1st United Bancorp Inc. (Florida) (FUBC) CEO Discusses Q2 2013 Results - Earnings Call Transcript

Jul.24.13 | About: 1st United (FUBC)

1st United Bancorp Inc. (Florida) (NASDAQ:FUBC)

Q2 2013 Earnings Conference Call

July 24, 2013 10:00 am ET


Warren S. Orlando – Chairman

Rudy E. Schupp – President and Chief Executive Officer

John Marino – Chief Financial Officer and Chief Operating Officer


Michael Rose – Raymond James

Frank Barlow – Keefe, Bruyette & Woods, Inc.

Peyton Green – Sterne Agee


Welcome to the Second Quarter Earnings Call. All participants will be in a listen-only mode until the question-and-answer session. (Operator Instructions) Today’s conference is being recorded. If you have any objection, please disconnect at this time.

I will now like to turn the call over to Mr. Warren Orlando, Chairman. Thank you, sir. You may begin.

Warren S. Orlando

Well, thank you, Melinda, and good morning, everyone. As Melinda said, I’m Warren Orlando, Chairman of 1st United. And I want to welcome you to our conference call. I’m joined today by Rudy Schupp, our Chief Executive Officer, and John Marino, our President and Chief Financial Officer. At the conclusion of our comments this morning, we will ask Melinda to set up a queue for your questions. And endeavor to conclude the meeting by no later than 11 O'Clock.

Today’s conference call is to review our second quarter earnings results and update you on the status of the company. Let me read this forward-looking statement, if I may. Of course, we need to disclose that we will be offering you more than just the historical perspective on 1st United today, and what we will discuss will include forward-looking statements, including statements about future results.

These statements are subject to uncertainties and risks. Actual results may differ materially from projections and could be affected by a variety of factors, including factors beyond our control. For a discussion of some of these factors, we refer you specifically to our SEC Form 10-K for the fiscal year ended December 31, 2012, and Form 10-Q for the period ending June 30, 2013. Forward-looking statements discuss today speak only as of today and we assume no obligation to update forward-looking statements or the reasons why actual results could differ. You can find a copy of our Form 10-K and 10-Q on the Investor Relations section of our website, 1stunitedbankfl.com.

So let me start this morning with a general overview of the quarter. On, July 1, 2013, we successfully closed our acquisition of Enterprise Bancorp, Inc., and its wholly owned subsidiary the Enterprise Bank. We’re all very excited on how this accretive transaction further leverages our balance sheet and increases the earning assets of the company. Rudy and John will provide more details on this important transaction for us in a short while.

1st United is currently now $1.7 billion asset enterprise. And subsequent to the integration of enterprise, we’ll operator through a strategically placed 23-office networks, stretching from Downtown Miami to Vero Beach and then from the Gulf Coast to the key central Florida markets of Tampa and Orlando. The merger with Enterprise is an in-market acquisition and will expand our footprint in the Palm Beach County market.

Also, in addition to discussing Enterprise, we want to tell you about a number of important developments at 1st United during the second quarter, which include our earnings during the quarter, our improving classified assets, the announcement of our second quarter dividend, and our overall sense of continued improving banking conditions in Florida.

So now let me turn it over to Rudy Schupp, our Chief Executive Officer for some additional overview remarks. Rudy?

Rudy E. Schupp

Thanks, Warren, and good morning, everyone, for the quarter ended June 30, we reported net income of $1.8 million or $0.05 per share. We had a good quarter and our focus continues to be to drive earnings per share through leveraging balance sheet, leveraging capital or excess capital, and of course, reducing overall expenses and reducing our loan revisioning.

Our acquisition of Enterprise during the call to meet a number of these (inaudible) are quite a little bit later and John is going to expand on the financial results in a moment.

So let me take a few minutes on the management of the company, first, the Enterprise acquisition, which is a big deal for us here. However in the throat of the integration right now and the technical IT interrogation, of course to take place in September.

But on July 1, with the acquisition of Enterprise took place and we added approximately $160 million of performing loans. Our pre-purchase accounting yield for that portfolio is just over 5%, because of their very unique structure, which we talk to the number of you about, we do not take any non-performing or substandard loans or other real estate owned, so very interesting transaction.

