Seacoast Banking Corporation of Florida
Q1 2018 Earnings Call Transcript

Published: 12 Jun 2018

[Operator:]

Welcome to the Seacoast Bank Investor Conference Call. My name is Zunera [ph], and I will be the operator for today’s call to discuss Seacoast Bank’s Acquisition of First Green Bank announced yesterday evening. Please note that this conference is being recorded. Before we begin, I’d like to direct your attention to the statement contained at the end of Seacoast’s press release regarding forward statements. During this call, Seacoast maybe discussing certain issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act, and accordingly comments by the Bank’s executives are intended to be covered within the meaning of Section 27A of the Act. I will now turn the call over to Mr. Dennis S. Hudson, Seacoast Bank’s Chairman and CEO. Mr. Hudson, you may begin.

[Dennis Hudson:]

Thank you very much, operator, and welcome everybody to this morning’s conference call to discuss our acquisition of First Green Bancorp, which as you just heard was announced yesterday afternoon. Joining me today on the call is Chuck Shaffer, our Chief Financial Officer, as well as David Houdeshell, our Chief Risk Officer. All of us look forward to answering your questions following the conclusion of a few prepared remarks. We posted a slide presentation on our website, if we go to seacoastbanking.com, and in the section entitled News and Events under Presentations, you’ll find the slide deck relating to today’s acquisition discussion. We’ll refer to certain of the slides during our call today. We’re pleased to have signed a definitive agreement to acquire First Green Bancorp. This acquisition brings us a highly complementary banking institution in a transaction that has excellent economics, strengthening our position in Orlando which is already at scale, and also in Fort Lauderdale and overall adding to our franchise across the state. First Green was established in 2009 and carved out a distinctive and a differentiated niche. Today, First Green is our fourth acquisition in Orlando and it will further strengthen our position as the largest Florida-based bank in that important and attractive market as well this acquisition strengthens our presence in the important Fort Lauderdale market. Significantly, six of First Green's seven branches are located within three miles of Seacoast branch providing opportunities for some cost synergies. We look forward to combining the very best of our respective locations as we introduce Seacoast suite of mobile banking and other innovative products to our combined customers. We expect that we will accomplish the integration of First Green quickly before year-end. As we said on our first quarter earnings call last month, we've now completed the integration of our two most recent acquisitions Palm Beach Community Bank in Palm Beach County and NorthStar Banking Corporation in Tampa, giving us the resources in terms of our leadership and operating experience to integrate First Green into our franchise. This is our seventh transaction since 2014. It would be following our proven integration playbook while still having the capacity to pursue other value creating opportunities that may present themselves. As today's announcement makes clear, Orlando the third largest MSA in Florida is an important market for us, propelled by an increasingly diversified economy, the U.S. Census data ranked the Orlando MSA eighth in the nation in terms of economic growth in 2007, and Orlando led Florida in job creation last year. Additionally, we're delighted to strengthen our presence in the Fort Lauderdale area also an important growth market in Florida. We look forward to welcoming First Green's employees and customers to the Seacoast family and joining with them to grow our Florida banking franchise. One final thought, First Green is the most recent example of Seacoast's balanced growth strategy which we've now used to expand in Orlando, Tampa Bay, Palm Beach County, Fort Lauderdale and elsewhere in central Florida. Since 2014 as I've said we've completed seven acquisitions with an average internal rate of return of over 20%. These acquisitions combined with our strong organic growth have increased the number of customers we serve in Central Florida nearly eight times from only 6,300 customers in 2013 to now 54,000 customers once we close on First Green. Chuck will provide some details on the transaction, but let me stress that we expect this transaction to create value for our shareholders. Specifically, we expect a payback on this transaction to be less than one year with an internal rate of return in excess of 25%. Assuming the transaction closes during the fourth quarter, we anticipate the acquisition will be neutral to adjusted 2008 net income per share and decidedly accretive in 2019 and beyond. Overall, Seacoast has a strong tailwind for sustained profitable growth and we remain confident in achieving our Vision 2020 financial benchmarks with the First Green acquisition being incrementally positive to these goals. Now, I'd like to hand the call over to Chuck Shaffer to take us through a few more details on the transaction. Chuck?

