First Merchants Corp (FRMEP) 2010 Q4 法說會逐字稿

Good afternoon, and welcome to the First Merchants Corporation 2010 earnings results conference call and webcast. If you would like to view the webcast, you may find the link on the First Merchants web site and slides are available to follow along. (Operator Instructions). Please note this event is being recorded.

We would also like to mention that during the call, management may make forward-looking statements about the Company's relative business outlook. These forward-looking statements and other statements made during the call that do not concern historical facts are subject to risks and uncertainties that may materially affect actual results. Specific forward-looking statements include, but are not limited to, any indications regarding the financial services industry, the economy, and future growth of the balance sheet or income statement. I would now like to turn the conference over to Michael Rechin. Please go ahead.

Thank you, Amy. Welcome to our earnings conference call and webcast for the fourth quarter ending 12/31/2010. Joining me today are Mark Hardwick, our Chief Financial Officer and John Martin, our Chief Credit Officer. My comments today begin on page four for listeners with access to the webcast.

Earlier today, we issued our press release with results that reflect our operations and other activities completed since September 30, 2010. For the fourth quarter, First Merchants earned $2.6 million or $0.10 per fully diluted share. The quarter was our strongest performance of the year from core banking operations, a product from a healthy margin and moderating loan loss provision. Our loan yields remain strong and our liability costs reflect reduced funding from wholesale sources. Provision for the quarter at just over $7 million was our lowest level in any quarter of 2010, reflecting a reduced level of non-performing assets and higher recoveries associated with a few loan resolutions that John Martin would cover later.

The press release states our full-year earnings totaled $11.7 million or $0.48 per share. Included in our full-year results was the exchange gain in the second quarter. We're pleased that the results of the full year 2010 produced a return to profitability without consideration of the one-time gain on the preferred stock exchange and the capital addition that transaction provided.

A fourth quarter profit of $2.5 million represents a $14 million positive change over the fourth quarter of 2009, and our full-year 2010 profit of $11.7 million represents a $57 million positive swing over all of fiscal 2009. While we're pleased with the direction and our results, we know they do not at this point fully reflect our earnings potential. At this point, I'm going to ask Mark to go further into our results.

Thanks, Mike. Good afternoon and thanks for joining the call today. As Mike mentioned, we did earn $0.10 per share, $2.6 million of net income available for distribution to common shareholders in the final quarter of 2010, and $0.48 per share or $11.7 million for the full year. My presentation will focus on year-over-year changes to our balance sheet, income statement and financial ratios.

If you turn to slide six, this illustrates management's plans to protect and strengthen the balance sheet consistent with our 2009 and early 2010 guidance regarding our capital preservation plan. Our earned asset ratio now totals 69%, down from 73% last year. Loan demand from our commercial and consumer customers remains soft, however, the shift from higher risk and large liquid loans to investment-grade securities does improve the overall risk profile of the balance sheet. The 2010 loans declined by $421 million and excess liquidity of $264 million was invested in the bond portfolio. The decrease in other assets, including the reduction of $130 million in short-term investments and $19 million of the corporation's deferred tax asset, also allowed for reductions and borrowings and investment in the bond portfolio. The deferred tax asset now totals $45 million and will be used as charge-offs exceed provision and earnings return to more normalized levels.

The composition of our loan portfolio on slide seven continues to produce a strong yield totaling 5.66%. When added to the bond portfolio, earning assets have retained a favorable asset sensitive profile and duration. $1.1 billion or 28% of our earning assets re-priced daily and another $938 million or 25% of earning assets re-priced during the remaining 12 months of the year. 47% of earning assets are fixed beyond one year. We're comfortable with how the balance sheet is positioned for the current rate environment, and we like how the balance sheet performs in a rising rate scenario.

Despite the addition of $345 million in new investment portfolio balances over the past two years, our bond portfolio on slide eight has maintained a higher than average yield and moderately shorter duration than our peer group. Our 4.15% yield compares favorably to the peer averages of approximately 375 and our duration is just a year longer. Including the portfolio's unrealized loss on the STN pretzel securities of $5.6 million, the portfolio still maintains a $1.6 million net unrealized gain. The unrealized gain decreased during the quarter by nearly $26 million as the yield curve added slope.

