Q1 2021 BankUnited Inc Earnings Call

Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to stay on buy and thank you for your patience.

[music].

Okay.

Ladies and gentlemen, thank you for standing by and welcome to Bankunited, Inc. First quarter earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question too on the session you will need to press Star then one on your telephone.

Please be advised that today's conference is being recorded if you were quiet any further assistance. Please press Star then zero I would now like to hand, the conference over to your speaker for today.

Greenfield corporate Secretary you may begin.

Thank you Joanna and good morning, and thank you for joining us today on our first quarter results conference call on the call. This morning are Raj Singh, our chairman President and CEO, Leslie <unk>, our Chief Financial Officer, and Tom Cornish, Our Chief operating officer before we start I'd like to remind everyone that this call may contain forward looking statements.

Within the meaning of the private Securities Litigation Reform Act of 1995 debt reflects the company's current views with respect to among other things future events and financial performance any forward looking statements made during this call are based on the historical performance of the company and its subsidiaries around the company.

Current plans estimates and expectations. The inclusion of this forward looking information should not be regarded as a representation by the company that the future plans estimates or expectations contemplated by the company will be achieved.

Such forward looking statements are subject to various risks and uncertainties and assumptions, including without limitation those relating to the Companys operations financial results financial condition business prospects growth strategy and liquidity, including as impacted by the COVID-19 pandemic the company.

<unk> does not undertake any obligation to publicly update for review any forward looking statement, whether as a result of new information future developments or otherwise on number of important factors could cause actual results to differ materially from those indicated by the forward looking statements information on these factors can be found.

In the company's annual report on form 10-K for the year ended December 31, 2020, and then the subsequent quarterly report on form 10-Q for current report on form 8-K, which are available at the SEC's website Www SEC Gov with that I'd like to turn the call over to Raj.

Thank you Susan welcome everyone. Thank you for joining us for on a quarterly.

Earnings.

Let me talk a little bit about the environment before we talk about.

The results for the quarter.

We talked to you about 90 days ago.

So I'll try and draw comparisons to what I said 90 days back.

I had an optimistic tone 90 days ago I'm more optimistic today.

What we are seeing the data that is.

Coming to us from every angle.

Around the vaccination of the pandemic on its economic data.

Cross the board, we're seeing more reasons to be optimistic for the remaining this year and into next year than we were in January and January looked fairly optimistic to begin with so the economy is opening up Florida is clearly.

Much farther along than other parts of the country, New York is a little further behind than other parts of the country, but overall on franchise, where we do business, we will see a lot of positive momentum.

And then debt.

Those assumptions and then get reflected in our financials, which we will talk to you in some detail, but generally feeling very good about economic activity and about the economy opening up into vaccine rollout.

The company also I will say that we are trying to gather data on how many employees have been vaccinated.

It's south of border data, so it lagged a little bit, but what kind of matching up with where the country is about 30% of our employees are either vaccinated on or about to be fully vaccinated and many more are in line.

Most of the senior management team is now fully vaccinated.

The quarterly performance, we reported net income off for about $99 million 90, $998 eight to be exact of $1 six per share. This compares to 89 that we reported to you last quarter and obviously last this time last year. The first quarter was a loss of 33.

So from a long way.

Sure a few months.

The highlights of the quarter is again, we'll go through a little bit on the P&L all jumped on the balance sheet after that net.

Net interest income.

To grow despite elevated levels of liquidity is a problem across the industry.

We had NII on $196 million. This compares to 193 last quarter and $1 81 compared to the first quarter of last year.

As we told you three months ago.

Positively.

Bias.

When it came to NIM guidance NIM did expand.

From <unk> 33 last quarter to <unk> 39, this quarter and.

Net expansion really is a result of us executing on our deposit strategy.

Deposits continued to grow and prosper if deposits continue to come down.

We had another very solid quarter noninterest DDA grew by $957 million.

Which I'm very happy about.

The average net.

Noninterest DDA grew by 338 million for that.

That really makes me happy is that non interest DDA now stands at about 29% of our total deposits just.

And where we would have 25%.

At the end of 2019, I think we like 18% and when we started this deposit centric strategy about three years ago. We were in the mid teens I think we were 14 or 15%. So we've come a long way.

And I'm very very proud of what the company has achieved.

Cost of deposits also declined by 10 basis points. So last quarter. We were at 43 were down to 33 basis points for this quarter and I'm very confident that second quarter, we will again, so a fairly decent decline.

And I can say that is because on March 31 on a spot basis, you were already down to 27 basis points. So we're starting second quarter at 27. So you know the number is going to be somewhere in the mid 20.

And the guidance that we gave that we will drop on cost of funds on cost of deposits into the teens by the end of the year.

Stance, so overall feeling quite good about.

What we've been able to achieve on the deposit side on the deposit growth was fairly widespread came from every part of the bank.

On credit.

The Oh.

Good day bad loans loans were down about $500 million.

Most of that decline.

Was the continued drop in utilization rates on lines. So I think $425 million off that 505 was directly attributable to less utilization. This has been a negative surprise for us.

We hadn't made assumptions when we did the plan at the beginning of the year debt.

The line utilization will start to normalize slowly month by month, but instead, we saw further declines in January we saw another decline further in February it's only March where we've seen a slight uptick.

One month doesn't make a trend, but it's a positive number in it we're happy to see that and hopefully we'll see this stabilize from here on and start to get back to normal. So Tom will talk to you more about that but that was what was the.

The biggest driver Inc.

From a credit let me go over a few things.

Temporary deferrals and modified loans under the cares Act modification under the cares Act that total number.

It remains stable at about three per cent of the portfolio.

And for your ratio declined 71 basis points last quarter, it's down to 67, but if you actually exclude the guaranteed portion of SBA loans. It was 53 basis points charge offs declined compared.

Compared to all of last year I think last year, we were running at about 26 basis point net charge off rate went down to 17 basis points for this quarter.

And for the first time since the pandemic hit us.

For the slides on classified assets also started to decline.

And as as we see more good economic data come through more importantly, as we start to see cash flow data from through I expect this number to start declining a little more rapidly for the second and third quarter. So overall feeling pretty good capital by the way you know needless to say, we're in a very strong capital position.

Set one ratio is at 13, 2% for Holdco and 14, 8% for the bank, we did buyback some stock.

We bought back about $7 3 million of stock this quarter you still have.

A little less than $40 million left in the buyback and we plan to execute it.

Just on buyback Opportunistically, it's a pretty volatile diamond the stock market. So we want to use that volatility to our advantage and buyback.

We see bps from the stock.

We didn't declare on 23 cents.

And.

Currently we anticipate maintaining that level on book value per share is now at $32 83, <unk> tangible book value was at $32, even both are above the pre pandemic levels.

So strategy stays the same are continuing to add.

One quarter relationship at a time.

Continuing to focus on non interest DDA I'll give you on example, something that just crossed my screen late last night, we've been looking for this lifting we've been calling on to supply for a long time, and we were finally able to private away from one of the biggest banks for the country.

It's a firm mid market firm based in Broward their relationship is coming over at once a day from which bank.

But.

It comes with a half a million dollar alone and $26 million in deposits with a full suite of Treasury management products and our long standing company, but a successful in the community.

And I'm very happy to happen it would be applying for bankunited, So I see it.

On a deal or two like this every other day and that's that's really driven by terrific, what where they asked for the franchise value and more focus on debt.

We'll also keep identifying niche markets and segments, where we can grow our where we're now shifting focus you know we havent hired many producers over the course of last year through the pandemic, but we're now focused on bringing on more producers and are in discussions with the number of producers in different geographies.

Very importantly, we will continue to invest in technology and innovation.

This actually I do want to say.

This quarter marks the culmination of our two year journey on the cloud journey as we call. It. We are now officially out of the data center business, we have a fully cloud enabled bank debt.

Total years to put everything in the cloud.

You know we partnered with Amazon.

