BankUnited's (BKU) CEO John Adam on Q2 2014 Results - Earnings Call Transcript

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BankUnited, Inc. (NYSE:BKU) Q2 2014 Earnings Call July 24, 2014 ET

Executives

Mary Harris – Senior Vice President, Director of Marketing and Public Relations

John Adam Kanas – Chairman, President and Chief Executive Officer

Rajinder P. Singh – Chief Operating Officer

Leslie N. Lunak – Chief Financial Officer

Thomas M. Cornish – State President of Florida

Analysts

Robert F. Placet – Deutsche Bank Securities

Brady Gailey – Keefe Bruyette & Woods

Ken Zerbe – Morgan Stanley & Co.

David Darst – Guggenheim Securities

Gerard S. Cassidy – RBC

Operator

Good day ladies and gentlemen and welcome to the Bank United Inc 2014 Second Quarter Earnings Conference Call. My name is Kathy and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Mary Harris, Senior Vice President, Marketing & Public Relations. Please proceed ma’am.

Mary Harris

Good morning and welcome. It's my pleasure to introduce our President, CEO and Chairman John Kanas. But first, I'd like to remind everyone that this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the company's current views with respect to, among other things, future events and financial performance.

The company generally identifies forward-looking statements by terminologies such as outlook, believes, expects, potential, continues, may, will, could, should, seeks, approximately, predicts, intends, plans, estimates, anticipates, or the negative version of those words or other comparable words.

Any forward-looking statements contained in this call are based on the historical performance of the company and its subsidiaries, or the company's current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as representation by the company that the future plans, estimates or expectations, contemplated by the company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity.

If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive.

The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements.

Information on these factors can be found in the Company’s Annual Report on Form 10-K for the year ending December 31, 2013 available at the SEC’s website www.sec.gov.

I will turn it over to John Kanas. John

John Adam Kanas

Good morning everybody. Thanks for calling in. Obviously, we’re very pleased with recent quarter’s results. We did $48.5 million, $0.46 a share and for six about $0.99 a share. We continue to enjoy the business climate in our two primary markets, New York and South Florida.

So far we’re getting a lot of publicity lately as recently as yesterday, big order call that about Miami actually outlining some of the things that I’ve reported to you over the last three or four months. So we see no abatement in the growth of both these markets.

New loans for the quarter grew as approximately as we predicted just $1 billion to $0.1 billion on a year-to-date basis. We’ve reported to you last time that we would like to see loan growth start to come in third that is about third in New York and third in Florida and third from our national platforms, and we pretty well, we came just close to during at this quarter as average $344 million and New York originations our new loans of $305 of Florida and then $322 in a combination of the national platform which is a combination of residential mortgages and $177 million of that from our three lending subsidiaries.

On a percentage basis 41% Florida, 25% New York now and 34% national and in terms of categorization that would be commercial real estate loans for the quarter, new loans as of June 30, 41% were commercial real estate includes on our occupies and multi-family, C&I at 41% – C&I 35% and residential about 23%.

Asset quality continues to be stellar, 21 basis points of non-performers, and 350% coverage of loan loss reserve covering the non-covered non-performing loans. Deposits grew equally as well, a little over $900 million for the quarter as we had hoped, and that growth is coming in above the New York and in the Florida.

We’re – I know there is probably fair amount of questions on this call today, given the earnings reports that had been in by other banks and re-sensitive to your interest which regard to a number of different areas that other bank reports have given rise to and we will take plenty of time today to answer any of those questions that you’d like to hear we were up – I would mention before we even start that, that we’re getting I believe closer and closer to a time when we will start to see some activity in the consolidation of this, particularly this mid-Cap banks, so a very interesting deal this week one was with CIT, which we think makes a lot of sense and our current belief based on conversations we’ve had with them are that regulators have a very balanced view toward consolidation of this sector and are beginning to realize and recognize that consolidation is a very important part of the mid-Cap future in the next year or two.

So, we are cautiously, but optimistic that we will see some more action in this area starting now. Raj, I want you to take over and talk about the product trends.

Rajinder P. Singh

John said deposits grew equally in terms of long growth we had over $900 million of deposits growth this quarter and a total for the year about $1.5 billion. Deposit growth was a third of it was in New York; two-thirds of it was in Florida and now our total deposits exceed $12 billion. Our loan to deposit ratio is still a very comfortable 88%. We are still below 90, so for the next few quarters expect us to grow deposits just a little under our long growth, because we do want to – we still feel we have room and we have some excess deposits.

