John Kanas - Chairman, President and CEO Leslie Lunak - Chief Financial Officer Raj Singh - Chief Operating Officer Mary Harris - Senior Vice President of Marketing & Public Relations Thomas Cornish - State President, Florida

Brady Gailey - KBW Ken Zerbe - Morgan Stanley Stephen Scouten - Sandler O'Neill Jared Shaw - Wells Fargo Securities David Bishop - Drexel Hamilton Joe Fenech - Hovde Group Gerard Cassidy - RBC

Good day, ladies and gentlemen and welcome to the BankUnited 2015 First Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. At this time I would like to hand the conference over to Ms. Mary Harris, Senior Vice President of Marketing & Public Relations. Ma’am, you may begin.

Good morning and welcome. It's my pleasure to introduce our Chairman, President and CEO, John Kanas. But first, I'd like to remind everyone that this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflects the company’s current views with respect to among other things, future events and financial performance. The company generally identifies forward-looking statements by terminologies such as outlook, believes, expects, potential, continues, may, will, could, should, seeks, approximately, predicts, intends, plans, estimate, anticipate, or the negative version of those words or other comparable words. Any forward-looking statements contained in this call are based on the historical performance of the company and its subsidiaries, or on the company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the company that the future plans, estimates or expectations, contemplated by the company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the company’s operations, financial results, financial conditions, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if the company’s underlying assumptions prove to be incorrect, the company’s actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause results to differ materially from those indicated by the forward-looking statements. Information on these factors can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 available at the SEC’s website. I'll hand it over to John. John?

Good morning everybody, thanks for dialing in. Once again we have turned out a very decent quarter that's been consistent with our expectations in terms of both loan and deposit growth in earnings, $0.44 a share on diluted per share basis. As we have been predicting at the end of ourselves, for the last few years we are in the period that we always refer to as the trough period were ended now and expect to continue to be in that trough into the second quarter. And based on the performance that we've seen this quarter and what is stacking up for the balance of the year, we continue to expect to see meaningful improvement as the second half of the year unfolds. Growth across the asset categories was completely in line with what we expected for the quarter although this first quarter is usually light, just under $950 million worth of loan in lease growth and about $750 million worth of deposit growth during the period; $550 million of the loan growth came from New York, $185 million from Florida, and another $200 million or so from a combination of all the national platforms. The big non-financial news for the quarter was the fact that we entered into an agreement to buy – Certus Holdings to acquire – from Certus Holdings to acquire the small business finance unit, we are completely on track with the integration of that business, we expect a regulatory approval from the SBA anyday, and we'll close this quarter on that transaction, we are already working with those folks on a day-to-day basis and have expectations that company will go volume relatively quickly as the rest of the year goes by. Our net interest income increased a little bit $172 million for the quarter, the margin cap was on a tax-equivalent basis was just a little bit over 4%, about where we had predicted it to be compared to 4.26% last quarter. We've had some additions to the selling group, the sales group I should say, in both Florida and New York we've added a total of just under 20 people this quarter. We have branched out as we had told you earlier in the year that we would into Jacksonville, Florida, Tampa, and Orlando; this quarter we added teams in all three of those markets as well as a team at our franchisee finance subsidiary and a new commercial banking team in New York. In addition to the new commercial banking team we're on verge of closing the deal with another team that we expect to be in place by the end of this quarter. So as we've said, South Florida, which was the engine for growth in the state earlier on continues to expand at an impressive rate. The real estate market continues to improve and that growth is slowly but surely began to show itself in other parts of state. We are actively beginning to spread out ourselves throughout New York in terms of the economy – in terms of its own economy New York City continues to be exceedingly healthy, you've seen so many other commentary of some other banks that do business up here. We are seeing no signs of slowing down in growth in either of these markets and we continue to be impressed by the asset quality performance, you can see that asset quality for the quarter continues to be modest, rather the problem continues to be modest, and only 34 basis points of non-performing loans, and non-performing loans over representing – the reserve representating over 200% of the non-performance. So, all-in-all solid performance, solid growth, continuation of loan quality trends that we've seen in the past and an expectations after next quarter that we will begin to see an improvement on the EPS line. I'm going to now turn this over to Raj, now that he can give you a little bit more granular detail. Raj?

