BankUnited Inc (BKU) 2004 Q4 法說會逐字稿

Welcome to today's BankUnited fiscal 2004 fourth-quarter earnings conference call. Today's call is being recorded. 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", "anticipates", "estimates", "project", "believes", "intends", "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 policy, 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 insurance or redemption of additional Company equity or debt, volatility in market price of our common stock, changes in accounting principles, policies or guidelines, changes in legislation or regulation, reliance on other companies for products and services, attracting and retaining key personnel and other economic, competitive, governmental, regulatory and technical factors affecting the Company's operations, pricing, products and services.

At this time for opening remarks and introductions I would like to turn the call over to Mr. Fred Camner.

Thank you for joining us today on our conference call for the fourth-quarter fiscal year 2004. Listening to that preamble to what we started, I used to as a child only think I needed to know the preamble to the Constitution of the United States, but times have changed. With me are Ramiro Ortiz, BankUnited's President and Chief Operating Officer, and Bert Lopez, our Chief Financial Officer.

It was another great quarter and outstanding year for BankUnited. We are proud to report our 15th consecutive quarter of record net income and our 5th straight year of record earnings. As we celebrate our 20th anniversary, BankUnited is the largest bank headquartered in Florida based on assets. At year end we had assets of 8.7 billion, up 22 percent over the same time last year. Our financial achievements reflect the efforts of our management team and staff. Our performance was fueled by strong loan growth especially in the middle market, corporate lending and commercial and real estate areas.

The one-two punch of hurricanes in September tested our branch network and gave us numerous opportunities to see neighborhood banking in action. Our operations team installed and uninstalled hurricane shutters four times on some branches. Our staff went above and beyond to help customers who were impacted by the storm. Everyone pitched in. Our business bankers in Miami loaded a truck with water and ice and drove north to distribute supplies to affected branches in Martin and Palm Beach counties.

Furthermore customers experienced minimal impact to our branches; most were operational the day after the storms, the few closings were due to power outages. We hope to have seen the last of the hurricanes for a while. I do make an exception; my family has that the University of Miami Hurricane football team we accept that out.

By the way, we've been asked on a number of occasions what exactly did it cost us for the quarter, taking care of this hurricane situation -- four hurricanes. And just in terms of -- essentially excluding costs that would relate to delays and so forth, we have an estimate of something under a penny, just a little bit under a penny a share for the quarter was affected by the hurricanes. And that's essentially direct costs.

As challenging as the last quarter was, it came at the end of a strong period of growth and performance. Fourth-quarter net income outpaced the previous year by 27 percent to reach 14.1 million and total deposits grew 9 percent to reach 3.5 billion. Net income for the fiscal year was 50.7 million, up 30 percent over the 39.1 million at September 30, 2003. We're pleased with this continued evidence of consistent, steady performance in our core business areas.

For the quarter basic earnings were 47 cents per share and diluted earnings were 44 cents compared with 37 and 35 for the same period last year. For the year basic and diluted earnings were $1.69 and $1.58 respectively compared with $1.45 and $1.36 for the fiscal year 2003. Overall BankUnited continues to show strength in nearly every important category -- loan originations and total loan production grew and nonperforming assets as a percentage of total assets dropped. We consider the continued increase in core deposits and direct lending as a positive reflection of our focus on strengthening relationships with existing customers.

I will now turn the call over to our President and Chief Operating Officer, Ramiro, who will discuss specific operating results.

Thank you, Fred. We have had a great year. And we're pleased to report another quarter of consistent, steady growth. This progress reflects the viability of our micromarket neighborhood banking strategies and validates the changes that we have implemented over the last couple of years. This is especially evident in the areas of deposit growth and loan production.

Our focus on deepening commercial relationships has contributed to solid growth and we're confident that we're making progress in our goal to become the primary bank for our commercial and commercial real estate clients.

