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Operator
Good afternoon and welcome, ladies and gentlemen, to the BankUnited fourth quarter and 2003 fiscal year conference call. At this time I would like to inform you that this conference is being recorded and 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 after the presentation.
This company call may contain certain forward-looking statements which are based on management's expectations regarding factors that may impact the company's earnings and performance in the future period. Words and phrases that such as “will likely result, expect, or continue, anticipate, estimate, project, intend, should, may, can, plan, target” and similar expressions are intended to identify forward-looking statements. Actual results or performance could differ from those implied or contemplated by such statements. Factors that could cause future results and performance to vary materially from current management expectations include, but are not limited to, general business and economic conditions, fiscal and monetary policies, war and terrorism, changes in interest rates, deposit flows, loan demand and real estate values, competition with other providers of financial products and services, the issuance or redemption of additional company equity or debt, volatility in the market price of our common stock, changes in accounting principals, policies or guidelines, changes in legislation or regulation, reliance on other companies for products and services, and other economic, competitive, governmental, regulatory and technological factors affecting the company's operations, pricing, products and services.
I would now turn the conference over to Alfred Camner, Chairman and Chief Executive Officer of BankUnited. Please go ahead, sir.
Alfred Camner - Chairman and CEO
Thank you for joining us today for our fourth quarter and year-end conference call. With me are Ramiro Ortiz, President and Chief Operating Officer, and Bert Lopez, our CFO. In light of the general economic uncertainties this year and the effects of the Iraq war, as well as the challenges in the form of very low interest rates, which created extremely high prepayments, I am certainly pleased that we reported both a record quarter, our eleventh consecutive quarter of record earnings, and our fourth consecutive record year. In addition to increasing net income for the quarter by 37% over last year's fourth quarter to reach $11.1 million, we are also up by 29% for the year over last year, with annual net income topping $39 million. Total assets for the company reached $7.1 billion by year's end, making an increase of 19% from this time last year. Our strong performance has not gone unnoticed. This year the acceptance shown by investors of our strategy and our abilities to execute allowed to us complete a successful secondary public offering in the third quarter, when we raised $72.8 million through the sale of more than 3.9 million shares of our Class A common stock. Overall, the share of capitalization grew by 56% from this time last year to reach $629 million dollars. What is particularly exciting is that, not withstanding the dilutive effect of the additional shares outstanding, our overall EPS, both basic and diluted, grew for the quarter to 37 cents and 35 cents respectively, up from 32 cents and 30 cents for the same quarters last year. On an annual basis, basic and diluted EPS grew to $1.45 and $1.36, respectively up from $1.20 and $1.12 for the last year.
BankUnited continues to improve in almost every key indicator, especially total loan production, core deposits, and non-interest bearing deposits. We believe these increases are a direct result of our neighborhood banking strategy, which Ramiro will discuss a few minutes, and general improvements in the way we operate to become more effective. We anticipate that the continued focus on service and profitability by our associates and management team will enable us to continue in this positive direction. I'll now turn the call over to our COO, Ramiro Ortiz, to discuss before the particular operational results. Ramiro?
Ramiro Ortiz - President and COO
Thank you, Fred. As Fred said, this has been an outstanding quarter and fiscal year for BankUnited. Total loan production continues to be an area of strength for the bank, total loan originations continued an upward trend in the fourth quarter, increasing 45% to reach $896 million compared to the fourth quarter last year. Likewise, total loan production for the year was $3 billion, up 31% over 2002. As a matter of fact, lending across all fronts was robust -- strong growth in residential mortgage loan originations, consumer loan production which hit record numbers for the year, and particular improvements in the fourth quarter for our commercial and commercial real estate areas. These are important milestones for our bank and reflect an increased focus on branch-originated business where there are significant cross sell opportunities. We have created linkage between our consumer banking areas and our residential lending twigs to effectively capitalize on cross-sell opportunities. Our initial results were very encouraging.
