Independent Bank Corp (Michigan) (IBCP) 2005 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Independent Bank Corporation first-quarter earnings release conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded. This webcast may contain forward-looking statements as defined in section 27A of the securities act of 1933, including statements regarding, among other things, the Company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on this Company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond their control. Future developments and actual results could differ materially from both those set forth in, or contemplated by or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. This webcast does not constitute an offer to purchase any securities nor solicitation of a proxy, consent, authorization or agent designation with respect to a meeting of company stockholders.

It is now my pleasure to introduce your host, Mr. Mike Magee, President and CEO of Independent Bank Corporation. Thank you, Mr. Magee, you may begin.

Thank you. Good afternoon. We are pleased that you could join us on our conference call to discuss first quarter of 2005 results. Joining me in today's call is Charles Van Loan, Chairman of the Directors of IBC and Rob Shuster, our Chief Financial Officer. We achieved record earnings in the first quarter of 2005 with net income of 11.3 million, which was up approximately 2.9 million or 34% from the first quarter of 2004 and up 4.5% on a linked quarter basis.

Our earnings per share of $0.52 this quarter were up 24% from the year ago comparative quarterly earnings per share of $0.42. In particular, the quarter was marked by strong growth in our level of interest earning assets and our net interest income. Profitability measures remained strong in the first quarter of 2005 with a return on average equity of 19.38% and a return on average assets of 1.47%.

Based on our actual first-quarter 2005 results, and our expectations for the remainder of the year, we remain comfortable with the estimated range of $2.10 to $2.20 for earnings per share for the full year. Nonperforming loans and net charge-offs ticked up a bit in the first quarter of 2005. However, we do not currently foresee any significant loan charge-offs and other adversely rated loans actually declined to the first quarter of 2005.

In Michigan we continue to operate in a difficult economic environment. Even though our state has the highest unemployment rates in the country, we are confident that we will continue to provide positive results through the efforts of our dedicated management team, sales force and support staff along with the two new markets we added to our franchise in 2004. We are optimistic about our prospects in 2005 despite challenges that include a flattening yield curve, a difficult regulatory environment and funding and liquidity needs as our loan growth is expected to continue to exceed our core deposit growth.

Rob will now provide some additional details on first-quarter results.

Thanks, Mike, and good afternoon everyone. As Mike mentioned, one of the main drivers of our increase in first-quarter 2005 earnings was our growth in net interest income. FX (ph) equivalent net interest income reached $35 million in the first quarter of 2005, which was up 31.1% on a comparative quarterly basis and up 1.6% on a linked-quarter basis. The increase in comparative quarterly tax equivalent net interest income was due primarily to a $680 million increase in interest earning assets as a result of our two bank acquisitions that were completed in mid 2004 in growth and commercial loans, finance receivables and investment securities. Additionally, our net interest margin was up three basis points on a comparative quarterly basis to 4.92%.

The increase in linked-quarter tax equivalent net interest income was due to an $89 million increase in average interest-earning assets, resulting from growth in real estate mortgage loans, commercial loans, finance receivables and investment securities. This growth in average interest-earning assets was slightly offset by a two basis point decline in our net interest margin. On a comparative quarterly basis and a linked-quarterly basis our yield on interest-earning assets and our cost of funds both increased due primarily to the rise in short-term interest rates.

Looking ahead, we remain relatively balanced in terms of interest rate sensitivity. However, over time the flatter yield curve currently in place is expected to gradually erode our net interest margin. At the present time we anticipate that continued loan growth will offset the impact of any erosion in our net interest margin. During the first quarter of 2005 portfolio loans outstanding increased by $99 million, which is an 18% annualized growth rate. To give you some additional trend analysis, net interest income for the month of March 2005 was up approximately $300,000 or 2.7% from January 2005, both of which were obviously 31 day months.

Moving on to non-interest income, service charges on deposit accounts were up 11% on a comparative quarterly basis, but down 11.6% on a linked-quarter basis. The comparative quarterly increase is primarily due to our two bank acquisitions in 2004. The linked-quarter decline is due to three primary factors. First, seasonal factors as fewer checks are written during the first quarter of a year compared to the fourth quarter; second, two less days in the first quarter of '05 compared to the fourth quarter of '04; and third, we are seeing a lower occurrence rate of MSF checks per checking account which may signal some belt tightening by consumers.