Our total deposits acquired were approximately $177 million with a pre-purchase accounting cost of funds of about 53 basis points. Of the total deposits, so even now, because we got ourselves in growing affordable deposit base, the core deposit base is very affordable. Their cost of funds today is about 53 basis points north of our supplement set down over time. Of the total deposits acquired, again, 15% I’m just saying, but only 21% were time deposits, so an interesting deposit for us.

From a cost structure perspective, we will just add one net new banking center and only 13 employees from the former enterprise, including two seasoned loan officers, which we are excited about, help us to fortify our Northern Palm Beach County franchise. So a very efficient transaction when we closed – after we closed those two offices.

But we believe this transaction will be immediately accretive to earnings after absorbing the one-time reorg expenses associated with the anticipated conversion in September and the closure of the two offices I just mentioned. A reminder, that the following discussion about the second quarter does not include the impact of our acquisition of Enterprise, since we closed it on July 1, 2013.

A little bit more on deposits portfolios, mix, and flows that the banker teams have been looking out here at 1st United. Our core depository from our perspective continues to remain among the finest in Florida and in the nation. Of our $1.29 billion deposit portfolio at June 30, approximately 35% is comprised of non-interest bearing deposits.

Total deposits remain relatively consistent from March 31, 2013 as we continue to manage the level of deposit. The quality of our core deposits has resulted in a cost of funds of just 27 basis points for the quarter ended June 30, compared to 31 basis points for the quarter ending March 31. Our low cost of funds helps drive our current and historically strong core margin of over 4%, and John, I’ll tell you, I just don’t remember for bank of our scale seeing this level of low cost of funds.

John Marino

Well, and I think that’s part of the story of the company really that the reality is as we continue to grow low cost deposits, our non-interest bearing deposits grew over $20 million from December to June, which is really driving – continues to drive that low cost of fund, even in the market that we’re kind of living and now we are seeing growth in our transaction accounts.

Rudy E. Schupp

That’s impressive with the equity markets doing what they’re doing and so on.

John Marino

Well, thanks. And let me talk about occupancy, it not slowed a bit. And as a result of our ongoing strategy of evaluating our cost structure, which as you know, we’ve met with you now for almost 2 years of our austerity program here.

We made the decision to additionally close our New Port Richey Banking Center in Pasco County, that would be in the sort of Gulf Coast area, Central Florida West if you will. We couldn’t repudiate that lease in the current text of our acquisition of the sale of Old Harbor Bank. Until this point in time, we had accented to grow the office, but we feel that the market is now consistent with our book of branded banking.

So the New Port Richey deposit office has about $23.8 million only 7% of which are non-interest bearing. We determine that the location was simply not profitable. We now have made the decisions to take a charge of approximately $404,000 in this quarter, while for lease termination, fixed asset running off and (inaudible). We anticipate on the good side annualized cost savings of approximately $400,000 after the branch closures, which should be around about 4 to 7 this year.

And so you know, as investors we continue to look at rationalizing our cost of doing business throughout the company. There’s a story that we look forward of telling here this quarter, and in our investor conferences that begin next week.

New loan production among portfolios, I’ll talk a little bit about that. Since December 31, 2012, our total loan portfolio increased by $21.5 million, despite fierce payoffs during the period, where the second quarter gross loans grew about $7 million, our second quarter – it was really our second consecutive quarter where we had net loan growth overcoming because of loss share of loan and legacy loans, pay downs, payoffs and resolutions, transfers and so on.

During the second quarter, we closed $77.2 million in fresh new loans, of which $56.1 million funded in addition to advances on existing loan portfolio of about $20.9 million. The total pipeline as of June 30, 2013 was $113.7 million, which compared to $92 million as of March 31, 2013. Included in this $113 million in loans in the pipeline are $43.7 million of loans that’s been approved and are pending closing. Indeed, we saw frankly a number of the loans that we expected to close in Q2 bleed into July. So we’re certainly getting off to a good start here in Q3.