So, guidance is unchanged for the future. Our deposits now at 25% DDA, 42% money market, 32% time deposits we keep us comfortable with that mix. Of course we want DDA to be even higher, and we will keep working on that, but we feel comfortable that the deposits mix of this company has come a long way in the last few years.

The cost of funds was excluding hedge accounting and accretion cost was 56 basis points basically stable, has been stable now for a couple of quarters, and we expect this trend to be the same. This story will not be cost of funds, it will be growth due to fund the loan growth that we’re seeing in the left side of the balance sheet.

Lastly, from my type, I’d turn it over to Leslie. As you know the long term agreement which was – a five year agreement expired in May. It was a great partnership with the FDIC and if we’ve been (indiscernible) we did sell a whole bunch of loans though not the entire portfolio, but we did not sell any loans we did not want to keep. And the loans that we did keep are pursuing and relationship that we want to grow, so it was a good partnership five years long, the residential offshore is another five years that will be 2019 before that expires.

With that I will just turn it over to Leslie and get into the number results.

Leslie N. Lunak

Thanks Raj, the quarter was pretty much in line with our expectations hopefully with yours, we are – as we told you we are seeing the impact on earnings of the run-off of high-yield and covered assets, net interest income in total being just slightly lower this quarter than immediately proceeding quarter although modestly higher than for the comparable quarter in six months of the prior year.

We expect over the next couple of quarters net interest income will be relatively stable and then start to trend upward, obviously pressure on NIM continues as headwind that’s being faced by the industry and NIM declined a 467 for the quarter. Due to the run off of covered assets coupled with the competition that we’re seeing in the prices and the sustained low rate environment, our guidance for NIM for the year remains unchanged.

As we disclosed to you at the end of last quarter, we’ve terminated our indirect auto lending business, we did decide this quarter to sell the indirect auto portfolio that resulted in a positive all in impact on pre-tax earnings this quarter of about $2 million, most of that in the form of the release of reserves that we were holding against that portfolio when we announced for loan losses. Also about $700,000 worth of termination and exit severance cost and that type of thing added in that number.

Other than that, the reserve and the provisioning for the quarter correspondence pretty much to loan growth, going forward we may see just a modest increase in provisioning as we move through the credit cycle, but we’re not expecting any material changes there in the near term, we’re not seeing any deterioration at all in asset quality. We continue to reinforce our guidance that we expect core non-interest expense to run about 10% higher for 2014 than it was in 2013, and then more modest increases going forward after that as we’ve guided in the past.

And continue just to reiterate our expectation that over the next few quarters we’re going to see a downward trend in EPS, that’s nothing new, it’s consistent with what we’ve been telling you, but want to reiterate that, that continues to be our expectation over the next several quarters and then we’ll see an uptrend again.

John, any comments you want to make before we open up for questions?

John Adam Kanas

Yes, a slight decline in our close to deposits, a very good number for growth of loans, solid credit quality and given this we were very pleased with the quarter and its come in at well exactly where we thought it wouldn’t what we had predicted. So.

Rajinder P. Singh

I just want to make one observation, New York loans grew $344 million and deposits grew $300 million.

John Adam Kanas

Yes.

Rajinder P. Singh

So we are pretty dedicated, pretty close to where New York is self funding.

John Adam Kanas

Self funding. And of course the natural business is do not generate deposits Florida funds bring some deposits to fund Florida loan growth as well as national loan growth.

Rajinder P. Singh

Do you have one listing is it that non-interest bearing is now just to a 20% of loans which has been creeping up over the nevertheless couple of years and again slightly proven, lot of that has to do with growth advance in New York. Having said all of that we’d like to start taking questions.

Question-and-Answer Session

Operator

(Operator Instructions) First question comes from Rob Placet of Deutsche Bank.

Robert F. Placet – Deutsche Bank Securities

Hi good morning. Just to start off, I guess anything in particular that drove the modest slow down in loan growth this quarter is it just kind of lumpiness or I was wondering if there is anything in particular?

Leslie N. Lunak

No. We told you last quarter that – we told you what we thought we would grow this year for $4 billion to $5 billion, we still think that’s true, but some quarters have been little overwhelming, some quarters have been a little under and we can’t time precisely when these closings will take place. We are finding that of course and every other CEOs reporting this quarter tell you the same thing, loan pricing is getting to be ridiculous because the competition for the loan price is going to be ridiculous. We certainly walk away from more deals based on price today than we ever do, Raj and I put down a plan yesterday and he was that morning in fact we just lost a $10 million resi deal.