On every one of these calls I update you on new relationships and I'll do the same now. In terms of the commercial area, when we implemented our strategy on March 31, '03, from March 31, '03 through September 30, '04 we've added 93 brand-new commercial relationships. If you do the math that's a 78 week period, so we continue to do better than one a week. And as I will continue to caution you, I don't know that that's sustainable, but I said that when it was 20, when it was 30, when it was 40 and so forth and the pipelines continue to be strong.

On the commercial real estate side during fiscal '04 we brought in 26 brand-new relationships and, if you think about that, that's a relationship every 2 weeks, a brand-new relationship every 2 weeks. So we're very pleased with the way that strategy is working itself out. The market, more importantly, has really accepted our local theme, that of local decision-making at the very core of our whole business model.

Our branch expansion program continues to move at a brisk pace. We opened our 50th branch in Stuart, Florida in September. This is our first office in Martin County and it serves the Treasure Coast area. In 2005 we intend to continue our branch expansion with the addition of 8 to 10 new locations. Neighborhood banking centers are an integral part of our micromarket strategy.

In the area of loan production total loan production was up 9 percent to $980 million for the quarter despite the impact of the hurricanes in September. For the year loan production was 3.7 billion, up 25 percent over the previous year. Residential mortgage loan originations were $813 million and that's up 36 percent over the same quarter last year. For fiscal year 2004 residential mortgage loan originations were 2.7 billion and that's up 27 percent over the previous year.

Consumer loan production, which includes our specialty consumer mortgages originated in the branch offices, was $91 million for the quarter and that was a decrease of 45 percent from the same time last year. For the fiscal year consumer loan production was $429 million and that was down 24 percent from the previous year primarily due to a slowdown in refinancing.

Commercial real estate loan production dropped 26 percent for the fourth quarter to 48 million but rose 112 percent year-over-year to reach 442 million. That drop was primarily due to the September hurricane situation where, for all practical purposes, that line of business slowed down during September. However, the pipelines are strong and many of the deals that we had expected to close in September we're closing them now.

Commercial loan production was $28 million for the quarter and that was also down 59 percent from the fourth quarter of 2003 but strongly up 68 percent year-over-year and reached 212 million. The same situation in the September hurricane slowed down our commercial loan closings, but again I would tell you we've got a strong pipeline and many of those closings that didn't take place in September should rollover for October.

The Company's loan portfolio balances grew significantly in 2004 to 5.7 billion at September 30th. This increase of $1.5 billion is related to an increase in residential mortgage loan balances, an increase in commercial real estate loan balances and a sharp decrease in prepayments. This includes a $1.2 billion increase in residential mortgage loan balances due to strong loan production and, again, a drop in prepayments. An increase in commercial and commercial real estate loan production, loan balances of $226 million are also a factor.

Core deposits continue to be a great story, total deposits increased to $3.5 billion at September 30, 2004, up from 3.2 billion at the same time last year. For the fiscal year core deposits were $1.7 billion and that's an increase of 16 percent year-over-year. Core deposits now comprise 47 percent of total deposits. That's an increase of 44 percent over the previous year. Non-interest-bearing deposits were up 25 percent for the year to $247 million.

We're extremely proud of our results in a challenged fourth quarter and for the entire fiscal year. These results show that our micromarket neighborhood banking strategies are working. The recent hurricanes gave our employees a chance to put our local tagline into action and provide outstanding service. Through our partnerships with local media and outlets we were providing information about storms and recovery efforts during and immediately following the storms. It's important to congratulate our staff; our employees really went above and beyond the call of duty in the most trying of circumstances during the hurricanes and we thank each and every one of them.

I'll now turn the call over to our CFO, Bert Lopez, who will discuss our financial indicators for the quarter and the year.

Thank you, Ramiro. As Ramiro and Fred have mentioned, we certainly do have a lot to be proud of this quarter. Beginning with the net interest margin which improved in the fourth quarter 190 basis points up from 186 basis points in the preceding quarter and up from 181 basis points from the same quarter last year.