They've been great partners and in terms of our capabilities, our infrastructure and the capabilities of cloud provides us for in a very different place than we were two years ago. When we started down this bad.

Also I want to announce that a part of this was also the first.

Our cloud native.

Application that we developed also a very big deal for banking on it because we've never really had any developers who've never developed anything in terms of products for them for delivering R. R.

Posit solutions, but two years ago, we decided that mobile banking is such a core function that we cannot just outsource it to the same vendor, which every other bank our size goes to.

That they needed to control this and needed to actually have this in house.

<unk> put a lot of effort into developing it was developed for like I said in the cloud and be launched this.

Just last weekend.

And convert it on and high customer base no issues at all.

And I'm very excited about this big investment that we've made also let me talk a little bit about a 2.0 and especially for the coupon on revenue initiatives. As you know they had been delayed given the pandemic, but I'm happy to report that we are actually making progress and getting a lot of traction all debated things that added up to that are there.

Net revenue targets, whether it's on commercial.

Card program, whether it's treasury management space and you'll start to see some of that you already are seeing some of that in our P&L deposit service charges and fees. This quarter were up 17% compared to the first quarter of last year. This is.

You know a lot of that is coming from the two point on initiatives that we put in place and more to come also you know a small business initiatives are that were also part of two point, though are now going to pick mentum small business as you can imagine the water distracted very much with PPP, one point O and debt PPP two point, though as the Pea.

P P and everything related to that gets behind us, we're going to start focusing on debt and start delivering on those initiatives as well. So overall feeling pretty good I think it was a pretty solid quarter, Tom and Leslie you're gonna walk in a little more detail on the businesses and also the financials, let's Tom why don't you go next share.

Thanks Raj.

So, let's talk a little bit about the deposit side first and you know obviously another excellent excellent quarter for us in Ni DDA growth and as Raj said I think it works when we look back at this quarter.

What's most satisfying as we're kind of building this wall brick by brick.

When we look at the results that you see in Ni DDA I think the thing that's most gratifying is how broadly it's.

Spaced across you know are.

Our business lines and also just the number of new relationships that are contributing to this to this growth, which is where we're seeing the majority of the growth is just coming off on what we would call new logos for.

For the quarter across all business lines, and you know kind of sweet spot type relationships for us that net non or particularly jumbo, but one that Raj mentioned, there's a little bit larger, but just a broad number of small business middle market commercial relationships is really adding to the San Diego.

So on average noninterest bearing deposits grew by 338 million for the quarter and by $3 1 billion compared to the first quarter of 2020 on.

On a period end basis noninterest DDA grew by 957 million for the quarter. While total deposits grew by $236 million. So we continue to allow more price sensitive and broker deposits to run off as well.

Grown beyond I D D. A day, so so significantly time deposits for the quarter declined by $1 billion.

So if you look at total cost of deposits as Raj mentioned declined to 33 basis points for the quarter, a 27 basis points on a spot basis down from 36.

As of December 31, 2020, and reductions in cost of deposits continued to be broad based across all product types and all lines of business. We continue to forecast good growth on ni DDA, a good continuation of the momentum that we've had.

Every quarter it may not be as strong as this one but we expect that each quarter to be very good and we also expect overall cost of deposits to continue.

The decline is.

As Raj mentioned on the loan side, we were down 505 million Q1 is not typically a strong quarter for us we did have a $234 million of growth on the residential portfolio with the E V O O Ginnie Mae portion contributing $341 million.

As Raj noted the majority of our decline for the quarter was really attributed to rely on utilization. We're just hitting historic lows, but we anticipate that will pick up as we start to see the year unfold the economy improve.

There are people starting to use more inventory purchases and other things happening within the portfolio.

One interesting side note we looked at.

Our numbers for the quarter and had we had a more historic level of line utilization our commercial loans are C&I loans would have actually been up to.

For the contributed another $800 million of base into the C&I portfolio. So it gives you some kind of a dynamic for what the line utilization.

Numbers look for as we look forward.

And the year were seeing good growth in pipelines in Q2 as Raj noted, obviously increased economic activity you know on.

Among our clients so we're anticipating.

For the year develops that we'll see.

Growth in our residential teams, our small business lending our commercial banking teams core middle market.

<unk> mortgage warehouse lending so we expect on.

For the remainder of the year to develop more strongly than we saw on the first quarter.

Just an update on PPP loans.

We booked $265 million worth of PPP loans during the first quarter under the second draw program.

And numbers of units, it's about a third of what we did in the first drop program at this point, we're not accepting any more second draw P. P. P loans on the forgiveness front.

We were re per day, a $138 million and long story made they were made during the first of our program. We have about 650 million remaining outstanding under the first drop program.

As of March 31.

Switching gears, a little bit some additional details around deferrals and care Act modification slide 16 in the supplemental deck also provides more details around this.

Level of loans on deferral or modified basis remained relatively consistent with prior quarter.

And commercial only $35 million of commercial loans were still on short term deferral as of March started first.

$621 million of commercial loans have been modified on.

For the cares Act.

Together these are 656 million or approximately 4%.

The total commercial portfolio, which is pretty consistent with low levels as the end of the last quarter.

Not unexpectedly the portfolio segment, most impacted has been the Cree.

Total book were $343 million for 55 per cent of the segment has been modified also consistent with prior quarter end.

Residential excluding the Ginnie Mae early buyout portfolio $91 million of our loans are on short term deferral, an additional $15 million had been modified under longer term cares Act.

Repayment plans as of March 31st, which total about two per cent of the residential portfolio.

A $525 million and residential loans that were granted an initial payment deferral 91 million or 17% are still on deferral for a 434 million or 83% of rolled off of those that have rolled off.

94% of our that paid off for making their regular payments.

At this time.

As it relates to the credit portfolio I wanted to spend a little bit of time as we normally do going into some of their occupancy collection rates in some key data is on some of the more impacted segments of the portfolio. So on average rent collection rates for the quarter, we continued to see good strength.

In the office market, we saw collection rates at 96%, which for even for both Florida and New York are multifamily.

Multifamily loans were at 90% collection rate in New York, and 92% collection rate in Florida, and retailers continue to improve and perform pretty well.

85% in New York, and 99% are in Florida.

Big News on the hotel front as we're seeing a lot more strength in the hotel market.

All of our properties in Florida are opened and have been for a considerable period of time, two or three properties that we have in New York are open with the third expected to reopen in June on.

Occupancy for the two hotels that are opening in New York are ran about 80% for March.

And in Florida occupancy rates for the entire portfolio, which is a little under 30.

Hotels in total average 80% in March for some reporting occupancy rates.

On the 90% range for those that have tried to find a hotel in Florida recently, it's not so easy to find any place. That's now open in Florida. So we've seen this improved from 46% last quarter, 56% in January and February were stronger than in March was up.

After the 80% level and we're seeing forward forecast for most operators that continue to show strength as we get.

As we start to head towards the summer months.

From a franchise perspective.

And the rest of our portfolio, we're seeing the majority of our concepts are opened reporting strong same store sales, particularly those with good drive through delivery or pickup.

Pick up models, we still have a couple of concepts that are predominantly indoor dining debt or challenge, but I'd say on a broad basis.

<unk> portfolio is performing much better.

<unk> is a challenge in this market a lot of <unk> operators are reporting difficulty in bringing in staffing right now where its stimulus payments and what not flowing through the economy. So the labor market is a bit of a challenge, but overall revenue is strengthening in this segment in the fitness.

<unk> planet fitness or we have to concepts as you know planet fitness for a 100 per cent of the stores are now open.

With you know with payment systems turned on our retention is averaging 90%.

And that concept and we now have all of our Orange theory franchises open there's been some decline in membership on operators are still expecting a full recovery. Some of them are still operating at lower capacity levels due to social distancing, but we're seeing signs.

Sizeable pickup in the Orange theory franchises as well so we're feeling.