Rajinder P. Singh

Yeah.

Leslie N. Lunak

The bid against this was 208 IO for three years or something.

Rajinder P. Singh

Yeah, I mean we’ve lost by a very large number.

Leslie N. Lunak

Yeah, we’re losing to those kind of numbers in New York and in Florida all time we simply not, there is a point beyond which we simply will not go to put up loan growth and we are seeing that on average more than we ever saw it before we lost a big deal in New York, (indiscernible) a deal in New York, the other day that somebody who went 10 years IO on a 75% loan to value, we’re just not going to do this and so, but having said that, we’ve a good pipeline going into the third quarter of loans that do meet our pricing requirements and our average, our prognostications really for loan growth remain the same.

Robert F. Placet – Deutsche Bank Securities

Okay, great. And then just secondly, securities balances increased fairly meaningfully this quarter, I was just curious if you could talk about that, and just kind of the outlook for that portfolio going forward?

Leslie N. Lunak

So, that’s two things – three things. One, we sold the indirect auto portfolio, so we had a, kind of a sudden inflow of cash towards the end of the quarter, it’s an attempt on our part to effectively put cash to work, have liquidity some or other than just at the Federal Reserve Bank earning little bit better yield than that. So that’s really what that is, and the lumpiness in loan demand as you saw our loan closings, loan closings were down a little bit for this quarter compared to the last quarter, so we put some of that into the bond portfolio. I would expect over the near term the next few quarters the securities portfolio to remain pretty stable, that the number you are seeing today.

Robert F. Placet – Deutsche Bank Securities

Okay. Thank you.

Operator

Thank you for your question. The next question comes from Brady Gailey of KBW.

Brady Gailey – Keefe Bruyette & Woods

Hey, good Morning,

John Adam Kanas

Hi Brady.

Brady Gailey – Keefe Bruyette & Woods

The margin guidance of 425 by the end of this year seems to be, I mean you guys are kind of right on track there

John Adam Kanas

Yeah.

Brady Gailey – Keefe Bruyette & Woods

Do you care to take a stab at, as we get closer to 2015; you care to take a stab of what the margin will do in 2015.

John Adam Kanas

Not really.

Brady Gailey – Keefe Bruyette & Woods

Do you care to take a stab that what – that’s going to deal with, yeah.

John Adam Kanas

We may have some guidance with respect to that later in the year, but right now, I think anything I put out there will be a little bit too assumption late and speculative so.

Brady Gailey – Keefe Bruyette & Woods

Okay. That’s fair. And then the tax rate I know we had some change in the tax go down for – tax rate was 33% in the second quarter, is that of a good run rate kind of from you all know.

John Adam Kanas

I think it has a good run rate for 2014, I think probably it will be a little bit higher in 2015, we did take advantage of some opportunities on state taxes this year. So I think, be a little bit higher in 2015, but its certainly good run rate for the rest of this year.

Brady Gailey – Keefe Bruyette & Woods

Okay, okay. And then on the deposit growth, you grew almost $1 billion that’s more than you’ve ever done before, is there anything specific that drove that or is it just more you are getting more traction.

John Adam Kanas

We did run a strong campaign this quarter. We’ve spent a little more of marketing that we usually do to see how much how far we can go, I think we probably overshot a little bit than what we had set out to achieve. And like I said before I think we want our loan to deposit ratio to edge up a little more use a little more effort shall be, so expect deposit growth to be a just a little behind loan growth for the next couple of quarters.

Leslie N. Lunak

And also Brady, deposit growth in New York flows the loan growth and we reported that to you before. We have a lot of deposit growth in the pipeline. In New York that comes as a part of these relationships that we are gaining in New York. They are not – they are not coming simultaneously, but I think you can expect to see more of the same.

Brady Gailey – Keefe Bruyette & Woods

Okay. And then lastly we’ve started to see earnings actually, the EPS come down like you all been talking about and you are saying, there is another two, three quarters of decline in EPS. Do you think that quarterly EPS base north of $0.40.

Leslie N. Lunak

I am not – I am not ready to take a step at that, there are too many variable I think between here and there, but we standby our estimates for the year, but I am just starting to guessing on a quarter to quarter basis probably not something we want to do.

Brady Gailey – Keefe Bruyette & Woods

Okay that’s fine. Al right thank you guys.

Operator

Thank you. The next question coming from Ken Zerbe of Morgan Stanley.

Ken Zerbe – Morgan Stanley & Co.

