BankUnited Inc (BKU) 2008 Q2 法說會逐字稿

Good morning, and welcome, ladies and gentlemen, to the BankUnited Second Quarter Conference Call.

At this time, I would like to inform you that all participants are in a listen-only mode.

At the request of the Company, we will open up the conference to questions and answers after the presentation.

As a reminder, the Company has posted a slide presentation to its website that it will be using on today's call.

This conference call and presentation 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, will likely result, expect, will continue, anticipate, estimate, project, believe, intend, should, would, may, can, could, 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 or performance to differ materially from current Management expectations include, but are not limited to, general business and economic conditions either nationally or regionally, fiscal or monetary policies, significant weather events such as hurricanes, changes or fluctuations in the interest rate environment, a deterioration in credit quality and/or reduced demand for credit, reduced deposit flows and loan demand, real estate values, competition from other financial service companies in our markets.

Legislative or regulatory changes including, among others, changes in accounting standards, guidelines and policies, the issuance or redemption of additional company debt or equity, the concentration of operations in Florida if Florida business or economic conditions decline, reliance on other companies for products and services, the impact of war and the threat and impact of terrorism, volatility in the market price of the Company's common stock, the Company's inability to raise capital due to challenging market conditions and other economic, competitive, servicing capacity, governmental, regulatory and technological factors affecting the Company's operations, price, products, and delivery of services.

Please refer to the documents that BankUnited Financial Corporation files periodically with the SEC, such as the Form 10-K and Form 10-Q, which contain additional important factors that could cause its actual results to differ from its current expectations and from the forward-looking statements contained during this conference call and in this presentation.

At this time, I will now turn the call over to Alfred Camner, Chairman and Chief Executive Officer of BankUnited.

Thank you for joining us this afternoon.

With me on this call today are Ramiro Ortiz, BankUnited's President and Chief Operating Officer, Bert Lopez, Chief Financial Officer, and Jim Foster, our Senior Executive Vice President of Corporate Finance.

We'll begin with a discussion of our results for the quarter, and will come back at the end of the prepared remarks to outline sub-steps in the strategic plan that we've discussed earlier.

We have included a detailed slide presentation, which we will refer to during the call.

Clearly, the housing market and economic downturn continue to impact our results.

Although we cannot predict the bottom, we are dealing with our challenges and taking steps to emerge from this cycle as a stronger company.

Our second quarter ended with a [result] loss of $65.8 million, or $1.88 per diluted share, compared with earnings of $24.4 million or $0.64 per diluted share for the quarter ended March 31, 2007.

The costs associated with the overall economic downturn have negatively impacted our results.

The continued uncertainty have led us to a provision for loan losses of $98 million for the quarter.

The total allowance for loan losses is currently $202.3 million, or 1.61% of total loans.

While most people on this call are very familiar with banking terminology, for others let me remind everyone that by taking this provision at this stage of the cycle our loan allowance now exceeds $200 million.

This is the first cushion of our defense for potential loan losses going forward in this cycle and this in turn does protect the bank's capital.

The loss, also, that we've had this quarter reflects other than temporary impairments of $25.5 million pre-tax on preferred securities of government-sponsored entities and certain mortgage-backed securities.

Although we are certainly now experiencing pain, we are confident that we are taking appropriate steps to ultimately become a well-capitalized Company that will take us through these difficult economic times.

On the slide that you have before you -- for those of you who have it available -- it demonstrates that BankUnited is well-capitalized.

Our Tier 1 capital is 7.8% as of March 31, 2008, above FIDUCIA's minimum requirements of 5% for a well-capitalized definition.

Likewise, our risk-based capital is 14.6%, also well above the FIDUCIA's minimum requirement of 10% for a well-capitalized institution.

As we transition to more of a retail commercial bank and reduce our overall balance sheet, our capital ratios will also improve from that.

Additional tangible equity support is also provided for the holding company by $184 million of HiMED equity units scheduled to convert to common equity in May 2010 at a minimum price per share of $23.40.

For us, it seems frequently that when analysts have referred to us that they leave out this particular point.

This additional capital on a tangible basis coming in will add in a projected basis somewhere in the vicinity of additional 1.3% additional tangible ratio.

Last week, we filed a preliminary proxy to increase the number of authorized outstanding shares of class A common stock.

This will provide us with flexibility to acquire additional capital through a variety of possible transactions.

We do not today have anything specific to announce, but we are exploring appropriate various alternatives to increase our total capital for any prolonged period of difficulty in our national and housing economies.

Ramiro?

Well, thank you, Fred.

I guess the challenging backdrop of economic fears by consumers and businesses, tightened credit standards, rising prices, we at BankUnited continue to focus on delivering the bank to the customers everyday.

In this difficult environment, we just simply cannot afford to take our eye off the ball.

We continue to be encouraged by the continued dedication that our employees show in this difficult environment and the positive feedback we receive from our customers.

That really is the strength of this company.

Total deposits increased 1% to $6.9 billion at March 31, 2008, up from $6.8 billion at the same time last year, and down from $7.1 billion at December 31, 2007.

The quarterly decrease was primarily due to efforts to reduce the balance sheet.

In addition, several national and local banks conducted very high-rate campaigns.

We used strategic pricing to retain multi-service customers and allow single-service depository customers to exit the bank.

At the end of the quarter, things normalized themselves, competitors pulled back, and we used the opportunity to re-enter the market and increase deposits as much more reasonable rates.

As of April 31, 2008, our deposits were at $7.6 billion.

We're closely managing our cost of funds and availability of funds.

Fred will talk about our longer-term balance sheet goals in the strategic plan section, but our short-term deposit-gathering activities will evolve given market conditions and opportunities that arise during the quarter.

The most important benchmark for deposits increased to $5.1 billion, and that's up 3% from March 31, 2007.

Our branch network is still relatively young, but continues to gain traction in the neighborhoods we serve.

Our network of more than 80 branches ensures that we have multiple options for liquidity and managing the cost of funds.

I'm on slide six now.

When Fred outlines the strategic plan, we will talk a lot about the retail commercial bank.

We continue to make steady progress as evidenced by a few key benchmarks.

Total relationships have increased from 58,000 in fiscal year 2003, to more than 98,000 in the second fiscal quarter 2008.

Commercial relationships have increased from 73 in fiscal year 2003, to 295 in the second fiscal quarter of 2008.

There's a lot of definitions out there.

