BankUnited Inc (BKU) 2004 Q1 法說會逐字稿

Good afternoon, and welcome, ladies and gentlemen, to the BankUnited first quarter earnings conference call. At this time I'd like to inform you that this conference is being recorded and 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 conference 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 future periods. Words and phrases such as "will likely result, expect, will continue, anticipate, estimate, project, believe, intend, should, may, can, plan, target and similar expressions are intended to identify forward-looking statements.

Actual results of 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, issuance of redemption of additional company equity or debt, validity in the market prays of -- price of our common stock, changes in accounting principles, policies or guidelines, changes in legislation or regulation, reliance in other companies for products and services, and other economic, competitive, governmental, regulatory and technological factors affecting the company operations, pricing, products and services. I will now turn the conference over to Alfred Camner, Chairman and CEO of BankUnited. Please go ahead, sir.

Thank you for joining us today on our first quarter conference call for fiscal year 2004. Together with me on the call are Ramiro Ortiz, BankUnited's President and COO and Bert Lopez, our CFO. We are proud to report our 12th consecutive quarter of increased earnings, record earnings to new growth in total core deposits and the growth of our loan portfolio are evidence of BankUnited's consistent steady growth. And income was 11.6 million up 32% from the same period last year.

Basic earnings were 39 cents per share and diluted earnings were 36 cents per share for the quarter compared with 34 and 32 for the same period last year. We're especially proud of growing our assets to 7.2 billion up 14% for the quarter ended December 31, 2002. Overall BankUnited continues to make improvements in almost all of our key performance indicators. Total loan product continues to be the growth area; a continued increase in core deposits is an important component of our consumer banking strategy with focused efforts to deepen deposit relationships with existing customers. Ramiro will provide more information about this shortly.

We're cautiously optimistic about future loan generation with neighborhood banks strategies gaining traction and we are happy with the results so far. Bert will highlight we are taking steps to positively impact net interest margin, and we anticipate improvements in this area as we implement our plan during the next several quarters. Investors continue to respond favorably to BankUnited this quarter. Our market capitalization increased to 771 million, up 88% over the same time last year. I am now going to turn our call over to our COO, Ramiro, who will discuss specific operating results.

Thank you, Fred. As Fred said, we're pleased to report another quarter of steady growth. The application of our local market knowledge gives us a significant competitive advantage. Our micro market neighborhood banking strategy is already paying off in the areas of core deposits, commercial banking relationships and commercial real estate lending.

Local decision-making, a small business team that is loaded with veterans and planned additions to the branch network will enable us to continue to capitalize on this strategy. In the area of loan production, total loan originations were 656 million this quarter, down just 7% from the previous quarter. Residential loan originations were $422 million, down 17% for the same quarter last year. Although this number is down slightly from previous quarters, analysis of industry-wide numbers shows that loan volumes fell approximately 50% nationwide. That was not the case at BankUnited.

Our production decrease was significantly smaller than the national average for two major reasons. First, the housing industry continues to be strong in South Florida. Housing starts and purchases are among the highest in this area of the country. In addition, BankUnited's strategy of focussing on purchase transaction rather than refinancing helped us stay ahead of industry wide trends. Consumer loan production, which including specialty consumer mortgage loans, originated through the branches was 101 million for the quarter, down 23% from the previous quarter.

A real highlight for the quarter was our commercial real estate loan production and our commercial loan production, which rose dramatically from the same time last year. Commercial real estate production was 76 million for the quarter, up 69% from the same quarter last year. We added seven new relationships during the quarter. Commercial loan production was $58 million, up 142% from the same time last year. Now let me expand on that a little.

It was in April of 2003 when we announced to the market our middle market strategy. Since then, we've brought in 52 brand spanking new commercial relationships. Now let me warn you, 52 new relationships in eight months of all established South Florida companies that are well-known to our management team, we don't expect to be able to continue at that trend. Having said that, that is also when I said, what I said when it was 10, it was 20 and it was 30.

But this is a number that we're very proud of. I believe that a lot of that was low hanging fruit that our experienced lenders that we brought in our middle market team brought with them, but having said that, the pipelines are strong and we continue to see robust business. The company's loan portfolio grew by $108 million to 4.3 billion. We expect, like I said, to keep the pipeline strong because of a good Florida economy. Core deposits grew 4% in the quarter to reach $1.5 billion, up 19% over the same quarter in fiscal 2003.

