Regions Financial Corp (RF) 2006 Q1 法說會逐字稿

Good afternoon.

My name is Tanya and I will be your conference operator.

At this time I would like to welcome everyone to the AmSouth Bancorporation's first quarter earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question-and-answer session. [OPERATOR INSTRUCTIONS].

I would now like to turn the conference call over to Mr. Dowd Ritter.

Please go ahead.

Good afternoon, everyone.

This is List Underwood and we certainly appreciate your participation, especially given the number of banks announcing today.

Our presentation, we'll discuss AmSouth's business outlook and includes forward-looking statements.

Those statements include descriptions of management's plans, objectives or goals for future operations, products or services; forecasts of financial or other performance measures; and statements about AmSouth's general outlook for economic and business conditions.

We also may make other forward-looking statements in the question-and-answer period following the discussion.

These forward-looking statements are subject to a number of risks and uncertainties and actual results may differ materially.

Information on the risk factors that could cause actual results to differ is available from today's earnings press release, our Form 10-K for the year ended December 31, 2005, and the Form 8-K that we filed today.

As a reminder, forward-looking statements are effective only as of the date they are made and we assume no obligation to update information concerning our expectations.

Dowd?

Thank you, List.

And good afternoon, everyone.

We appreciate you joining AmSouth's first quarter earnings conference call.

Also with us today is someone many of you are already well familiar with, Al Yother.

Al, as you know, has recently assumed the responsibilities of Chief Financial Officer on an interim basis and will provide a detailed discussion of our quarterly performance in just a few minutes.

We have had a solid start to the year and are pleased to be with you today to talk about our first quarter results.

Earlier today AmSouth reported first quarter diluted earnings per share of $0.52, an increase of 4% over the same period a year ago.

Net income in the quarter reached 181 million while profitability remained among the highest in the industry with a return on equity of 20.5%, return on assets for the quarter was 1.39%, and our efficiency ratio was 52.5%.

This solid earnings performance was driven by revenue growth from both interest and non-interest sources, outstanding loan growth, a higher deposit base, and continued strong underlying credit quality.

Among the highlights that contributed to the quarter's performance.

Loan demand was strong during the quarter.

Total loans increased by 15% on an annualized basis between quarters.

Florida's growth rate was even stronger than the company's with total average loans increasing 31% on the same basis.

Commercial real estate led all lending areas with growth of 26% versus the first quarter of 2005, reflecting the funding of last year's record production.

For the quarter commercial real estate closings totaled 1.8 billion, an increase of 35% over the first quarter of 2005.

Production was again strong in Florida with an emphasis on single family residential, multifamily rental and sells units, and retail properties.

Commercial real estate lending is one of our true strengths and we are pleased to have carried our significant momentum into the new year.

Small business lending also experienced another strong quarter.

Average loans outstanding increased 22% on an annualized basis between quarters.

This marks the fourth consecutive quarter of annualized double-digit loan growth in this particular line of business.

We also had good growth in first residential mortgages and home equity products this quarter.

First residential mortgages increased 11% on an annualized basis between quarters, while home equity, after slowing in recent quarters due to high payoff levels, regained momentum and was higher by 17%.

Wealth management experienced positive momentum as private client households grew 4.3% on an annualized basis and increases were also experienced in our trust and investment services income between quarters.

Total average deposits grew 630 million compared to the fourth quarter led by 436 million or 7.1% annualized increase in our low-cost deposits.

As we look ahead we're pleased with the early success of our most recent consumer marketing efforts.

New consumer checking production during the quarter was at it's highest level in the past two years.

Total deposits in Florida grew 13% as compared to the same quarter last year led by a 12% growth rate in non-interest bearing deposits, and continued to be aided by solid growth in households and continued strong performance of the 93 new Florida branches that we have opened since the beginning of 2002.

Non-interest revenue growth was also solid at an annualized 5.1% during the quarter.

Areas showing especially good growth included the previously mentioned investment services which benefited from increased annuity sales and commercial credit fee income.

