BankUnited Inc (BKU) 2003 Q2 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen to the BankUnited Financial second quarter 2003 conference call. At this time, I would like to inform you that all participants are in a listen-only mode. At the request of the company we will open the conference up for questions and answers following the presentation. This conference call may contain certain forward looking statements which are based on management's expectations regarding factors that may impact the company's earnings in future periods.

Factors that could cause results to vary materially from mangement's current expectations include, but are not limited to, general economic conditions, change incidence interest rates, deposit flows, loan demand, real estate values and competition, changes in accounting principles, policies or guidelines, changes in legislation or regulation, and other economic competitive, governmental, regulatory and technological facts affecting the company's operations, pricing, products and services. I would now like to turn the conference over to Alfred Camner, Chief Executive Officer. Please go ahead, sir.

Thank you and welcome to this BankUnited Financial Corporations's second quarter conference call. With me on the call this afternoon is Ramiro Ortiz, our President and Chief Operating Officer, and Bert Lopez, our Chief Financial Officer.

As you have seen from our earnings release we issued yesterday, we have had another excellent quarter at BankUnited, marking our ninth consecutive record setting quarter which beat street estimates, and continued solid track record of progress and success on all fronts. As a brief recap of those record results, net income for the quarter was 9.6 million and is up 28% from the same period last year. This translates into basic and diluted EPS of 37 and 35 cents per share respectively representing increases of 28 and 25 cents respectively -- percent, that is, respectively over last year's results.

We are very pleased with our results this quarter, especially given the fact that we achieved them in the face of challenges brought by the low interest rate environment and a charge for earnings we elected to take to improve our longer term cost of borrowings. Actually, what I'm most proud of is what this says about the BankUnited team, our ability to achieve this quarterly success despite those factors that negatively impacted earnings potential, clearly indicates that our strategy is sound, our company is strong and our team is creative and flexible enough to turn challenges into powerful opportunities for growth.

One of the challenges I mentioned was a 1.8 million charge we took against our earnings that resulted from a decision to redeem all of our 9.6 cumulative trust preferred securities. This is an important decision we believe will greatly improve our cost of volumes long run in spite of the current interest rate environment and we feel it should have a positive impact on earnings in the future. Clearly, of course, without that charge, we would have displayed even higher earnings.

On another note, obviously the current interest rate environment presented additional challenges and impacted our loan portfolio, particularly our mortgage portfolio, resulting from industry wide high levels of prepayments. We face that challenge buy capitalizing our strong loan pipeline and actually grew total loan balances by 47 million, despite the prepayment situation.

In fact, if you exclude prepayments of LSBOs we hold on a residential portfolio, that is those loans we purchased several years ago and which are serviced by those originators, our loan balances grew by 183 million. We expect as the LSBO portfolio runs off, that balance being 381 million now, as it runs off over the next several quarters, we will show far stronger growth in total loan balances. It should be noted that the prepayment rate of that LSBO portfolio is more than double what our own portfolio originated loans run off at. In this regard, I want to point out that BankUnited is not purchased loans for our portfolio and has not done so for a number of years, instead we have built our portfolio through the addition of loans we originate ourselves.

To this point, I want to discuss our overall lending activities prior to turning the call over to Ramiro to discuss other operational details of the quarter. Total loan originations were 657 million this quarter, this is up 28% from the second quarter of last year. Our residential lending, excluding those consumer mortgage loans we market through the branch network, was very strong at 471 million this quarter which was an increase of 38% over the corresponding period last year. This residential production success was a major contributor to the overall growth and originations and played a large role in combatting the prepay phenomenon as these loans we originated tend to prepay the rate almost half, as I said, of the LSBOs we hold. It is our intention to continue the practice of replacing the LSBO runoff with our own loans and look to realize cross-sell benefits from the lending relationships as well to benefit the organization as a whole.

On another lending front, equally as important are consumer loan production, which includes those consumer mortgage loans I mentioned earlier, reached 97 million this quarter, up 23% from the same period last year. Now, let me turn the call over to Ramiro to further discuss our performance this quarter and discuss the micromarket strategy we rolled out officially shortly following quarter's end. Ramiro?

Thank you, Fred. I think the logical place for me to start is our growth in noninterest bearing deposits over the last three years, on these calls you keep hearing us talk about our shift from the wholesale thrift model to a commercial banking model. Noninterest bearing deposits up sharply, by almost 40% from the second quarter last year to reach $145 million.

