BankUnited Inc (BKU) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to BankUnited's 2014 first-quarter earnings conference call.

My name is Leah and I will be your operator for today.

(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, Director of Marketing and Public Relations.

Please go ahead.

Good morning and welcome.

Is my pleasure to introduce our CEO, President and Chairman, John Kanas.

But first I would 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 terminology 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 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 a 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 of more of these 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 the 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 ended December 31, 2013, at the SEC's website, sec.gov.

John?

Good morning, everybody.

We have quite a number of folks on this morning, so we are going to give you a quick overview.

Most of you have seen the numbers that we put out at 7:30 this morning.

Obviously, and when I'm done giving my overview, I'll turn it over Raj who will then take it over to Leslie for a little bit more granular discussion.

We're very pleased, obviously.

We have been sitting here for two years telling you that our quarter-to-quarter EPS is going to decline as the FDIC asset runs off and as loans grow.

And while we still believe that is going to happen and it's coming later this year, we certainly dodged the bullet this quarter and have put up what I think are quite spectacular results.

This $0.53 is just shy of 11.5% ROE and just shy of 1.5% ROA.

We are under the same pressure that all banks are in this environment, which is certainly stressful for banks.

And you can see that our margin came down slightly again.

We have the benefit of having our margins start at a much, much higher place than any other bank.

And actually, the yield on new loans for the quarter stabilized, actually went up a couple of basis points.

So we are very pleased with that.

But this is an industry that is under a lot of pressure from the market and with interest rates, we are all looking for the elusive increase in interest rates that will have a positive impact on ours and most other banks' earnings.

And our prognosis is that that is still far in the distance.

We have had spectacular growth for the quarter, a little over $1 billion, $1.1 billion, and the distribution of that loan growth is as we had hoped and predicted and designed it to be; a little over $400 million of growth out of New York, a little under $400 million out of Florida, and about a little over $300 million coming from the national platforms.

And that only includes about $130 million, $134 million actually, in purchase resi.

So we have scaled that way back as we told you that we would, as loan demand continued.

We're so fortunate to be located in what I think are two of the most robust markets in the United States right now, Miami and Manhattan.

Raj and I drove through Miami last night.

He hadn't been here in three weeks, and I think there were three new buildings along Brickell Avenue that weren't there three weeks ago.

And I am not -- that is not an exaggeration.

I mean Miami is bursting again.

And not just with hotel or condominium projects, but with a substantial amount of user building in the middle of town.

And many of them, most of them are mixed use or commercial, partially commercial, partially residential use.

So we are seeing an amazing resurge of growth in the South Florida market.

The better part of the news is in Florida, that growth in South Florida has now started to infect the rest of Florida in a very positive way.

The Tampa market continues to be a very -- one of our favorite markets for growth in the next part of the cycle.

And moving up north in Florida into Broward County, we are seeing meaningful improvement in both real estate and general commercial activity.

Most of the growth as you see is commercial and CRE, about just under $1 billion of it, and only $85 million came from indirect auto.

Since we have been growing into our capital over the last couple of years and as we get closer to fully deploying all of this capital, we spend a lot of time now thinking about the different asset categories that we want to get bigger in and stay in or leave.

And an example of that is that we are now looking at the asset categories individually.

Right now, the line of business that is under the microscope for us is indirect auto finance.

We are fully aware that that is a low margin business, that it is also in the crosshairs of the regulators these days.

So while we look at all of our lines like that, that is the one that we are studying right now.

And as we continue to grow this way, we will get stingier with the deployment of capital against asset categories that don't make sense for us, especially when we have a choice.

And because of the diversity of the markets that we are in, we do have a choice.

Pricing, of course, continues to be very competitive, both in New York and Florida.

Frankly, mostly in the real estate business in New York City, we are seeing some new entrants into that market.

So people who haven't been in that market before who are trying to make names for themselves and develop reputations there that are throwing prices around that, quite frankly, we are not ready to compete with.

So we have chosen to turn away from some projects in New York.

