Investors Bancorp, Inc.
Q1 2015 Earnings Call Transcript

Published: 1 May 2015

[Operator:]

Good morning and welcome to the Investors Bancorp First Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask question. [Operator Instructions] Please also note, this event is being recorded. I would now like to turn the conference over to Tom Splaine, Senior Vice President. Please go ahead sir.

[Tom Splaine:]

Thank you and good morning, everyone, and thank you for joining us today. I'm Tom Splaine, Senior Vice President, and I am joined in the room today executive team are President and CEO, Kevin Cummings; our Senior Executive Vice President and Chief Operating Officer, Domenick Cama; Sean Burke, our Chief Financial Officer. We'll begin this morning's call with the standard forward-looking statement disclosure. On this call, representatives of Investors Bancorp Inc., may make some forward-looking statements with respect to our financial position, results of operations, business and prospects. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond Investors Bancorp's control and are difficult to predict and can cause our actual results to materially differ from those expressed or forecasted in these forward-looking statements. In our press release, we have included our Safe Harbor disclosure. We refer you to that statement; and these documents are incorporated into this presentation. For a more complete discussion of the certain risks and uncertainties affecting Investors Bancorp, please see the section entitled Risk Factors, Management Discussion and Analysis of Financial Conditions and Results of Operations set forth in Investors Bancorp, Inc. filings with the SEC. And now, I'd like to turn the call over to Kevin Cummings, our President and CEO.

[Kevin Cummings:]

Thanks, Tom, and good morning. Investors had another strong quarter as we posted earnings of $41.9 million for the quarter versus $34.4 million in the first quarter of 2014. This represents 22% increase in earnings and if we were back out the restructuring charges in the bargain purchase gain from our GCF and Roma acquisitions last year. Our net increase in net increase in core net income would have been 24% for the first quarter of 2015. This is our 29th consecutive quarter of year-over-year increases of 20% or better in core net income. If we back out the merger and restructuring expenses overall last date acquisition. Tax benefits that are non-recurring like the $3 million in the fourth quarter of last year. In OTTI charges which are normally unusual in non-recurring, big charge in 2008. During that period though we have grown our bank from approximately $5.8 billion at the end of 2007 to $19.4 billion today. More importantly though, we have grown our loan portfolio to $15.6 billion with $9.5 billion or 61% of that portfolio in commercial loans. At the end of 2007 loans were only $4 billion with $380 million in commercial loans of which $229 million was in construction loans. Our construction portfolio today is only $162 million and represents 1.7% of total loans. Our loan quality and asset quality continues to improve while we are ever mindful of the growth of this portfolio and the changing mix of the loans of the loan book as we continue to diversify into commercial real estate and business lending. Commercial loans increased 31% year-over-year as we continue to build our commercial business in the New York New Jersey Metro region and in the New Jersey Philadelphia markets. Our provision for the quarter was $9 million which was flat to the prior year but down $2.5 million from the fourth quarter of 2014. Net charge-offs were only $1.1 million in the first quarter versus $2.2 million in the first quarter of March 31, 2014, and $2.3 million in the fourth quarter of 2014. We continue to manage this loan growth in a prudent manner as we maintain our allowance at 1.33% of total loans and our non-accrual ratio to the allowance is a 189% at the end of the first quarter of 2015. It should be noted that 73% of our total loan portfolio the vast majority of these loans are at $11.5 billion are in the resi and multifamily portfolios. And these are in strong residential markets in New York and New Jersey and traditionally have a proven track record over different economic cycles. On non-accrual breakdown is as follows the resi and consumer portfolio is approximately $88 million representing 1.44% of that portfolio and the commercial and multifamily is 55 loans for $22 million and represents 1.23 basis points. Our total is a $110 million and 70 basis points. In that commercial portfolio of that $22.1 million, $3.4 million is contractually current in the vast majority of these commercial loans are from acquisitions that were not originated through the investor bank underwriting process and procedures. Only $6.1 million of the $22 million has been originated by the bank. The two largest non-accrual relationships are in long-term workouts and our Roma loan, our bank we acquired in December 2013 were $3.2 million and a book on federal loans were $2.4 million. One is written down to 51% of the original loan and the other is down to 66% of the original loan. We believe at this time that we have a good handle on our credit risk, but our growth in the unseasoned nature of the portfolio are factors that if management considers when estimating the provision for the quarters. With respect to our 30 and 60 day delinquencies, there was a spike up in the numbers in the quarter compared to December 31 for commercial loans. In the 30 to 59 category, at April 25 these loans are down from $79.8 million at quarter end to $1.8 million and in the 60 to 89 category from $19.7 million at March 31 to $1.4 million at April 25. This does not look like a start of a trend, but things are back to normal by the end of this month could have been the Easter holiday or religious holidays we are not sure really what caused the spike. On the ORE front, we had our eighth consecutive quarter of gain on sale of ORE, which to me is an indication of the conservative marks on our resi portfolio as we continue to look at ways to expedite our painful judicial process for foreclosures here in the New Jersey and New York region. For both the commercial and the resi portfolio, our exposure is limited as the average loan in this non-accrual category is 208,000 for resi and 400,000 for commercial loans. Our credit quality remains strong in something that we are very proud of here at the bank, considering the growth of the portfolio. Now I'd like to turn the call over to Sean Burke, who will give us some details on the balance sheet in the income statement.

