Bancorp Inc (TBBK) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2018 The Bancorp, Inc.

Earnings Conference Call.

(Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to turn the call over to Mr. Andres Viroslav.

Sir, you may begin.

Thank you, Victor.

Good morning, and thank you for joining us today for The Bancorp's First Quarter 2018 Financial Results Conference Call.

On the call with me today are Damian Kozlowski, Chief Executive Officer; and Paul Frenkiel, our Chief Financial Officer.

This morning's call is being webcast on our website at www.thebancorp.com.

There will be a replay of the call beginning at approximately 12 p.m.

Eastern Time today.

The dial in for the replay is (855) 859-2056 with a confirmation code of 4846178.

Before I turn the call over to Damian, I would like to remind everyone that when used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated or suggested by such statements.

For further discussion of these risks and uncertainties, please see The Bancorp's filings with the SEC.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

The Bancorp undertakes no obligation to publicly release the results of any revisions to forward-looking statements, which may be made, to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Now I'd like to turn the call over to The Bancorp's Chief Executive Officer, Damian Kozlowski.

Damian?

Thank you, Andres.

Good morning, and thank you for joining us today.

My name is Damian Kozlowski.

I'm the CEO of Bancorp and the President of The Bancorp Bank.

I've been in these positions since June of 2016, and I welcome you to our first quarter 2018 earnings call.

The first quarter was a great start to a new year.

Bancorp earned $0.25 a share on net revenues of $59 million and expenses of $39 million.

The commitment of our team to execute on our business plan is having a positive impact on our operating performance, and we continue to show momentum in our results.

Along with revenue and client progress in each of our business lines, we have continued to strengthen our overall platform with the goal of greater efficiency and productivity, enhanced by a higher level of risk management across our entire enterprise.

I would like to highlight 3 takeaways from the first quarter in more detail.

One, we saw positive signs of business momentum.

Each of our businesses showed positive first quarter trend led by a 48% increase in security-backed lines of credit interest income over first quarter of 2017 to $6.5 million.

SBLOC period-end balances grew approximately $100 million or 15% year-over-year, and Small Business Administration loans increased approximately $23 million or approximately 6% over the linked quarter, which represents a 22% annualized growth rate.

To provide increased information to investors, we have included in the earnings release a quarterly business line summary to detail our progress through revenue and other business metrics.

I hope this quarterly summary will be helpful in assessing our business and financial performance.

In addition, we will be updating our strategic business review on our website.

We will be reassessing our financial targets based on our performance and also including a new section that goes more in depth into our payments business.

As you know, this business drives our fee income and provides most of our deposits.

Number two, we continue to manage expenses proactively.

Noninterest expense increased 3% in the first quarter 2018 compared to first quarter 2017 while revenues increased 20%, showing continued expense control.

Additional expense opportunity is possible as the company is currently engaging in a reengineering process that could result in either lower costs or greater revenue productivity.

Our first major reengineering effort was creation of financial crimes risk management center of excellence.

This center incorporates all BSA/AML activities in our offices in Wilmington, Delaware, with finance staffing and processes.

The efforts should help our ability to grow in the future.

In addition, we have also provided in earnings announcement increased expense detail in our expanded income statement.

I hope this information, along with the quarterly business summary, will be helpful in assessing our business and financial performance.

And number three, we are investing in creating a truly advantaged platform.

Most of 2017 was dedicated to derisking the institution, creating new tools to remediate improved risk management and compliance and the reduction of nonproductive and redundant expenses.

While we continue to face some legacy challenges, which remain a key focus of management, increased effort has been given to unlocking the power of the organization through innovation and building centers of excellences to transform our platform through reengineering.

The first quarter is just the beginning of what we believe will be continuous building process in 2018 to create a better company, improving financial results.

As I've stated in previous calls and our 2017 annual report, we want to achieve extraordinary client and financial success through business and organizational innovation in a safe and sound manner.

Now before I turn it over to Paul, I want to address a couple of credit-related issues, one in Walnut Street and one in discontinued operations.

Walnut Street, to give some context, when I arrived in mid-2016 had about $174 million on our balance sheet and today it stands at $70 million.

