BankUnited Inc (BKU) 2005 Q4 法說會逐字稿

At this time I would like to welcome everyone to the BankUnited's fourth quarter and 2005 fiscal year end earnings conference call. This conference call may contain certain forward looking statements which are based on management's expectations regarding factors that's 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, could, plan, target, and similar expressions are inextended 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's expectations include, but are not limited to, general business and economic conditions, fiscal and monetary policies, significant weather events such as hurricanes, war on terrorism, change in interest, deposit flow, loan demand, and real estate values, competition with other providers of financial products and services, the issuance or reduction of additional company equity or debt. volatility in the market price of our common stock. Changes in the accounting principles, policies, or guidelines, Changes in laws or regulations, reliance on other companies for products and services, and other economic competitive servicing capacity, governmental, regulatory, or technological factors baked in the Company's operations, pricing, products, and delivery of services. [OPERATOR INSTRUCTIONS] Thank you. Mr. Camner, you may begin your conference.

Good afternoon and thank you for joining us today as we report on BankUnited's financial results for the fourth quarter and year-end of fiscal 2005. Joining me on today's call are Ramiro Ortiz, BankUnited's President and Chief Operating Officer; Bert Lopez, our CFO, and for the first time, our newly appointed Executive Vice President of Corporate Finance, James Foster. We're glad to be here together following a rough day with Hurricane Wilma battering South Florida. Last night not one of our 61 branches or operations center or headquarters had power. I'm happy to say that close to one-third of our offices and our principal operations center are already up and running due to a lot of hard work. Ramiro will talk a little more about this.

Before we get started, I'd like to introduce everyone to James Foster who joins us as a key member of senior management team. His experience with large diversified financial institutions including Chase Manhattan Bank and Futura Industries, a former Fortune 500 conglomerate and owner of the largest thrift in Georgia will be a valuable asset as we develop strategic plans for our future.

Fiscal 2005 was marked by substantial growth in many of BankUnited's key performance areas. By year end total assets reached 10.7 billion, a 22.4% increase from the prior year while loan production grew 44.8% to 5.4 billion. Moreover, we expanded our retail network with the addition of 11 branches including entry into the three new counties in Florida, Martin, Port St. Lucie counties on Florida's east coast and Lee county on the west coast. These areas hold great promise for us. I'm optimistic that we will be able to meet the competition, expand our customer base, and deliver products and services to more consumers and businesses in the state.

Net income during the fourth quarter reached a record 14.3 million while total deposits rose 34.2% from the same period last year to 4.7 billion. In addition, we expanded our funding sources in the fourth quarter and facilitated future growth through the sale and securitization of 509 million of our portfolio of MTA index mortgage loans. The success of this transaction proved that financial markets recognize the value of our products. We will evaluate future opportunities for transactions that create liquidity and enable us to manage our balance sheet more profitably.

For the fiscal year, net income was 27.5 million compared to 50.7 million for the fiscal 2004. The reduction in income was due to the -- primarily to the repayment of FHLB advances that we reported previous quarter. And those related swaps also in that quarter. Excluding those prepayments, net income for the fiscal year, September 30, 2005 was 51.7 million, approximately a 2% increase from fiscal 2004. During the fourth quarter, basic and diluted earnings per share were $0.47 and $0.44 respectively. Which is unchanged from the same period in the prior year. For fiscal 2005, basic and diluted earnings per share were $0.90 cents and $0.85 respectively as compared to $1.68 and $1.58 for the same period the prior year. Excluding the net loss relating to the FHLB prepayment basic and diluted earnings were $1.70 and $1.60 per share respectively for the fiscal year-ended September 30, '05.

In 2002, the Board of Directors approved a stock buyback plan of up to 1 million shares. During the fourth quarter we purchased 78,200 shares of Class A common stock in the open market. In the fiscal year we purchased 89,700 shares. We may make additional purchases in the future subject to applicable restrictions on the timing of trading of our stock.

Overall we are pleased with our performance for 2005. These positive results have been fueled in part by a proactive plan for repositioning the balance sheet and commitments of our team to enhancing relationships and expanding product lines and services to meet the needs of our customers. We have built BankUnited to a unique model, a hybrid that can offer neighborhood banking services to our communities while running an outstanding mortgage lending and asset building machine. At the same time our size enables us to offer comprehensive commercial and corporate banking services. This makes us different from other banks operating in similar markets. I will now turn this call over to Ramiro Ortiz, who will provide more detail on specific operating results. Ramiro.

Thank you, Fred. The results of fiscal 2005 demonstrate the success of our micro market neighborhood banking strategies that we've talked about for a long time now. During the year we opened 11 branches. Our new markets have unique characteristics and we're now developing micromarket strategies to fit these markets and be consistent with our overall strategies. We now have 61 branches in our system and plan to open 8 more in the next few months.

To help manage this growth and support future expansion we have promoted and we have hired veteran banking professionals in those markets to lead us in the expansion that we plan. We are now ready to serve those -- as the local neighborhood financial expert to those area residents. The success of our strategies are particularly evident in the areas of deposit and loan production. Total deposits during the 4fourth quarter increased 34.2% from the same period last year to $4.7 billion. Core deposits which include checking, savings, and money market accounts increased to 1.9 billion up 17% from September 30, 2004 and up 17% from the previous quarter in 2005.

The real highlight of the story is noninterest bearing deposits. Noninterest bearing deposits rose during the quarter to 372 million. That's up 50.3% from September 30, 2004. Now, as far as I'm concerned and we discussed this before, this is the real report card on our retail strategy and those are balances in noninterest bearing deposits and you can see this kind of increase of 50.3%. I don't know about all of you on the call and the different banks that you track but I've never even heard of a 50.3% increase year-over-year. This really gives me a tremendous amount of confidence in our micromarket strategies that we've implemented.

Loan balances during the fourth quarter grew to $8 billion. That's a 6.2% increase from the same period last year. This growth included a $315 million increase in residential mortgage loan balances as well as a $113 million increase in commercial and commercial real estate loan balances. Our commercial strategies continue to work in our local markets. We continue to distinguish ourselves as a consequence of our local decision making.

Total loan originations for the quarter were $1.6 million and that's up 66.2% from the fourth quarter of last year. Total loan originations for the fiscal year were a record $5.4 billion and that's up 44.8% from fiscal year 2004. Residential mortgage loan originations were $1.3 billion during the fourth quarter. That's a 50.9% increase from the same period last year. For fiscal 2005, residential mortgage loan originations reached a record $4.2 billion. That's a 43.2% increase from fiscal 2004.

