Q1 2020 Earnings Call
Thank you for standing by this is the conference operator, welcome to connect ones first quarter 2020 conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions to join the question Q you made press Star then one on your telephone keypad should you need assistance during the conference call you may signal at operator by pressing star and zero.
I would now like to turn the conference over to Joe calibrate.
With EM W.W.P.R. Please go ahead.
Thank you good morning, and welcome to todays conference call through do you connect ones results for the first quarter of 2020.
To update you on recent developments.
On today's conference call be Frank Sparacino, Chairman, Chief Executive Officer, and Bill Burns Executive Vice President Chief Financial Officer, the results as well as noted to this conference call, what's it only basis over the Internet.
We distributed this morning at a press release that has been covered by the financial media.
At this time Libre warn you that certain statements and assumptions in this conference call contain or based upon fold looking information.
They are being made pursuant to the safe Harbor provisions or the private Securities Litigation Reform Act a bunch of 95.
Such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated.
These risk factors were fully discussed in the company's filings with the Securities and Exchange Commission.
Forward looking statements, including this conference call. We're only made as a date of the call.
And the company is not obligated to publicly update or revise them.
In addition.
Sure in terms used in this call our non-GAAP financial measures reconciliations of which provided by the Companys earnings release.
An accompanying tables and schedules, which habit filed today on form 8-K, what do you actually see <unk>.
It may also be access to the company's website at <unk> Dot connect one bank dot com.
Each listener is encouraged to review those reconciliations provided in the earnings release together with all the information provided in release.
I'll now turn the call older Frank Sorrentino, Frank Please go ahead.
Thank you Joe and I. Thank you everyone for joining our conference call today I'd like to begin by expressing our sincere hope that you and your families are all safe and doing well. These are challenging times and our thoughts are with those who have been affected by this health crisis.
Given these unique circumstances I'd like to begin todays conference call by addressing our response to the covert 19 pandemic.
We took a proactive stance as the outbreak reach the New York area, taking immediate actions in order to safeguard their health and wellbeing of our team members and our clients.
The investments we've made an infrastructure and technology played a critical role in transitioning to a virtual bank model with 90% of our team shifting tour remote work at home environment seamlessly.
We leveraged these tools to continue to support our relationship banking model, allowing our clients direct connection dedicated bankers, who continue to serve them without skipping a beat.
Through the use of our digital channels technological tools and our dedicated call center. Our clients are primarily conducting day to day banking activities remotely.
I'm opinion slate, our retail offices pivot into a leaner contact less environment.
All said our team is doing well they've responded to the changing work environment with resiliency and their health and spirits are good.
We're proud of these efforts and to demonstrate our support for our teams. During this crisis, we've increased certain employee benefits that help address their needs.
We also quickly transition than mobilized our team to be an early an active participant in the U.S.P. A's Paycheck protection program.
Through the initial PPP funding ground connect one has assisted approximately 1400 companies and their 30000 workers. The ultimately secure nearly 400 million in needed funding for borrowers.
We are adding to that in this now second round.
We're proud of the fact that our capabilities allowed connect one to be one of the first banks in the nation to close in front of NSP, a PPP wrong and recognize the importance the cares program to our clients their employees and our communities.
This program truly is larger than the banking industry itself and we believe it was a service necessary to provide in order to ensure the continuity of our clients businesses keeping their staff employ at any immediate future and ensuring we do everything in our power to make sure clients get the funding that they need we look forward to being able to contain.
Can you to assist in this effort.
Bill will speak to the economic impacts of the program momentarily.
I also wanted to take a moment to touch upon SP, a lending activity at our Fintech subsidiary both fly as we discussed on prior calls we acquired this online platform in June of 2019 and focused on building its operating scale and infrastructure, we implemented growth growth investments over the past few quarters. These investments turned out there.
Very well timed given the prevailing market conditions, both flies extensive knowledge and Sps lending coupled with its ability to connect small businesses to an extensive network of financial lenders across the United States, which has become a critical resource in helping many independent businesses and franchisees secure the capital they need to persevere.
