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Executives

Peyton Patterson - Chairman, President and CEO

Glenn MacInnes - CFO

Don Chaffee - CCO

Analysts

Bob Ramsey - FBR Capital Markets

Frank Schiraldi - Sandler O'Neill

Christopher Nolan - Maxim Group

Amanda Larson - Raymond James

Damon DelMonte - KBW

Collyn Gilbert - Stifel Nicolaus

Matthew Kelly - Sterne Agee

NewAlliance Bancshares, Inc. (NAL) Q1 10 Earnings Call April 28, 2010 9:00 AM ET

Operator

Good morning and welcome to the NewAlliance Bancshares first quarter 2010 earnings conference call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation there will be an opportunity to ask question. Please note this event is being recorded.

I would now like to turn the conference over to Ms. Peyton Patterson. Ma’am, please go ahead.

Peyton Paterson

Good morning and thank you for joining NewAlliance’s first quarter earnings call. Joining me today are Glenn MacInnes, our Chief Financial Officer; and Don Chaffee, our Chief Credit Officer. We will be happy to take your questions at the end of my remarks.

Before I begin, I would like to remind you to read our Safe Harbor advisement and forward-looking statements on slide two of the presentation, slide that can be found on our website. Our comments today are intended to qualify for the Safe Harbor afforded by that advisement.

First I’ll provide an overview of the quarter and then Glenn will take you through the details. Then I will comeback to speak with you about our outlook on the reminder of 2010. In January, we identified our priorities for 2010 that you see on slide four, which focused on core deposit growth, NIM expansion, moderate non-interest income and loan growth, expense control with targeted investments and cautious optimism regarding credit quality. As our first quarter result suggest, we hit on all cylinders with strong financial performance building of the business momentum of 2009.

Now let me provide some specific highlights. Slide five looks first that the highlights on a linked quarter basis. As you can see, we had net income of $16.4 million, an increase of 35.5%, revenue of $71 million, which improved by 6.4%. NIM expansion of 15 basis points to 2.97% and core deposits increased 3.3% or 13.4% annualized.

On the lending side, we were pleased that loan originations were up 15.1% of which 36% were in commercial loans. A good sign at business optimism is returning and as other have continued to see their loan portfolios decline, our net loan portfolio increased by at $30 million.

As we previously discussed, our expenses return to more normalized levels of $42.2 million, which resulted in an operating efficiency of 59%, adjusting for the one-time BOLI contribution 62%. Credit quality, as Glenn will address shortly remained quite strong and far better than our local and national competitors.

On slide six, you can see the year-over-year progress we’ve made. Specifically, net income is up 41.8% or by $5.2 million. Revenues improved by 14.1% driven largely by the NIM expansion of 39 basis points. As NewAlliance continues to take market share, deposits increased 8.4% and very importantly, core deposits were up 22.7%. Lastly, we have maintained robust capital levels with our TCE ratio at 11.10%.

On slide seven, I’d like to emphasize what we believe is the firm foundation that these results are built on. Inside the company we live by a set of guiding principles that we have developed over the years. These principles foster a culture of performance that provides consistency throughout the business cycles. We start with the customer our brand focuses on delivering exceptional personal service and creating a win-win relationship with our customers. I’ll elaborate on this in my closing remarks.

We empower our employees fundamental to delivering that exceptional service is our workforce that is the one of the most engaged and committed around. One of my most important job is making sure that they have the tools and power to make it happen for our customers. We invest in our business this means investing in people, new business lines, de-novos and opportunistic acquisitions.

We execute on our strategy and as most of you know, we have a five-year strategic plan to deliver superior results for our shareholders. Critical to that is day-to-day execution and our project management offers provides me with frequent visibility to make sure everything that should be happening is happening.

The last guiding principle is really the result of executing on all the others. And that is to deliver superior financial results. We have a performance and results driven culture and we constantly measure how we are doing with service quality, sales, revenues and earnings and these principles together deliver the greatest shareholder value.

Now before turning it over to Glenn, I’d like to comment on the local economic landscape. On slide eight, the good news is we’ve begun to see signs of an economic recovery. In housing sales activity for both new and existing homes has increased, specifically in Connecticut and Massachusetts median prices continue to improve and building permits are up in the first quarter.

With respect to employment, generally the unemployment levels still remain high although lower in Connecticut and Massachusetts, but nationally. Connecticut did add 3000 jobs in March and Massachusetts added 7600. So confidence is returning to businesses.