Last year alone, we've reduced the exposure 44% with no meaningful adjustments.

We do have an adjustment in this quarterly update of $1.1 million.

The primary drivers of that was a $400,000 settlement as we continue to work down the portfolio, and number two, there was a change in the discount rate used in the model due to market -- changes in market rates.

This is set by a third-party, reviewed by ourselves and our accountants.

Second, I want to talk about discontinued operations.

In that portfolio is a hotel property in Fort Lauderdale that was 80% complete.

There -- once it became delinquent, there was a lot of interest in the purchase of the note and we received about 10 bids.

Last night, we signed a purchase sale agreement for the full principal amount and that transaction should close this quarter.

So that's good news on the credit front.

Now I'll turn it over to our CFO, Paul Frenkiel.

Thank you, Damian.

Consistent with our business plan and budget, Bancorp increased its profitability over first quarter 2017.

Net income from continuing operations was $14 million compared to $6.3 million in first quarter 2017.

The quarter reflected larger-than-expected $11 million gain on sale of loans into a securitization, which was partially offset by incentive compensation and other related expenses.

Quarterly results reflect continuing revenue growth in Bancorp's major lending lines.

A $5.2 million or 21% increase in net interest income compared to first quarter 2017 reflected double-digit growth in both security-backed lines of credit, or SBLOC, and SBA loans.

Interest income on SBLOC increased $2.1 million or 48% between those respective quarters while interest on loans held for sale into securitizations increased approximately $2.3 million.

Because the securitization closed at the end of March, related interest income will decrease in the second quarter of 2018.

In addition to loan growth, the increases in SBLOC and other loan interest income reflected the impact of the Federal Reserve Bank's 25 basis point rate increases in March, June and December of '17 and March 2018.

Our largest percentage increase in loan balances was in SBLOCs and SBA loans, each of which grew 15% year-over-year.

The SBLOC portfolio is currently yielding approximately 3.5% while SBA loans are yielding in excess of 5%.

Period-end loan totals, excluding loans held for sale and securitization, grew 16% year-over-year.

The lines of business comprising those totals have historically had low charge-offs.

Overall cost of funds grew 17 basis points to 52 basis points in first quarter 2018 compared to 35 basis points in first quarter 2017, reflecting only a partial adjustment of rates on our prepaid card and other deposits due to Federal Reserve Bank rate increases.

Prepaid card deposits are our largest funding source and should continue to adjust to only a portion of future increases in market rates.

The interest margin has benefited accordingly as rates on variable-rate SBLOC, SBA and other loans and investments have adjusted more fully to the Federal Reserve rate increases.

These factors have had a positive impact on the net interest margin, which was 3.12% for the quarter compared to 2.0% (sic) [2.70%] in first quarter 2017.

The increase compared to the prior year reflected the impact of the Federal Reserve increases and the timing of the sale and securitization of higher-yielding commercial loans.

The 3.12% net interest margin for the quarter was comparable to the fourth quarter net interest margin.

Prepaid card accounts, in addition to being our largest funding source, are also the primary driver of noninterest income.

Related fee income increased 5% in first quarter 2018 compared to first quarter 2017 while the total amount spent on prepaid cards or gross dollar volume was comparable at approximately $13.4 billion.

While there was organic growth in the account base, that growth was offset by the exit from one of our processors of a large tax preparation software company.

Noninterest expense increased $1.3 million or 3% over first quarter 2017.

Data processing expenses were $1.5 million lower than in first quarter 2017, and additional expense reduction opportunities in that and other categories continue to be pursued.

Net income also benefited from the application of lower federal income tax rates on higher pretax income.

At quarter-end, the consolidated leverage ratio stood at 7.7%, which compared to 7.9% at year-end 2017.

The lower ratio reflects the impact of seasonal deposits, which have historically reduced the leverage ratio in the first quarter of each year.

Continuing loan growth, expected Federal Reserve increases and noninterest income increases, all taxed at a lower rate, should continue to support earnings and capital accretion.

That concludes my comments, and I will turn the call back to Damian for questions.

Thank you, Paul.

Operator, please open the lines.