Our total loan portfolio stood at $4.2 billion at year-end, having grown by $109 million in the fourth quarter. Increases in interest rates during the fourth quarter resulted in an industry-wide slowdown in mortgage refinancing, and we experienced a decrease in our rate of refinancing towards the end of the fourth quarter. However, with the continued strength of the south Florida economy and our emphasis on loan generation through all lending channels, we expect our pipeline to remain strong, though off from peak periods. Additionally, we continue to bolster the commercial lending areas and have begun to transition to full middle market relationships, as opposed to large corporate participations. We're seeing from fourth quarter results that this transition and the strengthening of our infrastructure in support of this area are yielding some strong results. I'm proud to tell you all that April to date 29 brand new fully priced commercial relationships have been established. This should impact our margin and profitability going forward.
One significant step we took in the third quarter towards enhancing our deposit relationships was the official implementation of our micromarket strategy on the consumer side. Our micromarket strategy, which calls for a return to neighborhood banking, is beginning to show traction. We're seeing a nice increase in core deposits, particularly DDA figures, and we believe we can outperform and outmaneuver the large out of state banks while still offering more personal service levels than our smaller competitors. Core deposits grew 16% from the end of has year to reach $1.4 billion. By year-end, core deposits comprised 44% of our total deposits.
We're particularly pleased with the growth of non-interest bearing accounts, which increased to $198 million, or a steep increase of 69% over September 30th last year. In my eyes, that's the real judge of whether or not we're acquiring new relationships in the bank. Total deposits increased to $3.2 billion. Over time, the ongoing growth of core deposits and an emphasis on relationship-based pricing of time deposits will have a positive effect on our overall profitability. We have made substantial progress in the last year to strengthen the foundation for future growth. Significant management realignments improved investments and infrastructure, enhanced our distribution network, and improved our service capabilities. This year, we opened up additional branches, bringing our total to 44 locations, and we plan to open seven additional branches in the next three quarters. Of course, even with all this growth, BankUnited strives to closely manage the impact of growth on expenses while continuing our strategic investment in infrastructure, new banking offices, and the hiring of new talent to perform vital roles. In closing, it's the dedication of all of our associates that's the fuel that drives our success. Global decision-making and high-touch service distinguish us from our competitors. Let me now turn the call over to Bert Lopez, our CFO, who can discuss key financial indicators of our performance. Bert?
Bert Lopez - SEVP and CFO
Thank you, Ramiro. Our net interest margin continued to be impacted from the pressure from high industry-wide levels of mortgage loan prepayments and local market pressure to competitively price our deposits. We're taking steps to turn our margin around, and we’ve seen some stabilization this quarter, as our net interest margin was 181 basis points, which is flat as compared to the June quarter. While this is still down from 219 for the fourth quarter of 2002, the link quarter stabilization is encouraging. For the year, our net interest margin was 1.88% compared with 2.14% for the 2000 fiscal year. As part of our overall efforts to improve this area, we retired $162 million of high interest rate trust preferred debt this year, which has lowered our debt expense. There are many factors that will assist us in improving our margin over time and several actions that we will continue to pursue -- should help us in this regard.
In particular, as Ramiro mentioned, the slowdown in prepayments of mortgage loans, particularly in our portfolio of previously purchased loan serviced by others, allows us to grow our overall portfolio through the origination of our own loans, which prepaid a rate half that of the loans serviced by others. We're also looking at an increase in mortgage rates, which will make those loans we originate going forward more profitable, and we're is anticipating a significant opportunity to reprice a large number of certificates of deposits, which are now at higher market rates in the coming quarter. We presently have $1.2 billion of our $1.8 billion of certificates of deposits maturing over the next 12 months at a late of 3.07%, so we should have some good repricing opportunities there. Also, as Ramiro mentioned, our core deposit growth trends continue, particularly in the area of non-interest bearing deposits, which we expect to help lower overall cost of funds. And as Ramiro also mentioned, our commercial strategy is taking hold on both the loan and deposit side which should help the profitability of those areas as well as improve the margin going forward.
