OceanFirst Financial Corp (OCFC) 2008 Q4 法說會逐字稿

Hello and welcome to the OceanFirst Financial Corp. earnings conference call.

All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions). Please note that this conference is being recorded.

Now, I would like to turn the conference over to Ms. Jill Hewitt. Ms. Hewitt, you may begin.

Thanks, Camille. Good morning and thank you all for joining us. I'm Jill Hewitt, Senior Vice President and Investor Relations officer.

We will begin this morning's call with our forward-looking statement disclosure. This call, as well as our recent news release, may contain certain forward-looking statements which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words believe, expect, intend, anticipate, estimate, project, or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include but are not limited to changes in interest rates; general economic conditions; legislative regulatory changes; monetary and fiscal policies of the US government, including policies of the US Treasury and the Federal Reserve Board; the quality or composition of the loan or investment portfolios; demand for loan products; deposit flows; competition; demand for financial services in the Company's market area; and accounting principles and guidelines. These risks and uncertainties should be considered when evaluating forward-looking statements and undue reliance should not be placed on such statements.

The Company does not undertake and specifically disclaims any obligation to publicly release the results of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Thank you.

Now, I will turn the call over to our host this morning, President and Chief Executive Officer, John Garbarino, Chief Financial Officer Michael Fitzpatrick, and Chief Operating Officer, Vito Nardelli.

Thank you, Jill, and good morning to all who have been able to join in on our fourth-quarter and year-end 2008 earnings conference call today.

OceanFirst has just concluded its 106th year of continuous operations and our 13th as a publicly traded company. This has been an extremely difficult year for the entire industry and OceanFirst has not been immune. Nevertheless, we have posted solid consistent earnings for the quarter and entire year. We demonstrated the ability to face the challenges posed by the economic climate and generally succeeded in avoiding the credit issues and many of the investment security impairment charges incurred by others.

We appreciate your interest in our performance and are pleased to be able to review our latest operating results with you this morning. You have all had the opportunity to review our release from Thursday and following our usual practice, I will not be disrespectful of your time reciting a host of actual numbers from the release. My introductory comments will merely help frame our opportunity to add some color to the earnings posted for the quarter and year as we continue to attempt to fortify our balance sheet, navigate the risks imposed by market value accounting and generate value for our shareholders.

Diluted earnings per share for the quarter were $0.30, a 15.4% increase from the corresponding prior-year period yet off $0.02 from the linked-quarter. Excluding extraordinary items, our core earnings remained $0.32, matching the prior quarter. The Company's 48th quarterly cash dividend declared was $0.20 per share, unchanged for the 24th consecutive quarter.

There were two extraordinary items in the fourth quarter which worked at cross purposes and net reduced earnings by $0.02. The quarter benefited from $524,000 in state tax refunds for the years 2002 through 2006 and was offset by an impairment mark of $568,000 on our BOLI portfolio.

The Company's investment securities portfolio has managed to perform well and not suffer the severe impairment marks reported by many other financial institutions throughout the year. This write-down of our BOLI investment is the first such expense recorded by OceanFirst in what seems to be an increasingly irrational application of mark-to-market accounting to financial institutions.

In our case, the primary manifestation of mark-to-market especially evident in this quarter is the mark taken against securities in the other comprehensive income calculation. For the quarter, lower valuations of our securities resulted in a substantial hit to our book value.

While I will leave it to others to rail against the wisdom of mark-to-market accounting, we remain hopeful that some common sense can still be brought to bear on the concept to avoid the disastrous, often unwarranted, effects on the industry.

The quarter's earnings have again benefited from an expanding net interest margin which increased 5 basis points from the previous quarter, reflective primarily of liability cost decreases in the lower rate environment. Average interest-earning assets increased only slightly for the quarter and deposits remain difficult to attract, given our disciplined pricing on Certificates of Deposit in an overheated, highly competitive retail market.

Uncharacteristically, core deposits also contracted slightly for the quarter, driven primarily by a decrease in our government deposits.

Heavier-than-normal professional fees and other administrative charges prevailed during the quarter. This was largely attributable to the shutdown of our former subsidiary, Columbia, again artificially inflating operating expenses. Our efforts to sublet office space previously occupied by Columbia continue to fall short of expectations in a worsening commercial rental market. We have continued to temper these expectations, substantially increasing our provisions for the inability to sublet this vacant space, assuming an additional six-month period of vacancy now through the third quarter of 2009 and then a sublet at a more severely discounted lease rate.