For the fiscal year our net interest margin rose to 190 basis points up from 188 basis points in fiscal 2003. We've seen a slow down in prepayments during this quarter and expect that this should continue to assist us in improving our net interest margin. A reduction in borrowing costs and a greater number of higher margin loans, an increase in low-cost core deposits and repricing of CDs has also impacted this number during the year.

Going forward, we're also enthused by the rapid growth of our monthly adjustable residential loan portfolio which grew by $501 million to $2 billion from June 30th of this year. This growth has helped us remain positively GAAP'd at 1.9 percent for the 12-month GAAP. This growth has also allowed us to reduce our securities portfolio by $211 million or 9.3 percent of the portfolio from this past June and obviously we place these securities with higher yielding primary assets in the form of residential loans.

Our total non-interest income was $5.4 million for this quarter, a decrease of 18 percent from the prior quarter. For the fiscal year non-interest income was $22.1 million, down 22 percent year-over-year. However, we realize the gain of $7.2 million on the sale of nonsecuritized securities in the previous quarter; we also had gains of $1.5 million on these securities during the 2004 fiscal year. So for comparison purposes, if you exclude the security gains from both years we wouldn't be down 22 percent but just down 3 percent for year-over-year comparison.

Fee income including loan fees, deposit fees and loan servicing fees, but excluding loan servicing fees was 2.7 million for the fourth quarter which is flat compared to the same quarter in 2003. Fee income for the fiscal year was $10.5 million, up 2 percent over 10.3 million for the 2003 fiscal year.

Our insurance and investment income for the quarter was $1.1 million from commissions on sales and investment products sold through our branches, an increase of 78 percent over the same quarter last year. For the fiscal year, after having expanded our product offerings and increasing the sales force, this resulted in insurance and investment income increasing to $4.4 million, up 56 percent year-over-year.

Now partially based on strong mortgage origination volume, non-interest income from the sale of loans and securitized loans originated for sale was $435,000 for the quarter from the sale of assets in the form of loans and securitized loans. This compares with 1.9 million for the same quarter last year. For the fiscal year, non-interest income from these sales was 3.5 million, down from 7.3 million for 2003. This reflects a general industry trend toward lower margin saleable loans.

BankUnited's portfolio of residential loan service for others grew to 1.3 billion at September 30, 2004. In a rising interest rate environment these prepayments typically decrease. Because of this we experienced a slower rate of amortization of loan servicing rights for the quarter to 761,000 compared to $1 million for the previous quarter and $2 million for the same quarter in 2003. When we offset this by fees earned of $803,000 on these loans serviced the result is net revenue for the quarter of $42,000.

For the year BankUnited provided for the amortization of 4.3 million in servicing rights as compared to $6.8 million for 2003. This year's amortization offset by fees of 3.1 million earned on these lots resulted in a net loss of 1.2 million. In addition, we recorded a $1.2 million impairment charge over the year based on a valuation of the mortgage servicing rights by independent third parties.

Non-interested expense for the quarter ended September 30, 2004 increased by 1.2 million or 6 percent to 21.8 million compared to the same quarter in 2003. So it decreased by 764,000 or 3 percent compared to the June 2004 quarter. For the year, non-interest expense increased by 1.8 million or 2 percent to 84.7 million. Now non-interest expense for the fiscal year 2003 included a $5.5 million charge related to the redemption of trust preferred securities. Excluding this, expenses related to operations for the year would have shown a 9 percent increase due basically to our continued expansion and our investment in our infrastructure.

In the area of expenses and efficiency ratios we obviously strive to closely manage the impact of growth on expenses while continuing to invest in the technology infrastructure, new offices and new talent. For the quarter the efficiency ratio was 49.5 percent, down from 57.3 percent for the same quarter last year. For the year the efficiency ratio is 51.8 compared to 57.6 for fiscal 2003.

In the area of asset quality, retaining asset quality continues to be an area of focus for us. Nonperforming assets as a percentage of total assets improved to 20 basis points at the end of the quarter down from 25 basis points at the end of the previous quarter. The net charge-off ratio for the quarter decreased to 5 basis points from 8 basis points year-over-year. The allowance for loan losses as a percentage of total loans stood at 42 basis points in September '04 compared to 52 basis points at the same time last year and 44 basis points for the third quarter of '04.