Gains on real estate mortgage loans were up about 31% on a comparative quarterly basis due to an increase in the volume of loans sold. On a linked-quarter basis gains on real estate mortgage loans were relatively unchanged. Our loan sales margin was up a bit in the first quarter of 2005 at just over 1.5%. We had securities losses of about $32,000 in the first quarter of 2005, which included about $300,000 in other than temporary impairment charges. Real estate mortgage loan servicing income was up $1.7 million on a comparative quarterly basis and up $800,000 on a linked-quarter basis. These increases primarily reflect changes in the impairment reserve on capitalized originated mortgage loan servicing. During the first quarter of 2005 we had a $619,000 decrease or recovery on this impairment reserves. Excluding changes in the impairment reserve, we would expect real estate mortgage loan servicing income to run at about $400,000 on a quarterly basis.

Noninterest expense totaled $26 million in the first quarter of 2005, which was up $5.4 million on a comparative quarterly basis and down $236,000 on a linked-quarter basis. First-quarter 2005 non-interest expenses included the following unusual items: $240,000 in professional fees related to the wrapup of the Mepco investigation, $115m000 in additional audit fees related to cost overruns on the 2004 audit, $100,000 related to a workman's compensation insurance cost adjustment, and $100,000 of expenses related to the relocation of an executive management member.

In addition, performance-based compensation is off (ph) in 2005 due to a higher anticipated funding level on our employee stock ownership plan and for expected equity based compensation in lieu of stock options. ESOP expense was up $450,000 on a comparative quarterly basis and was up $700,000 on a linked-quarter basis. Incentive compensation was also up approximately $450,000 on both a comparative and linked quarterly basis. Thus our accrual for the anticipated replacement of stock options is running on an after-tax basis at about 1.3 cents per share each quarter or about $0.05 per share for the year. Our effective income tax rate was 27.6% in the first quarter of 2005, which was up slightly on both a comparative and linked-quarter basis. This increase was primarily due to tax-exempt earnings, representing a smaller percentage of pre-tax earnings and due to a rise in state income taxes.

Our assessment of the allowance for loan losses resulted in a provision for loan losses of $1.6 million in the first quarter of 2005, which was higher on both a comparative and linked-quarter basis. The increased provision was due primarily to a rise in first-quarter 2005 net loan charge-offs. Net loan charge-offs totaled $1.7 million in the first quarter of 2005. 2005 net loan charge-offs are further broken down as follows: commercial loans, approximately $300,000, installment loans approximately $550,000, real estate mortgage loans approximately $830,000 and finance receivables approximately $50,000.

The increase in the level of first-quarter 2005 net loan charge-offs is primarily due to one lending relationship where the borrower declared bankruptcy. We had both a commercial loan relationship and a jumbo mortgage loan relationship with this borrower. The first-quarter 2005 net loan charge-off on this relationship totaled $840,000 of which approximately $660,000 was on the mortgage loans and $180,000 was on the commercial loans. We wrote both the commercial loans and the real estate mortgage loan down based on an updated collateral analysis after taking into account estimated sales or disposal costs.

Nonperforming loans were up to $18 million or 0.78% of average portfolio loans at March 31, 2005. The rise at year end was due primarily to a $1.2 million increase in real estate mortgage loans and a $1 million increase in finance receivables. The increase in finance receivables is due to portfolio loan growth and the timing of the receipt of returned premiums as nearly the entire balance of the 3.1 million in finance receivables is expected to be recovered upon receipt of returned premiums. Despite the increase in net loan charge-offs and nonperforming loans, the allowance for loan losses declined slightly at March 31, 2005 due primarily to a decrease in the level of other adversely rated loans.

I would now like to turn the call back over to Mike Magee.

Thank you, Rob. Chuck, Rob and myself would now like to open the call for any questions that you may have.

(OPERATOR INSTRUCTIONS) Kevin Reevey with Ryan Beck & Co.

First, can you give us an update as to the Mepco investigation?

Well, as we mentioned or disclosed in our year end annual report, the investigation was completed during the first quarter of 2005, and there were no significant new findings or any other issues that arose as a result of the investigation. So we are still in the process of working through the individual accounts related to the accrual for possible refunds associated with customer loan overpayments.

So basically it's safe to say that the worst is behind you at this point?

That is our belief, yes.