[Chuck Shaffer:]

Thanks, Denny, and thank you all for joining us this morning. As Denny mentioned, I'll reference the slide deck which you can find at seacoastbanking.com. And I'll start this morning on Slide 4 with few comment on First Green. First Green is a $731 million bank by assets as of March 2018, headquartered in Orlando, Florida with seven branches across the Orlando area, Daytona and Fort Lauderdale. The acquisition builds on our three prior Orlando acquisitions adding five branches and increased distribution to our strong position in Florida's third largest MSA, which is highly profitable and operating at scale. Since its launch in 2009, First Green is grown significantly with the loan book and deposit portfolio totaling 629 million at March 31, 2018. This acquisition bolsters Seacoast position as the largest Florida-based franchise in the Orlando market, one of the fastest growing MSAs in the United States. First Green's loan book has an average loan yield of 5.17% at March 31, 2018 and the majority of the firm's funding is made up of checking, savings now and money market accounts, which represent 73% of deposit funding now it's referring checking represents 30% of the funding. Let’s move on Slide 4 to Slide 5, and under the terms of the merger agreement, First Green shareholders will receive 0.7324 shares of Seacoast common stock based on Seacoast 10-day volume weighted average price of $31.40 as of June 8, 2018. The transaction is valued at approximately 132.6 million or $23 per share and the deal pricing translates to 1.62 times First Green tangible book value. We expect the acquisition to close in the fourth quarter of 2018 after receipt of approvals from regulatory authorities and the approval for [First Bank] shareholders and satisfaction of customary closing conditions. We expect cost out of least 50%. We will phase these in over the first 120 days after transaction close. Using the crossover method, we expect tangible book value dilution to be earned back within one year then the turn rate returned north of 25%. Similar to our other acquisition, this is an accretive value creating transaction to strength our foothold hold in a key and growing MSA. Given the timing of the close, we expect the deal to be accretive to earnings per share in 2019 and beyond of at least 10%. The assumptions used for modeling were developed following detailed due diligence which include a review of more than 60% of credit exposure and due diligence identified to loan mark of 18.2 million or 2.83% and interest mark of 8 million or 1.25% of estimated loans outstanding at close. We estimated core deposits intangible of 1.75% and taken together our assumptions yield goodwill of approximately 72.5 million. A modeling does not include revenue synergies which are record shows we approved plan to achieve. I'll now turn the call back over then Denny.

[Dennis Hudson:]

Thanks Chuck. I appreciate that update and we would be happy to take a few questions.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Stephen Scouten from Sandler O'Neill. Please go ahead your line is open.

[Stephen Scouten:]

I'm curious one maybe start now on the credit mark. It seemed somewhat large relative to actual credit quality of the bank and I'm wondering, if there is any specific nuance there that helped drive that number or maybe more legacy issues that I am not privy to, if you can give any background about your view on the credit profile there?

[Dennis Hudson:]

Well, I can tell you, it was not particularly related to any significant issues that we encountered. I think so, as we look through the portfolio, we actually saw things that were well structured, solid portfolio. I would tell you though some of the areas that they have focused on were to us at least under our system, somewhat higher risk and kind of gave us we thought some opportunity to have a little bit higher credit mark. I wouldn’t say it's significantly higher than some of the other deals we've looked at, but I would say that accounts for -- David any other generalized…

[Stephen Scouten:]

Does that have anything to do with the granularity of your book versus theirs? Is that a way to potentially think about it? Or is it a little chunkier maybe than yours is?

[David Houdeshell:]

No, I wouldn’t even say that. I thought they were fairly granular book when we look through it. But some of that -- some of the asset classes they were in and these are not big numbers season at all, but some of the asset classes or some of the higher risk things that we tend to sign a little higher provision to I guess you should say.

[Stephen Scouten:]

And then maybe thinking, how do you guys as you approach this new deal -- how do you think about the timeframe of which you will start to see incremental benefit of your digital marketing and your kind of digital plan across these new customers? I mean I know you don’t model the revenue synergies but just as you think about the incremental benefit that comes from all you've accomplished there. Is that like a two or three kind of your timeline? Or how that plays out for you guys to your benefit?

