Operator: Good day, everyone. Welcome to the Earnings Call for Western Alliance Bancorporation for the Second Quarter 2013.
Our speakers today are Robert Sarver, Chairman and CEO and Dale Gibbons, Chief Financial Officer. You may also view the presentation today via webcast through the Company's website at www.westernalliancebancorp.com. The call will be recorded and made available for replay after 2 O'clock pm Eastern Time, July 19, 2013 through Tuesday, August 20, 2013 at 9.00 Am Eastern Time by dialing 1-877-344-7529, and entering pass code 10031032.
The discussion during this call may contain forward-looking statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements contained herein reflect our current views about future events and financial performance and are subject to risks and uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward-looking statement.
Some factors that could cause actual results to differ materially from historical or expected results include those listed in filings with the Securities and Exchange Commission, except as required by law, the Company does not undertake any obligation to update any forward-looking statement.
Now, for the opening remarks, I would like to turn the call over to Robert Sarver. Please go ahead.
Robert G. Sarver - Chairman and CEO: Thank you. Welcome to the Western Alliance second quarter 2013 earnings call. First, I'd like to spend a few minutes reviewing our performance highlights and then I'll turn the time over to Dale for a more detailed report. We'll then open it up for questions.
As we previously announced, we closed the Centennial Bank acquisition at the end of April, which has augmented our strong performance this quarter, with increased loans and deposits as well as a bargain purchase gain. We've really focused on maintaining our organic growth during the acquisition and integration of Centennial and believe we've been able to do that too.
I'm also pleased to report that Bank of Nevada has been released from their safety and soundness MOU, which has been in place since 2009. As you know, Nevada was perhaps the hardest hit state in the nation during the financial crisis. You'll see in the numbers today that Bank of Nevada is once again contributing to the strong results of the Company.
So, yesterday afternoon, our Company announced second quarter net income of $34 million or $0.39 per share, which includes a gain net of merger cost of $8.5 million from the acquisition of Centennial Bank for less than tangible book value, a $1.1 million gain on sale of OREO and a revaluation charge on our trust preferred of $3.3 million.
EPS was $0.30 excluding these non-core items, double the $0.15 earned in the second quarter of last year. Our net interest margin was 4.36%, the same as last quarter as improvement from Centennial offset continued loan pricing pressure and the cost of new debt to fund the Centennial purchase.
On a reported basis, our return on assets was 1.64% and return on tangible common equity was 21.6%, excluding the BPO, they were 1.23% and 16.5%, respectively. We continue to have strong balance sheet momentum with loans up $556 million for the quarter, of which $213 million was organic. Deposits are up $266 million with a modest organic decline of $34 million.
Net charge-offs were $2.7 million, only 17 basis points of average loans down 80% from $13.9 million in the second quarter last year. Nonperforming assets also declined to 1.9% of total assets from 2.5% a year ago. Our strong loan and deposit growth has been matched by our capital generation as Tier 1 common equity remains stable above 8%. Our tangible book value per share is up 20% in the past year to $7.26 as of June 30, 2013.
On April 30, we acquired $404 million of loans from Centennial and marked them down, a total of $53 million to reflect the impaired status of some of the credits. At June 30, the net book balance of these loans was $351 million. We also acquired $337 million in deposits, which has fallen to $298 million at quarter end, despite cutting the rates paid significantly.
We recognized a gain of $10 million on the purchase and incurred merger costs of $2.6 million, resulting in an after-tax gain of $83.5 million, or $0.10 per share. Dale?
Dale M. Gibbons - EVP and CFO: The organic loan growth as Robert mentioned was $213 million for the quarter of the $556 million total we reported. The loan growth was most robust in Arizona and California and included C&I loans, construction loans, commercial real estate owner occupied as well as investor. The only category that declined was residential real estate and as some of you know, we are no longer offering this product.
Deposits increased $266 million during the quarter but slipped $34 million without Centennial all of which was in CDs. The Centennial portfolio consisted of $242 million in CDs and $54 million in savings. Considering our first quarter deposit growth of $280 million, organic deposit growth was $246 million for the first half of the year.
Looking at the graph on the left, adversely graded loans and nonperforming assets from our own originations improved to $337 million in the second quarter from $375 million at March 31st and are down from $409 million, one year ago. More than half of the $82 million in non-accruing loans remain current with regard to contractual, principle and interest payments. We have $90.9 million of TDRs at June 30th, none of which are delinquent.