Additionally, of great interest for us and indicative of our shift in model, core deposits grew by 18% to reach 1.3 billion as compared to this time last year. Total deposits were relatively stable increasing to 3.1 billion as compared to 3 billion at the end of the last quarter and are up 7% from the end of the second quarter of fiscal 2002.

Our focus continues to be on growing true relationship accounts that we can grow and develop into long term banking relationships and we're pleased with the growth in core deposits. We continue to believe that brick and mortar branches are the key to building relationships and franchise value. To that end, we opened up our 41st bank location this quarter, located in the Broward County community of Wilten Manors, another monitor initiative launched was micromarket strategic direction we officially rolled that out two weeks ago.

Most of you that heard me talk about that a lot, it's a best of both worlds scenario. Simple in concept but one I expect will be very very effective our 11 micromarkets combined, the market intimacy and knowledge of a community bank with the strength and product depth of a 6.5 billion dollars bank, it's truly market driven strategy. Our micromarket managers have been given enhanced decision-making abilities, greater latitudes in how they work in their communities and with their client.

The retail strategy was rolled out two weeks ago, we're following up with a small business strategy that's being developed as we speak. The overall market implications for this strategy is that we will carve a niche for ourselves by offering more products and services in our community bank competitors. and a much more high-touch personalized and flexible service in than larger regional competitors, earlier I said it is the best of both worlds. We're enthusiastic about the potential for this plan and have a lot of confidence in the BankUnited team that's going to carry it out. I'd like to now turn the call over to Bert to further discuss some of the details of our financials this quarter. Bert?

Thank you, Ramiro. As Fred mentioned earlier, we face a challenge in respect to residential prepayments this quarter. These high levels along with competitive pressures with respect to deposit pricing resulted in margin compression this quarter down to196 basis points from 220 basis points for the same period in the prior year and 204 basis points in the most recent quarter.

As Fred discussed, the residential prepayments we experienced was industry wide and had particular impact on the loan serviced by others we hold in our portfolio that we had purchased sometime ago. As the prepayment trend continues we expect the loans serviced by other portfolios will sustain rapid depletion levels over the next several quarters. This may continue to have an adverse effect on the company's interest rate margin until the loans run off entirely. We will have or follow a strategy of replacing runoff with BankUnited originated loans at that we know run off slower and as such provide stability and strengthen the interest rate margin over time.

We're pleased to report a continued growth in noninterest income which reached $6.1 million for the quarter, up 39% as compared to second quarter last year. We are capitalizing on our growing mortgage production area and continuing our policy of selling certain of the bank's originated fixed income conforming residential loans, through this practice, the company realized sales gains of $1.9 million this quarter, from the sale of those assets, which will both loans and securitized loans and were originated for the purpose of sale. We're also happy to report there are service fees on deposits increased 21% from the same period last year following the increase in deposits that Ramiro had mentioned.

Turning to noninterest expense, again, the $1.8 million charge we spoke of for the complete redemption of the company's 9.6% interest preferred securities which totaled $46 million resulted in an increase of 16% in noninterest expense over this period last year as reported. Had we not taken the expense this quarter, we would have shown a 7% year-over-year increase in noninterest expense for normal operations which reflects the company's expansion. Our efficiency ratio was likewise impacted by the higher expense level created by the redemption and was 58.8% for the quarter, up from 55.8% this time last year. Again, if we did not occur the debt redemption expense and exclude the life insurance benefit payment, our efficiency ratio would have been 55.6%.

As many of you are aware, maintaining a high credit quality has been a key tone in our overall management strategy for the bank. We did, however, display an increase in nonperforming loans as a percentage of total loans. It's important to note the increase is primarily attributable to the delay in closing of one specific commercial loan payoff which was scheduled for quarter end. Our allowance for loan losses as a percentage of total loans is 53 basis points, up from 46 basis points for the same period last year and given our real estate secured lending portfolio, we are comfortable with this level.

Just a few more quick items, assets continue to grow and are now $6.6 billion, core and risk based capital ratios are 7.5% and 16.9% respectively, which are in excess of regulatory requirements, those numbers are for the bank only and don't include cash reserves that we hold at the holding company level. Our book value for common share is up 17% from the same period prior year and is now $14.23. Fred?

Thanks, Burt. At this time, I'm happy to open this call up to questions from investment professionals and analysts only. If stockholders or others need to ask questions, we've arranged they can call after this directly into our offices. Moderator, could you please open the call?

