Bancorp Inc
NASDAQ:TBBK
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Bancorp Inc
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Good day, ladies and gentlemen, and welcome to the First Quarter 2018 The Bancorp Inc Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, today's conference call is being recorded.
I would now like to turn the call over to Mr. Andres Viroslav. Sir, you may begin.
Thank you, Victor. Good morning, and thank you for joining us today for The Bancorp's first quarter 2018 financial results conference call.
On the call with me today are Damian Kozlowski, Chief Executive Officer; and Paul Frenkiel, our Chief Financial Officer. This morning's call is being webcast on our website at www.thebancorp.com. There'll be a replay of the call beginning at approximately 12:00 p.m. Eastern Time today. The dial-in for the replay is (855) 859-2056 with a confirmation code of 5846178.
Before I turn the call over to Damian, I would like to remind everyone that when used in this conference call, the words, believes, anticipates, expects, and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated or suggested by such statements.
For further discussion of these risks and uncertainties, please see The Bancorp's filings with the SEC. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
The Bancorp undertakes no obligation to publicly release the results of any revisions to forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Now I would like to turn the call over to Bancorp's Chief Executive Officer, Damian Kozlowski. Damian?
Thank you, Andres. Good morning, and thank you for joining us today. My name is Damian Kozlowski. I'm the CEO of Bancorp and the President of The Bancorp Bank. I have been in these positions since June of 2016, and I welcome you to our first quarter 2018 earnings call.
The first quarter was a great start to a new year. Bancorp earned $0.25 a share on net revenues of $59 million and expenses of $39 million. The commitment of our team to execute on our business plan is having a positive impact on our operating performance and we continue to show momentum in our results.
Along with revenue and client progress in each of our business lines, we have continued to strengthen our overall platform with both greater efficiency and productivity, enhanced by a higher level of risk management across our entire enterprise. I would like to highlight three takeaways from the first quarter in more detail. One, we saw positive signs of business momentum.
Each of our business showed positive first quarter trend led by a 48% increase in security backed lines of credit, interest income over first quarter of 2017 to 6.5 million as block period and balances grew approximately 100 million or 15% year-over-year and small business administration loans increased approximately 23 million or a 6% over the linked quarter which represents a 22% annualized growth rate.
To provide increased information to investors, we have included in our earnings release a quarterly business line summary to detail our progress through revenue and other business metrics. I hope this quarterly summary will be helpful in accessing our business to financial performance, in addition we will be updating our strategic business review on our website.
We will be reassessing our financial targets based on our performance and also including a new section that goes more in depth into our payments business. As you know this business drives our fee income and provides most of our deposits.
Number two, we continue managing expenses proactively. Non-interest expenses increased 3% in the first quarter of 2018 compared to first quarter of 2017 while revenues increased 20% showing continued expense control. Additional expense opportunity is possible, the Company is currently engaging in reengineering process that results in either lower costs or greater revenue productivity.
Our first major reengineering effort was creating of financial clients risk management centre of excellence. This centre incorporates all BSA AML activities in our offices in Wilmington, Delaware with finance tapping and processes. The efforts should help our ability to grow in the future.
In addition, we have also provided earnings announcements of increased expense reach on our expanded income statement. I hope this information along with the quarterly business summary will be helpful in accessing our business and financial performance.
And number three, we are investing in creating a truly advantaged platform. Most of 2017 was dedicated due to the derisking the institution, creating neutral to remediate and improve risk management and compliance and the reduction of non-productive and redundant expenses.
While we continue to face some legacy challenges which remain a key focus of management, increased efforts has been given to unlocking the power of the organization through innovation and building centers of excellence to transform our platforms for reengineering.
The first quarter is just the beginning of what we believe will be continuous building process in 2018 to create a better Company and improving financial results. As I have stated in previous calls in our 2017 annual report, we want to achieve extraordinary client and financial success to business and organizational innovation in a safe and sound manner.