And then how was the Midwest Guarantee acquisition, how is that deal? Are they delivering what you expected as well as the North Bank deal?

Kevin, this is Mike. We are very pleased with the amount of commercial loan growth that we are experiencing with that, through that acquisition. And we are starting to see actually some benefit also with our retail products. That they didn't emphasize a lot when they were Midwest Guarantee. We also introduced treasury management services in that market, and we've seen deposit growth because of the success of treasury management products and services to a lot of their commercial loan customers. So we've been very pleased to this point with a lot of -- the amount of commercial loan growth that we've experienced. They have a very strong pipeline, and we are very optimistic about the rest of this year and 2006.

And then my final question is related to look like there was on a percentage basis a significant increase in nonperforming loans and your mortgage loan category in your finance receivables category. Can you give us a little bit of color as to what is happening with those accounts?

I'll take them in two steps, Kevin. On the finance receivables as I said in my comments, that growth there is predominantly just because of portfolio loan growth in the timing of the receipt of returned premiums from the insurance carrier. So virtually all of those dollars are going to be recovered with the return premiums received from carriers. With respect to the mortgage loans, a portion of that was due to the specific credit I mentioned where there was a borrower or a bankruptcy and a charge-off. We still, though, have a balance related to that of roughly 6 or $700,000. The balance of the increase is just due to some increases in ninety-day plus delinquencies.

Perhaps it is somewhat reflective of some softening in the Michigan economy, although historically we've had very low charge-offs in our residential mortgage loan portfolio. So absent the one that I mentioned that we incurred in the first quarter of this year, we still are optimistic that our historical pattern of very, very low charge-offs in our residential mortgage loans will sustain itself as we move forward.

Great. Thank you.

Eric Roth (ph) with Hovie (ph) Capital.

I had a few questions for you. I was wondering if you could first talk about the economy mainly in southeast Michigan and just what you are seeing there from a consumer and business confidence standpoint. Obviously we are well aware of the news of what's going on there but just wanted to get your perspective as far as what you are seeing. And then also somewhat related to that if you could talk about what you are seeing in your various markets from a competition standpoint both on a loan and deposit pricing.

I will try to address both of those for you, if I can. First of all regarding the economy in the southeast Michigan, it goes without saying that Michigan is highly dependent upon the big three in the auto industry. And I guess the good news there is that while the big three continue to lose market share in the U.S., their sales have stabilized at about 6 to 8 (ph) million units, and the forecast is for that to stay around 16 (ph) million units. The real estate market in the southeast is really never taken off, so we are not -- and since the majority of our commercial loans are tied to real estate we're not too concerned about a decrease in the value of real estate collateral.

There does seem to be a pickup in the Western in West Michigan in some of the economic indicators that we are seeing, some new hires and jobs being made available. So overall we are confident in all of our markets that while some are down, we are seeing a rebound in some others that hopefully will continue to show us good mortgage consumer loan and commercial loan growth. The southeast Michigan has -- I just happen to be on the Federal Reserve Bank of the Detroit branch, and the economic forecast we have received is that while the economists do not see a quick turnaround they don't see much more of a decline in that market. So I would say that is positive.

Regarding competition, I think because of the pressure that some of the financial institutions are showing in the first quarter earnings release as far as decline in their interest margins, we've actually seen a little bit more, I would say logic when it comes to pricing. Where it used to be extremely competitive market, but it seems like we are seeing a lot of the competition come back and start pricing using realistic rates on both deposits and loans.

That surprises me somewhat, and I may be wrong but I believe it was Republic on their call was talking about how fierce the pricing had become and how risk didn't seem to be priced in on some of the loans that they are seeing. And I was just curious what you are seeing that is different than what they are seeing or maybe I should ask them.

Right because we've actually seen where the pricing has -- the pressure on pricing has weakened a little bit. But where we are seeing real competition is usually in commercial loan structure. You are seeing amortizations being stretched out a little bit and maybe a little bit more latitude on personal guarantees on credits. So I would say it is more in structure and not on rates right now. And again, this is just a recent development.

And on deposits, nothing too irrational there?

Again, we see that it seems that a lot of financial institutions are starting to use logic again with pricing deposits.

Interesting.

And I know that everyone watches Fifth Third closely and George Schaefer has been pushing deposit growth at Fifth Third and I believe that as you see financial institutions including ours, we've become more reliant on borrowed funds are going to continue to at the bank level and at the branch level emphasize deposit growth, core deposit growth.