Thanks, John. I'll talk about deposits really quick and then jump little bit into more detail on the service transaction, maybe though John has covered it very well. This is a good quarter for us from a deposit growth perspective, deposits grew about $750 million, the local deposit ratio is now at 93%, so we keep inching up very slowly but there is still room to go as we've always said in the previous calls. Costs of deposits for this quarter excluding any hedge accounting or accretion was about 55 basis points, and you should expect it to remain in that level and the growth to stay at about the same level over the course of the next few quarters. In terms of geography, New York this quarter from deposit growth had a great quarter, grew $536 million, which if you actually compare it to is loan growth; this was kind of a self-funded quarter which is the first for New York, New York has always had more loans than deposits but over the long term as we once have stated, our desire is for New York to be fully self-funded, so this is the first quarter that it came pretty close to be self-funded. DDA grew about $81 million overall, most of the growth was in money market and savings by $553 million and time deposits grew $115 million. In terms of the Certus transaction, this was a deal we cross acquired in the past, it was in the making for several months so we finally announced it a few weeks ago, and we expect to close it sometime over the next few days, certainly in the second quarter. The only approval we need for this deal is approval from the FDA and the USDA, we do not need OCC or FED approval; and as soon as we have those approvals we will be closing. We will close and convert and integrate this transaction on the same day. So there is – the conversion already is in progress, all the planning is done and on the very first day everything will be converted. We're also talking to people beyond this what we're acquiring in terms of enhancing this team and we're having good success over there as well, we look to enhance what the adverse is in terms of management and in terms of sales and produces. So that will also happen shortly after we close. I will turn it over Leslie Lunak.

Thanks Raj. As John said, we saw an increase this quarter in net interest income, marginally or modestly when compared to the immediately preceding quarter and more markedly when compared to the comparable quarter of the prior year despite the declining impact of sales from our zero carrying value pool. We continue to expect quarterly growth in net interest income as – to reemphasize what John said, this quarter and next quarter we find ourselves in what we would consider a triumph in quarterly EPS but we do continue to expect noticeable increases in the back half of 2015. Pressure on NIM continues due primarily to the run-off of covered assets. As expected, our guidance for NIM for the year remains unchanged, we expect the rate to decline to flatten and then just start to stabilize a little bit going forward. We did see the cost of interest bearing liabilities come down this quarter, primarily due to the reprising of some higher rate CDs and FHLB advances. In line with our previous guidance we continue to expect single digit growth in non-interest expense for 2015 and with respect to provisioning again, I would reiterate that we expect the allowance to remain relatively constant as a percentage of loan for the foreseeable future and that's the way I'd look at that. So there are highlights from a financial performance and forward-looking guidance. John, anything you would like to say in a way of wrap up before we…

No, I just think in summary, these few markets continue to perform as we expected they would, in a stellar fashion, South Florida is creating all of its own traffic jams with the construction cranes all over the beach and all over the city of Miami, and New York continues with the – the expansion in New York that really started in earnings to couple of years ago in Manhattan has spread rapidly to the burrow, so Brooklyn and Queens are very busy market these days as is the grand [ph]. So we're seeing activity coming from all of the burrows as well as Manhattan, and our New York guys are very optimistic about loan trends going into the rest of the year. So, with that I think we're ready to take some questions.

[Operator Instructions] Our first question comes from Brady Gailey from KBW. Your line is open, please go ahead.

Hey, good morning guys.

Good morning, Brady.

One of the thing I noticed about the linked quarter loan growth was your purchased a lesser amount of resi mortgages, is that – was that just a blip or do you think that the run rate for resi mortgage purchases will kind of decline from here?

Brady, as you know over the course of last six or eight quarters, we've been purchasing less and less. Having said that, this quarter was especially low, part of it was so much volatility in the market, around rates. And – so, while I would say that the general attraction is that we will be buying less and less, first quarter may have been very low.

Okay. Alright, and then when you look at – we keep talking about when the trough is – if you look at the street estimates, it has earnings growing I think at $0.02 to $0.03 next quarter. Do you think that's appropriate or do you think that earnings still has maybe one more quarter of downside until we start seeing some growth?