Lastly, we expect GDP numbers to show modest growth between 3% to 3.25% for the U.S. and in our region, 2.5% to 2.75% growth. Consumer and small-business spending is also picking up. But although we do see bright spots we remain cautiously optimistic as we work our way through the early stages of the recovery. I'm very pleased during the first quarter, we have begun to deliver on the goals we set forth on our last earnings call.

And now I’d like Glenn to provide more detail and color on the quarter. Glenn?

Glenn MacInnes

Thank you, Peyton, and good morning. I'd like to begin on slide 10, which highlights our revenue momentum over the last five quarters. As Peyton commented, we achieved a record $71 million in revenue in Q1, up 6.4% linked quarter and 14% over prior year. Excluding a one-time borrowing benefit of $2.6 million, our revenues would have been $68.4 million, still a record amounts for NewAlliance Banc.

Net interest income increased $2 million over linked quarter primarily as a net result of a reduction in deposit and borrowing costs partially offset by lower asset yields.

Non-interest income is up $2.2 million on a linked quarter basis and adjusted for one-time items would be flat to fourth quarter. This is a net result of lower seasonal volume and over (inaudible) revenue offset by additional volume in our wealth management and merchant services businesses. We are pleased with the consistent progress we have made improving revenue over the last five quarters. Now I’d like to highlight the key drivers of our Q1 performance.

Turning to slide 11, we’ve provided our interest expense drivers. As we have discussed with you in the past, we have a very focused effort on expanding our net interest margin, two of the key elements in this effort have been to reduce deposit costs and to lower the cost of borrowings. As you can see on slide 11, our cost of deposits drops by 26 basis points over the prior quarter and now stand at 1.06%. In fact, we have reduced our deposit costs by 91 basis points over the prior year.

As you will see later on, we have achieved while consistently increasing our total and core deposit balances. On the bottom chart we highlight our cost of borrowing, which was down 26 basis points linked quarter and 35 basis points year-over-year.

During Q1 we paid down 164 million of borrowings with an average rate of 4.24%, our cost of borrowings ended the quarter at 370 basis points. Pulling this all together you can see on slide 12, the progress we have made in expanding our net interest margin.

On slide 12, can see we’ve had five consecutive quarters of NIM expansion. For Q1 NIM ended 2.97%, up 15 basis points on a linked quarter and 39 basis points over prior year. As you know, earlier we had provided guidance of achieving 3% NIM within the first half of the year. Clearly we are on track, I feel great about the progress we’ve made in achieving this objective.

Our efficiency in operating leverage are highlighted in slide thirteen. As demonstrated, we continue to make progress in improving the efficiency of our organization. As we highlight on the top section of the slide, the efficiency ratio for the quarter was just below 60%. Adjusting for the one-time BOLI item, our efficiency ratio would be just under 62% versus prior quarter of 67% and full-year 2009 at 67%.

Keep in mind, we’ve improved our efficiency while entering into a new line of business, making key strategic hires, and increasing our marketing initiatives in support of our brands campaign. The operating leverage chart provides additional texture on revenue and expense trends. As Peyton highlighted, our focus continues to be on funding efficient investments in our business.

Now, let’s look at some of the key balance sheet drivers. In slide fourteen, we highlight our deposit balance trend. We continue to grow our deposit base with a net increase of $30.9 million over prior quarter. What’s encouraging is that we’ve achieved this growth while continuing to decrease our cost of deposits.

As you recall, earlier in the presentation, I highlighted the reduction in deposit cost of 1.06%, a 26 basis point decline in linked quarter and 91 basis point decline year-over-year. As we highlight on this slide, we are encouraged by the shift towards core deposits particularly in the context of our future rise in rates.

Our core deposits grew $180 million, or 3.3% linked quarter, and $678 million, or 23% over prior year. Importantly, core deposits now make up 72% of total deposits versus 64% in prior year.

Lastly, we’ve been successful providing our customer with attractive rates on longer-term CDs. This is extended to weighted average maturity of our portfolio from nine to 14 months. Even an expected rise in interest rates, we were pleased with the progress and we remain committed to growing low cost deposits.

Turning now to slide, fifteen which highlights our loan originations; as you can see our originations totaled $390 million, up 15% linked quarter, but flat versus prior year. I would, however, highlight that the mix in originations have shifted favorably towards more commercial originations. Commercial originations in Q1 represented 30% of the total volume, whereas in prior year, commercial activity represented just under 11% of originations.