[Sean Burke:]

Thank you, Kevin. I would like to briefly review some of our financial highlights for the quarter and a little more detail starting with our balance sheet. Total assets $19 billion threshold in end of the quarter at $19.4 billion up nearly 13% on an annualized basis from the fourth quarter. Lending activity in our markets continues to be strong and was particularly robust in the month of March. Our loan portfolio rose $524 million to $15.6 billion during the quarter representing nearly 14% growth on an annualized basis from the previous quarter. Dissecting the loan growth shows that CNI led the way with 34% annualized growth, CRE at 32%, multifamily at 23% and residential going the other direction shrinking at 6% annual rate. Our current pipeline of loan is strong in $2.5 billion with CRE and multi making up 65% to that total. On the liability side deposits for the quarter grew 185 million or 6% on an annualize linked-quarter basis, the 12.4 billion. Well our deposit growth for the quarter was solid would have been better if not for two factors. The cyclicality of our meaning deposits and CD run off. Both factors are temporary and we expect both these trends to reverse in future quarters. Asset quality metrics remain very strong as Kevin pointed out non-performing loans, total loans decline to 91 basis points at March 31. In addition our loans to non-accrual loan coverage improved 189%. Early stage delinquency did trend up in the quarter, but we’ve seen these figures bounce around from quarter-to-quarter before. And as Kevin also pointed out and when we dug into these balances indicated a large percentages early stage delinquency loans. For brought current few days after quarter end. Shifting gears the income statement we recorded net income for the quarter 41.9% or $0.12 per diluted share which represents 22% and 20% year-over-year growth respectively. Net interest income rose to $144 million for the quarter our strong loan volume while net interest margin remain stable at 3.18% up basis points on a linked-quarter basis. Pre-penalty payment income contributed 4.6 million for the quarter was 3.1 million in the fourth quarter, absent pre-penalty income margin would have decline two basis points. Net interest income total 8.5 million, a decline of 1.3 million from the fourth quarter, but decline is primarily due to lower gains and security transactions and weaker mortgage banking related income. The first quarter of 2014 also included an approximate $1.5 million bargain purchase gain related to our acquisition of gateway so making comparisons to the current quarter versus the prior year a bit in consistent. With respect to our expenses our efficiency ratio was 50% for the quarter versus 54% in the first quarter of 2014 and 49% in the fourth quarter of 2014. As we’ve mentioned in previous calls we are midst of converting core processing systems which is caught and undertaking. The conversion will cause increased expenses in 2015 to consulting fees and over time our hourly employees to our working on the project. The schedule completion date is August 2015. Last but not least we began to repurchase our shares during the quarter and retired approximately 3 million shares. So we are ahead of schedule with respect to share repurchases. Our stock has appreciated nicely since our second step conversion we continue to the value in it in a current market levels and will continue to repurchase. On that note I’d like to turn it back over to Kevin for some concluding remarks. Before we open it up to Q&A.