Yeah.
As a result.
Both wise transaction flow has increased tremendously and we believe this will continue beyond the PPP program.
Visits by small businesses, the both flies web sites, including P.S.P.A. cares that both fly dotcom site have risen 10 fold and they've established relationships with several new banks.
Apart from connect won both fly has facilitated over 3500 applications through their online lending platform, while successfully aging agenting over 2000 PPP loans.
For borrowers totaling over 750 million through a number of financial institutions. We're extremely proud of both flies ability to meaningfully address the increased need for small business funding during these very challenging times.
Well fly operates as an independent brand and generates revenue primarily through referral fees looking beyond the PPP connect one has joined the roster of banks funding both light secured loans I.
I'd now like to take turn to take a look at another important focus which would be credit we've taken a thorough approach to evaluating risk across our loan portfolio and have decided that postponing the adoption of Cecil and utilizing our loan loss reserve model for the time being what's the most appropriate path for connect one.
I will discuss our approach and its impact to our financials in greater detail.
Taking a look at our loan portfolio, we have low levels of exposures to many of them most impacted industries.
For example, our hospitality and hotel exposure represents just 1.2% of our loan portfolio and transportation represents 1.5% and our direct restaurant exposure is approximately 1%.
Additionally, we have virtually no direct exposure to casinos aviation cruise lines movie theaters or energy and no credit card exposure.
Nonetheless, we still have clients seeking assistance and we're proactively communicating with them to ensure that they're aware of federal and state financial system programs available. Many are both of our borrowers are taking advantage of different opportunities that have effectively been afforded by legislative regulatory and accounting governing bodies.
Regarding loan modifications and deferment requests were actively engaging with clients on a case by case scenario and right now total deferments under review currently represent roughly 15% of total loans are approximately 900 million. Although our review process is showing that about a third of those are probably not necessary.
Of the total deferments under review a majority are in the CR ray or multifamily segments, all very well secured strong LTV loans within our operating markets.
As bill walks through those numbers you will see why I believe we're taking a conservative approach and we're all optimistic that if a return to work effort continues and we begin to move back to a functioning economy. The majority of our borrowers will be back on their feet.
Additionally.
We are and always have been a relationship blender with virtually no brokered loans employing a culture of strict underwriting standards within objective of creating and growing a diversified loan portfolio and funding mix.
Our capital base remains strong and our board of directors recently declared a quarterly dividend payable on may 4th.
However, we did suspended our share repurchase program until further notice while we had another 600000 shares available to purchase and believe the stock price is attractive and not reflective of the long term prospects of connect one we and most in the industry would agree that now is just not the right time.
Finally, I want to highlight that on January 2nd we completed the end market acquisition of bank Corp. of New Jersey.
The final phase of our integration and con and conversion will be completed on may 4th with no delays and we're on track to meet or exceed the financial metrics disclosed when the transaction was announced.
I'll now turn the call over to Bill.
Okay. So thank you Frank and good morning, everyone.
First I'd like to Echo Franks remarks, and I hope that you all of your families are well and I extend thanks to the connect on team for all their extraordinary efforts as we all see to overcome the overcome the colder 19 pandemic. So anyway, there's a lot to cover here. So let me get right into it the first quarter on an operating.
Basis was quite strong for us and that was across the board would be was strong in terms of net revenue margin and growth on a pretax pre provision basis and in that number I'm also adding back merger charges.
Our pre tax net revenue increased 32.6 million, which is up 4.2 million sequentially and that's why now part of that was simply the merger with BK Jay.
Thank you jerseys quarterly run rate was slightly below 2 million. So even excluding the effect of the merger at the quarter reflected a nice sequential increase in operating net revenue.
Net interest income was solid reflecting growth and stronger margin that included higher purchase accounting and then a couple of minutes I'll get more into into what's going on with the NIM.