It's important to note that we define relationship customers as those with more than one service type -- not one product, but more than one service.

A person with several CDs or three checking accounts, for example, does not have a multiple service relationship in our definition.

We've increased services per household to an average of 2.058, and I'm extremely pleased with a consistent increase in this important area.

As a way of benchmarking, when we first started measuring this back in '04 we were at 1.2.

We also had in terms of cross sales and services, 57 of our branches now average over two services per household.

Again, to put some color on this, when we first started measuring this in late '03 we did not have a single branch over 1.4.

Referrals to our investment sales, that's our subsidiary BUFS, have also increased significantly in the last few quarters.

Investment sales income increased 50% year-over-year, to $2 million at March 31, 2008.

Commercial and commercial real estate loan balances increased to $1.3 billion during the quarter.

I want to emphasize, most of our commercial business is concentrated in Miami-Dade, Broward, and Palm Beach counties.

The business environment in these regions is holding relatively stable.

I'm going now to slide on page seven.

The business climate is challenging.

I don't want to be Pollyann-ish about this, but our market is filled with small businesses and entrepreneurs that are very savvy.

They know how to replace softening in the domestic arena with international and exports opportunities.

That's a South Florida phenomenon.

The weak dollar is particularly helpful in this regard.

We find that many of our customers have expanded their cross-border activities.

The construction industry -- those companies are turning to public sector work to fill the gaps.

Small builders are focusing on refurbishing existing properties rather than building from the ground up.

We do not bank over-leveraged companies, so our customers have been able to handle this downturn relatively well.

It's again important to remember that our entire neighborhood banking business is in Florida and most of our commercial business is in Miami-Dade, Broward, and Palm Beach counties.

Unemployment in these areas have remained below national averages and the economies have proven to be resilient.

Just one last point here to put things into perspective.

When we had our last real estate downturn in the late '80s, the unemployment rate in South Florida was north of 12%.

At this point, fortunately, the unemployment rate is still holding strong.

I want to turn the call now over to Bert.

Thank you, Ramiro.

I'd like to take you folks through some of the credit summaries and some of the numbers for the quarter.

Let's begin on page eight with a provision loan loss of $98 million for the quarter.

Net charge-offs were $13.3 million for the quarter.

Breaking that down, we have residential and consumer net charge-offs of $13.1 million.

Now that's net of about $6 million in estimated recoveries from mortgage insurance, so while the mortgage insurance companies cover about 19% of our portfolio, fully a third of the charge-offs were covered by insurance.

Consumer net charge-offs continue low at $128,000, and commercial and commercial real estate net charge-offs were only $154,000 for the quarter.

Non-performing loans went to $608 million.

Real estate owned went to $73.4 million, giving us a total of non-performing asset number of $682 million, and with a larger provision we now have $202 million of reserves against that.

One particular item, just if we break down the non-performers, the vast majority continues to be residential -- that's $574 million of the total $608 million.

Commercial and commercial real estate loans comprise only $28 million of the non-performers, and that's concentrated just in three loans.

So that, plus the $73 million of the OREO, gives you the $682 million of non-performing assets.

On page nine we have some ratios related to the reserves and the non-performers.

Non-performers of total assets now 4.75%, up from 2.99%.

The allowance for loan losses as a percentage of total loans is now at 161 basis points, up from 93 basis points last quarter.

Coverage ratio moved up a little bit to 33%.

Our charge-offs for the quarter annualized came out to 42 basis points for residential and for the total, and that compares to17 basis points for residential last quarter, and 19 basis points annualized in total.

There's no denying the increase in non-performers as having an impact on our margin, so if we dissect the two -- if you remember, we reported a margin of 205 basis points for the March quarter, versus 212 basis points of interest margin for the December quarter.

Now the net effects of the carrying costs of the increase in NPAs, as well as the interest reversal when loans go into non-performers was 52 basis points this past quarter versus 36.

So the adjusted margin ends up at 257 basis points, versus 248 last quarter.

The takeaway from that is obviously with a decrease in interest rates, and the lagging effect of the NPA index to which about 60% of our loans are tied, we do have the opportunity to continue to improve the underlying margin.

And in fact, it did during the quarter, again excluding the effect of the NPAs were at 257 versus 248 last quarter.

So the underlying margin continues to do well.

On page ten we'll show the real estate owned activity for the quarter.

We began with 167 units.

We had 145 transferred in.

We were able to sell 39 during the quarter-ending balance of 273, so that's the activity for the quarter.

Now in April, we had 51 OREO properties were either sold or under contract to be sold, so we have -- obviously a very successful April.

I want to mention, Bert, that when we're talking about that the most important thing in our estimation from our experience -- and we can discuss the experience of our team overall as being quite extensive and having gone through a number of cycles in the past -- it's very important that as you get the REO in that we get it out the door.

So this number of 51 is just a beginning of showing how much we emphasize the concept of moving properties that come on the books as quickly as possible out of the institutions, sold and put that money back to work.

So that's critical.

We have put together a top team, extremely experienced, frankly, in institution and have been involved with in the past.

They were also involved with this during the late '08s/early '90s situation in the former S&L crisis and many of them have extraordinary experience in accomplishing what we need to do both in the collections side, loss mitigation side, and ultimately, the sale of real estate owned.

Let me just jump in here, Fred.

In a way, we were victims of our success.

We really didn't have a real good formal residential REO team.

We had very little non-performers to speak of and all of a sudden we had to build that area literally from scratch.

We were very fortunate.

We built -- as Fred was saying -- a very effective area with very experienced and talented leadership and collectors.

We've implemented a tremendous amount of technology in the area.

The REO department has three formal sales and marketing teams.

We spent a lot of time working with borrowers, trying to work out payment plans and so forth.

And we've made very, very significant progress.

I think that the important point here, going back to the slide on page ten, is that during April, 51 REO properties were either sold or under contract to be sold and that's more than what we had for the entire quarter ended March 31.

Yes.

It's our goal and object that we continue to ramp-up that situation.

Again, to move those properties out as quickly as possible.

On slide 11, we've talked a lot about our credit standards in the past, but for us we think it's important to repeat because it does distinguish us from a number of other entities who have been out in the markets, and who have been there telling what their stories are.

And our story, from this viewpoint and from our underwriting standards is extraordinarily different than many of them.

We felt we had been very conservative.

This never gets around the fact that if you have housing you've got housing and we're in a housing problem nationally.

But we want to give these reminders.

We had no subprime lending.