[Dennis Hudson:]

Yes, I think to your point, so first of all we do not include any revenue synergies and any modeling that we do and that's important to get out there. I would say the initial thing that we focused on when we've done acquisitions like this using some of the unique things that we do around communicating with customers, really have to do with on-boarding those customers into our franchise, helping them to get comfortable with the Seacoast and learn about Seacoast in terms of who we are. And so, we have a very straightforward strict disciplined 120 days strategy or first 100 days strategy I guess to help welcome those folks on to our platform. Then, we'll get out beyond the first 100 days, we began to kind of slowly bring in some of the things that you've seen Steven and develops let's say over 12 months into what we think could be real value. I think important thing about this transaction, we're acquiring 10,000 customers approximately, which is a very nice size for us to absorb and could make a meaningful impact as we look forward. Also kind of fail to reiterate as we took the Q&A, the funding base for this companies are actually quite strong, 30% DDA mix, very, very solid customer base. We're very impress with the job that First Green has done in building their customer group and we're really excited to work with them as we go forward to begin introducing that some of the things you just mentioned.

[Stephen Scouten:]

And then maybe just last for me. Does this give you all you need in Orlando here for a while? I mean do you feel you’ve got the footprint to grow where you want to be? And I guess for incremental M&A, do you start to think about some of your other further along the I-4 Corridor or Tampa or other areas that might where you might be able to benefit from additional scale from here?

[Dennis Hudson:]

That’s good question and as we lead forward, as we’ve always said, we lead with organic growth. And so, our focus in the near term here is going to be concentrating on adding these households into the greater Seacoast focus, cross-selling, supporting all of our customers with our balanced growth strategy. So with that said though, yes, we were and are at scale in Orlando and this just makes us a little more at scale and more profitable in that really important market gives us more earnings that we can use to deliver value to shareholders, but also gives us an opportunity to make further investments in that market as we scale larger and so -- so, that's where we’re going to be focused. We've never ruled out another acquisition in the market, if it was value creating, but as you probably know there’s a not a lot left in that market. So I think this position us really well in an important market.

[Operator:]

Thank you. Our next question comes from Steve Moss. Please go ahead your line is open.

[Steve Moss:]

Just wondering here have you entered into any agreements to retain lenders in the management?

[Dennis Hudson:]

Yes, we’re working on a lot of that right now. We've got agreements in place, some of the key folks, but probably have more to come on that.

[Steve Moss:]

And then my second question here, pretty decent size acquisition here for you guys, but would you consider another acquisition this year or wait till after this one close?

[Dennis Hudson:]

We never say, never, and as you know last year, we did two at once and that worked out really well for us. So having said that though, we have work to do with this it’s a fairly large customer base and we’ll be focusing our attention on that. We have indicated though in remarks that we made when we started the call that we think we’ve capacity to do more and we’ll -- we’ve nothing pending. I’m not saying that because we’ve something out there that is immediate, but we think over the next context with the next two to three years in the state, we’ll be continue to be active. Again, I just reiterate though, our primary focus is maintaining organic growth and our customer base -- growing our customers every day and strengthening our relationships with customers and engaging deeply with them to -- with some of our cross-sell engines that we use and that has put us in a very strong position to continue to develop the organic growth, and we use M&A as a method to supplement that growth when we see opportunities. So, all depends on the opportunities.

[Steve Moss:]

And I guess my last question here I was wondering, was this a negotiated transaction? Or was it just an option?

[Dennis Hudson:]

I would day, it was something lead that we talked about for a while. We met these folks and spent some time with the team at First Green and kind of dates back to sometime last year where we began some conversation.

[Operator:]

Thank you. Our next question comes from Daniel Mannix from Raymond James. Please go ahead your line is open.

[Daniel Mannix:]

So I just wanted to start on the loan book. So it seems to be a material increase in the CRE exposure here, where are you comfortable with that going? And I guess on the other side of that coin, what are your thoughts on the C&I side?

[Dennis Hudson:]

Chuck, do you want to take that kind of talk historically what we've done?

[Chuck Shaffer:]

Yes, sure, and as we talked with -- in the past about it, we added CRE would likely come through acquisition work where we had the opportunity to put a mark on those transactions and the loans coming into the portfolio and this is an example of that. Our CRE ratio on a consolidated basis was roughly a 190%. This moves us to about 220% to 225%, so it does move us up well below the 300% regulatory guidance, but we -- we're moving towards the C&I portfolio when we model this into our modeling for the deal, we do model in moving towards the C&I book, as far as like gearing ratio is on lenders and the like we establish some structure as we're going to move towards the C&I book. We had multiple ways to manage the CRE exposure as we moved through time, and we'll continue to work towards a primarily C&I book with lower CRE exposures as we have in the past. So it doesn't change our strategy in any way. We're still focused on granular lending, heavily focused on C&I, and this brings the opportunity to bring some CRE and it's -- in an attractive mark that we feel comfortable with.