For acquired adversely graded assets on the right, at June 30th the book balance was $125 million. We believe there was minimal risk of loss on these loans as they are already net of $67 million of combined credit and rate marks from purchase accounting. Our strong organic loan and deposit growth augmented with our two acquisitions of Western Liberty and Centennial, resulted in 20% increase in total assets during the past year to $8.6 billion. This growth was matched by our increase in equity as our tangible common equity rose from 7% to 7.4% over the same period.
Book value per share climbed to $7.26 despite a non-cash valuation swing in our available for sale portfolio of $18 million during the quarter as interest rates rose.
For the second quarter, net interest income was up $6 million over the first quarter to $82.2 million, including $1.6 million of loan discount accretion from Centennial. At $87.2 million, total revenue was up 13.8% to $81 million over the second quarter of last year. Comparatively, operating expense grew 5.8% to $47.1 million during the same period as we continue to improve our operating leverage, resulting in pre-tax, pre-provision income of $40 million, up 25% from year ago.
The credit loss provision was $3.5 million, outpacing net charge-offs of $2.7 million for the quarter. The year ago, net loan losses were $13.9 million. Dispositions of other real estate were at 117% of carrying value during the quarter, resulting in the $1.1 million that Robert mentioned. We incurred a debt valuation charge of $3.3 million as we wrote-off the liability for our trust preferred borrowings, which occur – which mature in approximately 20 years.
The $10 million bargain purchase gain for acquiring Centennial at discount to book value was partially offset by the merger expense charge of $2.6 million during the quarter. Pre-tax income was $41 million and tax liability was only $6.8 million as the bargain purchase gain is a permanent difference and not subject to income tax, resulting in a net income of $34 million and $0.39 per share.
Reviewing the change in EPS from the $0.24 in the first quarter of 2012, earnings increased a $0.05 to the higher net interest income driven by our strong organic loan growth and upholstered by the Centennial acquisition. Increased operating expense cost $0.01, while we picked up $0.02 from the lower provision bringing our second quarter earning power or $0.30 per share.
Reversing out the after-tax gains on other real estate, in Centennial as well as our TruPS valuation lost, resulted in our reported earnings of $0.39 per share. On a consolidated basis our margin was flat for the quarter at 4.36% as margin gains from Centennial offset the additional cost of debt at the parent to complete the acquisition and continued competitive pressure on all of our markets.
Western Alliance Bank was the beneficiary of Centennial acquisition and explains their margin improvement. Torrey Pines Bank has the most asset sensitive loan book and the lowest cost of deposits.
As we discussed on our last call, we hold higher levels of cash at March 31 in expectation of substantial runoff of Centennial deposit as we cut the rate on theirs to nearly match our own. To-date that runoff has been fairly light as deposits only fell 12% from $337 million as of the close date to $298 million at June 30. So, our cash and short-term investments have been higher which has reduced our investment yield. Loan yield was flat including the accretion of discounts on Centennial which otherwise would've added 10 basis points while deposits costs were stable.
With our expenses growing at less than half of the rate of the revenue, our efficiency ratio improved to 52.2% during the quarter, compared to 56% last year. As asset quality has improved, legal appraisal and other collection costs have all declined. Compensation costs have increased to reflect higher levels of bonus accruals as well as compensation for new hires.
At 1.94% for the second quarter our pretax, pre-provision return on assets edged closer to our interim goal of 2% as pre-income tops $40 million for the first time, which was led by a performance improvement in Western Alliance Bank. We continue to expect improvement in this measure over time as revenue growth continues to exceed that of expense.
Excluding the bargain purchase gain, ROA was 1.23% for the second quarter which is up over 50% during the past year. Certainly Bank of Nevada's consistent performance was helpful in having been released from their safety and soundness MOU, a similar view that Robert mentioned. As we have reviewed in the past in addition to our strong loan growth we have been significantly improving the quality of our portfolio at the same time.
Looking at the portfolio composition by grade, a year ago on the left, $1.2 billion or 23% was in the high pass category and $3.6 billion or 70% was in other pass loans. The bars in the middle show the change during the past year, in which 58% of our organic loan growth of $826 million was in high pass while classified assets shown in red declined. The quality of our acquired loans from Centennial and Western Liberty is lower than our homegrown credits with $295 million, or 70% in other pass loans.