Moving on to net interest income, it reached $6.7 million for the quarter, up 56% compared to the same quarter in 2002. For the year, total amount of interest income was a record $28 million, up 63% from last year. The income including loan fees, deposit fees, and other fees was $2.7 million for the fourth quarter, a 35% increase for the same period last year. The income for the year of 2003 was $10.3 million, up 27% from last year. In order to fully capitalize on our loan generation capabilities and to generate non-interest income, this quarter we generated $1.9 billion dollars of gain on sales loans and securitized loans. These assets were specifically originated for sale, and for the year, non-interest income from this discipline was $7.3 million. Additionally, we more than doubled our non-interest income from the sales of investment securities and other assets, which yielded $7.2 million for the year, up from $2.5 million for last year. And for the quarter, these gains totaled $1.3 million, versus $4.3 million for the quarter ended June 2003. We did see downturn in the area of loan servicing fees as a result of the high level of mortgage prepayments I mentioned earlier. In the fourth quarter, we provided for the amortization of $2 million of servicing rights, which was offset by approximately $600,000 of fees earned on those loans, a yielded net impact in this area of $1.4 million. For the year we provided for amortization of $6.8 million of servicing rights, up from $4.1 million for 2002.
On expense side we continue to make prudent decisions including investment and new offices, talent and infrastructure that will provide for our future growth, and we expect to continue to invest in those areas that will be a benefit for the company as a whole. A few unique items impacted our expenses for this quarter. Expenses for the quarter were $20.6 million, down from $22.7 million for the third quarter. The last quarter, we did have $3.7 million in write-off of deferred issuance charges on the retirement of our trust-preferred debt. So in essence, our expenses grew $1.6 million dollars for the quarter, and of that $1.6 million, $1.2 million,, the vast majority of that, is attributable to the change in value of our financial derivatives, as accounted for under FASB 133. [Indiscernible] expense for the year was 11% -- I'm sorry, up 16% over last year. Our efficiency ratio was 57.3% for the quarter and 57.6% for the year, as compared to 56.6% and 55.8% respectively for the same quarter and prior year period. Offsetting some of the expense increase, particularly for the fourth quarter, we did recognize the benefits of some tax planning strategies that we implemented, which lowered our effective tax rate.
As far as our asset qualities are concerned, we're pleased to have shown an improvement in the fourth quarter with non-performing assets as a percentage of total assets decreasing to .59%, down from 75 basis points or a 21% improvement in the quarter, and up slightly from 53 basis points at the end of last year. Total chargeoffs for the year have decreased. We were at $3.4 million for the 2003 fiscal year, versus $4.8 million for 2002. And for the quarter, our net chargeoffs as a percentage of total average loans did increase slightly to .8% from .06%. I'm sorry, that's .08% from .06%, but down from 12 basis points of last year. We've always maintained a conservative credit culture at BankUnited. We're constantly working to seek improvements in the overall credit quality of our loan portfolio. Although there is no assurance that this trend will continue, our efforts paid off this quarter and we will work to keep this downward trend on track. Our allowance for loan losses as a percentage of total loans stood at 52 basis points at year-end, versus 51 basis points at last year-end. And then a few other items. Core and risk based capital were 7.2% and 16.1% respectively at year-end for the bank, and book value for common share was $14.88 at year-end, up from $13.52 at last year-end. I'll turn the call back over to Fred.
Alfred Camner - Chairman and CEO
Thank you, Bert. As you can see by what's happened, we really feel that we had an excellent year and a foundation to go forward from here. For some of you, since many of you are from the New York or other areas, we all recently expected that we had a wonderful win for our Florida Marlins, so I hope in advance that none of you are too mad at us at this point, but one of the things we learned out of all that, one for all us of us no matter where we are and what city we're in, is that the ultimate ingredient we must have as an institution to go forward and to get the results for all of you is the degree to which we can execute on the plans and strategies that we have. We've got some excellent plans this year. We've just finished our budgeting. We're quite optimistic in that regard. And the key word that Ramiro will tell you, the No. 1 word that we're talking to all our senior officers and our associates is the word of executing on the plan and getting the job done. So we're very optimistic for the future. With that, we're now ready for questions. Moderator, if you could go ahead and open up the call for questions.
Operator
Thank you. The question-and-answer session will begin at this time. If you're using a speakerphone, please pick up the handset before dressing pressing any numbers. Should you have a question, please press star 1 on your push button telephone. If you wish to withdraw your question, please press star 2. Your questions will be taken in the order they are received. Please stand by for your first question. Our first question comes from James Abbott from FBR. Please state your question.
James Abbott - Analyst
Good morning, gentlemen. Good quarter.