Now before I turn it over to Paul, I want to address a couple of credit related issues. One in Walnut Street and one in discontinued operations. Walnut Street to give some context, when I arrived at the mid-2016 it had about a 174 million on our balance sheet and today it stands at 70 million. Last year alone, we reduced the exposure 44% with no meaningful adjustments.
We do have an adjusted in this quarterly update of 1.1 million, the primary drivers of that was a $400,000 settlement as we continue to work down the portfolio and number two there was a change in the discount rates used in the model due to changes in market rates. This is set by a third-party, reviewed by ourselves and our accounts.
Second, I want to talk about discontinued operations, in that portfolio is our hotel property in Fort Lauderdale that was 80% complete. There once it became delinquent there was a lot of interest in the purchase of the note and we received about 10 bids. Last night, we signed a purchase sale agreement for the full principle amount and that transaction should close this quarter. So that’s good news on the credit side.
Now, I will turn it over to our CFO Paul Frenkiel.
Thank you Damien. Consistent with our business planning budget, Bancorp increased its profitability over the first quarter in 2017. Net income from continuing operations was $14 million compared to $6.3 million in first quarter 2017.
The quarter reflected a larger than expected $11 million gain on sales of loans into a securitization which was partially offset by incentive compensation and other related expenses. Quarterly results reflect continuing revenue growth in Bancorp’s major lending lines.
A $5.2 million or 21% increase in net interest income compared to first quarter of 2017 reflected double-digit growth in both security backed lines of credit or SBLOC and SBA loans. Interest income on SBLOC increased $2.1 million or 48% between those respective quarters while interest on loans held for sale into securitizations increased approximately $2.3 million.
Because the securitization closed at the end of March, related interest income will decrease in the second quarter of 2018. In addition to loan growth, the increases in SBLOC and other loan interest income reflected the impact of the Federal Reserve Bank’s 25 basis point rate increases in March, June and December 2017 and March 2018.
Our largest percentage increase in loan balances was in SBLOCs and SBA loans, each of which grew 15% year-over-year. The SBLOC portfolio is currently yielding approximately 3.5% while SBA loans are yielding in excess of 5%. Period end loan totals excluding loans held for sale and securitization grew 16% year-over-year. The lines of business comprising those totals have historical had low charge-offs.
Overall cost of funds grew 17 basis points to 52 basis points in first quarter of 2018 compared to 35 basis points in first quarter of 2017 reflecting only a partial adjustment of rates on our prepaid card and other deposits due to Federal Reserve Bank rate increases.
Prepaid card deposits are our largest funding source and should continue to adjust only a portion of future increases in market rates. The interest margin has benefited accordingly as rates on variable rate SBLOC, SBA and other loans and investments have adjusted more fully to the Federal Reserve rate increases.
These factors have had a positive impact on the net interest margin which was 3.12% for the quarter compared to 2.0% in first quarter of 2017. The increase compared to the prior year reflected the impact of the Federal Reserve increases and the timing of the sale and securitization of higher yielding commercial loans.
The 3.12% net interest margin for the quarter was comparable to the fourth quarter net interest margin. Prepaid card accounts in addition to being our largest funding source are also the primary driver of non-interest income. Related fee income increased 5% in first quarter of 2018 compared to first quarter of 2017 while the total amounts spent on prepaid cards or gross dollar volume was comparable at approximately 13.4 billion.
While there was organic growth in the account base, that growth was offset by the exit from one of our processors of a large tax-preparation software company. Non-interest expense increased $1.3 million or 3% over first quarter of 2017. Data processing expenses were $1.5 million lower than in first quarter of 2017 and additional expense reduction opportunities in that and other categories continue to be pursued.
Net income also benefitted from the application of lower federal income tax rates on higher pretax income. At quarter-end, the consolidated leverage ratio stood at 7.7% which compares to 7. 9% at year end 2017.