I know there was a lot of discussion in the media around the municipal portfolio. I'll be happy to take some questions on that, but I think the key item for our muni portfolio, the highlight is that we do not have any variable rate demand muni bonds in the portfolio, and 62% are general obligation, while 38% are revenue bond. We've looked at this portfolio hard over the last two years. We've sold a number of bonds in specific states where we had some concerns, and we feel great about the overall positioning of that muni portfolio going into 2011. Also in an attempt to guard against that downside risk of market value fluctuation that we experienced in the quarter, we placed $287 million or most of our newest investments over the past 24 months and held a maturity portfolio to protect tangible common equity based on rate fluctuations.

If you look at slide nine, the improvement in our common equity since year end 2009 is a result of two significant transactions which we've discussed in prior calls. The first was the completion of our registered direct private placement, and just a reminder of 4.2 million shares at $5.75, a 10% discount to the market. That closed on March 30, and it raised -- we were able to raise $24.2 million. The second, as announced in our press release and 8K filed on July 2, was a completion of our $46.4 million exchange with the US treasury, resulting in an after-tax gain, due favorable accounting treatment of $10.1 million.

The reduction of preferred stock is reflected on line seven. Again, I'm on slide nine, and produces the increases in lines eight and line six for the remainder of the converted funds. Our balance sheet is less leveraged than two years ago, and the composition of our remaining liabilities are reflected in this statement on slide nine. Our excess liquidity has been used to strategically reduce higher paying terms and overnight deposit liability such as rate-sensitive CDs, broker deposits and borrowings. The reductions on lines two, three and four over the past two years total $534 million in 2009 and $415 million in 2010.

Our improved deposit mix and costs of supporting liabilities is illustrated on page 10 and remains very satisfying to management as demand and savings deposits now total 65% of our total deposits. Our regulatory capital ratios on slide 11 are well above the OCC and Federal Reserve definition of well capitalized. We're pleased the total list space capital expanded during 2009 and '10, and now totals 15.72%. Our tangible common equity is expanded as well, and now totals 5.84%.

Despite earning $2.6 million for the quarter and reducing total assets by $3 million, our tangible common equity declined for the quarter by 18 basis points as the unrealized gains on securities declined by $26 million and net of tax affected our equity position through other comprehensive income. It's interesting that part of our balance sheet requires fair value accounting when the rest is recorded at cost. We have an asset-sensitive balance sheet where higher interest rates help earnings, but increased rates, when isolated just to the bond portfolio, did damage our equity during the quarter.

Net interest income on slide 12 is holding up well considering our decline in earning assets this year. The increased margin in 2010 of 13 basis points reserved approximately $5 million of net interest income for the year. Given the historically low rate environment, including a flat yield-curve throughout most of the year, we're pleased with our net interest margin of 3.87. As stated in the press release, yields on earning assets declined by 24 basis points, and our cost of supporting liability declined by 37 basis points.

In the fourth quarter, net interest margin was 3.83%. For the non-interest income on slide 13 reflects some volatility due to line six, securities gains and losses, and when normalized for the portfolio activity on line nine nearly equals the 2009 results. Total non-interest expense on slide 14 totaled $142.3 million for the year down from $151.6 million in 2009. We are pleased with the efforts made in all controllable categories with the exception of line five. We will continue to show line 12 until we achieve a more normalized run rate of OREO and credit-related expensesWe believe that when assessing our long-term profitability potential, it's an important factor to consider.

Now please turn to slide 15. We are pleased with our level of profitability during the year and we continue to be encouraged by our pre-tax , pre-provision run rate. We continue to improve our non-accruals, our allowance coverage ratios and we're experiencing sizable recoveries, validating our marks and impaired loans. These trends are providing the foundation for reduced provision expense and allows our pre-tax pre-provision run rate to find its way to the bottom line. Now, John Martin, our Chief Credit Officer, will discuss our quality trends.

Thanks, Mark. Good afternoon, everyone. I'll be covering slides 17 through 26 of the presentation starting with the quarterly highlights then moving through the details of the credit quality metrics, and finish by reconciling our nonconforming assets and conclude with charge-offs and our allowance position. We continued -- on slide 17, we continued to see improvement in our non-accrual assets during the quarter with non-accrual loans declining from $98.6 million at 9/30 to $90.6 million at the end of the year.

This was as a result of a number of factors, the most significant was the collection and resolution of three non-accrual relationships totaling $8.9 million, the largest of which was $5.5 million. The resolution did generate a recovery, and as Mark just mentioned, validates that our marks are in line with our specific reserves. We continue to see improvement in line accrual loans, new non-accrual loans remain elevated.