[Kevin Cummings:]

Thanks, Sean. Over the last five quarters starting with Marianne Wade we have begun to tradition of highlighting one of our employees who exemplifies the values that this Company stands for. We have so going on here at Investors as we continue to work on our core conversion open branches and deliver on a promise to improve the lives of our employees and our customers. This quarter’s unsung HERO is Steve Deering, a Senior VP in our commercial business lending group and a team leader for our North Jersey lenders. Steve joined the bank about three years ago and quickly demonstrated strong credit and business development skills but more importantly he has distinguished himself as a quiet but very effective leader here in our New Jersey business lending. Our business lending now totals $1.2 billion which includes owner-occupied commercial mortgage loans which rely on business income for repayment. This portfolio has grown 52% or $412 million over the last months and is a tribute to Steve his boss Mark Noto and the entire group as the bank continues to make investments in this area of relationship banking. Steve is a leader who leads by example and lives not by the banking Golden rule which is I have the gold I make the rules but he treats his coworkers and customers the way he wants to be treated. I've been on many calls with him – some our larger relationships for $25 million to the small local not-for-profit for 500,000. In all his dealings he lives the core values of this Company. I recently asked him to join the Board at the Summit Speech School, and he did so without hesitation, in another situation at my request he invoiced another not-for-profit and it is negotiation for a loan refinancing for a $10 million loan. He supports the Morristown Soup Kitchen and participates in many events such as the many parades we participate in and the retail sales rallies. He's a team player he strives for a win-win in all his dealings with customers and he's a reliable and dependable leader. He is a guy that you’d want to be in a foxhole with. We thank Steve for his commitment to the bank and his dedication to our core values. His leadership by example he sets is an inspiration to all the work with him and I thank him for all the good things he does at the bank. Summing up this quarter it was a great start to 2015. We continue to leverage the capital raised a year ago using three of our four levers. Organic growth, assets are up $2.9 billion year-over-year or 18%. Cash dividend, we paid $0.10 in February and declared another $0.05 to be paid in May for a total of approximately $54 million. And then finally, the early approval from the fed, we started our stock buyback of almost 3 million shares or $35 million which started in mid-March. We continue to buy shares as it still appears to be a good use of our capital for our shareholders, when we are trading at tangible book levels of 1.2 compared to peers in the 1.6 to 1.8 levels. The final level is mergers and acquisitions which we will look for and evaluate when the opportunities appear on our radar screen. I want to remind everyone that we are in the midst and working two jobs here at the bank. Our day job is growing and expanding our markets, but we also have our night job which is completing this core conversion which I am happy to report is moving along on schedule. On the weekend of April 17, we had our first what we call mark file conversion and all went well as planned. We still have a lot of work to do, but at this time we are on plan and ready to gear up for a very busy summer. This team is committed to doing what is necessary, to create a bank that makes a difference with its employees and its customers and the communities that we serve. And if we do these things take care of those constituencies you our shareholders will be rewarded. I look forward to seeing some of you at our shareholders meeting in June. And now I'd like to open up the lines for questions.

[Operator:]

[Operator Instructions] The first question will come from Mark Fitzgibbon of Sandler O'Neill.

[Mark Fitzgibbon:]

Hey, good morning guys and congratulations to Steve. First question I had related to the pipeline I wondered if you could share with us what’s the approximate average yield on that is and also give us some sense of the maturity mix is primarily solidify your papers?

[Domenick Cama:]

Good morning Mark, it’s Domenick. Glad you raised the issue of the pipeline, we now have two significant pipeline, if you look at our CRE pipeline that’s about $1.7 about 72% of that pipeline in five and seven-year products. We also have given the initiative to grow our C&I business pretty close to completing the build out of that team that pipeline is up to approximately $700 million and again the majority of that paper sits anywhere between the three and seven year categories of maturity. In terms of the weighted average coupon on the CRE which includes multifamily that has a weighted average coupon of about 360 whereas on the business lending pipeline that has in average our yield of approximately 3 and 78.

[Mark Fitzgibbon:]

Okay great. And then secondly I wanted if you could help us think about the margin in 2Q I assume you are going to see some core compression excluding prepayment penalties in the second quarter.

[Kevin Cummings:]

Yes, I mean obviously if you keep putting loans on 350 with a 4% average asset yield you are going to have some compression at this point. We’ve been able to out pace the compression between the growth and actually this past quarter the increase in prepayment income. But for the second quarter we are anticipating again without prepayment income a compression of somewhere between 5 to 7 basis points.

[Mark Fitzgibbon:]

Great and then last question I want if you could just update us on your de novo plans.

[Kevin Cummings:]

We have on branching – we have approximately a 60 new offices the west schedule to open sometime in 2015. We have already open two in the first quarter and have about 14 more again a lot depends on construction but we think we are on target to open these new branches this year.

[Mark Fitzgibbon:]

Thank you.

[Kevin Cummings:]

You’re welcome

[Operator:]

And our next question comes from Jared Shaw of Wells Fargo.