Turning to noninterest income it too was up as we continue to successfully build noninterest income revenue streams were having more success selling commercial loans and expect that to be consistent source of revenue for us in the future you don't want to project exact amounts right now for the rest of this year given the endemic crisis.
Second we increased our BOLI income and entered into some new contracts in the first quarter before rates plan. So we got good deals there.
This is another synergy from the bank, New Jersey merger, which didn't have any volley.
Third as both light, which even before the PPP was projected to have increasing fee revenue revenue and the current run rate. There is about 1 million per year.
The PPP program is put both lie on the map like never before so we're very optimistic here.
Now to the expense Sir.
Our core expense growth rate will likely be lower than originally anticipated.
Due to a more likely than not slower growth scenario.
One caveat to that are the expenses to be incurred in monitoring and closing out PPP, but those expenses come off the increase revenue from the program.
And then just an update on how the merger cost saves are impacting the expense line. The first quarter reflects about 1 million in cost savings next quarter or expect to add an additional 1 million, bringing the total run rate to 2 million and then by the third quarter will hit the full run rate of 70% savings or 3.3 million savings per quarter.
So that 70% seem side, maybe even a record in the banking industry, but it is accurate keep in mind. We are closing virtually all the bank New Jersey branches, maybe one will be kept out.
So hopefully that's enough for you for your models.
On the efficiency ratio for the first quarter. We are pleased with the 42.7, its usually higher in the first quarter and it was flat versus the 2019 first quarter.
Remains among the best in the industry and with the Bank, New Jersey cost saves that are coming I'm expecting that to improve as we get through 2020.
Want to talk now about the balance sheet, what's happening, where we're going so first with regard to loan growth point to point annualized after adjusting for the acquisition was in the high single digits sequentially and the same for deposit average gross you take away the benefit of the acquisition we were still in the high single digits.
Looking to the second quarter and beyond I try to give you. These guidelines. So we're going to see an increase in demand deposits due to the PPP.
To some extent thatll be temporary however, we are confident that we will gain more clients more core clients and business. As a result of that program I can assure you that virtually every client who funded through the program was very pleased with how we process then in assisted them with their applications.
As always in the quarters ahead, we will remain highly focused on driving both DTA core core relationship deposit growth. However, the wholesale markets remain very liquid gallon very very cheap. So we will be mine, we always monitor the tradeoff between core economics versus potentially higher costs deposit growth for example comps.
Beating on Cds, which are always highly.
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Our next is loan growth in spreads certainly our expectation is for a lower loan growth outside PPP.
But as of now we're just going to refrain from giving any loan growth guidance.
To the extent, we're originating new low risk loans, our expectation is for wider spreads even on the multifamily segment. Those spreads right now are in excess of 250 basis points, which.
Leads me to a little bit further discussion of the margin. So first on a GAAP basis margin expanded five basis points sequentially and part of that was due to the additional purchase accounting accretion coming from the acquisition and those amounts will be tapering off by about 600000 next quarter and by a total of 1 million by the end of 2020.
So on a GAAP basis, we're still going out purchase accounting it'll just be a little bit less but now let's look at the core margin, which appear to contract by six basis points, but I don't think that tells you. The story, which is a positive on first off for those six basis points were due solely to actual liquidity on the balance sheet something we did intentionally in conjunction with the crisis.
Further that remaining two basis points of contracts. It came from the bank, New Jersey balance sheet, which had a margin of only 2.7%. So over the course of the quarter through securities portfolio restructuring and deposit repricing, we did that through the quarter, we've eliminated that negative drag and then more recently we have benefited.
From the fed hundred basis points move all are shorter term wholesale funding approved by close to the 400 basis points. We also had opportunities we took advantage of to fund longer duration at rates below 1%.
Over $100 million that we lowered deposit cost significantly and there could be more to go even and they'll be Cds repricing over the next few quarters and on the lending side, we were protected significantly by the floors.