We did not have piggybacking of loans.

And our loans with LTVs higher than 80% required mortgage insurance.

And those loans that we made -- the adjustable rate loans -- were always underwritten to fully index rate and there are very few apparently out there who can truly said that.

And even after the Federal guidelines were passed I'd say there weren't a heck of a lot of institutions that even adhered to that policy for quite some time.

So it's a reminder to everybody that that's something we always did, and it's very important when you go through and think of where we are and where we could ultimately be versus others and what the trend lines have been.

Our weighted-average FICO at inception was 709.

We had a strong appraisal review process including in-house reviews when needed based on our underwriter's judgment and experience, as well as other factors that were essentially automatic for those reviews.

We limited our exposure to high-rise condos, and we particularly stayed away from what's referred to as the downtown Miami corridor.

When underwriting loans, we calculated debt-to-income based on all obligations.

We looked for total debt service and we looked at FICOs that we took in in the context of 24 months of active credit history.

It appears that many in the market did not look at that concept, but we felt it was important that the people had actual credit history.

The bottom line of all of this, is we took a very different approach to underwriting our residential loans, and we believe that ultimately will prove out for us as we go through this difficult period.

Okay.

We have a slide on page 14 which shows residential loan portfolio documentation.

Here we show the full doc slide of 17% of 43% stated income, and you can see the remainders.

One important take-away from this, though, is that in the cases of the stated income stated assets and stated income verified assets, we always verify the employment.

And then we went a step further and did a reasonableless test on the employment to make sure that it made sense, vis-a-vis the income level.

Another important note there on the primary residence, it was not available to first-time buyers and it was only primary residence on the no-doc loans.

We're also presenting the FICO score distributions at inception as of March 31.

Here for the entire portfolio you see the breakdown.

The 660 and above comprise 89% of our total FICO scores of total portfolio, and then we break it down between 640 and 659 to 8%, and then between 620 and 639 is 3%.

And there's less than 1% of the loans below 620, and those were all our CRA loans, which we are required to make by law.

The option ARM portfolio is very similar in terms of the distribution, again slanted very much towards the 660 and above rates.

On page 16, we presented a total residential loan portfolio by Vintage.

Here we've broken it down, obviously, by Vintage with the various balances and then the percentages.

As you all probably know, the '06 Vintage comprises 36% of the total portfolio with '07 being 21.

Again, the percentage of mortgage insurance coverage is at 19%.

Here you see that it is skewed towards the higher percentage areas.

'06 at 36% of the portfolio has 29% mortgage insurance coverage, and 2007 has 27% coverage by mortgage insurance companies.

Moving on into the NPL category.

As we've said in the past, [while] '06 is 36% of the portfolio, 58% of the non-performing loans is in the '06 category, only 12% in the '07.

Then again, looking at the coverage of mortgage insurance, as you would expect, the higher LTV loans are in the NPL category.

Those are the ones that we've transferred the risk off to the mortgage insurance companies.

And fully 47% of our '06 Vintage that is in NPLs is covered by mortgage insurance, and 59% of those 2007 Vintage loans that are in non-performing are covered by mortgage insurance.

So again, the higher LTVs, higher risks, we've transferred that risk off the balance sheet.

On page 17, we present to you the mortgage insurance coverage by company.

Again, 19% of the portfolio is covered by mortgage insurance, 29% of the '06 Vintage is covered by mortgage insurance, and 47% of the '06 Vintage that are NPLs are covered by mortgage insurance.

You see the breakdown here for the full portfolio coverage.

United Guaranty, which is a subsidiary of AIG, covers about 48%, PMI is about 20%, and Republic is about 14%.

All total, about 82% of the insurance coverage is in those three companies.

And if you look at the '06 Vintage, fully 53% is covered by United Guaranty, 11% by PMI, and 22% by Republic.

So again, the higher risk is then transferred off with stable companies in the mortgage insurance realm.

Total residential loan portfolio by category.

Here we breakdown for you the geographic concentrations that we have.

Florida 52% of the residential portfolio, California 9%.

As we move over into the NPL category, what you see is [the] pretty consistent NPLs in relation to the geography represented in the portfolio.

In Florida 52% and 55% of the NPLs, California -- 9% of the portfolio, 11% of the NPLs, Arizona -- 7% of the portfolio, 8% of the NPLs.

And then you see decreasing rates through Illinois, New Jersey, Virginia and others.

On the following page we have the residential loan portfolio by Florida MSA.

There's been a lot of bad press and concern over Florida housing depreciation.

What you see here is areas are scattered, particularly in the Miami-Dade area, while 27% of our residential portfolio, only 11% of loans that are Florida NPLs is related to the Miami-Dade area.

And we've got a very low non-performing ratio there of 2.68%.

Fort Lauderdale, similar story in that 18% of the portfolio is Fort Lauderdale, 18% of the NPLs in Florida are in Fort Lauderdale.

West Palm 11% of the portfolio, with 15% of the NPLs.

And there, you see some of the other areas that have been a little bit harder hit.

Fort Myers, which is primarily for us Cape Coral, is at 18% non-performing ratios, Naples at 12%, and then Port St.

Lucie/Fort Pierce area at about 12% also.

So the majority of our Florida loans, which is concentrated in Dade County, actually shows very good results in terms of non-performers versus the portfolio.

Bert, I just wanted to mention that we have had some recent review out in the field, and one of the important things that we have is that we get our people now out in the field in terms of REO dispositions and determinations of what's happening in the markets, and particularly in the Florida area I think the clear figures show up here.

Certainly, the Fort Myers area is a problem, but the primary part of that problem is in Cape Coral.

Fortunately, while we have exposure there, it's relatively limited.

Likewise, you can see from the same statistics that the Port St.

Lucie area certainly has significant problems as well as the Naples area.

And again, we have a relatively lesser exposure ultimately to those areas.

It's extremely important to understand that what we refer to as South Florida, which is Miami, Fort Lauderdale, West Palm Beach areas, that while we have certainly in Palm Beach and Fort Lauderdale some levels of non-performers, that appears to be much more in line and much lower figures as we've gone through here, and somewhat goes against, I guess, some of the views that people have tried to say nationally of what's happened, and particularly the Miami-Dade County numbers, part of this and are much lower non-performing ratio.

I believe we have only 116 files, actually, in foreclosure in the Miami-Dade, and the reality of this is that the area is doing better partly because of its vibrant economy, partly because home prices -- while they've declined some recently have never been in the problem that let's say the Cape Coral area or the Naples area has been in in the state.