Consumer loan production was $90 million this quarter. That's a 69.7% increase from the same quarter last year. For the fiscal year, consumer loan production was $299 million. That's up 64.9% over the prior year. Consumer loan balances grew by 107 million or 63.3% from September 30, 2004 to 277 million for the quarter ended September 30, 2005. Our micromarket and commercial strategies are working. We maintain our strength advantage as the largest banking institution headquartered in Florida while structuring our staff, services, and community involvement to meet the local needs of a growing number of customers throughout the state.

You all might be curious about our hurricane situation and how that worked out. I'll brief you very quickly on what we did. On Thursday, our management team activated our hurricane plan. This was done in the afternoon and prepared us in essence for the storm. Yesterday afternoon, literally hours after the hurricane at 6:00 p.m. we had our first post hurricane meeting. Today, at 4:00 a.m., our operation center was back fully operational. Today as of 12: 30, as Fred mentioned, roughly a third of our branches are now open. We expect most of our branches to be back open tomorrow.

Our lending units are fully operational and now we're going through a process with our commercial and commercial real estate lenders where literally we go customer by customer and check on the impact of their businesses. Overall our staff has responded admirably to this challenge and we are very proud of their efforts. I will now turn the call over to our CFO, Bert Lopez who will discuss our financial indicators for the quarter end this year.

Thank you, Ramiro. We've had a very busy and productive year that was highlighted by specific steps we took to improve our balance sheet. During the fourth quarter net interest margin improved to 185 basis points from 167 basis points during the preceding quarter. This quarter over quarter improvement can be attributed to balance sheet restructuring, upward repricing of the MTA index, and enhancement to mortgage products that have enhanced the collection of prepayment fees. While the margin is improving, an unexpected reduction in the Federal Home Loan Banks anticipated quarterly dividend rate this quarter, negatively affected total interest income and the net interest margin. We estimate that the net interest margin would have been approximately 2 basis points higher at 187 if the Federal Home Loan Bank had not lowered the dividend rate.

We expect that the following factors will continue to effect net interest margin going forward. First, fund cost continued increase in response to general market interest rates and competitive pressure on deposit prices. During the year, however, we prepaid 530 million in long-term Federal Home Loan Bank Advances in order to help our company obtain lower cost funds through deposits and borrowings. Prepayment fees on this debt and related swaps totaled $37.2 million which on an after tax basis reduced the Company's earnings for the third quart and for the fiscal year by $24.2 million. This prepayment coupled with prudently managing our deposit costs and other borrowing costs helped restrain our liability costs as it increased only 9 basis points in the fourth quarter from our third fiscal quarter.

Second, a significant portion, now 61% of our loan portfolio consists of adjustable rate mortgages of which a substantial amount is indexed in the monthly treasury average. During the quarter ended September 30, 2005, the MTA index increased by 42 basis points and generally kept pace with increases in the level of market short-term interest rates. Despite this trend, no assurance can be given that the index will continue to match federal reserve increases in interest rates.

Third, the industry-wide phenomenon of mortgage loan prepayments continued to impact our margin. Recognizing this, we implemented programs in the third quarter that have already contributed to stabilizing the impact of prepayments on our margin. During our third quarter, these prepayment fees contributed approximately 6 basis points to our net interest margin. During the fourth quarter, the prepayment fees added approximately 8 basis points or a marginal improvement of 2 basis points over the previous quarter. As a result of these pricing improvements in the aforementioned mortgage product enhancement our yield on earning assets increased 30 basis points for the quarter to 5.03%.

In order to help us increase liquidity, flexibility and positive exposure in the secondary market, we sold $509 million of the MTA index adjustable rate mortgage loans for securitization during our fourth quarter. We acquired 278 million of the securities issued in that transaction which we expect will facilitate future growth. Going forward, we will continue to evaluate similar opportunities that may enable our company to more effectively manage the balance sheet. Total noninterest income in the fourth quarter was 5.5 million, a 13% increase from the same quarter last year. For the fiscal year, total amount interest income was 22.6 million, up 11% from last year. This included a $1.4 million charge on a settlement of swaps related to the aforementioned Federal Home Loan Bank debt prepayment. Gain on sale of assets which includes loans and securities totaled $6.1 million for fiscal 2005, as compared to $5 million for fiscal 2004.

Fee income which includes loan fees, deposit fees, and other fees, but not loan servicing fees was 2.7 million in the fourth quarter up 29% from the same period last year. Fee income for 2005 was 9.2 million, up 5.2% from 2004. The fee income total also reflects the reclassification of fees on mortgage prepayments from other income to interest income for the current and previous periods. Our portfolio of residential loan service or other, stood at 1.7 billion at the end of our fiscal year. Servicing fees for the quarter were $0.9 million and were offset by $1.2 million of amortization resulting in a net loss of $300, 000. We recorded $130,000 and a 1.2 million in impairment charges based on evaluation of the servicing portfolio by independent third parties during fiscal 2005 and 2004 respectively.

In the fourth quarter, noninterest expense which includes $35.8 million in pretax prepayment fees related to the Federal Home Loan Bank prepayment was 144 million, a 70% increase from the 84.7 million for the prior year. However, noninterest expense excluding the prepayment fees related to the debt repayment was 108 million for the fiscal 2005, up 27.6% from the previous year.

The increase in noninterest expense for the quarter and fiscal year also reflects the Company's rapid expansion into branch network and its support areas as well as expenses related to our first year, Section 404 Sarbanes-Oxley Act compliance. The fourth quarter costs related to Sarbanes includes approximately $500,000 of nonrecurring expenses. During the 2005 fiscal year, we opened 11 branches and entered three new Florida markets. 6 of these 11 branches were opened during the fourth quarter. Our efficiency ratio for the quarter was 59%, up from 49% for the same quarter last year and for fiscal 2005, the efficiency ratio was 77.52 compared to 51.7 for the prior fiscal year. Again, excluding Federal Home Loan Bank prepayment fees, the efficiency ratio for 2005 would have been 57%.

Our nonperforming assets as a percentage of total assets decreased to 8 basis points for the fourth quarter from 10 basis points in the third quarter and down from 20 basis points September 30, 2004. This quarter we were in a small net recovery position and it's helped bring our net year to date annualized chargeoff ratio down to 3 basis points compared to 4 basis points for our preceding quarter. We consider these levels to be superb and of course there is no guarantee that these low-levels of nonperforming assets will be sustainable in the future.

The allowance for loan losses as a percentage of total loans was 32 basis points at September 30, 2005 compared to 42 basis points at September 30, 2004 and 33 basis points as of June of '05. While the current level is relatively low compared to the banking industry in general, management believes the allowance is prudent given 90% of the Company's loan portfolio is secured by real estate primarily residential real estate. And of course there can be no assurance that additional provisions for loan losses will not be required in future periods.