Yes, sir. At this time, we will now open the phone call for investment banking professionals and analyst questions only to create the broadest possible questioning. BankUnited wants to answer all stockholder questions.

BankUnited has established a shareholder question line where individual shareholders can ask Alfred Camner, CEO, Ramiro Ortiz, COO, Bert Lopez, CFO, and Lauren Camner, Director of Investor Relations any additional questions they may have. Shareholders are invited to call, starting 10 minutes after the conclusion of this call, dialing the same number, 1-800-915-4836. Once again that number is 1-800-915-4836 if you have additional questions, that have not been answered. The question-and-answer session is open at this time, if you're using a speakerphone pick up the hand set before pressing the numbers. Should you have a question, press star 1 on your push button telephone. If you wish to withdraw, please press star 2. Your questions will be taken in the order in which they are received. Please stand by for the first question. Our first question comes from Ariel Whitman of Sandler O'Neil. Please pose your question.

Hi guys. My question is actually three parts. First, I guess mainly to Bert, is can you comment on what we should expect with respect to the net interest margin going forward with respect to prepays? The second question is probably a Ramiro issue with the credit, I'm assuming it's taken care of or has been taken care of from end of the quarter until now, excluding that credit, what are your ratios, how do they look?

And then on the third part of it is expenses. On a linked quarter basis employee compensation was up pretty dramatically, I'm wondering if you can comment on that?

Ariel I'm going to give Burt to answer as much as he can, and Ramiro and I will chime in.

Okay.

Starting with the first question on the margin and the effect of the prepays, we think we're still going to be under the pressure of prepays for the coming quarter although they should subside from where they were for the last couple of quarters. On the deposit side of the margin, we still have some pretty strong competitive pressures but given that, we have just a little bit over a billion dollars of CDs that will mature over the next few quarters, next two quarters, and that should give us some additional pricing pressure on the margin side. On the liability side, I'm sorry. All told we think the margin will stay right about where it is plus or minus a few percentage points in the same -- in either direction, so we don't see it deteriorating much more.

The other question on the asset numbers, if we exclude the one relationship, our nonperforming assets as a percentage of total assets dropped to 54 basis points from 64, and nonperforming loans as a percentage of total loans dropped to 74 basis points from 91 basis points. And allowance for losses as a percentage of nonperforming goes to 61 -- 62 basis points from 59 basis points.

Ariel, I would just add that this particular credit is probably more of a philosophical discussion than a real credit issue.

Okay.

It's one of these situations where we mutually have agreed that it's best to exit the relationship and this was really a delay in closing with the new bank as opposed to a credit problem.

Oh, okay.

Our credit quality continues to look good. Having said that, we're going to start building our commercial portfolio and while we've got strong underwriting criteria, we're going to be building our commercial portfolio.

Okay.

Then, Ariel, to your third question about the salary increase, the majority of that came from an increase in commissions primarily because of the increased production.

Okay. That's good. Thank you.

By the way, I'm going to tune in one little thing on the credit item as Ramiro mentioned, the LTV on that item is well below 50%, just to give you an idea that -- it's just something that sometimes happens where you don't feel you have an appropriate relationship with a borrower. Okay. We're set up for the next question, if we've answered that.

Our next question is from Jennifer Dunbar of Robinson Humphrey. Please pose your question.

Good afternoon. Bert, I was wondering if you could comment on the lower tax rate this quarter versus the previous quarter and what we can expect going forward?

Sure. The tax rate this quarter had been reduced tax planning strategies we had, we dropped the effective rate or our marginal rate from 38 1/2 to about 35 and change and I think that rate should hold steady to the remainder of the year.

Okay. And I was wondering, Ramiro, can you give us more color on what the commercial loan production was during the second quarter?

Yeah, it's -- our commercial strategy quite frankly isn't yet where I want it to be, our focus towards the second quarter was rolling out the micromarket strategy. Having said that, in the six months that we've been here, we brought in 18 brand-new relationships so, we're off to a start.

I would tell you that this next quarter there's going to be a strong focus in terms of how we're going to structure our commercial team and so forth but this last quarter our focus was really the rollout, the development and rollout of the micromarket strategy.

I'd just add to that, really where we are on our commercial situation further is that we've been in a process, we've examined our overall structure, the kinds of credits we have. We continue to have some fairly, you know, what I call a AAA-type credit in sense of the experience and borrowers and so forth, our ultimate targeting is we make adjustments in the portfolio will be toward more middle market situations.

