high concentrations we’re also required to hedge. The 2010 futures today, the average price is higher than our recommend base case. Any client today really can enter a hedge that will lock in prices in excess of those pricing assumptions today.
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