The allowance for loan and lease losses, while declining in actual dollars, increased for the fourth quarter as a percentage of total loans from 2.86% in the third quarter to 2.9% at the end of the year. The percentage increase in the allowance to total loans, combined with the decrease in overall amount of accrual loans, improved allowance to non-accrual loan coverage to 92%, from 85% in the third quarter. 30 to 89-day delinquent loans increased to $30 million at 12/31/2010 from $23.8 million. This category was most significantly impacted by two relationships totaling $7.2 million where the conditions of the current renewal are being negotiated. Absent these renewals, the 30 to 89 day delinquency was in line with previous quarters and -- we are paying particular attention to the progress of the negotiations related to those two renewals.

90 days past due improved to $1.3 million and primary reflected unresolved -- primarily reflects now unresolved consumer mortgage delinquency -- that has gone past due 90 days while commercial 90 plus days past due were $175,000. Next, trouble debt restructurings and other restructured loans increase from $5.3 million to $7.1 million as we resolved issues related to specific projects and customers in the quarter. Finally, non-performing assets and 90 plus days past due increased to $120 million from $130.8 million at 9/30.

While issues persist -- we continue to make progress this quarter with the -- stabilization and improvement in our portfolios that began in late 2009. Referring now to slides 18 through 20. This quarter brought a change in the mix of our non-accrual loans while the net movement was positive with non-accrual loans declining from $98.6 million to $90.6 million as shown on slide 18.

There were increases in specific categories as shown on slide 19. Please refer to slide 19. Now, non-accrual construction and land development loans categorized in this slide as land and lot, increased from 6.25% to 6.10%. This increase resulted primarily from the addition of two relationships totaling $7.8 million. These names are highlighted on slide 20 and represent roughly one-third of the new non-accrual loans for the quarter. The first name categorized as single family housing construction is under a formulized collateral package with roughly half of the collateral being homes under contract with the other half being completed or spec homes. We believe that at this point, we have our marks set and it is in line with our expected loss that may otherwise occur.

Turning next to slide 21, other real estate owned decreased marginally for the quarter from $21.5 million to $20.9 million. Most of this change came from the write down of ORE as we updated appraisals and recognized losses in the value in the ORE portfolio. Total write downs totaled $6.7 million for the quarter. Turning next to slide 22. 90 plus days past due improved with the resolution of two large past due relationships, as mentioned in the prior call. We'll be seeing improvement in the category, we continue to carefully manage both the 90 and the 30 plus days past due to quickly resolve issues as they arise.

Now, turning to slide 23, to recap the changes in the non-performing asset category, we started the quarter with $130.8 million in non-performing assets and 90 plus days past due. We reduced non-accrual loan by $8 million. We had a net decrease of ORE of $600,000, by adding $7.2 million in new ORE, selling $1.1 million and writing down $6.7 million. We decreased 90 plus days past due $4 million and restructured another $1.8 million that moved out of non-accrual. The net decrease then for the quarter in non-performing assets many in 90 plus days past due was $10.8 million and shows continued improvement for the quarter.

Now, moving on to slide 24, charge-offs. We saw some reversal in progress in the land to lot portfolio mentioned earlier. This portfolio continues to run off and corresponding charge-offs continue to abate. That said, absent this change, all other commercial charge-off areas showed improvement for the quarter. In contrast, the consumer portfolios experienced more stress this quarter. The residential mortgage portfolio saw an increase in charge-offs from 1.09% to 1.12%. Non-home equity consumer installment loan charge-offs increased from 1.15% to 1.28%.

Concluding then, with slides 25 and 26. On slide 25. As we follow our allowance methodology and recognize charge-offs against provisioning for specific assets and prior periods, the allowance declined in absolute dollars while as a percentage of total loans was increased from 2.86% to 2.9%. While charge-offs for the year exceeded provisioning by $9.1 million, our overall coverage to loans -- improved.

Turning now to slide 26. We continue to make progress growing the allowance vis-a-vis non-accrual loans. As mentioned earlier, the reduction in non-accrual loans for the quarter allowed the allowance as a percentage of non-accrual loans to grow to 92% up from 85% in the previous quarter. While challenges remain in the portfolio, it continues to stabilize and we are seeing signs of improvement. So in closing, I'd just like to add a couple of other things outside of the portfolio that credit is working on, or has worked on for 2010 and continues to work on for 2011. Let me describe some of those accomplishments that our credit team and partnership with the line of business has made.