As that develops I don't think you'll see what you would call significant growth per se in the commercial area. It's almost in a sense like discussing the presently our deposit base while we've grown in deposits, a lot of what's happened is we've turned into more and more core deposits and adjusted the content of the overall deposit base, then likewise, in the commercial, you're going to see that start to adjust, too.

In terms of originations, which was also part of your question, $89 million for the quarter, but we also had some pay-downs and larger participations that we're involved in.

Which I think goes to my concept, because we will to some degree be steering away from in the future major participations as a way of filling a commercial bucket as opposed to having real relationships.

Okay. Thank you.

Our next question comes from James Abbott at Friedman, Billings & Ramsey. Please pose your question.

Good afternoon, gentlemen.

Yes.

I wondered if you could talk on the securities portfolio up pretty substantially linked quarter, I was wondering if you could talk about the structures of those securities, the duration and how you're funding?

Yeah. The strategy of that and what it is is the relatively short term securities duration of approximately two years but slightly more, and the concept is that where we've seen it appropriate in the market and have gotten wide enough marginal gain, that we've gone ahead and put those securities on. I know there are some other institutions that have done likewise in the market when they thought there was those opportunities and we have, too.

The second part of this is on a longer term basis, this gets back to the LSBO portfolio and really our loan growth and our ultimate strategy that you will see one longer term good loan growth as we mentioned, if you exclude the LSBO runoff, you would have had 183 million increase in the balances on our loan side. And frankly this is how we're looking for future, we're down to something more than 300 million in that LSBO portfolio, my belief is that we'll still have some good run off this quarter that we're in now, ultimately slowing and dissipating through September and frankly, at some point you get down to what's the end of the prepayment of a portfolio.

So it's our belief that through September 30th we're pretty well going to come to an end of that and we'll be in position, therefore, for more and more growth in loans which will have ultimately a higher margin basis for us against our funding. So, as those securities pay off, begin that duration I gave you, we'll be replacing those with good loan growth.

On the residential portfolio, I appreciate that comment. On the residential portfolio, though, correct me if I'm wrong, but a lot of that portfolio that you're originating is relatively new therefore unseasoned and a little bit less likely to prepay naturally. Is there any truth to that versus is that part of the reason there's a disparity between the prepayment fees?

No, historically our loan portfolio has had a much lower CPR rate and it's really been that way for a long time. Bert just wrote down some numbers next to me which is basically so that you know that our portfolio runs at 25 CPR, the LSBO portfolio's running at almost 70% CPR, so, there are a lot of reasons for that, the LSBO represented much higher yielding or coupon loans.

Clearly certain of the original originators have even though they're not supposed to, have gone back out to their borrowers and refinanced them and frankly, you know, it's just been a detriment to us, but it's almost over.

Okay. A couple of quick questions, one on the credit that -- the nonperformer has that been sold at this point? I just wanted to clarify.

It's pending still. The closing, the fire marshall or something came in other day, I don't know what it is, whatever's happening, I have no idea the reality is it's supposed to be out of here shortly. It's an extremely low LTV loan, not really a concern to us. It's a relationship problem.

Was the relationship paying on contract? Was it up to par on --

I don't know if I want to go into the specifics. I don't think it's probably appropriate to do that since it involves an individual, maybe somebody can figure it out. But I -- it was more philosophical than performance, I will tell you that.

It's a philosophical matter.

And my final question is.

By the way, the problem is most institutions wouldn't be having this discussion with you at all because we have had so few commercial loan problems over the years of any kind, it's like when one pops up, it shows up, you're asking the questions so I suppose as time goes on, I once had a discussion with somebody who's on this phone call, there may be a day where we'll actually have a loss in a commercial loan, a major loss of some kind, but we've never had one really and, you know, I guess that's the situation. But so when this happens on a delinquency, you end up having to talk about a loan, one loan.

Yeah, I think it's just looking it was more kind of to get a handle on it because of the size of the loan. On the core deposit growth you had this quarter, I was wondering if you could give color on what types of deposits they are, noninterest bearing, Burt, you talked about that earlier on. Maybe if you had a weighted average cost of the core deposit growth during the quarter, not overall cost of core deposits, although that would be helpful but if you just had what the growth was during the quarter and what types of deposits were they, largely money market accounts, so forth.