Alfred Camner - Chairman and CEO
Thank you.
James Abbott - Analyst
I wondered if you could touch on a couple of things. One, your non-performing assets improved very significantly, down a little over $10 million linked quarter and yet your net chargeoffs were only a minor part of that. I wonder if you could touch on what the driver for that was, whether there was just a general improvement in the economy or if there was some cleaning that you were able to do or what.
Alfred Camner - Chairman and CEO
Well, I think most of it, and I'll be very frank, you always reach sometimes a little point of embarrassment and when you're in the process of getting a lot of things done. We came to the end of the last quarter, and we really felt that we had not emphasized enough and not focused enough on making sure the collections process was going at an expeditious pace. And I personally, myself, took some interest in that area and being an old workout person for many years, realized that we needed to speed up collection execution. And that's the primary reason for the improvement. Since we have very well secured assets, we just needed to get the collections moving faster, and we've built in some new controls on getting that going at a faster pace, and I think we'll continue along that line as we go forward.
James Abbott - Analyst
How much more do you anticipate that the -- decline to continue and at a similar magnitude or anything -- can you give us any color on that?
Alfred Camner - Chairman and CEO
It's always difficult to say. You could always have a little bit ups and some other downs in that number. We're certainly going to just keep working on the speed of doing it. I mean, at some point you, of course, do reach the point where the court system is -- you only can push it so far, but we just felt that there was some things earlier interventions and some other situations where if we paid more attention to it we could move the properties and/or the foreclosures faster, so we're going to keep working on that. The other major thing that happened last quarter is we had the one major commercial loan that had ballooned out somewhat and we're optimistic had a good piece of that may end up resolved in this quarter.
James Abbott - Analyst
Okay. Wonderful. Thanks. And then a couple other housekeeping items, I guess. On the tax rate, it looks like the tax rate came in at 20% this quarter. Is that just a function of maybe Bert, I don't know if you can touch on that.
Bert Lopez - SEVP and CFO
Sure. That's a combination of a couple different tax claim strategies and just an overall cleanup of our estimate for it in the end of year. I would caution, though, that we're not going to sustain a 20%, 22% tax rate. It will be more in the low to mid-30s, closer to a 34% tax rate going forward.
James Abbott - Analyst
Okay. So those are essentially one-time events, then, this quarter?
Bert Lopez - SEVP and CFO
Yes.
James Abbott - Analyst
And premium amortization, did you have premium amortization for the quarter on the securities portfolio and purchased loans, I guess?
Bert Lopez - SEVP and CFO
On the securities portfolio, premium amortization was about -- had an impact of about 60 basis points on the portfolio itself. I apologize. About 80 basis points this quarter, up from 60 basis points last quarter. So we did see an increase in amortization as rates -- or as prepayment came in pretty strong for the July and August months, but they did slow down in September and October, and we think they will slow down a little bit more in November.
Alfred Camner - Chairman and CEO
I should just make a general comment in terms of margin. There is no question, like many, even though we had been slower than some, we still received a great deal of prepayments in July and August, even more in the sense than we would have projected. That certainly has slowed down, obviously rates and made a difference. We have all along —and we’d mentioned this -- have put a lot of emphasis in our production area in directing it toward mortgages, which involve the purchase of homes, so we feel on the production side, while we'll also have some decline against the peaks that we had with the heavy refi's, nevertheless, our declines I do not believe will be anything like some of the other institutions have been reporting recently. We're very optimistic in that regard.
Bert Lopez - SEVP and CFO
An example, while industry norms are pipelines that have been reduced in the 40-45% range, our pipeline has been decreased in the 20% range, and we think that that's pretty sustainable.
James Abbott - Analyst
Okay. Phenomenal. And so if I were to understand that correctly, then the margin would have been in excess of 2% had we had been in the current rate environment for the fourth quarter. Is that correct?
Bert Lopez - SEVP and CFO
James, the numbers I gave you really were just for the mortgage-backed securities portfolio. I think we would have seen them closer to 2, but I don't think it would have been over 2, just in the portfolio as a whole.
James Abbott - Analyst
All right. Thanks very much.
Operator
And the next question comes from John Pandtle from Raymond James & Associates. Please state your question.