Interchange income was also higher not only due to increased card volume but also usage tied to our check card rewards campaign.

On the non-interest expense side let me mention one significant item.

Our industry leading BSA/AML program is now fully implemented and, as such, substantially all of the costs relating to bringing this program on line, which amounted to over $20 million in 2005, are now behind us.

We're committed to keeping this program best-in-class and going forward our expenses will only reflect the cost of maintaining this program.

Other operating highlights in the first quarter would include our credit quality, which continues to be a strength.

We did charge-off our previously disclosed exposure to two airline leases, which carried significant reserves.

As a result of the charge-offs the ratio of non-performing assets to loans was 0.27% at quarter end, which is among the lowest in our history, down from 0.34% at year end.

We continue to experience strong household growth in Florida during the current quarter with households in Florida growing 9.5% on an annualized basis and leading the entire company's growth.

Also we repurchased 5 million shares during the quarter to prevent any earnings dilution that might occur in the year from issuance of shares through our various employee benefit plans.

And finally, I'm sure you all saw this mornings update from S&P raising its ratings on AmSouth Bancorporation and AmSouth Bank.

With that overview let me now turn it over to Al to cover the first quarter results in greater detail.

Al?

Thank you, Dowd.

Let's take a look at the details.

Net interest income for the quarter was 397.7 million, an increase of 5.6 million or 5.7% on an annualized basis versus last quarter.

Now this increase reflects the impact of a wider net interest margin up to 3.42%, which is a 5-basis point improvement over the fourth quarter and higher average loans.

A solid 7.1% increase in low-cost deposits coupled with a continued focus on loan pricing also contributed to the increase in net interest income in the quarter.

Now, let's take a closer look at our lending areas.

Continuing a trend, loan demand was, again, very good in the first quarter with total loans increasing at an annualized 15% rate, which is essentially the same growth rate that we experienced last quarter.

On a geographic basis Florida led the way with overall loan growth of 31%.

The areas that provided the strongest loan growth were commercial real estate, small business lending, and on the consumer side, equity lending.

More specifically, our commercial real estate loans increased 26% over the same quarter of last year.

Now this growth reflects significant funding of the record production that we discussed with you last quarter, which included the record December single-month closings of nearly $1 billion.

In the first quarter, production remained strong with new originations of 1.8 billion.

Commercial real estate prospects for future growth looks strong as well with pipelines remaining at record levels.

On all fronts we are very pleased with the success of our commercial real estate lending business not only from a growth perspective but from profitability and credit quality standpoints as well.

This portfolio was built very methodically with an intense focus on sound underwriting fundamentals.

Let me quickly give you some details on this book of business.

Nearly 60% of our commercial real estate portfolio is related to projects that are under construction.

The portfolio is very granular with an average loan size of just $734,000.

It's well diversified with the largest concentration being in single-family residential, condominium, retail, and in multifamily.

In total, over half of our real estate exposure is to lower risk residential property types.

And we have intentionally remained on the sidelines in the more cyclical and, therefore, more volatile areas like office and hotel projects, which make up only a small portion of our outstandings.

Another area that performed well was small business lendings, which posted outstanding link quarter annualized growth of 22%.

Calling efforts, improved business banker productivity, and our continued focus on customers in the 5 to $10 million sales segment, again, contributed heavily to our success in this area.

On the consumer side, demand for home equity products continued to be strong with production of $1.2 billion.

Production of first residential mortgages totaled $741 million in the quarter, which is down from the fourth quarter levels reflecting a seasonal decline in demand.

Growth in home equity average balance has accelerated this quarter as well increasing 17% on an annualized basis versus the fourth quarter.

Drivers included the continued strong production just mentioned and lower payoffs of existing credit lines.

Also augmenting the growth this quarter was the mid-fourth quarter purchase of $269 million of high-quality, variable rate, private client equity lines of credit.

The investment securities portfolio at period end was 11.4 billion, down 275 million from the fourth quarter levels.