We continue to maintain our strong capital position in excess of regulatory requirements, our core and risk base capital ratios were 7.1% and 14.5% respectively at September 30, 2005. Our book value per common share was $16.59 as of our fiscal year-end up from $16.19 at the end of the last fiscal period. As Fred and Ramiro noted previously we have been focused this year on refining our balance sheet, expanding our network, and continuing to improve results in our core performance areas. I will now turn the call back over to Fred.

Well, I think we are off to a good start on this call and I'm ready, moderator, for questions.

Thank you. [OPERATOR INSTRUCTIONS] Your first question comes from Laurie Hunsicker with FBR.

Absolutely, great, great, great quarter. Wondered if you could just give us a little bit more color specifically on, I guess, forward-looking margin expansion in terms of what you're seeing and maybe in terms of what you're seeing too with respect to your core deposit growth being very good. If that's a trend that will continue. And maybe how much of that core growth came out of your new branches that were this year, if you have any sort of break down on that?

We'll have to try to get together for you. Break downs on the fourth quarter it's -- in terms of how other offices actually did, but I'd say overall there is no question that our newer offices do help us expand core. Noninterest bearing is more akin to the offices that are more mature and particularly those in the areas that have commercial operations, small business operations, and so on. So all of that relates -- it's kind of a split. I don't have the exact amount for you on the air, but basically we get a lot of the noninterest bearing that we really work hard on in some of our older offices. The newer offices are generally attracted to certain core deposits. There is no question that some of them are also though in CD areas. It is a combination. We've worked very hard to build our core deposits. We are very optimistic about continuing to do so.

Ramiro, he may want to get into a little more detail on, this but ultimately Ramiro spends a lot of time ruling that item and every senior management meeting to keep building our noninterest bearing deposits. We think long run that's clearly going to be a big plus for us. Whether we can maintain the same kind of percentages that we've had as Ramiro mentioned, that is an extraordinarily high percentage. We had this last year. We're optimistic. I don't know if we can hit that same percentage again.

Laurie, let me had a to something that Fred has said. One of our real secret weapons and one of the things that gives us our best opportunity going forward is that three years ago we had 37 branches. We now have 61 branches and as we analyze our branch profitability, the newer branches are the ones that, right, now are not completely profitable. Every single day that comes on every one of those branches becomes more and more and more profitable. We've got this whole profit wave that is coming on board and as a consequence of this kind of growth, tomorrow looks better than today and the day after tomorrow looks better than tomorrow.

How many of your 61 branches are break even or better?

Roughly half of the branches are break even. The positive things is that the ones that are not break even are our new branches. So literally, Laurie, I mean, you see these month after month. You have you one more that is profitable and then the next month you have another one that is profitable. And this gives us tremendous head wind going forward.

And Laurie, just to give you an idea, approximately a third of our branches are less than two years old. So again, we have the expense base in, there but as Ramiro and Fred was mentioning, as we pick up on the revenue side, that should be a nice push going forward.

Yes. And then what is the average deposits to break even?

Well--.

It depends on who you ask, Laurie. I have generally a rule of thumb and usually if we're in the 20 to 25 million area in deposits, you'll see an office that's breaking even. We actually have some new offices that have already exceeded those kind of numbers really within about a 6 to 9 month period. But there are a lot of other factor that's go into the calculation and--.

Like a couple of the deposits.

That makes up the deposit, but also the whole concept of the office itself and how we're growing it, what the costs are, the particular location. There are a lot of things that go into this discussion. I'm always -- have a certain amount of skepticism referring to the profitability of an office because there are a lot of ways to go about measuring that.

Sure.

But clearly we feel that a lot of these are in the stage of becoming profitable. Every new office we've really opened this last couple years, I think you would find is going to be a excellent office for us. We have been very optimistic about our site locations and we're very optimistic about the new markets that we're getting into. We're now starting to move up the east coast. We think there are some people up that way that really need our competition badly. They are going to be welcoming us with open arms. I know that things have been a little too easy for them. So we're going to make them smiley faces to see us across the street.

And likewise, we're starting to do the same type of situation on the West Coast. There are some locations. We had decided, and just to understand our strategy, in the past I think everybody's just determined that, gee, if you have to go in a new market you must open 5, 10, whatever in one market. We have really gone a different way. We've tried to find what we think are some good sites, get open in maybe one, maybe two, whatever it is. And then we just keep plugging away too find other sites in those markets in the belief that we really just -- we need to get our toe in and then we're going to get the foot in and then the rest of the body starts coming through the door. That's how we've looked and viewed it and thus far it seems to be working very well.

In the meantime, Laurie, they become excellent funding sources for us.

Absolutely. And -- absolutely. Did I hear you right in terms of eight more branches to open in 2006?

Well,--.

Give or take.

There are eight new branches that are scheduled to be open some time around January of '06, between now and January, February of '06.

Okay.

And then we have a -- I believe the additional branches thus far scheduled for the rest of the year thereafter is somewhere between three and four.

Somewhere between three and four, okay, so about the same pace maybe a little bit better than you did this year. Okay. Two more questions just quickly, on the effective tax rate, should we be using 30 or 32? And then last, buybacks, we're very excited to see you all aggressively buying back, or more aggressively buying back, I guess, than you have in the last few years. Any thought of increasing that further with your stock down here?

Frankly, because of various rules from counsel, relating to what we call our -- we have an internal blackout period done when earnings are in position and so forth, we believe we would have bought some additional shares back. So there is a very good chance that we will be buying some additional shares, depending of course upon the pricing and how we think things are going. By the way, just and Bert may want to put more information in this in terms of our cost on those branches that Ramiro is mentioning, not all but a lot of the people and some of the costs are already built in and even into this last quarter we had because we hire the people obviously in advance of opening the offices.

All right, Laurie. The people ahead of us we're helping, we have this quarter approximately $1.4 million of costs we've attributed to the new branches that opened this quarter and last quarter. So we need to build that into the numbers going forward. But as we mentioned earlier, the majority of the branches -- or a third of the branches are still relatively new. So they will had revenue and we have got most of the expenses already baked in.

Right.

On the tax number, we were about 29% this quarter. That's a combination of the effects of a loss that we had last quarter due to the Federal Home Loan Bank prepayment. And just some shoring up of the number right at the end of the fiscal year. Going forward, I would advise a 32-basis point run rate that's-- a 32% run rate. That's typical of where we have been running given the structure of the income and expenses that we have.

Okay. Great. Thank you very much. Nice quarter. And stay safe.

Your next question comes from the line of Jennifer Thompson with Oppenheimer.

I was wondering if you could give any color on the trend in the net interest margin through the quarter? What did it look like going -- in the last month of the quarter versus the average? Was that trending higher?