Non-interest bearing deposits were up 5% for the quarter to $207 million, an increase of 59% from the same time last year. Total deposits increased to $3.3 billion, up from 3 billion at the same time last year. Non-interest income included a million dollars in commissions from sales of investment products; now that's up 50% from the previous quarter and 49% from the same time last year. These results are consistent with our strategy to increase non-interest income from commissions on the sale of investment products. We look for continued improvement in this line of business. As a result of our micro market neighborhood banking strategy, we have seen a strong increase in core deposits. We can outperform the large out of State Banks while offering a broader pro product set than our smaller competitors. Continued growth in this area and an emphasis on relationship based pricing of time deposits will have an overall positive effect on our profitability. We continue to strengthen the foundation for future growth by refining management responsibilities in the organization and making prudent investments in infrastructure. The dedication of our associates is what drives our success. Local decision-making distinguishes us from our competitors. I will now turn the call over to CFO Bert Lopez, who will discuss our financial indicators for the quarter.

Thank you, Ramiro. We have a lot to be proud of this quarter. Net interest margin improved to 1.91%, up from 1.81 in the previous quarter. Improvement is the result of the slowdown in mortgage loan prepayments due to increased mortgage rates, a decrease in our cost of deposits. Improvement of net interest margin is an ongoing process and will be affected by several factors. First is a relative increase in mortgage rates has slowed prepayment, this will help margins if rates remain at higher levels. Also BankUnited's activities in originating our own loans and with assets depreciate slower and offer significant cross-sell opportunities. Our portfolio of loans serviced by others purchased prior to 2000 and to prepay almost twice as fast as our own originated loans. The balance of this portfolio is now 166 million compared to 207 million at the end of last quarter. This portfolio should continue to run off rather quickly. A decrease in our cost of deposits as our certificates of deposits are re-priced at lower rates will also help our margin.

Over the next 12 months, we will re-price $1.2 billion of CD's with a rate of 2.74%, approximately 800 million or two-thirds of these at a rate of 2.69% will price in the first six months. Also a lower debt expense following the retirement of high cost trust preferred securities should help our margin, and lastly a continued increase in non-interest bearing deposits as our commercial and micro market strategies continue to gain traction. All those factors should help move our margin in a positive direction. Non-interest income for the quarter reached $5.1 million, down 12% from the previous quarter, due to a reduction in mortgage loan sales related to decreased production of sale able residential loans. The income, which includes loan fees, deposit fees and other fees but excludes loan-servicing fees was up 7% from the same quarter last year and reached $0.5 million. Our non-interest income from the sale of assets in the form of loans and securitized loans originated for sale was $1.2 million, flat from the same time last year but down from $1.0 million for the previous quarter. This decrease is tied to the decrease in mortgage loan originations and a decrease in the profit margins of such sales, which is typical of the industry at this time.

Also last quarter, we had $1.5 million in gain on sale of securities, while this quarter we did not sell any securities. Absent these security gains, other income is essentially flat from last quarter. In the area of expenses and efficiency ratio rather closely managed the impact of growth on expenses while continuing to invest in infrastructure, new offices and new talent. Our efficiency ratio is 51.46% for the quarter, down from 54.68% for the same quarter last year. This is due to a strong increase in net interest income, which increased 16% over the same quarter last year, and which also increased 9% from the preceding quarter. This contributed to the improvement in the upward trend in revenue growth and while we keep a watchful eye on expenses. Non-interest expense year-over-year increased $900,000 or 5%, and from the preceding quarter, our expenses decreased $1.5 million or 7%. Last quarter we recorded approximately $1.2 million in mark to market losses in accordance with FASB 133. During this quarter, the majority of that mark to market turned around and taking these and other one-time adjustments into consideration, expenses increased approximately 3%. Our asset quality is strong. Non-performing assets decreased by 30% from the previous quarter. As a percentage, non-performing assets to total assets improved to 41 basis points from 59 basis points at the end of the previous quarter. The net annualized charge-off ratio for the quarter decreased to five basis points from eight basis points in the last quarter. While we considerably decreased non-performing assets and charge-off ratios, there is no guarantee this positive trend will continue, but we are extremely pleased with the improvement. Our allowance for loan losses as a percentage of total loans stands at a prudent 51 basis points compared to 52 basis points for the same time last year. Well the level is relatively low for the banking industry in general. We believe the current allowance is appropriate because of the composition of our loan portfolio, which is more than 90% secured by real estate. Finally, core and risk-based capital was 7.3% and 15.9% respectively at the end of the quarter. Book value per common share is now $15.03, up from $13.74 for the same time last year. I'll now turn the call back to Fred.