We had a combination of interest-bearing checking and noninterest-bearing checking growth. The noninterest bearing as Ramiro mentioned, was up nicely year-over-year and 39% and the quarter over quarter we were up about 11.5% or about a 46% annualized rate but between the -- noninterest bearing and interest bearing is where we received most of our increase.

In terms of a blended rate, obviously I don't have a blended rate but obviously, noninterest bearing would be zero and the interest bearing rates were somewhere in the high 1's, they were below 2.

Okay. Thanks very much.

Our next question comes from Irwin Katz of Raymond James Associates, please pose your question.

Hi guys.

Hello.

Well, I got to say something, which may or may not be appropriate, but I saw the numbers yesterday and I e-mailed you guys and I want to tell you, since then, I have gotten lots of very favorable comments as I distribute this information so on behalf of my clients, my family and myself, I want to say thank you because when I saw the numbers yesterday and of course I'm not real analytical guy as your guys know, but I was really impressed so I want to say thank you and now I got to see how you're going to make the numbers look better next time as I think you probably will.

That being said, the growth in these opportunities that you've developed -- and this micromarket strategy is very intriguing to me, is in other parts of the state where I have had conversations with folks where community banks have really built their businesses, it comes from the lack of service from some of the bigger institutions they're competing with. Is that a similar situation up and down the coast?

Well, it is the best of both worlds strategy, Irwin, in that we are going to kill them with service and at the same time, we've got the muscle of a $6 billion bank behind us. We don't believe that you can bank people the same way from Memphis to Miami or from Charlotte to Miami, as a matter of fact, from Palm Beach County to Miami we think there are some challenges in doing that.

Our approach is to we develop the 11 logical micromarkets, some of it is driven by geography, others by ethnicity, other by the type of business in the market, et cetera, and then the idea is to have our market managers become the centers of financial influence in that market and then to go in and dominate that market. In essence, our market managers will take the place of what a community bank president used to do before the big wave of consolidations took over. So, it's a combination of good old fashioned service, coupled with the technology and the strength of a $6 billion organization.

I'll just add to it, what Ramiro said, just about every regional entity now, which really as far as you could be concerned have call it the largest market shares, really have gotten to the point where it's almost completely mass marketing of some type and even though they keep talking about new initiatives and new advertising programs and new this and new that, it still comes out to the same thing. It's a generic product, being applied generically.

There's no question in my mind and certainly from how Ramiro used to operate where he had been previously, until they also went to the same kind of mode to some degree, is the customer wants some attention, wants to be able to get some service but would also like some products. A lot of small community banks don't really have the products, but on the other hand, if they go to the big guys with the products, they get mass marketed and they really have a lot of problem getting the kinds of service and attention they would like and we think we've developed here and this really is out of Ramiro's head, I think it's a fabulous concept, he's done this for many many years in retail banking to develop a situation where you can address both the product needs and the personal service touch needs.

Irwin, it really is the best of both worlds.

That's great. I have one quick follow-up.

I just want to say that my mother also thanks you for your very kind comments.

I appreciate that. Your mother's a lovely lady, I remember meeting her many many years ago.

I actually had a conversation this morning with a long, long-time client who has owned shares in this company since December 10, 1985 and that person said to me this morning says look what these guys have done from the amount of assets they had then to where they are today in the performance and he was very happy with that. And so anyway, I shouldn't take your time for that but let me shift off.

This refinance thing, as I saw it, and again, I'm not an analyst, as you know, kind of led me to believe because you're not process of expanding and moving into these other commercial loan areas and the foreign nationals I guess and presume are continuing to be good opportunities, assistant it correct as you had the refinancings, you had the opportunity to put the money out at a better spread somewhere else because of the new direction?

I don't think it's just that. What happens Irwin, to make it clear, this goes back to the FASB 91, and goes back to another question relating to expenses and how that relates at any particular time, but essentially when the loan gets paid off we have to take a charge directly against the interest income side as opposed to a reversal of expense side.

So in essence, some of the these are actually higher rate loans than -- and maybe older, that are being paid more rapidly but then we have to write off the expense originally of what we may have paid out than was being amortized over a long period of time. It accelerates expense and so it effectively reduces our margin a very immediate way. When that type of -- these types of prepays slow up, we think our margin has a great deal of opportunity. And clearly the new loans were making, we feel we're originating somewhere depending on the circumstances, at a 270 to 320ish area that are going in our portfolio against the costs that we match -- cost of funds that we match against them.