And given the vibrant economy we do have down here, this has been a much better situation.

But this also goes back to our underwriting.

And we've discussed some of it.

We've discussed areas and types of loans that we've avoided over a period of time, and we think that's put us in very good stead as we go forward and we recognize that there will be some losses we recognize, but we have an overall national problem here going on.

But as we position this portfolio and especially some of the direct criticism on us relating to Florida, that you can see that the problems are there, but they are somewhat moderated compared to many out there with respect to the Florida markets.

And to that effect, on the next page we show that this quarter we ran a random sample of current values of our properties in our residential loan portfolio using a third-party AVM -- or automated valuation model -- provider.

And here we present the results of that.

As you see, Florida as a whole our original LTVs were at 71% and we went to 78%.

Palm Beach went from 71% to 82%, Broward from 72% to 76%.

And as Fred pointed out, the 5,000 loans that we have in Dade County, original LTV of 70%, they actually improved to 69% and that's the oldest part of our portfolio and the most significant part.

The three counties, as Fred mentioned, comprised approximately 60% of our Florida portfolio and about 30% of our residential portfolio.

There's been a lot of discussion over resets, as you know.

Most of our option ARMs are monthly, so the rate does change every month.

But there are five-year time horizons and 115% limit in terms of the amount of negative amortization that we will allow, so we do have the resets due to those two factors.

And here, we're presenting actual numbers of resets, as well as projections for the rest of '08 and '09 and 2010.

Now one important caveat here, these are all done with an assumed interest rate scenario going forward, but are also assumed at 0% CPR.

So this is the stress test of worst case example.

And what it shows is that in fiscal third quarter and fiscal fourth quarter of '08 we expect a total of $91 million of loans to reset and [net] 257 loans.

We've estimated '09 to be $886 million, and then fiscal 2010 at $2.4 billion.

If you apply a CPR rate to these, remembering these were all at 0% CPR, and just 10% CPR rate in 2008, 15% in 2009, and 20% back to normal levels in 2010, these numbers change.

The fiscal 2009 numbers goes from $886 million to $819 million.

And the fiscal 2010 reset number goes from $2.4 billion to $1.996 billion.

So obviously CPRs, which will be an occurrence in our portfolio, will affect the amount of resets and will bring those down.

It's important, Bert, to note that we already have programs in place that we're anticipating and we're addressing these resets, and we're negotiating with borrowers to try to make modifications to their loan before the reset actually hits.

I'd like to now turn the call over to Fred to discuss our strategic plan.

Thanks, Bert.

We're now going to talk a little bit about the strategic plan and this is covered in slides 22 through 25.

The multi-year strategic plan has a clear goal, to follow a course that will lead us to becoming Florida's preeminent retail commercial bank.

Today we are the largest bank headquartered in Florida.

The opportunities of the past few years in the residential arena moved us away from focusing exclusively on the bank side of BankUnited in our Florida franchise.

Our vision is the bank that maximizes shareholder value.

To achieve this, we will develop deep and profitable relationships with our customers in all areas of the business.

We will focus on the balanced asset composition and its contribution to earnings.

These steps will take us to a higher portion of recurring fee income, which will smooth out the cyclical aspects of net interest margin.

Jim Foster, our Senior Executive Vice President of Corporate Finance, is leading the execution and development of this plan.

The plan has four separate but related steps.

We will be looking to reduce the size of assets.

We will be reducing expenses.

We will look to grow other non-interest income and we will look to create what would ultimately put us into an excess capital position.

With respect to reducing asset size, when we launched this program last quarter, we began implementing some of the tactics immediately.

We have taken initial steps to reduce the size of assets.

We closed four wholesale residential regional offices and seven operation centers.

We've taken the wholesale department staffing levels, which have dropped now by two thirds, and we have also reduced our portfolio production in wholesale and have eliminated all SIVA, SISA option ARMs, no ratio and low-doc offerings for portfolio.

Virtually all of our production coming in this quarter will be salable products, primarily to Fannie Mae, Freddie Mac and shortly to FHA/VA.

We intend to grow as well our retail banking loans at a prudent 5% to 10% per year.

As the plans gain traction, we look to have a larger percentage of branch-originated loans including small business lending, commercial, and other types of consumer loans.

These moves will result in a more balanced loan portfolio reflecting the composition of a traditional retail commercial bank.

We further intend to improve our deposit mix and look to lower our funding costs as a result.

And we look to do all of this with a continued emphasis at all times on credit quality.

With respect to reduction of expenses, we will have continued expense reduction, which goes in hand with a reduction in the earning assets.

We are looking closely at all processes and organizational efficiencies in an effort to increase productivity.

We have already gone from 1,500 employees to 1,300 in the last several months.

Future efficiencies will be gained through productivity improvement and other gains will result from normal attrition, realignment of staff, and consolidation of the functions in offices.

Growing other non-interest income.

The growth of other non-interest income will provide additional diversification and stability to our earnings stream.

A portion of this increase will come from loan-servicing fees and deposit service fees.

A growing transactional relationships with retail consumers and commercial clients will also contribute to this area.

The wealth management group will continue to produce higher investment and management fees as they gain greater traction in our overall footprint.

In terms of strengthening capital, we have excess capital as a topic for the current environment.

It's a little unusual, but we do project an extremely strong capital position down the road.

Our capital improves by a asset reduction, and the conversion of the HiMEDS to equity, which is the mandatory terms in 2010.

In addition, we are currently exploring other opportunities for raising capital to bring us into an extremely strong position, not only to weather any prolonged downturn in the housing and national economies, but also ultimately to firm our position to achieve the strategic goal of being that pre-eminent retail bank for Florida.

This plan is a straightforward one.

There are no heroics involved.

It's disciplined.

It's reliance on our core strength.

We intend for the bank to ultimately be a highly profitable one as measured by ROA, ROE and earnings momentum.

Our Senior Management Team has and continues to put a lot of work into this plan and has looked as its many different scenarios.

I believe we're laying the foundations of getting BankUnited where we and our stockholders and all of our employees want us to be.

We're now ready to open the floor for questions.

Thank you very much, sir.

We are now ready to begin the question and answer session, ladies and gentlemen.

Please limit yourselves to one question and one follow-up.

If you have additional questions that were not answered, you may re-enter the cue.