Thanks, Bert. I think as you all can see that in many respects, we have weathered well the end of the re-fi boom, and we're quite optimistic in that regard. Also, with more recent announcements of considerable cost consolidation in the industry in Florida, I'm reminded of Ramiro's comments that you may have heard before that we really are in the best of both worlds, even more so today, that we're large enough to take care of major customers and to give them a complete concept of product availability while at the same time, we have little decision-making in the community bank field that's bringing more and more customers to us, and it's going to enable us to continue, we believe, along the patterns of being able to grow in a fashion that's excellent for our stockholders and returns. In any event, it's now time that we can open up for questions if the moderator would please open up the call for that.

Thank you. The question and answer session will begin at this time. (OPERATOR INSTRUCTIONS) Our first question comes from David Honald with KBW. Please state your question.

Good afternoon.

Hello.

Could you expand just a bit on the CD re-pricing opportunity? You know, maybe in terms of what sort of maturities and associated rates you'll look to roll those into?

David, I am sorry I could barely hear your call but your question, but I think it was regarding what CD's we expect to roll the current CD's back into and what re-pricing effects that would have?

That's right.

Okay. As I mentioned, we have about $800 million of CD's, which are going to re-price in the next six months at a 269 rate. What we see is re-pricing back in the range of 2.25, maybe 2.30, so we expect to pick up anywhere from 40 to maybe 60 basis points on those as they re-price.

Next. Just as a follow-up, could you comment on premium amortization in the quarter and the extent to which the margin might have benefited from that? Thanks.

I think he's saying how much that the -

Premium amortization in the quarter.

I'm not sure if it's his phone or operator needs to follow on.

David, could ask him to repeat the question.

Sure, guys. Is this better?

That's much better.

About premium amortization during the quarter and went impact on net interest margin.

We did see a significant slowdown in premium amortization particularly on our NBA security portfolio. That slowed down quarter-over-quarter to the tune of about $1.8 million in terms of basis points has an effect of about 41 basis points quarter to quarter. So that was a significant help obviously. We've had a continued belief in terms of improvements in the pre-pay situations, we've been going forward. We should mention also with respect to the re-pricing that we have the $200 million in notes in the market that are at a 540 that will also be reprising this quarter.

Thanks.

Thank you. Our next question comes from Laurie Hunsicker with FBR.

Hi, Good afternoon. I'm just wondered if maybe you can comment just a couple things quickly I had questions on. Number one was the tax rate, where that will be running. We were thinking I think closer to 34, it came in at 32. Where would we expect to see that, I guess, for 2004 going forward?

We should still see it, Laurie, right about in that same range of 32 to 34.

32 to 33%?

32, 33, 34, right in that area.

OK. And -- OK. And you don't have anything tighter than that? That's a bigger range.

If you need to narrow the range down, I'd say 32, 33.

OK. And then your loan servicing portfolio of $1.1 billion for others, where is that currently carried on the books?

It's valued at 125 basis points, and you've got to remember, that's been built up over the last few years, so most of the loans are relatively new and most of them have been originated at a pretty low rate, so we're pretty comfortable with the valuation.

OK, And what is your weighted average?

Coupon rate?

Yeah.

It's right about 580, 590.

OK, great. And then maybe if you could just comment a little bit more generally, your core deposit growth this quarter looks phenomenal. You guys had a terrific quarter. If you could maybe comment a little bit more as to where that growth is coming from, how your -- are you stealing the share, where is that coming from? And maybe if you could also elaborate a little bit more specifically on the C&I side, you know, I know you all were adding some new commercial lenders, how that's all playing out. That would be great, thanks.

Let me first talk about the C&I. Credit quality is really the governor that drives our commercial loan growth. Let me start out by saying that. We're not going to be in the business of go-go lending. Having said that, the number that I talked about, 52 brand new relationships over an eight-month period, quite frankly I had never seen that. I take a great deal of comfort in the fact that these are all established south Florida companies, all well-known to our management team, and this is good. This is playing out just as we had expected when we laid out the strategy. The core deposit, a big part of our micro market strategy that we released almost a year ago was just that, to transform our balance sheet from less reliance on CD's and more towards core deposits. I'm particularly pleased with our non-interest bearing deposits and the growth that we've had in that area.

You have perhaps some shock. Just going back to C&I, how many lenders do you actually have now that are part of your team?

Let me see. We have five in Dade County and two in Broward County.

And how does that compare to where you were maybe, you know, a year ago?