(Operator Instructions) And our first question will come from the line of William Wallace from Raymond James.

Thanks for the update on that discontinued loan, that's great to hear.

There was a lot of interest in valuing the property.

So we're glad to, in the last moment before we had this call, to have a purchase sale agreement signed.

Yes, so am I. Can we get an update on the Florida property?

Last call, the expectation or what you were hoped to close in April, can you update us on that?

Yes.

It looks -- everything's going well.

There's a lot of money behind the deal.

They're working with the town.

They are figuring out how to phase the project.

So we still expect to call -- a close in the third quarter.

And right now, we're making money on the mall, so we're cash positive on the mall.

So we've -- I think the project will continue to be scoped out.

And as the developer decides on how to phrase it with the town, we will ultimately close the transaction in the third quarter.

Okay, great.

And then as I think about the Walnut Street, the roughly $800,000 related to the discount rate change, is that -- would you anticipate that the discount rate will change every time the Fed moves?

Or is there a different rate that drives the calculation of what the discount rate should be?

Different factors.

Wally, it's really unknown.

It depends on market conditions and we have no way of knowing what the spreads are going to be.

The spreads have -- over the last year, the spreads -- corporate spreads have contracted.

They may stay where they are, they may contract further or they may widen.

So we just have no way of knowing that.

Okay, fair enough.

But we should watch the corporate spreads if we want to try to track it ourselves?

Yes.

Okay.

On the loan sales, was that -- is that one sale?

Or did you execute multiple sales this quarter?

No, it's just -- no, it's the floating rate securitization.

It was about $300 million and it goes to, yes, institutional investors.

We did get much -- after 2, this is our third one.

We had a lot of interest not only in all the tranches, but also in the equity slice tranches and stuff.

So it was a very successful securitization, and it's our third.

So we're well known in the market now.

Okay.

So 2 questions around that.

One, can you quantify the interest income from those loans that was in the second quarter -- or in the first quarter?

Or said another way, can you quantify how much the interest from those loans benefited the margin?

Well, the only way we could do that is do the -- at the start, you have to have the average balance and then times about 6%.

So do you have a good way of doing that?

Well, actually in my comments, Wally, if you look at quarter -- first quarter 2018 to first quarter 2017, that's actually why I cited that the interest on those loans increased by approximately $2.3 million.

The timing of the replacement of that interest is, again, an unknown.

We just can't predict when loans will close and when we'll ramp up.

But as I said in my initial comments, we know that because the securitization happened at the end of March that -- and because it takes time to ramp up and loans to fund and so forth, that interest income will decrease in the second quarter and -- but it'll keep increasing, a relative decrease in the second quarter, but it'll keep increasing up until the end of September when we're planning the next securitizations.

Right.

And these will come -- these are coming on around 6% now?

Lower now because -- a little bit lower because spreads, corporate spreads did, as I mentioned before, contract.

So there's some -- a little bit lower than that.

Okay.

And then as we look at the associated expense with these sales, I'm just trying to think about how we look at a quarter's expense run rate when there's not a loan sale in it, and thank you for providing the line item detail on some of the expense lines.

Is maybe -- do I think about...

Our run rate is more like $36 million -- $35.5 million, $36 million, [under] $39 million.

So that's the associated cost and a lot of it is driven by compensation.

So you see the compensation line is up, that's where it's coming from.

So we're still well on track with where we wanted to be on the expense side.

We're happy where we are there.

To get a -- like I've said before, to have a double, 20% revenue growth and just 3% expenses, that's a jaws we can live it with.

But if it's 10% growth, we would probably have negative expense growth.

Right, right.

Okay.

And then the tax rate came in around 28%, Paul.

I believe we were talking about 26.5% last quarter.

Is 28% the range we should be using now that we've had a quarter to figure it all out?

Yes, spread through this year, I think, yes.

I think for this year, yes.

Okay.

And then my last question before I let someone else hop on, can you talk about just progress on your leverage ratio target?

Yes.

As I mentioned before, we had a slight decrease in the first quarter because we have the seasonal deposits, which include gift cards -- gift card balances and tax refund balances so we won't have that in the second and third quarters.