The lower ratio reflects the impact of seasonal deposits which have historically reduced the leverage ratio in the first quarter of each year. Continuing loan growth expected, Federal Reserve increases and non-interest income increases all taxed at a lower rate should continue to support earnings and capital accretion.
That concludes my comments and I will turn the call back to Damien for questions.
Thank you Paul. Operator, please open the line.
Yes sir. [Operator Instructions]. And our first question will come from the line of William Wallace from Raymond James. You may begin.
Thanks and good morning guys.
Good morning.
Thanks for the update on that discontinued loan that’s great to hear.
There was a lot of interest and value in the property. We are glad to in the last moment before we had this call to have a purchase sale agreement signed.
Yes, so am I. Can we get an update on the Florida properties, last call the expectations or what your hopes to close in April, can you just update us on that?
Yes, everything is going well. There is a lot of money behind the deals, they are working with the talent, they are figuring on how to phase lead projects. So we still expect to call a close in the third quarter and right now we are making money on the mall. So we are cash positive on the mall. So I think the project will continue to be scoped out and as the developers decides on how to phase it with the talent we will ultimately close the transaction in the third quarter.
Okay great. Thanks Damien. And then as I think about Walnut Street, roughly 800,000 related to the discount rate change. Would you anticipate that the discount rate will change every time that moves or there a different rate that drives the calculation of what the discount rate should be, different factors.
Wally, it’s really unknown, it depends on market conditions and you know we have no way of knowing what the spreads are going to be. Over the last year that spreads, corporate spreads have contracted, they may stay where they are, they make contract further or you know they may widen. So we just have no way of doing that.
Okay. Fair enough. We should watch the corporate spreads if they want to cut it, track [indiscernible].
Yes.
Okay. On the loan sales, is that one sale or did you execute multiple sales this quarter?
No its the floating rates securitization, it was about 300 million and it goes - institutional investors . We did get much after two this is our third one, we had a lot of interest not only in all the tranches, but also in the equity slide tranches and stuff. So it is a very successful securitization and it’s our third, so we’re well known in the market now.
Okay. So two questions around that. One, can you quantify the interest income from those loans that was in the first quarter or so another way, can you quantify how much the interest in those funds benefited the margin?
Well, the only way we could do that is through the - at the start, you have to have the average balance and then times about 6%, so if you have a good way of doing that...
Well actually in my comments Wally, if you look at first quarter of 2018 to first quarter 2017, that’s actually why I cited that the interest on those loans increased by approximately $2.3 million. The timing of the replacement of that interest is again an unknown. We just can’t predict when loans will close and when will ramp up.
But as I said in my initial comments, we know that because the securitization happened at the end of March, that and because it takes time to ramp up in loans to fund and so forth, that interest income will decrease in the second quarter but it will keep increasing - a relative decrease second quarter, but it will keep increasing up until the end of September when we are planning the next securitization.
And these are kind of more around 6% now?
Lower now, a little bit lower because corporate spreads did as I had mentioned before contract. So there is a little bit lower than that.
Okay. And then as we look at the associated expense with these sales, I’m just trying to think about how we look at a quarter’s expense run rate when there is not a loan sale in it? And thank you for providing the line item detail in some of the expense lines. May be do I think about…
Our run rate is more like 35.5, 36 and 39. So that’s the associated costs. And a lot of its driven by compensation. So you see the compensation line is up, that’s where it’s coming from. So we are still well on track with where we wanted to be on the expense side. We are happy where we are there. Together, like I said before to have a double - 20% revenue growth and just 3% expenses, that’s a joy that we can live with. But if it’s 10% growth we would probably have negative expense growth.
Right, alright. Okay. And then the tax rate came in around 28%, Paul I believe we are talking about 26.5%, last quarter it was 28%, the range we should be using now that kind of…
Yes. I think for this year, yes.
Okay. And then my last question before [indiscernible]. Could you talk about progress on your leverage ratio target?