Of the pipeline of $92.4 million at March 31, 2013 about $50 million of those loans were approved pending closing just by comparison. Loan production has been increasing due to improving markets; our expansion in Central Florida, and the additions we continue to make in new loan officers and business bankers.

Our new loan production was partially offset again by resolutions, payoffs, principal reductions; transfers to ORE of non-performing loans of approximately in total $70 million are comprised of $20.8 million in covered loans and about $49.3 million in uncovered loans for the quarter. And John, maybe you take a second and breakdown the uncovered portfolio reduction.

John Marino

Sure. And actually of the $49 million, we still saw some – most of that related to some fierce payoffs. We had about $28 million of the $49 million just payoffs on our existing loans. The other $21 million really were just payments on our $900 million plus portfolio. So again, we’re still seeing as a company fierce payoffs not only on the uncovered, the covered portfolio, but our uncovered portfolio as well.

Rudy E. Schupp

And I would, probably would comment to you that from a competitive perspective, we think we’re running all over it, whenever we have a situation where payoffs maybe impending. What we have found is, we have a number of our clients who simply sold the business, even then we exempt to win the financing for the net new company with the purchase. So we feel pretty good about our competitive position.

Let me talk about loan classifications for a second. We’re continuing to see improvement in classified and deferred assets. During the quarter, we again saw a decrease in classified loans, which include the substandard and special mentioned categories, are comprised of $8.5 million or reducing by 11.6%. In addition, total non-performing assets reflected a decrease by approximate $2.9 million since March 31, 2013.

Total loans pass due; let’s talk about the pass dues for a moment. 30 to 89 days, let’s say also decreased by approximate $1.1 million from $3.9 million at March 31, 2013 to $2.8 million at June 30. So in all categories we continue to achieve reductions in our classified and challenged assets. We’re very pleased because 1st United as we continue to look at in the state of Florida, problem asset ratios continue to be well below Florida bank averages.

We continue to expect to view – you could see slight ups and downs in NPA statistics between quarters, on an overall expectation that we’re going to continue to manage through a low legacy non-performing asset ratio. Enjoy frankly strong credit safety through our loss share agreements for years to come and when compared to loss shares, let’s emphasize that approximately 32% of our entire loan portfolios represented by covered assets under loss share agreements with the FDIC.

So let me take it to John, and talk more in depth about our financial profile, and Warren and I’ll come back.

John Marino

Thanks, Rudy. First I’d like to talk a little bit more about the Enterprise transaction that we closed on July 1. The total consolidation that we paid the Enterprise shareholders was approximately $45.6 million. Now included in that $45.6 million was about $20.5 million former Enterprise non-performing loans, substandard loans, and certain other loans that we had identified.

Also part of the consideration was approximately $1.7 million or the total amount of the Enterprise other real estate as of June 30. In addition, non-investment grade and other investments of about $18.3 million were paid and included in that $18.3 million were $6 million of investments that were actually non-performing.

So the actual cash on top of the assets that we basically gave is consideration, was just over $5 million for the transaction. When it was offset and done, we paid about 1.2 times tangible book value. And again, we acquired no non-performing assets or substandard loans in the transaction.

At this point, you can imagine we’re very, very early in the process of determining the valuation of the assets and liabilities required, but right now, we’re estimating about $9.5 million of goodwill in the transactions, and we’re estimating and up to a three year earn back on that goodwill.

We did note that we’ll have one-time integration related costs booked up to $1.8 million that will come through in the third quarter, relates to the branch consolidations on some people, severance, those kind of things. But again, with all happened in the third quarter, we don’t actually anticipate any of that leading into the fourth quarter. Our integration or conversion is happening on September 27, is that right, Rudy? September 27. And that’s for the quarter.

For the quarter ended June 30, we did report net income of $1.8 million or $0.05 per share, and those earnings were impacted close by $1.3 million loan provision. Our net interest margin for the quarter ended June 30 was a strong 5.79% compared to 5.09% for the quarter ended March 31, 2013.

Excluding the $5.4 million of accretion during the quarter ended June 30 related to the changes in cash flows and the disposition of assets acquired in the FDIC, since the transaction across the discounted purchase price. Our margin was at 4.2%, and that 4.2% compares to the 4.1% we had for the quarter ending March 31, 2013.