Better about <unk> and franchise portfolio.

We felt last quarter for the quarter before so seeing a lot of strength there so with that Leslie will get into a little bit more detail about the quarter now so Leslie thanks, Tom.

As Raj mentioned net interest income grew this quarter up about one 5% from the prior quarter and up 9% from the first quarter of the prior year.

<unk> increased 39 this quarter from 233 last quarter in spite of elevated levels of liquidity on the balance sheet. So we were pleased to see that the yield on loans increased to 350.

This quarter from 355 last quarter.

Recognition.

Fees on PPP loans.

Forgive him added about six basis points this quarter compared to three last quarter. So if we pull that out pretty flat quarter to quarter for any yield on loans.

$15 $2 million at the FERC.

I'm just struggling with us this morning.

He's left to be recognized from $6 $3 million of that relates to the first drop program.

And yield on securities declined by 90 basis points to 173 for the quarter for.

<unk> remains really high on the bond market as I'm sure I'll, Let me now on the <unk>.

Expiring on for an accelerated level of prepayments on some of the higher yielding mortgage backed securities. So that is the only do remain under pressure.

Total cost of deposits declined by 10 basis points quarter over quarter with the cost of interest bearing deposits declining by 13 basis points. We do expect that to continue to decline given that the spot rate was 27 basis points at quarter end.

I'm going to be at least.

Somewhat lower than that so we will see an additional decline this quarter, although maybe not as much as we've seen the last two quarters.

<unk> borrowings increased to $2 32, and the borrowings that were paid down on where short term lower rate advances compared to the hedged advances that remain on the balance sheet and the aggregate. There was about one $6 billion of hedged examples that are scheduled to mature over the remainder of 2021 with a weighted average rate in excess of 10%.

And we continue to evaluate the economics some of them.

It makes sense to terminate some of the longer dated hedges that are out there.

When do you expect for NIM to continue to increase we expect it to grow next quarter. It will be helped by TEP forgiveness, but even excluding that we expect them to continue to grow our check a lot.

Shifting gears, a little bit to talk about seasonal in the reserve overall the provision for credit losses for the quarter was on recovery of $28 million compared to a recovery of $1 6 million last quarter on obviously, a provision of 125 million from the first quarter of 2020 and wish list for the quarter wasn't really flow start being provision related to the answer.

Net of Covid.

Negative provision this quarter, primarily resulting from an improving economic forecast on within your forecast for a minute.

On the outlook for unemployment.

It's driver.

There are really.

The reserve decline from one point to 8% for nine five per cent of loans slide nine through 11 of our deck give some further details on the allowance.

Major drivers of change.

Reserve went down $36 million related to the economic forecast again, primarily the change it on unemployment.

A decrease of $10 $1 million things charge offs on most of which related to one day FTE franchise, along that was hard on traveling from prior to Covid.

A decrease of $12 8 million charge.

Within the portfolio amongst on the lot decline on the balance of loans outstanding.

$6 $1 million increase on qualitative reserves $9 6 million dollar increase related to certain of Samsung's, primarily I total claims.

Total on stage.

An increase of $6 $8 million related to loans that were further downgrade on 10 of Susquehanna.

Category. So those are the major components on the reserve for the quarter I do want to point out for the reduction on the reserve for the quarter was primarily related to the cost weighted portion of the portfolio.

For pass rated loans declined from 137 million from 93 million, while the reserve for non pass loans increased from 120 to 128, so as we move forward.

Our expectation would be if economic trajectory plays out as we think it's going to we would expect to see.

Some upward and risk rating migration.

And that should that would in turn resulting from further reductions on the reserve.

Some of the key economic forecast assumptions drove the reserve and I'll remind you that it's really a lot more complicated than that.

A high level looking at some of the data points.

In the economic forecast national unemployment declining to 5% by the end of 2021 and trending down to just over 4% by the end of 2022.

On GDP growth of just over 7% by the end of 2021 and two three per cent for 'twenty to the S&P five.

Index remaining relatively stable at around 3700, and fed funds rates staying at or near zero into 'twenty time frame.

Little bit of detail on risk rating migration and you can see a.

A breakdown of all of this on slide 23 from 26 in the deck.

Total criticized and classified assets declined by about $75 million this quarter, but we did see some migration into the substandard accruing category from special mentioned, we do again expect to see some positive tailwind here for the economy continues to improve as we expect it to as we move through 2021.

In terms of the migration to sub standard accrual of the largest categories, where we saw that were at Cree Hotel multifamily in New York and office nonperforming loans did decline this quarter from 244 to 234 million.

Just to quickly wrap up on the look forward to the rest of 2021.

To reiterate Tom's comments, we do expect non interest DDA growth to continue.

As well as total deposit growth, but our focus remains on non interest DDA on one or more than willing given our liquidity position to allow more rate sensitive on broker deposits to run offs.

I think healthy advances will continue to decline on securities will probably grow in the low to mid single digits, depending on our liquidity position the provision.

Asian always for fun wanted to try to forecast under fees all the provisions should in theory be related to new loan production.

Charge offs and reduced reserve and when do you see positive risk rating migration on the currently expect we'll see some further reserve release related to that.

Net interest income should be up mid single digits over 2020, as non interest income excluding securities gains, which tend to be episodic and we don't make any attempt to predict those on.

And then with respect to expenses I would say the guidance we gave in January.

It has not changed.

With that I'll turn it over to Raj for closing comments.

Lastly, I'll just add to your a little color.

Many hard time to try and predict what will happen.

You know, we gave you guidance three months ago.

And I look at various aspects of our guidance on the deposit side. We're way ahead on what we thought we would do it would be very honest.

This quarter was much better than what it was sitting on for that.

On the loan side.

We had.

And also the expected debt will start bringing in.

Increasing underlying utilization instead, it actually declined.

With the exception of March weighted went up half a point so it's sort of done in the right direction, a little bit but December to Jan Jan two fabs, but you know it was just.

It surprise us because we're seeing economic activity around that is what we're not seeing the line utilization.

So you know.

I think the guidance overall fees.

Pretty good about where the trajectory would be for earnings.

But in terms of deposits I think we will outperform on the loan side I think we said low to mid single digits would probably be the low single digits based on what we see now.

And our margin, we still feel pretty good and the already delivered a nice expansion in margin and we'll continue to do that so overall I feel fairly good I was in Miami for the first time off for 12 months.

Two weeks ago I spent a few days there and just to see.

The hustle and bustle that is that from hearing about from everyone for the last several months now but to actually see it and feel it.

I will tell you that.

You know if you are planning some obligations nobody can go to Europe for people on 900 go to lead on Hawaii, Florida. Other places now's the time to book your hotels, you are not going to find any hotel rooms. If you wait for another month, that's how active Miami Beach.

Miami generally is so very very positive trends that we're seeing some silly things also happening in Miami Beach, but.

That just comes with the with the territory.

That's all day.

[laughter] spring break.

But let's.

Let's turn this over and take some questions.

Thank you, ladies and gentlemen, as a reminder to ask a question you will need to press Star then one on your telephone to.

To withdraw your question press the pound key.

Again, Thats star one to ask the question.

Our first question comes from the line of Dave Rochester with Compass point Your line is open.

Hey, good morning, guys.

Morning.

Regarding the long trend for the quarter and the outlook for the year was just wondering what the main areas, where where you saw the greater runoff in that traditional C&I book this quarter.

And then just given your increased optimism Raj I was wondering I know you mentioned your youre looking for a ramp up there on the number of a number of areas later this year.

So just wondering where you're seeing the most new momentum right now in the pipeline at this point and then how much larger is that pipeline versus last quarter. Thanks.

Yes, so that's exactly the question I asked Tom yesterday.

But the pipeline is that you know three months into this quarter versus three months into last quarter and I think as Andrew was roughly two and a half times, but.

We are seeing.

The pipelines on a much healthier in Florida, and New York.