Yes as I mentioned before we had a slight decrease in the first quarter because we have the seasonal deposits, which include gift card balances and tax refund balances. So we won’t have that in the second and third quarters. So we expect the positive - and plus we will have additional earnings in the second and third quarters which should continue to drive the ratio. Again, we are looking - the short-term target is 8.5% and we expect to get there at some point in 2018.
And on that, the first quarter is always the first and fourth quarter usually you see pressure as it does start to come along. Will the first and the fourth quarters always be a little bit lower and the second and third kind of be at or above, is that how we should think about?
Its depending on the timing of securitization, but definitively you can only say that the fourth quarter will either be equal to get a great earnings or less, but generally the trend is up. I think if you look over the last year, you will see the trend has been going up. We did have that deferred tax asset adjustments based on the tax rates, but with the lower tax rates obviously we are creating more capital. But I think like Paul said, you will see 8.5 somewhere in the third quarter potentially like we have said, I don’t think that’s changed and then hopefully by the end of the year we will be very close to nine.
Thanks guys. I will let somebody else talk. I appreciate it.
Yes. Thank you Wally.
And our next question comes from the line of Matthew Breese from Pipar Jaffray. You may begin.
Good morning guys.
Good morning Matt.
Just on the securitization, just want to get a better sense the nuts and bolts there, in general when you do a securitization, what is the total amount of loans that you are looking to package up. 200, 300, 400 million?
300 million, we have there is in whole process that you put in place if we have an investment banker represents from Wells Fargo who is experienced in this area. They go into a securitization trust and then securities are issued. We do not service the loans, so there is different tranches to institutional investors and then there is obviously the lower grade paper for people to take one access spread on the bottom of the transaction.
But it’s a very similar to many other types of CLO like transactions, although loans are floating rates, so you know there are three years with some renewal options in there repositions of properties. There is just a good institutional market for that paper. Most of the people who are issuing those securities are not banks unlike the CMBS market where big banks dominate the discounted floating rate markets.
There is a lot of funds and other types of institutions there and as a bank maybe there is a little bit of strength in our credit and risk management today in our underwriting process and maybe that’s why we have seen a good cadre investors in the securities.
Alright. And then you know per that 300 million that get securitized, typically what is the expected gain on that, is it a percentage or a flat fee.
It’s wide it’s based on a lot of things, there is levels that are set by rating agencies on the different tranches and then there is market spreads when we did the loans and what the spreads were at the time. 5 million is we believe in average gain, but we have proved wrong twice already, so our first gain was on four, the second one was much more than that based on the spreads.
So I think five is a good way to look at it, but if we think it’s going to be higher long-term, we will let you know, but we were again surprised by the how much access spread came out of a transaction, because the levels that were set on this market spreads and hopefully we can maintain that.
But you know I think a conservative estimate is five, maybe seven, but we have had two upside gains been proved wrong twice. We are not doing it on purpose trust me, we try to give you an accurate information we were pleasantly surprised.
No, again that’s a third-party setting Matt, it’s reviewed by us obviously and everything, but there’s a third-party involved in at the netting the gain and everything.
Right. But if we think about on like annual basis, so stepping back and continuing a longer term kind of view, Five to seven twice a year that would be a good kind of place to be.
Yes. Overtime what will probably happen, I don’t think we will have three, probably not even next year, but we might creep up a little on the size. So as our capital increases we might have a $350 million securitization which will improve the economics and improve the gain. Right now it’s probably round 300 million to 325 million.
You know two securitization probably this year and next year, gain of five plus, it’s a good way to look at it and the loans like Paul said they have been around six, but depending on the corporate spreads where they are they tend to be - they go around six. That could be a little lower, that could be a little higher. Right now it’s a little bit below six.
But still -- and there is also the risk, we keep a sight to the security where the gain is present, but we get all this credit risk off our balance sheet at a period where the loans are highly unlike would have any problems which is the first three months of any of these projects.