Our provision for loan loss for this quarter is 1.65 million or nearly two times our charge-offs of 868,000. While the level is relatively low on our reserve to total loans, in general we believe the current allowance is appropriate because of the composition of our loan portfolio which is more than 90 percent secured by real estate and primarily residential real estate. These positive results are due to continued emphasis on credit quality. And while we're proud of these numbers, we know they may not be sustainable in the future.

BankUnited continues to maintain a strong capital position in excess of regulatory requirements. Our core risk based capital was 7.3 percent and 15.6 percent respectively at the end of the quarter. Our book value per common share stood at $16.19, up from $14.88 in September of '03.

During the quarter we also had an issue from the emerging issues task force of the financial accounting standards board which finalized a rule related to the treatment of convertible debentures. This would impact the 3 1/8 percent convertible notes that BankUnited issued in February of 2004 which do have contingent conversion triggers. The new rule requires issuers to include the number of shares into which debentures could be converted if the triggers are reached even though the trigger has not been reached. This number impacts calculations of diluted earnings per share. BankUnited estimates that if triggers were reached its diluted earnings for fiscal 2004, which we just completed, would be reduced by approximately 5 cents per share to $1.53.

If we choose to remain with the converted method, which is announced by the EITF where all the shares are accounted for, we estimate a range of 6 to 8 cents per share impact for 2005. This will vary based on our net income and also obviously on the growth of our outstanding shares.

The terms of our convertible senior note permit the Company to deliver cash or a combination of cash and stocks in lieu of stock upon conversion, and we're presently reviewing which methodology we choose to follow. I'll now turn the call back over to Fred.

Thank you, Bert. I hope everybody got every one of those numbers down. In any event, it's been a great year. We're quite optimistic about the future. Our South Florida economy has been doing well, it's picked up steadily over this last year from the general demand throughout the country, but all through after since 9/11 and for a short period after we have recognized growth in the Florida economy, that demand appears to be strong.

The hurricanes certainly have caused a problem. There are a lot of people who need to rebuild but there's another way to look at it and that that rebuilding between insurance monies and federal aid is somewhere in the vicinity of 30 billion additional dollars that will create even that much more demand in a Florida economy which has already been in a miniboom. So we're quite optimistic that we'll have tremendous opportunities as we go forward with our expansion plans this year.

Okay, we're now ready for questions. If the moderator would please open the call to questions.

(OPERATOR INSTRUCTIONS) James Ackor, RBC Capital Markets.

I was wondering -- a couple of things -- first of all, housekeeping. I need to get Lopez to do my taxes for me. With the tax rate, Bert, you guys have been forecasting that the rate would go a little bit higher than it has over the last couple of quarters and I'm wondering what we should expect for an effective tax rate in fiscal 2005?

Jim, we're modeling about 33 percent for a marginal tax rate -- or an effective tax rate, I'm sorry, going forward.

Is that going to be relatively evenly distributed or should we expect some volatility from quarter to quarter?

No, we should be pretty evenly distributed. We've had timing differences come through and that's where you've seen some of the changes. Also last quarter we had just about a penny per share in the tax refund that we had picked up from prior years, but you should be pretty consistent going forward in '05.

Okay. Another question would be thoughts on the margin. It sounded like you were somewhat optimistic on some more margin improvement in fiscal 2005 with the addition of higher yielding assets and ongoing reduction in borrowing cost and I know we visit this from time to time, but as rates get higher or go higher assuming they did do there are some long-term borrowings that you could conceivably retire with less owners prepayment expenses if rates get to a certain point. Can you maybe discuss where you're at on that?

