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Sterling Financial Corporation (NASDAQ:STSA)

Q4 2013 Earnings Conference Call

January 31, 2014 11:00 AM ET

Executives

Rich Arnold – Vice President-Finance

J. Gregory Seibly – President and Chief Executive Officer

Patrick J. Rusnak – Chief Financial Officer

David S. Depillo – Executive Vice President and Vice Chairman

Ezra A. Eckhardt – Chief Operating Officer

Analysts

Brett Rabatin – Sterne, Agee & Leach, Inc.

Jeff A. Rulis – D. A. Davidson & Co.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Operator

Good morning, everyone and welcome to the Sterling Financial Corporation for the Fourth Quarter of 2013 Earnings Conference Call. Each of you will be on a listen-only mode for today’s presentation until the question-and-answer period at the end of the call. Instructions will be provided at the end of the prepared remarks for those who wish to ask any questions.

This conference call is also being audio webcast and be accessed on Sterling’s website at www.sterlingfinancialcorporation.com. Today’s conference is being recorded for replay. Additionally, the replay will be available at the Sterling’s website following the call.

I would now like to turn the call over to your host, Mr. Rich Arnold. Sir, you may begin.

Rich Arnold

Thank you. Good morning. Joining today’s call will be the following members of the management team at Sterling Financial Corporation. Our President and Chief Executive Officer, Greg Seibly and our Chief Financial Officer, Pat Rusnak. Additionally, we have some other team members available for the Q&A at the end of the call. President and Chief Operating Officer of Sterling Bank, Ezra Eckhardt; Vice Chairman, David DePillo; and Chief Credit Officer, Steve Hauschild.

I would like to caution participants that during the course of today’s conference call, management may make statements that are not historical facts regarding events or future financial performance of the company that are forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act, which management believes are benefit to shareholders.

These statements are subject to risks and uncertainties and actual results could differ materially due to certain risk factors including those set forth in our filings with the SEC. You should not place undue reliance on forward-looking statements. The company does not intend to correct or update any of the forward looking statements that we make today.

Specific risks that maybe discussed during the course of this presentation with respect to the pending merger of Sterling Financial Corporation and Umpqua Holdings Corporation include whether shareholders approve the merger, whether regulatory approvals are received the timing of closing, whether the companies have accurately predicted acquisition and consolidation expenses, the timing and amount of savings from consolidation, the expected earnings contributions of both companies and management’s ability to effectively integrate the companies.

Also this call should not be deemed to be an offering of securities or solicitation of votes by Sterling or Umpqua in connection with the proposed merger. Shareholders of both companies are urged to read the joint proxy statement perspectives that was mailed to shareholders on or about January 24, 2014 as it contains important information about Sterling, Umpqua, the merger and related matters.

The directors and executive officers of Sterling and Umpqua maybe deemed to be participants in the solicitation of proxies from their respective shareholders. Information regarding the participants and their security holdings can be found in each of Sterling's and Umpqua’s most recent proxy statements and certain current reports on Form 8-K filed with the SEC and the joint proxy statement perspectives that's been filed with the SEC.

All documents filed with the SEC are or will be available for free on the SEC, Sterling and Umpqua websites or it can be obtained by contacting Sterling or Umpqua’s Investor Relations department. For a more detailed description of certain factors that may cause the company’s actual results to be materially different, we refer you to the sections entitled forward-looking statements and risk factors in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission.

We’ll now begin with remarks from Greg and follow with comments from Pat and conclude by taking any questions you might have. Greg?

J. Gregory Seibly

Thanks Rich, good morning everybody. Thank you for joining us today for Sterling's fourth quarter 2013 earnings conference call. For the fourth quarter, we reported net income of $22.2 million or $0.35 a share; this compares to net income of $21 million or $0.33 a share for the prior quarter and net income of $20.9 million or $0.33 a share for the fourth quarter of 2012. For the 12 months ended December 31, 2013, we reported net income of $93.6 million or $1.48 a share compared to net income of $385.7 million for $6.14 per share for 2012.

You may recall that during 2012, we had an income tax benefit of $292 million or $4.65 per share. On a pretax basis, 2013 net income increased $37.8 million or 40% over 2012; this performance results from our continued focus on our key operating objectives, improving our deposit base, focusing on asset quality, growing loan balances, reducing operating expenses and actively managing capital.