[Jared Shaw:]

Hi, good morning.

[Kevin Cummings:]

Good morning, Jared.

[Jared Shaw:]

You send a little time on the deposits – is a deposit campaign still on going and how is the success been from that campaign.

[Kevin Cummings:]

Well, the deposit campaign that we talked about in the previous quarter is over and however given we are loan to deposit ratio has gone we are planning for another deposit promotion that will occur – that will start sometime next week actually. We put several levels in place I think Sean mentioned that the majority of the outflow of funds really occurred in our CD bucket and you can see that on our balance sheet. And so at this point we are poised to protect that line item and we want to stem the flow of CDs going out of the bank and so we are introducing a new campaign as I said next week.

[Jared Shaw:]

Okay and then when you look at the growth in the – the mass growth in cost of deposits this quarter was that really due more to a mix shift change or did you have to pay up a little but more in the market.

[Kevin Cummings:]

Yes, we on the cost of deposits you mean?

[Jared Shaw:]

Right.

[Kevin Cummings:]

Yes. The cost of deposits is a result of that increase from the 125 campaign that we ran but our overall cost of deposits quarter to quarter was actually down a basis point.

[Jared Shaw:]

Okay, great.

[Sean Burke:]

And any kind of layering the non-interest checking sorry Jared its Sean. Yes, the growth in the non-interest checking is another buffer for us to so that continues to grow at a nice clip and that will help offset some of that you know additional increase coming in some of the rate-sensitive products.

[Jared Shaw:]

Yes, absolutely great thanks. And then on the - looking at the comp and benefits line of the growth there. How much of that was due to net new hiring versus the over time costs you are saying you are incurring on the conversion cost and what would be a good excluding sort of the FICA in the first quarter noise what would be a good place to look at going into second quarter?

[Sean Burke:]

The compensation line Jared is in addition to new hires in the over time it's also a reflection of the increases that occurred across the employee base. In terms of how that breaks out how much is attributed to over time, and versus the increase in staff, I don't have that number for you. We can you know I can call you with it later on but I don't have that number now.

[Jared Shaw:]

Okay; great. Thank you.

[Operator:]

The next question comes from Collyn Gilbert of KBW.

[Collyn Gilbert:]

Good morning, guys. Just wanted to follow-up on a couple things Tom on the NIM color that you said the 5 to 7 basis points of compression expected in the second quarter the first quarter performance was better than what you guys were guiding to, was there anything in particular that drove that and why the acceleration in the second quarter?

[Tom Splaine:]

I think the growth obviously helped to outpace the reduction in NIM we didn't model for $600 million in growth for the first quarter so that always helps and then the month of March had an unusually high number of prepayments. So prepayment income was up in the quarter I think there was difference between the first quarter and last quarter of about $1 million in change. So those two factors help to keep the NIM pretty stable versus the compression of the 3 to 5 basis points less that we projected.

[Kevin Cummings:]

Dom, I would just add one more point on that in our construction book which is a portfolio that continues to wind down from time to time you get some non-accruing loans that take are paying interest and that can grow up some the yields there and so we did have a little bit of that in the construction book, it’s not much, but maybe that contributed another 2 basis points to the margin.

[Collyn Gilbert:]

Okay, that’s helpful. And then just can you guys give just a little bit more color on the C&I growth that you are seeing, maybe kind of the average loan size that you are putting on the type of barrower. I know Dom, you had mentioned it’s kind of three to seven year paper and the yield on it, but just getting a little bit understanding I mean that portfolio is just grown tremendously year-over-year, if you could just give us a little bit more detail is to what’s going on there?

[Domenick Cama:]

I mean there are two major segments Collyn, one is what we call kind of community lending those are loans that are under $5 million and we now have a dedicated team here in Short Hills that basically is processing those requests in a pretty efficient manner, but the majority of the paper that we’re seeing is traditional middle market we are seeing huge growth in our medical lending platforms, and then again just a traditional middle market business our guys that we've established that in our New York office are doing business with attorneys and different types of companies in New York. I would say when I look at the concentration of new loans coming on in terms of sick or industry code I see medical is leading the way and we have a segment of entertainment or I should say hotel loans that we’ve made also good loans in midtown New York City.

[Sean Burke:]

Yes, the average loans for the March 31 originations is in that $1 million to $2 million range now. I mean there is a lot of blocking and tackling and it’s just getting the brand out there and old fashion relationship banking.