There have been times when we've been close to looking at situations that we could alter those convertibles. As our portfolio has turned to more and more of an adjustable framework we continue to look at that because clearly that could at some point continue as some type of drag. And we have taken pieces, I believe, at the right time and have done some swaps to match our portfolio. But we do have quite a bit still outstanding that we still haven't resolved. As we're growing of course it, as a percentage, results in a lower and lower percentage drag on our earnings. And certainly as we do grow it will have less effect on the margin.

So excluding the impact of the longer-term debt just for a second, just looking at your natural business growth, is it fair to assume that if things continue as is with growth on both sides of the balance sheet that we should get some level of modest margin improvement in '05 assuming interest rates don't change dramatically from current levels?

We're fairly optimistic of that, but you know all the -- as an analyst you know all the "ifs". But clearly we're putting on assets that give us margins in excess of where our margin stands today.

Thank you very much.

Laurie Hunsicker, FBR.

Just to follow up on what Jim was asking I guess with respect to margin -- the 500 million in residential loans you purchased, what are the terms of those, what type of loans are they? What is the yield running and what is the average yield running for the securities portfolio?

We haven't purchased any loans. We don't purchase loans. But we did originate them and what was that you were asking?

I'm sorry, they were originated residential -- you originated (multiple speakers).

Yes, that's just an increase in the amount of adjustable-rate loans that Bert was referring to. Our total -- most of the loans that we originate that are adjustable-rate are MTA adjustable loans and they either adjust monthly or adjust on some relatively short-term period. Right now our portfolio is more and more becoming basically adjustable against short-term borrowings.

Okay. And Fred, did you have the average yield on the loans and the average yield on securities for this quarter?

Bert I think is looking for that.

I've got for the quarter we're looking at an average yield on our residential loans of approximately 452. On our securities portfolio it's about 383.

And you don't happen to have the numbers right in front of you for last quarter do you?

For last quarter?

Yes. If you don't know (indiscernible) I'll look it up.

I just happen to. On residential loans 452, and on our mortgage-backed securities portfolio 349.

Okay. I'm sorry, the residential was 452 as well.

Yes.

Okay. And in terms of the earning asset structure you had massive growth and it was really a nice shift from loans to securities as you suggested. What sort of growth -- what sort of shift can we expect for 2005?

Well, we'll continue to shift two loans from the securities. I can't give you -- no one would allow me to predict what that will be under today's rules, but we think we'll continue to have a significant increase in our loan portfolio this year. We're very optimistic about our ability to originate loans for our portfolio and that's the primary emphasis of what we do. And clearly, while that will be substantially residential, we're also optimistic that given the demand in Florida that we will likewise see increases in our commercial and our commercial real estate portfolios this year.

And then along those lines, can you comment just a little bit on your loan loss reserves? I mean, your asset quality is excellent, but in terms of reserves to loans you're light of your peer group. What your thoughts are there?

Well, this, Laurie, has always been an historical situation with us. Most of the people who are in the peer group back to years where they have lots of losses and therefore built upon a historical basis prior reserves of which I guess some of them are starting to reduce over a period of time. Under the SEC rules which we adhere to carefully our concept is that we try to put on as much reserve that's reasonable given our historical losses which frankly have been very minimal. So we continue to realize that our portfolio is very heavily real estate secured over 90 percent, as Bert had mentioned, and a very substantial portion of that is residential. So given that circumstance we think we are an in a very good situation. And I wish we were 20 years old, if we had been 50 years old we'd probably have something compared to everybody else.

I guess in terms of loan loss provisions, Fred, is this a good run rate this quarter? It was certainly up from last linked quarter.

It varies because we have to clearly look at what it is. We did add a little bit of extra reserve on this quarter for what we consider a temporary concept of hurricane related situations since sometimes you don't eventually hear about that until later. So while we pretty well surveyed the situation we felt it was a prudent thing to add a little bit of reserve on for our hurricane reserve.

So if we were to quantify that maybe that's 300,000 or 400,000 out of the 1.6?

I don't know the exact amount, but that's probably relatively close. I don't have the exact figure here but --.