This decline represents a continuation of our strategy to lower our investment portfolio as a percentage of earning assets, which now stands at approximately 23%.

The rate increases continued to pressure spreads on investment securities and in this environment we remain unwilling to reinvest the majority of these cash flows back into securities.

We are instead using that cash to fund loan growth.

Also we are not extending duration in either our investment or loan portfolios, and while this has a short-run negative impact on net interest income we do believe that this tactic is prudent given the flat yield curve.

The duration of the investment securities portfolio at the end of the quarter was 3.7 years and we continue to be essentially interest rate risk neutral.

Now shifting to the funding side of the balance sheet for a moment, total deposits were up an annualized 7% over last quarter led by a 7.1% increase in low-cost categories.

As usual for our first quarter we saw seasonal decline in the non-interest bearing deposit growth rate versus last quarter.

However, a year-over-year comparison reflects non-interest bearing growth of 10%.

Low-cost deposit growth continues to be a key strategy for us in every line of business and in all geographies.

As we have discussed before, however, we are especially focused on growing our deposit base in Florida, which has the fastest growing population rate of the 10 most populace states and with our aggressive branch expansion and marketing plans for the state which call for 54 new branches this year, our expectation is that Florida will continue to set the pace for AmSouth.

Now turning to asset quality, net charge-offs in the first quarter totaled 41.8 million or 47 basis points of total loans, and reflected the write-off of two previously disclosed airline leases that had migrated to non-performing status last quarter.

Excluding these airline losses, which totaled 26 million, the net charge-off ratio would have been 17 basis points which continues to reflect the general strength of the economy and more specifically, the quality of AmSouth's loan portfolio.

Of the 26 million related to airline leases, 21 million was included in the allowance at year end.

The loan loss provision in the first quarter totaled $27 million resulting from several factors including loan growth and others as dictated by our allowance methodology.

These amounts after net charge-offs yielded a first quarter ending allowance for loan losses of 352.2 million or an allowance to loans ratio of 96 basis points.

Non-performing assets decreased 22.6 million to 100.3 million at the end of the quarter producing a non-performing asset ratio of 27 basis points.

This decrease is directly related to the charge-off of the airline credits that we just mentioned.

We had less than $1 million of Katrina-related losses this quarter and we continue to believe the remaining loan loss reserve established in the third quarter of 2005 is adequate to cover our remaining losses related to Katrina, at which we anticipate will be more fully realized later in the year.

Now, turning to non-interest revenues.

Non-interest revenues totaled 219.7 million for the quarter, as compared to 216.9 million in the fourth quarter, which is a 5.1% annualized growth rate.

Service charges on deposit accounts which typically are seasonally lower in the first quarter of the year were virtually flat compared to the fourth quarter.

As compared to the same quarter last year service charges were up 10.1 million or 12%.

Trust income in the first quarter was higher by $410,000 or an annualized 7% growth rate over last quarter.

Revenue for investment services also showed renewed strength increasing 3.6 million in the first quarter which is a 79% annualized increase over fourth quarter levels, mainly attributable to higher sales of both variable and fixed-rate annuity products through our brokerage subsidiary and our branch platform.

An increase in commercial credit fee income of $1 million resulted from an increase in interest rates swap transactions facilitated for commercial customers, and also higher letter of credit fees during the quarter.

Interchange income was up 1.3% over the seasonally strong fourth quarter on an annualized basis or 17% versus the first quarter of last year.

An increase in the number of debit cards and higher usage of existing cards which both link to the free checking with CheckCard Rewards Program which we introduced in the third quarter of last year, continued to bolster the interchange income.

Included in other non-interest revenue was a $3.6 million net gain from the sale of three branches located in a non-metropolitan area of Northeast Mississippi.

Now as in past quarters and in the normal course of our business we constantly review and occasionally sell or consolidate branches in an effort to redirect resources from lower growth areas to high growth areas.

For example in this case, we have planned for later this year three new branches on the Mississippi Gulf coast, an area expected to experience rapid growth.