So we expect the positive -- plus we'll have additional earnings in the second and third quarters, which should continue to drive the ratio.

Again, we're looking -- the short-term target is 8.5% and we expect to get there at some point in 2018.

And on that, if the first quarter is always -- first and fourth quarter, right, usually you see pressure as those deposits start to come on.

Will the first and fourth quarters always be a little bit lower and the second and third kind of be at or above?

Is that how should we think about?

Well, it's depending on the timing of securitization.

But definitively, you can always say that the fourth quarter will either be equal to, if you had a greater earnings, or less.

But generally, the trend is up.

I think if you look over the last year, you'll see the trend has been going up.

We did have that deferred tax asset adjustment based on the tax rates.

But with the lower tax rates, obviously, we're creating more capital.

But I think you'll, like Paul said, you'll see an 8.5% somewhere in the third quarter potentially like we said.

I don't think that's changed.

And then hopefully by the end of the year, we'll be very close to 9%.

And our next question comes from the line of Matthew Breese from Piper Jaffray.

Just on the securitization, just wanted to get a better sense the nuts and bolts there.

In general, when you do a securitization, what's the total amount of loans that you're looking to package up?

Is it $200 million, $300 million, $400 million?

Yes, $300 million.

We have -- there's a whole process that you put in place.

We have an investment banker represent us from Wells Fargo who's experienced in this area.

They go into a securitization trust and then securities are issued.

We do not service the loans.

So there's different tranches to institutional investors and then there's the, obviously, the lower-grade paper for people who want access spread on the bottom of the transaction, but it's a very similar to many other types of CLO-like transactions.

All the loans are floating rate.

So there are 3 years with some renewal options in there.

Repositioning of properties, there's just a good institutional market for that paper.

Most of the people who are issuing those securities are not banks.

Unlike the CMBS market where big banks dominate, this kind of floating rate market is, there's a lot of funds and other types of institutions in there.

And as a bank, maybe there's a little bit of strength in our credit risk management today in our underwriting process and maybe that's why we've seen a good cadre of investors in the securities.

All right.

And then per that $300 million that gets securitized, typically what is the expected gain on that?

Is it a percentage or a flat fee?

It's wide based on a lot of things.

There's levels that are set by rating agencies on the different tranches.

And then there's market spreads when we did the loans and what the spreads were at the time.

$5 million is, we believe, an average gain.

But we've been proved wrong twice already.

So our first gain was around $4 million, the second one was much more than that based on the spreads.

So it -- I think $5 million is a good way to look at it.

But if we think it's going to be higher long term, we will let you know.

But we were again surprised by the -- how much excess spread came out of the transaction because the levels that were set in this market spreads and hopefully we can maintain that.

But I think a conservative estimate is $5 million, maybe $7 million.

But we've had 2 outsized gains, so I've been proved wrong twice.

We're not doing it on purpose, trust me.

We're trying to give you an accurate information.

We were pleasantly surprised.

Yes, again, that's a third-party setting, Matt.

It's reviewed by us obviously and everything, but there's a third-party involved in estimating the gain and everything.

Right.

But if we think about it on like an annual basis, so stepping back and considering a longer-term kind of view, $5 million to $7 million twice a year, that'd be good kind of place to be.

Yes.

Over time, what will probably happen, I don't think we'll have $3 million, probably not even next year, but we might creep up a little on the size.

So as our capital increases, we might have a $350 million securitization, which will improve the economics and improve the gain.

Right now, it's probably around [$300 million to $325 million].

You'll have 2 securitizations probably this year and next year, a gain of $5-plus million is a good way to look at it.

And the loans like Paul said, they've been around 6%, but depending on the corporate spreads where they are, they tend to be -- they go around the 6%.

They could be a little lower, they could be a little higher.

Right now, it's a little bit below 6%.

But still -- and there also -- the risk -- we keep a slice of the security where the gain is present.

But we got all this credit risk off our balance sheet at a period where the loans are highly unlikely to have any problems, which is the first 3 months of any of these projects.

Understood.

No, that's very helpful.

Okay.

And then the hotel property with the purchase agreement.

What was the size of that?

$38 million.

It's the biggest loan in discontinued.