On the floating rate loans and although there have been many requests by borrowers to to lower their fixed rate loans in response to decrease in marketplace. We agreed to that and only a small handful of case. So in summary, the trend is an increase in core margin due to lower funding costs combined with just moderately lower asset yields.
The impact of the PPP and our expectation of higher lending spreads.
The given where two on capital the capital ratios remained strong well above levels needed for a while capitalize our capital and liquidity levels continue to remain remain robust and through internal stress testing, we show an ability to web a substantial stress over a prolonged period of time. Nevertheless.
As Frank mentioned, we are spending that share repurchase program for the time being at least until the crisis clears.
We recently declared our common dividend have no no plans to change that other than a slight change to the timing to conform with most of the industry.
On a tangible want to comment about tangible book value per share it's increased.
Thanks over the last 10 or more quarters in a row is fell slightly this quarter, but it was only by 13 cents, but we had expected backdrop as a result with the merger and we will continue as always to focus on building tangible book value per share.
As Frank mentioned I'm going to talk about C.. So he alluded to it and we disclosed in the release, we decided to postpone adoption of Cecil [laughter] when that flexibility. The delay was announced I basically jumped on it because I knew that the combination of this new complex accounting estimate combined with the drastically change I can also.
I should and forecasts that would lead to potentially a very nontransparent confusing situation for all banks and investors now I do understand the many banks could have reversed course, and so they didn't have a choice a methodology, but we have the flexibility to go either way.
And we do understand that postponing Cecil raises the question of what will the impact be to sanction statements. So furnace, let me tell you with regard to that day one adjustment.
And the bank, New Jersey merger, we estimate that the impact is going to be an additional 20 to 25 million increase to reserves include that includes the reallocation of the PCI Nonaccretable marks totaling about 8 million.
So if you understand the math here the charts to capital is only going to be eight to 12 million after taxes, and but with regard to regulatory capital of their transition rules in effect, so and today not implementing Cecil today has a very limited impact and regulatory capital.
Secondly, turning to our loan loss provisioning for the quarter I believe our kobin related provision for this quarter was not materially impacted by using one method over the other in other words loan loss allowance includes our estimated potential impact of covance by utilizing qualitative factors and monitoring a far request many other banks sticking to the incurred loss Medicaid.
Conclusion that the provisions could be lower we did see it that way to watch the crisis in backs provisioning in a similar magnitude whether you see so or incurred loss and that our provision reserve effects conservative estimation parameters.
So as you are all well aware, it's going to continue to be difficult for anyone to forecast segment economic conditions down the road, but I believe connect one is well positioned well prepared and we'll be closely monitoring the depth and duration of the crisis and its impact to our borrowers.
We just want to turn to PPP talk about that a little bit we weren't and continue to be very successful participating in the PPP, helping local economy and our borrowers and also earning some extra income for us and our shareholders. We've we've been able to leverage our technological infrastructure and in our view. It has allowed us to effectively take advantage of the program.
So through the first funding round as Frank mentioned, we had upwards of 400 million fundings, representing 1400 loans.
Fees associated with are expected to be in the 10 million plus range. So those are yield adjustments will flow into our interest income over the life of these loans life of these loans, we expect to be less than six months.
On top of that both fly as an agent is expected to book some fee income.
And none of these numbers take into account second round of ERP. So even more revenue is potentially expect.
So that is all for now I look forward to your questions, but first let me hand, it back to Frank for some of his closing comments Frank.
Well, thank you bill.
Again I you know, we are certainly, especially proud of our efforts around the PPP program being one of the first in the nation and combined with the efforts put forth by our subsidiary both fly says a lot about our team here and connect one bank.
Strong culture of our company was a driving factor in our execution success from the founding of our bank through today, we continue to operate with two key principles put our clients first and operate with a sense of urgency.
This is certainly true when our clients are growing.
Proven it to be true during difficult times, that's especially true today in a crisis, we were built for this.
This is an unprecedented time and the short term will clearly be a challenge, but we will all face it together head on and determined to persevere.
As always.