Total non-interest expenses for the first quarter were $330 million, which compares to fourth quarter expenses of 320.6 million and in the first quarter a year ago of 319.5 million.

As in past years personnel costs increased in the first quarter rising 10.1 million or 23% on an linked quarter annualized basis.

The increase was primarily due to seasonally higher payroll taxes, specifically FICA taxes, incentives and higher employee benefit costs.

The increase in benefit costs is primarily related to increased pension expense of approximately 2.7 million per quarter which we'll continue throughout the year.

Beginning with the second quarter personnel costs will also reflect stock compensation expense as calculated under SFAS 123R.

As we previously disclosed we expect these costs to be approximately $0.02 to $0.03 per share in 2006.

Current quarter expense also includes higher marketing costs of $5.7 million as compared to the fourth quarter, which is being used to support various aggressive marketing campaigns including a variety of offers aimed at establishing new customer relationships, increasing loan demand, and generating low-cost deposits.

Now we are intentionally spending a disproportionate amount of our marketing dollars during the first quarter of the year so we can realize as much revenue benefit as possible throughout 2006.

As expected professional fees return to more normal levels in the first quarter, decreasing 7.6 million compared to the fourth quarter as the implementation costs of our regulatory compliance efforts have abated.

Our efficiency ratio was 52.5% in the quarter.

Also as Dowd had mentioned in his opening remarks, we did repurchase 5 million shares of our stock during the quarter.

Now these shares were repurchased to prevent any earning solution that might occur in the year from the issuance of shares through various employee benefit plans.

In addition, we still consider our shares an attractive investment and may repurchase more of them in the future quarters as our growth in capital levels allow.

Now, I would like to take a moment to reiterate our earnings guidance for 2006.

We expect earnings per share for the year in the range of $2.11 to $2.17, including the impact of the adoption of Statement of Financial Accounting Standard No. 123R.

This statement includes, among other things, stock option expensing and is estimated to reduce earnings between $0.02 and $0.03 per share, which is included in the guidance just mentioned.

This earnings forecast generally assumes a stable economy, a moderately rising interest rate environment, and flat equity markets as well as these factors: Higher net interest income reflecting a relatively stable net interest margin, solid loan growth with disciplined pricing coupled with continued strong low-cost deposit growth, a continuation of strong underlying credit quality, steady growth in total non-interest revenues from current levels, and modest non-interest expense growth in the low to mid single-digits.

And Dowd that concludes my remarks.

Thank you, Al.

Before closing let me give you an update on our branch expansion program.

It would be an understatement to say how pleased we are to be back in the branching business.

As you know branching in the high growth markets, primarily in Florida, is a key element of our business plan.

This quarter we opened 15 branches, 12 of which were in Florida.

Our plan for all of 2006 calls for a total of 64 new branches to be opened and we expect 54 of those to be in Florida, mainly in markets where we already have an established presence.

We have had a great deal of experience in de novo branching over many years and at every step whether it be from site selection to grand opening our processes are well-designed, tested, and proven.

Consequently, we have extremely high expectations for this branching.

These planned openings combined with favorable growth trends in both loans and deposits that we experienced in the first quarter give us confidence as we begin this new year.

Our goal continues to be sustainable, quality earnings growth, higher profitability achieved through internal growth driven by the execution of the tactics under our strategic initiatives.

We believe that this combination of focus and execution will result in improved performance and higher returns for our shareholders as we look ahead.

That would concluded our remarks and why don't we open it up now for any questions.

[OPERATOR INSTRUCTIONS].

Your first question comes from Gary Townsend with Friedman, Billings, Ramsey.

Good afternoon, Dowd, how are you?

Hey, Gary, how are you?

I'm doing well, thank you.

Good.

Any update on the regulatory issues?

No.

We really have nothing new to report whatsoever.

But you're not too constrained?

No, absolutely not.

As you'll remember, I guess we -- back late last year made it known that we had gotten approval to proceed with building and opening the offices in the first quarter.