We've also chosen to turn away from some projects in Florida where we are getting the same kind of pressure, although even having to turn away from some of those things, as you can see we still continue to have plenty of loan demand in both markets.

And from all -- from every angle we look at both of these markets, it certainly would appear that certainly for the balance of this year and on into next year that the vibrant growth in these markets is likely to continue.

So book value has gotten to almost $19.50, $18.80 tangible.

And our tier 1 leverage is still above 12%, risk-based is just under 20%, and total risk-based -- that is tier 1 risk-based -- and total risk-based at 20.3%.

So all in all, right where we would have liked to been if we could have written this report 90 days ago.

And while we are very optimistic about the markets in the future and we are very optimistic about this Company in general, one should not forget that that this is an industry that is fighting a number of different issues, one of which is the market which has led to unfortunately historically low margins for the industry.

And we don't see any real improvement there in sight.

And as soon as we start thinking, we understand what the Fed is saying, they seem to go the other way.

So whether that is intentional or unintentional, it is pretty difficult right now to predict the direction of interest rates going forward.

So we continue to not try to do that.

We continue to keep an extremely neutral position on the balance sheet so that whichever way interest rates go, we do not bet the ranch here.

And I remind you that we still are facing some quarters ahead of us where earnings per share will be under pressure, again depending upon how quickly loans grow and how quickly the FDIC asset attrites.

But this quarter shouldn't be taken as evidence that that is never going to happen; it is going to happen.

But it also, if our prognostications are right, it also turns around and starts going the other way in 2015 and beyond.

So we are very, very pleased with the growth.

We are very, very pleased with the profitability.

We are extremely pleased with the market's health that we operate in, and look forward to the rest of this year with enthusiasm.

I'm going to turn it to Raj right now, who is going to talk a little bit about just about everything, the deposit trends and et cetera.

Thanks, John.

I'd like to point out this quarter we will be celebrating our 5th anniversary as a Company.

We started the Company in 2009, and in May 22, we are celebrating our 5th birthday.

It is an important milestone for a number of reasons, one being that it is -- our commercial loss share agreement, which was one of the two loss share agreements we entered into with the FDIC and uncovered the smaller portion of our portfolio, the commercial loans, that ends on May 22.

As we have told you in the past, our loss share agreement was unique.

We had a right to sell any or all loans at the end of this loss share.

We exercised that right, working with the FDIC over the last few months.

We are selling approximately half of the remaining commercial loan portfolio.

The other half of the portfolio we like; we would love to keep that.

The sale went through in the last week of March.

We got a very good pricing for that portfolio.

Great news for us and the FDIC.

And the numbers generated about $11 million bottom line on a pretax basis, and Leslie will talk more about the numbers.

But going forward, the commercial loss share agreement is finished.

We have no more loss coverage.

The residential, which is a vast majority of our loans, covered loans, that runs for another 5 years.

Turning to deposits.

We grew deposits a little under $600 million this quarter.

And we expect to continue deposit growth and speed it up from here over the course of the rest of the year.

Our portfolio, our mix of deposits is now looking much more like a commercial bank.

DDAs stand at a little over 25%, almost 26%.

Money market is 43%, money market and savings and timed deposits about 31%.

So we are very happy with where we are in terms of growth and in terms of mix of deposits.

Cost of funds is now beginning to hold steady.

It is at 55 basis points, excluding hedge accounting and accretion charges, sort of non-cash charges; 55 basis points.

We will probably trend down slowly from here, but not by leaps and bounds, since we are now focused more on growth rather than just bringing down cost of funds.

With that, let me turn it over to Leslie and she will get more granular into the numbers.

Morning, everybody.

Kind of hit the high points.

Our loan growth as John mentioned was very good for the quarter, which led to an increase in the dollar amount of net interest income, although NIM itself remains under pressure.

Down to 5.05% for the quarter.

However, that is actually a little better than what we had predicted, held up a little stronger than we thought.

We still stand by our guidance for NIM for the year that we've provided to you previously.

As Raj said, the unusual transaction for the quarter was the commercial loan sale, which had about an $11 million pretax impact on earnings for the quarter.