[Dennis Hudson:]

Also provides opportunity for us I think to grow our consumer focus. First Green has done a nice job with some of the residential lending that they've done in their markets. We'll continue to expand that as we look forward as well as smaller consumer loans, home equity loans that sort of thing, HELOC clients. Also you know we're not, we don't -- we still have some appetite for CRE and they have some good lenders at First Green, and we'll continue to kind of work with them through time to kind of rebalance some of the focus as we get through time. So it's not something that we just kind of jerk in place, it's something we do very carefully over time. And when you look back at every deal we've done, over the last seven deals, every one of them has pushed up our CRE exposure a little bit. And when you look at the year after that, we see that exposure come down a little bit. So net, net after all of those deals were done, we still ended up today with a very, very modest CRE exposure and we want to keep it that way as we go forward and go through time. So particularly interested in working that number back, but it doesn't happen in a month. It happens over a year or two as we look at that, so -- but we have seen in every deal we’ve done within a couple of quarters in a number peaks and begin to come back down. And just to make clear to everybody, I don’t think our CRE number goes from what to what Chuck. I’m sorry I don’t have it.

[Chuck Shaffer:]

Sure. It's from 1.9% to 2.25% I believe and that’s on a consolidated basis.

[Dennis Hudson:]

190 to 220.

[Chuck Shaffer:]

190 to 220, sorry, all of you do.

[Chuck Shaffer:]

Yes, right.

[Steve Moss:]

We've talked about loan yield. We’ve talked about the deposit base. Can you tell us what the asset sensitivity looks like at First Green and whether that improves or I guess detracts from your current sensitivity?

[Chuck Shaffer:]

Yes, so, one of the benefits of this transaction is the deposit book. When we looked at the deposit book and as we’ve talked in the past, one of the first things we look at it on an acquisition is. What does the deposit portfolio look like and what's that franchise look like? And in this case, the deposit portfolio is very granular right across multiple geographic markets across the Orlando base as well as Daytona and Fort Lauderdale. And so, we saw a nice base with 30% DDA that help supports asset sensitivity, and so when we look at this is complementary are at sensitivity. We think the deposit book is complementary and with a cost of funds of approximately 0.68% at the bank, we cost the deposits 0.868% First Green. It's one of the more attractive deposit portfolios we will look at forward as we move forward. So, we think it's complementary to our assets sensitivity. We don't think in any way, it negates the asset sensitivity we carry. And if you look at NIM, it will be accretive to NIM looking forward, adds about 4 to 5 basis points the net interest margin without taking into account any effect from non-cash related accretion from the transaction and adds about 7 basis points on a pro forma effective yield on loans and about 4 basis points on pro forma effect cost to deposit. So it's positive NIM, positive asset sensitivity, so we like the combination going forward.

[Steve Moss:]

One last one for me, if I can guys. So I know it's a might be a little bit early for this question, but as we look out into the end of next year pro forma for this deal, you're getting around that 8 billion mark. What are your thoughts on prepping across 10 billion? How much of that infrastructure I guess you have in place currently?

[Dennis Hudson:]

Yes, so first of all I guess you’re talking about the organic growth as we kind of chug forward over the next year and so forth. I don’t think we quite get a 1 billion, but no question where we’re scaling larger with first of all just to be clear, we don’t see us crossing the $10 billion mark over the next year or two. I mean I think it's a little further up. Having said that as any bank like this scales larger and it's really important that we build out a lot of second line of defense functions around our risk organization. We've been hard at work doing that over the last couple of years and it's increasing the competency of the risk organization with lots of new people that we’ve added over -- even just, over the last year. We’ve done a lot of the same work in some of the operation periods and the like, so we continue to work on that. We do have a plan to get it there as you know with the change that was enacted recently was I think that's kind of push that a little bit for in terms of DFAST and things like that. But we've been running our version of DFAST for the last year and we'll continue to do and work with our regulators to make sure we have an understanding of the risk as we get forward. So to simply answer your question, we do have a plan of continue to scale the organization, we're right in alignment with that plan from a people standpoint and a competency standpoint, and we will continue to build that out over the next 18 months.

[Operator:]

Thank you. Our next question comes from Michael Young from SunTrust. Please go ahead your line is open.

[Michael Young:]

I wanted to maybe just follow back up on kind of some of your comments about the acquired loan portfolio and the gearing ratio going forward, and just get a sense for what you think the organic growth profile will be as a bank pro forma sounds like it maybe a period of time where someone need to run off and you're kind of ramping production potentially, but maybe you can kind of qualitatively speak to that?