Laurie, a run rate of what we've been in the last couple of quarters is about 1.2 million and increasing that as a portfolio increases about 1.3 million or 1.4 million there abouts would probably be a good number. Again, just to reinforce what Fred mentioned when you look at the numbers of our reserve coverage; while we're not as high as our peers in our allowance for loan losses as a percentage of total loans, a lot of that is a composition as you mentioned. Another number that we take a look at very closely is -- we don't have a lot of asset issues. Our allowance for loan losses as a percentage of nonperforming loans is 151 percent whereas last year it was 60 percent. So we've been able to increase the loans against those known problem assets and then, of course, we keep a reserve for the rest of the portfolio. And also if you look at our reserve rate, it's nearly twice our charge-off rate. So we think we're going what is prudent in light of the rules and regulations and risk in our portfolio.

Okay. And then, just one more question. Going to expenses -- I guess specifically your professional fees were down linked quarter a lot, 1.6 (indiscernible). I wondered if you could address that? And then just generally if you could talk about overall expenses they -- were down, what your efficiency goals are? Clearly as you all mentioned, you're opening 8 to 10 new branches next year. Expenses go up with that. But if you could give us some direction on what we might see in expenses for this next year that would be great.

Let me just give you -- our efficiency ratio, we constantly strive to be below 50. There are times we're a little above 50. We have a lot of expansion, very frankly. We have emphasized franchise expansion and therefore we think within the range that you have seen us typically we will fall somewhere probably between the 49 and the high of 57 or so. And how much that ultimately will be where we fall -- Ramiro, and I'm going to shortcut Ramiro so he doesn't get into this and hear another speech -- Ramiro plugs very hard on expenses and he'd probably tell you he'd expect to be at the lower end of that. But in any event, it's a hard number to plug at anytime. But, we're very optimistic about keeping expense controls on as we go forward.

And then just two last questions. Quickly, your 1.3 million servicing, where is that capitalized?

118 basis points.

And one last one. Fred, this is for you. Your stack is looking really cheap here. I know that we've had some ups and downs in the market. Just wondered if you could comment generally on share repurchase. It's something we'd love to see you do, your competitors do it, you're very attractive at these levels, your capital is building back up. Any comments you have there would be great.

We're quite optimistic about our future and there's no question that if the market (indiscernible) end up reflecting our future that it's very possible that we will be doing share buybacks.

Do you all currently have any kind of authorization in place or you'd have to authorize?

We have an authorization in place which will undoubtedly be examined again annually which usually is the next Board meeting which happens to be tomorrow.

And what is your current authorization that you all have?

I think it's for 1 million shares is my recollection.

1 million shares -- okay, perfect. Thank you all very much.

Erwin Katz, Raymond James.

I don't have any number questions. My question really relates to -- I was down in South Florida not too long ago and I drive around a lot and I kind of look at the cost of real estate and things like that. And you guys have done a spectacular job over the years in not having loan problems. But I presume you guys are lending money on -- I mean, I was off of Brickle Avenue, I saw these high-rise condominiums going up and the prices were really expensive, to me anyway. Where do you see that going? Do you see the market for you to be able to continue to lend there conservatively and -- I get concerned about real estate prices.

It's always a mixed bag. Obviously the real estate prices reflect the demand. The demand has been continuing. If anything, now that the hurricanes have gone, as I mentioned, with the amount of dollars that are going to be coming into the state through our market area and certainly some other market areas we expect to be in -- there will be even more demand. The prices have gone up, in some cases where we're uncomfortable with that pricing we're much more careful in our LTVs.

With respect to the commercial side, for example the area you just mentioned, we've taken passes on doing commercial projects in those areas. On the other hand, on the residential side where you get essentially significant down payments and you're looking at people's credit and so forth as individuals, that's something else that we look at as a different situation, but nevertheless likewise keep track of certain areas in the state where we're more or less comfortable. We try to measure that as we go along.