On slide sixteen, we highlight our loan portfolio balances. On a linked quarter basis, we increased our net loans by $30 million, or just over 2.9% annualized. So this represents only a slight increase. We are encouraged as this quarter represents the first net positive trends we have seen since the fourth quarter of 2008. With regard to the residential portfolio, while the outstandings are basically flat, we have covered the loan off in our purchased residential portfolio of $36.9 million.

Again, our total commercial loans increased $42 million linked quarter, or 10% annualized with a majority of the growth occurring in commercial real estate, which was up $38 million linked quarter, or 12% annualized. We are also pleased by the pricing power we continue to enjoy in this sector.

Now, I would like to spend some time on our credit metrics. Slide seventeen highlights the credit quality of our portfolio. NewAlliance has consistently maintained best-in-class performance standards in credit quality. Our delinquency rate for the quarter was 177 basis points. At this level, you can see we remain well below state and national averages and we remain pleased with performance of our portfolio. The increase of 23 basis points over prior quarters attributable to two areas, the first being an increase in residential delinquency and the second at single CRE credit.

While the economic data is beginning to suggest the worst of the recession is over, unfavorable economic and real estate market conditions [continued to set] and it may have an additional [strength] on our portfolio. However, we believe that our historic practice of prudent underwriting diminished size of the residential construction portfolio and stronger average FICO scores combined with low weighted average loan to value ratios are significant advantages in keeping asset quality management.

On slide eighteen, we highlight the composition of our loan portfolio, which you can see as primarily residential real estate, commercial real estate, consumer loans, and C&I. Now let’s look at the portfolio, in more detail.

Turning to slide nineteen, the residential portfolio which is 50% of the total, there is one to four family loans, 98% owner-occupied with delinquencies of 2.22% and only 18 basis points in net credit losses for the quarter. The updated weighted average FICO is 7.47 and the updated loan to value is 63%.

Our home equity portfolio of $700 million continues to have superior result of only 64 basis points in delinquencies, well below state and national averages. The net loss for the quarter was only 11 basis points annualized. Weighted average FICO score remains strong at 747 and CLTV is 68%.

Turning now to slide twenty, our commercial real estate portfolio continues to be one of the best performing with delinquencies of 1.1%. As we highlight the permanent CRE portfolio of $1.2 billion continues to be well diversified in is conservatively underwritten. Only 11% of the portfolio matures over three years, which we believe provides ample time per claims, walk through the current credit cycle. The construction of permanent piece of this portfolio an amount of $67 million had non-performing loans at 1.13% and no credit losses.

On slide 21, we highlight our C&I portfolio. This represents $415 million or 9% of the total portfolio and experiences delinquencies of 2.42%. Net charge-offs for the quarter were 87 basis points annualized. The portfolio was well diversified, but it’s one we continue to monitor closely. On slide 22, we highlight our residential development portfolio. The portfolio consists of $26.5 million in balances and as of the delinquency rate of 7.45%, net credit losses of 1.83% for the quarter. Of the total $26 million, $10.3 million is condominium related and as highlighted the non-performing for Condo portfolio was $2 million. All losses on this portfolio have been reserved for us.

Turning now to the slide 23, our quarterly net charge-offs totaled 26 basis points, which was up three basis points from prior quarter, but down one basis point from prior year quarter. At quarter end, our non-performing assets that its $54.9 million, our allowance for loan loss for the quarter ended at $54.2 million, 1.13% of total loans and 83.5% of non-performing loans. We are very comfortable with the coverage given our net charge-off performance.

Our investment portfolio was highlighted on slide 24. The portfolio remains 98% in Treasury/Agency or AAA rated securities. For the quarter, the portfolio had a yield of 4.15% and duration of 1.9 years. Our net unrealized gain on the available sales portion, which totaled $2.3 billion, it was $39.8 million for the quarter.

Lastly on slide 25, we highlight our capital position and as you know, we started the recession with ample capital and chose not to participate in TARP. At quarter end, Tier 1 risk-based ratio is 19.82% and our TCE ratio is 11.10%. Clearly, this level of capital combined with our self registration in October, will allow us to the opportunistic and further expanding our franchise.

With that, I will turn it back over to Peyton.

Peyton Patterson

Thanks Glenn. In my closing remarks, I’d like to remember back to my opening comments about our guiding principle. You remember that I highlighted our focus on the customer and our commitment to our employees and that is really embodied in our new brand positioning “Do Your Thing”. I’d like to highlight three specific initiatives we launched in the first quarter that have brought our new positioning to life.