We remain disciplined and managing our business by conducting business more digitally as we grow.
By using the full range of our company's banking expertise to help our clients.
By building, our tech technology to help small business clients, including through added capabilities such as both fly.
And by diligently watching our credit.
While we look forward to the time when we get in front of this pandemic. We're prepared to continue to operate connect one in a safe and sound manner for our clients our communities and our shareholders.
With that we're happy to take your questions operator.
We will now begin the question and answer session.
During the question can you you May press Star then one on your telephone keypad, you will share teller acknowledging your request. If you are using a speakerphone. Please pick up your handset for pricing any Keith.
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Well pause for a moment as colors join the queue.
Our first question comes from William Wallace with Raymond James. Please go ahead.
Thanks morning, guys.
Morning, Wally the net interest margin.
The net interest margin commentary Bill you said, there's four basis points.
Pressures that was due to excess liquidity that you put on at the beginning of this is that liquidity still on balance sheet and if so how long do you think you keep it to be cautious.
I think for the duration of some of this crisis I'd like to have a little bit more liquidity. So.
And your models I would keep awareness now.
Okay. So we'll get the two basis points back.
In the second quarter, and then and then it sounds like I mean.
It sounds like you've really captured a lot of the benefit on the funding side and you're not seeing that much pressure can you can you maybe help us quantify.
What what level set to margin my experience.
Well you know it could be a lot Wally but.
It depends what we one of the strategic moves we want to make so so for instance, if it's really.
In excess of 10 basis points I might be a little bit more aggressive on deposits right on competing posits. So part of this is looking where we've been and also making that future. So I can say is that I'm optimistic about the core margin going forward, but I don't feel there's so many moving parts and we can change course.
Little bit that I don't want to give you exact numbers okay.
Okay.
On the Ppt I think you might have given it bill but did you. If you did would you repeat what the fees are on the round one.
Loans.
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Im pretty confident we're going to be able to get more than 10 million in fees in the first round and again that that is and it's fee income, but it goes into interest income.
So we'll have to see exactly how long the loans are on the books I do you know if it really is often the first quarter in the second quarter, all be gone right and booked in the second quarter, but if those loans remain outstanding right then making it can you can go into the third quarter.
Yep.
And then what's the pipeline or kind of expectation for round two.
Well, it's Frank I wouldn't say that we've had yeah, we've had similar.
Level of requesting round to relative to the to the number of applications that are coming through the dollars per loan or actually a little bit smaller a in the second round, Mike My Best guess bear is the most sophisticated borrowers.
We are able to get through in round one and.
Some of the folks that needed to get some additional information together came through in round, two and they tend to be the smaller businesses.
Okay.
And then ended and it's going to depend on how long the program last right you see now the SBA, you're spending a lot of time.
Figuring out ways to moderate the program so that all banks get access to it.
Right right Okay.
Okay.
Okay and.
Just.
Well the asks about the Cecil decision Bill and you built your reserves 16 by <unk> million call It and right in line with what would have been let's see so but you would've gotten the 8 million.
So on balance sheet, you would compare more apples to apples for all the other banks that have adopted Cecil and I believe you said it wouldn't be.
As as good of a comparison, so I'm just kind of curious if you could.
Well if you could.
Talk me through that again, well the reserve well the reserves will be higher but you do have to take a little bit of they have to capital to to make the reserves higher so I'm, just saying on a total basis.
Looking at the capital accounts or the company, a really isn't that much different.
Okay, but you're right the reserve if you're looking at reserve number it is going to be higher.
After one when we implement Cecil.
Okay and also the point I wanted to make that was just on that basis, you know and I believe this that it really comes out the same way incurred loss versus Cecil because.
Encouraged people misunderstand occur lots it doesn't mean losses incurred it means you can potentially see those losses. So there is a projection elements to the incurred loss Massa nothing.
The thing that Seasonals different is that it goes out over the life of a long way out to the very end.
Yeah, right, but yes, okay, but for you.