Yes, I think they are overly optimistic by a quarter. I would be surprised if that would have – I will tell you that this quarter is little better than I thought it was going to be but I don't see an improvement coming up in the second quarter but we continue to reiterate our feeling focused at the back half of the year. So I wouldn’t think that's up for the second quarter.

Okay. Alright then, do you have any prepayment penalty fees are flowing through your non-covered loan yield?

We do Brady but they haven't got to the point yet that they are material along anyway.

Okay, great. Thanks guys.

Thank you. Our next question comes from Ken Zerbe from Morgan Stanley. Your line is open, please go ahead.

Thanks. Couple of questions, just in terms of the loan growth John, I know you mentioned you hired 20 people I think it was this quarter, how much of your go forward loan growth, so the $4 billion to $5 billion relies on new hires, and…

When we projected that loan growth which was back in the early part of the first quarter, we didn't expect any new hires. So that projection was without the new hires that we've put on. We think that they will be added.

Are you speaking with the $4 billion to $5 billion of loan growth this year?

Yes.

Okay. And then just…

And these people work out and their volumes come in early. They will make a positive contribution to our expectations but that's too early to say. So we're absolutely sticking to our loan growth estimates here.

Got it, okay. And then just a quick question on the amortization of the SAP asset, I think it's too tired this quarter, at what point did that actually start to go down?

No, I hesitate only because it's hard to predict. I think it will slightly higher next quarter actually but remember on the flipside, so will interest income from the covered loans. I would continue to suggest that you focus on the net yield of the asset as a whole which will continue to be between 9% and 10%. We are seeing improved performance from the covered loans, you may have noticed we had a large transfer from non- accretable difference to accretable yields this quarter. So that will result in higher amortization next quarter and higher interest income on the several loans as well but the net of the two won’t change materially.

Got you, okay. And then just – sorry, last question on Florida, it looks like the Florida franchise had a little slower growth this quarter, is that just seasonal slowdown because I know you mentioned large cranes down there but…

Yes, it's a blip, remember that we would ask you not to look at quarter-to-quarter but we do think that as the cards fell this quarter that's particularly life of Florida, not indicative of a trend.

Okay, thank you very much.

Thank you. And our next question comes from David Bush, Dudenhiem Securities [ph]. Your line is open, please go ahead.

Good morning.

Hi, David.

I was probably just following up on the FDSE discussion, what's the updated level of expected amortization in total that you have?

David, I don't have that number right in front of me but it will be in the 10-Q when we file.

Okay, but do you think it would go up from about $300 million that you had at year end?

Probably but I don't know how much?

Got it, okay. And then John, maybe – because you commented on some of the average deal sizes that had stake [ph] in multi-family and if you're getting the opportunity to look any large packages?

We had a chance to look at large packages all the time David, generally speaking, it's not our first choice although some of the large packages are coming from our better customers that we know long time we are taking part of some of the credits. But deal size is about the same, I'm looking at Tom Cornish sitting across the table for me, I would say employer – deal size is not any material differences, Tom? Thomas Cornish : No, I would say particularly multi-family, you're generally looking at $10 million to $25 million in Florida in that sector.

There is nothing significant about the change of deal size at this quarter to any quarter. We continue to see – to answer your – you expected a question actually, we continue to see a lot of pressure on pricing, particularly in larger credits. We don't see any over exuberance on the part of other banks with regard to structure on the larger credits. We are seeing some of the smaller banks on smaller credits that are getting a little bit ambitious about both loan pricing and structure, so we're being very careful in those areas but the larger more sophisticated borrowers, and the larger more sophisticated banks are sticking to their guns on the structure of credit, and that – we view that very positively.

Okay. And then with the SBA acquisition would we expect to see an on average that you're available for sale loan would be about $300 million?

No, it will not be that large; in that business maybe available for sale will be between $30 million and $50 million.

Okay. So I guess you will bring over $200 million and then you will have a sale and then you will manage it at lower level?

That $200 million is the unguaranteed portion of those loans that are retained.

Okay, I understand.

Most of that.

I got it.

The pipeline at any given time which will be held for sale will be between $30 million and $50 million.