But as I mentioned it is important to remember that these loans are already net of credit marks on this portfolio. Even with the acquisitions, the weighted grade of our loans improved during the past year with high pass now standing at $1.7 billion or 27% of the total portfolio. Net charge-offs fell to $2.7 million in the quarter from $5.4 million in the first quarter as gross loan losses declined by 29% to $5.7 million and recoveries increased 51% -- 15% to $3.1 million. Net loan losses annualized were 17 basis points of average loans. $3 million of the $3.5 million provision during the quarter was to establish a reserve for the $213 million of organic loan growth we achieved. This was a ratio of 1.4% on net new loans.
These two table show how our allowance is different as results of the acquisitions we've conducted. In the first column, at June 30, 2013, we reported a loan loss reserve of $96 million and total loans of $6.4 billion with a ratio of the reserve to loans of 1.5%. However, included in the total number is $421 million of acquired loans from Western Liberty, which was completed last year and Centennial Bank. No reserve is provided for these loans, is that they've already been written down to fair value. So, in the title – in the column titled less acquired loans, we pulled them back out, resulting in the adjusted column showing our reserve of $96 million in organic loans of $5.991 billion, thus the adjusted ratio is 1.61% instead of 1.5%.
Lower table is different methodology and it starts with the same reported data, but instead of taking out the acquired loans, it adds back the credit discounts that have been recorded on these loans as if it were part of the reserve and also shows that would've been a higher gross balance since the discount would have been added back.
Adding the $45 million in credit marks only, that would result in reserve of $141 million and total loans of $6.465 billion. The reserve ratio would be 2.18%. The point is, I believe the disciplined accounting treatment between organic versus acquired portfolios should be considered in evaluating reserve adequacy, which would result in a ratio of somewhere between 1.61 and 2.18, not the 1.5 we reported.
Typically loan losses are recorded in a period they are recognized, which is what we discussed a couple of pages back. The top graph however shows how charge-offs by year of origination would have look instead. From this graph you can see that of our cumulative losses from 2000 through June 30, 2013, $378 million, or 95% were incurred on loans originated from 2004 through 2008. Only $8 million of losses have been incurred on loans originated since that time. And while these newer loans may not be fully seasoned, the quality of these loans appears far better than the earlier period.
The bottom of the graph shows that the loan portfolio as of June 30, 2013 stratified by when the loans were actually originated. It shows that 73% of our loan portfolio was originated after 2008 and just 25% of our current balances remain from the high loss origination year shown above. Using the pig and the python analogy, as you can see the bars in the blue have largely been digested.
Robert G. Sarver - Chairman and CEO: Thanks Dale. Largely from our strong earnings performance, our tangible book value per share is up 20% during the past year to 7.26. Excluding the one-time bargain purchase gain from Centennial, our return on tangible common equity was 16.5% for the second quarter this strong capital growth has enabled us to support the increase in our balance sheet as our capital ratios have remained stable during the past year and exceed the well-capitalized targets under both the current as well as the Basel III standards to take effect in 2015.
Looking ahead we expect our organic loan and deposit growth of $100 million per quarter to continue. As we mentioned we were short of this target for deposits in 2Q due CD run-up but still exceed the average of $100 million per quarter year-to-date. The margin was flat this quarter but would've slid except for the acquisition of Centennial as the accretion of loan discounts added 8 basis points, which was partially offset by higher debt at the parent that cost 2 basis points.
As the acquisition was only in for two months during the quarter I'm looking for the margin to be essentially flat again this quarter with modest contraction resuming thereafter. If the recent rise we have seen in market rates holds it should provide opportunities for investment at higher yields in the future, while not translating to higher funding costs.
We are looking for continued efficiency improvement as legacy credit costs continue to fall allowing revenue growth to continue to outstrip expenses. We will also see a benefit from lower deposit insurance at Bank of Nevada of about $500,000 per quarter going forward. However, we expect these improvements and efficiency to be incremental over time at a slower pace than during the past year. We will still be incurring merger charges from Centennial as the systems conversion is scheduled for next week, but believe the majority of the integration expenses are behind us.