John Pandtle - Analyst
Thank you and good afternoon. I actually have a few questions if we could. Just to follow up on the previously comment, are you saying that if rates remain stable on the long end, that you would expect all things equal, the margin would be closer to 2% for the December quarter?
Alfred Camner - Chairman and CEO
We hesitate to make those kind of predictions. I think what Bert was saying, if you had seen last quarter and not the exact same thing but, remember, there are other things going on other than the ones that we are talking about, that it would have been closer to 2% for that period, just eliminating a couple of those items, but there are other items. So if you're asking me what the trend is, we think the trend with rates where they are now, will be upward, comfortably upward, and it will be -- we think it will look a lot better ultimately than this quarter, but of course, we put all those caveats that you always put into these kind of things, but you still had relatively high prepaids even in September, but not as high as July and August, and likewise, you still have some still flowing through. Remember, you're running about anywhere, depending on servicing, I think all of you remember that we also still have, though we're down to $200 million of it. We still have loans we purchased from others in this little scenario, too, and have pretty high prepay speed there. All these things are slowing down, but some of it runs two to four months behind. So October will be higher than what we would, quote, consider the norm, but not as, probably as much as in September nor certainly as much as in July and August. So we are in the appropriate trend that we think the prepays are going to do very well for us, that slowdown, and it is no question that had a substantial, by far the most significant effect on our margin situation.
John Pandtle - Analyst
Okay. And then the unrealized gain position in your securities portfolio I think was about $16.5 million in June. Do you know what that number was in September by the end of the quarter?
Alfred Camner - Chairman and CEO
The after tax number is there is $6.6 million. 16 was also an after tax number.
John Pandtle - Analyst
$6.6 million net gain now?
Alfred Camner - Chairman and CEO
Yes. After taxes.
John Pandtle - Analyst
Okay.
Ramiro Ortiz - President and COO
Net unrealized gain after taxes.
Alfred Camner - Chairman and CEO
You will have to remember that we still have a relatively low duration on all those securities for the most part.
John Pandtle - Analyst
Okay. And the duration, the change there from June to September?
Ramiro Ortiz - President and COO
Our duration of the MBS portfolio was 1.8 in June. When rates came up and went down a little bit right at the end of the September we're at 2.08 years. What we've done is taken a 100 basis point shock on that that extends to 2.8, but as you can see there's not too much there in the way of extension. Those are all typically short-term, short-duration securities that we bought into our NBS portfolio.
John Pandtle - Analyst
Then just to clarify a housekeeping item, net chargeoffs for the quarter, the number you showed in the press release was for the full year. Did I back into the correct number, it's about $1.6 million for the quarter?
Ramiro Ortiz - President and COO
Yes, we are at $1.7 million year-to-date at the end of the June. Then we're at $3.4 million year-to-date at the end of the September.
John Pandtle - Analyst
Okay. And would you expect that number to moderate in ‘04 on a percentage basis?
Alfred Camner - Chairman and CEO
Yes. Typically, we are in anywhere from the five basis, 5 basis points to 10 basis points as a percentage of total loans in our chargeoffs. For this quarter we were at 8 basis points. So we're right within that range.
John Pandtle - Analyst
Okay. Thank you.
Operator
And our next question comes from Gary Tenner from SunTrust Robertson Humphrey. Please state your question.
Gary Tenner - Analyst
Thanks. Most of my questions have been answered but I wonder, Bert, if you could be a little more specific on the CD maturities over the next four quarters or so, give us a better sense of the timing of this.
Bert Lopez - SEVP and CFO
Sure. We have as I mentioned $1.2 billion of CDs that are coming due over the next 12 months. $800 million of those are in the first six months and then $400 million obviously in the second six months. The second six months has a yield of 3.6%. The first six months has a yield of 2.6%, but we do have some repricing opportunities there.
Gary Tenner - Analyst
Great. And just to follow on John's question regarding the chargeoffs, At $1.6 million -- or $1.6 million or so net chargeoffs in the quarter, is that about a 16-basis point annualized rate?
Bert Lopez - SEVP and CFO
That -- I.
Gary Tenner - Analyst
I think you had said 8 basis points.