Yes, it was. Except for the unexpected surprise from the Federal Home Loan Bank. In actuality it came down a little bit in the September month. I don't know if you are familiar, but on September 30, the Federal Home Loan Bank had announced that they were going to substantially reduce their dividend rate. So had that been back in place we would have seen an upward trend during the quarter. But as it turned out, in actual we took a little bit a dip in September because of that.

Okay. So was the -- excluding that impact, would the final quarter have been higher than it -- it would have been higher than average you are saying?

It would have. The final month would have been higher than the average during the quarter. The quarter itself obviously would have been higher also by about 2 basis points as we mentioned.

Okay. Now could you--.

By the way, I just want to mention that in terms of -- this may anticipate some people's questions. In terms of the Home Loan Bank dividend, we are all waiting for guidance from them as to whether they're going to go ahead and increase it back to their number. This relates to their filing of their SEC registration and a present regulation from the Housing Finance Agency involved with whether they are allowed to do dividends without permission. They've indicated to us they have full intention as soon as they resolve that to go back to their prior dividend or a higher dividend in fact. So we're just waiting to see if they can get that all put together. Excuse me go, ahead, please.

Great. And then just a couple of questions in terms of the expenses. First of all would you expect any material impact from this most recent hurricane? Was there that much of an impact from the closing of the branches?

In the past we have experienced anywhere from -- I'm going to give you a broad range from 100 to somewhere in the 400 to 500,000 impact from hurricanes. And it's very hard for us to gauge that presently. The after effect of a hurricane of this nature and one that particularly covered every single county that we have offices in is that those particular counties generally develop a large influx of insurance money over the next several quarters thereafter. So to some degree there could be a slight impact running into this quarter. I can't fully estimate it until we get everything put together.

Just to describe a little bit more the hurricane overall, there's probably a little bit less structural damage that we've seen in other hurricanes in this particular hurricane. There's a lot more of the power out, water not working debris, et cetera, but there is no question that there will be a certain amount of reconstruction items that go on, a certain amount of insurance payout that will go on and the general affect of this has been a actual pick-up of the economy. Now, I put a caveat here since our economy in Florida, particularly south Florida, through every market area we're in is extremely strong. It is almost hard to imagine it getting even stronger. So nevertheless this will probably carry on into at least a year's plus time. That's been the general prior impacts.

With maybe an initial pressure in the current quarter because of the impact is what you're saying.

As I said generally it's had -- several of the hurricanes have mounted about 150 to 250,000 and we end up not even particularly mention them in releases later. I think once we mentioned one that was in about the 350ish area. So we can't give you that estimate right now. We're getting in our offices up. If you asked us last night we would have probably told you it was the larger number. We're getting our offices up and running even faster than we imagined and notwithstanding some of the dire predictions of the public relations people at FP&L last night it seems like the electricity is moving much more rapidly than they indicated. And I guess a lot of homes may be be impacted, but the businesses are very quickly being put back on-line, and for those a lot of our offices to the extent they are not going to be on-line fast enough, we're opening those with generators. We're pretty optimistic it will have a minimal impact for this quarter. But we can't guarantee you that right now because we don't have the entire picture at hand.

The vast majority of our branches that are down, Jennifer, are power situations and just we need more generators. Actually, if we had more generators we would have even more offices open.

Right. Well, it sounds pretty good, I guess. In terms of the compliance costs, I guess you mentioned a little bit about Sarbanes-Oxley related costs. Can you give us a sense of what total compliance costs are running, maybe magnitude of change quarter over quarter and what do you think a good -- what did we end up with in terms of a run rate impact to expenses?

Ongoing Sarbanes-Oxley costs in particular, those are about 1.7 million for the fiscal year. We had a good chunk of that, about 600, $700,000 in the last quarter -- sorry, $800, 000 in the last quarter. Our run rate tends to be closer to 300, 350 for the quarter. The ending just came because a lot of the work came right at the end of the fiscal year. So I'd use the $300,000 number going forward. We're expecting some efficiencies from particular outside auditors and doing the 404 compliance. We also have obviously some efficiencies from just having gone through it for the first year and we're that much smarter about it for the second year. From the 1.7, I would bring that back down to about 300,000 per quarter.

Okay. And just one final question. In the past you've given us some guidance on what you think the impact of the MTA repricing would be sort of on a monthly or quarterly basis. Can you give us any thoughts on that from what you -- from whatever information you have right now?

And you -- we have got to be careful with this. We're just projecting where we think the MTA index should go. But it should be -- it should increase in the low 40 basis point range for this next coming quarter. Now, that will be positive or negative depending on what general interest rates do and how we can keep our deposit costs and our funding costs down which we did a pretty good job of this quarter, but we're expecting somewhere in the mid 40s in terms of -- I'm sorry, low to mid 40s in terms of increases in the MTA for the next quarter.

Which is about in line with what you did this quart ?

Exactly.

And I can say overall that in terms of some of our planning that we have taken into account probably a belief that somewhere between 4.50 to 5% some time this next year is where things are headed. And given -- it is almost interesting from my viewpoint that since I started this company almost the entire time Alan Greenspan has been the head of the fed. And so when you are looking at it, Vernace, I assume will be the next and we're of the belief that no matter what happens that he probably will at least plug in a couple increases to show he is good at inflation. So we're generally working our concepts and trying to plan for something between 4.50 and 5%.

Great. Thanks very much.

Your next question comes from the line of Jim Ackor with RBC Capital Markets.

A couple of quick questions. With regard to the loans that's were sold, the MTA loans, can you give as a flavor for what sort of gain on sale margins you were able to achieve with those loan sales?

Yes. I think because of the way we structured this particular transaction, we didn't look for particularly gain on sale per say. That's not really in this number. We purposely retained pieces of this including certain strips of it because we think that ultimately will be positive to margin. So, essentially the overall transaction -- the overall transaction from a direct reporting basis for that quarter ends up being approximately break even. And, again, there's a lot of details to that.

Now I should also mention one other thing that there is no question that we incurred a lot of additional costs because no matter how you do this, and even though there may have been people involved who had been involved in some securitizations in the past when you do the first major securitization like this in a company, there are a lot of additional costs that are incurred in terms of just getting everybody geared up. The next time we do one, even if we use the same structure, I would think that it would probably be more profitable as a actual sale item in addition to a retention item.

Okay. In terms of looking at capital levels, loan production, prospects for buybacks, balance sheet growth, et cetera, it looks to me like your tangible equity is somewhere in the neighborhood of 4.5% of total assets at the end of the fiscal year. And I don't recall it being that low for quite some time. I'm curious as to where you're comfortable taking that and how do you, I mean, considering your origination volumes are so strong and don't appear to be slowing at all, it seems as though you are going to have to put more of this stuff out to the secondary market, or you are going to have to raise capital or perhaps you will just not continue with share repurchases in any significant way, shape, or form. Am I off track there?