I think might be different than others, you you'd said it seems like a pretty conservative approach on the Q factors and the loss expectation. So it seems like Hey, Ryan I think I mean, yes difference other than the 8 million that's not that's not on it's not showing okay.
All right I'll I'll step out unless somebody else ask your question. Thanks.
Thanks, Rob Thanks Wally.
Our next question comes from Collyn Gilbert with KBW. Please go ahead.
Thanks, Good morning, gentlemen.
Hi.
On the PPP program.
Specifically as it relates to both by so I know you had said.
Their previous run rate, what kind of in the million dollar or so a year is there any way you can help us quantify.
Relate that million to what the volumes have been before for that and where you see biden going for them not to we don't have to tie into a definitive number for the year, but just trying to really quantify the magnitude of what they could potentially could be bringing to the organization.
All right.
Burdick antagonist.
I I think that what what we definitely saw here was a phenomenal opportunity for both fly to showcase, it's where and how its ability.
To act responsibly in the marketplace. There are banks that never heard of both fly before that are now on the platform. There our franchise or is that never considered using both fly that are now on the platform. So.
It's really going to depend on the strength of the economy going forward, but certainly from a marketing perspective, both why is now in a very enviable position.
And I don't know that we can draw straight line from what happened in PPP to increasing revenues, but clearly if all the sources of your future business are now awake into your ability to be there an ability to execute.
It's gotta translate into a better revenue stream going forward. We've also taken this time and through this process. We've we have been building infrastructure for both fly over the last nine months, but you we've put a lot of effort over the last six weeks into solidifying a lot of how their platform.
Works getting economies of scale out of it having the ability to scale up quickly.
And we think Thats, all going to bode really well for both fly going forward, there as well prepared as vacancy.
Okay, and I guess, what makes or in the press release I think if I if I read it correctly I'm just trying to understand so did I did I see it that both why expects the process a thousand applications and upwards of 750 million in loan is that isolated to both y or that's.
So fly and not combined.
Yeah, No. That's just both fly and actually reflect what covers the continue to climb with PPPC slash too right.
Yes, Okay, and then they know Collins.
Phil Collins spell it and those loans our agents it versus the loans that we funded.
Connect one that.
Right well then that we're getting my next question is how does the fee structure with the agency part of this program work.
So it's a it's a lot less than if we do it then we funded for the purpose of it was really to build.
Flies connections and build its business space and I think we were successful at that and successful with that.
Okay, Okay got it.
Okay, and putting bullfight aside for a second within what you guys have done so far in the TPP program and what you anticipate to do well, what's the split between new customer.
Extensions versus current customer extensions within that program.
So I would tell you that the majority of what we've done have been for existing clients. However, there is a component that would fit the non client, but they could have been a client of connect one through some other entity that they had so we certainly service those folks as well.
If someone that had company a with a us but company be was with a different financial institution and they brought company be to us for the PPP loan we treated them the same as if they were.
A client for that for that.
Company as well and in many of those cases were able to bring that relationship into that connect one family for completely non clients again, I would break those down into.
The different segments, but the one segment that we had a lot of success with as folks that could not get their PPP loan processed with generally the larger institutions, who were a little bit weight to the party in the first in the first program.
And so we've had tremendous success in bringing new clients into the bank, who have promised to bring us there.
Three relationships.
And so we've done a fair amount of that business. We've also done business for whether its churches are schools nonprofits. Other you know what we thought were central businesses within the communities that we serve if they asked us to we tried to say, yes wherever we could.
Okay, Alright, that's helpful and along those lines on.
Frank or belt, though you had alluded to deposits going up because of the TPP program is that sort of what you're saying right. There Frank is that your deposit relationships are coming as well within.
New customers or whatever yeah, so differently than what Bill report to build building reporting that whatever whatever.
Whatever loan funding, we put out is going to wind up in a depository account right until it spend.