We have now gotten the second and the third quarter's offices approved and are moving forward.

And from our perspective, as I indicated in my remarks, we think we have complied with not just the letter but the spirit of the order and have an interest-leading, frankly, a BSA/AML Program in effect now at AmSouth.

Well what's wrong with those regulators?

How come they are not letting you out of the order there?

Now Gary, if you think I'm going to touch that on this call you are mistaken.

I understand.

Well, thank you very much for your time.

Thank you.

Your next question comes from Barry Cohen with Merrill Lynch.

Good afternoon, gentleman.

Thanks for taking the call.

Good afternoon.

Wondering if you could touch upon in a broader sense than just simply your company, the commercial real estate business and talk about the different portions of it in terms of both construction and straight-up commercial real estate?

We have been hearing a variety of different things, especially out of Florida.

Wanted to know if you could talk about pricing, terms and conditions, what you are seeing in the market that's causing you, if anything, concern?

And then I have a follow-up.

Okay.

I guess Barry let me say first of all as Al covered pretty thoroughly, we have what we would describe as a very granular book-of-business and with the primary portion of it being construction and with the average loan size being just under $750,000 I think it tells you how diversified it really is.

The biggest segment, a little over a fourth of that, is in single-family residential.

You come up from that, as Al said, condominium, retail, and multifamily.

The thing that our real estate people, frankly, year-in and year-out the hardest thing that they always tell us and then, of course, they have another record quarter like they did fourth quarter and again this quarter, is the fact that the payoffs come so fast.

And what we experienced last year and the more rates have increased, we have seen the payoffs slow down, but as rates started escalating in this recent 22-month cycle of increases, we were running hard just to catch up, and now that the payoffs had stopped ahead of time we're seeing the typical borrower in our portfolio stay in the portfolio until certificate of occupancy.

Their takeout is on the front end and the credit quality is just pristine.

I just can't say enough about that.

Now, again, I can only comment on the way AmSouth does that business with very experienced, first class builders and developers.

That said, I will tell you that even those people are pushing for structural differences and pricing difference today that we have not seen over the -- six months ago.

And so it's -- you can tell it's a changing business, but from our perspective we're still very comfortable with the profitability and the credit quality of what is going on our books.

Okay.

Maybe as a follow-up because there're -- you know, we have tried to take a look inside of the people who have reported so far certainly on a trend basis over the last couple of quarters, the commercial real estate and construction books, and trying to understand better how the yields are generated in that business.

And there seems to be -- and I'm not including you in this category -- some discrepancies between a few players in the market and the broad market.

How much of your business is in the mezzanine portion of the lending pool or even what is generally characterized as the "B" tranche?

Well, that's a pretty easy question for me to answer; zero.

Okay.

We don't have any in the "B" tranche nor do we have any mezzanine.

Again, ours is with first rate, "A" level developers, and I think that's a different perspective and a different way to do it, but that is no change in business, that is the way we have operated commercial real estate for many, many years here and it has proven very successful for us.

Well, again, I appreciate your candor and your willingness to take the question.

Thank you.

Absolutely.

Thank you.

Operator?

Your next question comes from David Stumpf with A.G. Edwards.

Good afternoon.

Hey, David.

Not to beat a dead horse but to dig a -- take a slight different angle on the real estate.

Obviously regulators have begun to rattle the savors a little bit with regard to real estate, and I know community banks and things like that are probably under a little more pressure in terms of some of these capital requirements and exposure discipline they are putting on them.

But just in terms of them being focused on it, obviously they have some concerns.

Are there any specific areas, Dowd, where you all -- I know you mentioned office and hotel -- are there any other areas that you all feel a little nervous about that you've pulled back on or anything in that regard -- with regard -- especially in Florida?

Okay, David, I guess I would say one, that we're not concerned.

Probably 15% of our portfolio is in condominium lending, but generally the type builders and the type projects we're involved with are the type that have not allowed the so-called flipping that you read about.