Got it. Okay, thank you.

Thank you. Our next question comes from Stephen Scouten, Sandler O'Neill. Your line is open, please go ahead.

Hey guys, thanks for taking my questions. Leslie, quick question on the NIM, when you said that the NIM should kind of begin to stabilize, are you thinking about that kind of a core basis or do you mean the reported NIM should be in the stabilized sphere?

So what I mean is the rate of decline will slow somewhat as the new loan portfolio continues to represent a larger portion of the total, that's really a better way to put that.

Okay, got you. And then, just – maybe on the M&A front and I apologize if you've touched on this already, but just curious if the strong outperformance you guys have had in the shares here year-to-date is that – if you anticipate that helping your ability to get a deal done or if you would have any increased desire – do get a deal done at this point in time or if it's still kind of, as you said, just as likely to buy as to sell and kind of the same message?

It's kind of the same message, you probably won’t tired of hearing me say the same thing for the last two years. We continue to have conversations with people searching in earnest for deal that builds value and while there is probably even more potential deals out there that are doable right now because we think that there is this plenty of interest on the part of sellers in having conversation these days. We still haven't turned up anything would build value here, when we do you will hear from us. But I can't say that there is anything imminent here.

Okay, thanks guys, I appreciate it.

Thank you. Our next question comes from David Easan [ph], UBS. Your line is open, please go ahead.

Hi, thanks for taking the questions. I was wondering if you could maybe touch a little bit more on the deposit growth outlook and maybe specifically what you're seeing in New York and with some of these larger customers that maybe kind of being pushed out a little bit by the bigger bank?

Yes, we really haven't had – this quarter really hasn’t been impacted if at all I think by any of those deposits coming over from the city banks that are driving frankly hundreds of billions of dollars of deposits out. But we are engaged in lots of conversations with the types of accounts that are being pushed out at the large banks, some of which we have no interest in, but some of which we have lot of interest in, so while we expect – we said to you before that the deposits in New York tends to be larger than they are in Florida because they are generally all commercial. So we expect to see continued growth in where we would normally get commercial deposit growth from our commercial customers in New York and then on top of that as the year unfolds, I think it will start to see some help in that area from these accounts that are getting cushion [ph]. The big banks are being very, very aggressive about the way they are pushing these deposits out and it's not that they are just charging them a fee to keep their deposits, they have actually in some cases written letters to some of these guys and said we are sending you a cheque on June 30, so you better find a bank. So we're able to have granular discussions with these people that are on our own terms and expect that – we'll see some of that later in the year.

Great. And then when you talk about the 20 sales people that were hired, how much of that extent is in the run rate here in 1Q and should we expect a little bit of a further uplift going forward?

So a lot too much of it is in the 1Q run rate but it is encompassed in the guidance side put out about single digit increases in non-interest expense.

Okay.

And what we did on the salesman line, we've succeeded in achieving some operating efficiencies in the retail banking side in the branch system in Florida, and to be frank with you, I wouldn’t be surprised if we say as much as we're going to spend on that.

Okay, great. Thanks.

Thank you. Our next question comes from Jared Shaw, Wells Fargo Securities. Your line is open, please go ahead.

Hi, good morning. I'm just circling back on the – if you look at the $550 million that came out of here, how much of that was on multi-family versus other commercial lending?

Hold on a second Jared.

Hold on a second, we'll tell you. So, about $400 million of that was multi-family.

Okay. Again as we look going forward we still expect to – with the growth you have in the Florida franchise in new locations, what's the expectation for future loan growth in terms of next between Florida and New York and via national platform?

I would expect that loan growth in New York will continue to eclipse Florida by some amount but not as drastically this quarter.

Okay. Then we should still expect to see that loan to deposit ratio potentially push out through the 100% level?

Yes, I mean it's our plan the first loan to deposit ratio up getting closer to 100% and at these levels that's going to take a while.