(OPERATOR INSTRUCTIONS)

And your first question comes from the line of Jefferson Harralson of KBW Capital.

You may proceed.

Thanks.

I wanted to ask you a question on how the insurance works.

Is the amount of a loan that's insured the original balance over 80% loan value?

And how much in total of loans are insured of that piece?

Let me take that as additionally an individual item with respect to how insurance works.

And the actual contracts provide that they pay for a percentage, so the average percentage for our portfolio is 25%.

And essentially what happens is that covers, and Humberto will correct me anyway here, but I believe as it would go as it covers the principal balance that includes with respect to option ARMs the balance that has also developed from negative amortization.

It covers the costs of recovering that property, which would include attorneys' fees and other particular costs related to that cost recovery.

It covers taxes and insurance that have been developed into escrow and it also covers our interest.

It's a significant payment and it's an absolute payment.

It does not depend on the sales price of the house; it depends simply on making that payment.

So technically, the sales price of the house ultimately in our disposition could be at a figure less than that recovery.

All right, so you're saying that the entire principal balance is covered, not the principal balance over 80%?

No.

It takes the loan at what it was -- which is let's say a 90% loan -- and it covers that loan to the extent of the total principal balance at 25% on the average.

Okay.

By the way, the range of that for some loans -- it depends on how low a figure it was over 80% originally when we made the loan, so that goes and ranges anywhere from 12% and I believe up to 35%, depending upon the amount or the original LTV of that loan.

And then, Jefferson, the second half of your question -- how much of the portfolio is covered by that?

It's about $1.9 billion, and then remembering again that we put on the insurance, so everything over 80% -- the higher risk area -- is insured.

And then as we mentioned in the slide, 2006 for instance, 29% of that portfolio was covered by mortgage insurance or about $1.2 billion.

And then when you look at the NPLs, again, following the higher risk characteristics, 47% of the NPLs that are '06 Vintage are covered by mortgage insurance.

So you see a trend in a specific direction in that the higher risk loans is what's covered by mortgage insurance, so again, transferring the higher risk off the balance sheet.

And by the way, Jefferson, there's a lot of misunderstanding when people address portfolios and when you've seen some other people who have come out with their information in the market.

And it is from our perspective that what has happened and what is clear to us is that a number of very large institutions made very substantial amount of loans where they show them as being 80% or less, but in fact, where they also did piggybacks on top of them.

So rather than do what we did, which costs more, and that is, say that if we're going to go above 80%, we're going to have a situation that the loan is insured and that the insurance is substantial, they instead did an 80% loan combined with a 10%, 15% or 20% figure above that as a second loan and clearly increased both the risk in terms of loss to that loan, but the risk also in terms of the default status.

So we've been trying and we've got to do a better job of it.

There's no question that we've been trying to get out into the market and understanding that our underwriting process, our desire only to have a little piece of any market and not have the giant pieces that others wanted, that that put us in a position of doing our utmost to have much more careful underwriting and this was one of the particular areas that we think is very important.

When you look at our portfolio and look at the ultimate loss mitigation that will go on with respect to the actual NPAs that we end up having from the portfolio.

Okay.

Thanks a lot.

Thank you.

And your next question is from the line of Brian Roman with Robeco Investment Management.

Go ahead.

Hi.

Thanks for taking my question and thank you for the slides.

It's very helpful.

Just a general question.

I keep listening to this and I keep hearing that you guys did a better underwriting job than everybody else and everything is better, but I'm still sort of quizzical.

If I listen to the early part of the presentation it was, in Florida unemployment is strong, you underwrote to fully-indexed level, you sort of did what you're supposed to do and yet, just taking Florida, which is slide 19, 6% is non-performing.

And then I go to page 14 and I sort of read across -- .

The question, I guess, comes up -- where among these different -- ?

Is there greater degrees of non-performing among these different columns here as we go from left to right?

Full-docs, income verified, reduced

You mean the distribution of the non-performers by -- ?

Yes.

I guess I'm trying to understand what went wrong.

Well, what went wrong is that on a national housing basis you've got a certain (inaudible) downturn that's across the board.

Now the question is, what will be the effects ultimately on us?

Our NPAs rose at a later date than most all the other institutions that are similar categories and while ours are rising, that ultimately results in the question as we go through the cycle, will ours end earlier?

Will ours be prolonged past theirs?

What do you think?

It's hard -- .

Well, we think that our underwriting and our situation with respect to resets and with respect to the fact that our borrowers were -- .

Let me go to kind of a backward situation.

You're somebody who are in the "liar loan" category or into any particularly category of loan.

If you want to go into some of the really big entities that are out there and who had qualification at 1% start rate and you didn't have to qualify at 7% of 7.5%, but you had to qualify at 1%, it doesn't take much to get that qualification done.

So why, on a really original basis, do you come into our shop?

Do you come into our shop if you're going to have a good chance of your appraisal being reviewed versus somebody else's shop where the appraisals weren't particularly reviewed and if they were, they weren't reviewed by regional people.

We could go down through a whole category of these.

We had higher FICOs and frequently -- .

It just is a number of items.

We didn't allow the piggybacks.

You came to us, you're going to end up with mortgage insurance and you're going to cost a little bit more.

We were looking for a little piece of the overall market to fit our portfolio concept.

On the other hand, we cannot escape.

For example, at Cape Coral there's [track] housing.

Wherever the builders -- particularly the national builders -- did a heavy amount of track housing where there was a lot of land availability, we find those areas are going to have higher delinquencies and we're going to have to move our way through those.

Will we fare better ultimately in those track housing areas than some?

I can't totally tell you that, but you can turn around then and look at a Miami-Dade county, where we have a very substantial piece of our portfolio, and you can see that we are performing extremely well.

One of the reasons is that there's very little track housing available in Miami because there's not a lot of land available.

And secondly, it relates to restricting some of our underwriting, such as not doing high-rises in some of the areas.

We've been written up.

A lot of people have been upset with us.

They call it black-listing that we didn't allow our loans to be in certain areas and particularly the high-rise condo area in downtown Miami in a corridor along that area.

But the truth is that we didn't feel it was prudent as a lender.

There are other places we were likewise written up when we were doing some national lending.

We have articles about us in the Nevada newspapers because we wouldn't do high-rise lending there.

We're going to be affected.

Our California loans, they're scattered throughout the state, but some of them are going to end up being in some of those track housing areas where builders right now are unloading inventory, so much difficult situation.

Maricopa County, Arizona.