We had four a year ago in Dade county and one in Broward County.

OK.

Now, there's been turnover in that area, and quite frankly, we've upgraded the talent level in that area.

OK.

Our focus has gone from what was primarily a participation type of strategy to a full commercial relationship strategy, where we bank not only the companies with fully priced products, but also the owners as well.

Which, by the way, also is a strong reason for increase in our core deposit area, in particular, non-interest bearing accounts. So, the relationships that are being developed and it's partly because, we have excellent people on hand and we're able to now service these customers in a way we haven't been able to do before, but there's also clearly a trend in the market, where the bigger are getting bigger and as a result, more customers are really looking for a bank where they can get localized decision-making.

Right. OK. And then just one final question, obviously, Ryan and I are new to banking I do here but, from the standpoint your balance sheet is transitioning phenomenally while your asset quality is improving, obviously you have excess capital. Could you just comment from the standpoint of capital management, in terms of dividends, in terms of buybacks, if we could expect to see that at some point in the horizon or what your thoughts are?

That's been a mixed discussion for us. We have been growing rapidly over the last several years. Really, if you look back at us, I think it's about six years ago that we were around 600 million in size. We're now over 7 billion. So, that's still is an important factor to us. We feel this extraordinary continued opportunity for additional franchise developments in the state and clearly the several recent major consolidations that have occurred just makes it even more attractive for us to fit into the niches that we can do best on. So, we haven't been as active in buying back shares. We have instituted and have technically a buyback program that exists, but it's really for periods, when we think the price of our stock has declined too much. There was really only one instance probably last year which we just almost ended up starting buy shares and the price almost jumped back immediately.

OK.

A few people got a tremendous opportunity for those couple of days and, you know, frankly we believe that we're going to put our capital to extraordinary increase and franchise opportunities.

And the growth. OK. Great. Thank you all very much. Nice quarter.

Thank you.

Thank you.

Thank you. Our next question comes from Bartley Parker with RBC Capital Markets. Please state your question.

Good afternoon, guys. I was wondering if you could talk about guidance for the loan loss provision versus how the portfolio are being transformed into with more C&I loans and commercial real estate loans?

Bert you want to ?

Sure. As far, as you can see our provision trended down this quarter, just under a $1 million and really it goes back to what Ramiro had mentioned, that lot of the loans, all the loans being generated are being generated such a level of credit quality that, we are hard-pressed to continue to provide large amounts in terms of provision. Our charge off ratio decreased, our non-performing assets balances decreased by about 30%. So, we are looking at this. I'd say monthly, but actually it's weekly and as we continue looking forward, I think you'll see a trend at this level or maybe even a little bit lower in the next coming quarters.

Yeah. We, you know, we had a little bit of a blip last year and I got personally involved in it at that point and keeping a closer track because it was a little surprise to us and we had discovered, I think we mentioned on other calls at the time that, what had happened in terms of collection efforts, things had started dragging a little bit. And we got that sort of updated in a much more current fashion and we've revamped our area in terms of collection. So, at the moment, we're extremely pleased with how things are going and believe that, you know, there's always, we've got all those caveats to everything in life, but it's just a situation, which has been extremely pleasing to us that we've demonstrated as I think, we have historically good credit situation.

Yeah, you guys have. OK. Thanks.

Thank you. Our next question comes from Al Savastano with Midwest Research. Please state your question.

Good quarter, guys.

Thank you.

I was wondering if you could flesh out expenses for me again. I'm not sure how FAS 133 relates to the expenses. That's what you said previously.

Without going into a long discussion of 133, basically it revolves around financial derivatives, and requires you to mark the mortgage of financial derivatives and for certain types of financial derivatives, you mark that through the P&L. Last quarter, our September quarter, we had a mark of $1.2 million to the negative run through our expense level. So, this year -- I'm sorry, this quarter-end and this calendar year, for this fiscal year, I'm sorry, that in essence turned around. Almost the entire piece had turned around, so we had a swing of another $1.1 million to the positive on top of the $1.2 million.

What line item does that category -- what line item is that category has been?

That's in other expenses.

This kind of thing is going to be periodically bouncing around.

Yes.

It's the nature of now the way they have this rule, so sometimes you're going to see that a plus or a minus. It's going to be working that way.

And we've taken steps to minimize the swing, but we will have some fluctuations going forward.

This is a swap?