First, on slide 27, we described our new marketing and advertising campaign, we launched in early February to an integrated multimedia campaign. It’s all above NewAlliance working with each customer to help them to do their thing. We have highlighted our full range of business in consumer products as solutions to help customers improve their financial situation.

Unlike many brand campaigns, we are not just measuring increase to where it us, but we expect loan, deposit, and household growth to all accelerate. So far we have been extremely pleased with the results. We will monitor the results closely and continue to invest in the campaign throughout the year as long as this exceed are performance expectations.

Turning to slide 29, we show a philosophy with great service providers and that is, that your brand is only as good as the service that your people deliver everyday to every customer. That’s why our brand initiative literally started with the employees. They helped to craft our brand focus and value proposition. They helped to build the training materials and case studies some real customer experiences and they have to deliver the training to our entire employee based.

It’s no coincidence that exceptional personal service is the poor of our brand. If something we have historically been very good at delivering and if something that big bank struggled to provide. I am so proud of our employees. They are among the most committed and engaged out there and this most recent brand engaging process has taken our service to an even higher and more consecutive level.

Lastly on slide 30, the final component of extending our brand is literally bringing it to live in our physical facilities. In my opening, I talked about driving our business through selective investments in our franchisee and we’ve talked before about our interest and expanding in Hartford and Fairfield County, as well as the Boston metropolitan area.

The most recent de novo branch recently opened in downtown Hartford and it is the first to bring our new brand fully to life. The facilities designed to create a perfect environment for our bankers to help customer and businesses do their thing. De novo branching is critical to our organic growth strategy and we are committed to expanding our branch network where we believe our value proposition can win.

So in conclusion, our comments on 2010 outlook and I would suggest that we are of to a very solid beginning and we remain steadfast in our principles, namely revenue growth remains a primary focus and we are well on our way to achieving the 3% net interest margin that we did guidance to you earlier in the year, to achieve that no later than midyear.

Our branding campaign in driving quarter positive growth, as businesses become more confident in the economic outlook, commercial loan originations will continue to expand and we believe, this is the perfect time to us to invest in our business while sustaining operating leverage improvement and we are cautiously optimistic on an improving credit environment.

I will now close and we would be very happy to take any questions that you may have.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Bob Ramsey from FBR Capital Markets; please go ahead.

Bob Ramsey - FBR Capital Markets

Could you talk a little bit about maybe what contribution the asset based lending team had to the commercial loan originations in the quarter?

Glenn MacInnes

It’s Glenn MacInnes. As I highlighted the primary driver of the commercial loan growth was in the commercial real estate business. I think it was about $3 million in outstanding and average for the quarter. So they just sort of begin booking the business. That being said, I think you’ll see a lot more volume in the second quarter.

Bob Ramsey - FBR Capital Markets

With the 3% margin sort of now insight, how are you guys thinking about the margin outlook in the back half of the year?

Glenn MacInnes

Well, I don’t think we’re going to guidance all the way though the year, but our focus continues to be as we highlighted to further reduce our deposits. We are locking in some longer terms CD rates as well.

Peyton Patterson

I would add maybe to that, while we continue to see improvements in our cost of deposits. At some point, there’s just about as well as you’re able to get it, but our focus is really very much on building throughout the high yielding asset to commercial loan side of the book. So that further NIM expansion will be more equally weighted on loan generation as it’s been on lowering across the deposits.

Bob Ramsey - FBR Capital Markets

Then maybe last question, it looks like the securities balances were down a bit in the quarter. Did that reflect -- did you all have any impact from the Freddie Mac loan buyouts in the quarter?

Glenn MacInnes

Yes, we did and it was about $100 million in buybacks.

Operator

Our next question comes from Frank Schiraldi from Sandler O'Neill

Frank Schiraldi - Sandler O'Neill

Just wanted to ask you a little bit more about deposits, and I know it’s early in the quarter here in the second quarter, but I’m wondered how deposit gathering is going so far in the second quarter. Is it sort of same pace as first quarter and are you seeing anymore competition pickup in the market at all?

Peyton Patterson

We are very pleased though the momentum, as we ended first quarter and typically we see deposits seasonally down in the first quarter, but we are very, very pleased with the growth in the core deposits, whether it’s checking, listed money market and saving accounts and as Glenn highlighted, we’ve been pretty successful about getting the customer go long with longer CD term. So we have a multi-pronged approach to growing deposits and our branding campaign is certainly helping and also the sales force to continue the momentum, a lot of which we saw last year into this year.