A number of the areas within Phoenix aren't really doing that poorly, but there are areas where we've made loans in track housing and development builder areas and those are going to have some more difficulty.

So we are going to have, in a sense, our share of delinquencies and NPAs, but what we're saying is we've generally run lower than a lot of people out there.

Our underwriting was at a much higher level.

We believe that's going to carry us through to a better extent and also, a very good piece of that, and particularly we look at the 2006 because I think everybody centers in on 2006.

2006 we had a very high percentage of those NPAs covered by mortgage insurance and the mortgage insurance is generally with the very best companies who appear to be in more than enough position to weather

Can I interject with another question?

This is my follow-up.

As we look at page 14 and somebody asked me if I wanted the distribution of non-performers by those columns.

Can you give me just sort of a general characterization of how the non-performers fit in those categories?

Sure.

When we look at the non-performers by doc type, the short answer is they mirror pretty much the same percentage you see in the portfolio.

They're off by 2 or 3 or 4 percentage points in either direction, but they're just about equal to what you see here -- .

So you're saying a no-doc -- and then I'll cut out -- a no-doc loan is 9.1% of the portfolio and you're saying it's about 9% of non-performers?

That's exactly right.

Specifically, it's 8% of non-performers.

Okay, great.

Thank you.

And by the way, that relates to a concept that as we did risk management we went through this process and we said depending on what stock types you had you then had to have higher qualifications and so we underwrote this to a concept of reaching a certain risk level.

And that's why it generally has held that the NPAs appear more than anything else to relate to some degree the geographical distribution, where they are, where the worst places are within that geography.

And as I look through the foreclosure list, that's what it pretty well fares out.

And you can see the foreclosure listings, there's no question, for example, that Cape Coral and the Fort Myers area -- .

We just had somebody recently go over there.

Cape Coral's got a lot of for sale signs, but the pricing of the houses now have really been brought down in what they call the affordability index range, so there's some movement in the Fort Myers area presently, but in the Cape Coral area there's going to be a while to have a real recovery there.

We could talk about more areas in the state and maybe other people will ask us questions about those, but we think we have a pretty good concept of what's happening in most of these

Thank you very much.

And your next question comes from the line of Gary Gordon with Portales Partners.

Go ahead.

Okay, thank you.

Two questions.

First, it sounds like you're still going to be in the sort of mortgage banking business, originating mortgages for sale to the agencies and then servicing.

As stand-alone businesses, are these profitable businesses now or how do you see them in a year or two?

I'm going to answer that one in this way.

I think what we've made as a strategic decision was that we had an origination platform.

We've cut back substantially on its geographic location, consolidated its operation significantly.

And the goal of this is, yes, to have in a sense an encapsulated business that's capable of producing mortgages for Fannie Mae, Freddie Mac, FHA/VA.

If some other conduits open up, perhaps for those conduits.

But not for the purpose particularly of doing now portfolio loans.

There were some portfolio loans clearly put on this last quarter because they were already in the pipeline and we made the decision that we would honor those commitments, which I think is an appropriate thing to do.

We believe, but this is subject to determination as we go forward, but we believe that this is an area that has a potential greater profit down the road because so many companies have basically shut down their origination platforms altogether, that having that origination platform as we cycle through this year, as we go into what will clearly be changes in the administration -- whether its Republican or Democratic -- and certainly the changes have already occurred and will probably only get stronger in the Congress that there will be efforts to have greater and greater uses of that platform.

And we felt that given the cost of the infrastructure -- we've already put that in place -- it was appropriate to keep that going because we feel that's going to be even more profitable down the road.

We don't include it that way in our projections in terms of how we developed our strategic plan, but one of the clear things is -- and Jim Foster sitting here could probably spend some time with some people talking about this whole area -- but the concept is it needs to remain profitable.

It needs to have the developed efficiencies to be profitable and its potentials down the road may ultimately be significant considering how many entities have gone out of this business area altogether.

But Gary, the primary focus of the plan is building up the retail commercial bank.

Yes, okay.

I would just put some numbers around that for you.

Our gain on sale this quarter after hedging expenses was about 30 basis points, was about 56 basis points last quarter.

Some of those hedging expenses, obviously, were timing expenses -- we'll get some of that back.

But there is opportunities to generate some decent amounts of revenue through that line of business.

Expect three-eighths to maybe five-eighths worth of spread on gain on sale.

And then we keep working, as Fred mentioned, rather diligently to improve the efficiencies of that area as we get it to a point where we feel comfortable with its ROE and then as he mentioned encapsulate it and then take opportunities where they may be prevalent in the future.

Okay, thanks.

As follow-up, I'd like to ask about the $25 million impairment charge, if there was GSEs and other mortgage-backed securities.

Is there a rough breakout between the two and what's your further mortgage-backed security credit risk?

The $25.5 million, as you mentioned, was broken out as $8.9 million of GSE and those were preferred securities of Fannie and Freddie.

We decided to take the other-than-temporary impairment this quarter as we thought it appropriate given some of the environment.

The other remaining piece, about $16 million, was related to securitization we had done in September of '05.

We had done a securitization for about $509 million and sold off some of the top traunches and we kept the remaining traunches of the security.

Obviously with the markets, the mortgage-backed security market being rather disjointed, we have received some low marks on those remaining traunches, even though out of the $509 million we've had less than $300,000 of actual losses coming from that securitization.

It's performing very well -- continues to perform well.

But given some of the mark-to-market or mark-to-model, in some cases, marks that we've had, we thought it prudent to go ahead and take about $16 million, which are in the lower traunches, as an other-than-temporary impairment for this quarter.

In terms of what remains, Gary, other than that security, really all the other MBS securities in the portfolio -- except for a couple of odd $5 million, $6 million pieces here or there -- have been purchased prior to May of 2004.

So those securities are obviously older and tend to have a shorter life and tend to have some pretty strong valuations in the underlying collateral.

Okay, thank you.

And your next question is from the line of Paul Miller with FBR Capital Markets.

You may proceed.

This is Annett Franke at FBR.

Good morning.

Quick question on the real estate end, the 39 properties sold during the quarter.

What type of properties?

Could you give some more specifics on the terms of property class and also the average loss severity on those properties you sold?

Yes.

They're just simply houses in all locations where we've had them now.

A few of those really relate to some in the Midwest, which probably had some higher loss figures.

We don't have that much of what I refer to as the pipeline of foreclosures, particularly in the areas of the Midwest which are most severe, which is Michigan, but a few of those came through in that [period].