We were obviously again pleased with the drop in net charge-offs in the second quarter, but this was in part due to higher recoveries, which are even harder to predict than losses. We do believe that our credit recovery continues and look for lower levels of problem assets over time. However, there will be some volatility in our asset quality results.
At this time, we would like to open it up for questions.
Operator: Casey Haire, Jefferies.
Casey Haire - Jefferies: I was hoping to dig in a little bit deeper on the loan guidance. It seems a little conservative at $100 million especially coming off a pretty robust organic quarter. I'm just curious, is that seasonality or are you – can you give us some color also on the pace of run-off at Centennial? It just seems a little conservative about $100 million a quarter.
Robert G. Sarver - Chairman and CEO: Yes. The Centennial probably is not going to be a lot of heavy run-off because the term of these loans is fairly lengthy and for the most part a lot of them they could have been refinanced at lower rates probably already have. I think it's probably just conservative forecast, in our part because our pipelines are still pretty healthy.
Casey Haire - Jefferies: The securities yield is down 30 bps on the quarter, that's the excess liquidity drag relating to the Centennial deposits?
Dale M. Gibbons - EVP and CFO: Partially related to that. We also had an acceleration of prepayment speeds in the second quarter that has subsequently retreated and what that acceleration did, is it resulted in higher amortization of our premiums in our portfolio as most of those bonds we have were bought – were purchased in the secondary market. As that reverses, that yield should maybe retreat a little bit. I'm not looking for the securities yield to decline from where it is today.
Casey Haire - Jefferies: So, ex the premium hit, it was much less than 30 bps?
Dale M. Gibbons - EVP and CFO: Right.
Casey Haire - Jefferies: Then. Just lastly on the credit front, I mean, the credit recovery trends just seem, you got a lot of tailwinds there. I know you guys have talked about normalized rates being around 50 bps, but just given all the tailwinds, it seems likely that we're going to be running at pretty benign loss rates. I'm just curious about if that's how we play out, your ability to hold the provision at this level or better going forward?
Robert G. Sarver - Chairman and CEO: We do have a little wind at our back in terms of recoveries as we're collecting some of the stuff we've charged off over the last four five years. I think it's just tough to project really low sustained rates because, you know, surprises always happen in this business. So, we're not going to project 10 to 20 bps, but if it happened, it wouldn't be a surprise.
Dale M. Gibbons - EVP and CFO: If you look at our gross charge-off numbers, that was kind of almost double the 17 which is more in line with kind of where we've kind of guided over time. We have recoveries this quarter and we'll probably have some more a little bit, but we're not looking for what's taken place in the past at some other intuitions. They had a higher reserve level and we're able to even run negative provisions for a while. So, we've got to continue to provide for our loan growth which we're pleased with and so, I'm not looking for the provision to really fall any lower than it is now.
Operator: Joseph Morford III, RBC Capital Markets.
Joseph Morford III - RBC Capital Markets: Just a quick follow-up on Casey's question there. Just, you touched on the pipeline being strong. Just in general how does that compare with where you were three months ago and are pay downs still much of an issue, an ongoing issue that you have to overcome at all?
Dale M. Gibbons - EVP and CFO: Yes. They are because for the most part our book is commercial and therefore the amortizations and the maturities are five years or less. So we do have a fair amount of amortization but I would say just our pipelines are strong or stronger than they were 90 days ago. So it is pretty good. The new business is good. The duration of our loan book is about two years. So there is a lot of activity just hold balances flat.
Joseph Morford III - RBC Capital Markets: Then while on it just a more broader question on the economy, you are obviously in some of the markets that enjoyed some of the strongest recovery tied to the housing. Just wondered, if you can kind of talk about what spillover effect if any you're seeing in those different markets that is leading to increased business activity and is that driving some of the C&I growth that you are seeing too?
Robert G. Sarver - Chairman and CEO: Yes. I think it is a little bit. I mean construction activity has a pretty good waterfall in terms of guys going out and buying new trucks and subcontractors being busy and money being spent at C-stores and casinos after work and fast food operators get more revenue and so. Construction is good for the overall economy and it does affect some of our customers and we are seeing that especially in Las Vegas where it's starting to pick up and hasn't had any new construction there for a long time, so that will be good.
Operator: Brad Milsaps, Sandler O'Neil.