Understood. Now that’s very helpful. Okay. And then the hotel property with the purchase agreement, what was the size of that?
$38 million. Yes, there is a big loan in discontinued. We are working with the purchaser, so what will happen is about 18 million will come off, we will provide credit and that credit is not only going to be backed by all the collateral, but also additional guarantees by the purchaser. So it’s going to be a safe loan. We will go down about 13 million and then we will have a bridge loan in place for the acquirer if that will be extremely low risk.
Okay. 38 out of discontinued and then?
I’m not sure where you will put the 25 million, but the delinquency will end. So you will see that come off. You will see it go down by approximately 13 million and then we will have a new loan. I think it probably will be booked in discontinued, but it will be a safe and sound, it will be we believe a very safe loan.
It’s only up to a year, it’s only as a combination for them to finish and reposition the property. The people who are buying the property are extremely experienced and have great knowledge of the marketplace and knowledge of the hotel industry and they are and we are very excited and so is the town I think of Fort Lauderdale that they have decided to build the property.
Okay. And so that in combination with the mall, and we are looking at over the next six months potentially something like a 70 million coming out of discontinued right?
Well, yes 15 from the loan, 37, 38 from the hotel.
Okay, okay. Sorry my numbers are a little off there.
Because a big book because we are at 195 as you know, people will know history we had dramatic - since two years ago we have really focused on is I think we are at 195 now. So obviously with Walnut Street going down 44% a year just continue being a little bit less last year.
But we are being very aggressive compared to obviously all the work we have done over the last few years, just the total balance are a lot lower, but we have put a lot of credit risk management in place and we are being very transparent about it as much as we can be. And making sure that the market knows that there are certain adjustments.
If you think about last year Matt, the good way to look at it because they are same, they are sorts of the same loans, they are different loans, but they are same portfolio they came from. So if you put Walnut Street, whatever that Walnut Street adjustment together would just continue together gives you a good idea of what is going on. Last year, if you put those two together we had a substantial gain in those two portfolios not a loss.
Right. That’s right, now that’s very helpful, okay. And then I have asked this question before and I know it’s incredibly difficult with some of ins and outs of the securitizations. But I would love to get just a better for you on the margin outlook and I don’t know if it’s perfect however or given the current yield curve environment where you think the outlook on the margin would be over the next 12 months?
I’m sorry the net interest margin or the margin on securitization?
The net interest margin.
Well if you go trace it back, I mean those interest rates have a very big impact on the net interest margin plus a lot of our loans are variable. So if you look at SBLOC block, look at the dramatic increase in SBLOC, you have a 15% increase in the portfolio and a 48 % increase in revenue. So they have a profound impact on many of these businesses and you will see that profound impact on go up substantially in the margin.
So I don’t have a prediction, because there is so many variable involved, but it also has the size of the portfolio and what we are holding securities versus loans. But that margin should continue well and we don’t have the aggressively pricing of the deposit data. So we are going to continue as the market we adjust to rising interest rates on the funding size and they are more fixed rate.
Traditionally we have underperformed the market substantially, but I think I recently looked at the FDIC book and we are right on at the market right now as there was a decline and a little bit bumped up in the overall banking rates. So I believe you will see us outperform other bank and our net interest margin which has been not the case that is bank, we were a big laagered.
And so I think we will turn ourselves into a position of leader rather than laagered our net interest margin which I think if you look at our loan-to-deposit ratio can be sustained because our loan-to-deposit ratios is still low and we are trading loans for bonds over the next few years.
Right, okay. Just my last one, obviously loan growth you was quite strong. I think last quarter we talked about kind of 13% to 15% loan growth outlook, is that changed at all or are you any more optimistic given the results this quarter?
I like our double-digit growth and the portfolio basis, we have had stronger growth I think over the last year and once again I don’t - SBLOC I’m fine with and SBA I’m fine with growing it 20% because I consider those incredibly accretive, very safe businesses, SBLOC doesn’t even count towards some of our capital ratios like other businesses.