In this market, we remain heavily focused on the strength of our balance sheet as opposed to being preoccupied with growth. With this strategy and our consistent earnings in 2008, we continue to bolster our core capital ratio, which grew to 8.1% during the quarter prior to any assistance from the Treasury Capital Purchase Program which we recently closed in the new year. Well capitalized by all standards prior to the Treasury investment, our pro forma core and risk-based capital ratios were increased to 9.93% and 15.47% respectively, assuming all treasury funds are available to the Bank.

Our Board has voluntarily agreed to participate in the capital purchase program to prudently fortify our balance sheet and capital position in these uncertain times. Over time, we expect to leverage these funds manytimes over to bolster lending, as encouraged by treasury, and take full advantage of opportunities within our market.

As noted earlier, our cash dividend has been continued, unaffected by economic conditions for now. Our Board remains committed to a strong cash dividend policy benefiting our shareholders with an aggressive dividend payout ratio of current earnings.

I will ask Vito Nardelli, our Chief Operating Officer, to once again bring you up-to-date on the good news surrounding the Columbia loan repurchase reserve performance as well as comment briefly on our core bank credit quality, increased loan loss provisions, and BOLI impairment. Vito?

Thank you, John. I am pleased to announce that there have been no repurchase requests received in the quarter, nor has there been any loan repurchase activity.

For the year, total charges to the reserve for repurchase loans were $1 million, which was used to repurchase three loans and fund two negotiated settlements. At December 31, the reserve for repurchased loans stands at $1.1 million, reflecting a quarterly recapture of $37,000. The total recapture from the reserve for repurchase loans for the year amounted to $248,000. There remains one outstanding repurchase request from Fannie Mae, which we are contesting.

Looking at asset quality, nonperforming loans increased $3.5 million for the quarter to $16 million or 97 basis points of total loans receivable. In the core bank portfolio, which excludes the $4.6 million of residual Columbia loans which have already been aggressively written down to market, nonperforming loans total $11.4 million or 69 basis points of loans receivable.

The two largest nonperforming credits are commercial relationships of $2.1 million which was added this quarter and $1.9 million which we reported last quarter. Each is well secured by recently reappraised commercial real estate.

I have reported to you in the last two quarters of one remaining loan to noted investor Solomon Dwek in the amount of $480,000 secured by real estate occupied by a branch of BankAmerica. This loan has not yet been resolved but there remains a contract for sale in the amount of $985,000 which is under the control of the bankruptcy trustee.

While we are not pleased by the 22 basis point increase in nonperforming loans for the quarter, neither are we alarmed. We diligently monitor and manage the delinquency metrics of our entire portfolio and all remain favorable to the overall market statistics, reflective of our strong credit culture.

During the quarter, we realized net loan charge-offs of $153,000, bringing the year-to-date total to $578,000. We are keenly aware of the economic environment and the condition of the real estate market. Considering these factors, as well as the current level of nonperforming loans, we have increased the provision for loan losses for the quarter to $600,000. The total provided for the year was $1.775 million.

I will now turn our attention to the reported impairment in our Bank Owned Life Insurance of $568,000. The BOLI is invested in a separate account insurance product which has been invested in a fixed-income portfolio which was designed considering the Lehman Brothers Aggregate Bond Index as a benchmark included within that portfolio of bond instruments for major top-tier corporations as well as mortgage-backed securities and government bonds. In the fourth quarter, the impairment was related to the default of certain corporate bonds. We are carefully reevaluating the portfolio mix to assess risk and determine whether to continue with the current portfolio or to alter the risk profile at the expense of the expected return.

With that, I will return the discussion back to CEO Garbarino for some concluding comments prior to engaging in a question-and-answer session this morning.

Thank you, Vito. In closing, I would like to reflect on the extraordinary events our financial system has endured over the past four months. Throughout this turbulent period, we have been continually challenged by the markets and unprecedented governmental interventions proper to address the rapidly evolving issues. In many cases, government's response has been at best inconsistent and often subject to criticism. The Congress and media have misinterpreted and mischaracterized the efforts of treasury at nearly every turn.