As a general matter, but we're seeing in New York also build up a little bit, but Florida is clearly ahead and CRE.

I would say C&I is for that I had been CRE, though Florida CRE is also.

Are coming along very nicely so.

C&I.

CRE, both from Florida, New York, some C&I, so where we are.

In terms of line utilization would it fell really fell actually this was a quarter in which even the mortgage warehouse.

Line utilization came down so but that is normal mortgage warehouse lending always slows down in the first quarter. In fact, I would say it didn't slow down as much as it has or any of the last five years. It had been in the business. Our first quarter is like you know you shut down everything in that business and utilization.

Goes down into the Thirty's, we were sitting on the 15th but it did drop from the sixties fifties, so the warehouse business and sort of helping actually you know loan growth.

But that's very cyclical.

C&I lines were down which is just I think there's just a lot of liquidity in the system and not enough economic activity is what I would say.

If economic activity than returning the question, but as you know what happens with all this liquidity how would that impact loan growth and I don't think any of us know exactly.

We're guessing.

I don't think we would return all the way back to normal.

What I think 17 or 18 points below our utilization in the C&I business right now compare to pre pandemic levels. So.

I'm not expecting all 17 points 18 points to come back, but it's half of it came back and it's been a pretty big number.

Yeah.

Yes.

Had a little bit more color on the first part of the question that you asked if you went to our supplemental deck.

And look at page 14, I mean, it gives you a pretty good breakout of.

Sort of our commitments by industry level, when and if you look at the two largest.

That's where we saw you know a bad at the draw down from a utilization perspective, and where we're not seeing inventory build up yet at the wholesale trade levels that that was apparent in the financing and insurance segments, which are.

The largest part of our portfolio, we're not seeing because of the liquidity in the system.

We're not seeing as heavy utilization there. So those are probably the two.

Biggest areas as we look forward.

I think we're going to see.

Growth in more core.

C&I type markets I think we'll see more growth on the wholesale distribution businesses as inventory levels start to build I think we'll see.

More on health care over the course of the year I think that'll be a strong area for us in the Cree book.

<unk>.

The body likes the industrial assets and you know we have seen a good buildup in industrial assets.

Florida as Raj mentioned is doing well, so we expect to see multifamily.

Buildup in the Florida market and then the other asset class I think that you know.

We like as well as others tends to be specialty office buildings around the health care and medical.

Life Sciences industry I'd say those are the areas that we would expect to see growth for the remainder of the year.

As it relates for Anthony and I and create yeah. Yeah in terms of loan growth. There's another more detailed point, which you know some of you who've been following the company long well no.

It was in third quarter of 2016, when we announced that we had.

I'll start.

Backing away from New York multifamily up until then we were doing a lot of New York multifamily and it's a five year product for the most part so we're coming up on on five year anniversary off of that fees in our.

On our sort of hit.

History, where new York multifamily was the largest business line contributed to the growth more than any other business line. So as that gets behind us and I think we have one more quarter left that run off coming from those assets put on five years ago will be in the rearview mirror and I think you know that's probably third quarter.

It is what if I remember it right I think it was third quarter of 2016, when we did that so that's a five year anniversary that big chunk of that is still you know in our number.

<unk> declined there's still a lot of that is coming from me on multifamily so as that gets behind us it gets easier in terms of not having to fight that tailwind.

Yeah. So it sounds like you guys are pretty well positioned for growth to accelerate on the back half of the year do you think that you'll actually see some growth in the second quarter, just given everything you're seeing right now.

I certainly hope so yes, I think what.

We're in a better place.

In the second quarter line utilization is one that I've stopped trying to guess.

But it's getting into a place like how low can it go its already so low so from that perspective, you know I I say optimistic but the pipelines is really what we can see and really be that sort of tangible stuff and we're seeing our people a lot more active now than they were at this time last quarter.

Great appreciate the color there and Leslie on the NII Guide.

Are you just assuming the current interest rate backdrop sort of persist through this year and that margin expands in each quarter for the remainder of the year.

So I'm not going to try to predict it quarter by quarter day, because episodic things can happen, but I do think over.

Over the rest of the year, we will see expansion you know what I'm sitting here right now I expect it to expand next quarter, but whether it will go.

Apart from weather.

For wrap up flat you know, it's hard to say.

Yeah.

Yes sounds good.

It's a good trend to see there and then maybe just one last one on expenses you guys.

Raj you mentioned hiring producers now I was wondering how extensive youre expecting that effort could be and it sounds like that's all contemplated in the expense guide for the year is that for me.

Yep Yep Yep.

Great and in terms of how.

How extensive do you think that's going to be.

And on the area.

It is spread out it is not in one concentrated it sounded like when do we get $40 something like that in one area. It is spread out my comment was more around debt that was not the focus in the middle of a pandemic. So it really became a focus now in the new year and we're in discussion today is producers across.

On the franchise.

But over the course of nine months, starting March to December of last year.

I don't think we hired any producers that may be too bad behind.

Wanted to hit on there, but we are not really that was not bad.

It's just hard to do that when especially when he was telling people you can't really go out and meet clients. What do you do with your not a producer and do work on them.

I think it's the only time in the history of the company that we didn't hire for so long.

Sounds good alright, thanks for all the color guys I appreciate it.

Thank you.

Our next question comes from the line of Ben Garlinger with healthy growth.

Your line is open.

Good morning, guys good morning.

Good morning.

I was wondering if you could just kind of take a big picture view, you've always been a great comments later on.

Animal spirits on the market.

Got it.

Your opinion thought it'd be on line Utilizations are low.

And economic activity is supposed to ramp up from.

Current levels do you think that you'll start to see continued.

Growth or do you think that people will start using their deposits I'm just trying to get a sense of how you think the current loan to deposit ratio mix might go going forward and how sticky those new deposits really truly on.

Yes listen if this was only based on economic activity I would give you a very emphatic guidance net loan growth is going to be very robust. The problem is that it's based on not just economic activity based also on how much cash is in the system and we know there's tons of cash in the system.

So and that's not going away anytime soon and the fed is not going to pull cash out for probably another year or two years, probably so that's what makes it hard to guess exactly what the behavior will be the economic activity and liquidity in the system. Both drive loan demand economic activity is definitely coming back and we're seeing it every day.

But on the other the other question is much harder to figure out as to what that impact will be which is why I cannot give you a very robust you know our emphatic.

Guidance for for loan growth.

Even in the first quarter, there has been more economic activity in the first quarter versus fourth book.

But we didn't see line utilizations.

People are just sitting on a lot of cash.

Got you that's helpful and then obviously really difficult.

Right.

100 plus years so.

I do appreciate that color, if we could kind of transitioning a little bit more too.

The reserve.

Credit outlook I get that everything is trending the right direction, Florida is nominal.

In terms of the.

Aspects relative to the National average so when you guys look and you said cash positive cash flows and things of that extent are a big factor.

Being that the.

The <unk> and the <unk> was good for you on the one Q was good. So the trend is definitely a positive direction I was just curious on what you guys think your current reserve.

It really comes down to get that book.

Puncture.

Loans themselves and that hadn't remixed a little bit.

More so curious on that loan or the reserve to loan ratio on.

Kind of what we might see.

Next quarter for the next couple of quarters trying to continue this trend as directed by Moody's.

Yes.

I would say.

High level Big picture.

Portfolio composition remains relatively consistent obviously to your point if you know if the.

The mix of loans changes.

Dramatically that could be a factor here for this portfolio composition remains relatively consistent over time I think we'll see the reserve trend back down to closer to where it was on the KFC he'll adoption, particularly for moving back towards a similar economic environment.

And at that time.

To tell you exactly when we might get there is it.

Pretty difficult.

To be honest with you, but I would say.

His back toward those levels provided we are in fact, moving back to that type of economic environment.

And so that was around 59 or 60 basis points at that point in time.

Okay, that's really helpful.

And then.

My final question kind of comes from.