The provision that you see corresponds primarily to loan growth, nothing else really unusual going on in there.

Asset quality remains very strong with our nonperforming loans to total loans in the noncovered portfolio at 0.24%, and allows coverage of nonperforming loans at over 300%.

So the portfolio continues to perform well.

Non-interest income continues to be impacted by amortization of the indemnification asset.

We currently expect that to probably hold about where it is through 2014, and then maybe start to trend a little lower.

Non-interest expense is, as we have been guiding you in the past, is starting to finally reflect, particularly in the comp line, the full people impact of the expansion into New York and the teams that we added last year that are generating the loan growth.

And you are seeing that pretty much fully reflected now, as well as the impact of our merit increases and payroll taxes on the first quarter.

I don't expect further material increases in that line, maybe just a gradual -- little bit more of a gradual uptrend through the year.

Reiterate our expectation that EPS will trend down the remainder of this year and then up again in 2015.

At this point, I will turn it back over to John.

Do you have anything else to say before we go to questions?

I think the point we like -- I think Raj was saying that we've beat the estimates 6 out of 8 quarters.

Don't get the idea we are sandbagging here.

We are doing the best we can to predict quarter to quarter, and some of this is somewhat unpredictable.

So you shouldn't have the opinion that when we say that EPS will come under pressure as a result of rebalancing the balance sheet that it is not going to happen; it will.

So let everyone be conscious of that.

We take seriously our commitment to the regulators, because this is a growing company and we are busy continuing to build the back room and pay a lot of attention to what regulators like to call operational risk, and spending money and time and bringing in our best people to make sure that the Company keeps up with -- that the back office of the Company keeps up with what is going on in the front.

So we do expect a continuation of growth at approximately these levels out into the future.

We will continue to invest in the infrastructure of this Company, both in human beings and technology and in process, so that we continue to keep our word to the regulators that as we grow that we will exercise due care in making sure that we keep up in the back office.

So having said all that, love to take questions.

(Operator Instructions) Brady Gailey, KBW.

Hey, good morning.

You know, when you look at the new loan yield quarter to quarter, it has been coming down, I don't know, around 10 basis points each quarter over the last year.

Then it was actually flat this quarter -- it was actually up 2 basis points to 363 from 361.

Are you all seeing better loan pricing or stabilization of loan pricing?

Brady, that is more a reflection of our exercising care as to what kind of loans and what type of pricing that we are willing to engage in.

Fortunately for us, both these markets are growing at such a pace that we can be fussy about the loans that we make and the loans that we pass up.

So we are passing up so loans for rate that are otherwise very good credits, but frankly don't make sense to us at what we are seeing.

So we are able to pass up those loans that don't meet our pricing standards and still grow at this pace, which I think is probably the best news.

And Brady, that yield is really converging more on the whole -- the yield on the overall new portfolio is much closer now to what we are putting on currently.

And it is a little bit less impacted by order stuff now that may have been at a little bit higher yield as well.

Ken Zerbe, Morgan Stanley.

Great, thanks.

I guess my first question for you guys, John, you have talked obviously a lot on this call about the magnitude or the pace of EPS declining over the rest of the year.

Do you guys have any estimates for how much of a decline that you would expect over the next few quarters in EPS?

Don't read me wrong there, my comments aren't intended to stress magnitude.

I'm just sensitive to the fact that we keep telling you that it's going to happen, and it hasn't happened yet.

And I don't want anybody to think that it is never going to happen.

Don't think we are lying to you.

Yes, don't think we are lying to you.

We are not changing the guidance.

No, we are not changing guidance here.

So we think guidance is on the money.

So I just want to remind people who may not have heard us say it before that this is still out there.

And so while this is a great quarter and we expect guidance is accurate for this year, no, don't misread it.

This is not -- I am not sending you a signal here that there is more magnitude than we thought.

Gosh, understood.

Okay, then second question.

When you look at second quarter, I think I heard that you are done with the commercial loss share.