[Dennis Hudson:]

Chuck, do you want to handle that?

[Chuck Shaffer:]

Yes, Michael, we -- in our transactions, we would consider the fact that there's going to be a period of time where we transition over to our current credit book in our credit policy in the light. And so in this case, we modeled about 7% loan growth on the acquired portfolio moving forward that's lower than our guidance for our aggregate organization of low-teen and low double-digit loan growth. And so in that case, we try to model conservatively loan growth out of this transaction and we think that it is very achievable, if not conservative, but we did model in about 10% growth on loan outstanding.

[Michael Young:]

And the runoff that you see that's not something accelerated, this is just kind of just normal pay downs of maybe CRE loans overtime?

[Chuck Shaffer:]

Exactly and that's what we've seen in other transactions, we've managed that effectively in some cases by design and in some cases just normal amortization of the portfolio. I wouldn’t expect this portfolio to be then behaving any differently than other portfolios as we've acquired. If you look back, although there were smaller transactions, all the deals we've done had higher CRE books, and most of the smaller banks will look at will have higher CRE books. And so, this is very similar to those transactions we've done and I would say it's a much different in anyway.

[Dennis Hudson:]

It's a very intentional strategic decision that we made, as you know from a risk standpoint, aligning our strategy with our risk appetite which took us away from CRE to some degree, but it also provided us with an opportunity to be able to compete better with some of the acquisition works that presented itself to us as we were in a position to absorb the little bit of the growth in CRE exposure. As if I could clarify one thing, generally speaking, we do not want to run off any business and we want to work with customers and we want to work importantly with the team at First Green to make sure we understand the customers and work with them as we go forward. And the last thing we want to do is run business off and included in that, we do not have a desire to run off a whole bunch of CRE exposure. But when you look at the overall CRE exposure in the entire bank across the footprint, over time, we’ve seen those numbers kind of work their way back to our strategy and it's really a matter of how we emphasize growth, where we focus our marketing efforts across the state, the focus we have on various types of asset classes that that we feel good about, and others that we begin to deemphasize with new folks that join us. And overall, it brings those numbers down. The numbers typically do not come down because we’re running off a bunch of CRE loans in an acquired portfolio because we’re taking a holistic look at the entire portfolio and making sure that we take advantage of opportunities to manage it to numbers that we like.

[Michael Young:]

And one other question just maybe on the big picture kind of efficiency ratio, targets and goals. I mean First Green Bank was running at about 60% efficiency ratio and taking out about half the cost. I would assume this should be fairly accretive to the efficiency ratio moving lower to the low kind of 50s ratios targeted by end of year, but going in the next year this should be very accretive to that moving lower, is that correct?

[Chuck Shaffer:]

Yes, without getting too specific there, I think you can assume this is accretive to efficiency ratio and maybe you handle the conversation how the way we had as well where you take cost outside of this transaction and model it out, it’s going to be beneficial to our aggregate efficiency ratio.

[Dennis Hudson:]

Again, we take a look at the whole organization and over the last kind of interesting, Michael, over the last couple of years, we’ve moved the fair amount of our operations folks into the Orlando market. Last year, we or about a year ago, we opened up a new call center for example in Orlando, and I think today we have maybe 60 to 70 employees in the call center. And when you look at the entire Orlando market, I think we have over 200 employees across the Orlando franchise. So, we’ve a pretty fair attractive employee base there and we’re looking to really continue to build that out over the next couple of years. We find really strong ability to attract great people in the Orlando market and one of the real advantages of this deal is it gives us insights into some great people that First Green that have operated together as a team for a long time, and really looking forward to getting more people than you probably might think, placed in different aspects and areas of the organization.

[Michael Young:]

And if I could sneak one last one just on the product capabilities of each bank. Are there any new products that either First Green brings to the table? And if not, what new products that you’re kind of bringing to them and their customer base?

[Dennis Hudson:]

We’ll be getting into that as we get closer to the people at First Green, and we are going to -- want to do a lot of listening, in the first few weeks as we sit down and engage with them and part of that listing includes deeper understanding of exactly how they come to market and really looking more carefully at some of the products there. What we've seen to-date is, is a great alignment in terms of the products they deliver and the products we have and we think some of the insights we'll be able to deliver to the First Green folks through some of the work we've done and data and analytics really will help continue to drive deeper engagement with all of the customers that we acquire in the market. Probably the most important thing though is what we bring into the customer base as an expanded set of products and ability to handle lots of expanding relationships around treasury and some of the work we do around small business is pretty unique that I think they're going to find very interesting in terms of very quick ways that we can serve customers across the franchise. So, it'll be a fun as we begin to discover that together with our team as we do in every deal.