A little bit more so.

On the deposits and fees that continues to ramp up pretty good but as you kind of expand out.

<unk> and <unk>.

Areas of the economy are continuing to improve.

You think we've kind of hit back to that high watermark and it's more so a connection on the business growth itself or is it more so a question on like that.

Everything lapsed in terms of kind of on forgiveness on when we should continue to see back on our standard growth rate.

Yes.

I'm not sure for goodness as really having much of any impact on net.

The deposit picture at least I don't think that's a big driver of what's going on with deposits I think we remain quite optimistic about non interest DDA growth and that's really a function of.

Raj gave you a couple on the anecdotal examples of the kinds of clients that were on boarding and the.

The strategy in that regard so I think given that we're very positive on that continued non interest DDA growth.

Terms of overall deposit levels in the system I mean, unless the fed does something very tactical poll liquidity out of the system is cash income state system maintenance of around from the balance sheet on one thing for the balance sheet on another and back again.

But I think we continue to be optimistic about non interest DDA growth going forward is that every quarter going to be a billion dollars on that.

Alright.

Let's see I'll I'll add to that there may be 100, 150 million you know, it's hard to say exactly how much but.

Some benefit from the PPP loans as we just sit on people do take those loans and put them on DDA. So that maybe 100 $150 million in that range and.

And that will bleed out over the course of the next few months are the other thing I will say that also has helped DBA.

Made changes not only do on deposit pricing, but also into our earnings credit rate on Treasury management products. So as those have come down.

And they have come down fairly aggressively.

You know apply on time to either then start paying fees because all of them hold more DDA.

On the competence is compensating balances and cover those those fees.

So that also you know except for the client because they want to do.

But one way or another either helps our DDA levels on it helps our fee levels. So some clients choose to hold more DDA others clients choose to just pay the fees.

And you're seeing that benefit come through in both places. So does some of that also in the numbers.

But a large part of this what really gets me excited I'll get to all of US excited is that we're seeing more and more new business coming in on new clients, new accounts, new relationship like standard and relationships.

And then when declines on here are the.

Operating activity that those clients are performing in the wires and these hedges and how they're engaging with us that is just going up and up and up and that that's a day very positive trend youll see billings and the numbers, though that on balance sheet P&L numbers for those are you know are there.

Dash boards every day, what do we see how much activity is happening in the back office that is really really good news.

And then I would also add you you used the word segment, which is very important you know when when Roger for two years ago.

When we were at $14 six or whatever the number was as a percentage of total deposits and ni DDA.

When he laid out the growth strategy for <unk>.

Trying to get to a 30% number right, which seem like a huge undertaking at the time also a lot of it has to do with analyzing segments. I mean, you don't do it acts for that play.

We have spent a good deal of time and energy.

An effort focused on.

The segments that tend to be more deposit rich oriented and so new relationships as a part of it but also new relationships you know different industry segments. As we look through them off for you different levels of deposits based upon the businesses.

They are in.

So a lot of our focus.

Focus has really been around driving calling activity and new relationship activity.

What we perceive to be deposit rich industry segments and deposit rich relationships.

As a first level of priority.

So you get both the combination of the level of new relationships that we're seeing across the board is very encouraging but it's also the selectivity airport were pursuing and how we think about you know.

Focusing on products and services and relationships around a variety of industry segments that tend to lead to high levels of Ni DDA.

Got you Yeah, that's really helpful. Thank you guys on a.

Great start for the year and I'll step back on queue.

Thank you.

Our next question comes from the line of Abraham on a Waller with Bank of America. Your line is open.

Good morning Ebrahim.

Good morning, Anthony.

Uh huh.

Most of the question moving to Austin on today think of one Big question George It seems like the last five years, you've transport from the franchise, it's optimized from an efficiency standpoint.

Winning market share.

At the same time everything that for you have from your peers is there's a lot more chatter on M&A consolidation and kind of.

So setting franchises up to take on large banks index et cetera, just talk to us in terms of where your mindset in terms of being open to something large transformation from a deal standpoint, as you look forward as opposed to.

Oh kind of organic strategy that you've talked about and you've been executing on for the last year or so for the last few years.

Yes.

It sounded like a broken record because I've always said this are you now for the last for five years and even before that we're building the bank.

You know organically we.

We don't try and think about doing a deal every day because when you start thinking in those terms you you you you lose focus on US you know.

You never make these multiyear investments in multi year efforts. Just you know on this whole deposits transformation didn't happen in a year. This is a newer and a 40 year on this journey.

So when you think M&A, you're starting to think very short term I know theres a lot more M&A happening.

As I had predicted in a call or two ago that there won't be a lot of pent up M&A and that'll happen.

Listen if the right deal comes along we keep our eyes open for those we do engage in conversations.

But a lot of these deals that are happening you know that there are less than exciting. It was the only thing I can say.

They generally fall into the category.

No.

I'm out of energy and out of ideas. So what can we do let's sell the bank and you know.

And see if that does something.

But and everyone just basically heightened behind that we need to be able to spend on technology and we are spending on technology. We are creating things that you know wouldn't be helps us scale, but it sounds like you cannot do them, but obviously it also so.

We stay focus 90% of our effort is focused on organic growth a 10 per cent of our eyes on fixed on what can be done inorganically.

On the world could be surprised some day, if we do something.

So it's not like we never ever discussed we never ever talk about there's a lot of for organic growth ideas often comes from what we'd look at other banks and say well what theyre doing this why can't we do that.

So you.

You know.

It's just hard to you know to say, when and where and what circumstance of deal will happen.

You know even this last quarter, we were engaging on one day small deal in one mid sized deals that you did on them didn't go anywhere.

And in consideration value, but a small.

But.

Just have a very high bar for you know for.

Taking that risk of doing a deal on the operating risk and all the pay off that comes with it.

It needs to be really compelling strategic sort of.

You know rationale that would make us take all that operating risk.

Does that total jobs I guess as a follow up for debt. When you look at sort of what kind of stocks are being rewarded by investors or those that have some differentiated growth profile and when I look at I mean, I get the slow start to the year for you ended up sort of the industry is it all day options that could lead you to become a more often.

Above average growth play out when you think about top line revenue growth loan growth in terms of team hiring with some niches that you can get into just give us a sense of how youre thinking about debt.

Yeah.

C.

They're a card that you play if you haven't yet had right now which is basically the business lines that we have.

Billings over the last few years and then there are a card that you may pick up off the table for the next 234 years so you're.

You are talking about those cars.

For all of those researching what is it the next business Slide next product mix service net geography to look into.

And the ones that you haven't had to listen if people are just residential player.

And it had a big mortgage origination business over the course of last year, they've gone from Lucky by having that business model would have been a lot of money over the last year much more than we did but on the flip side it could be some other business, which got heard a lot more so.

It is you know a lot of those businesses are cyclical.

And and I'm spending a lot of time thinking about sort of beyond the mix of businesses. We have a day what is the next leg of expansion and then I'm not talking about geographic expansion I'm talking about product and business segment expansion that we should venture into what we'll see.

Our culture, what moving our rich.

<unk> appetite.

And what is it that we can be successful that you know.

Don't want to get into businesses and try and compete against bank of America and pretend that we didn't win let's say capital markets or something like that but there are niches that we're studying very very carefully and and you know when the time is right we will announce them.

But the mix of business that you have in hand do you you have to basically lead to what they'd vitamin D is youre not going to try and grow.

Businesses that are impacted by depending on what you're going to try and treat them, which is what we're doing but then others, which are which are doing well and have been benefiting from the pandemic like take a warehouse, but I just want to be aggressive and grow them, which is exactly what we've done.

Got it makes sense. Thank you.

Thank you.

Our next question comes from the line of Jared Shaw with Wells Fargo Securities. Your line is open.

Hey, good morning, guys.

Hey, maybe just circling.

Circling back to the BK U 2.0, and how that was was delayed really with with seasonal I mean, it started with COVID-19.