I want to take just a few minutes to review the progress in each of these areas. Our first objective is to improve the mix and cost of our deposit base. We continue to make progress in lowering our funding costs during the quarter. The average deposit costs for the fourth quarter of 2013 were 31 basis points, down 4 basis points from the prior quarter and down 15 basis points from the comparable period a year ago; this marks the 28th consecutive quarter of funding costs reductions.

Our second objective is to complete the balance sheet de-risking process and improve asset quality. The NPA to asset ratio at year-end 2013 was 1.21%, down from 1.36% at the end of the prior quarter and down from 2.28% at the end of 2012.

Our third objective is to grow loan balances and originations. During the fourth quarter, portfolio originations totaled $606 million, up 8% compared to the same period a year ago. Annualized organic loan growth for the fourth quarter was 10%.

Our fourth objective is effective expense control. A great deal of focus during 2013 was on improving the future efficiency of the organization. The ratio of non-interest expense to average assets for the fourth quarter of 2013 was 3.31%, down from 3.42% the prior quarter and down from 3.77% for the fourth quarter of 2012. Finally, our fifth objective is to actively manage our capital.

During the year we completed three acquisitions, Borrego Springs Bank, the Puget Sound operations of Boston Private Bank & Trust, and Commerce National Bank, the last of which was completed on October 1, 2013. Combining these transactions added $547 million in new loans and augmented our presence in several key markets. We declared cash dividends of $0.95 per share during 2013, which included the $0.35 special dividend representing a 19% increase over 2012 and a 64% dividend payout ratio.

With the announcement of Umpqua merger we are precluded from paying additional special dividends, increasing the regular dividend rate or buying back stock. Regarding the merger, integration planning is going well and we believe we’re on pace to close some time in the second quarter of 2014. We have mailed out proxy statements for our Special Shareholders Meeting which will be held at 3:00 PM on February 25, 2014 at the Sterling headquarters in Spokane. It’s been a pleasure working with the leaders of our Umpqua through this process and we look forward to smooth transition once the merger is completed.

I will now turn the call over to Pat, who will walk you through the financials in additional detail.

Patrick J. Rusnak

Thanks Greg, and good morning. In few minutes to go through the financials and we’ll open up for questions.

Starting first with the income statements. The tax equivalent net interest margin for the fourth quarter of 2013 was 3.58% which was down 1 basis point from the prior quarter and up 9 basis points from the same period in 2012. The margin expansion from a year ago was principally due to the reduced deposit costs and improvement in the mix of earning assets due to loan growth and lower borrowing costs due to the Q4 2012 balance sheet repositioning. In comparing the fourth quarter of 2013 to the same period of 2012, average loans increased by $968 million despite a $174 million reduction in residential held-for-sale loans. Average MBS and investments declined by $298 million.

With respect to loan re-pricing during the fourth quarter of 2013, approximately $588 million of loans re-priced down by an average of 3 basis points. By comparison $564 million of loans re-priced down by an average of 35 basis points during the third quarter of 2013. And $742 million of loans re-priced down by an average of 33 basis points in the same period last year.

The yield on MBS was 2.61% for the fourth quarter of 2013 which is an increase of 15 basis points over the prior quarter, principally resulting from reduced premium amortization. The average cost of deposits for the fourth quarter of 2013 was 31 basis points, down 4 basis points from the prior quarter and down 15 basis points in the same period a year ago, reflecting continuing incremental improvement in the mix of deposits and CD re-pricing.

We’ve now recorded a provision of credit losses since the third quarter of 2012, for the fourth quarter of 2013 net charge offs were $904,000, compared to $1.2 million for the prior quarter and net recoveries of $566,000 for the fourth quarter of last year. At December 31, 2013, the total credit allowance stood at a $148 million or 1.99% of loans, compared to 2.08% at September 30, 2013 and 2.60% a year ago. Non-interest income for the fourth quarter of 2013 was $29 million, compared to $32 million for the third quarter and $31 million for the fourth quarter a year ago.