But what I was referring to is that for a brand new client who wants us to do their PPP loan and we're moving their relationship and we've had tens of millions of dollars of new deposits come into the bank that have nothing to do with PPP nothing to do with the loan itself, but have to deal with the fact that they were dissatisfied with the bank that they were out.
And they move their entire relationship into connect one.
Got it okay.
Paul and then.
Okay, Alright, and then Frank on me.
You mentioned that the dollar amount of sort of forbearance requested 900 million inside the majority of multifamily CRT.
Give me any more color on that and if you said it in your initial comments I apologize, but what you're extending kind of a deferral I'm curious what you're extending and also to do no of that 900 million how many of those low balances or whatever also participate in the TPP program.
So let me take the first question first which is we are granting a 90 day deferral for the folks that do ask for it and can go through a qualification program that we as we said we'd doing this on a case by case basis, we're looking at those requests.
If it's a reasonable request will granted we do believe that in further underwriting and time will show that.
Probably up to a third or maybe even a little bit more will demonstrate that they really didn't need the deferral, but because of all the market pressures out there that they feel they are entitled to what they're going to ask for it because they can get it as far as you know what's underneath the cover relative to what the expectation is going for.
But at this moment, it's really hard to tell based on.
When are we going to get back to work what's going to happen.
How is how are they going to be impacted we have found our multifamily portfolio in new Jersey is somewhat stronger or has a better ability to paid and the multifamily portfolio in New York, which is obviously much smaller in percentage terms relative to connect ones portfolio and that the b.
Class apartment buildings, the vast majority of the tenants are paying or at least have paid a their april rents.
We do not see in a CR re categories that the PPP program provided a lot of direct helped to those clients. We are seeing where we have mixed use or in a see an eye area or in any retail component or other types of CR rate where PPP.
Is going to be helpful that money is flowing through we also feel out it's obvious to me right that ppt program is going to flow money through two employees of companies that will then be able to pay rent, which obviously helps the entire system.
So I think April numbers came in across the board here connect one better than our expectation for who's paying what and what the derivative of who's paying what to the apartment building owners.
It'll be interesting to see what happens in may.
Okay. Okay. That's helpful.
I will leave it there all right. Thanks guys.
Thanks gone.
Thank you called once again.
Once again, if you have a question. Please press Star then one.
Our next question comes from Matthew Breese with Stephens, Inc. Please go ahead.
Hey, good morning.
Hey, Matt Hey, Bill just maybe going back to the core NIM commentary. If you have it can you give us an idea of what the spot rate for deposits were at the end of this quarter versus a year end.
Bill.
Please standby as where we connecting the speaker.
[laughter] amount was you asked that question again.
Yes, sure so on the core NIM outlook I was just curious.
And what the spot rate of deposits were at the end of the quarter versus at year end.
I don't know exactly what that number is but I know they were down pretty significantly from year end due to 100 point basis 100 basis point move with a with the fed reserve, but I get to that number Matt.
Okay.
And then you had mentioned that the.
The multifamily rent payment trends in New York was it was quite a bit better than new Jersey.
Can you quantify that right around that weve.
New York was Oh, Yeah, New Yorkers worse in New Jersey correct.
Right, Yes, right can you quantify that because we've heard conflicting things on on the rent collection from from some of your peers.
I I got back I don't go back.
Let me just finished this question Bill so I think relative to what our peers have report I I don't know what's in their portfolios, but relative to our own portfolio. We found that are the new Jersey portfolio performed better and when I say performed better I mean across the board we had similar performance relative.
To April on time payments and or a request for deferrals, but when we started to inquire as the who's paying rent, where we found that the new Jersey portfolio had better percentages of tenants paying the rent and I think theres a number of factors that go.
Into that.
I think it's the smaller.
Rent size that is more affordable I think its people maybe not living in New York City, 100% at the time feeling that they don't feel obligated to pay those rents. The dollar amounts are much greater in New York than they are in New Jersey.
The the amount of workforce housing is more prevalent in new Jersey than it is a you know in some of the inner boroughs of New York. So I think there's been a lot of factors that go into why that would actually be true, but that's how you know that's what we found when we did our stress testing in our research around.