You know as you as you reengage on that what should we be looking for in terms of on.

Fees and then maybe on the expense side does that switched to bring the mobile platform in house is that sort of incorporated under that PKU PKU to point out when it is there any expense savings as a result of that.

So that was actually not part of it would be good too because I know that was a outside of fees.

The cloud initiatives that those are both outside and committed to just before we started to point out.

So.

There are other things like the small business initiative, that's into Plano, which was delayed and is only ramping up as we speak.

Any small business initiative in the middle of a pandemic you can imagine right.

The only kind of small business lending that happened over the last 12 months was basically DPP. So as that gets behind us small business initiatives start to pay off and that should generate both loans and deposits and fees.

Over the course of time as an average.

Also cost saving tool as well because the automated a lot of that process.

In terms of your overall coupon I know.

That's a $60 billion number we've put out there 40 was expenses, we already got there and then from a while back it's the 20th revenue, which is what we had been delayed on and now its beginning to come through it.

Not one big thing that I can point to you it's not like okay handle that $20 million was this number and we're almost you know it's a lot on little things like.

Like deposit service charges, which again is in itself makes it made up a whole lot of little things. It's a you know the commercial card program on the interchange fees, we expect to learn.

It's a small business initiative and a whole host of things that can make up that.

So it is delayed but it is not you know.

Put aside it is certainly achievable and deliverable and we're already beginning to capture that but I can't give you like one big thing to say Okay. Here is the you know.

On the eight of that 'twenty, which is right here let's.

Leslie maybe you can shed some light into it.

No I think that's exactly right Raj, it's a combination of commercial card Treasury management initiatives small business initiatives, there's some little small things, but those are probably the big three.

From a revenue side we're on.

Are you starting to see those gain traction we thought we'd be to the finish line with that sometime mid 2021.

Adhere to that Covid took a year out of our lives.

You asked about.

The new mobile App save money no that was not about cost saves that was about delivery.

A higher quality customer experience and part of the increase that youre seeing in the P&L on the technology line as the cost of that initiative running through the P&L.

Capitalized originally so that really wasn't about cost saves the cloud strategy on the other hand in delivering on our cost base.

Helping to offset from our investments that we're making.

Okay. So so on that $20 million of sort of remaining.

<unk> revenue over the next five quarters or so we should think that that gets you know we leg into that or over that period of time.

That's fair.

Okay.

And then could you just comment on sort of debt.

Talked about the huge amount of excess liquidity.

PKU, but in the system whats how is that impacting loan pricing.

The loan demand pretty pretty limited right now, but obviously a lot of competitive pressure out there that really negatively impacting pricing what are you seeing on new loans.

Yeah, absolutely I mean, you see it in the bond market and you'll see it in the loan market and especially on the.

The higher end of <unk>.

Of the credit spectrum, so for investment grade.

And very highly rated.

Borrowers pricing has been very very tight.

And that's actually one of the differences between three months ago and now also is that the kind of pipeline one day by much smaller than what it is a day, but also the pipeline back in January looked very much full of clients, who you know who could do deals that you know LIBOR, plus 100, and LIBOR plus 125 level.

Which are very difficult for us to make any money on.

But now we're seeing more middle market companies are more sort of so what is our meat and potato business and not JP Morgan for meat and potato business those kinds of businesses.

Tend to be.

You know.

Price much better and allow us to make the margin that we need to do to have a decent return on capital.

So, but yeah. It does.

The liquidity in the system, especially if you have.

If you're on a very well rated borrower a this is a great time to borrow and debt.

On.

That is impacting our margins.

I would also add that a lot of the activity that we saw in the first quarter I mean, there's always sort of loan demand and so question is do you want to be a supplier of that demand.

Net price and the debt risk level, but a lot of what we saw on the first quarter in terms of deals that we looked at where refinancings of investment grade type public sector debt University.

School debt and.

Card desire to be in.

15 to 20 year fixed rate loans that were non derivative hedge debt.

140 fixed rate was just not really five on was not really a very great to be honest and so we saw.

For a lot of business, where there were 14 or 15 risk.

Respondents to Rfps and all 14 or 15 margin. We responded we were 15 out of 15.

Because of our desire to book business that we didnt viewers profitable.

There is not great, but there was a lot of.

A lot of that activity was there in the first quarter, because I think other elements of the C&I book were not there. So a lot of people put on some dollars in that category, but it's not at sort of.

The return levels that we would want to see in the portfolio. So I think as we see more C&I the more classical.

C&I business start to come on in subsequent quarters, We will also see a better relative right in right in Iowa and quality mix.

Okay. Thanks, and then just finally you were mentioning in the comments.

Hiring producers and where you're seeing in new geographies or in existing geographies and if it's new geographies.

Where are those is that south east or nationwide.

Now this is mostly in our existing geography.

Okay.

Thanks.

Okay.

Thank you.

Our next question comes from the line of Stephen Scouten with Piper Sandler Your line is open.

Hey, good morning, everyone. Good morning.

I'm curious on the on the share repurchase Rajeev. You mentioned you know obviously you have been just under $40 million remaining and I think as you guys have talked about it previously.

When I go to your board.

$60 million cadences, so how do you think about the share repurchase.

The stock at these levels and Alternatively, what do you see as kind of the best uses of excess capital beyond the share repurchase today.

Yeah, I think when we got the share.

<unk>.

Buyback on.

Frozen I wouldn't say.

Electrical on reauthorized.

I think our stock was at 35 or 36 in that range.

I could be off by a couple of dollars, but it was in the mid <unk> similar and we came out of it and we started buying back stock and you know we are let's say bad we don't trade like.

For investment managers, we kind of give some guidelines to a broker and they execute every day a little bit but those are the parameters that we gave them became irrelevant very quickly because the stock from within a matter of two or three days I think it went from the mid thirty's to to beyond <unk>.

40, and then eventually even at 49 almost $50. So we've adjusted I think a couple of times, we've looked at adjusting at a couple of times, but it just felt like it was getting ahead of itself.

Not because I don't think the stock is worth anything less than 50 Bucks, but it's just it's a day volatile time and you know one piece of bad news I know can move to market by <unk> 10 per cent. These days so as those times come up Oh.

He will be very aggressive in buying very very quickly because.

But I just you know it that's not that's not banking on soft it's just the whole market is behaving that way.

So moving now into blackout for some time.

And as we come out of the blackout in a couple of days Leslie and I will put our heads together and will give new guidance due to our brokers to go execute again.

But this 40 or whatever 37 38 million net is left will get used up fairly quickly I would think.

And then my expectation is the board will.

Again for what another $150 million would they like to do on them into 50 at a time, which is fine with us.

And the minute. This cause used up we will be back for another 150 million because you could see capital levels or are you now.

Yeah, I don't want to take on the highest they've ever been but they are pretty pretty pretty high.

Yeah, No for sure you guys have.

Clearly plenty of capital here today. So that's helpful. Raj and then maybe just a higher level question you guys have done that.

Very good job really transforming the bank over the last few years Bankunited 2.0, and several other initiatives in the balance sheet transformation has been significant but as you look at it moving forward and kind of how to get the bank, maybe more peer like profitability what day.

Do you see as the clearest path there that maybe easier steps you might be able to take her focus on from here to get to where you want to be.

Yeah. So I think we are doing what was the hardest thing in terms of getting to peer level profitability, which was getting our cost of deposits in line with peers, that's where we where the for this way.

I think where.

We're pretty close to getting that done certainly by the end of this year to be in a very good place from that perspective for 30% DDA.

Our cost of funds in the teens, that's a pretty good place to be but that was the biggest undertaking.

On the on the on the interest income side as you know.

It will have an extra 50 basis points of yield on on what we have and that will basically why are changing the mix of loans, which is taking on a different risk profile.