They are where the builder starts a project, those that they are usually presold 100% before construction starts with generally 20% down.

Now that said, I will tell you that anecdotally from our people in Florida and when down there looking, you can see the number of units for sale in Florida and the length of time on the market has lengthened substantially in the past four or five months.

Right.

It took a while to see it after the hurricane season, but you can indeed tell it when you are in those markets.

Okay.

And I think that in itself is what has caused the concern.

And is it statewide or is there -- obviously we read about Miami a lot, but I would assume some of the other markets are seeing a little of that as well, it's not just Miami?

We're seeing that in several places.

I mean Miami, we would see in north -- a few places in Northwest Florida where there's been rapid growth.

Not only are -- some properties own the market longer, we've obviously seen what was double-digit price appreciation, people were accepting as a given, if not every year, every six to eight months, that stopped.

You are seeing prices stabilize.

We're not seeing declines in pricing, but we are seeing a stop to increases in pricing.

Yes.

Al, welcome back.

Thank you, Dave.

You gave some data during your remarks regarding growth rates for Florida.

I think you gave deposits, non-interest-bearing deposits and loan growth.

Was that year-over-year -- can you repeat those for me if you can find them?

And were those year-over-year growth rates or annualized link quarter?

Let me get List to call you on that.

I want to --.

Okay.

-- give you the exact number you're looking for.

Okay.

Thanks a lot.

Thanks.

Thanks David.

Your next question comes from Christopher Marinac with FIG Partners.

Hi, guys.

Good afternoon.

Hey, Chris.

Hey, Chris.

I wanted to ask you about deposit pricing and are there any particular initiatives that you think can be successful to get core deposits and --?

Well, Chris, we are looking at deposits constantly and pricing by market.

What we're trying to do is make sure that we stay appropriately priced for every market.

We have several initiatives currently underway within the company to raise low-cost deposits throughout our whole footprint.

Obviously there is a lot of emphasis on Florida because of the growth potential there.

But one of the things that we said in there is deposit growth -- low-cost deposit growth is a major part of every geography and every line of business's initiatives here in the Company right now.

And has been for any period of time.

Are there any markets that are stronger than others as you break out what we just seen here in this last quarter?

I didn't hear the last part of the question, Chris.

Could you --?

Are there any markets that are stronger than others as we delve into what was just reported for Q1?

Well, all of Florida is continuing to be -- to grow very, very strong.

And we do have growth in other parts, South Alabama, South Louisiana has grown very well.

We have had growth throughout the whole Company, but I would think those two areas have exhibited the strongest growth.

Okay.

And then last question, are you seeing any signs of non-bank players who are kind of encroaching on your lending turf that's creating some paydowns and things leading back to work in terms of new loans?

Not really.

Not that much because we're dealing more in the middle market lending areas and commercial real estate, as Dowd has described it with very strong builders that we have longstanding relationships with.

And I don't think we're getting -- encouragement into those areas by non-banks.

Great, Al.

Thanks very much.

Sure.

Your next question comes from Heather Wolf with Merrill Lynch.

Hi, good afternoon.

Good afternoon, Heather.

I had just a couple of questions, a follow-up on the commercial real estate question.

Can you talk a little bit about your loan to values and debt servicing in those portfolios currently and maybe how they have been trending over the last few quarters?

Let me come back to you on that one.

List and I will get back with you on that and give you some more detail.

Okay, great.

And then also on the margin, I understand that the shorter day count helps as well as some of the growth in your low-cost and non-interest bearing deposits, was there anything else going on there that we should know about?

Nothing other than we are continuing to emphasize good loan pricing discipline within the Company and just trying to make sure that we raise the best combination of deposits and funding that we possibly can.

But no other nonrecurring items, no.

Okay.

And can you talk a little bit about maybe your expectations for deposit pricing competition of future quarters?

Well, we don't think it's going to lessen any.

We think it -- the need for deposits to fund loan growth is common to all banks right now.