As a result, the expectations of the year ahead are indeed unclear. Our outlook continues to be cautious and restrained. While OceanFirst has maintained a strong lending presence in our market, there is no denying that underwriting conditions have been tightened. To fail to do so would indeed be foolhardy.

As I noted earlier, with a fortified balance sheet and a strong belief in the credit quality of our portfolio, management feels well positioned to weather the continuing storm and persevere. Many forecast that the worst for our market may lie ahead and we find it difficult to disagree. In many ways, much of our area has been spared the deep suffering experienced by other parts of the country although local trends and rising unemployment, increasing delinquency and softness in real estate values are impossible to ignore.

We recognize that these conditions do not present an attractive platform for heroic performance by a financial institution. Nevertheless, our shareholders should be assured that we believe we have taken every action we possibly can to take advantage of market opportunities that will inevitably reveal themselves in our quest to generate value for our shareholders' investment.

With that, Misters Nardelli, Fitzpatrick and I would be pleased to take your questions this morning.

(Operator Instructions). [Robert Korash], Private Investor.

Yes, in regard to the continuing risks from the Columbia venture, you mentioned the leasehold obligations. Could you tell us what the annual costs are relating to that lease and also the number of years for which that commitment will continue, irrespective of whether there can be (multiple speakers)?

Sure. I will give you a rough idea of the numbers. Unfortunately, there are several properties involved. All of the leases as you can imagine are different and they all expire at different times also. There's properties in Westchester County and also out on Long Island and also in New Jersey that are involved, so there's three separate locations. But in general terms, most of the leases -- some of the smaller leases expire later this year but the main lease, which is on the major piece of property in Westchester County, expires in 2012. The annual lease experience for that property is $155,000 in round numbers.

Right now, we are incurring annual lease expense in 2010 or anticipating, in the event of no sublet, of just under $300,000. So that gives you an indication of some value. Hopefully, that is responsive enough for you.

Okay. I have another question but I don't want to take another turn.

Feel free. We always allow two, Robert.

My next question has to do with the treasury preferred stock that is being issued. My assumption is that is basically a line of credit that you are not committing to taking all of that money at this point but you have access to it. Is that correct?

No, that is not entirely accurate. It is a preferred stock investment. We closed it on January 16. The treasury is now in possession of a stock certificate that says they own 38,263 shares at a value of $1000 a share in OceanFirst Financial Corp. Their preferred shares came under preferred and they pay a fixed dividend of 5%. So the dividend obligation began on the date of closing, which was January 16.

What they additionally received under their -- and this is their program. The terms of their program is a warrant to purchase an additional 380,000 shares of our common at a price that was determined by a calculation for the 20 days prior to the approval of our participation in the program. That exercise or strike price is $15.07.

Okay. How do you anticipate that the obligation on the preferred dividends will impact the common share dividends that you have traditionally been able to [post]?

We feel it will have no initial impact. We have taken steps to immediately invest that in short-term investments. We have levered the treasury's investment 1.4 times. We feel that, in short-term investments, we will be able to cover the cost of the preferred dividend as well as the common stock dilution.

Again, as I mentioned in my comments, on a longer-term basis, we intend to deploy that many times over in our lending operations. I believe that, with the additional leverage and in an ideal situation, we feel we can lever that 7 to 8 times; we will actually have that accretive to our common share dividend. So we're very concerned that we are not affecting our common shareholders by taking this [talk] and we're taking steps and we're executing a plan to see that that is in fact the case.

Frank Schiraldi, Sandler O'Neill.

I've -- just a couple of questions here. First, I was wondering if you would be able to give any further -- any further specifics would be helpful that you could give on the two largest nonperformers in terms of LTV on the new appraisals, specific type and maybe specific reserves against them. Any sort of specificity you could give?

Yes, Vito gave you some flavor for that direct loan certainly, but you're talking about the two new loans that we talked about being recently reappraised?

Right. The two you mentioned in the release, the 2.1 and the --.

Right. We talked about them both having been recently reappraised. Again, based upon the latest appraisal which occurred really in the last three or four months, we are concerned honestly about believing an appraisal that may date back to 2005 or 2006.

The LTVs I believe -- Vito, do you have the actual number?

I have the reappraisal numbers John. On the one property, the reappraisal came in at $3 million. On the second property, the reappraisals came in at $2.2 million.