Great thanks, good morning. John, maybe first question for you, have you had any direct conversations with the regulars that would actually give you confidence in your statement that M&A actually could start picking up because we’ve heard that in the past, I just want to make sure that we are not – not from you, but I just want to make sure that we are not getting overly excited because we saw one deal get done and then 12 months down the road find out that the deal still can’t close and wandering what gives you –

John Adam Kanas

We like most mid-cap banks can – are talking to the regulators nearly on a daily basis, certainly on a weekly basis. And so the comments that I’ve made our result of specific conversations, we had with regulators that lead us to believe that they are very conscious of the fact that consolidation in this area is inevitable and that they repute toward consolidation is very balanced right now. There was a time and I think I reported to you probably a year ago, when I said that I thought that, the fear of regulatory oversight and intrusion might have been standing in the way of some people trying to do a deal.

I can tell you that we don’t feel it anymore, based on what we’re hearing in the regulator side. I think they have been very realistic and yes, those are based on face to face conversation we’re have, I think that we’re going to finally start seeing some action in this space and I think that the regulators, they are certainly not encouraging consolidation, but they are certainly not discouraging consolidation at this point.

Rajinder P. Singh

And is that – because it feels like just a month or two months ago it fell like they didn’t want to emanate and get down at all, are those conversations, has it materially improved in the last month or so, or is it just a gradual improvement over the last six months. It’s a gradual improvement, but there is a noticeable change, I think a noticeable change in the last three, four months, so I think that people are beginning to understand, all of the pundits around this industry are beginning to understand that this is a very difficult time for banks that a lot of the earnings growth that the industry has seen in the last six quarters have been driven by reserve releases and expense reductions and that game is over. And if interest rate stay where they are or if by the way got for bid short–term rates were highs and long–term rates don’t that there will be increasing pressure on the industry and particularly the mid–cap space and I think regulators are understanding that is a likelihood and that then consolidation becomes the obvious next step and I’m the one – I’m encouraged by the recent conversations we’ve had.

Ken Zerbe – Morgan Stanley & Co.

Got it, okay. And then one question for Leslie, I think I heard you say that the NII should be roughly stable, I assume that’s from the 169 number. Does that also account for the – I guess the runoff of the portfolio with a zero carrying values?

Leslie N. Lunak

Yes, it has.

Ken Zerbe – Morgan Stanley & Co.

So all in 169 roughly going forward, okay. All right, Thanks very much.

Operator

Thank you for your question. The next question comes from David Bishop.

Unidentified Analyst

Hey, good morning guys.

John Adam Kanas

Hi, Dave.

Unidentified Analyst

Hey just one of you there give some obviously some press about the effects of the rank control, building pass in New York city, John I want to give us some commentary, what you’re seeing the best (indiscernible) sort sobering effect on the multi family market and any impact so far?

John Adam Kanas

Yeah, no question it’s a topic of great discussion, the Mayor has made comments that they were certainly not positive toward that subject.

But we can tend to believe based on conversation we have with our barrowers and with the big developers in the New York that while that’s a consideration this is not something that’s going to be– it’s going to make a fundamental change in that multi-family market.

What we are seeing this administration do as an example we’ve seen some specific cases where a developer goes in and he wants to do a development plan somewhere in the burrows of New York and he wants an 80 20 split of low income to the project and the city puts a and they want to go, and they would like to see 30% low income, but at the same time we’ve seen them negotiate higher density and more units on the same property, so it seems to be balancing itself off pretty well in these negotiations so far.

With regard to rent control, I mean that’s a subject we could pasture about forever but it certainly seems to be having little or no impact on values in that market we are on activity in that market that – I don’t think that would be a substantial dislocation here as a result of that.

Unidentified Analyst

Okay. And then may be a question to Leslie, may be update us – may be understanding asset sensitivity, change into quarter?

Leslie N. Lunak

Really no material change, we continue to run the Bank with interest rate risk at a very low level. We’ve never taken a lot of interest rate risk, nothing has changed about that we’ve extended a little on the liability side but that’s more in response to what we’re seeing on the asset side, free loans tend to be more three and five year fixed rate product as opposed to floating rate products.

So that’s really been just to maintain the position where we are, the duration of the bond portfolio is still low, so on balance, I don’t think there really hasn’t been any material change in our interest rate sensitivity position.

Unidentified Analyst

Got it and then John maybe one more question. I think you alluded to in the preamble regarding, some of the regulatory discussions out there, we see some of your peers sort of come underneath the previews from the BSA and AML will be there more focus there. What you hearing from your regulators, how you are feeling in terms of your position in terms of your systems and compliance on the BSA and AML side.