[Collyn Gilbert:]

Okay, that’s helpful. And then just tying back to systems conversion obviously you guys are still on track for that August completion, any update or changes that you need to share with us on where we see that run rate settling out on the expense line?

[Domenick Cama:]

No I think Sean pointed out that will see some increase – we will see some increase in expenses due to over time and consultant, but we don’t expect that to be significant. We still plan to have about a $4 million annual reduction in our item processing and data processing cost year-over-year related to it, once can make the conversion.

[Collyn Gilbert:]

Okay.

[Domenick Cama:]

Collyn keep in mind that will be approving the stock plans are going to the stockholders for the MRPs and stock options – in the second half of the year.

[Collyn Gilbert:]

Got it, okay and then just one final question on the buyback, so you guys are two weeks there in the quarter to execute on that 2.9 million shares which is pretty impressive does that said any light as to how aggressive or how what the opportunities you might see in the third quarter for buybacks. I am sorry second quarter.

[Sean Burke:]

I think Collyn, we have always laid out of plan that would – that show that on an annualize basis we would buyback about 10% of the shares which is approximately $35 million. If we use what we did in March we are actually way ahead of plan on a monthly basis if you do that math because 35 million to buy-to-buy 12 – 3 million in a month so we bought 3 million and half month. So in terms of where we see the next quarter going I think it will boils down to where were trading at as a price to tangible book. I mean that is always to me the guiding principle at this point in our lifecycle that’s the guiding principle is to how much – how little shares will buy going forward. So I guess in order to clarify that if our stock continues to trade at this level we think it’s a good investment for the company. Kevin pointed out that we look at company on a terminal multiple basis on tangible book and if appears a trading it somewhere between 150 to 170 that gives us a good indication of where we should be buying our stock that and where we think it’s a good investment.

[Collyn Gilbert:]

Okay, okay that’s helpful. That’s all I had. Thanks.

[Operator:]

Our next question comes from David Darst of Guggenheim.

[David Darst:]

Hey, good morning.

[Kevin Cummings:]

Good morning.

[David Darst:]

So Tom on the borrowing growth this quarter can you give us a sense of what duration are using and what the funding cost are if you are using something different than overnight.

[Tom Splaine:]

We are actually we took advantage of the rally in the market would rates coming down he did extended out some borrowing and also took advantage of borrowing that will rolling off. We had about 150 million roll off in the first quarter at a rate of about three in a quarter and replaced them at a rate of about two in a quarter. So we used durations I won’t say durations I'll say maturities we used maturities of somewhere between three years to five years. But for some part of the quarter, we did have an excess of funds in the overnight bucket but again took advantage of them. So our plan David is to continue to be conservative on the borrowing front. It’s the place that gives us the ability to hedge some of the interest rate risk in our portfolio and so we'll continue to look at maturities that range anywhere between three years and six years.

[David Darst:]

Okay I understand and then as you're discussing the C&I growth, and the hotel industry, are those like fixed rate - say collateral or do you actually doing operating loans at a variable rate for the hotel industry?

[Tom Splaine:]

In the hotel industry those the once that I talked about on today are real estate loans they are Midtown Manhattan properties where we have leads on where property you know our loan-to-value is less than 50% and so while we underwrite a hotel and we underwrite the cash flows from the hotel in order for repayment of the loan, we are using the property as collateral.

[David Darst:]

Okay, and then what’s your growth this quarter relative to your prior guidance about a billion six in loan growth, should we begin to think about closer to 2 billion for loan growth this year?

[Tom Splaine:]

No I think so. To be honest with you, I think the pipeline on the C&I has grown faster than I thought it would and so now as I look at our pipeline I don't look at it in terms of a billion seven anymore, I look at it now as a pipeline of $2.5 billion. We are certainly on pace to exceed our $1.5 billion guidance that we gave so I think – you know I'm always a little hesitant about pushing the envelope but I think it's safe to say that we will be above that billion five number if things continue with this pace.

[Kevin Cummings:]

If you look at March 31, 2014 to March 31, 2015 with a $200 million reduction in the residential and consumer portfolio, total loans exceeded $2 billion. So as you know our commercial book grew $2 billion over the last 12 months and that’s without an acquisition. So we don’t want to over promise and underdeliver but it's in that $1.5 billion to $2 billion range.