Okay, so on the $2.1 million is an appraisal of $3 million and on the $1.9 million, there's an appraisal of $2.25 million. We also had personal guarantees in both circumstances and in both circumstances, we feel that the personal guarantees are quite strong. So, we have no specific reserves allocated to these properties, nor do we feel that it would be prudent to do so. They are well secured by every measure right now.

These are commercial real estate properties?

They commercial real estate properties, exactly. Local, in Ocean County. They have been somewhat shuffled for some time. They've only become nonperforming in the last quarter.

Okay. As far as [once] for family loans, what were the charge-offs on in the quarter and on --has there been an influx in the quarter of one-to-four family into nonperforming?

No, not really. Actually, the increase in nonperforming on the residential site was not severe. The charge-offs on the residential I think are pretty mundane. I believe, in all cases, they were loans that had migrated from the Columbia portfolio that had been heavily written down and the charge-offs are relatively nominal. Mike is searching for it.

It was 153,000 for the quarter but they were all related to Columbia, Frank. They (multiple speakers) some of the Columbia loans.

Is OREO, is that the Columbia loans? Is that basically what makes up OREO?

Yes, the main one?

Yes.

Some of the Columbia loans when into ROE, yes. The one-to-four family part in the nonperforming is up $600,000 from September to December. That is mostly bank loans but that portion is up $300,000.

Okay. Then I think you may have given it to us before, John, but is there any specifics you can give on the trust preferred, the single issuer portfolio? Is the unrealized loss that is hitting OCI, is that basically one of those securities?

That is really what is coming through there. Again, as you know, Frank, our portfolio is $55 million. It was 11 original issues at $5 million each. They were all investment grade; they are all investment-grade. During this past quarter, we saw write-downs in companies such as BofA and Chase that hadn't previously been effective affected terribly but in this market obviously they are now. So the write-down through OCI was substantial and had a really debilitating affect on our book value, as you know. It is all related to that trust preferred portfolio. They were all investment grade.

Again, I believe we've actually got a total of eight or nine issues now. Through consolidations with Bank of America has taken now I think a total of $15 million. That was really written down very substantially in the last quarter by virtue of the market quotes, the illusionary market quotes, if we will, in this mark-to-market world. They are all investment, State Street, companies that you would have thought you were safe with.

Right, okay. Finally, I just want to make sure I understand the comments you made about -- the largest leasee had said that runs you guys $300,000 a year. Is this right that, in 2010, you basically --?

I think all of the leases were $300,000. The largest lease I believe was -- I'm sorry, yes, you're right. The Valhalla lease in Westchester is $300,000 for 2010. I was looking at a partial year for '09.

So are your basic assumptions right now are that you will be able to recoup about half of that in 2010 through a sublet?

Do we have to tell the world how much we're willing to discount it on a sublet? I don't want anybody from Valhalla to make us an offer. Actually, I wish they would make us an offer this afternoon. Maybe I could treat this as an advertisement, Frank.

Sure, why not.

We have assumed that there will be no income from the sublet through the third quarter and we've taken every substantial discount as far as our assumption from that point on through 2012. So we are discounting it on a regular basis, trying to get some activity in it, but you can imagine the commercial real estate market, as I mentioned, is worsening and certainly not getting any more attractive.

Fair enough. Okay, thank you.

[Ron Reba], Private Investor.

Hello. I was just looking at the value of the stock. As I'm recalling, it was down to $12.30 which is probably the lowest in a year. What measures are you trying to implement in order to raise the price of the stock at this time?

Well, I can appreciate your concern because we share your concern with the market performance of the common. I don't think, though, that anyone thinks that they're in a position to raise the price of that. I think that all we can do, frankly, Mr. Reba, is perform as expected, generate the earnings and hopefully the market will reward that performance. There is very little we can do to manipulate the price of that stock. We are very distressed that the market is trading off across the board and is somewhat indiscriminate in how it treats companies.

In our case, for example, we went through a very rocky patch in 2006/2007 and our stock price was pummeled for that. Last year, we had the good fortune to perform quite well versus the rest of our peers, but the recent selloff certainly in the new year I don't think is at all reflective of the type of quarter or year end that we've just reported to you this morning. Unfortunately, that is not something we can affect directly; it is only through our financial performance.

I know that other lending institution CEOs and their directors are foregoing bonuses in exchange of stock. I noticed that the directors as well as yourselves are going to be hitting thousands of shares of stock (inaudible) next year. Are there any plans to forego your bonuses or any of your stock?