Okay. And then finally just on M&A side, if you were to be more likely from what we saw the Certus acquisition or would you at some point like to add a new deposit rich…

We're spending a great deal of time looking at things like the service acquisition, remember I mean just sort of recap that is the company that makes $20 million a year and we brought in for after-taxes and we brought them for $20 million. So I mean this is – we would take as many of these as we could find, so when you buy companies on these kind of multiples they are certainly our first choice. And there are other opportunities around before somebody asked a question, yes, we are looking at – we've got calls from bankers on the GE stuff and so right now the bankers are concentrating on the very large portfolios of GE – we think some of that break down into smaller pieces so we're going to sit looking at what might be available if we haven't really seen anything yet that's of interest. So continuing to look at the non-bank stuff where the multiples are way more in our favor but this doesn't mean that we're not always paying attention to the possibility that the bank deal just hadn’t seen anything that makes sense.

John, just to clarify, Certus makes about $20 million pre-tax.

Great, thank you.

Our next question comes from Steven [ph] from JP Morgan. Your line is open, please go ahead.

Good morning everyone. Regarding earnings in the second half I think you used a term like noticeable increase, when we think about the second half we know there is less [ph] coming from covered, is that really the only stores of this expected ramp or whatever term you would like to use or you would also expect to pick up in the core business in the second half?

I mean it really is coming from that, it's coming from balance sheet growth and additional minutes of income produced by the new asset portfolio that's really what it's about, the new book hadn’t grown to the point that it's more than replacing the net interest income that is being run off from the covered portfolio, it's really damaging growth.

As such when you think about the headwinds from the covered, thinking about once we see that turn it's more gradual, is it more – you see those headwinds really lessening significantly in the back half?

I'm not sure exactly what you mean by headwinds?

In other words, what's holding that earnings in the quarter in terms of when we move forward in terms of getting this lift and how material would lift?

The list is really coming from growth and net interest income resulting from growth in the new loan portfolio. I don't know – the clever portfolios continue to contribute positively, not negatively to earnings just as lesser amount every quarter.

It's like earnings from that portfolio are declining?

Are declining, correct, and we were just reaching the point that incremental earnings from the new portfolio are out stripping that rate of decline.

And to out our final point to it, the declining earnings from the covered loans that decline is slower and slower every quarter, it becomes a straight line. So if the decline is happening slower and slower and the buildup of earnings from the new portfolio is happening faster and faster, so that's the inflection we're talking about.

And Leslie, just on the margins, you're still looking for the full year margin on the 84% range?

Yes.

And finally, last on the earnings release, the story reported that they saw a pretty big slowdown in multi-family, pipeline fell a lot right in the competitive environment and they are choosing to stay disciplined rather than losing standards. Can you talk about what you're seeing there and maybe what your pipeline is on?

We're certainly not seeing any slowdown in that area, in fact the New York guys are quite optimistic, their loan growth was down this year. As we've said before this, there is always a lot of crazy competitors out there and lots of deals that we pass out in a market the size of New York especially when you pull the burrows, there is more than adequate loan growth to go around and make us feel confident in achieving the numbers that we expect to achieve this year.

It was the pipeline John?

Yes, it is, pretty notably by the way.

Our next question comes from David Bishop from Drexel Hamilton. Your line is open, please go ahead.

Thank you, good morning. Looking back to the teams you hired this quarter on the commercial side, can you give us some color in terms of regions maybe some of the product segments those guys are focused on?

Ted talked about Florida a little bit, Tom is more interested in Florida and John from New York. Tom, talk about the guys in Florida.

Sure. It's different in different markets, in Jacksonville we've got a team to focus on upper and middle market commercial business and commercial real estate business, so we've grouped from one bank that focuses on both of those segments long time Jacksonville, bankers that we think are going to give us an excellent lift on both sides of that business model. In Orlando we brought in a guy that was one of the lead commercial real estate bankers across the state in one of the major institutions in Florida who has most significant buying of commercial real estate relationships in Orlando, Tampa, and Jacksonville, particularly in specialized type product areas. For us as John mentioned at the end of the month we'll have a lift out of a business banking team that is another Orlando competitor, that's a smaller kind of seismic group size, predominantly $5 million to $35 million revenue type clients. We added a project financed person in the State of Florida to cover the entire state, out of Miami doing significant public sector project, work a guy who is working for an investment banking company, who is one of the leading project finance people in the State of Florida. So it's a little different in each market, as you go across in the State of Florida but each of these are bringing us a geographic footprint opportunity that we did not have before. So they are bringing us product capability that we're optimistic about the growth that we didn't have before. In New York some of the people are coming on board are actually – there is couple of guys that we're just finishing negotiations with, one who I think is signed on today coming from a major bank in New York City with a team of his own that will bring in yet a different variety of deposit business and then we are to seeing. John, actually we added some folks in new CPL as well.