John Adam Kanas

Yeah. This is the hot-button subject, all regulators these days and obviously all banks are having to pay a lot of attention to this issue including us. We are very comfortable with our AML/BSA compliance regulators are in constantly looking at that at our institution in every other and we are very comfortable with where we stand on that subject.

Those are the – that and other compliance issues tend to be the hot-buttons that stand in the way of consolidation, the regulators have made that clear publically to the industry and so I think a lot of people including us obtaining a lot of attention to the subject, especially in light of the M&T situation that sort of took everyone by surprise with regard to our situation, we have spend a lot of money in that area and other areas of regulatory compliance.

This is a rapidly growing institution. And as I’ve told you before we get a lot of regulatory attention because of that and we have had to invest very significantly over the less three or four years in that area and all of the other compliance. So we are comfortable going forward.

Unidentified Analyst

Great. Thank you.

Operator

The next question comes from David Darst of Guggenheim Securities.

David Darst – Guggenheim Securities

Hi, good morning.

John Adam Kanas

Good morning, David.

David Darst – Guggenheim Securities

John I mean, based on the volume of production you are doing in New York and then you comment about bringing deposit form of relationship, it does sound like that you are differentiating your business model away from the solely broker multi-family market, can you give us any contact just in – maybe the rate advantage you think you are seeing or maybe the average loan deposits that you are doing that are different?

John Adam Kanas

We compete against all kinds of institutions in New York. Some of them really specialize in unitary price, they would just do a very simple basic multi-family loan cash flows on its face. Because we’ve got 35 years experience in that market with some of the largest land owners there, we seek to try to find opportunities were we can make loans as an example of building that is not cash flowing at the momentum, (indiscernible) into building doesn’t cash flow he needs to invest money.

We will make a loan on that property based on the strength of the borrower and the ultimate value of the property. And we can get a little bit more interest rate on that property. Some of these are not straight multi-family buildings they are mixed used, they might be partially commercial buildings and partially multi-family, they might be in the burrows instead of in the heart of Manhattan where pricing is a little less intense.

But having said all of that there is in no way is rate competition easy in any of those types of situations. We are seeing vigorous competition from more and more institutions coming into New York, one of the reasons why – we said this a long time ago, we want to make sure that we spread the risk if you will in this loan portfolio between Florida National and New York, we really want to keep an eye on all of these markets and both of these markets so that we don’t have to, we overly depend on any one of the other.

There are times it seems to be cyclical, there are times when rate pressures in Florida are greater than they are in New York and times when depending on the products it’s greater in New York. Right now it's tough in both markets but as you can see because we are so small and we are in such very, very large markets both north and south, there is plenty of room for us to grow loans that fit into our criteria.

David Darst – Guggenheim Securities

Okay. Was there any growth change in the yield relative to what rolled off from the indirect auto and what you added in the securities portfolio?

John Adam Kanas

Actually they were pretty comparable interestingly enough the average yield on the securities portfolio is just about is very close to what the average yield was on the indirect auto portfolio.

Rajinder P. Singh

Which answers the question, why we got rid …

John Adam Kanas

Why we got rid of the direct auto portfolio, but anyway, it really – that is not going to have – that didn’t really have a meaningful impact on the margin one what or the other.

David Darst – Guggenheim Securities

Okay. And what about the expenses going forward, were there any savings from indirect and is this kind of 11% growth rate that one.

John Adam Kanas

Yes there are some savings, but I think not enough to move a needle on the guidance we put out there about increase in the operating expenses.

David Darst – Guggenheim Securities

Okay got it, thank you.

Operator

Thank you for your question. (Operator Instructions) The next question comes from Gerard Cassidy of RBC.

Gerard S. Cassidy – RBC

Thank you. Good morning, guys.

John Adam Kanas

Good morning, Gerard.

Rajinder P. Singh

Good morning, Gerard.

Gerard S. Cassidy – RBC

John in the past you’ve talked about some of the opportunities that you had in New York on the deposit front you and Raj said this. Regarding the bigger banks maybe pushing some of their customers out due to the LCR and SLR requirements. In the deposit growth you saw in New York this quarter, did any of that come from winning over those bigger commercial type customers.

John Adam Kanas

No, not specifically this quarter. Gerard, but the trend is clear that the larger institutions are getting more and more discriminating about the deposits that they want to keep. It’s been made clear I think for the industry that LCR will apply to banks I guess the $100 billion up.