Brad Milsaps - Sandler O'Neil: Robert just maybe a comment on M&A. I know, it sounds like you guys continue to have really strong organic growth, but coming off of the success of the Centennial deal and you guys have a nice earnings multiple now. What are kind of your thoughts on M&A? Maybe what markets and might we see you maybe look at maybe some fee income generating type business to maybe lessen the concentration spread revenue?
Robert G. Sarver - Chairman and CEO: I don't worry quite as much of the spread revenue. I think just leveraging what we are really good at probably makes more sense than getting into other things that we're not as good at. But we do – we are getting a pretty good currency now and so it just gives us a lot of flexibility in terms of looking at deals, and I think there will be a fair amount of opportunities for us. We have taken advantage of two kind of what I call value plays and now, we are in a position to look at not only value plays, but also healthy banks that we can add on kind of our sophistication and some of our products and our size and help them grow.
Brad Milsaps - Sandler O'Neil: Is there a certain size that you want to target or existing markets, new markets?
Robert G. Sarver - Chairman and CEO: Probably more existing markets and size-wise, no, we are kind of open.
Operator: Brett Rabatin, Stern Agee.
Brett Rabatin - Stern Agee: I wanted to ask about – Robert, you were talking earlier about the efficiency would continue to improve but at a slower pace and you've kind of given some aggressive thoughts on where the efficiency ratio could get to in the (past). I was just curious, if you could update that a little bit in terms of where you might eventually get to and then also I was just hoping whenever you could reach out to people that you've added here in the past quarter to and just kind of thoughts about the growth potential from those adds?
Robert G. Sarver - Chairman and CEO: We are a business bank and so you got to look at efficiency ratios in that context which those banks that are good tend to be a little lower. Dale is signaling me at 50 and I would hope we could be in the mid-to-high 40s over time. So, he is not happy looking at me right now. But that's where we should be.
Brett Rabatin - Stern Agee: Then, just in terms of people you've added in the past quarter or so, can you talk maybe about some of the teams that you have been putting in place?
Robert G. Sarver - Chairman and CEO: We're always on the lookout. I would say this quarter was probably a little bit slower in terms of new commercial teams we added. We did add a group in West L.A., couple of bankers and have a pretty good following. We added equipment leasing individual, we added somebody onto our staff in California that will be focusing on municipalities, but we had a pretty big focus with that Centennial deal in terms of on the loan book and a lot of our senior management have been working on that portfolio. So, it wasn't an extraordinarily strong quarter for us in terms of new hires. We've got a lot of senior bankers in the Company right now, who got their tentacles pretty well spread and as I said earlier our pipeline has been pretty darn good, but we're always on the on the lookout for good folks that can add business to us. And the good thing about it now is, we god good incentive plans, companies doing well and we're making deals and people know it and so al lot of the good bankers are starting to find us versus us having to go out and find them.
Brett Rabatin - Stern Agee: Then just one last quick one on ORE, if you gave it I missed it, but just any thoughts on potential gains kind of given where you have marked a lot of those properties going forward? Do you think you will see some additional potential gains in what you have remaining?
Robert G. Sarver - Chairman and CEO: I don't think we are going to see losses. Kind of based on what's in escrow and appraisals and all that, I think, I had estimate anywhere from breakeven to kind of continued modest gains like we have this quarter.
Operator: Herman Chan, Wells Fargo.
Herman Chan - Wells Fargo Securities: I want to get your take on the deposits from the Centennial acquisition. It seems like the attrition there was lower than expected. But what are you baking in for attrition going forward as it relates to the margin outlook?
Dale M. Gibbons - EVP and CFO: In terms of the margin outlook we have marked those down. So kind of the day we closed that deal we cut their deposit rates from – about almost half, a little less than half of where they were to-date, really kind of in line with our own. So we are down 13%, quarter-to-date we were down about another $3 million is all. I am expecting that we are probably going to see maybe a similar kind of rate of attrition. Maybe that means fewer dollars over the next couple of quarters to what we saw in Q2. That would take – continue to take us down a little bit. We haven’t had an internet channel in the past and we have elected to keep that open. They have basically been a wholesale operation. So our ability to kind of continue to hold that or maintain that really is going to depend on large part on perhaps how competitive we are. Today, there is the whole industry, I would say is maybe a bit wash in liquidity and as a result, broker deposit rates are lower. These aren't broker deposits incidentally, but they are wholesale in that respect and so it's going to depend a little bit on that, but right now, we've got good credit demand and so we're interested in doing what we can to mitigate the attrition, the attrition from Centennial.