Is there any other unusual items that we should expect to see in the second quarter based on the expiration of the loss share?

No.

No.

It's done.

Perfect.

Okay, thank you very much.

One of the benefits, just to finish that -- one of the benefits and it sort of goes a little bit back to Brady's question; one of the benefits of having several different national platforms and two very, very large markets that we serve and being a relatively small institution, we can be pretty fussy about the loans that we make.

And we can be fussy about sort of the guidelines that we draw in terms of pricing, and that is helping us here.

Robert Placet, Deutsche Bank.

Hi, good morning.

I was just curious if you could provide any additional color on pricing competition and any loosening of standards for the markets in general for both New York and Florida, maybe say versus last quarter.

I know you guys said that you are maintaining your credit standards, but just any market color in general.

Yes, we saw -- if you were to compare quarter to quarter, I think we probably said to you last quarter that pricing was better in New York than it was in Florida.

That was true last quarter.

This quarter it is about even, maybe even a little tougher in New York.

The glamour of Manhattan and its robust economy has attracted a lot of newcomers to that market.

Now remember, it is a $1 trillion deposit market, so a couple of small banks wandering into New York making loans at lower rates isn't going to change the market any.

But it does -- but there are people there that are doing things we wouldn't do in terms of rate.

So we are backing off a little bit on that.

But as I said, these markets are so big that there's still plenty of room for us to do all we want to do at our standard levels.

But no, I wouldn't -- there is not much of a change.

We are not seeing anything crazy.

I mean we are not seeing people that are really modifying terms and structure in any dangerous way.

It is mostly rate.

There's a lot of people doing IOs for certain periods.

We have done some ISOs for selective customers, particularly in New York because that is the market in New York.

But some people are going a little bit too far with that, in our judgment, but it is about the same as it was.

I think look, everybody, is scrambling here to put assets on the books.

So they are taking as low a yield as they can stand, and you can see by the industry what has come out so far this quarter that I think that net interest margins on a consolidated basis are as low as they have ever been in recent history.

So just a tough time.

Okay, thank you very much.

Matthew Clark, Credit Suisse.

Good morning, guys.

I think this past quarter, pricing in New York multifamily became more competitive.

Can you give us -- I know overall, yields ticked up, but can you give us a drilldown to multifamily in New York and kind of what you're seeing, what you're doing pricing wise, and relative to the market?

Yes.

On a day-to-day basis for this past quarter, there has not been a material change from January to March.

As I've said before, there is some new entrants into the market that are trying to buy their way in on some of the smaller deals, that are upsetting a little bit the balance of pricing.

But it is not -- honestly, I probably shouldn't even mention, not even -- it is not big change from what we saw frankly getting close to the end of last year.

And with regard to multifamily particularly, it is about the same.

It has been tough since last fall, and it is about the same.

Okay.

And just switching to expenses, I think this quarter looks like -- I think you had previously guided at 10% comp expense growth for the year.

It looks like you're running a little bit ahead of that.

Are there any -- can you quantify maybe some seasonal adjustments that might occur in 2Q?

I mean do you still believe that that run rate of $49 million could still gravitate a little bit higher, or could we step back a little bit here in the second quarter?

I think it could gravitate a little bit higher, Matthew, but probably not materially so.

You know, one of the things you see in the first quarter is the impact of payroll taxes and whatnot and all our merit increases from last year kicking in, and that will stay with us throughout the year.

It could gravitate a little higher, but I don't expect it to be materially.

Okay.

And then with the growth out of New York being $400 million, it seems like that is partly seasonal.

Could we see that start to accelerate throughout the balance of the year?

And it doesn't look like -- you're relying less on resi purchases.

So do you believe that we could step up that $1.1 billion or so run rate going forward?

It is very hard to say.

As I said earlier, we are trying to cherry pick what we want to do here.

You know, we have said $4 billion or $5 billion worth of growth for the year.

We are on track, basically, for that kind of growth, and it is going to vary from quarter to quarter.

Sometimes these closings slip over from the 30th of the month to the 1st of the next month.

