Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Matt O’Conner – Deutsche Bank.
Matt O’Conner – Deutsche Bank
As we look at the charge off level for the second quarter, is this the new kind of run rate to grow off from here or was there some upfronting of the commercial real estate losses as part of the revenue that you did this quarter?
Stephen D. Steinour
Matt, we’re in one of these moments in the credit cycle where it’s very difficult for us to project. I would tell you we’re recognizing losses earlier than we had been. There’s always a continuum of when you can take loss. Having said that, I don’t know how material that would be second quarter to first. But, well continue to address issues as we see them arise and move forward.
Matt O’Conner – Deutsche Bank
Just in general, you guys seem to be one of the few banks out there looking more closely at C&I and some of the income producing commercial real estate. Is it that you’re trying to get ahead of the curve, you think your mix might be a little bit worse, are others just behind? I’m trying to reconcile it to folks out there saying there won’t really be issues in C&I and CRE and don’t seem to be reserving or charging off any of that stuff?
Stephen D. Steinour
I don’t really know what our competition has in their books Matt. It’s hard to make a relative comment. As we’ve shared with you and others earlier, we’re really trying to get the entire left hand side of the sheet and that’s in part what Don referenced by looking at the Alt-As. We want a clean sheet as much as we can this year and so everything has been looked at or is being looked at, wholly every asset on the sheet is being looked at or has been looked at.
Matt O’Conner – Deutsche Bank
Then just lastly, as I look at the loan loss reserves they were below the annualized charge offs this quarter obviously, well below the non-performers. Should we expect more reserve build going forward relative to charge offs?
Stephen D. Steinour
Well, we tried to break this out a little bit. We took a mark-to-market on Franklin when we moved it in and that’s 20% of our non-performing loans or thereabouts. So, we’re trying to do a more apples-to-apples comparison. Franklin unfortunately seems to be relatively unique to us. We certainly feel the reserves are adequate or we’d have another number there. Directionally, with the economy worsening could we build reserves somewhat? Possibly, but we haven’t seen anything that concerns us in terms of big buckets of risk that have not already been reviewed and addressed to the extent that we see the inherent risk.
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