[David Houdeshell:]

Denny, if I could jump in there too just I know you made the point earlier, but to reiterate the point because there was a key point is with the analytics platform we built as we talked in the past, we have a wide set of products with strong consumer base, consumer products set. We have strong mortgage products set. We have a well team. And so when we bring all that to an acquired base, it's usually great advantage to use the data analytics to create opportunities for growth in those products. And with this transaction given the granularity and size of the customer base of 10,000 customers, it's going to bring significant opportunities to bring and deepen relationships as we move forward.

[Dennis Hudson:]

Yes, this last year we had some of the best growth and wealth that we have had, and I would say a big chunk of that came out of the acquired customer bases that we have across the state. It's been a very gratifying.

[Operator:]

And our last question comes from Bill Zimmerman from Orlando Sentinel. Please go ahead your line is open.

[Bill Zimmerman:]

Talking about our customer on-boarding and being able to serve customers. A certain amount of the customers here have been buying into the marketing of being socially responsible and environmentally responsible. How does that fit into your projections for customer retentions during the on-boarding process?

[Dennis Hudson:]

Right, well, first of all we look forward to providing First Green customers with our extensive online and mobile banking services, which we think are really going to be great. But as the Florida based bank with 90-year-old plus history in the state, we believe our new customers will find that we're deeply committed to them and share First Green's concern for the environment and for what kind of a socially responsible focus. And if you think about it community banking when it's very hard to is every bit of being socially responsible and focused on customers, our mission as an organization is to help our customers improve their lives and help them build stronger communities that's at the heart of who Seacoast is, and I think that's entirely aligned with the heart of what you find at First Green with their focus on being socially responsible, and the like, I think it's a great alignment and a great combination for our two firms.

[Bill Zimmerman:]

You mentioned some of the ability to take locations that are within three miles of each other and sort of fold those together. You've also said that you expect to keep several employees on, so how does those two things factor in as you make those determinations going forward?

[Dennis Hudson:]

Yes, no question and there will be some consolidation there and that doesn't mean their offices close. It means we will look at both offices and make sure we make the right decision for the combined customers. But in terms of the people, it's critically important that we retain the people that are connected to customers when we’re talking specifically about offices and branches. And we will build a team, a combined team of folks from both organizations. I mentioned earlier, you've probably heard a few minutes ago that we've moved a lot of our operations for example, couple of years ago, we moved I think about half of our loan operations team into the Orlando market and we continue to expand that focus over the last year. And again our call center was moved to Orlando about a year ago and provided a pretty significant boost to our overall employment of 200 people in that market over the last year we probably been one of the faster growing employers in the Orlando market and that opens up tremendous opportunities for people in addition to joining us and branches and things like that. So we’re looking to continue to grow our overall employment in the market and we will find lots of opportunities. You know, obviously, to the extent we have open positions today, we're going to hold those position, and to the extent we have more open positions grow over time in that 200 number count we'll hold many of those open, and we’re going to work our hardest to make sure we place as many people as we possibly can into the combined organizations. And what I find that the end is we do a pretty darn good job of that, picking up lots of great people with talent and capabilities that we need in this company.

[Bill Zimmerman:]

And one more question, as if you look at locations, I'm very interested in a bottom line analysis and I don't know how far you've gotten into educating yourself on which locations or of that matter, but several the First Green locations have LEED certification or solar or you know electric car charging capabilities. Will those factor in as far as they bottom line decision to your operating expenses?

[Dennis Hudson:]

Yes, we'll want to look at all of that. We -- obviously, it's way too soon to make those decisions. So, we'll have more to say on that later to get through time, but we’re quite impressed with the job that they've done with the physical locations, and I'm sure we’re going to want to keep many of those looking just like they do now. So, we will say as we get through time.

[Operator:]

And I’m not showing any further questions at this time.

[Dennis Hudson:]

Great, well, again we thank you for spending some time with us on the call this morning. We look forward to continue to provide you updates, as we go through time, and we will be back talking to you in July as we post our quarter. Thank you.

[Operator:]

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.