But we are -- I should say this, we are controlling our growth.

I mean we could be growing, frankly, a lot faster than we are.

We have far more loan demand that we can swallow.

So we are going to continue, particularly with rates at these levels, we are going to continue to govern what we do.

Got it.

Thanks, guys.

David Darst, Guggenheim Securities.

Good morning.

Could you talk about the national diversification, and what is the sustainability of the capacity to grow that?

And then is that also a benefit from an asset sensitivity perspective relative to booking a lot of 5-year loans at lower rates today that could have some issues in 24 or 36 months?

You know, the national portfolio is, as it stands now, at a little over $1 billion.

About half of that approximately is in our municipal finance subsidiary, about $300 million in our small business lending subsidiary, and the remainder in our equipment leasing company.

All of those businesses, I think the growth trajectory that we have been seeing is sustainable.

I think this quarter may have been a little bit of seasonal low for some of those businesses.

From a rate perspective, obviously if rates go up, the yield curve steepens, we will see new production come on at a higher rate.

The small business and equipment financing businesses tend to be some of the higher-yielding portfolios that we have anyway, just because of their nature.

Probably more of those portfolios tend to be more fixed than floating, but they are shorter term for the most part.

So I think, yes, we would see some benefit from rate in those portfolios, not to any -- you know, I wouldn't say we'd see a lot more benefit in those portfolios than we see anywhere else as rates go up, but we will see some benefit.

And the market is pretty big.

Oh, yes.

Right, right.

These are very small operations, and there is a lot of room for growth there.

Absolutely.

So if I take a very long-term view of 3, 4, 5 years, this could grow to many times its size.

We just don't want it to be too large a part of the bank.

It will always be a small part of the bank, but as the bank rose there is -- from a market point of view, there is a lot of headroom here.

We could grow the business quite a bit.

You have all heard me say this before, particularly those of you who knew me in my prior life.

It has never been our strategy to dominate a market.

It has always been our strategy to -- an old bank analyst friend of mine used to say, what I want is a little piece of a big thing for a long time, and that is us.

And we have a little piece of several big things, and we intend to do that for a long time.

And that gives us pricing power and the ability to discriminate in the kinds of assets we put on the books, and to exercise care if one market is looking weaker than the other.

So it is sort of the best of all worlds here for us.

Okay, and then Leslie we are seeing some variability in the tax rate.

Do you have any guidance for what we should look for for the year?

I do.

We had an adjustment this quarter that related to some changes in New York State tax law that were enacted during the quarter.

I think you can expect an ETR on the whole of between 36% and 36.5%.

Okay, great.

Thank you.

It actually came down a little in New York, didn't it?

Yes.

A little bit of a benefit.

New legislation in New York.

A little bit of a benefit this quarter in New York.

Gerard Cassidy, RBC.

Thank you.

Good morning, John and Leslie.

I had to jump off for part of the call, so I apologize if you have already addressed these answers to these questions.

But first, John, on the leverage ratio where do you think that should get to before you have to start to maybe consider putting some more capital into the Company?

We have been saying 9%'ish, certainly starting to think about very hard in the 9%'ish range.

It will also depend on the velocity of our growth when it gets there.

If we are seeing growth that is even -- that is outstripping our expectations at that time, we might start earlier than 9%'ish.

Certainly by 8.5%, we are into it.

And I don't see any reason why, given where we are in these markets, why we shouldn't work our way down to that level as we said in pretty short order, sometime in 2015.

And Gerard, some of it is also a little market driven.

We will be opportunistic based on where capital markets are at various times.

We certainly don't want to wait until the last quarter when we need to raise it, because nobody wants to take that risk.

So we will start paying attention to where the capital markets are later this year, and keeping our eyes and ears open.

And when we find the right opportunity with the right instrument, we will do something.

The 8.5%, 9%-ish level that you have identified as the point where you would choose to look to raise capital, is there any thought of allowing that to go lower, since I assume your regulatory requirement, you're obviously not part of those, the SLR.

So the 3% is obviously the number on leverage where -- the minimum you have to be at.