But I will say this, in our footprint with many of the larger banks we do have very disciplined competitors in deposit pricing as a general rule.

There will be periodically banks that for whatever reason fits their balance sheet needs will go out and try to raise deposits at a rate that we might not be comfortable with, but as a general rule we think we can price reasonably throughout our whole footprint.

Okay.

Heather, one of the things that we said back almost two years ago, I guess May, when rates started increasing for the first time is internally we thought it was important that we not make the same mistake that many -- we and many banks made the last time there was a cycle of rate increases, and that is don't try and live off of the back of the depositors.

And so we have tried to have a correlation of passing through deposit pricing, which to Al's point is put as rates have gone up we're spending a lot of time now on the loan side trying to get the loan pricing up so that we can continue to be competitive on the deposit pricing, so that we don't see deposits outflow out of the bank because I think it took a long time to get a lot of consumer's confidence back in -- putting money back into banks.

Okay, great.

Thank you so much.

Your next question comes from Bob Patten with Morgan Keegan.

Hey, guys.

Hey, Bob.

Just following up on Heather's question, I mean everybody is de novo branching and if you just look at Florida market where 54 of your 64 branches are going to be -- you got Commerce, you got Colonial, you got Bank Atlantic, you got SunTrust -- everybody is putting branches on every corner and it's almost like we have seen this movie before.

And you said we've seen the cycles.

What are the warning signs when you look at -- we have gone too far?

I mean, the whole industry is doing the same strategy.

How do you differentiate from AmSouth?

Bob, I can tell you we have a very disciplined approach and a very well-rounded -- you have been through it as many of you on the call have, the whole cycle that goes from site selection to preopening, the six months prior to opening all the way through the first year of opening it, and we're still seeing 15 months or less breakeven on every new office we open.

And particularly in Florida, I understand there are a lot of people branching there.

There's a lot of competition there, but as long as we keep getting to your comment of, "When do we know it's a mistake?"

When we start getting growth rates that are not as indicative as they are now, that even though we're increasing our share, we're still growing substantially faster than the market share in Florida, which means we are obviously taking some of these customers away from others.

And so as long as we can get 10%, which is what it was in the first quarter, net household growth in the State of Florida issued, we're growing much faster than the markets we're in, which is a real positive to the way we're doing it.

And we think it actually drives everything from middle market to trust to private client to small business the more presence we have in those markets, not just consumer.

Any thought, since this is becoming such a well-adapted strategy in the industry, about posting same-store sales?

For branches under one year, over two years, so this way the market can see who is really good at de novo branching on a consistent basis.

We can track all of that.

Generally people want to know the profitability of them, but obviously they are a key driver of our new households and of our deposit growth and loan growth and those type things.

Those new offices in Florida contribute substantially to that.

Okay.

Just in terms of that you guys would consider metrics, such as, profitability and same-store sales?

We have all that now.

We don't talk about it.

I mean in detail people haven't really been as interested.

Everyone is more interested in the macro but you can just look at the macro numbers or we can break it out micro.

We track it branch by branch.

We can talk about it city by city.

And, Bob, if you are looking at it for comparison sake, one of the problems you run into is there's really no consistency in the way people construct their same-store sales numbers.

Every bank, every company is going to be a little bit different.

So it could create some non-comparable situations.

Yes, I guess that's why we're the analysts, huh?

Thanks, guys.

[OPERATOR INSTRUCTIONS].

Your next question comes from Jennifer Demba with SunTrust.

Good afternoon.

I was just wondering if you could elaborate on any further airline exposure you might have in your loan portfolio?

Sure.

We have less than $50 million of airline exposure, and I'm happy to say that well over half of that is investment grade levels.

So we feel very comfortable with what we have right now remaining.

Okay.

Thanks a lot.

Sure.

At this time there are no further questions.

Are there any closing remarks?

Operator, if there are no further questions, let me just thank everyone for joining us today.

We appreciate it and we'll stand adjourned.

Thank you.

Thank you.

This concludes today's conference call.

You may now disconnect.