No, this is actually a loan commitment, and well, I was going to say, it's really your loan commitments that you have on your books at the end of the period, and the valuation -- I mean, it's just under the rules now, you have to keep doing a evaluation each period, so depending on the loan commitments, how much you have, what rates they were at, et cetera, et cetera, et cetera, you end up with some swings in this. Everybody's really got that on their balance sheet at this point.

Great. That's very helpful. One more follow-up on that. Are you doing a rate lock or time of sale, the hedging?

The hedging is at rate lock.

Great.

The loans that we're planning to sell, we hedged those at the time the rate lock commitment occurs.

We have a fairly conservative program of how we hedge in terms of market risk right now.

Great. And then just a bigger picture question. Are you all done with your strategic planning and just about ready to focus on execution or is there still more planning going on?

We are pretty much on the execution phase out of our strategic planning, our micro market strategy and our commercial middle market strategy, our investment services strategies, all came out of that, and, you know, as you saw by the numbers generated this quarter, we're hitting the road.

Great. Thank you.

Thank you. Our next question comes from John Pandtle from Raymond James. Please state your question.

Good afternoon. I just wanted to know what the unrealized position was in your securities portfolio was, either a gain or a loss?

Presently it's at a pre-tax loss of $651,000, post-tax of $424,000.

That's perfect. Thank you very much.

Thank you. Our next question comes from Kevin Reynolds with Morgan Keegan. Please state your question.

Good afternoon, guys. Good quarter, and I've got a question, you know, follow-up on the FAS 133. I understand you correctly, Bert, you said it was essentially a $2.3 million delta sequentially?

Yes.

And so does that mean then short of, again, not being able to project these things, at least I'm not, I'm not sure about the other analysts, but as it will be there in a little choppy, I think Fred said going forward, so are we looking at a 33-cent run rate this quarter that could be adjusted upward or downward to the extent that this moves around?

No, there's a couple other things in interest. We talked about the gain on sale and a few other things, but when you say $2.3 million swing, one of the things that will occur in the future, we've taken some steps to lower that swing. There'll be some choppiness, yes, but we expect it to be much less. So when you peel it all back, I think we should have a stronger quarter than that.

OK, I got disconnected a little bit earlier but you may have commented on this, maybe you have not, but with what appears to be sort of 35, 36-cent run rate, how do you guys feel with the range of estimates that are out there for fiscal 2004 at this point?

I don't know if I normally like to comment on that. We at this time, with all the predicates and the going forward language and et cetera, just believe that we have excellent opportunity to have continued improvement during this year. And that's how I'd normally put it. In the past, we'd tried to peg numbers, but given all the new legislation, it's getting harder for us to go that kind of route, so Bert tries to give, you know, guidance as to more specific numbers without saying what we think the actual end numbers will be, but we feel pretty good right now that we're positioned to do a lot of good things in the market.

OK. Any way, it was worth a try and then one final question. I know you sort of alluded to it, and maybe this one is for you, Ramiro. Obviously we made an announcement last Friday and I was just wondering if I could get your take on the magnitude of the opportunity of the merger in your market and maybe what steps you've initially taken to sort of capitalize on any disruption that may potentially occur.

Every time that there's a merger or a consolidation, an acquisition, it creates turmoil in the marketplace, so that's nothing but opportunity for us. The banks that are involved in mergers and acquisitions tend to take their eye off the ball. Loan officers tend to sit around the water cooler talking about who's going to get what job, and customers are left hanging, and we see that as opportunity for us.

You know, frankly, all the major acquisitions occurred in the state have been of the nature where the business plan of the acquire ends up changing dramatically, and that affects everybody, and they all know it at this point because more than likely, a good portion of those people working in a institution just acquired had been somewhere else before or know of other people who were somewhere else before, and everything changes. And they don't know what they're really going to be able to do in the future, what they can promise their customers. Everything gets up in the air. And that's a lot of opportunity. And frankly, it's also opportunity for us when it's appropriate to track additional people -- attract additional people to our organization because we're localized, as we're able to tell customers, the people sitting around the table are making the ultimate decisions. So that's what's happening.

A real live example, and I don't want to jinx it, but a real life example, a few hours ago I got a phone call from a very important client of theirs who, while he's not ready to move over the entire relationship as a consequence of the uncertainty, asked to set up a meeting with our head of corporate banking today at 4:30, and he is going to do a piece of his business with us, move a piece over to us just to get the relationship started. Now that's a real life story that happened today, and those kinds of things will continue to happen.

OK. Well, I'm glad that we could help.

Thank you.

Thank you. Our next question comes from David Honald with KBW. Please state your question.