At the end of the year, we completed the successful implementation of a consumer origination platform for our retail line of business. Credit with the line of business worked as a team to implement a platform for the ease and flow of information from our banking center locations through banking center underwriting and on to loan operations bookings. With this implementation complete, we are now focused on the expansion of our credit capabilities in the small business space. We are building additional underwriting capabilities and partnering with the line of business such that we will have the capacity to more efficiently and effectively deliver credit to our retail line of business.

While much attention has deservedly been paid to addressing portfolio issues, we continue to build capabilities for the future. Mike, at this point, I'll turn it back over to you for your comments.

Thank you, John. Before we ask the operator to open the lines for questions, I'd just like to add a few comments. Over the past two to three years we've shared this simplification of a company structure in terms of charters, branding, back office management and even governance. One of the results is a clearer line of business orientation in areas such as our mortgage business, human resources and credit administration. The effort and results John described in credit quality and portfolio management speak in part to our standard approach to the business.

At the top of page 28, I refer to our retail line of business, which we formalized earlier this year. I'm very confident we'll see a similar benefit to our company and retail banking in terms of customer service, product introduction and sales culture. The early performance of this group through Mike Stewart, Dan Gick and his retail team is very positive in complementing the market ownership of our region President and their respected communities. The lift from that effort will be important as we add resources to our small business and middle market coverage.

When I reflect on 2010, I'm very pleased with the evidence of profitability, the execution on the AlCO strategy that Mark described, our ability to gather deposits of the most valuable variety from our clients, and some of the raw run rates of a couple of our businesses, mortgage in particular, what we benefit on a rate-driven business. There's head winds to be sure. We are surprised somewhat by the level of our health benefit costs as they accelerated a little bit in the fourth quarter. But the run rate for our business feels good to me.

We have the remainder of the credit cycle to weather and it's getting the attention it deserves as it remains on our highlights for 2011. On the last page of the presentation, and I feel like the knowledge base of our bankers ought to offset some of the margin pressure that we see take place as evidence of growth works its way in our industry's reaction throughout slightly stronger loan demand. So, at this point, with the year behind us, I would take questions as would my colleagues. Amy, if you would open our lines.

Thank you. (Operator Instructions)Our first question comes from Scott Siefers at Sandler O'Neill.

Afternoon, guys.

Good afternoon, Scott. How are you?

Good, thank you. Mike my first question's probably best for you. Just in terms of maybe following up on some of the comments you made at the very end of your prepared remarks. If you could talk about any signs of strength you are seeing in terms of overall loan demand. We heard from some others that C and I is starting to come back, albeit at a slow pace, but coming back nonetheless. Any comments you could offer anecdotally and then additionally any thoughts you might have on when the actual contraction would stop and we'd start to see an expanding portfolio.

The tail end of your question about when we see growth is my biggest question. I mean that's what we're poised for. If you look at the last page of the press release, Scott, that has the detailed loan information on a five quarter basis, shows some encouragement to me. The net decline in the overall loan portfolio is just less than $80 million, I think it was $78 million. The C and I portion of it if you look at it, was the least it had been in that period of time. It was $20 million third quarter to fourth. That's encouraging. It complements the information and the reporting that we now are able to glean better.

You referenced anecdotal. The anecdotal part feels good. We have quantified answers as well. We track on an increasing accuracy, I would say, based on the reporting, we're able to produce both new approvals and incremental approvals. And for the fourth quarter as we come into the first quarter of this year, we end the year with $116 million up from $81 and $44 and $80 for the three quarters prior to that. So that's healthy.

The biggest offset in my mind is knowing that those numbers are actually approved, is just what goes out the other side. Not just by amortization, which is a function of the business, but the resolutions that our bankers and credit administration achieved in improvement oftentimes result in payoffs. That's kind of a wild card, and many of them are positive for us.But it's precluded us, up to this point, from showing a growing balance sheet, which we think is really the last critical element in beginning to show the earnings resurrection on a really consistent basis.

Okay, thank you. And then Mark, the next couple of questions are for you. First, sequentially, margin came under a little pressure. Maybe just any thoughts you could share on your outlook if you think it'll be stable at this level or maybe some additional contraction. And then, the last question is a separate one. Just the other expensed line item in the aggregate was a little higher than I had anticipated. I suspect it's OREO costs in there, but first, are there any one-time items in there? Then, second, could you detail what the OREO costs were for the fourth quarter?