I would like to remind you that the non-interest income for the fourth quarter of 2012 includes some unusual items relating to the balance sheet repositioning, including a $33 million debt payment charge and $11 million gain on the sale of securities, in addition to an $8 million gain on a divestiture of our Montana branches. The largest variants in the non-interest income was residential mortgage banking operations which generated $9.5 million of revenue for the fourth quarter of 2013, compared to $13.5 million for the prior quarter and $28.2 million for the same period a year ago.

Total mortgage banking activity which is comprised of sold loans was the change in the warehouse of held-for-sale loans and lock commitments was $340 million and the associated margin was 2.03% for the fourth quarter of 2013, reductions of 28% and 28 basis points respectively, compared to the prior quarter. Actual volume of closed loans for the fourth quarter was $524 million, a decrease of 23% from the prior quarter; 64% were purchases, 36% were refinancing.

In addition to the reduction in non-interest revenue, the lower level of mortgage banking origination activity also had an adverse effect on the net interest margin due to a $52 million decline in the average balance of mortgage loans held for sale.

Loan servicing fees, which were included in mortgage banking operations revenue were $2.0 million for the fourth quarter of 2013, up $548,000 from the prior quarter; this increase was almost entirely due to a larger MSR valuation reserve release, $842,000 for the fourth quarter and $491,000 for the prior quarter. The $5.9 billion residential servicing portfolio had a carrying value of 88 basis points as of December 31, 2013 with the remaining valuation reserve of $73,000.

Mortgage banking operations revenue for the fourth quarter of 2013 also included a $475,000 negative valuation adjustment on a $28 million pool of residential mortgage loans accounted for its fair value. There was a positive adjustment of $265,000 in the prior quarter.

Total fees and service charge revenue for the fourth quarter were $16 million, about the same as the prior quarter and up 11% from the year ago period; the increase year-over-year principally due to acquisitions.

Total non-interest expense for the fourth quarter of 2013 was $84.4 million, down from $85.3 million for the prior quarter and $89.6 million for the same period a year ago.

Compensation and benefits expense was $46.2 million for the fourth quarter of 2013 compared to $47.1 million for the prior quarter and $49.5 million for the fourth quarter of last year.

Total other non-interest expense for the fourth quarter of 2013 was $21 million compared to $21 million for the prior quarter and $22 million for the same period a year ago. Included in this line item is merger-related expenses which were $3.6 million for the fourth quarter of 2013 substantially all related to the pending Umpqua merger.

Moving on to the balance sheet; during the fourth quarter of 2013, we surpassed $10 billion in total assets, crossing the threshold for the Durbin Amendment. We determined that staying below $10 billion as of year end was not feasible, given the pending transaction with Umpqua and other considerations.

Gross portfolio loans, which exclude loans held-for-sale ended the quarter at $7.5 billion, up $304 million for the quarter. Total portfolio originations for the fourth quarter of 2013 were $606 million, just up 3% over the prior quarter and up 8% over the fourth quarter of 2012.

We completed the Commerce National Bank transaction on October 1, which added approximately $165 million in loans. We also sold a $100 million of non-residential loans from the fourth quarter of 2013, including $85 million of multifamily loans of which $55 million classified as held-for-sale at the end of the prior quarter.

Adjusting for these components or annualized organic loan growth for the fourth quarter of 2013 was 10%. For the full year, organic loan growth was $725 million, or 12%.

Securities balances were relatively flat over the last 12 months as purchases nearly offset principal pay downs. The investment portfolio weighted average life at December 31, 2013 was approximately 4.8 years and effective duration, approximately 4%.

OREO balances continued to decline during the fourth quarter of 2013, ending the year $8 million compared to $17 million last quarter and $25 million a year ago. I’m pleased to report that with the benefit of 2020 high insight, my OREO sale crystal ball was of only by a couple of quarters as our largest single OREO property was finally sold during the fourth quarter. As of December 31, 2013, OREO portfolio was comprised of 23 properties carried at an average discount of 72% to the loan principal balance.

FHLB advances increased by $118 million during the fourth quarter in order to fund acquisitions and loan growth to replace the positive outflow associated with CD runoff.

Final two items I would like to cover are income taxes and capital. We recognized income tax expense of $7 million for the fourth quarter of 2013, represented an effective tax rate of 24%; this rate is below statutory rate due to permanent differences and other tax-exempt income items. We expect the effective tax rate to be more normalized for 2014 at approximately 34%.