But what is the focus on the 8.5%, 9%?

In what world?

Not in our world.

In what world do you think we could go to 3%?

I'm going to answer the question.

Look, we understand that because this Company -- look, there is a lot of regulatory oversight today for all banks.

When you're running a bank that is growing at this rate, regulators are paying attention to what we are doing.

And they are being cautious as we are being cautious and holding us, I believe, that a bank that is growing like this to a higher standard than a bank that is not growing, that is in a part of the country that is not growing at all.

So we would err on the side of caution here by raising more sooner than pushing our luck with the regulators and going too far the other way.

Okay.

In regards to the loan growth in the quarter, the New York portfolio, the growth that you show there, how did that break out between traditional commercial real estate versus C&I?

Hold on a second.

You know what, Gerard, I don't have it handy, but if you want to give me a call later I will give you -- I will run through that with you.

Yes, I would be guessing.

It's certainly weighted toward commercial real estate.

It is, but I don't have the numbers right in front of me.

And that would include multifamily, too.

So we will get back to you.

Okay.

And then in terms of in the national portfolio, you mentioned this quarter that your consumer loans, which are primarily indirect auto, grew by $85 million.

And that was down quite a bit from the fourth quarter number of $180 million.

Was it your choice to pull back or is it just lack of demand?

What caused the rate of growth to slow?

That is indirect auto.

I think that is a market where we're being a little bit cautious right now, Gerard, because of both yield and regulatory compliance considerations.

So I would say it was more our choice than a lack of (multiple speakers.

I'm not sure whether you were on during that part of the Q&A, Gerard, but one of the comments I made is that we are looking particularly at that business.

And as we begin to deploy this capital, we are getting more and more discriminating about where we are willing to put capital to work.

And that is one of the businesses that is low-margin and in the crosshairs of the regulators and something we are giving a lot of -- we are giving a hard look at.

Okay, and final question.

Raj, in the past you've talked about your cost of funding coming down.

And it fell again, which is great.

Where do you think the cost of deposits could eventually bottom out to?

I think you mentioned it was about 60 basis points this quarter.

How low can that go from here?

Gerard, honestly, I don't know.

What we do know is we push it up and to the point where it is too painful to push it.

So we are still cutting rates, but we are doing it much slower because right now, priority number one is to grow the deposit base.

Roughly -- the true cost of funds where we are paying on the depositors is at 55 basis points.

So take out the accounting noise, you come to about 55 basis points.

It feels like a good place.

It will probably go down.

It is not going to go down to half that.

But I am really more focused now on growing deposits down, on shrinking the cost of funds, which has been the battle cry of the last four or five years.

Great, thank you.

(Operator Instructions).

Herman Chan, Wells Fargo.

Thanks.

Another question for Raj that follows up on the previous comment.

You mentioned a pickup in deposit gathering going forward.

Can you give some color on the drivers of that?

A lot of our deposit growth even this quarter did come from New York.

So New York is doing very well.

We invested very heavily in people.

I wouldn't say in branches but really in people, and they are bringing in a lot of business.

It comes in erratically because these are relationships that take a long time to bring over, so it is a little harder to predict.

Florida, it is a combination of consumer as well as commercial growth.

And on the consumer side, I hate to say it, but it is still a price game.

If you advertise and you put a decent price out there, money comes in.

And the sensitivity is within 5, 10 basis points, you can move the needle quite a bit.

On the commercial side, the story is similar to New York where we are using our incentive plans and incenting our salesforce, both commercial lenders as well as private bankers who bring that business in.

And national businesses, obviously, there is no deposits.

So it is a combination of those things, and it is a bigger focus for us since last summer than it had been before this.

So there were some changes that we made to the incentive plan, in fact, some that we're making even as we speak, which will have an impact on behavior inside the Company over the rest of the year.

Herman, our strategies are very different between Florida and New York, and Raj is absolutely right.

So the account size tends to be larger in New York and the growth there tends to be driven by relationships.