Can you tell us a little bit about how you put up such big growth on your deposits this quarter sequentially?

One of the advantages that we had in some of our markets -- and I'll talk about Bay City and southeast Michigan -- is again; I mentioned earlier our emphasis on treasury management services. We did not have a lot of municipality money, and we've been able to go after and receive a lot of school district funds, a lot of City, County and Township funds that we were not competitive in before. And those entities carry large balances. And so when you are able to grow in those markets you can see almost the immediate impact on deposit growth.

One other comment. We were down on a sequential quarter basis on non-interest-bearing. And if you historically go back and look, that is a pattern that has been rather consistent, and at least as best we can tell it is due somewhat to outflows of funds like Mike said we've had some success in picking up some larger municipality accounts. But there is also ebbs and flows of their balances, and we've traditionally seen some of that money flow out in the first quarter of the year. And then the increase in time deposits was concentrated in broker CDs as we were moving money out of variable-rate Federal Home Loan Bank advances that were maturing and into broker CDs because we were able to get better rates there. So where we had most of the growth was in savings and NOW accounts but on a sequential basis it was up about 50 million.

One other comment that might -- and this is more anecdotal than anything -- was short-term rates going up. When rates were real low there was less incentive for customers to be moving excess funds, commercial customers, municipalities and the like, there was less pressure on them to move excess funds out of checking accounts and into money market accounts. But a movement from going from zero percent to maybe 30 basis points wasn't a real impetus. But now with short-term rates having moved up, I suspect people on the larger commercial accounts are paying more attention to their excess funds, and we've probably seen some shift out of the non-interest-bearing over into money market accounts where people are really kind of watching their idle funds a little bit more.

And what percent of your deposit mix now is brokered CDs?

Brokered CDs at the end of the quarter totaled 711 million. So that is about a little less than one-third.

Okay, great. And one other question. I was wondering if you could talk a little bit about your securities portfolio and what is going on the there, both I believe you have some GMAC and Ford paper there -- .

No, we don't have GMAC Ford, if we do we might have one small position with Ford that I think matures in the second quarter. So we don't have any significant exposure at all to Ford Motor Credit, to General Motors or to GMAC. We had two other than temporary impairment charges in the quarter. One was on a mobile home asset-backed security, and that is about $2.5 million security. It is the highest piece. It is the class A piece in the structure. But we have been doing continual upgrades or updated analyses on it because of some erosion in the underlying collateral. We recorded an additional $200,000 impairment charge on that security in the first quarter. That is our only asset-backed security that is rated below investment-grade. When we bought it it was rated AAA but it has gone through several downgrades. But we still feel comfortable that on a long-term basis there is very good credit support underlying that security still. But because of changes in the market value on it and the uncertainty that we will recover that decline in value over a reasonable period of time, we did record an additional $200,000 other than temporary impairment.

And then the other $100,000 other than temporary impairment was on our Fannie Mae, Freddie Mac preferred stock portfolio, and that was only about $100,000. I think we only have remaining there now variable-rate issues. We did have a couple of fixed-rate issues that we swapped out of during the quarter and moved into variable-rate issues that we think will stand up quite well in a rising rate environment. And quite frankly the tax equivalent yields on them are pretty good right now.

One last question if you could just talk about the Mepco, the loans, the receivables and as far as percentage of your total loan mix now, any thoughts as far as where you would like to see that going? How big a piece would you like to see that become and if it gets to be a little bit larger is there a point in which you're going to look to do something to some sort of securitization and sale?

Yes. As you saw it grow, it grew to about 308 million. I mean, we are very happy with the growth in the portfolio. I think I also mentioned that there was in the first quarter $50,000 of net charge-offs in the portfolio which is about 6.5 basis points on an annualized basis. So it has been performing well from a credit perspective. You know, we haven't set any absolute dollar amount, the portfolio is relatively high yielding and has a relatively short duration. So certainly it is an asset that fits very well into our balance sheet.