So, that's something we've historically done. There have been other times in our existence when we've had situations like this but I would say certainly over the next several years barring something significant in the way of either terrorism or a situation where the economy suddenly reverses tremendously nationally, the demand in Florida where you see it's coming from, Latin America, people -- they earn a dollar they put 50 cents essentially up here as an investment -- the continued flow of senior citizens that come down here, but there's a new flow in addition I should say besides is also Europeans who are coming here because of the situation with the dollar.

There's a new flow coming and that is that the people who are in the age 50's group who are professionals or in other kinds of job in the north and the midwest, they're regularly coming into Florida now for also second homes because this is where they want their second home. They look down the road -- that's become a very significant factor as well. That's been the added demand that's occurred really this last year and a half in addition to everything else that's kept our economy doing well.

So we're optimistic, but we try to keep track of the situation. We try to avoid some of the bubbles that may occur. And certainly on the real estate construction side there are certain areas that -- just meeting with a developer the other night and he was telling me what a great project where he is building it and he asked me about a loan. I told him we don't lend in that area even though he's got 100 percent presales. I still wouldn't do the loan. I think that's essentially as best I can guide you. It's not a perfect situation, but it's worked for us for a lot of years.

Thank you very much.

(OPERATOR INSTRUCTIONS) Jefferson Harralson, KBW.

A question regarding the expensive block of funding. You mentioned you had taken pieces down and swapped against that. Can you talk about, to your recollection, how much have you swapped out, how much is left of that block funding and what the cost is?

Do you -- I'm not sure if I can give you exact numbers.

There's 700 million in total at just under 6 percent. That's the raw coupon rate. We've swapped about 100 to 150 million of that to a LIBOR plus, I think it's about an average of LIBOR plus 170 to 210. But that's obviously just a portion of the 700 million.

Do you take a loss when you do a swap like that?

No.

That's way off with a swap curve?

No, what happens is -- and Bert's referring to losses. They have to match the particular item that you're swapping under the rules. What's happening is our portfolio turns more adjustable than we look at various fixed instruments and look to ultimately adjust them to match the adjustables. That's been an ongoing process. And if Bert's giving you a range -- because I'm not sure -- it's somewhere in the 100, 150 area. I'm not sure how much it actually is right now. I'd have to get the exact number for you.

And then the $500 million of new mortgages on the books, you mentioned that the lion's share of it was MTA, how much of it was nonresident alien type of lending?

It would be a modest amount. That's not the main product for the nonresident alien group. And as a percentage our loans to nonresident aliens has been going down as a percentage.

So is it in the upper 20's still or mid 20's?

No, it could be somewhere around 20 percent or so, but I'm not sure if on an ongoing basis it's been that way.

I guess lastly, of your mortgaged portfolio, do you know what percentage of it is MTA or is indexed to the MTA?

We do. We have -- this quarter we have $2 billion indexed to the MTA out of 4.7 billion, that's 42 percent. Last quarter, June 30, '04, we had about 1.5 -- just under 1.5 billion out of the 4.277 billion in portfolio so that was about 35 percent. Obviously the majority of the growth came in the MTA, we grew just under 500 million and that was primarily MTA. So we're making the portfolio more and more adjustable rate every day.

What's your funding strategy for the MTA indexed portfolio?

We've done a lot of studies on that and it varies on time, our prediction of rates, etc., but on a relative basis, and I'm just giving you a generality right now, it's a combination of overnights, 30-day, 60, 90-day and here and there some 6 month and 1 year. But it's a fairly complicated concept of a formula based on where you think rates are going because you always make some adjustment for some of your forecast rate situation. But for the most part it's pretty well just an even amount with the product itself.

Thanks a lot.

Al Savastano, Midwest Research.

Just a couple of questions. You've had some great earning asset growth over the past couple of years, do you think you can sustain that pace in 2005?

We're quite optimistic that we can continue to have significant growth this year in assets.

Similar to the last few years, there shouldn't be any big --.

I can't give you the exact amount, but we think we have a lot of demand available that compared to some very large entities we're not everywhere so we have more places (indiscernible) to go to and therefore we feel there's a lot of opportunity. We're just going to keep following that up.