Rajinder P. Singh

15 over.

John Adam Kanas

15 over.

Rajinder P. Singh

And then 250 and over is 100% LCR.

John Adam Kanas

Yeah but it’s faced in over 50.

Rajinder P. Singh

Correct. Over two years.

John Adam Kanas

So, we’ve – we will continue to be the beneficiary of the facts that some of these accounts, our great business for banks like ours, and I think we will benefit more and more as the quarters go by, but this is really nothing in this quarter yet and significant.

Gerard S. Cassidy – RBC

Leslie you’re asked about asset sensitivity, if we – some of the banks had given us a 100 basis point parallel shift – the yield curve goes up by that much, it would increase net interest revenue by X. Do you guys have any of those numbers, that if we did see – a 100 basis point increase in the yield curves, what that would do to your net interest revenue?

John Adam Kanas

Yeah. Gerard we’d put that out on our queue, so, that will be coming out in the couple of weeks but, we focus a little bit more on a 200 ramp as our standard measure but, any parallel shift in the curve will have a modest improvement in net interest income. It won’t be dramatically because as I stated before we manage interest rate risk to a pretty low level, we are not betting on rates, but there will be a with any parallel shift in the curve, some increase in net interest income, and we usually put those numbers out in the queue.

Gerard S. Cassidy – RBC

Great and then just finally John, coming back to your thoughts on what you are sensing from the regulators regarding M&A, what are some of the – do we kind of come back now to trying to figure out what banks want to sell, I mean do they just come down the price or is it compensation of the senior management team leaving on the seller that plays into it, can you kind of give us some color on what you were calling the deals in the past, what you needed to do to get people to sell out?

John Adam Kanas

You and a lot of the other people of the call and I talked about this. I think probably you can use all kinds of signs here and you can look at the institutions a hundred different ways to try again the answer that. Probably the simplest thing is you got the agency.

Rajinder P. Singh

That’s it to the bit of major determinative handle our ten years. But I think that you are beginning to see in this quarter, and I believe you will see in feature quarters and on institutions as they run out of road fear which releasing assets and reducing expenses.

And I think that, more and more people are beginning to think sensibly about similar bank that you really talked to say these are buyer. Well that can be sure right in the not all buyers and we think that over the next two quarters.

When the tide goes up we’ll figure out who really supplied versus seller. But it is in odd, I think rather than the finance trying to predict what you are talking about. I think that you just imply simple economics to some of these companies and you could figure out whose got a future in the business as well.

Gerard S. Cassidy – RBC

Do you think potential sellers are being more rational on evaluation in prices obviously prices are down meaningfully from pre-crisis and many of the deals that have been last two years are been very small, but the prices have been relatively low. Do you think the mindsets of these potential sellers has been put down to the current environment.

John Adam Kanas

I don’t think so, not yet. I mean, we’re hopeful that it eventually will. I think the market has to do that for us. Right now the market particularly in the mid cap space is treating most institutions equally, the relative prices, the book multiples, and the earnings multiples are pretty similar form institution to institution, a regardless of performance over the market or that helps from feature that institution so, I think the markets going to have to start differentiating first and that make it people thinking differently, but look if you running a bank that selling for 1.8 or 2 times book and you all getting pressure from anybody whether your performance is good or bad, that really isn’t any impetus to change once life or once a world, so we continue to be hopeful that the day will come in the market differentiates these companies.

Gerard S. Cassidy – RBC

Thank you, appreciate you color.

Operator

Thank you. I would now like to turn the call over to Mr. Thomas for closing remarks.

Thomas M. Cornish

I appreciate your interest in the company, it is business as usual down here, we are a kind of over – I can’t over emphasis rather, the degree to which we are seeing an economic recovery here in Florida that seems to have lights and sustainability, as we mentioned earlier an article in the WallStreet Journal yesterday just about specific pieces of property along Brickell and we are extremely familiar with all of the developers in that area and what’s going on and I can tell you that Florida is back and there is significantly less leverage in this market than was here in 2004, and 2005, and 2006.

So, we think it is a healthier return to this level. New York continues unabated, the growth there out over the next year or two looks very impressive, our customers have never been in better shape in terms of their own liquidity and now if we had net interest margin the world would be great place.

So, I think you can expect more of the same from this company as we go forward enjoying the health, relative health of these two markets and we look forward to coming back to you in three months and giving you that report. Anybody else Raj.

Leslie N. Lunak

Thank you.

John Adam Kanas

Thanks everybody.

Leslie N. Lunak

Thank you.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Thank you.

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