Bert Lopez - SEVP and CFO
The 8 basis points was a year the date number. We moved our number from 6 basis points to 8 basis points quarter to quarter. I think it does work out in the low teens in terms of chargeoffs, but then again, we don't see that that rate of chargeoffs continuing through next year.
Alfred Camner - Chairman and CEO
What we do in final quarter of the fiscal year, will not necessarily be indicative of the next quarter after.
Gary Tenner - Analyst
Sure. Fair enough. Thank you.
Operator
Our next question comes from Jim Ackor from RBC Capital Markets. Please state your question.
Jim Ackor - Analyst
Good afternoon, guys. As a long-suffering Red Sox fan I was very happy to see the Marlins win, actually, so thank you for that. A couple of quick questions. Bert, when you said 80 basis points upon on the premium amortization, I didn't quite follow what you were really talking about there. Do you have an absolute dollar amount?
Bert Lopez - SEVP and CFO
I don't have an absolute dollar amount handy. I think it's about $4.6 million. But the 80 basis points was just an annualized rate that all the prepayments had impact the mortgage-backed security portfolio by this quarter.
Jim Ackor - Analyst
The yield on the portfolio?
Bert Lopez - SEVP and CFO
Yes.
Jim Ackor - Analyst
Okay.
Alfred Camner - Chairman and CEO
That is -- that's strictly on the mortgage-backed portfolio. It does not relate to the loan portfolio and what was a significant impact from the prepayments that occurred on the loan portfolio, particularly as we’ve all discussed before, and many of you know, they’re loans that we purchased from others which, again, prepaid down, I believe it was from $280 million down to $200 million. So, for example, we didn't give the number -- I guess we should have -- that the actual growth in loans was pretty close to $200 million if you exclude that one category again from the situation. So you can see we're starting to build up momentum in terms of our loan production, and it's picking up quite a bit.
Jim Ackor - Analyst
Okay. And a follow-up on --
Alfred Camner - Chairman and CEO
I should say loan portfolio growth.
Jim Ackor - Analyst
Right.
Ramiro Ortiz - President and COO
You're right. It was $191 million for the quarter, excluding (not audible).
Jim Ackor - Analyst
Okay. With regard to asset quality, obviously, you're making a concerted effort to change the mix of the loan portfolio over time, you mentioned middle market commercial lending picking up some momentum. Can you give us some sort of broad-based guidance in terms of what you expect to do with our loan loss reserves? Obviously, your chargeoff experience and history has been extremely good over time but one could presume or one should assume that those numbers may or may not move a little bit to the upside on the chargeoffs as you change the risk profile of the loan portfolio. So is there any kind of guidance on the provisioning process and the level of reserves that you're going to be ultimately comfortable with as the mix changes?
Alfred Camner - Chairman and CEO
Going to give this one to Bert, but this is a tough question.
Bert Lopez - SEVP and CFO
I mean, that's hard to predict, the actual mix obviously going forward, but conceptually you're correct. As we do more commercial and commercial real estate as a percentage of the total, our reserves for loan losses will continue to change. Typically we provide a little will over 1% for commercial and commercial real estate loans, where our residential loans we're providing .1%, so just mathematically the numbers will change going forward.
Alfred Camner - Chairman and CEO
The provision we've been taking has generally left us with some general reserve situations, and I guess it gets really more complicated in view of all the accounting rules. So even though, because we're so much residentially oriented and otherwise real estate secured, we've had a relatively low reserve level. In actuality, it's a reserve that we think is extremely adequate for quite some time. Nevertheless, we feel it's appropriate to continue to add reserves as we go forward. I don't know if that helps any. It's a difficult --
Jim Ackor - Analyst
No, that helps. That's fine. Thank you. And, Bert, one more quick follow-up, actually two. The tax rate going forward, did you say low 30s?
Bert Lopez - SEVP and CFO
Yes. 33%, 34% going forward.
Jim Ackor - Analyst
33, 34. And I don't suppose by any chance you happen to have average balances, quarterly balances for earning assets, equity loans and assets.
Bert Lopez - SEVP and CFO
I do. I can give you those broad categories now if you'd like.
Jim Ackor - Analyst
Yes, just for modeling purposes. Thanks.
Bert Lopez - SEVP and CFO
One second. Let me get to them. You wanted loans?