Yes, I can. I'll start with the expense question. Our base salaries over the last four quarters have been 12.6, 12.7, 12.8 and then 13 in this quarter. Those are the underlying base salary costs in the company. Then on top of that, we have incentives for mortgage and commercial activity, and also the insurance agency. So those -- are where most of the line items were and some of the volatility comes from.

Then our health insurance where we show salary and benefits together was $800,000 higher than last quarter. Or actually our total benefits, not just the health insurance. We did change health insurance providers and we're trying to push as many claims through at the end of the year as possible before we move on with our new carrier. So, those are a couple of the items that drove the higher expense levels that we would anticipate a more leveling off to back to a more normal number next quarter.

On the margin side, if you noticed our margin for the quarter was a 383. Not quite as strong as last quarter or as strong as the year-to-date. We think that we've probably peaked in terms of overall margin, but we're very comfortable with the overall structure of the balance sheet. As I mentioned, the amount of running assets that we have are relatively short, and we're trying to preserve our ability to expand margin in a rising rate environments. And we feel like we have done that, we really haven't extended the loan portfolio, which if we get any uptick in rates, will actually help us. I think worst case scenario for Morgan is just a continuation of this low flat yield per.

Okay, perfect. Thank you.

Thank you, Scott.

The next question comes from Steve Scinicariello at Macquarie.

Good afternoon, guys.

Hello, Steve.

Just a couple quick ones for you. I definitely like the progress in the overall MPAs but did want to follow up with you on what some of the inflows into NPLs looked like and kind of what was causing some of that stuff and what may be some of the loss severities might look like on that stuff relative to some of the other stuff you've resolved.

The -- Steve, this is John Martin. The losses that we've taken against individual accounts, again, have been, I think I mentioned, were in line with our specific reserves. I don't know specifically if you're asking about real estate or --

-- Mostly the CRE stuff.

CRE stuff, it has varied, the land development portion of it, or the land that we've taken into OREO or otherwise written down. That's still been fairly severe through the year and was probably closer to the $0.50 on the dollar for that type of real estate. The other properties that we've taken or had appraised, obviously they vary depending on whether it's a strip center or retail, and depending on the vacancy on the individual properties. But I would say that we're seeing anywhere from a 20% to a 30% mark against real estate that is not performing.

And Steve, I would compliment, I think I follow your question. The -- you find what we think of as an expected loss in two places, the level of the specifics that John spoke to that lived in the reserve as it is against even the newest non-performers that went in in the fourth quarter. And then, the prior question spoke to, was there any amount of the other expense that included OREO write downs as assets transferred from non-performing to the OREO. That would be captured in that line. So I guess knowing that you can be surprised when you ultimately get to a collection day, you feel like those two places tend to capture the value we would expect to lose.

Got you. I did notice that seemed like kind of the size of some of -- the new non-accruals seemed to tick up relative to where they were last quarter. And just kind of curious what were some of the key drivers of some of the non-accruals that came in this quarter relative to last.

Yes. I think, Steve, if you look at slide 20 and you see the single family housing construction, obviously, that has been weak and continues to be weak in terms of new housing starts, and as a result, that's a driver that's obviously impacting. You look at residential land and home construction. That, again, that same category of new housing and the retail center that you see in number three it's as a result of vacancies. So it's really recession related and it's housing and non-owner occupied related.

Then just one last one on this. Just in general in terms of where we are in terms of valuing these things. I know you mentioned 20% to 30% mark. Maybe these appraisals started to stabilize yet.Or there's still downward momentum? Where are we in that re-evaluation cycle in general?

I'd say, you know, we're probably seventh inning, if you will. I think it's stabilized. Maybe that depends on the demand for space. It feels, based on what I'm seeing as though it stabilized in the properties and appraisals that we're getting back. Again, It's still not at the levels that it was three, four years ago when we did original appraisals, obviously, and the properties would perform if the vacancy was still as high. So it's really --it feels as though it's stabilized.

Great, thanks so much.

The next question comes from Stephen Geyen at Stifel Nicolaus.

Yes, good afternoon. My apologies if the question has been answered already. I stepped way for a just a moment. Just curious about the other expense, did you give the OREO component of that?