I think it is more of a combination of almost everything you said. It's -- and we haven't made some final decisions on this in terms of how we're to approach things. We have a lot of different ways of possibly raising funds to keep moving forward. We haven't made a definitive decision on exactly where our tangible would end up resting. And likewise the securitization was evidence that we're in position to do a lot of things on a balance sheet basis. It gives us opportunity to move assets to -- a certain portion of assets off the balance sheet and at the same time retain a higher yielding base of assets in the process of doing that securitization.

So there are a lot of interesting developments. These are things that we're looking at now and, in fact, since we introduced Jim Foster today as being on board and just joining us, That's one of his principal projects to work up that combination. Certainly if our stock not in a, what we call a -- and I'm not sure what they like to call this from a counsel's view point, but we sort of call it the blackout period, if our stock had fallen that -- as low as it did, notwithstanding other circumstances, I had expected we would have been in there buying. And there was a couple of days there that we were very surprised that people underestimated where we were and where we were going. And given that situation, we feel that we're of more than sufficient resources to do buybacks. I would expect that we will continue some buybacks. Everything is a clearly timing and we haven't determined all those timing points.

Okay. Fair enough. Finally, one last comment for Fred and for Ramiro maybe as well, can you just give us some broad commentary on any trends, continuation thereof or maybe -- maybe some changes if you have seen any with regard to condo construction and for condos and the whole concept of investors being still active in that market and where you see risk and how you are trying to avoid those risks?

I will go first and than Ramiro I think is going to add in to this. Basically we have generally kept away from some of the highrise condo construction except in some very specialized markets where we feel that they were particularly strong locations. And there are -- such as the downtown corridor and so forth, those -- and Miami for example, those areas we have kept away from doing construction financing for those areas. We've -- but other than that, most of our construction is either relating to some commercial stores, shopping centers, or it relates even more so to the low rise housing and residential from a construction view point. Clearly we're still a major residential in loan entity in terms of doing that. That's an emphasis that we have.

In terms of pricing, there are a few soft spots that have been reported I think even nationally in the market. When we say soft, it is generally that they have slowed a teeny bit in the rapid rise and we frankly, think that is good for the situation. We feel that there are a few areas in Florida that need to cool off a little bit. And we're cognizant of that. And what is really interesting is that except for a few out of state lenders, most of the local lenders are very cognizant of that. I think we're all sort of participating in what I would call the let's take it easy phase because we felt that a little bit of this was getting ahead. So we've been pretty comfortable with that.

Overall the markets have been strong. The overall economic trends have been strong. As I said, because of the hurricane situation, we're going to end up with probably increased liquidity from individuals who need to rebuild different houses and it will be not so much the entire house, like it was in hurricane Andrew. But it will be more that they had some roof damage or something else that needs to be fixed. So this adds on to the overall economic activity. So we're extremely optimistic. People are moving to Florida in large numbers. They continue to do it every day. And there are a lot of good reasons for that. Ramiro, you may want to add on this in more detail.

Jim, I'll just pile on to it for a couple of things. We look at it from two different perspectives. One is the developer and the other one is the end user residential mortgages. On the developer side and you and I have talked about this before. We're not in any of the sexy stuff. Our is kind of a very dull, boring portfolio. I take it as a compliment when a lot of the go-go developers as a casual comment say well, BankUnited is too conservative. We don't brings these kinds of deals to BankUnited. I take that as a compliment. So we're not in the go-go stuff. In terms of end user residential mortgages, we have limits in terms of how much we will lend on any one unit. And then we also have controls in place to make sure we don't get flippers into our portfolio. That's not to say we don't have any, but we have different controls in the application process so that we can minimize the numbers of those.

I guess overall if you are looking at things from the economic perspective and where the state is and even relating to the hurricanes, Jeb Bush, our governor, had given a statement to the press, which I guess was kind of a -- maybe a somewhat fair comment on reaction of government and local authorities and so forth in addressing hurricanes and while we've had our damage and this was a tough hurricane for everybody, so I don't want to totally minimize that. On the other hand, the reaction and the preparedness and et cetera has put us really in a position that it becomes a go forward that actually adds to the economic base of the state. And fortunately we've had the leadership in local and state authorities for the most part. Not in every spot, but for the most part that enables us to respond well to that.

Thanks a lot.

Your next question comes from the line of Irwin Katz with Raymond James & Associates.

So you guys know that I'm always interested in what is going on in spreads and everything, but more importantly I'm interested in knowing what the loan quality and things such as that, but it looks like you pretty much answered my question in the last response. So I'm pleased to hear that we're in good shape there.

Yes, we've -- we're optimistic about that, but we're all aware and this enters into our calculations that when the fed raises rates as rapidly as they are, that their desire is to reach an end point that too often in the past ends up being into some kind of national recession. Fortunately this state has not suffered as much in those recessions as others. But we're cognizant of that and that has become part of how we plan in terms of our credit now. And there is no question that ourselves and again, some other local entities have probably tightened their credit and I'm starting to see some nationals also tighten credit. So if everybody is looking at something, I guess that's one of the things you can look at. But what the fed wants to accomplish, they're accomplishing.

So even with the -- some maybe new players coming into the market who might be a little bit more aggressive to maybe buy business, is that still allowing you plenty of opportunity for you to continue to bring good quality stuff on that fits your loan criteria?

I think Ramiro will tell you, and he may want to jump in on this, that we turned down a great deal of business.

Yes, Irwin, you've been around Florida banking for a lot of years. You know a lot, a lot about it. And once you've been around the marketplace and you saw the '70s and you saw the late '80s and so forth, and every one of the cycles, yes, we have new players come into the market and all of a sudden they've put together -- and actually that's the scary part of the real estate cycle and they put together parameters that don't make any sense and terms that don't make any sense. And we maintain the discipline that quite frankly, we walk away from those deals. And we've all seen it before, but we maintain the discipline. That's not to say that we're not going to get nicked like everybody else in the event of a downtown that Fred is talking about. But we won't get nicked as much as others. At every one of our Board meetings when we report on our MPAs and chargeoffs, I always at the end of the report say, now guys this is not sustainable and I keep saying that. Where we're at, these basis points of nonperformers, I'm not sure that's sustainable as you know. But having said that, we maintain our disciplines and I'll reiterate again that we're not into any of the sexy stuff and ours is a dull story as it comes to credit.

Well, I'm very happy to hear that. Thank you, guys and keep it up. I'll look forward to seeing you guys soon.