In New York we've really filled in some of the spots we needed to fill in not figuring it was starting here two years ago just about – set ourselves out now to be in good shape and letting cycles C&I as well commercial real estate. And we'll continue to add, particularly in New York we're going to continue to add people for the rest of this year.

I appreciate the color.

Thank you. Our next question comes from Joe Fenech from Hovde Group. Your line is open, please go ahead.

Good morning guys. John, the number of your competitors in Florida, some of the smaller guys that started to talk about overheating in South Florida, we heard the condo [ph] market in day county from somebody specifically yesterday, multi-family in South Florida we've heard for few quarters now. If you talk about what you guys are seeing, you guys have been little bit more optimistic about where you think we are here in the cycle, anything troubling you're seeing or the concern is still in your view lower stated?

We've said this for the last two years that we're always on the edge of our chair in Florida because in Tom has seen this a lot longer than we have in his experience, so it's like 25 years of banking, I mean the floor is heating up like crazy, they are building condos in every square inch of ground, you can't roughly pull down a customer the other day, sunny ails [ph], you can't find a place to park roller construction cranes. But these are – for the most part these condos are all sold and presold, there is lot more equity in these deals than we saw in the early 2000s when every real estate broker had a deposit on five condimunian units. But I remind you we're not in that business, we are not financing any of that new construction, we don't finish the higher rates, we haven't yet, I mean it doesn't mean we wouldn’t do a small piece of one for big customers one of these days, that's not our business. We make our money in our customers are other people who are the support industries that surround construction and the general economy. So look for us to be backing the – the accountants, and the lawyers, and the staff people and all the subs that work on these things, they have so much work lined up for the next couple of years that it's hard to imagine them slowing down much. It's not hard to imagine that I think on the front line but sooner or later they stopped building these high rise condos down there because I don't know how many – we've tried to figure out how many are under construction in town compared to what's been absorbed. I mean it is impressive to take a look at it. Look, this is Florida, it's a boom bust state, we know that you can't keep up at this pace forever, and I would agree if a bank in Florida tells you that they are worried about overheating, we're in that cat, we're worried about over heating too, the girls worry about overheating, so we're not seeing anything in particular though that gives us positive moment.

Okay. And then John, I appreciate your comments on your appetite for additional things to do in the specialty finances and non-bank arena. Question is, how big is too big, in other words is there a certain cap in terms of how much you would like to see the non-traditional or specialty finance piece comprising your balance sheet?

Yes, I mean we obviously don't want to see it become the tail wagging the dog but at this time these smaller companies, it's hard not to be attracted to them when we can get loan yields that are significantly better than we can through the bank directly and see opportunities to buy them at these prices but Raj will you talk about this?

We're roughly at 10% give or take on balance sheet. So we still think it's a very small amount and like John said it's not really on core business but it is a nice thing to have to diversify our portfolio and not be dependent only on commercial real estate market. So we all see this grow into some large 40%, 50% of our balance sheet but a 10%, 15% sounds okay.

Yes, if this spends it up, that's exactly what I would have said. If this ended up being even 20% of our balance sheet someday and we'll continue to see opportunities of these kind of numbers, it wouldn’t trouble me. What we really sort of a global business strategy here is, when we can find smart people who are expert in a particular category and have been able to demonstrate their expertise over long periods of time and over several economic cycles, and it allows us to be less dependent on the kind of commodity businesses which is probably the most obvious commodity business that multi-family business in New York where pricing pressure continues to meet. Then we'll take advantage of those trends but don't look for that business to be 40% or 50% of the company.