We're working with the purchaser.

So what'll happen is about $18 million will come off.

We will provide credit, and that credit is not only going to be backed by the full -- all the collateral, but also additional guarantees by the purchaser.

So it's going to be a very safe loan.

We'll go down about $13 million and then we'll have a bridge loan in place for the acquirer that'll be extremely low risk.

Okay, okay.

So $38 million out of discontinued and then...

$38 million.

I'm not sure where you'll put the $25 million, but the delinquency will end, so you'll see that come off.

You'll see it go down by approximately $13 million.

And then we'll have a new loan, I think it probably will be booked in discontinued.

But it'll be a safe and sound -- it'll be a safe, and we believe, a very safe loan.

And it's only up to a year.

It's only as a combination for them to finish and reposition the property.

The people who are buying the property are extremely experienced and have great knowledge of the marketplace and knowledge of the hotel industry.

And they are and we are very excited and so is the town, I think, of Fort Lauderdale that they've decided to build the property.

Okay.

And so that, in combination with the mall, I mean, we're looking at over the next 6 months potentially something north of $70 million coming out of discontinued, right?

Well, you have $15 million from the mall and $38 million -- $37 million, $38 million from the hotel.

Okay.

Okay.

Sorry, my numbers are a little off there.

Okay.

That's a big move because we're at $195 million.

As you know, people who know the history we've have dramatic -- since 2 years ago, we've really focused on this.

I think we're at $195 million now.

So obviously with Walnut Street going down 44% in the year and just continue to be a little bit less last year.

But we're being very aggressive.

It's very -- compared to, obviously, all the work we've done over the last 2 years, just the total balance is a lot lower.

But we've, obviously, put a lot of credit risk management in place and we're being very transparent about it as much as we can be and making sure that the market knows that there are certain adjustments.

If you think about last year, Matt, the good way to look at it because they're the same -- the source are the same loans.

They're different loans, but they're in the same portfolio they came from.

So if you put Walnut Street, whatever that Walnut Street adjustment, together with discontinued together, gives you a good idea of what's going on.

Last year, we had, if you put those 2 together, we had a substantial gain on those 2 portfolios, not a loss.

Right, that's right.

No, that's very helpful.

Okay.

And then I've asked this question before and I know it's incredibly difficult with some of the ins and outs of the securitizations, but I would love to get just a better feel on the margin outlook and I don't know if it's per Fed hike or given the current yield curve environment, what you think the outlook on the margin would be over the next 12 months.

I'm sorry.

The net interest margin or the margin on the securitizations?

The net interest margin.

Oh, well.

If you could go trace it back, I mean, those interest rates have a very big impact on the net interest margin, plus a lot of our loans are variable.

So if you look at SBLOC, look at the dramatic increase in SBLOC.

You have a 15% increase in the portfolio and a 48% increase in revenue.

So they have a profound impact on many of these businesses, and you'll see that profound impact go up substantially in the margin.

So I don't have a prediction because there are so many variables involved.

But it also has the size of the portfolio and what we're holding securities versus loans.

But that margin should continue.

Well -- and we don't have the repricing of the -- the aggressive repricing of the deposit beta.

So we're going to continue as the market readjusts to rising interest rates on the funding side.

And they're more fixed rate; you'll see us -- traditionally, we've underperformed the market substantially, but I think I recently looked at the FDIC book and we're right on at the market right now as there was a decline and a little bit bump up in the overall banking rates.

So you'll -- I believe you'll see us outperform other banks on net interest margin, which has been not the case at this bank.

We were a big laggard.

And so I think we'll be -- we'll turn ourselves into position of leader rather than laggard on net interest margin, which I think if you look at our loan-to-deposit ratio can be sustained because our loan-to-deposit ratio is so low and we're trading loans for bonds over the next few years.

Right.

Okay.

Just my last one: obviously loan growth year-over-year was quite strong.

I think last quarter we talked about kind of a 13% to 15% loan growth outlook.

Has that changed at all?

Are you any more optimistic given the results this quarter?

No, I'd like to have double-digit growth on the portfolio basis.

We've had stronger growth, I think, over the last year.