Yes, We have already implemented plans in our new budget year that there will be no review of officer salaries, including executive salaries, until midyear of 2009. We want to see how the year begins to unfold with all of the uncertainty I spoke to. Our bonuses are incentive based. They will not be paying across the board. This refers to our entire officer staff, not just executive management. They will not be paying anywhere near target levels. They will be paying something glass than target, even given I think the very credible year's performance that we turned in. Our board bonuses were forgone entirely the two prior years at the executive level. Right now, there is no discussion about foregoing bonuses because I think we have turned in a very credible year of financial performance.

All boards and all executive management teams have the dual issue of trying to retain executive talent. I think that, when you have a management team that is able to perform as well as we did in 2008, there is some reward that is necessary to keep those people engaged. I realize this is a fine line that has to be walked and I appreciate your concern but I don't think that we've been accused of being at all frivolous with our compensation. Believe me, we're taking steps that we think we need to send the message and I think our executive team understands that.

What about the shares, what about the gifts of stock for 2009?

You say gifts of stock. I am not familiar with that.

I saw somewhere in the Internet inside information where you and other directors are due to receive 1000 shares of stock (technical difficulty). Am I wrong?

I'm sorry. Yes. What you are referring to perhaps is the fact that, as part of overall compensation when it comes to our officer team, our compensation is not only in the form of cash but under our best practices purpose, it also includes equity based compensation. So there have been annual equity grants of options and in some cases restricted stock awards. That is part of the overall compensation plan and it is duly reported every year in the proxy statement. So if you're looking at an Internet insider issue, it would disclose that as having occurred last year. That subject has not been taken under consideration yet for this coming year. It will be under consideration in February when our HR compensation committee meets and it will be duly reported in our proxy statement for the annual meeting.

I noticed you were getting close to 60,000 this year as a gift stock.

No. First of all, it is not 60,000 shares of gift stock. It would be options, option awards, which would be issued at the current strike price and would only have value if in fact the stock price accelerated over a period of time. That is a practice that we think aligns management and the board's interest with that of our shareholders because it only adds value if the Company performs well.

So you have plans not to take bonuses or in addition free to maybe (inaudible) this year?

As I said, our HR Compensation Committee of the Board will be meeting in the month of February. They will be addressing it at that time. So I wouldn't want to comment on anything they may choose or not choose to do.

Okay, thank you very much.

Ross Haberman, Haberman Fund.

Good morning guys. I just wanted a clarification going back. The $55 million which you hold, that was the face amount of the trust preferred. What are you carrying that (multiple speakers)?

(multiple speakers) the current (inaudible).

It is about $34 million. It's in the balance. You said $34 million.

So it has been written down $21 million through OCI right now and of course again that has been a drag on our book value.

So you [counter] about $0.61.

Yes. Again, there is no pool trust preferred. That is all issuers and it was all -- you know, they were all investment-grade companies. But again, everything, as I just reported or as I just mentioned to the other caller, everything is being treated somewhat equally here.

Again, that -- is that more to an actual bid or price or that is a mark to a cash flow discount (multiple speakers)?

That is a level two pricing and it is based upon broker quotes that are obtained at the end of the quarter, which we know can be somewhat illusionary too. It's the whole mark-to-market issue that we could talk about forever and whether or not we feel there is any -- certainly we feel there is no permanent impairment to the securities and they are temporarily impaired by market conditions. So far, the accounting profession has seemed to agree with that. We hope they continue to look at it that way.

Had you actually tried to sell any of those over the past several --?

No because we think that would be giving it away, frankly, Ross. It is not for sale at that price.

Okay, I just asking (MULTIPLE SPEAKERS).

(multiple speakers)

I just asked the question to see if you have ever tested the market you might say.

No, we always obtain three broker quotes on it and try and use that as our valuation. Of course, that's carefully reviewed by KPMG.

I just wanted to go back. What was the actual lease cost to you in either this quarter, the fourth quarter of '07 -- sorry, the fourth quarter of '08 or for calendar '08, what was the net cost?

For Columbia?

Yes please.

We took an additional $244,000 leasehold reserve during the quarter.

$240,000?

$244,000.

That was your actual dollar cost or --?

Well, that was --

Again that was to cover some sort of future (multiple speakers)?