And Al, we've got strong pipelines in all of our business lines.

Great. What's your margin on the MTA?

I'll just say in general -- and I'm giving you a range -- that the mortgages are somewhere between 230 to 250'ish area in general. That's above -- that would be above the index, okay? And your overnight fundings are somewhat relatively close to the index. Sometimes below it, sometimes a little above it. It depends on --

And then in general the MTA product should be margin accretive.

Oh, yes.

Excellent, thank you.

David Masdea (ph), Front Point Partners.

I was just wondering if you could add any additional comments to the effects of the hurricanes in your area. I don't know if you can compare it to past hurricanes over the last few years that have hit your area and how it changed your business if at all?

The fact is that hurricane Andrew in '92 was an extraordinary storm and in a sense that extraordinary storm didn't hit Florida this time but we had four of them, several of them were the one level below extraordinary. When we had Andrew there was an initial pause, an initial what does everybody do, the people whose homes were most affected in a severe manner look around for other living; they don't end up going out of the state, they generally stay in the state and they look for other accommodations.

That's additional demand, as they get their insurance checks they buy other homes. Other people rebuild, that creates a lot of economic demand in terms of construction and there's a flow of money in general into the economic system in Florida. So it actually created a boom in a sense within a year after hurricane Andrew.

I can't tell you it's going to do exactly the same thing, but there's every evidence that it's a more widely dispersed area in the state this time. Charlotte County was particularly get. Some of the areas in Orlando and south of Tampa. You go over to Martin County, Palm Beach counties, they had hits. Some up in the Melbourne area and the counties surrounding that. Some in Polk and so on. So it's kind of widely dispersed. There's a little bit up in the panhandle, we're not really involved in the panhandle for the most part. But we are involved through loan originations and some of our branch expansion in just about every area.

Okay, that's helpful. And then just on the issue with dilution related to your convertible; you mentioned that you were reviewing options to mitigate that. Do you have any additional comments on (multiple speakers)?

We haven't made any decision. One of the problems is that we need a final reading of the rule. We're looking at what some other people have done. It seems to vary. I'd say thus far as best as I can determine -- and I don't know if this figure is really accurate -- about two-thirds or so have I think elected to do the dilution method, about another third have elected to do the cash method.

The problem is that there's some guidance that's supposed to still be coming out of the accountants that haven't come out yet as to what exactly it means if you do one or the other. So it's still up in the air somewhat. We have one of those meetings scheduled that hopefully will have enough data that we can determine which way we're going. I can't tell you right now which way.

Okay, thanks.

As you know -- and I should have mentioned this -- it's a little frustrating to us because in our particular case the trigger point is extremely high against the issuance point. The EITF to some degree really addressed more of the situation where the conversion point was much closer, the trigger point. So we've been caught up in an odd situation.

Okay, thank you.

Donald Guise (ph), private investor.

You talked about share repurchase as a possibility. I'm interest in the other side of that. Do you have any current plans or imminent plans for selling more common shares?

That's something we evaluate at all times, but right now we believe that we have plenty of capital for growth plans for a pretty good amount of time now. And even though we're rapidly growing as a result of the convertible offering that we were just talking about, we are really very well financed and there's always a possibility that given very low rates that we might hear and there pick up small amounts of additional debt financing at the right moments, but essentially in terms of stock we're not looking to issue stock right now.

Do you ever visit the idea of maybe a dividend for the common?

We always look at that, but our Board always measures that against what is very rapid internal growth and we certainly have used that to fund that growth.

That's all of the questions, thank you.

Mr. Camner, it appears there are no further questions at this time. I would like to turn the conference back over to you for any additional or closing remarks.

Thank you. I appreciate everyone who's been on the call. We've had a tremendous year. It's been very gratifying with everything our associates and our officers have accomplished for this year. And we're really looking forward to this next year. We think the opportunity in Florida is extraordinary. Thank you very much.

That does conclude today's teleconference. Thank you for your participation and have a wonderful day.