So, in the long run, we feel this bodes well for our margin but we're going to have to get through the regular prepay. We still have some regular prepays of our own portfolio but also the LSBOs that have a highly accelerated rate.

Thank you very much, gentlemen, I look forward to your tenth consecutive quarter of better results.

Thank you, Irwin we'll try to do that.

Our next question from Jefferson Harrelson of Keefe Boyer and Woods, please pose your question.

Good afternoon, gentlemen.

Yeah, hey.

I wanted to ask you a follow-up on an earlier gentleman's question on the leverage that was added at least on an average balance basis this quarter. You mentioned that the securities you're buying in at two years average life, can you tell us more about the securities you're buying are they 30-year stabilized, are they NBS's or what are they?

Mostly NBS's which generally will have some type of adjustable rate coupons on them. They can be five-1's, three-1's some other kinds.

And the borrowings are up about 500 million on an average basis, what sort of duration are you borrowing to fund that?

Approximately the same thing.

And what do you think the spread is on this leverage that you added?

It did reduce in a sense, it had some effect on our margin against where we do our loans and this -- you're generally going to find, depending which kinds we put on board, that you're somewhere between 180 and 200. Once in a while, a tad over 2, generally not below 180.

Okay, and what is the general yield on adjustable three-1's, five-1's, seven-1's right now.

What is it that we're producing?

Yes, what sort of yields --

What we're producing as mortgages?

Yes.

It would be in the high four's in some circumstances it will be in the low five's, depends on the type of product.

Okay. When I look at the gains on loans sold, up 58% versus last quarter and the originations are up about 29% versus last quarter. Did you sell more loans this quarter or are you selling them or are you booking the servicing at higher profits?

We've been -- what we believe is conservative about the booking of the servicing so we haven't really changed that rate. Essentially, that relates to a certain amount of the mix that's come in through our different origination offices.

So, it's a generality, it's not exact, but the generality is to the extent you have more demand for fixed rate conforming loans, those are going to get sold and there was more of that coming through the offices in this period.

Okay. My last question is, on your capital, ending capital from quarter one to quarter two was up about 15.5 million and the net income for the quarter is up about 9.6 million and I was wondering what the differential is?

The difference is the appreciation on securities that we have held for sale, the mark-to-market.

The comprehensive income and what is your total unrealized gain on securities?

31 million at the end of March.

Okay. That's up about 6 million?

Approximately, yeah, 5 1/2, six.

Thanks a lot, guys.

Our next question is from Bartley Parker of RBC Capital Markets, please.

Actually it's Jim Hacker, how are you guys doing?

Hello.

A couple questions. I was wondering, one, if you were able to disclose or willing to disclose what the quarter-end margin looked like as opposed to the average margin for the quarter. And also, I was curious maybe for you, Fred, in terms of the long-term restructuring process, it seems to me, and I think I asked this probably too often, but it seems to me that sort of the promised land in terms of the type of franchise you're trying to build here is getting that margin from the 2% level up closer to the 3% level, a more normalized community bank type of a margin.

And in terms of looking at what moves your are making on the asset side in terms of what you're trying to accomplish with the lending programs certainly makes a lot of sense to me. I'm wondering if you guys as a group give any thought to looking at a way to deal -- are there any way to deal with these long-term borrowings, high cost borrowings on the liability side of the balance sheet and whether or not there was any way to extract yourself from some of these high-cost borrowings to accelerate the process of margin improvement?

The answer is we always look at those things, we don't always have solutions for them. Our treasurer, who I feel is a top-notch fellow working with Bert, we regularly have discussions like that in terms of our strategic outcome meetings and we have made some suggestions. Clearly part of the discussions, suggestions have been that we've looked at paying down our higher rate trust preferred and, of course, we did some of that this last quarter and that actual pay-down occurred at the very end of the quarter.

Additionally, you know, there are other ones that we still have outstanding that I would not be surprised if we don't do something with between now and September and all of those will help. There are some roll-offs of some borrowings that we have, some note issues out in the market that actually mature in the next, I think it's approximately a year and a half, Bert?

February 2004.

Yeah, so it's actually less than a year and that's a fairly good chunk.

How big is that chunk, Fred?

200 million.

Okay.

The -- there are a bunch of types of different securities and beyond that, it becomes more complicated, the ones that aren't running off in the next year or two, the ones that are stretched a little longer. So, those are all questions we address every time we can.