Herman Chan - Wells Fargo Securities: In the last quarter call, I think there was a mention about charter consolidation either later this year or early next. Should we expect any sort of expense saves related to that endeavor?
Dale M. Gibbons - EVP and CFO: Well, charter consolidation is – that is something that – it's been on our table to pursue. We think that will give us a better kind of a risk profile as we are able to have controls and centralization of processes. We are already inducing the same way and we have kind of centralized underwriting at higher levels of credit, but at the same time, anytime you do something differently or multiple times, it's going to introduce nuances. So, we think that will help. There will – there should be some maybe cost saves from charter consolidation, but I think the real value is really going to be from just kind of our architecture and our administration and ability to execute. So, Robert mentioned that we're going to pick up about a $500,000 a quarter in FDIC insurance at Bank of Nevada, maybe some other things associated with this, but I'm not looking for big pickup on expense saves.
Operator: Terry McEvoy, Oppenheimer.
Terry McEvoy - Oppenheimer: Dale a question for you, last quarter purchase accounting accretion, if I'm reading the Q correctly was about $2.1 million, and in your prepared remarks you said $1.6 million of additional purchase accounting accretion from Centennial. Do you have the total number for the second quarter or was the $1.6 million – did that represent the total?
Dale M. Gibbons - EVP and CFO: No the $1.6 million was Centennial. The $2.1 million was a little higher than we would typically get. As you know Western Liberty is smaller than Centennial, and included a payoff of a loan that had been credit impaired. So, as you saw, we had rate marks on Centennial of about $17 million, so those should come in at about $1.6 million. We had it for two month, so it was about $800,000, $800,000 a month. We should continue to see that. The Western Liberty accretion was lower during the second quarter than the first quarter as we did not have any credit impaired payoffs. So, it's going to be kind of hard to predict. I mean if we get payoffs on some of these loans, and it is included in the page that Robert reviewed. There is $43 million of credit impairment on the Centennial book. I don't know how that's going to come in. We expect that that's necessary because, we're ultimately – some of those were not going to every get fully paid off and there is going to be kind of a workout schedule, two or three years from now. So, it's going to introduce some volatility in that number. If I added the $1.6 million plus the Western Liberty piece, that total is going to be about $3 million, a little less than that to maybe $2.5 million. As a result, we didn't get the pick-up on the impaired payoff.
Terry McEvoy - Oppenheimer: So back of the envelope about 15 basis points of the margin came from purchase accounting accretion between those two transactions?
Dale M. Gibbons - EVP and CFO: Yeah. Probably, maybe a little bit less than that. In addition, we did pick-up – we did put on issue debt to close the Centennial deal that cost us 2 basis points.
Operator: Jeff Bernstein, AH Lisanti.
Jeffrey Bernstein - AH Lisanti: Just wanted to get a little more flavor on some of the lending that you are doing. Are you mostly getting refi type activity in CRE or are there actual transactions starting to take place in your markets? Can you touch a little bit on what's going on in construction lending, is it horizontal type stuff for homebuilding or is there vertical stuff in there, et cetera?
Robert G. Sarver - Chairman and CEO: Yes. Sure. So we had organic loan growth of a little over $200 million for the quarter, included in that was growth in the construction bucket of $35 million and we are doing a couple things there. One, we have got a couple of apartment projects we are financing and the other is we are financial some lots, residential lots that get rolled off to builders. So an investor will come in and buy a piece of land and develop lots that are pre-sold to a public homebuilder and we will finance 40% to 50% of the cost and that's – you will see that in that bucket. Then we have a little bit of residential construction in there. In terms of the other type of real estate, about $40 million of that growth was owner occupied CRE and those could be a refinance or could be where a business is buying a new building to occupy. Got another $40 million to multifamily in terms of increases and then $15 million of smaller amount was an increase in CRE investor, where an investor's buying a property.
Jeffrey Bernstein - AH Lisanti: Any commentary you can give around just yield variations among those, I mean is construction still getting a lot better yield and your multifamily…
Robert G. Sarver - Chairman and CEO: Yeah. Construction is getting a better yield because you got the fees included in it, but it costs more money to do it too, but the fees bump up the yield. So, probably at the low end is multifamily and then you get into multifamily and CRE owner occupied would be at the lower end. So, let's say those yields are coming in low to mid 4s and then you get into construction and you are talking somewhere in the low to high 5s, all in with fees.