So but I don’t want uncontrolled balance sheet growth. So you know that’s the range, you know 15% is kind of the higher end, 15% to 20% on some of these other businesses. Having said that, both SBA especially and SBLOC we do want to grow at that kind of rate.
SBLOC you know with rising interest rates you want to - with the safety and soundness of that particular product it could be double the size that we would be very happy with it in a rising interest rate environment.
Right, okay. Got it. Thank you very much for taking my questions.
Thank you Matt.
And our next question comes from the line of Frank Schiraldi from Sandler O Neil. You may begin.
Hey guys good morning. Just a couple of questions, well just on the prepaid card fees, its looks like a pretty good result like 5% result up like 5% year-over-year. So I’m wondering just now that some of the noise I think is out of that line item, is that a decent expectation of run rate going forward or is that stronger than you expect to see on a year-over-year basis here through the rest of 2018?
Yes, it’s hard to know. We do think that it will grow in the high single-digits. We have said that before. We do have this ATH business and we have some new capabilities in that area. So you saw 11% growth - and that I think you are going to see substantial growth over the next couple of years, double-digit growth in fees from that side and high single-digit 7% to 9% potentially in the prepaid.
You will one obviously quarter that will be better and some quarters that will for whatever reason will be less. It depends on mix of the programs, some are higher versus lower fees, new programs that we get. So that’s kind of the guidance on that business.
But we don’t know quarter-to-quarter. This was a good quarter, you know it basically has been volume. We lost one of these tax, but clearly that was less economically beneficial to us which means that we were able to get a mid single-digit return even moving that program by having a better mix.
Okay. And then, sorry, did you lose that program last year or you just lost it without of last year’s 1Q numbers?
Yes, we know about it, yes. It was in the number last year not in the number this year. Yes it was.
Okay. And then just on deposit costs, obviously you talked about portion of the increase and rates will get passed through in deposit costs. If you look at like demand and interest checking just line item on the average balance sheet, there was a eight basis point increase quarter-over-quarter to 49 bps. And I’m just wondering - trying to get a sense of for a given 25 basis point rate hike, is that reasonable or was that inflated given the strength in LIBOR this quarter?
This is a tough one, you want to answer, it’s about 40, right? 40%
So again it depends on the mix and where the deposit balances end up. But our agreements, our contracts with the prepaid vary and we don’t really get that specific in terms of the percentage increase. It depends on a lot of factors, the cost associated with the account, the size of the account. All we can say is that you can look at the rate increases in the past, look at the increase and monitor that on a quarterly basis, in all likelihoods and some were at a floor, it’s likely the adjustment to future increases will be possibly greater than in the prior adjustments. But again, we have constant flow of contracts, renewals and so forth. So we really can’t project too closely.
Yes, we probably could say and I don’t know, it’s going to be less than 50%.
Yes, I think that’s a safe.
I think that’s safe to say. It’s less than 50% and probably more like 40%, 35% to 40% of the interest rate increase. But once again the warranty on that is that it does move around a lot, it depends which programs and is susceptible to those things. But it’s definitely only a portion of the interest rate increase
Okay, alright, got you and those do reset pretty quickly though upon the interest rate increase, whatever the percentage number is. Okay.
Yes. So you would see the impact, whatever happens you saw the impact already most of it.
Got you, okay great, thank you guys.
Thank you Frank.
And our next question comes from the line of William Wallace from Raymond James. You may begin.
Thanks. Just a follow-up question, I was wondering if you could give us an update on the remediation plan for the consent order and when the regulator next come in?
They are going to come in June to do a interim and I believe October to do a full safety and soundless. We have made a lot of progress I think, we are talking about in the order of 100s rather than a few issues.