During the quarter, we had other real estate gains of approximately $400,000 and assets with a carrying value of $2.3 million. Most of those gains really related to covered assets for the quarter.

As a result of the increased estimated cash flows received on loss of shared assets, and the $5.4 million of income that we recorded, we also recorded an approximately $5.2 million charge in other income, and that includes about 312,000 charge related to other real estate gain, for the reduction in the FDIC receivable or the indemnification asset for the quarter ended June 30. And in a minute I’ll talk a little bit about where our indemnification asset stands at the end of the June.

During the quarter ended June 30, we did sell about $22 million in securities and realized net gains of about 609,000. We also took the opportunity to purchase about $94 million in securities, which is partially offset by the sales payoffs and maturities.

At June 30, the company still has about $100 million of liquidity earning just 25 basis points. As we indicated in previous quarters, we continue to work on expense reductions. We continue to evaluate areas to prove efficiencies in operations, and has expanded evaluation to various operational processes. The closing of the New Port Richey Banking Center is an example. We anticipate seeing additional positive impacts throughout 2013 and beyond related to these efforts.

Total other real estate at June 30, 2013 was $18.1 million, which compares to a little over $19 million at March 31. $18 million or $18.1 million includes $10.5 million in assets covered by loss share. And at June 30, we were about $1.5 million of other real estate under contract, which we do not anticipate any further losses and expect those to close sometime in the third quarter of 2013.

Total non-performing assets decreased about $3 million, from $42.7 million at March 31 to $39.7 million at June 30. Our overall NPA ratio is about 2.57% at June 30.

Now, if you exclude out the covered loans, our NPA ratio drops about 1.2%, which compares to March 31. At June 30, our performing troubled debt restructurings were about $19.5 million as compared to about $19 million at March 31, and as we said modifications are evaluated on a loan-by-loan basis, and we expect that the balance of TDRs will go up and down between quarters, as we continue to see throughout every quarter.

Our overall performing TDRs yield an average 4.42%. And as I indicated, we took a loan provisioning in the quarter of about $1.3 million, but half related primarily to charge-offs, changes in appraisals and changes in cash flows on the loans. The other half related to a performing loan that is dropped down into the substandard classification during the quarter, and we put on a specific reserve, an impaired reserve of about $700,000.

During the quarter, we did record charge-offs of about $760,000. Our loss as a percentage of non-covered loans was about 1.6% at June 30, and compares to a similar number at March 31. We continue to see an overall reduction in cost side assets. During the quarter, we saw $8.5 million reduction in classified loans, when we compare it to March 31.

Total special mention substandard loans at June 30 was $64.8 million, and that compares to $73.4 million at March 31 and $91.3 million at December 31. So the trend is certainly gone the right way as it relates to our classified assets. Now, our indemnification asset is less than 12% of the book value of our covered assets at June 30. We had about $12 million of cash pay downs on our indemnification asset since year end, about six of that happened in the second quarter here. Consistent with past practices, we evaluate the flexibility of our indemnification asset on a quarterly basis, and we’ll continue to monitor as you would expect.

At June 30, 1st United had a leverage ratio of 11.3%, risk-based capital ratio of 20%, and Tier 1 capital of about 19%. Our consolidated leverage ratio of 11.3% is generous and is important obviously as we continue to look at acquisitions. We do estimate on a pro forma basis with the Enterprise acquisition, our leverage ratio will be just under 10% on a pro forma basis. We continue to believe there has to be a buffer about well capitalized levels given the regulatory and other risks that exist.

Our book value and tangible book value at June 30, our book value was $6.78, our tangible book was $4.99. This morning we’re actually hit late last. For the late last night, we did declare our second quarterly dividend of $0.1 per share, which is anticipated to be paid this August.

With that, again, I will turn it back over to you.

Rudy E. Schupp

Yeah, I would like to highlight a few things as takeaways for our work in the second quarter. Obviously closing the Enterprise that acquisition was a big endeavor for us. $160 million in performing loans, low-cost funding source, our net one location that will pickup 30 employees that we will find over from the unit costs make this transaction very accretive after the one-time merger expenses again estimated to be up $1.8 million that will take you in Q3. What we are going to be excited about in our conferences and beyond is to talk with you not only about the top line revenue implications here, but also about what we see as the efficiency and our cost attributes for this unusual structure for the enterprise acquisition.