As a group overall, there was a 17.7% loss figure in those and I think generally is what we see in the market is that depending on the locations and where we have the sales as they come in, we'll see probably some higher loss figures overall in the California/Arizona markets.

A couple of the markets we mentioned in Florida -- in particular the Cape Coral area, somewhat the Naples area, and some scattered spots around the state where there were track housing areas -- would probably show up with some higher losses.

But we also believe we'll experience as we go into the larger areas of South Florida, which are Dade, Broward and Palm Beach, that we'll be looking at some lower loss rates.

This actually needs all to be developed because, in terms of a pool, we only have a small amount of those sales initially in the first quarter.

We now have a lot more contracts on hand and as we develop more data going through this quarter we'll be able to give people a lot better information through this quarter.

The main [emphasis] to understand is from the experience I've had and I've had a great deal of specific experience through the '80s, frankly, through the '70s, '80s and '90s at different cycles and certainly through the worst cycle of the late '80s and early '90s when a very large amount of homes were actually sold by the RTC.

I think a lot of people realize it was in many ways a commercial crisis for a lot of savings and loans and banks around the country, but the reality also was that there were thousands and thousands of houses sold at that time.

You can go through this process, but the most important thing for an institution is to move those properties rapidly and we have geared up to do so.

We have a lot of great procedures in place to accomplish that and most importantly, our people are required, who are involved with that, to get to know the brokers, to get to know which ones are going to get the job done for us, how to get that disposition done at the best price possible for us, but then to move that property rapidly.

And our people are required to get out in the field and know the markets of where those properties are, what needs to be done in those sales, and how well is our broker performance chart and so forth.

So we've got a lot going in this area.

It's ramping-up rapidly and unfortunately, it will become one of the most successful [Dutch grade].

Nobody likes to think we have to have as one of your most successful areas of a company as the REO disposition, but it will be one of the most successful because we're going to move the properties rapidly.

Thank you very much.

And your next question is from the line of Gerard Cassidy with RBC Capital Markets.

Thank you.

Good morning.

The question I have is one page 21, where you guys give us some of the actual results on the resets and then the projections.

Could you share with us on the actuals what the increase or decrease in the payment was to the 41 loans that did reset during this second quarter.

And then, do you have any information on the non-accruals in that portfolio?

Do the non-accruals go up as a result of the monthly payments going up, assuming they do go up?

We haven't really had particular experienced a problem at this point because we've had so few resets with a situation where that's created any real problems in terms of NPAs.

In terms of really addressing what happens, what we're doing is we're so early at this that what we're doing is we've initiated some pilot programs that are really just getting started with a concept of what do you do with loans that ultimately come to reset?

There's a very big difference with a lot of our loans.

It's not complete.

It's not perfect because clearly, in some areas there are more difficulties than others, that is geographically.

But let's take the borrower.

The first picture of the borrower is that we underwrote our borrowers to be able to pay a fully-adjusted rate.

So if they move into some type of new mortgage, the concept is that you re-underwrite that loan and you do it in a way that accomplishes not only a higher payment generally, but really a product that is market-driven that allows them to feel more comfortable.

The reality is there are a lot of people out there, since they qualified for fully-adjusted in the first place and they get everything from a Suze Orman on TV to articles in the Wall Street Journal and about every other newspaper you can have that says they shouldn't be in an adjustable rate loan or if they are in an adjustable rate loan it should have a longer, fixed-rate period, that they are going to be desirous of those kind of products.

And those are the type of products we're going to look to put people in and we'll re-underwrite those loans.

What will be more difficult is there will be a certain number of loans in an outlying basis that, for example, if we go to the Cape Coral area or we go to some of those track housing developments outside Phoenix in Maricopa area and you say, now the LTVs are a different LTV.

What do you do with those?

And that's what we're working with in trying to understand better is to how to ultimately approach that loan situation.

It's possible that there will be other programs coming from Federal authorities as to how to relate to those, but in the meantime we're going to develop some of our own programs for those people.

Most of our people want to stay in their houses.

That generally is the case.

There are alternatives contrary to what a lot of people say.

In many areas, those alternatives are not really better, they're worse.

They want to stay on their properties.

We try to help people stay in our properties that they have, so we're going to go through this process.

The pilot program will help give us some direction and then we'll be doing a great deal more of activity in anticipation while rates in the particular circumstances they are now, which are relatively low, of helping everybody to move to appropriate products for them over this summer, fall, and the beginning of next year.

And that's how we're viewing it.

So I don't know if that answers it well enough for you, because really the number of loans we've had thus far aren't really very indicative of what will be happening.

Overall, because our resets haven't even really occurred, they've always been out there at a distance.

We've had very little in the way of problems because of the question of resets.

In terms of the $50 million that have gone into reset, what was the typical change in the monthly payment for those people?

We don't have the specific amount, Gerard, but if those folks were -- .

It depends on what they were paying at.

What happens with the loan is the payment options come off, so you go to fully amortizing the principal and interest.

So if someone was paying down at even a minimum payment of about 2% and then they ended up resetting during this period with interest rates about 6.5%, then you'd see their payment change -- the interest-only portion -- by about that amount.

To give you a little bit more color on the number, we have had a handful of loans that didn't make their first payment after this.

This is a little bit hard to determine because most of these resets occurred right at the end of a quarter, so we really don't have a good sample to say, two or three month's worth of activity.

But just a handful that didn't make their first payment, obviously, the vast majority did.

But I don't know that we have really enough information to actually do a

Generally, our people have told us, but again I don't have the specific breakdown, so I don't want you to then put too much on this.

Generally, people have opted for either interest-only-type mortgages or for fixed-rate mortgages.

I just don't have the specific breakdowns for you because it was such a small number of loans.

It wasn't something we brought in today.

Okay.

And then my second question on your construction and land portfolios that you reported in the quarter of about $169 million for construction and land looks like it's about $289 million.

Have any percentage of those portfolios have had their loans extended or modified to those borrowers?

That particular portfolio, there's been some, not a whole lot.

But as I look at the portfolio, what I'm seeing is pay-downs, vis-a-vis the last quarter.

If I take the raw land category, which is now $113 million, that's paid down from $117 million the December quarter.

When I look at [A&B], which was $79 million in the December quarter, it's now down to $65 million and the construction piece of that is down from $111 million to $109 million.

So that continues to pay down.