Once again, I don't -- SBLOC, I'm fine with and SBA I'm fine with growing at 15% -- 20% because I consider those incredibly accretive, very safe businesses.

SBLOC doesn't even count toward some of our capital ratios like other businesses.

So -- but I don't want them -- I don't want uncontrolled balance sheet growth.

So that's the range.

15% is kind of the higher end, 15%, 20% on some of these other businesses.

Having said that, both SBA especially and SBLOC we do want to grow at that kind of rate.

SBLOC, with rising interest rates, you want to -- with the safety and soundness of that particular product, it could be a double the size and we'd be very happy with it in a rising interest rate environment.

And our next question comes from the line of Frank Schiraldi from Sandler O'Neill.

Just a couple of questions left.

Just on the prepaid card fees, it looked like pretty good result, up like 5% year-over-year.

So I'm wondering just now that some of the noise, I think, is out of that line item, is that a decent expectational run rate going forward?

Or is that stronger than you expect to see on a year-over-year basis here through the rest of '18?

Yes, it's hard to know.

We do think that it'll grow in the high single digits, we've said that before.

We do have this ACH business and we have some new capabilities in that area.

So you saw 11% growth on the -- in that, I think, you're going to see substantial growth over the next couple of years, double-digit growth in fees from that side and high single digit, 7% to 9% potentially in the prepaid.

You'll have one, obviously, quarter that'll be better and some quarters that'll, for whatever reason, will be less.

It depends on mix of the programs.

Some are higher versus lower fees, new programs that we get.

So that's kind of the guidance on that business.

But we don't know quarter-to-quarter.

This was a good quarter, we had basically the same volume.

We lost one of these tax, but clearly that was less economically beneficial to us, which means that we were able to get a mid-single-digit return even losing that program by having a better mix.

Okay.

And then -- sorry, did you lose that program last year?

Or you just lost it, it was out of last year's 1Q number?

Yes, we knew about it, yes.

No, it was in the number last year, it's not in the number this year.

Yes, it was.

Okay.

And then just on deposit costs, obviously you talked about a portion of the increase in rates will get passed through in deposit costs.

If you look at like demand and interest checking, just that line item on the average balance sheet, there was a 8 basis point increase quarter-over-quarter to 49 bps.

And I'm just wondering, try to get a sense of -- for a given 25 basis point rate hike, is that reasonable?

Or was that inflated given the strength in LIBOR this quarter?

This is a tough one.

You want to answer it?

It's about 40%, right, 40%?

Yes.

So again, it depends on the mix and where the deposit balances end up.

But our agreements, our contracts with the prepaids vary and we don't really get that specific in terms of the percentage increase.

It depends on a lot of factors, the costs associated with the account, the size of the account.

All we can say is that you can look at the rate increases in the past, look at the increase and monitor that on a quarterly basis.

In all likelihood, since some were at a floor, it's likely the adjustment to future increases will be possibly greater than the prior adjustments.

But again, we have constant flow of contracts, renewals and so forth so we really can't project too closely.

Yes, we probably could say -- and I don't know.

It's going to be less than 50%.

Yes, I think that's a safe...

I think that's safe to say.

It's less than 50% and probably more like 40%, 35% to 40% of the interest rate increase.

But once again, the warranty on that is that it does move around a lot.

It depends on which programs and it's susceptible to those things, but it's definitely only a portion of the interest rate increase.

Okay, all right.

Got you.

But those do reset pretty quickly though upon the interest rate increase, whatever the percentage number is?

Yes, yes.

Yes.

So you see the impact.

Whatever happens, you saw the impact already, most of it.

And our next question comes from the line of William Wallace from Raymond James.

Just a follow-up question.

I was wondering if you could give us an update on the remediation plan for the consent order and when the regulators next come in.

They're going to come in, in June and -- to do an interim and I believe October to do a full safety and soundness.

We've made a lot of progress, I think.

The last -- we're talking about in the order of 100s rather than a few issues.

We have the -- they're always looking for the entire envelope of activities in risk management.

That's why we have this integrated compliance plan in place.

That's reengineering with our center of excellence here in Wilmington.