Our net deferred tax asset at December 31, 2013 was $284 million and included $242 million of net operating loss and tax credit carry-forwards. Approximately $53 million of the DTA was included in Tier 1 capital at December 31, 2013.

With respect to capital, Tier 1 common equity ratio as of year-end was a 11.8%, down about 50 basis points from September 30, principally due to the Commerce National Bank acquisition. Consolidated leverage and total risk-based capital ratio as of December 31, 2013 were 11.6% and 16.1% respectively.

At this point, I will return the call to Greg for some closing comments before we open-up for questions.

J. Gregory Seibly

Thank you, Pat. The fourth quarter was another solid quarter for Sterling. I want to make sure that I take the time to acknowledge and thank all of our team members for their ongoing focus on our key objectives and all of their hard work and dedication, particularly as we have gone through this period of time where we are working on the pending Umpqua merger. I also want to emphasize for all of you that we will continue to focus on our key operating objectives until the merger with Umpqua is complete.

With that, operator, we are ready to take questions.

Question-and-Answer Session

Operator

All right, thank you. We will now begin the question-and-answer session (Operator Instructions) our first question is coming from Mr. Brett Rabatin. Sir, your line is opened.

Brett Rabatin – Sterne, Agee & Leach, Inc.

Hi guys, good morning.

J. Gregory Seibly

Good morning.

Brett Rabatin – Sterne, Agee & Leach, Inc.

I wanted to ask a little bit about the multifamily and C&I loan originations in the quarter. Can you give us any thoughts on the multifamily market and just obviously strong increase in the quarter, can you give us some thoughts around the multifamily platform going forward? And then just on the C&I originations, they were off a little bit, but pretty strong, kind of given in your in the midst of a merger, any thoughts on C&I as well?

J. Gregory Seibly

Yes sure Brett, it’s Greg. I am going to have Dave take that question.

David S. Depillo

Sure. The multifamily originations year-over-year increased by about $100 million, so the trajectory of growth is modest to upward even with what we would consider a significant competition in the market, and some pricing pressures that’s a core evidence over the last year. However, even with the recent rise in interest rates through the summer months, originations have maintained a very strong pace. Our expectations are that we will continue to grow modestly year-over-year against approximately $1 billion run rate that we have in the portfolio.

So the market is good. The majority of our originations are in the major metropolitan markets and it’s been a business plan of a cautious and moderate growth throughout the portfolio overtime. On the C&I side, the growth is off slightly we did have some significant pay downs that we experience typically during the fourth quarter, so that was a little bit of an aberration there.

However, our new originations year-over-year have doubled since the prior year. So we have a very strong momentum in the C&I area and approximately 50% of the total originations within C&I are non-real estate related. So we feel really good about the mix as well as the pace. So all things, considering the merger activities and some of the distractions there, people are staying extremely focused and we are continuing to gain market share in our major markets.

Brett Rabatin – Sterne, Agee & Leach, Inc.

Okay, that’s great color. The other thing I was curious about was the discount accretion; what was the number for that of remaining and I missed it if you gave out that how much was that on the fourth quarter?

Patrick J. Rusnak

Yes, good morning Brett. The discount accretion represent for the fourth quarter about 55 basis points. Just looking back a few quarters before that, it was 73 basis points for the third quarter, 88 basis points for the second quarter and 93 basis points for the first quarter. And so there was about $1.8 million of discount accretion for the fourth quarter.

Brett Rabatin – Sterne, Agee & Leach, Inc.

Okay. And then just one last one on mortgage banking; any thoughts on what the pipeline looks like currently and so how you think that things will shape-up this quarter with the merger pending?

Ezra A. Eckhardt

Hi, this is Ezra Eckhardt. So the pipeline I’d say is trending in line with the industry overall and Pat had referred to the slight decline. Of course this year, our originations were down 7.5% on a year-over-year basis. I think the pipeline is always softer in the first quarter and generally speaking, we are on track with the integration plan. So I don’t expect to see any surprises that would outpace the industry in anyway.

Brett Rabatin – Sterne, Agee & Leach, Inc.

Okay great, thanks for all the color.