Guys, I just had two follow-ups. One, Bert, if you could just give us a sense of the FAS 133 adjustment? I know you've already touched on it, but what directionally happens with rates to make a link quarter swing like that? Maybe why the hedges don't qualify? And then as a follow-up, if someone would like to tackle sort of expansion plans via de novo or any potential acquisition candidates in your contiguous markets? Thanks.

Sure, David. Let me throw out a couple of caveats. You know, obviously with the volatility, interest rates we've seen over the last couple of quarters, that may or may not affect us going forward, but what we've really done is take into account a few procedures and different accounting procedures in terms of hedge accounting so that we can lower the volatility of these type of swings. And if I were to make an estimate, I would say probably swing in the $300,000 to $400,000 range at most for every quarter going forward. But again, that's dependent on a lot of different variables, but that would be a best estimate I can give you at this point.

David, on the expansion plans, let me try to deal with that. Between now and December 31st, we have seven new branches that will be opening up in our footprint. Our chairman Fred keeps reminding me that's not enough, he wants more, but at this point, we'll have seven that will be open by December 31st in terms of acquisitions. If all the stars are lined up right and the moons are lined up right and an acquisition candidate strategically fits with what we're doing, yeah, we'd love to take a look at it.

We will be making an announcement shortly of some additional movement in moving upward on probably, in a sense, the coast so that we will be in some additional market areas that we technically aren't in right now. We expect to have leases in our hands that are being finalized. So we're probably going to put out an announcement to that effect in the next few weeks.

And that's included in your seven branch estimate for 2004?

Yes, it is.

OK. Great. And then how many new branches came on line during fiscal 2003?

Four new branches. We were anticipating six, but we only got four open. Now the other two will be part of the seven that we'll have opened up in the next couple of months. Delays in the permitting process, that's what got in the way of that. We're making some adjustments in some of the things we've been doing because what's occurred is that for some of the prime locations, we've come to the realization that to get open at those spots in the original way we wanted to do it, there's a lot of developer time now in getting permits for construction and etc, so we've made some adjustments, and our concept of branch distribution right now so that we can speed up some of the openings.

But David, it's important that you understand that all the numbers that we've talked about and all that growth is all organic growth. We will continue to expand our branch network and the acquisition if an opportunistic situation pops up, we'll certainly take a look at it. We're in a great market, and we want to keep acquiring more of that market share.

Thanks.

Thank you. Our next question comes from Steve Gerstner (ph) with (inaudible) Asset Management. Please state your question.

Hi, guys. Two questions. The first, and I think Ramiro was answering some of this question, is there physical overlap between union plantar and regions branches and your branch network or is there no --

No, there is still - there really isn't overlap in South Florida. However, my experience is that at any time -

In a way it does not occur. I think you're saying -- are you saying is there overlap with us and Union Planners?

I guess any of the three parties in that. Florida is probably going to be up one area where they have to close branches.

Regions did not have a presence in South Florida. There is significant union planters presence in our footprint, and although Regions doesn't have a footprint here, my experience is that any time a company goes through a merger, that's opportunity.

Sure.

Yeah, and union planters has a significant presence in Dade, Broward and Palm Beach as well as some other areas we're expanding to, and additionally, they also have presently one of the strong presence in the Hispanic market, particularly in Dade County. And how this inter plays with having possibly an effect on that isn't clear, but I would have some belief that that's an additional opportunity for us as well.

Great. I'd have to agree. And second question is, if you could just maybe refresh me in terms of the duration and the cost of some of your SHLB borrowings. Don't you guys have a relatively large piece that's maybe kind of on the expensive side that's going to come due in early 2005 or what is that stand right now?

We do have a pretty significant number. It's about $600 million, and it's at about a 6.37 rate. But while a little bit of that will come due in early 2005, most of that is actually four years or so out in the future. They do have some optionality on them, so depend on where interest rates go, it could be sooner. But that's really out a little bit longer than 2005, as I mentioned.

Yeah. And I mentioned before, we do have 200 million of 5.40's that is coming due very shortly, A few days.

Great. Thanks a lot, guys.

Thank you. (OPERATOR INSTRUCTIONS) If there are no further questions, I'll turn the conference back to Alfred Camner to conclude.

We appreciate everyone being on this call and the questions you've asked. We continue to believe that we have the extraordinary opportunities afforded us in terms of further franchise development and value. The markets in some respects have begun to recognize some of that, and we hope and believe that as we continue to get the message out and continue to perform, that we will see even more recognition from the investor market of what we're accomplishing. We thank you very much. Good day.