Our own portfolio.
Got it okay.
Bill when you dropped off I'd ask what the spot rid of deposits was you know at the end of the quarter versus year end, what that with a delta was.
You mean, what what rader deposits going on at.
Exactly yes.
Well on the wholesale side, it's it's.
Very.
Okay.
In the.
30, I think it's 30 to 50 basis points on the on the to on a core deposit side, we dropped them about half way given like a beta I'd say that a beta 50% and then we have more we have more deposit.
Cds coming off a few hundred million in each of the next three quarters at 2% or so and Cds, so because a lot of.
Reasonably ever deposit costs going down a lot, but I don't have the exact them for you right now.
No that was helpful.
And then in the release you had noted that.
There was a construction credit that drove some increase in mph. You also said it was well secured can you just give us a bit more color on that on that loan what it secured by.
And yes is there any estimate what you think lost content on on this one could be.
Yeah, I'll I'll take that I.
Matt I don't believe we're going to take a loss and that actually that building was contracted it was a condo project that was nearing completion in Brooklyn, and was actually contracted to be sold I'm just before the crisis. The entire building ownership was going to change and and then.
Through you know the worsening in this crisis that that transaction fell apart. So we do believe that that will get back on track a we're working with the borrowers right now.
But in the meantime, the metrics of the transaction forced us to put it on non accrual and we're taking the most conservative approach there, but we do not expect the laws.
Got it okay.
All right. That's all I had I appreciate it thank you.
Thank you Matt welcome.
Our next question comes from Collyn Gilbert with KBW. Please go ahead.
I thought it was dying, but I'm not done although not a couple other thing so I'm just on the.
Mhm side Bill Yeah can you tell us what your current TV offering like your one year CD operating rate is I know you mentioned, you got 2% coming off but just curious.
As to what that you well ideas, but we think about like every couple of weeks, we we adjust based on what the competition is that but.
Knee you know if you hadn't needs to be at 1% plus still to to bring money and so it's it's not economic versus wholesale funding, which is 40 to 50 basis points, but you know we still want to be somewhat competitive out there and it did not see too much run.
Okay. All right. That's helpful. And then just following up on the construction comment just broadly how is your construction portfolio holding up and what are you seeing kind of anecdotally from some of those borrowers I mean, despite I guess construction supposedly being shut down in new Jersey. It doesn't seem like it somewhat I had done so.
Just curious as to how.
Portfolio Terry.
Yeah, Collin, we've spoken to most of our clients there and the construction realm and for quite a while they were doing okay. Even through the crisis until the state order. The shutdown that's only been a couple of weeks. We so we recognize there will be some delays in delivery of projects. There were also.
So some delays that we observed through materials that are that were coming from overseas that will be tied up you know anything that's coming from Asia anything that's coming from Europe, a they will be some slight delays in getting windows and door knobs, and you know those kinds of things, but overall, we think.
Construction will resume shortly if not you know in some places it's already begun to resume <unk> and I know, what you're saying in some places and never stopped but it will resume and projects will get completed we actually think for the vast majority of the portfolio. The demand is actually incur.
Are you seeing for the product that's being built because of its been so much stress on our the constructed construction sector. So I think we're going to wind up in a good place we will have to expand some maturities give people a little bit more time to get projects completed or we are doing its very similar.
Relation of the entire portfolio you know looking at.
Percentages of completion and whatnot at this point in time and really getting behind the numbers as to what are going to be the request for extensions of time.
But we think that's really about it it's the extension of time, that's going to be a little bit of an issue.
Okay, Okay, great that is it alright, thanks guys.
Thank you Carl.
There are no further questions at this time I would like to turn the conference back over to management for any closing remarks.
So thank you very much everyone. We appreciate you taking the time today, Oh listen to enjoying our first quarter conference call. Please stay safe and we look forward to speaking to you a next quarter. Thank you all.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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