We were not willing to do that over the last three four years, because we kept talking about that you know this is the end of the business cycle does not the time to go and take a new kinds of risk, but now we feel differently and we're analyzing what the right business mix would be for us going forward for.

From from a risk perspective, and return that we want to take incremental risk.

I don't have anything to announce for you today, but that's something we're analyzing every day as to what is it that we want to grow and what is it that when I'm not grow so much change the profile book.

The thing that debt.

You guys know gets really under my skin is the comparison when people do two on return on equity or tangible equity to others that return on tangible equity.

On a return on equity on a return on tangible equity is the same because we don't have a lot of intangibles, they've never done many deals or any deals so well.

But that gets compared to most banks, who are serial acquirers or in other words cereal.

You know intangible creators.

The return on tangible equity is better because you know you you use that for a capital one day capital is lower than next day and you have more earnings from what you just bought and suddenly you can say look on a return on tangible equity risk in other words don't look at what we spent on buying the earning stream just looked at what we bought.

So that I have.

I I get annoyed by that comparison.

Kind of on equity to anybody elses return on equity.

Low.

We're not.

Not just Midland attack, we're actually pretty far ahead.

But but but going back to our margin. It's I think the deposit work is getting done and on the lending side I think it's a good environment to be thinking about.

If and how we want to change some of the lending mix.

Okay, Great. That's Super helpful answer and I'm sure you guys are glad you are you did indeed hold off on taking that additional risk into the pandemic. So congrats on that as well.

Yeah. Thank you.

Thank you.

Our next question comes from the line of Steven Alexopoulos with Jpmorgan. Your line is open.

Hey, good morning, everyone.

How are you.

I wanted to start on the deposit transformation. So if we look at the increase in DDA is very impressive, but it's happening at a time, where customers consumers and businesses are all sitting on more liquidity, which makes it pretty tough for outsiders to gauge how much of this improvement has come from these initiatives are that Randy.

Other metrics you could share in terms of how youre progressing maybe number of new DDA accounts opened or new commercial accounts.

Uh huh.

Yeah, Steve that's a good thought and it's actually something we're getting for part two is are there some more meaningful metrics that that we could be sharing along those lines I don't have that in front of me right. Now obviously, we want to be sure we're pulling together whats most meaningful.

I don't know if the number of accounts is really all that meaningful maybe number.

Sort of an internal metric that we talk about number of new logos.

The number of new business customers that we brought in and we can give us some thoughts on whether we want to start sharing that I think.

But we havent made it public yet.

For the point that we're comfortable with.

Yeah, we haven't talked about sharing some operating data.

But there are a lot of.

Issues that come up with sharing that like just you know how many wives that going through the bank.

Something as basic as that but on that front also I know what we're trying to do with why is going forward.

So the effect of the low cost.

Yes.

Yes that number will eventually go south as as we you know make some changes to our technology platform.

But if we showed you that so there's been a lot of discussion of that that is an accurate way to two.

It shows on nonfinancial data and if it is going to be relevant and useful for shareholders, but we haven't really landed on anything yet.

Debt that we've published but we are having that discussion.

Especially for taking up I think on your question from two earnings calls ago.

Yes.

Things will be forthcoming Steve we just want to make sure we're using pellets for the most meaningful metric.

And we.

We wanted to share the data around on nonfinancial metrics. It is as reliable as it needs to be before we put it out on the public realm.

On both of those things are at.

On the Hopper for what I would say Steve is that we see.

We see the tangible results.

Every day and I would tell you that the level of results being driven by new relationships in key target segments.

We're focusing on is the primary driver of the Eni results that you are saying I would agree with you.

Yeah, and I don't think anybody knows Inc.

This is not a bank United.

Isolated.

Statements, there's a lot of liquidity on our system.

I don't think I think it's unprecedented in terms of both the amount of it and the reason it there so I.

I don't think anyone.

At this point has great confidence in their prediction about what happens to that over a long period of time.

Yeah no.

I would agree with that I guess, it would just help us because they're trying to <expletive>ess like how far you've really gone with fixing the outlier on deposit cost right and if you had some outside metrics to share on it would be helpful. I think it's a fair point and it is something we're spending some time on internally.

At some point, you'll start to see that but like I said.

We wanted to be sure that the metric is really the most meaningful indicator indeed, yeah.

The numbers right to be on.

We have the ability.

We can easily produce it reliably.

Yep Yep.

When you see growth coming from a large number of relationships that are relationships that are.

90% Treasury management oriented relationships, where you have.

$5 six products sold into that client base, and it's a stratification level, where it's not.

Any one huge individual accounts it gives you.

For more confidence as it relates to the long term duration of those promotion chips.

Yeah.

Helpful.

I'm curious in regards to Florida, just being more open than other parts of the country from a net economic view, that's actually a good leading indicator.

To that end what are you hearing from commercial customers in Florida are they now starting to look more actively and investing expanding hiring more or is the mentality. We're in a pandemic. It's just time to still be hunkered down.

I know that for instance, you said yeah.

Not only for investing expanding on hiring but also acquired.

Yeah.

We're seeing an uptick in M&A activity, the Florida commercial mentality right now is very positive on all fronts.

Okay. So to the degree that you now see loan growth at the lower end say low single digits versus low to mid is that really just a function of where we are now the starting point or do you expect less of a bounce up in the second half than what you <expletive>ume for early Steve I think it's primarily in the first.

The first quarter was obviously disappointing from a growth perspective on yeah.

It's a starting point, that's lower than where we had hoped to do at this point in time, yes, okay great.

Great. Thanks for all the color.

Thank you.

Our next question comes from the line of Brady Brady Gailey with K B W. Your line is open.

Thank you good morning, guys good morning.

But.

Heard you say that.

<unk> line utilization was down 17, or 18 point, so I'm wondering where that sits as a percentage now like what is the line utilization as a percentage for any of that.

Sometimes just never really disclosed and I think if I came on.

I think without the context of a lot of history. It wouldn't be very moving from what we'd never made that public.

But just to clarify for me that historic.

Historic lows.

The 70 point just to make that clear, it's not 17 points from.

Pre pandemic levels from now.

This quarter right right right. It was down about six 6% this quarter.

Okay.

And then yes.

As people.

You start to look at inflation and higher rates I'm, just wondering if bankunited.

It's going to be more asset sensitive.

You have to do the next period that we see higher rates on your deposit base is better you've remixed.

The loan portfolio remember multifamily use about 20% on the 6% do you think youll be more asset sensitive.

The next go around when we start to see higher rates.

I will tell you Brady the balance sheet is more <expletive>et sensitive now than it was.

It is but our.

Risk appetite for interest rate risk, we've never been one to his strategy to make money is to make a bet on rates.

No.

We will probably continue on.

<unk> has given us a mandate to manage interest rate risk for relatively low levels.

I don't foresee that changing.

So I don't think we will make us think that one way or the other although the balance sheet more <expletive>et sensitive today than it was last time, we went through the rate cycle, our pre pandemic, but I don't I don't see us.

Making a big bad on rate.

Hitting us either to be extraordinarily <expletive>et sensitive on extraordinarily liability sensitive.

Okay, great. Thanks, guys.

Thank you.

Ron.

Our next question comes from the line of Christopher <unk> with D. A Davidson your line is open.

Thanks, Good morning, everyone.

I'm wondering in chronic.

Hey, so I just wanted to ask.

Last quarter, you said debt.

You can get the cost of deposits to I think the low 30 basis point range and it looks like.

You've been able to do that pretty early on so I'm curious if there's any update there or if that outlook.

<unk> over the next two or three quarters.

I think on.

But what I said, which is by the end of this year, we will be in the teens.

And cost of deposits will continue on for drop into you know up until this time next year, that's as far as I can see.

The book.

Based on drop it's not going to be 10 basis points a quarter that you just saw this quarter. It will start to slow because you. Just you know there's only so much you can you can get down to but I'm more concerned about making getting to the teams than I was even three months ago.

Got it thanks and then.