So we're moving everyone out of Tampa into Wilmington, and we've done a lot of hiring, new hiring, and we do have some transfers.

So I think it's having -- I think we're moving along at the appropriate level.

I don't think it's constraining our business very much.

And I can see the light at the end of the tunnel.

It's not up to us.

We have a lot of very confident people working very hard in setting up a best-in-class financial crimes capability, but also third-party risk and consumer compliance.

So we're really trying to change the game.

We expect to grow.

We really do want to grow this business, especially on the prepaid, but all our businesses commensurate with, I think, our strategic advantages over time.

And to do that, we're going to obviously have to be higher volume and lower risk or have greater risk control.

So I'm not really thinking consent orders and its impact on the business.

I think about the capabilities we have and our ability to grow in a safe and sound way in the future.

So I don't -- I think we're going to work with our regulators and we're going to get on -- full get on the same page.

And we want them not only comfortable that we've solved the issues from the past, we want them comfortable that we can be new product areas as this market develops, as the fin tech movement continues to challenge the retail and community bank model, we want to be on the forefront of that and have exciting new opportunities at which we have some now.

And in order to do that, we need to have a safe and sound institution with a great leverage-able capability that's best-in-class.

That's what we're headed for.

Okay, one thing you said piqued my interest.

You mentioned moving the Tampa team to Wilmington.

Are you going to shut?

I can't remember was that a -- that was a center that was going to be around the BSA/AML transaction monitoring.

Is that correct?

Yes, that's it.

We're setting up a center of excellence, best practice center here and this is part of a whole long process.

Originally, our capability for financial crimes was set up in Tampa.

The rationale of that, it was a center for other banks.

It became clear that, that was great maybe for some types of recruiting.

But at the end of the day, it really should be integrated into our business here in Wilmington and there were some opportunities here in Wilmington to attract very talented groups of individuals, and it's also consistent with our -- the milestones that we have to do to restructure and reengineer the business.

So the decision was made a few months ago to go to the next level and build that center here.

And everything from office space to policies to procedures, but technology interaction with how you can leverage up the platform.

So all that is being integrated here in Wilmington.

And is there any change in expense as a result of shutting down Tampa?

Not a big change, no.

We have some -- nothing that will, I think, meaningfully impact the financials.

We have some duplication during the move period, but it's really not large.

We are definitely going to get efficiencies outside the system.

So you'll see maybe a little bump.

It probably won't be noticeable in our financials, but ultimately we will have a much more productive capability so there won't be a lot of additional resourcing as volume grows.

So it's not, I don't think, a big impact near term.

We already have the office space, everything that was already rented here in Wilmington as well as the technology people.

So you won't see a lot of associated expense, but you will ultimately see the shutdown of the Tampa, some -- a little bit of severance, that kind of stuff, but it won't be very meaningful, I don't think, to the financials.

Okay.

And my last question, you mentioned that you were going to provide a note to the buyer of the Fort Lauderdale hotel and I don't know if it's ever been asked.

Are you providing a note to the buyer of the mall property in Florida as well?

No, not at this time, no.

No, not at this time.

This is very -- we actually want to do the -- it's going to be a very good -- it's a very good deal for us and for the buyer in the Fort Lauderdale property.

So we're happy to do that.

We think it's a good deal both ways and it's going to be very safe.

On the other side, that's not intended, but we don't know.

Maybe.

Would we do it, I think we would under the right circumstances.

I don't think it would be a credit concern whatsoever.

But that's a small -- the development down in the mall is hundreds of millions of dollars.

This is a -- and our purchase price is $15 million.

So it's -- we're a very small part of the equation in the Florida mall development.

The town, it's -- we're just the guy with the -- we're the only -- the owner of the mall, but there's bigger people than us involved in the redevelopment of that.

It's exciting redevelopment.

It's going to be very successful.

But it won't be us.

And I'm showing no further questions at this time.

I would now like to turn the call back to Mr. Damian Kozlowski for closing remarks.

Well, I appreciate it for everyone on the call.

I think we had a really great first quarter, appreciate all the questions, and thank you, and we'll talk again next quarter.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program, and you may all disconnect.

Everyone, have a great day.