Okay, I was just a little surprised hear you talking about the GE portfolio because my thought with you guys historically is that you're not fans of buying portfolios of assets you like businesses, so I thought that the GE…

Don't misunderstand, we are looking at teams of people, I shouldn't even say that we're not even doing that yet. What we have told bankers who called us about this they said, when you get teams of people who are managing thesis [ph] of assets in businesses that we can understand and grow with as partners would these people would be happy to take a look, I'm not sure I'll even see anything like that.

Yes, if you look at our history, we buy something very small, attempt to grow it to many times its size whether it's UCBL, whether it was Pinnacle France, whether it's [indiscernible] or the small business platform we're in the middle of buying, we like to buy very small things that have growth potential and where we feel the management team is strong enough and the business that we like to understand.

Yes, we will never give up multi-billion dollar portfolio acquisition.

Okay. And then just lastly, just a clarification on the earnings progression you talked about earlier. You talked about maybe second quarter earnings expectations, John being a little too optimistic, does that mean we got to rethink how the trajectory will look coming off second quarter earnings or is that blip just specific for some reason to the second quarter results and it just means the ramp will be steeper going into the back half of the year. I guess I'm just wondering if you think the second quarter expectations are too high or street expectations for the back half of the year is too high as well?

I don't think we're saying anything that we haven't been saying for quite some time now that we expected earnings for the first two quarters of this year and then we expected to see an increase in quarterly EPS in the back half to the extent that the street is forecasting that upward trajectory that begins in the second quarter, that's not consistent with what we've been messaging all along.

I guess a better way to say this is, what we've said consistently is when you add them all up, 2015 earnings are going to look like all 2014 earnings but the second half is going to be lot stronger than the first half and that will build into 2016.

Okay, thanks.

Our next question comes from Gerard Cassidy from RBC. Your line is open, please go ahead.

Good morning, John.

Hi, Gerard.

For a minute I thought you were buying somebody $9 billion of assets. One question for you, can you give us some color – you did talk a little bit about the structure of some of the deals you're seeing is weakening compared to maybe a year ago. Could you give us some color on what part of the structure of loan and earning that you're seeing today?

You shouldn't overestimate that, what we're really saying is that smaller banks who are dealing with smaller customers are getting more aggressive and are more willing to compromise structure, as well as rate than larger banks are for larger structure. So we're seeing some of the $3 million, $4 million and $5 million loans, even smaller than that where we're competing with small community banks where they are willing to do thinks we're not willing to do and so we're turning down the number of those deal.

Okay. And when you have looked at potential acquisitions of depositories, what are the hot buttons that you want to make sure you've got identified for the regulators when you might consider giving one and bringing it to their attention.

You mean from the regulators…

[Cross Talks] So if you were to find a depositary that made sense, it was accretive when you guys are all comfortable with it, what do you know today that you have to make sure is done – the Ts across and before you bring the regulators to take a look?

It's the same stuff as has always been the case. Look, sadly we've all got to sit here in the bleachers and watch painfully what's happened to MNC and what's happening to some other banks as they wind their way through the regulatory Craig mark [ph]. And look you don't buyback and selling back today, it has to be clean in those – in the CRA area and they have to be clean and aggressive in the money laundering business, you got to have the backlog and support. All of the systems that regulators are requiring and it doesn't matter really what size you are because the bar is very high for banks. So for instance I mean if we were to look at a bank that in our view was upto regulatory standard, we bring that as a regulators and ask them about that, that would be a hot topic and we would have to convince regulators that we're going to be able to bring them upto regulatory standard quickly or regulators are probably not being happy about. I told you before to the market that regulators have been very forthright with us and other banks and said, look, green light, you guys find something that makes sense but it's the same old trip wires that have been really provided this business for the last two three years and we don't expect that's going to let off anytime soon.

Thank you. And then Raj, can you show the interest sensitivity of the balance sheet, if we do see the Fed funds rate rise 50 basis points by the end of the year, long end of the curve maybe because by a similar amount, what type of impact would that have on net interest revenue for you guys?

Gerard, I would have Leslie answer that.

Gerard, the existing balance sheet is very interest rate risk neutral, that hasn’t changed, that's been consistent for some period of time now. What we would see if we saw rates move would be an increase in net interest income but driven more by balance sheet growth than by repricing of the existing balance sheet which as I said is very neutral.