As far as our margin at the end, I don't feel totally comfortable in disclosing that because a lot of things happen in any one month. I don't think that helps you out very much of the reversals in commercial interest on something could lower one month as compared to not another month, so you never know what that situation is going to happen. In general, pretty well what you see is what we've been.

Okay.

When you even out the quarter, that's really what it's been, the prepays are our number 1 problem as Bert mentioned in terms of margin presently and on a current basis.

The second problem is, I think every institution to some degree is facing this, how low can you go in paying rates to your customer? And so while we have some more CDs turning over that may be ultimately beneficial to us in the repricing of those CDs, I think that's what Bert was saying earlier, about a billion dollars coming up, the reality is we're not sure where that's going to end up depending on where the market pressures or at any one time over the next several quarters. And they'll reprice our benefit, but I'm not sure how much of our benefit yet. We just don't know.

The last part is on longer run, I think we've discussed this and this does relate to -- from developing more consumer and more commercial relationships, we hope to get those margin figures up. They were headed up before, you had a steeper decline in interest rates as we've had, and as much prepays and we've had. So, I'd like to think as the prepays dissapate you'll see our margin moving back up. And if I were able to have reversed this in the FASB 91 and said you'd be looking at a much better margin, you might be saying some of my expenses were higher because we'd be adjusting the FASB 91 category.

Thanks, appreciate it.

Ladies and gentlemen, as a reminder for investment banking professionals and analysts should you have a question, please press star 1on your push button telephone. If you wish to withdraw, please press star 2. Our next question comes from James Abbott, please go ahead with your question.

One quick follow-up question. On the other option obviously with the cash flow that's coming from the prepays or one of the other options I guess is to use that for share repurchases. What thoughts do you have in that sort of category now that the share count went up linked quarter?

We look at our opportunities. So, if there were a drop in the market, we've announced that we have available and would purchase -- I'd like to think the market isn't going to drop and we're going to keep going up, but we would certainly take that into opportunity if there had been some kind of drop at this stage for some reason. We probably -- we didn't have it completely instituted when there was a drop for a short time, and we had the board reinstitute it. We were kind of surprised at it, but this is when you were leading up to all the war stuff and our stock dropped in price.

Some people got a really good bargain, as a result, I would like to have gotten the bargain for the company at that point. But by the time we were able to renounce the program, the stock snapped back up and really hasn't been anywhere close to that again.

Based on the spreads you're getting on the securities, would share repurchases be more accretive to earnings per share at this point or less, do you have a sense of that?

You know, I don't know if I got that specific calculation in my pocket right now, that varies at times. In terms of our overall growth strategy, obviously you have to have a certain amount of capital at hand and we've done a certain amount of financing through trust-preferred which I think a lot of you on the phone call are aware of. So, I don't really have a specific overall answer for that one in terms of that particular calculation right now.

Okay. Thanks.

Our strategy continues to be that we think we have a unique opportunity in a market that has -- because of not only consolidation, which has been ongoing, surprisingly enough, but also through strategic moves by major regionals and nationals that gives us opportunity to grow our customer base and our branch network and we expect to continue the expansion of that through this year and certainly expect to do so next year. We just think it's a wonderful opportunity.

It's -- sometimes unless you're here and in the market and really understand, sometimes it's hard to describe the extent of that opportunity. It's tremendous and with Ramiro on board and all the changes he's made, in terms of direction and teamwork and team setups and so forth, we think we're just in an incredible position to take advantage of that opportunity.

Okay, thank you.

If there are no further questions, I will now turn the conference back to Alfred Camner.

Okay. I appreciate very much everyone who tuned in to listen to us. We were certainly excited by what we accomplished this last quarter and we look forward to the opportunities coming up this next -- during the year. Thank you.

Ladies and gentlemen, BankUnited wants to answer all stockholder questions. BankUnited has established a shareholder question line where individual shareholders can ask Alfred Camner, CEO, Ramiro Ortiz, COO, Bert Lopez, CFO and Lauren Camner of Investor Relations any additional questions they may have. Shareholders are invited to call starting 10 minutes after this conference call ends to the same phone number 1-800-915-4836 if you have any additional questions that have not yet been answered.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1-800-428-6051 or 973-709-2089 using ID number 290726 followed by the pound sign. This concludes our conference for today. Thank you for participating and have a nice day. All parties may now disconnect.