No we had written that down, as you recall, on the prior quarters going all the way back through last year. That was the additional assumptions that we have imposed upon the additional expense that would be taken based upon further discounted rents. In other words, without going into actual calculation, when we first started to discount what we thought we could sublet this property at, it may have been at $0.60 or $0.70 on the dollar. We might have taken that assumption down below those numbers, so that the incremental additional write-down -- it would already been written down say $0.30 on the $1. We are taking it below that as far as the assumed ability to sublet it.

So, going forward, though, you are just going to hit your reserve as opposed to taking a quarterly expense. Is that correct?

Well, again, we extend the assumption signed to that the property will be dark, will be completely vacant, so right now our assumption is that the property would be vacant through September of this year and then it assumes that we would only obtain a very heavily discounted sublet of our cost through the maturity of the leases in 2012.

So you're right. If that happened, if that assumption holds, then any loss would be charged against the reserve and it would not flow through the income statement as long as those assumptions hold up.

Conversely, if we were able to sublet it earlier or obtain a more attractive sublet, we might have a recovery.

Just one final question -- are you seeing a lot of refis now?

Yes.

What are you doing? Are you modifying them or will that further hurt the margin or the spread as I guess you refi them and sell them?

It is an excellent question, Ross. Yes, contrary to popular reports which said the refi activity has dropped off in the last week or two, our refi activity has never been stronger. We were discussing this the other day. Our residential pipeline is at unprecedented levels, both in terms of dollars and in units. We are absolutely inundated with refis.

We've always maintain a modification program which we try and offer to our existing refi customers as an alternative to refi-ing. We try and encourage that in terms of what we think a win-win situation for both the Bank and the customer. We do it at a slight premium to current market but we do it on an expedited basis with much reduced cost to the borrower.

Fortunately, I can report that the vast majority of the refi business we're seeing is not our portfolio. It is about one-third our portfolio and two-thirds other institutions so that we are more than happy to do that because that is new business to us.

The answer to your question with regard to the margin is we do not see a dramatic effect to our margin because, frankly, we see customers refi-ing for 50, 75 basis points in some cases. They are not the types of heavy refi discounts that you had seen in previous refi markets where people may have been taking 7.5% or 8% loans and refi-ing them down to 5% or 6%. So we're not too concerned about the effect on the margin, although you are absolutely right; there will be some effect. But the fact that our current pipeline is two-thirds other people's business is a great source of comfort to us.

Just the last question -- are you keeping any of those or you are selling them all? (multiple speakers) the ones which are not yours?

Right now, they're all being sold.

Okay. Thanks again, guys. The best of luck.

[John Seibel], Regal Securities.

Hi, guys. How are you? Two quick questions -- one is you mentioned a repurchase request from Fannie Mae. How much is that loan for?

That loan is in the amount of $270,000 and we have a $81,000 reserve against it.

That goes back to what August of last year? Yes, that goes back to August of last year. That is the last repurchase request that has not been adjudicated and we are currently contesting it. I believe it is in an arbitration proceeding right now.

The second one -- I'm sorry to do this to you but I just want a clarification so that I'm on the same page. I thought, when the first caller called regarding the vacant Columbia space, you said the total of your lease expenses in 2010 is going to be $300,000 and Westchester is $155,000 per year to 2012.

Yes, I may have misspoken that. The Westchester expense was $300,000. The total expenses, which cover some of the New Jersey and Long Island property is -- I'm adding it here as we go along -- is an additional $58,000 in New Jersey; there is only a partial year for -- no, that is it. The Long Island property, the leases all run out in '09. So it will be an additional $58,000 for New Jersey property.

When does the New Jersey property run out?

That runs through November 2011. As I say, it is a little confusing because there are several properties and they all have different expiration dates.

Okay, so we're looking at a total lease expense (multiple speakers) of $358,000?

For 2010, it would be, in round numbers, $356,000, yes.

Okay, thanks guys. Have a good day.

(Operator Instructions). We show no further questions at this time. I would like to turn the conference back over to Mr. Garbarino for any closing remarks.

Thank you Camille. I appreciate it. I would just like to, again, thank everyone for their interest in joining us this morning. We have been able to report four decent quarters to you in 2008. Despite the current uncertain times that we live in, we hope that we have the same luxury to continue in 2009. We will look forward to speaking to you at the end of the first quarter. Thank you.

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