The other aspect of this, Gerard, that is good news is our public home builders and whereas our committed exposure in the December quarter was $129 million, it's now down to $93 million as a consequence of credits that stopped revolving and the actual outstandings are down from $82 million down to $73 million this quarter-end and that's from pay-downs.

And as a matter of fact in the month of April we had another $4 million pay-down, so that $73 million is now $69 million.

So we've gone from $82 million in national home builders, from $82 million all the way down to $69 million in the quarter, in four months, actually, and that's been as a result of natural pay-downs.

Okay.

And then, on this portfolio, when you do have a modification or an extension, do you move it into the non-performing asset category or do you just keep it as accruing?

It depends on the loan.

It depends if they're current; if they keep paying.

Great.

Thank you.

And your final question comes from the line of [Donald Geiss].

You may proceed.

Good afternoon, gentlemen.

First, my disclosure.

I am neither an analyst nor an accountant nor a banker.

I like to deal in very simple concepts.

I think this question has probably been answered, but maybe you could summarize -- somebody could summarize this response for me in 25 words or less.

How did we fairly quickly go from a well-operating bank that I've been invested in for ten plus years to suddenly a $65 million quarterly loss and a $200 million loss provision.

25 words or less, please.

Thank you.

Well, I guess the best way to describe this, Donald, is that since World War II on a housing down-turn position, we haven't had one this strong and sudden and combined with an unfortunate credit squeeze and I'd also have to say that for those people who created our accounting rules, they helped create a spiral down with respect to what happened in the secondary markets on mortgage securities.

So there are a lot of mortgage securities out there, including those backed by government agencies, that have incredible pricing problems because no one wants to buy them that's a bank because if they put them on their books then they have to re-market them if they decline in value again.

Mark-to-market accounting has been a disaster for the entire industry.

We've got an over-building of housing nationally from the national home builders who all had light bulbs that when demand slowed down they cut valuations of land but keep building houses and since they all did it together we even made the inventory worse.

And you put all that together and easy credit times that came out of the original Fed situation, but the ultimate responsibility in this Company as far as sales, and while we maintain much more conservative underwriting than just about any other of the entities out there, I've got to say that nevertheless we still ended up with some concentrations in some of the track housing areas that in retrospect I would rather not have.

We did a good job of staying away from a lot of the high-rise condos and ultimately given this whole national spectrum, we believe that we're still in better shape to run through this and because of our situation within mortgage insurance and the underwriting we did have, we believe our mitigation of losses and our degree of losses will ultimately be much more moderate than a lot of major institutions that I think to somewhat our surprise -- and many people's surprise -- made huge amounts of piggyback loans, extraordinary amounts of subprime loans.

Some of the best known lenders in this country did that in incredible quantities, a huge amount of just mass-marketed second mortgages and this is all having an effect because a lot of borrowers are now overextended.

There's a spill-over effect throughout the housing market and this is going to be a difficult period for everybody to get through.

It is our belief that because of our underwriting we will be able to weather that better than some others, but there's no kidding the fact that this is a difficult time.

Donald, this is Ramiro Ortiz and I just wanted to add one more comment to this.

This is the same exact Management Team that we've had in place for the last six years during the good times.

Not one single member has left the team and I can assure you that while we're all embarrassed about what's happened, this national downturn has been a bigger force than what we can handle and I can tell you that this entire team is completely committed day and night to getting us back to where we should be.

My follow-up question would be, as a ten-year investor I obviously take a long view.

Looking forward, am I going to be close to ten years before I see the stock value closer to the tangible book value of the Company?

We can't predict things like that and our SEC attorneys would jump all over us.

We'll say to you that the savings and loan crisis, which technically was a greater crisis to some degree than what we're facing now because of the thousands of institutions that closed around the country took a period -- depending on when you think it started -- of about five to seven years.

We don't believe we're in that time-frame here, but there's no question there is some very major policy situations that our government, which is somewhat not doing anything right now because we're in an election year and they can't seem to get anything done, need to address.

Our Fed has attempted to address it.

More needs to be done, but the ultimate determination here is the opening back up of credit and that credit situation depends on the secondary markets ultimately being again available for mortgage-backed securities to trade so that there is a better concept of the ability to move credit along for housing.

And the tightened credit, when you consider how tight credit has become for getting a mortgage loan today -- including even through the agencies -- and then you see the housing figures, which seem to have kind of a bottoming effect at the moment, there is some indication there.

You've got to be careful about this.

Everything's got its caveat.

But there's some indication there that anecdotally there are areas in this country that seem to be picking up with some house sales, notwithstanding the extraordinarily difficult time people have to get a mortgage loan right now to close on a purchase of a house.

So when the light at the end of the tunnel occurs, it's very difficult to know.

It's the light at the end of the tunnel that counts because then the cycling up occurs much more rapidly than people expect.

But a lot of people sitting on the sidelines who want to be able to buy houses, but they want to buy them always at the lowest point -- if they can get it -- and some of those people can't yet totally afford it because of the tightened mortgage credit situation.

I believe sometime in the next six months we will see a loosening of what's happening in those regards because ultimately Congress will make sure that happens and neither of the two candidates running presently will really [ultimately] oppose that; they'll favor it.

So those candidates for president, so I think something will happen positive down the road here.

But this is going to be prolonged, certainly, for looking for that light during this next year.

I just spent three days in the St.

Pete/Clearwater area and there's still a lot of construction going on at high-rises and so forth, but there's also a lot of houses for sale over there.

And I appreciate your candor and I'll be watching with interest as we move into the future.

Thank you.

Thank you.

I believe that is our last question for this conference call.

I thank all of you.

Of course, the Management Team is available to those of you that still need additional follow-up information, as we have always made ourselves available in the past.

A lot of what we've done in the previous three years relating to underwriting standards, we believe will keep our losses manageable and certainly more moderate than many of the institutions out there whose underwriting standards had substantial deterioration.

We are clearly refocusing our efforts and resources on our core retail commercial banking business and we're transitioning our company to that traditional concept of a retail commercial bank model.

We've got a lot of work ahead of us.

We've got to bring ourselves through a difficult housing situation.

There's no question about that.

But we have an excellent Management Team.

We have a tremendous group of employees and they're all dedicated and they're all up to that task of accomplishing our goals.

Thank you very much.

Thank you for your participation in today's conference, ladies and gentlemen.

This does conclude the presentation and you may now disconnect.

Have a wonderful day!