Operator

All right, thank you. Our next question is coming from Mr. Jeff Rulis. Sir, your line is open.

Jeff A. Rulis – D. A. Davidson & Co.

Thanks, good morning.

David S. Depillo

Good morning Jeff.

Jeff A. Rulis – D. A. Davidson & Co.

I had a follow up on I guess it is just the sort of a hypothetical perhaps on crossing the $10 billion threshold, should Umpqua merger gets held up I guess, could you remind me what that impact is on fees in the second half of the year?

David S. Depillo

It’s on an annual basis about $6 million, so that would start, $0.5 million a month that would start in July. And of course, Umpqua is already subject to the Durbin Amendment. So whenever everything came together, it would be effective at the date of closing whenever that occurs.

Jeff A. Rulis – D. A. Davidson & Co.

Got it. And then perhaps a little more fluffy question I guess on, on just sort of the Southern California effort so far, in broad terms, I guess how would you gauge that your I guess the progress in that region as you know would you still call it sort of a fledgling operation with sort of years to build out or is it certainly maturing pretty quickly and if you could just provide any color about your progress down there?

J. Gregory Seibly

Jeff, it’s Greg, I will take that and then I’m going to turn it over to you David again for some comments, because he is the guy he is leading our efforts in that market. But I think generally, as we’ve shared with all of you, the whole strategy there was a buy and build strategy.

Obviously, that started with CNB which was completed in early part of the fourth quarter. I think our staffing efforts in terms of building out the commercial and depository teams that we needed to augment our multifamily operations in that market. From my perspective, are certainly on track, but David if you want to add a little bit more color from the market perspective that would be helpful also.

David S. Depillo

Certainly Greg, yes. The fact is that we do have our teams and officers in place now reflected in our fourth quarter numbers in commercial originations. The Southern California market approximately equal to our other major metro markets as far as loan originations, so it’s definitely hitting straight from that perspective.

On the depository side, we are still building out the teams and that takes a little bit longer, but we are receiving good flows outside of the business and our absorption of and we have stability now within that acquisition and are feeling that [indiscernible] start growing itself as well.

So I would say that it’s gone from fledgling to meaningful and will continue to gain momentum certainly during 2014.

J. Gregory Seibly

Jeff, last piece of color I live you with, it’s Greg again, is that clearly the Southern California market is a huge market and if you look at where our company was in that market just a year and a half ago or so before the Borrego transaction, before ultimately CNB and before the build-out of those commercial and depository teams were in a much better position there, but it’s a huge market and I think the issue of how big and what we want to do there overtime, particularly post Umpqua merger is something that I’m sure that there will be more to say about that over coming quarters, but where we sit today I would say that from my chair and from David’s chair, from Pat’s chair and others I think we feel very comfortable about the progress that’s been made.

Jeff A. Rulis – D. A. Davidson & Co.

Okay. And then may be one quick last one, sort of sustaining pretty good loan growth I guess post merger announcement, any sort of change or anything you are doing differently on the incentive to the lenders to keep them engaged, has that been a challenge or may be just some feedback as to how that has gone?

J. Gregory Seibly

Yes, so the first issue is we’re not going to talk specifically about actions and strategies that we’re taking into the key sense of merger. What I would tell you and it’s been something that our company, given the journey we’ve taken over the last 4.5 years while I have been the CEO of the company, is really built around communication, entrust, and teamwork.

And I think the announcement that was made on September 11, 2013 we’ve been embraced in exactly the same way, which is the best thing you can do in times of transition. It is to spend time with your team members, talk to them about what the future will entail and make sure that we’re staying focused externally, because in situations like this, I think for all of you, what you will see is organizations have a tendency to get very internally focused and forget the thing that keeps us all viable, which is focusing on our customers.

We’ve tried to continue to stay very focused around team members and customers and I think it’s working. The results clearly have shown up in the fourth quarter, the quarter with additional momentum during a period of time when there is plenty of uncertainty out there. And I will tell you, I couldn’t be prouder of the folks in our organization and the work that they are doing everyday.

So again this is probably something that just comes with the experiences we’ve had over the last four or five years and again I am very confident that our team members will do a terrific job as we approach the merger day.

Jeff A. Rulis – D. A. Davidson & Co.