Yes, If you look, I didn't. I mentioned the salary and benefit component. If you look at the detailed slide of our expense statement. Let me make sure I have the right page here. Looks like it's on slide 14. You'll see the ORE and credit related expenses in total $12.4 million up from $9.8 million a year ago, and $5.2 million was the number for the quarter.

5.2, okay.

A couple million dollars higher than we were in the third quarter.

And just curious if you gave the general -- or if you could give the general reserve and the specific reserve. What the balances were?

Yes, I can. Our ACS 450 pools, the general overall reserve continues to increase. We ended the year last year at 210, 2.10% of total loans, and it now would increase 2.23%, 2.35%, 2.44% and now sits at 2.51% of total loans. So the remainder of our 290 reserve, other specific impairment, and they've decreased during the year from 26 to 22, 18, 15, and 14. So we're seeing in the overall allowance calculation, a reduction of specific impairment reserves and a continued increase in the general allocation.

And last question. You mentioned the two credits that really drove the increase in the 30-day to 90-day past due. Just curious if you have the specific reserve for those?

No, I don't believe -- no, we do not.

Thank you.

Again, we were working on that.

There's not a specific on those particular assets at this time.

The next question comes from Brian Martin at FIG Partners.

Hello, guys.

Hello, Brian.

Mark -- John, that -- the one credit that came on board you talked about on the single family housing that was on the larger side, do you have much more exposure on that single family component of credits of size or is this one one of the last ones or -- ?

This is probably one -- well, I can't say it's going to be the last one, but clearly in respect to the overall portfolio, it is one of the larger if not the largest instruction and development related borrower.

Okay. And then maybe to Mike, I guess I'm just trying to get a sense of what gives you optimism? I know you talked about on the growth of the portfolio. If the commercial slippage this quarter was less than it was last quarter, but if you don't see some growth, does that cause you to look at external growth more? Or where are you at looking at organic growth versus external growth at this point? Just given that loan to deposit ratio's kind of, I thought it was really at the bottom of where you guys -- what your target was at 70%.

We'd like to keep it where it is, or even have it grow a little bit higher. When you say, look someplace other than organic growth, are you referring to mergers and acquisitions or portfolio purchases?

You know, anything, I guess. What would you, I guess if you are not getting the organic growth or it doesn't materialize as you expect, does that change your strategy a little bit? It sounds like your plan right now is organic growth. If something comes along that works --

I really view them individually in that if there were an external way to grow that was prudent, in a geography we thought we could manage, that we would address that as aggressively as we thought was prudent.

I feel like the block and tackle part of the company is to execute our strategy in the markets that we know the best. And, as you know, a couple of the markets we feel we have the greatest upside in, we have some of the lowest current market share in. That, coupled with the dominant one, two, three share we have in our most legacied markets as they begin to show evidence of recovery, we should get our share of that. So I'm pretty comfortable with our organic strategy. But, to your point, if we were to have the magnitude of balance sheet reduction in 2011 that we had in 2010, we're going to have to change our strategy somewhat, but we don't see that.

Can you just give your thoughts on this small business lending fund and what your interest is in that?

Yes. We're looking at it closely, and as you know, the application deadline is at the end of the first quarter. We may well go and apply because I think there's merit to it, particularly for a bank like First Merchant's that is involved in the CPP program. The details, as they come available to us, don't wow me. And particularly some of the measurements involved and some of the rate adjustment mechanisms that have fairly dated benchmarks as the determinants of what the effective rate is. So, we've participated in all of the kind of wide access communications that the Treasury Department has offered with a moderate interest. There's no cost other than our time in moving through the application process, so it's something that I'd say is worthy of more discussion at our Company. But I don't see that it's got great upside for us. I don't know that the program is as well conceived as what I thought it might have been on the front end.

Okay, all right. Lastly, John [Via], the size of the construction and development portfolio at this point is what? What is that down to?

It's roughly $100 million. $106 million, I believe is the lot and land as we've got it defined.

All right. Thanks very much, you guys.

Thank you, Brian.

This concludes our question and answer session. Would I like to turn the conference back over to Mr. Rechin and the management team for any closing remarks.

Thanks, Amy. This will be a quick close. Speaking for my entire group of colleagues here with me today and our senior management, we're very pleased with the following of the company through the 2010. I feel like our 2011 plans are exciting and achievable. And we'll look forward to talking to you around the first of May when the first quarter concludes. Thank you very much and have a good afternoon.

The conference has now concluded. Thank you for attending today's event. You may now disconnect.