Yes. Same for us, Irwin.

Your next question comes from the line of Gary Tenner with SunTrust Robinson Humphrey.

I wonder if you could tell us, Bert, what the number would be for the negative amortization in the MTA portfolio during the quarter?

During the quarter?

Yes.

At the end of the quarter we stood at $12.6 million for a cumulative number.

Okay.

And remember though, Gary, That's on a base of over $4 billion worth of outstanding.

Right. I understand. And the negative--.

Gary?

Yes.

I'm sorry to interrupt. As mentioned 12.6 million is for the entire period of the existence of the loans. We were at 9.4 million through September. I'm sorry, through June. 9.4 million through June of '05.

So for the fourth quarter 3.2 million?

Yes.

Yes it is -- now remember though, Gary, the size of the base. It's a small item at this stage for us. It is one that -- and in terms of people and I have seen a lot of information and articles and things going around, we probably address the MTA more conservatively than maybe some other people do and so we have a different process. We qualify people on the adjusted rate as opposed to the base rate. There are a number of things we do in terms of our LTVs as to how we control that and so forth. So we think overall it is a pretty conservative situation. And in fact, from my history of the past and I have been through the 6 month California 11th district. I have been through the, 1 year -- the old 1 year adjustable and et cetera. This product actually in the way it is being done, in many ways, is more conservative than a number of those products were.

Gary, let me just jump in with a few details. That is important to differentiate our product from the one that is typically out there. As Fred mentioned the LTVs are pretty low. We originate this, and LTV is 74% for the portfolio as a whole. We do underwrite this as at the fully indexed rate. And the one thing that we do on the back end is we don't allow the negative amortization to get higher than 115% of the original balances. I think typical for the market is allowed to go up to 125% of the original balance. That's another way we keep this pretty conservative and we think overall the credit quality has been very good and it is underwritten pretty conservatively.

Okay. And the negative debt distinguishment costs are I guess a reversal from a previous expense? Could you just talk about that for a second?

Are you talking about the Federal Home Loan Bank?

Well, just on the operating expense line items. You've got a reversal looks like of a debt extinguishment cost of $734,000. Just want to just make sure what that relates to.

That's a piece of the overall, early prepayment of the Federal Home Loan Bank Advances. In the third quarter we wrote off a chunk of those. We prepared in the second quarter -- I'm sorry, the fourth quarter we also sold some advances. The net difference of that was a positive and that's why it is a subtraction from the expenses.

Okay. All right. Thank you.

Your next question comes from the line of John Pandtle with Raymond James.

I had a couple of questions. The first relates to the level of your securities portfolio which has trended down nicely over the past year as you replaced it with this MTA product. It looks like it has effectively enabled you to manage your capital levels. And Bert, I was just wondering, as I look at it I'm showing a loan to earning asset ratio at least on an average basis of about 80.5%. I was wondering how much more flexibility you have to move down the percentage contribution of the securities?

Yes, John, what we like about the securitization process is it gives us the security that we know all the embedded characteristics behind it. And we think that is a good avenue for us in terms of changing our securities portfolio to contain more of the asset that we know about. As we mentioned earlier, that's something we're going to continue to want to do as we go forward. I don't know that it is going to continue to trend down, the securitizations and anything we have put in the portfolio will determine that. But remember the securitizations that we are getting is turning around and giving as a security that has a pretty high yield on it and bodes well for the margin.

I guess effectively over the past year though you have been redeploying liquidity and in effect funding this loan growth in the MTA product. Not putting as much pressure on your capital levels. It sounds like to me you are not going to have as much flexibility there?

No, well, what we're doing is we're letting the original part of the securities portfolio, that will continue to run off. But I think what Bert is referring to is that as we go forward, we will continue to do a certain amount of structured securitizations of our own.

Right.

And so pieces of that will get replaced in the securities portfolio as that portfolio runs off.

But outside of that sort of financial engineering, if you will, on more of a core basis, you would think the securities would continue to decline as a--?

Yes, outside the securitizations, most definitely they would continue to decline.

The securitizations that we're doing put us in position for -- from a liquidity view point that is extremely positive. And in fact, as this will go on, it will actually continue to increase our liquidity.

Okay.

Quite a bit. And we learned a lot in this transaction because there have been some other entities that have done MTA securitization situations, but -- and sales and securitizations as we did. But, in the process of structuring this, there are a lot of different ways we can do this for the future that we think will continue to enhance and even more so what we did with the past transaction.

Okay. And just to clarify a previous comment, the $934,000 of loan sale gains in the quarter, none of that was related to the sale of that 509 million of MTA?

It's included therein, yes.

How much?

We were right about break even.

No, that was break even. So you are saying the amount there, no, those are just simply -- you will see period to period that we take different loan sale gains. There are other loan sales that are in there as well as some other security sales.

So there was no effective loan sale gain booked in the income statement from that 509 million?

Break even.

Okay.

It was break even. As I mentioned, the way we structured it, it ended up being a break even transaction with certain enhancements on the piece that we continue to hold.

Yes, so the 934 is pretty much a normal operating number?

Yes.

And then finally, Bert, and I apologize if you detailed this earlier, but this 18 basis-point linked quarter increase in the net interest margin, do you have a break down of the incremental benefit from the prepayment of the debt and then the impact on adjusting the teaser period for the MTA?

The information -- what we felt about this is the information is a little fuzzy for the following reasons, and I don't know if Bert wants to add beyond what I have on this is what we in our minds have a general number as to how much it improved things, you have to remember that under the varying accounting treatments when we went about and did the prepayment, we had no plan reborrowings done. And you have to then go out in the market and so what happens is in the process of doing that -- this gets complicated because this relates to a FASB ruling as well or an EITF ruling or something. But for us we went back in and essentially we tried to replace them to some degree with different kinds of borrowings. But you then are really in the position that you have to look at the entire pool of our liabilities. There's no question that it added significantly on to our margin, but it depends on whether I pick liability a, b, c, or d as to what really, in a way, indirectly replaced the ones that we already had.

Do you have a feel for what it would have been versus the average?

I'm not allowed by my counsels to say this. But we did, in the original call, and if we could dig that out and I'll ask Bert to do this, he could call you and let you know because we gave a kind of a general projection off the original call and I just don't have that in front of me right now.

Okay. And that would have been the teaser rate, or the teaser time frame?

I'm sorry. Oh, the teaser -- we also gave some kind of general projection then, but again it all depended on volume rate et cetera. So that's varied. But we can go back and give you that projection. I think we were actually relatively close to the affects, but not 100%. But it would help you. And I would be happy to -- anybody else that needs to give Bert a call, we would be happy to let them know.