Jeffrey Bernstein - AH Lisanti: That multifamily, that prices off like a five year as opposed to the C&I stuff?
Robert G. Sarver - Chairman and CEO: Yeah multifamily, if it's not construct -- well, if it's construction…
Jeffrey Bernstein - AH Lisanti: No, I just meant the multifamily perm loans.
Robert G. Sarver - Chairman and CEO: Yeah. Right, we'd be doing three to five year and mostly, what we'll do is like a bridge facility, so someone is buying something and maybe they need to close it quick and they don't have time to get it in a perm or they are buying something the refurbishing it that type of thing. We don't really do the long-term permanent multifamily were more of the bridge loan.
Operator: John Moran, Macquarie.
John Moran - Macquarie Capital (USA) Inc.: So, a quick follow-up on the premium amortization question. Dale, do you have the dollar amount of that? I guess we could probably back into it easy enough if I just assume that 30 basis points was mostly due to premium amortization, but I just…
Dale M. Gibbons - EVP and CFO: There is a combination of factors, that was partly premium amortization, partly because you see our balances in cash and short-term investments were higher than what we expected. We could – we still have about $100 million or little more than that in there based upon as we talked about in the first quarter call, we ran up our cash position in in expectation of your deposit run-off in Centennial, that's been more muted. So, we got higher cash, we had premium amortization, a deceleration or acceleration to that. We did have some loan sales as well. I mean security sales as well. So, those items combined that. I can maybe see what I can come-up with and maybe catch a little bit later, but I don't have that number with me.
John Moran - Macquarie Capital (USA) Inc.: Just a quick kind of circling back on OREO, I think last quarter you said you had two-thirds of it either under contract or heading toward LOI. Just with the activity this quarter where does that stand today?
Dale M. Gibbons - EVP and CFO: Well it's probably a little bit less because we got new OREO coming in with the acquisition of those two banks we made. So, we're – I don't – we didn't really put and OREO slide in this time, because it is not that material anymore. I don't see our balance of OREO coming down that much because we're going to be selling things and we are bringing new stuff in from these acquisitions. So, the actual balance itself maybe relatively stable for the next two three quarters, and as I said the valuations really not much volatility there. obviously the land pieces especially in residential has gone up a fair amount, but other than that it's just – I don't think it's going to be that material in terms of the impact on our financials.
John Moran - Macquarie Capital (USA) Inc.: Obviously that goes back to what you said earlier a breakeven to modest gains and I just want to make sure that I heard that correctly? Then last one is kind of nitty one and apologies if I missed it in prepared remarks. But Centennial coming in caused some noise on tax rate. I just want to make sure Dale, 25% is still kind of like where you guys were running effective, is that still a good number to think about going forward or is there some aspect of DTA utilization or something with this deal coming in that would change that?
Dale M. Gibbons - EVP and CFO: Maybe a hair under 25% but yes, that's – it's going to bounce back up in the third quarter.
Operator: Gary Tenner, D.A. Davidson.
Gary Tenner - D.A. Davidson: I just had a question on M&A. you mentioned on the call taking advantage of these two most recent deals with (indiscernible) purchase gains helping the growth handle the book, et cetera. Can you talk about and you may have commented on this to some degree, but can you talk about what you'd be looking at for deals – obviously you are trading in excess of 2 times tangible book right now? So, you have got some good currency to use to go out and do deals. So I just look to hear your commentary on that.
Robert G. Sarver - Chairman and CEO: Well as I said, it gives us the optionality to look at a lot of different deals. More types of deals than we did say a year ago. But I can't really forecast for you or predict, I am not going to really give you color on specific deals or how many or when or where. So I can't give you too much help other than we try to be pretty disciplined. We have learned our lessons over the years on what works and what doesn't work and we have got fortunately a very strong and robust organic growth opportunity with the Company. So we are going to be pretty disciplined on these deals.
Operator: At this time we show no further questions. Would you like to make any closing remarks?
Robert G. Sarver - Chairman and CEO: No. I just appreciate everybody taking the time this morning to dial in and hear about our quarter.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.