But just from a funding perspective because of the growth in wholesale funding and the liquidity challenges that that presents, we are exploring that potential securitization facility. One issue with any securitization facility is the funding costs relative to where we are able to fund it on balance sheet and the securitization facility its likely to cost us about 70 basis points more in funding costs. Now we can offset that if we can get sales treatment and get capital relief. So we are going to look at that seriously. And if we can achieve capital relief, where we free up capital which we can either deploy into other assets in terms of leveraging the balance sheet more liquid assets or potentially buying back more stock, we think we can get the impact to be neutral on an earnings per share basis. But that is the one trade-off. You gain in liquidity, but you -- with all the kind of proposals we are looking at, we are still looking at about 70 basis points higher in funding costs on a securitization facility. So that's what we're trying to weigh those two against one another.

Great. Thank you, guys.

Brad Milsaps with Sandler O'Neill and Partners.

Good afternoon. Most of my questions have been answered, but I just wanted to go back to the broker CDs. It looks like as you touched on you guys really swapped out your variable-rate FHOB (ph) advances for the brokered CDs. I wanted to know relative to your comments at the end of the year kind of how that changes your interest rate sensitivity position. And then what is your appetite for the broker CDs going forward? And then finally Rob, did you -- what percent of those did you swap out to some other fixture or floating-rate? I want to get an idea of how those are fitting into how your managing your balance sheet going forward.

As I mentioned earlier we really haven't changed our interest rate sensitivity profile at all hardly from year end. We still remain just slightly asset sensitive. So we are always trying to manage through as best we can a balanced position given the assumptions that we utilize in our modeling. With respect to the brokered CDs, they did grow, as you mentioned. A lot of it was swapping out of variable-rate Federal Home Loan Bank advances. I guess we look at a couple of different factors. First of all, we like to use brokered CDs as opposed to FHLB advances, even if the rates were comparable and I think with the brokered CDs we've actually been doing better than FHLB advances. The nice thing with the brokered CDs is it is unsecured versus the Federal Home Loan Bank advances we have to have collateral whether it is one to four family loans or home equity loans. So by swapping out of the brokered or out of the FHLB advances into the brokered CDs it actually gives us more liquidity because we freed up our Federal Home Loan Bank advance availability.

The other thing we like about the brokered CDs is we really can create whatever kind of funding duration we need so one of the things we've been doing with the brokered CDs is we have been doing long-term brokered CDs and by long-term I mean seven or eight year brokered CDs which are actually callable brokered CDs, and then we've been swapping them back to short-term funding, three six-month LIBOR in order to create a variable rate funding. That three to six month tenor actually matches up quite well with the finance receivable origination volume. So that is one of the strategies, and by doing that we can actually create a fairly stable long-term funding source. And then by doing a seven or eight-year brokered CD but then create the duration that we need relative to what we are seeing on the asset side. And then similarly, if we need term funding on the brokered CDs we can either do brokered CDs two, three, four-year brokered CDs or we can do short-term brokered CDs that are tied to some short-term index, predominately LIBOR. And then we do an interest rate swap to create a longer-term funding by putting out a fixed rate interest rate swap. So that is why we like them a lot. I know having them represent one-third of the deposit base seems like a lot, but they are extraordinarily flexible. They are unsecured borrowings. When we are creating the variable-rate funding we can get close to LIBOR flat. So they've been just working extremely well for us, and they are very efficient. We could raise relatively large chunks of money extremely efficiently.

So for all of those reasons that is why you've seen that increase there. And obviously we had another quarter where our loan portfolio growth outstripped our core deposit growth. But certainly a long-term brokered CD provides a stable funding base, and then we are able to create the duration of funding that we need.

Just two quick following questions. Given the loan growth that you are seeing and some of the challenges that you are facing on the deposit side, at what point or where do you feel comfortable I guess if you had to go this route drawing your securities portfolio down as a percentage of your balance sheet? And then finally would the need to attract more deposits make you guys more or less likely to de novo branch at all? Any plans for de novo branching at all in 2005 or into early '06? Thanks.

I'll take the securities one and then I will let Mike or Chuck handle the branch one. On the security side you can see we are actually from end of '04 to end of March of '05 we are actually pretty flat in securities available for sale. So what we essentially did was just replaced one-off in that portfolio. So I would expect to us, as we have a strong loan growth to see that portfolio diminish somewhat because the loan growth will just supplant the need for additional investment securities. On the whole most of our securities are still net at gains. I think our gains are more -- were around 13 million, and our losses were more around 4 million.

So we are still on a relatively significant net gain position in the portfolio, and we'd really prefer not to generate necessarily gains on sale out of that portfolio, particularly on munis because that's not an efficient tax strategy. The gain on the sale of a muni is taxable.