And I'll wrap up with this final question. I guess what I'm getting to is, if you take out the incremental benefit related to those two items which are kind of one time issues, did you -- do you feel like you experienced any expansion in the core margin?

Oh, yes, when you say they are one-time issues, there are adjustments in products. We believe, for example, that we will have some additional product introductions over this next quarter -- they won't have as much impact directly in this quarter that we're in now. But we think those product enhancements will do some more margin expansion going forward. I mean, there are a lot of other things we can't guarantee, but a lot of different circumstances in the market I can't even guarantee you that for example the product enhancement will be receptive. But our people feel it will be and if it is, that will do some more margin enhancements. I mean, there are a number of things that we are doing in an effort to build our margin.

Okay. Thank you.

Yes.

Your next question comes from the line of Greg Powell with Bernstein.

Hi, I'm a little confused on the data you gave for the negative amortization. In your Q it mentions for June 5.5 million. And then you just said 9.4 million if I heard it right. What's the difference between those two numbers?

Greg, you're exactly right. I wanted to clarify it. But I misquoted, the 5.6 was for the 9 months ended June '05. The 12 million was what we have at the end of the full year so the difference is approximately $7 million that ticked up during the quarter.

Okay. And that would be interest you ran through your P&L but your did not collect on a cash basis, is that right?

That's correct. That's the amount of negative amortization that was created during the quarter.

Okay. Thank you.

Your next question comes from the line of Donald Gice, a Private Investor.

First of all, let me compliment you. I wasn't sure this morning that we were going to be having this conversation this afternoon and the fact that we are I think is a tribute to your planning and to your people. You've obviously got a good bunch of people, you do good planning and I congratulate you on that.

Thanks.

My question has to do as a private investor with efficiency ratio and I seem to ask this question a lot. I understand the reason for the degradation of the ER in the most recent periods, but from growth requires investment and investment in turn growth in earnings and so on. Can you give me any direction or any thought on when you think the line of your increased operating costs will cross somewhere, your earnings growth and we see this thing driving back down toward that 50% level?

I think it is really twofold. One is, obviously, the efficiency ratio relates to the degree we have revenues. And the growth in revenues. And while we're optimistic about that growth in revenues, we're also cognizant of the fact that the fed continues to raise rates readily. So given that and given up to the point where they do have some kind of pause, we continue at a GAAP situation against LIBOR. It is fairly significant and obviously to the point that that narrows with respect particularly to the MTA product, we pick up a substantial amount of additional income. That additional income would clearly have an affect on the ratio.

The other way to look at this and I don't want to get around it is that we have expenses, a piece of which are already in the base for the opening of offices that are going to be significant into this next quarter. And all these do have an initial impact going forward on that ratio. But we also feel that we need to make more savings. And to do so, we're instituting a number of additional initiatives in the organization on savings costs. One is, in a sense, we're going to create a -- I'll put it in these framework, a expense Czar who is going to be hammering division, division, department by department.

The second situation is that we're going to be looking -- that each division has somebody who is especially assigned with a responsibility in an incentive concept of finding expenses that they can extinguish less and et cetera. Likewise, we're looking as a component of this year's comp and in terms of incentive plans to add that into the basic plan for each and every principal senior officer that they have a responsibility and can benefit if they can get costs cut. So we feel that there is room for that. We already started in terms of our budgeting process this year and actually ended up addressing some of those kinds of cuts. And we think we're on our way to getting that, in a sense, done. But that is not an overnight process, but we feel that when you've grown like we have, that as nice a job as we've done overall of getting offices open in a speedy fashion and growing the mortgage originations and so on, that there is room here for some cost-cutting and we're really going to, in a sense, swing the knife without injuring the patient whatsoever.

Can I infer from what you said that you have incentives both for decreasing costs, that's of course any business that is a driving passion, and also incentives for increasing productivity in the sense of the deposits, earnings, bottom line earnings?

Yes, that's going to be much more built in to incentives this year than it has been in the past. The expense piece. While certain pieces of the -- that have always been built in because it related to the budget itself. What we're doing is going beyond that and saying, okay, we have hammered away at this budget and in addition to that, you find us savings, get the productivity, get your results, but still find a savings then you're going to benefit personally by finding those savings.

Let me just jump in for a couple more comments on that. Last year, there is no question was a year that we invested in ourselves. There was an -- a lot of investment needed in terms of infrastructure in terms of new branches et cetera, et cetera. I would tell you that the worst of that is behind us and there is going to be a lot of emphasis on expense control in fiscal '06.

Well, that's good to hear. Does any of your growth into new areas entail going into an existing facility? I guess this is a way of asking, do you buy any of the -- any small operations in the counties you are moving into, or is everything a new -- a new facility and all new people and so forth?

We're always looking. It is a constant effort. But as another evidence of the undervaluing of our franchise in the market presently, I don't think any of those that were a good franchise have sold for less than 4 plus times book. And for our purposes, we're in position now, we've got good site selection going on we're in position to open up where we need to. Our model and I don't know if I anticipate any other questions because I know some people wrote some things relating to Commerce Bank and some other entities that are involved in the Commerce Bank model. That's not our model. That's not what we do. They do something different. They are very successful at doing that. We have a different model. Our model says that we can open up in areas that we can be successful there, that we can build upon, initial openings whether it is 1 or 2 or 3 offices and build into markets and do our thing. And we're very optimistic about that. The initial results of all that have been extremely satisfying.

Good. Thank you very much.

Thanks.

Your next question comes from the line of Albert Savastano with Janney Montgomery Scott.

Two questions for you. First, if you could give us some color on your pipeline and kind of separate it from your residential, consumer, and commercial and the second question is how competitive is the deposit market and what are you seeing as far as trends within deposit mixes?

Yes, let me address the pipeline first. The pipelines are robust. Again I will tell you and reiterate what Fred said. There is a lot of stuff that we just exclude from the credit table just because of the number of new players in town that just don't fit our quality standards, but I would tell you that that continues like we've been doing. I have been talking about new relationships at every one of our conference calls. We now have 164 new commercial relationships since we started our commercial strategy. The pipeline is full and that continues very, very strong. In terms of commercial real estate we're being more picky in terms of the types of commercial real estate projects that we're in. Very much bread and butter types of stuff and we've got good pipelines in the bread and butter stuff. And in terms of residential, our pipelines are stronger than ever.

And I should mention overall that when you are looking at this, that the initial concept was to be extremely strong in Dade which is -- if people don't know it's really the greater Miami area. We started building and getting stronger and stronger in the Broward which is the greater Fort Lauderdale area, and that's really building and we're expanding more and more with small business and so forth. And this is a gradual process so that we ultimately think we will really be in excellent shape through this year in that county and additionally we're starting to get -- we're just really getting into the expansion of that into Palm Beach County. And this doesn't relate to some other counties that we're going into with our offices. We eventually will fall on into those areas. So there's more to this in terms of something. We could have immediately expanded in every one of those places, but Ramiro has always had a very disciplined approach to making sure that where we go, that we have top notch people and that we get it done in a top notch way.