They are always looking for the entire envelope of activities and risk management, that’s why we have this integrated compliance plan in place that’s reengineering with our centre of excellence here in Wilmington. So we’re moving everyone out of Tampa into Wilmington and we have done a lot of new hiring and we do have some transfers.
So I think we are moving along at the appropriate level, I don’t think it is constraining our business very much and you know I can see the light at the end of the tunnel so an upside, we have a lot of very confident people working very hard at setting up of best in class financial crises capabilities but also third-party risk in consumer compliance. So you know we are really trying to change the game.
We expect to grow, we really do want to grow this business especially on the prepaid, but all our businesses commensurate with I think our strategic advantages overtime and to do that we are going to obviously have to be at the higher volume and lower risk or have greater risk control. So I’m not really thinking consent orders and its impact on the business. I think about the capabilities we have in our ability to grow and in a safe and sound way in the future.
So I think we are going to work with our regulators and we are going to get on - full get on the same page and that we want them not only comfortable that we solved the issues from the past. We want them comfortable that we can be new product areas as this market develops as the FinTech movements continues to challenge the retail and community bank model.
We want to be on the forefront of that and have exciting new opportunities of which we have some now. and in order to do that, we need to have a safe and sound institution with a great leverageable capability that’s best-in-class, that’s what we are headed for.
Okay. One thing you said [indiscernible] you mentioned it moving the Tampa team to Wilmington, are you going to shut - I can’t remember that was a centre that was going to be around the BSA and now transaction monitoring, is that correct?
Yes. We are setting out the centre of excellence best practice centre here and this is part of a whole long process, originally our capability for financial clients was set up in Tampa, the rationale that that was a centre for other banks.
It became clear that that was great maybe for some types of recruiting, but at the end of the day it really should be integrated into our business in Wilmington and there were some opportunities here in Wilmington to attract very talented groups of individuals and it’s also consistent with the milestones that we have to do to restructure and reengineer the business.
So the decisions was made a few months ago to go to the next level and build that centre here and everything from office space, to policies, to procedures but technology, interaction with how you can leverage up the platform. So all that is being integrated here in Wilmington.
And is there any change in expense as a result of shutting down Tampa?
Not a big change, no. Nothing that will I think meaningfully impact the financials. We have some duplication during the move period, but it’s really not a large. We are definitely going to get efficiencies outside of the system. So you will see may be a little bump. It probably won’t be noticeable on our financials, but ultimately we will have a much more productive capabilities. So there won’t be a lot of additional resourcing as volume does.
So I don’t think a big impact near-term. We already have the office space everything that already rented here in Wilmington as well as the technology people. So you won’t see a lot of associated expense, but you will ultimately see the shutdown of the Tampa, a little bit of the severance that kind of stuff but it won’t be very meaningful I don’t think to the financials.
Okay. Thanks. And my last question, you mentioned that you are going to provide a note to the buyer of the Fort Lauderdale hotel and I don’t know if it’s ever been asked, are you providing a note to the buyer of the mall property in Florida as well?
No, not at this time. We actually want to do it here. it's a very good deal for us and for the buyer and the Fort Lauderdale property, so we are happy to do that. We think it’s a good deal both ways and it’s going to be very safe. On the other side, that’s not intended, but we don’t know maybe would we do it? I think we would under the right circumstances.
I don’t think it would be a credit concern whatsoever. But the development down in the mall is hundreds of millions of dollars, and our purchase price is 15. So we are a very small part of the equation in the Florida mall development. we are just a guy with the only the owner of the mall. But there is a bigger people than us involved in this, it’s exciting redevelopment. It’s going to be very successful, but it won’t be us.
Okay. Thank you very much, I appreciate the time.
Thank you. And I’m showing no further questions at this time. I would now like to turn the call back to Mr. Damian Kozlowski for closing remarks.
Well I appreciate everyone on the call. I think we had a really great first quarter. Appreciate all the questions and thank you and we will talk again next quarter.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.