Second, I would say our pre-tax earnings for the quarter of $2.8 million was included a $1.3 million loan provision. We would tell you that this number compares to the 650,000 loan provision that we incurred in the first quarter, but is above what we would expect and continue to expect on an ongoing basis. So we say that to you, because we believe that should be the case.

Our net interest margin of 5.8% is, of course, extraordinary. When we look at our core margin at 4.2%, exclude the impact of the resolution of purchase loan is above their discounted carrying value that for the second quarter as well ending June 30, 2013.

So our margin continues to be strong. We were successful during the quarter in producing net organic growth within our loan portfolio. All of you know that one of the few curses of buying several field banks in their process of offset by its many blessings is that, you would be at the crush of resolutions and payoffs that you must get and the lost share asset portfolio.

So the net growth that we’ve achieved now and saw after second quarter consecutively that we’ve seen it, we have a good outlook going forward. Our pipeline remains strong at a $113 million at June 30, with over $44 million approved in pending closing going into the third quarter.

Next, I would say that despite the period of persistent low interest rates that it looks like we will experience with sometime to go. We have an ongoing projects continue to reduce operating expenses and enhance earnings power to ensure that we’re positioned as well for the future. Our priorities for fiscal 2013 of the balance of it include prudent, but strong net growth and the loan portfolio it’s all about top line revenue and controlling expenses, also, opportunities to leverage our excess capital, excess cash flow liquidity, all we think will yield the kinds of results that we are looking for here in 1st United.

So in summary we believe that the state of banking in Florida is improving and we particularly like 1st United’s position and strength among the small handful of $1 billion plus for our headquartered publicly held banks. That’s a one just to ramp up.

Warren S. Orlando

Thanks, Rudy. Yeah, just as I’ve commented on in the past, let me just reiterate the fact that we are at 1st United committed to and focused on increasing earnings, continuing to grow, and acquire sensibly, maintaining our regulatory reputation, which we value greatly for, it has enabled us to participate in the successful M&A activity here in Florida. And we always focus on safety and soundness, which as a result will hopefully elevate our franchise value for our shareholders.

So let me thank you for joining and appreciate your support of and interest in 1st United. And now Melinda, we are ready for some questions.

Question-and-Answer Session


We will now begin the question-and-answer session. (Operator instructions) One moment please for the first question. Your first question comes from Michael Rose, Raymond James. Your line is open.

Michael Rose – Raymond James

Hey, good morning, guys. How are you?

Rudy E. Schupp

Good morning, Mike.

Warren S. Orlando

Good morning, Michael.

Michael Rose – Raymond James

Hey, a lot of conference calls this morning, so I got on a little bit late. But can you give us an update on where your loan pipeline stood at the end of the quarter if I’m remembering correctly, I think the pipeline was at a about a $186 million at the end of the first quarter and obviously you had some decent growth this time around, so just want to get an update.

John Marino

Yeah, the pipeline Michael, at the end of Q2 was about $113 million, where $44 million approved and pending closing going into Q3. We had a number of loans that are just, for customer purposes did not close in Q2, and yeah, we still had net growth over pay downs, payoffs, transfers, and so on for the quarter. So we feel pretty encouraged going into the quarter with that kind of pipeline, those kinds of levels of approvals and in candidly of every expectation that we will have a very important quarter here in Q3 our loan production.

Warren S. Orlando

Michael, it compare to – we’re actually $93 million in the pipeline as of the end of the first quarter.

Michael Rose – Raymond James

Okay, that’s helpful. And then, obviously with the Enterprise deal, so just recently being closed, and I just want to get your thoughts on future MA opportunities from here. Are you starting to see with the rise in interest rates that we had at the end of last quarter, some of the small banks little stressed out about the securities portfolio, the impact on book value and earnings as we move forward from there. Is that kind of the catalyst as we move forward as it relates to future M&A and just kind of what you are seeing?