Okay. And on the deposit side please?

Yes, on the deposit pricing, it is competitive. It continues to be competitive. But we're being very successful.

Yes, Al, I was going to tell you, it is no secret that there is a lot of deposits down here and the competition is pretty tight. What we try to do is not be at the top of the market in terms of paying. We try to be somewhere in the mid to the two thirds range in terms of what we're paying on deposits. Now, having said that, and given the scenario we talked about earlier about rising rates, we have shifted more towards funding the balance sheet with CDs just as a point where should rates go higher than expected and that's been the trend so far, we will have locked in some relatively long-term funds. Somewhere between 6 and 16 months that will help cushion the increase in interest rates. So we have moved a little bit towards CDs but we try to keep that in the on half to two thirds range in terms of the overall pricing. So we're not at the top.

From time to time, Al, opportunistic tactics are part of our deposit pricing strategies.

Okay. Thank you.

Your next question comes from the line of Barry McCarver with Stephens, Incorporated.

Good afternoon, guys. And thanks for the good quarter.

Hello, Barry,. Thanks.

The call is getting kind of long here so I'll keep my question real short. Fred, you sort of hit on it just a minute ago, but in terms of the future performance, what we haven't heard much about is bringing the right guys on to manage these new markets. You've ruled out a number of branches. Already have a number on deck for the coming year. Where are you getting the new people from? Are you promoting from within? Do you feel like today you have the right kind of guys to open up these new branches and be successful? And then kind of second to that, an update on your current micromanager network, or how are those guys coming along? What are we seeing in terms of pushing the decision making down to the branch level there?

Yes, I'm going to give you a general response, Ramiro, within bounds of not giving away our secrets will give you the rest of the response. But, basically, I think overall we have developed in the place that a lot of people would like to be working at. And we have got that reputation. We've got the reputation as a management team. We have got that reputation in terms of having a direction and being a strong local entity that doesn't have all their direction coming from someplace very far away. So that's a big help to us. So that means that we end up recruiting people from a number of other organizations as well as we have a strong training program internally and we really look to also promote people from within, it's a strong emphasis with us. And we think the two combined have really put us in excellent position. Ramiro, I don't think I--.

Fred said I'm going to go first , then you go, Ramiro. But I thought he covered it real well. Barry, let me just emphasize that we're now at the stage that we're building depth in terms of folks that we can put out there. While we're still leading with veteran bankers, we now have graduates from our training program that we can put in some of our smaller branches. It sounds presumptuous and I hate to say this, but we've become the employer of choice. A lot of very, very talented people are coming from large organizations that like the autonomy that we're pushing down. I have been grading this strategy since we started it and we have worked from a D all the way to what I would consider today an A plus. A little more that I want to do in terms of pushing decision making to the market managers. That continues to happen. And this is working and it is working very, very well. And again I want to stress that I'm surprised that the number of talented people, really from all over organizations that want to come to work for us.

You said and Fred said the same thing, kind of the employer of choice, is there anything in specific you can point to other than just the atmosphere? I mean -- what's the employee costs like? Are you guys having to pay up now? There are so many new branches going up in the area.

Not really. If you were to look at our salary make up in terms of branch managers and quote, market managers whatever the comparables are, we're not at the very highest, we're not at the very lowest either. We're kind of at the lower middle, but with incentive compensation that can take them up to the very top. This attracts the kind of person that wants to be, A, left alone, is comfortable making decisions and wants to compete to make more money. That's the kind of folks that we're bringing on board.

In addition to that, this year we did a complete -- a company wide employee attitude survey. And what we wanted to do quite frankly, was create a base on where are we at? Quite frankly, the results came in a lot stronger than what I had anticipated. And it really pinpoints now where it is that we need to improve upon, what it is that we continue to build on to continue to attract talented players and this was a survey that 1100 employees had an opportunity to respond to. Again, I'll tell you that we're attracting some very, very, very talented people.

The other thing that works particularly in the consumer division for us, particularly effective is that we're probably the only bank that has a decentralized retail strategy. Because the micromarket strategy that in essence is what it does. It decentralizes the retail strategy across our markets. And the folks that we're attracting are folks that don't want to be running a branch in Coral Gables, Florida and listening to somebody in Charlotte, or in Atlanta telling them how to do it.

Great. Thanks, guys.

Thank you.

Your next question comes from the line of Tisha Jackson with Credit Suisse Asset Management.

Hi. Actually, all my questions have been answered. Thanks.

Okay. Thank you.

Your final question comes from the line of Jefferson Harralson with KBW.

Thanks. In the transaction where you sold the MTA product you talk about retaining certain strips. Is there a residual asset attached to those strips and can you explain a little bit about what those -- what you are retaining on your balance sheet and which categories it is in when you see the balance sheet?

Well, as a generality we sold off -- one of the reasons it was break even up to the front is we sold off strips that were LIBOR based, that are relatively low LIBOR figure. So there is no question that we have an interest strip that is potentially attached and I think this is somewhat different from situations that attached basically to loans we originated. And which we know the prepayment characteristics of and have a record on. So we're actually comfortable that that additional item ultimately will increase the possible yield on the overall loans retained. And that to us we felt was a very attractive way of structuring this particular situation.

Is it -- is the asset in the loan book or the securities portfolio?

It is in the securities portfolio.

And--?

It is a relatively small item, but it amounts to a good yield enhancement.

And do you know what the asset value of that item is?

It is about 7 million.

Okay. Thank you.

At this time there are no further questions. Mr. Camner, are there any closing remarks?

I just appreciate everyone being on today. Frankly, I appreciate everybody making it in this room today because it wasn't very long ago when we were listening to whistling winds and watching the trees bend and watching a few of them fall. But I'm proud of what our organization has done and a very quick recovery from that situation. We expect to be completely up and operating in all offices within a couple of days.

And, we're very optimistic going forward. We've made improvements in margin. I think a lot of people were looking to find out about that for this quarter. We still think we have a lot of work to do on that to create more positives out of that as a trend. And likewise, we've got growth prospects, a good piece of which have already been accounted for in this last quarter, but some will had additional expense going forward. But which we feel will clearly bring us into a position of being the franchise bank headquartered in Florida in a way that's very strong in results as we go down the road here. So all caveats are the usual ones, but we're quite optimistic and I thank all of you for being on the call today. Goodbye.

Thank you. This concludes today's conference call. You may now disconnect.