Jim Ackor - Analyst
Loans, assets, earning assets, and equity.
Bert Lopez - SEVP and CFO
Total loans after provision, average balance for the quarter was $6.205 billion. You wanted total earning assets?
Jim Ackor - Analyst
Yes, please.
Bert Lopez - SEVP and CFO
$6.629 billion. And then average assets $6.842 billion.
Jim Ackor - Analyst
And equity?
Bert Lopez - SEVP and CFO
Average equity was $434,714,000 or $435 million on average.
Jim Ackor - Analyst
Thanks a lot, you guys.
Alfred Camner - Chairman and CEO
You're welcome. Thank you.
Operator
And our next question comes from Gene Garfield with Briarcliff Capital. Please state your question.
Gene Garfield - Analyst
I believe on the last call you mentioned the possibility of reviewing your dividend policy at the end of the fiscal year. Any thoughts on that, please?
Alfred Camner - Chairman and CEO
We keep reviewing it, and there are a lot of things attendant to that relating to rates, where we are, some capital market questions. It's been a complicated one for us. I don't have a definitive where we're going discussion. I know we'll end up having it as a topic in the board sometime in the next two months, and that's all I can really tell you at this point. I wish I could tell you more on it.
Gene Garfield - Analyst
Okay. Thank you.
Operator
Our next question comes from Sam Caldwell from KBW. Please state your question.
Sam Caldwell - Analyst
My questions have been answered. Thank you.
Operator
Our next question comes from John Pandtle from Raymond James & Associates. Please state your question.
John Pandtle - Analyst
Thanks again. Quick follow-up. In terms of your mortgage-backed securities portfolio at about $2.1 billion at the end of the quarter, how do you expect that to look as we move through 2004? And where I'm coming from is expected balance sheet growth for 2004. It looks like you expect loan growth to pick up. Do you expect to fund some of that through maturing securities and if so what does that imply in terms of earning asset growth?
Alfred Camner - Chairman and CEO
We expect to have some fairly healthy asset growth, but we do not expect to grow mortgage-backed securities. There will be some fluctuation there because at times we'll have the payoffs. At times we will do sales when we think it's appropriate, when we have good gains, and frankly, it's not a formal hedge but it's almost an informal hedge in a sense -- some interest rate movements. Beyond that, we don't really anticipate, particularly our growth in there. There are times, though, that if you happen to produce a fairly large amount of conforming loans that you end up securitizing, there could be occasions where you could see that temporarily go up if the sales go over a period in. That would be unusual, but it does happen once in a while. So basically, we're looking at that as probably in general flat to somewhat down. So in a way that says, yeah, we'll produce some of our funding will come out of ultimately that area.
John Pandtle - Analyst
Okay. So that implies slower asset growth versus what you saw in ‘03 for next year.
Alfred Camner - Chairman and CEO
Right now I think the way things are going, we see somewhere in the around $200 million in loan growth per quarter, which could be a little less or may actually end up being more than that. So that would indicate that we'll still have some pretty healthy growth not withstanding that we're not growing the MBS portfolio.
John Pandtle - Analyst
And I promise one last question. You mentioned the unrealized gain position after tax of $6.6 million for September. Do you have a feel for where it would stand now? Given the rate move we've had?
Alfred Camner - Chairman and CEO
When we took a look at that, when we shocked it up 100 basis points, after tax we were about flat, so we did come down from the $6.6 million. But that was using September 30th numbers and shocking up 100 basis points. So in essence the $6.6 million would come down to just under $1 million.
John Pandtle - Analyst
Thanks again.
Operator
Once again, ladies and gentlemen, as a reminder should you have a question, please press star 1 at this time. If there are no further questions, I will now turn the conference back to Alfred Camner.
Alfred Camner - Chairman and CEO
Well, we greatly appreciate everyone listening in. We hope we've given you a good concept of our future. We certainly thing the word execution in terms of our planned strategy is the most important one for us now. We've made a lot of improvements and strides this last year, and we're looking forward to doing something even better for all of us as stockholders. We thank you very much for being on the call today.
Operator
Ladies and gentlemen, if you wish to [inaudible] you may do so by dialing 800-428-6051 or 973-709-2089 with ID number of 309765. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.