Okay, thank you.

Operator

Thank you. Our next question is coming from Ms. Jacquelynne Chimera, ma’am your line is open.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Hi, good morning everyone.

Patrick J. Rusnak

Hi, Jacquelynne.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Pat, was there any sort of a unique tax treatment on the $3.6 million in M&A expenses? Any of that wasn’t tax affected?

Patrick J. Rusnak

Yes, there’s a significant chunk of the uncorrelated as most of the professional fees that won’t be deductible.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Okay. Do you know what chunk of that or is it safe to assume that its majority of the $3.6 million?

Patrick J. Rusnak

Substantially off.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Okay, thank you. And I known that there is a construction originations took place during quarter, what market is that generated from?

Patrick J. Rusnak

That was mostly SBA and type loans that were in various markets, it was not necessarily residential construction and development loans and it included a reclassification of a small portion that was not classified as construction in the prior quarter.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

The SBA pick-up, is that related to break of it all or is it just kind of a pick-up throughout the organization?

Patrick J. Rusnak

It’s both, we are a little bit of low with the Borrego operation after closing, but it picked up some goods ahead of steam going into the end of the year. So we are having and we’ve now essentially melted all of our SBA operations into the Borrego platform. So we’re seeing progress both with the original Borrego operation and throughout Sterling.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

And so the generation of these is from that ongoing progress?

Patrick J. Rusnak

Yes.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

We could see if you can pick-up from there?

Patrick J. Rusnak

Well, we’ve had an improvement in SBA gains in the fourth quarter and our expectation that we would be in the market selling the guaranteed portion of the SBA loans going forward and if things continued as they have been recently, it would indicate an increase in the non-interest revenue for government guaranteed loan sales.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Okay. And is it safe to say that with concentration where they are in the multifamily construction investors CRE portfolios that you would look to sell some additional multifamily loans in future quarters?

Patrick J. Rusnak

Yes, we would expect that given the concentration levels both for total CRE as far as the regulatory considerations there and for multifamily specifically where we have internal policy limitations or guidelines that we would be in the market on a recurring and regular basis selling multifamily loans, we did few sales in 2013, we did a few the year before. There appears to be a good demand for the product although it’s certainly not as developed, the secondary market as you got for residential loans, we are working to make sure its as good of a market, as we can create for it and that we can be in the market on a regular basis, getting the best execution possible.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Okay, great. And then I guess just lastly, I want to make sure that I heard you correctly, I am not sure in his prepared remarks that within by some, with the loans that re-priced I think at $588 million was that by only 3 basis points, did I hear that correctly?

J. Gregory Seibly

That’s correct. Yes, I think some of it is a function of where these loans are, where these loans are in, in terms of their index, I was going to look at the categories here, spare with me one second and we’ve had biggest chunk of $588 million.

The biggest chunk was in the commercial category and most of these are I think is likely tied to shorter-term, market indices, which haven’t moved all that much, we had off the total $588 million nearly a little over $450 million was in the commercial category and again these things are re-pricing in this case from $290 million down to $284 million. So these things were tied to shorter end of the curve as opposed to our multifamily loans, which are generally at a five year pricing.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

So it’s a relatively a small amount in the quarter than was that just a function of mix more so than an ongoing trend?

J. Gregory Seibly

Yes, I’d say for this, from looking at this one quarter that was more a function of the mix for this quarter with very little outside of, in fact we had very little commercial real estate that were priced this quarter compared to some other quarters.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Okay, and then just lastly one quick housekeeping one, the Commerce National acquisition do you plan to convert that before the proposed and post-merger closures?

J. Gregory Seibly

The conversion for that is already been completed.

Jacquelynne L. Chimera – Keefe, Bruyette & Woods, Inc.

Okay, great. That was all I had, thank you for the color.

J. Gregory Seibly

Great, thanks Jackie.

Patrick J. Rusnak

Thanks, Jackie.

Operator

Thank you. At this time, there are no further questions in the queue.

J. Gregory Seibly

Okay, thank you, it can be appreciated. Everyone, this concludes today’s conference call. Thank you for your participation. Have a great weekend.

Operator

Thank you and that concludes today’s conference. Thank you for participating. You may now disconnect.

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