We have hired teams of relationship bankers and we will hire more relationship bankers, but not necessarily more branches, at least no considerable number of branches.

So one of the things that gives me comfort is we are highly diversified, not only in the asset side of this balance sheet but also on the liability side.

So we know that by turning the dial a little bit up in Florida on these 100 branches of consumer loans -- I mean the consumer deposits -- we can bring deposits in over the transom by adjusting rate.

And in New York, we just hired more relationship people that tend to bring in these larger commercial relationships.

So right now, it is a combination of both things.

But I think Raj is right, our forecast here for growth over the 1 1/2 years would certainly imply that we are now starting to pay more attention to funding and to deposit growth, and you will see that.

Right, understood.

Just following up on that then, your loan to deposit ratio has advanced to about 90% versus 67% a year ago.

Given you're expecting some pickup in deposits, how do you think that ratio sort of shakes out over the next couple years?

Well, I'm not crazy about going over 100%, I can tell you that, although lots of banks operate comfortably in that range.

So between 90% and 100% is sort of what our target is.

Great, thank you very much.

Thank you.

I would now like to turn the call back over to Mr. Kanas for closing remarks.

So, in summary, a great quarter for us.

We are very pleased with the results.

Both of the markets -- or all the markets that we operate in are bouncing back impressively.

Every indication is that safe growth in both -- in all these markets remains ahead of us.

Asset quality, which we really haven't talked about, as you can see has remained I think stellar.

And we don't see any erosion of asset quality in the forecast.

What you are not seeing in this bank as you see in every other bank is a lot of banks this quarter have made it by reducing non-interest expenses and by returning reserves.

And this Company is just the opposite.

We are not returning reserves, we are building reserves, and we will continue to build reserves as we build the size of the loan portfolio.

And we are going to continue to invest in the Company as we go forward because we have got great momentum, and we do not expect to interrupt that momentum.

So it is one of the few bank growth stories in the country, and we are very pleased that we are where we are.

And if we had to write the script for this a year ago, this is where we hoped to be.

And we look forward to the rest of this year and on into next.

Certainly these markets, we talk a lot about Miami because Miami is a scary market.

South Florida is a scary market, and everyone knows that these kind of markets that are so hot tend to get overblown from time to time.

So we spend a lot of time -- and sitting here with me today is Tom Cornish who has been recently hired to run Florida for us.

Tom and I have been spending a lot of time recently with some of the people who are plugged in intimately to what is going on in the building cycle here in South Florida.

And we are hearing all good things, and that is that a lot of pent-up demand, a tremendous number of users coming to the market, not seeing any overleveraging going on.

The banks are not being overly aggressive as they once were.

Lots of -- I mean this all started a few years ago when you heard me talk about the excess supply of condos, and now the Latin American community came in and swept them up.

Well, it is not just the Latin American community anymore that is fueling the growth of South Florida.

Other parts of the country have noticed it and big money is finding its way to Florida from the Northeast.

Another winter like this and I think New York will be empty and Florida will be overflowing with people.

But every indication is that this market is going to remain strong for the foreseeable future.

Of course, New York is New York, and it is so big and so strong that for a small player like us, we share that market as you know with several other banks who do what we do: M&T, Signature and a couple of others.

And there is room for all of us to grow at these kind of levels and hardly even be noticeable.

We like that role, we like that position that we are in.

So we don't get unduly influenced by strong movement in any one of these markets, and we have a lot of vision forward in these markets to our sources and our contacts.

Tom has spent 25 years here banking in Florida, and knows everybody who is everybody.

So we have got even a better view into what is going on.

John Bohlsen who is not here with me, but he is on the call; John has been lending money in New York City for 35 years with me, and we know everybody who is everybody in that market.

So we tend to get early looks at what is going on from the people that we know intimately in those markets.

So we're very happy with that position and very happy with the results to date.

I am done unless anyone else has a question?

Thank you very much for calling in and talk to you in 90 days.

Bye-bye.

Thank you.

Thank you for your participation in today's conference.

That does conclude the presentation.

You may now disconnect, and have a great day.