Frank Schiraldi - Sandler O'Neill

Then on that note, the CDs, how far are you able to get deposits just to go and then what’s the pricing point?

Glenn MacInnes

We have a five year offering, that’s 3.5% that was just recently launched and so it’s been very successful. We probably close to $60 million and really just very early in the launch of it.

Frank Schiraldi - Sandler O'Neill

So is that, sort of the CD product? I mean, what CD products are sort of moving the best as now? Is that far out or is it two year or one year or something like that?

Peyton Patterson

We have relationship pricing in place and we tried to not only providing the track of five year, but typically it will extend down, 40% of what will bring in now, its really coming in long excess 18 months. So that will show the real change in the mindset of consumers who are typically going after six months and more like 90 days, six moths CD. So I think its reflecting consumers need for greater deposit rates on the long end.

Operator

Our next question comes from Christopher Nolan from the Maxim Group

Christopher Nolan - Maxim Group

Glenn, is there any possibility of doing some security, so if I’m realizing some of those security gains, given the agency book is fairly short in a gain position environment?

Glenn MacInnes

Yes, as I highlighted that the unrealized gain is $39.8 million at end of the quarter, but we’re always looking at that I mean obviously, we’d like to have the offsetting assets or loan growth, but it’s something we continued to evaluate.

Christopher Nolan - Maxim Group

So it’s a possibility in coming quarter or two to see some security gains (inaudible) attrition?

Glenn MacInnes

We look at it very regularly.

Christopher Nolan - Maxim Group

Don, turning to credit quality for a second, do you have a little color behind the jump in non-performers for residential? What was that commercial real estate credit that went non-performing? A little detail on that, please.

Don Chaffee

So I always look forward to your credit questions, because I think you’re one of the credit officers out there, but on this latter question first, that we just say a typical office building in a very nice town, I won’t disclose the balance. It was going along well. We have a guarantor that has a pretty good substance. They are cooperative, one of their tenants filed DK and that caused the problem, so we’re working with them and we’re hoping to be able to restructured and come out in pretty decent shape.

With regard to the increase in the non-performing loans in residential, one other thing is that, we have seen as long as the unemployment rate remains high and it was very nice to see it come down as fast. There will be stress as we’ve told you. When we underwrite loans, one of the things we do differently is really emphasize reserves besides equity. So, you see this jump in non-performing loans.

I would remain you that, because we have a very good equity in the deals. They will not all become losses, and that’s why you see the loss rate on a residential portfolio I believe that 18 basis points is really, really low. So also, I’m very pleased with results.

Operator

Thank you. Our next question comes from Amanda Larson from Raymond James; please go ahead.

Amanda Larson - Raymond James

Glenn, you mentioned, I think the residential portfolio is done running off. I’m sorry, I didn’t hear your commentary on it, but I just wanted to know if you thought that since you guys did have a little bit of a pickup in loan growth this quarter, at end of period, do you think that will accelerate into the year?

Glenn MacInnes

I think we are planning on future loan growth. What I highlighted Amanda was that, even though residential appears flat quarter-over-quarter, we had run off in our purchase portfolio $36.9 million. We have a very strong pipeline both in commercial real estate and particularly in asset-based lending. We are feeling good about the growth.

Amanda Larson - Raymond James

Peyton, did you touch on (Inaudible) at all yet on the outlook for the effect on deposit piece?

Peyton Patterson

No, I didn’t but I am happy to address that. I think as we may have stated in the past we have a fairly to de minimus exposure onto that in terms of our fee income. While the growth exposure, if no one was to opt in, that exposure could be as highest $5 million. Our estimate has been it really is about $1.2 million in terms of what we believe, what will actually happen, but we have many counterbalancing initiatives that, in terms of new products and services to counteract that exposure. So, we are feeling pretty good about, sort of riding that one through fairly unscathed.

Operator

Thank you. Our next question comes from Damon DelMonte from KBW; please go ahead.

Damon DelMonte - KBW

I was wondering if we could kind of turn the conversation to M&A right now. I’m just kind of wondering, if you could update us on your outlook? Have you had any increased discussions with other banks in the area? Have you considered looking at any potential FDIC-assisted deals?