Rudy E. Schupp

Yeah, I mean, in the long time and I guess a couple of things to say, and just to say, with Enterprise we worked so hard on that, because with no shares issued as you know and consideration in buying the Enterprise, that has incredible attributes for us and for the shareholders most importantly, because it will drop down, I’d love to thank, we love the bank, that we could get some high cash content consideration transactions done in the future for those similar attributes.

Having said that, we’re consistently looking Michael, and we probably do as much diligence as the most active of banks are looking at. The community banks that are within our footprint is our focus. It’s interesting to us when we look Basel III for example, I think you know the top corrective action thresholds were elevated to a level that will capture institutions that were weakening the kind of capital, but let’s just say not as we can go continuing around 3% and 3.5%, let’s say Tier 1.

So we see opportunities there. We continue to look and talk with banks. Enterprise is a good example of the company that we talked with well over a year ago and we’ve returned to with our sort of creative idea as a way to get a merger done. So we both look at net new opportunities, we tend to dig out very few folks bring us any opportunities. And so we tend to dig them out, as well as new ideas.

John Marino

The other thing I think I would add is, we still believe we got enough capital in our cash deal of $200 million to $250 million and still has plenty of capital buffer as a company.

Warren S. Orlando

And yes, just one further comment, rest assured as we’ve done in the past, we will ensure that we don’t do a transaction that doesn’t make sense and that isn’t decretive to the company.

Michael Rose – Raymond James

Okay. And just one follow-up if I can with respect to loan pipeline, I think you said it was $113 million, how much of that is in kind of the Tampa Greater Sanford area versus kind of your markets? Thanks.

John Marino

Yeah. You bet of the $113 million, I don’t have a pipeline in front of me, but my recollection on that it’s about $40 million. That is in the – what we call our Gulf Coast, Tampa regions if you will, and Central Florida as a whole, it brings that up closer to $60 million. so central Florida has become very important to us in terms of new loan generation. Great question.

Michael Rose – Raymond James

Great. thanks for taking my questions, guys.

John Marino

Thanks, Michael.


The next question is from Frank Barlow, KBW. Your line is open.

Frank Barlow – Keefe, Bruyette & Woods, Inc.

Hi, guys and thanks for taking my questions this morning. First is on the NIM outlook. The NIM is remained remarkably stable over the last few quarters. Now I was curious if you guys could give me an update on your outlook for that core NIM?

John Marino

Well, one comment, we don’t necessarily give projections for the future, but because of company has had so much liquidity earning just 25 basis points, and as we continue to deploy that liquidity, that’s really continuing to strengthen our margin despite what’s obviously going on in the marketplace. So I think Rudy talked out $21 million of loan growth for the first half of the year. well, if you take that $21 million, and get rid of the 25 basis points, we were running on it, and the 500 basis points we give or take, we’re running on that. It continues to shore up the margins. Similarly, we deployed some money on the investment side of the house as well. we think we should see, we gave you a little bit of the numbers on enterprise, and again, that should continue to allow our margin to show off. So though we’re not going to predict out what our margin is going to be in the next few quarters, we still see some positive things in our balance sheet that are helping stabilize it.

Rudy E. Schupp

And we would comment again that, as the $160 million of fresh home loans coming from Enterprise as pretty first kind of adjustment of where our quoted average coupon was about 5%, which is a positive again to our go-forward margin.

Frank Barlow – Keefe, Bruyette & Woods, Inc.

Okay. And then as far as the securities purchases in the quarter, can you talk a little bit about those, and maybe what the average duration of the entire securities book is?

Warren S. Orlando

Sure. Most of what we’ve bought historically are obviously agency securities. They tend be mortgage backed. Our duration is about 4.5 to 5, our latest duration now would be on kind of the stretch out on the interest rates, it’s probably about 5 years right now. The weighted average life is under that at probably 4.5 or 4.4, that’s a give or take numbers as it relates to our portfolio. We obviously are continuing to get decent pay downs on our investment portfolio every month.

Frank Barlow – Keefe, Bruyette & Woods, Inc.



(Operator Instructions) The next questions from Peyton Green, Sterne Agee. Your line is open.