[Sean Burke:]

Yes, David it’s Sean. I was going to add one last point it does certainly look as it were ahead of schedule there, but what I would say and what you see is maybe a little bit of caution because that pipeline could be – people trying to get ahead of raising rates here and you never know what’s going to happen in the second half of the year, but sitting here knowing what we know it does look as if we’re ahead of schedule, but it’s hard to predict I guess what will happen in terms of rates in the later half of the year and what could happen to that pipeline.

[David Darst:]

Got it. Okay, and just do you expect excluding your employee benefit programs and their approvals and that impact on expenses. Would you expect the $4 million kind of hit the bottom line or are there other areas within the company that you still want to invest in that would result in maybe seeing more than a couple million dollar of expense growth in the back half of the year?

[Sean Burke:]

Yes, that $4 million number David is an annualized number and we outside of the benefit plans I think we feel pretty good about the number being somewhere between $78 million to $80 million. We’ve been giving guidance to $78 million, but again caution on the impact that the benefit plans is approved by the shareholders would have on our quarterly run rate.

[David Darst:]

Got it. Okay, thank you.

[Operator:]

And our next question is from Matthew Keating of Barclays.

[Matthew Keating:]

Yes, thank you. Given your plans to repurchase potentially upwards of 10% of the shares per year, it actually requires a fair amount of cash can you talk about your plan to fund those repurchases would be securities maturing that you use that cash to buyback stock or are going to look to the borrowing markets to fund those repurchases?

[Sean Burke:]

You know what Matt, we don’t have much room on the security side. Basically we keep securities at about 15% of the portfolio and if you look at where securities have been you'll see they've been running just a touch under there. So we don’t have the ability to take a security off and use the cash to buy our stock back. We will look for the borrowing markets that's been the primary that's what we've used to date and that's what we'll continue to use.

[Matthew Keating:]

Okay, that’s helpful. And then as you think about share repurchases I know you said at the current levels [indescribable] it’s attractive how do you balance the level of share repurchases activity versus I know your long standing desires has been to keep potential book value per share stable or growing, so how do you think about the trade off there in terms of - to return capital versus [indiscernible] support tangible book value.

[Sean Burke:]

It’s Sean Matt. What I would say there is you know the way we look at it we obviously know that buying back shares is dilutive to tangible book you know but on the other end we're picking up some EPS accretion there so I think you know we look at it in a number of different ways you know we look at it in terms of at this level is at good investment and then we also look at it on sort of an earn back basis. We can look at it on an IRR basis there's a number of metrics in terms of what we look at and where we feel comfortable buying the stock and as we kind of noted earlier given where it is, we feel good about our repurchase and we will continue if things – if our stock trades in this range

[Matthew Keating:]

Great, thanks for the color.

[Operator:]

And next we have a question from Christopher Merrimack of [indiscernible].

[Unidentified Analyst:]

Thanks, Tom I was wondering if you could give us further color on the sort of revenue benefit kind of near-term versus intermediate term once we systems convergence completed the summer.

[Tom Splaine:]

Well, I can’t the revenue benefit will be certainly the reduction in expenses related to using more efficient processing system and consolidating a lot of the activities under one processing system, but we also expect revenue pick ups with the new system in that it is a better system for commercial banking. It will allow us to do better analysis of commercial checking business and commercial customers business will be able to better track fees and and expenses related to running the commercial business. So while we have not currently quantify what impact the new system will have on revenue from a income perspective we are anticipating that will greatly benefit of the income lines going forward.

[Tom Splaine:]

It we expect to improved efficiency in the branches in the retail side, improve our cash management product suite and also the Ethernet and mobile banking. So I am not saying that is going to result immediately and say headcount reduction are things like that, but hopefully able free our staff and the retail side and on the commercial side because we use this legacy system that has a lot of work around and will allow us to better serve our customers and hopefully free up the time for more marketing and business expansion activities.

[Unidentified Analyst:]

That’s great. Thanks Kevin, thanks Tom.

[Operator:]

And this concludes our question-and-answer session. I would like to turn the conference back over to Kevin Cummings for any closing remarks.

[Kevin Cummings:]

Okay, well I want to thank you for participating on the call today we are off to a great start. I can’t believe that year ago we were in the midst of the second step it seems like very long time ago $16 billion bank soon to be $20 billion bank. I think we are largest bank headquarter in New Jersey and there is a lot of momentum in the company and I want to wish you all a good weekend and hopefully we will some of you in our shareholders meeting in June. Thank you participating. And have a great day.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.