Peyton Patterson

Yes. I think the M&A environment is clearly picking up. I think a lot of that is result of a lot of people continuing not to whether the credit cycle of that well. More boards seeing interested in, perhaps aligning with the partner that it is doing well and being able to grow the market share together. So we have our hands in number of M&A activities and are really pretty optimistic about that until that will be continued to be regular part of our multi-pronged capital strategy going forward.

Damon DelMonte - KBW

Do you have confidence that a deal could be announced by the end of the year?

Peyton Patterson

We don’t commit to things like that, but let’s just say that we’re very focused on at the present time.

Damon DelMonte - KBW

Then if you could just quickly switch over to provision and reserve levels, given your outlook for credit for the rest of the year, how should we think about the reserves? This quarter, it was at 113 basis points. Is that a level you’re comfortable with?

Peyton Patterson

Don.

Don Chaffee

Yes, we’re very comfortable with it, because the loss rate for the quarter was 26 basis points. So as you can see at 113 that’s a good multiple even if you assume that the year could potentially be higher than that. So we’re very comfortable with the level. We added a little bit more in provision after much discussions has be on a conservative side

Operator

Thank you. Our next question comes form Collyn Gilbert from Stifel Nicolaus; please go ahead.

Collyn Gilbert - Stifel Nicolaus

I was wondering if you could just give a little bit of color, I’m shifting back to the lending side, on the competitive environment and kind of where you're seeing the best opportunity, and where competition is the tightest?

Peyton Patterson

We’ve seen continued bright spot in terms of our pricing power on the credit side, particularly in the commercial real estate C&I and then of course we have new asset-based lending business. A lot of that business is coming from our larger competitors and we have been very, very pleased. We’re being asked to participate in transactions of exceptional quality in our contiguous footprint were we’re really able to build a brand awareness for ourselves and get them really good deals on the book. So we’re feeling pretty good about long growth for the year and I think first quarter was representative, I think of the trend that hopefully will continue.

Don Chaffee

I would say Collyn that the underwriting of the CRE loans is more conservative and much more conservative than normal CRE underwriting in terms of that LTVs in that service coverage ratios.

Collyn Gilbert - Stifel Nicolaus

Then to sales points, then you're still seeing good pricing power even with the stronger credit because I guess some of the anecdotal here in some other companies is that there's fewer good credits out there, so more banks are obviously chasing them, which is putting pricing pressure on them, but you're not necessarily seeing that?

Peyton Patterson

Well, we would like to look at things on a relative basis. It’s by no names the kind of pricing competition you would see year or two ago. So I would say, we feel a lot more power. There are fewer competitors out there and so that also advantages us in the market that we lending.

Operator

Thank you. Our next question comes from Matthew Kelly from Sterne Agee; please go ahead.

Matthew Kelly - Sterne Agee

On the $100 million that was bought out of the Freddie program, what was the premium on that?

Glenn MacInnes

I’m sorry. The second quarter, “What was the premium?”

Matthew Kelly - Sterne Agee

What was the premium that you write-off in the $100 million. I’d say brought out.

Glenn MacInnes

These are brought, there is no premium. I think brought it part.

Matthew Kelly - Sterne Agee

Okay, do you have anything exposed to Fannie buyouts in 2Q?

Glenn MacInnes

In Q2, yes, it’s probably about $50 million.

Matthew Kelly - Sterne Agee

On the securities book, what are you looking for cash flow on that portfolio for the year? How should we be thinking of that for net growth as loan portfolio growth starts to pickup fully, yes that uses liquidity to help fund the loan growth?

Glenn MacInnes

Yes, I mean we’re looking for a cash flow about $700 million.

Matthew Kelly - Sterne Agee

What are we using for a tax rate for the year?

Glenn MacInnes

I would use 34.1.

Matthew Kelly - Sterne Agee

Were there any one-time items in the expense that we should be aware of any reductions? I know that there’s a couple of line items that came in lower than had been looking for. Anything unique there or…?

Glenn MacInnes

Now, if you recall, then we did have some one-time in the fourth quarter, so we had indicated that time, we put out our burn rate was 18,425, so we’re pretty much there. Thank you. This concludes the question-and-answer session for today. I’ll now turn the floor back over to Ms. Peyton Patterson for any closing remarks.

Peyton Patterson

Well, I’d like to thank everybody for joining the call today. I hope everyone will agree, this is a very strong quarter as the great way to kick-off the year and we forward to seeing many of you on the road into our second quarter earnings call. Thanks for joining this morning.

Operator

Thank you. The conference has now concluded. We appreciate your attending today’s presentation. You may now disconnect.

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