Sensitivity basically comes from assets that are not on the balance sheet yet, so based on higher that would go on the balance sheet of higher rates and has created more earnings. But if you just look at the static balance sheet the way it stands right now, it's neutral.

Okay.

And I'd remind of it, Grace has been [ph] remember that we've been sitting here for the last year to say, not so fast, I'm not sure we believe rates are going to go up as quickly as some people have. So it's worked out very well for us that this balance sheet has been neutral, as it is but we're still not convinced that – I'm not convinced. We're going to say riot in June and I'm not totally sure we're going to see Fed take action this year. So for those who need – remember that all of our prognostications that we've made earlier this year are based on the fact that we don't have any friendlier interest rate environment than we have today. If we get a friendlier interest rate environment that would be a parallel shift in rates and new assets come out with better yields, that would an obviously big net positive to us but we have accounted that in our estimate for earnings this year.

Great. And then finally Raj, you've talked in the past about the digital channel that you guys have developed and the industry has developed through the smart phones. Can you just give us an update on any metrics you have – the amount of customers that are using that channel to access their accounts or make deposits and how important is it – is it more important today or people are actually deciding which bank to use based on their digital channel, have you seen any of that?

Gerard, it is obviously a very important channel, going forward we'll more than it is, it has been two years ago. What it is driving is, it's driving less and less traffic into the branch. We see that everybody, we measure it every year but year-over-year fewer customers walk into our branch. So you may have picked up on this when John said about 15 minutes ago that while we're hiring people our total expenses won’t rise because we are actually shrinking in the branch, that's a direct result of the fact that people are using our branches less and using online technology more which is letting us pull some expenses back from the branch system, and we can see that even more, we will probably – it will not be surprising to see us with a smaller footprint over the next couple of years as we consolidate some of these branches because of less traffic. So other than that we have not put out any metric as to how many people are online, how many are using Bill Pay and so on. But in general I will say that trend is up in a very strong meaningful way and once somebody signs on, especially if he was signed on, started using something like Bill Pay online, they become a very sticky customer. And – so we aggressively pursue people to become Bill Pay customers and overtime we expect that to pay back itself through less use of branches and for us take expenses out of the branch site.

It is certainly much faster than some of the private technology like ATMs and internet banking, the asking rate is much quicker than most people expected but remember that this is – most of the discussion centers are around consumers although our commercial customers are using their instruments of technology like the multi-capture and other things that made the delivery system to them a lot more efficient than it would have been through the branches. In summary what we're saying here is that the branches system is rapidly becoming a expense and automotive means of delivery, I'm service decent, and I think that trend will continue here and throughout the industry and nothing’s going to stop them. I think this quarter the millennial population, the baby bloomer so those people aren’t going to be standing in line of branches anytime soon.

Totally agree, thank you guys.

Thank you. Our next question comes from Laura Chen from BMO Capital Markets. Your line is open, please go ahead.

Thank you, good morning. I just wanted to follow up on the decline in this quarter, especially on the multi-family in New York, can you talk about at the pricing was in that portfolio and get [indiscernible] third quarter we had to drop below 3%. Typically no, the coupon rates on our loans we put on and I don't have the statistics for multifamily alone in front of me right now but the coupon rates that we put on this quarter were actually surprisingly equal to what we put on last quarter, and they are on average just slightly lower. So we've seen that pretty much stabilize actually.

It's actually New York a little bit, we're not go up the three but we've seen plenty of accomplished year and that's what I talked about earlier.

And just my second question on the tax rate, just a little bit lower than what I was expecting in the first quarter plus any guidance in terms of go forward on the touch rate. I think for the year this year it will be between 33 and 34 and little bit lower in the third quarter because of the planned release.

Should be similar to tax rate in the third quarter of last year, I don't remember what that was, so I'll stick to between $33 and $34 for the year, in the third quarter this year probably.

I show no further questions in queue at this time.

Good. So in summary, god quarter, growth as we expected, margin above where we thought it would be optimistic, continue to be very optimistic in both markets for the balance of this year and look forward to talking to you in about 90 days. Thank you.

Ladies and gentlemen thanks for participating in today's conference. This concludes our program. You may all disconnect. Have a wonderful day.