Peyton Green – Sterne Agee

Great. Thank you very much. I was just wondering, Rudy, if you could talk maybe a little bit, you mentioned that about $160 million of performing loans at 5% would come on, what do you think the deposit side will look like given the consolidation conversion, that’s going to happen, and should we assume that you use cash or your securities portfolio to fund any gap?

Rudy E. Schupp

Well it’s kind of interesting. The deposit portfolio is of course larger than the loan book, a) second, in the [transparent] consolidation it’s kind of interesting. We’re actually closing our office in North Palm Beach, and we’re closing Enterprise’s office that is if you will in the region about 10 miles away.

And so those are the two offices that are being closed. So from the perspective of our book of business in our North Palm office, which is in excess of – it’s worth $120 million office, we expect 100% retention of that book, and we move that client base up the road to Enterprise’s main office, which is again in the same trade area. So we would expect a retention there.

The Enterprise office that we’re moving into is also about $120 million office, in that office we have reason to believe that we’ll have strong retention of that book of business and we’ve been very careful to work with those clients ahead of time and to retain the right people in the consolidated office.

The office that we’re closing of Enterprise is, which is again the one which is about 10 miles away, plus one that is really a time deposit base of deposits. And we will – two things will happen; one we’re closing it, we don’t while it’s time deposit base, we will expect to have their maturity to lose much of that book of business, which we want to lose, that approximates some $30 million in deposits of high cost deposits now. What’s interesting for us, Peyton is, we thought that would be the case over in the sales of Harbor Bank acquisition and we found that those customers’ series of perceptions were that they wanted to say with us, and they accepted our market rates, which are well – are actually below middle when we shop competitors from Miami-Dade, Central Florida.

But our expectation and our goal is that we’ll in large part consistent with the office that we’re closing of Enterprise’s some 10 miles away. The Jupiter office of theirs which is really the net new office in a sense to us that we retain gets us into a market that we wanted to be, and we would expect retention of that book of business.

So all in, we would end up with, we would think at the end of the day, in aggregate, bulk of deposits from what we think of is enterprise today that is some $30 million or more smaller, which would be a good thing.

John Marino

Yeah, and we also have gotten or we also received about $40 million of cash from enterprise as well to kind of round up the balance sheet for the company. So any run off, but the rest will be funded by again the 25 basis point money that we have.

Peyton Green – Sterne Agee

All right, and then I think you mentioned, so one net office, 13 net employees, what would you expect that the overall expense burden from operational and pro forma basis to be on a quarterly basis?

John Marino

I think, that’s a good question, I think that’s probably a question where we’re not going to answer, because you know how we do, we don’t necessarily give projections out. But when you think about 13 employees, when you think about one location, I think you can get to that math. In our goal, so in terms of a statistic wise straight out core operating expenses to average sales were benchmarking ourselves against the better performers nationally a point north and say (inaudible). Hence, our plan is to be, have that operating expense ratio to be consistent with the better performers in the industry. And we think we can get a long way toward that a year or so.

Rudy E. Schupp

And enterprise is going to be a significant feature of that thing.

Peyton Green – Sterne Agee

Okay, and then maybe just one last follow-up on that, out of 13, how many are true bankers versus branch supports there?

Rudy E. Schupp

Yeah, really there is two lenders that were high performance lenders. We had, you know how else to put this, but we had hired a couple of other lenders from this bank, which became a little bit of a tough social issue this year when we were trying to buy them. So arguably, we have about four lenders, but really of the count of 13, two in our, excuse me, three in our minds are what we consider lending capable consistent with our branded banking bankers while the rest are branch supports staff types, that will largely be retained in the two offices, the one we are consolidating into our office.

Peyton Green – Sterne Agee

Okay, great. Thank you very much.

Rudy E. Schupp

Thank you, Peyton.


And clearly, we are showing no questions there. (Operator Instructions) One moment please.

Rudy E. Schupp

Melinda, if there are no further questions, we are ready to wrap it up.


Thank you. We are showing no further questions.

Warren S. Orlando

Well, we thank you all for your participation. Have a great day.


Thank you for attending today’s conference. You may disconnect at this time.

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