Conversely, where we could look at opportunities would maybe be to sell some muni positions at losses because that is a better tax strategy because those losses are tax-deductible. And then the reinvestment of the proceeds work a lot better. In essence the government on the muni is subsidizing 35% of your loss on the sale of the securities.

So if we're going to be doing any trading there that would be more likely what we're looking at, some sales of some munis to generate some losses. But absent that I think we'd probably more likely just see a gradual decline in the portfolio as we get paydowns and runoff in the portfolio without the need to reinvest because of the stronger loan growth. And Mike, do you want to answer the de novo branch question?

Brad, on the de novo branches we have one that will be coming online this quarter, and then we have another one that should come online in the fourth quarter. And then we have two that we should see open the first quarter of next year. So we have a total of four de novo branches that we are working on right now.

Any particular part of Michigan?

The one that will open this June is in Saginaw. Later this year will be Lansing market. The other two, one is in Grand Rapids, and one is down in Troy, near Troy.

Okay, great. Thank you.

Kenneth James with FTN Midwest Securities.

Good afternoon, gentlemen. I just want to go back to your outlook for the margin here for a second. For a couple of quarters now we have been talking about the potential for eroding margin and given that you are 40% wholesale funded, your wholesale funding was up linked-quarter and the curve has been flattening for some time, I was kind of surprised to see your net spread in the margin hold up as well as it did this quarter. So going forward (inaudible) the magnitude of erosion are we looking at low single-digit type for quarter margin erosion, or do you think it has the potential to get worse than that?

Well that is the million dollar question and it is a very difficult one to forecast. I will tell you what we're trying to do, and which this may help us because we are in excess of 100% loan and deposits ratio, we use an incremental pricing template when we look at pricing new loans or purchasing new investments. By that I mean what we are doing is we are matching it up against a buyer loan (ph) because we recognize that we are basically funding new loans, new investments with additional buyer loans at least on a macro basis. And then we also, depending on the type of loan or type of investment, use an allocated capital model. So for example a commercial loan we are allocated 10% capital. We don't go below 6.75% capital even though an asset may have a 20 or 50% risk weighting. So I think that pricing discipline -- and then we are trying to achieve 20% or better returns on allocated capital.

So I think that incremental pricing discipline helps us. Now you have got to offset that sale in the marketplace using that pricing template and that discipline, are you going to be able to generate the loan growth that you're looking for. So far we have generally been able to be successful at that. So I think looking ahead that we are able to continue to be successful at that. In other words, maintain that marginal pricing and still get the quality that we are looking for and be able to generate good volumes then I think our margin will hold up better in the flat yield curve. If that proves more difficult then you could see maybe a little bit more erosion in the margin. But that is what we're trying to do. We are trying to combat that flatter yield curve by using that incremental pricing strategy. And if we can continue to work successfully on that I think maybe we will be better than where we think we will be on the margin. But it is extraordinarily difficult to project right now. Did that answer your question, Ken?

Yes, thank you for the color.

(OPERATOR INSTRUCTIONS) Jason Warner with Howe Barnes Investments.

A couple questions here. The first one is just repeat what you said about the Mepco investigation costs for the quarter, was that 240,000? And that is completed so nothing more going forward?

Yes, that we completed the investigation during the first quarter, yes.

And the other question is what is your thoughts on stock buyback? I know you guys kind of reiterated your authorization. What are you looking for with your buyback going forward?

We have authorized 750,000 shares for share repurchases. That authorization expires on December 31, 2005. To date this quarter we haven't repurchased or to date in 2005 we haven't repurchased any shares. So obviously we have some opportunities. Our capital ratios did decline a bit because of the acquisitions from last year. Now they did bump up in the first quarter, but you know we're going to try and balance getting some growth in our capital with share repurchases. But I certainly think we will be opportunistic where we have opportunities to repurchase shares.

I was just going to comment that it really depends on what our other alternatives are. But as long as we are growing at the levels we are right now, it is difficult for us to see strong buyback. But if things start slowing down in terms of our balance sheet growth, that will be an opportunity for us.

There are no further questions at this time.

Thank you very much for your attendance and participation today. I look forward to talking to all of you in the future. Thank you.

This concludes today's teleconference. Thank you for your participation.