Just looking at the average Securities book I think this is the first time, we've seen a decline in at least a little while was that just prepayments overpowering the ability to find new paper or was that deliberate and and what should we expect over the next couple of quarters.

Farmer.

Yeah, it's a difficult market share.

<unk> investment officer.

During at some point during the last quarter came to me and said you know I just can't.

On anything I want to buy and this is a guy who wants to buy for a lot. So.

So.

Yeah, just a very difficult market spreads are very tight to find something you have to find the right things. We are purchasing securities that you write prepayments has continued at a rapid clip.

I do expect the bond portfolio to grow in the near term some of Thats going on.

You had a lot of cash on the balance sheet at quarter end were attempting to deploy that.

But some of thats going to depend on how much loan production, we can do as well I would rather make loans from on the bond portfolio right now so.

Got it alright, that's all I've got thanks.

Yeah.

Thank you.

Our next question comes from the line of Steven.

Long with RBC capital markets. Your line is open.

Hi, good morning, guys.

Alright.

So just.

Back to Steve's question earlier just on deposits.

You get a sense of.

How much your average balance per DDA accounts has increased today versus say pre pandemic.

And that's something that's net.

For disclosed publicly so on.

I don't have those numbers in front of me.

You know.

Generally I will make a statement that the push has been to go lower.

Find smaller clients rather than larger clients mind, small business and middle market versus corporate because from a from a price sensitivity perspective for smaller dealer relationship the bad.

Are you infer in rising rate environments are generally the marching orders and even the incentive plans are designed in such a way to incent smaller midsize depositors', rather than really big ones.

Got it thanks guys.

And you guys have done really.

On a phenomenal job with the deposit side.

Now youre looking at down to mid teens for the cost of deposits. So, but maybe if we look at just total funding.

On funding costs.

I have at around 64 basis points, that's coming down.

From <unk>.

Last quarter, so given your DDA growth.

The $1 6 billion in hedge advances rolling off time deposits rolling off to where do you think total funding cost could fall to by the end of the year.

I don't have that in front of me, but obviously you know that.

The cost of those Okay tell me advances.

Probably not come down in the aggregate because what's going to be left.

The higher rate loans, but there'll be a smaller part of the mix on the aggregate that'll have a positive role off on that $1 6 billion in hedges will have a positive impact on <expletive>ets.

No on the aggregate cost of funds.

Although not necessarily on the cost of debt. They tell me is considered.

Considering the fact that because of what little amount on the last for the high cost.

And I do expect the balance to come down.

On the position.

When do you still have time deposits that are gonna roll offs that are at higher rates, we have maybe half a billion that's going to roll off in the next few months with price to fill it over 1%.

And then some additional amounts that are going to roll down.

Not nearly as much of a gap is that that's still price and above our current offer great. So you will see overall N.

And as DDA continues to grow the mix it will come down, but I don't have an exact number forecast for their time right now.

Got it so with all debt liquidity cash balance you could basically.

Essentially let your your borrowings and time deposits roll off.

If loan growth.

It's not there is that a fair price.

Asthma is not they are absolutely optimistic about loan growth being there.

Right right.

Yes.

Okay great.

Then just one last one just on the Ginnie Mae purchases.

Thank you we'll continue on with this level or is it kind of just the supply may not be there.

Charge prior to actually grow it.

And on the planet.

ROE and add other servicers to our existing list.

But exactly where the market will be we will find out, but I'm actually fairly optimistic about that business.

Okay, Great I appreciate the color. Thank you.

Thank you.

Our next question comes from the line of David Bishop with Seaport Global Your line is open.

Hey, good morning, guys how are you mark.

Do it.

Good good Hey, Leslie.

Piggybacking on Christy's question Thereabout Securities It sounds like Theres, obviously appetite to add there it looks like based on the average is versus the end of period you added there just curious on you.

Your yield sort of held in better than we had modeled here just curious where you see overall portfolio yields on the investment securities trying to gear in.

In the near term with the additional above these bonds at tighter spreads.

Yeah, I mean, what we put on in the first quarter came in between $1 40 and 150.

However, I will say, we are still keeping duration very short so.

We can improve that a little bit by adding to duration.

Don't know how much of an appetite we have for that but it is it is a point of discussion.

But I do expect some of that excess cash to moving to the bond portfolio over the course for the second quarter unless as I said on the loan pipeline really picks up on we're able to deploy it that way because I would trade some of those bonds for loans right now.

Right.

Got it.

A very fluid in flux situation, depending on the direction of the economy or so but.

Obviously first quarter try to credit trends moving in the right direction.

Net charge offs, well below the level of past due.

Three quarters or so any sense as you look forward to.

2021 versus 2020 overall loss content, where you where you could see those trending here over the near to intermediate term.

Charge offs are really difficult to predict, particularly the timing of them.

I do think obviously, we are seeing we are not seeing charge offs materialize.

To date, they've been episodic in nature they haven't been.

Broad or systemic.

This quarter.

I said it was really one loan and it was a loan that's been a company that's been struggling on the back pre pandemic kind of for the pandemic didn't help but.

They continue to be episodic, they're very difficult to predict I can tell you on our model.

I don't know how valuable that is you know based on that you know certainly.

40 basis points. This fight, but I don't have that type of model spilling out I don't have a high level of confidence on that because the model can't predict the timing of charge offs and.

And we do think that the trajectory of the economy from continue to improve.

And if it does improve it as our current economic forecast suggests I think we will see.

Yeah.

Migration out of those criticized cl<expletive>ified categories backup into the past portfolio.

Got it appreciate the color then Raj one follow up on the Bto B.

PKU to point out at least on the on the revenue side their impact on the fees do you have for the back of your mind or where you'd like to see fee income.

Sort of pencil out as a percentage of revenues and just curious of the $20 million how much is sort of in the run rate at this point.

I don't have a.

Target number for you that this is what will make us happy in terms of fee income for total revenue I know not especially doctor thanks to that.

On giving you already you know generic answer which is higher I would like it to be higher than what it is but at the same time not you know I'm not trying to.

Benchmark us to banks that are in very different businesses and say, we want to get there for example.

For a bank with the retail mortgage origination business.

No we'll have a lot of gain on sale.

<unk> revenue, which flow through fee income and if we chose to be net business, which as you know we have chosen not to be used to be in that business like we got out because it generated revenue, but it just didn't generate enough return that's often the issue we find with fee businesses, either but they need scale in a very different level.

So you know wealth management capital markets kind of fall into that category.

Or it's businesses that generate fees revenue, but not bottom line, which is again you know at least for us the residential origination business ended up being debt or let's say mortgage servicing you know at one time you were on the mortgage servicing business as well.

But we chose to exit that because it just was we needed a very different level of scale, so alright, I'm intrigued businesses.

For us on.

Resource on fees is deposits and loan fees.

And that is what a lot of cool Plano is trying to.

Increased for a commercial card as you know call it a treasury product.

But that is also going to go through you know you'll see that for you there's nothing there.

I don't think we have officially disclosed exactly where we are with the $20 million in terms of you know it'll be.

Half of it or not but you know Leslie and I can talk about that and maybe we can start shedding data moving more detailed.

For the next earnings release.

But we're not we haven't yet achieved the $20 million, we are litter for good.

Good six to 12 months behind it and hitting those targets and like we said we expect to get there probably at on this time next year on the middle of next year.

Got it and then one housekeeping question for you Leslie.

Good tax rate to <expletive>ume moving forward.

I would say in the neighborhood of 25%.

Excluding anything unusual on the weight of discrete items.

Yeah.

Got it.

Got it appreciate the color.

Okay.

Thank you.

Our next question comes from the line of Christopher <unk> with Janney Montgomery. Your line is open.

Thanks, Thanks for taking everyone's questions. This morning.

<unk> kind of outlook question as it pertains for the P PNR relative to the balance sheet.

You see that ratio, which is about 115 or 16 basis points do you see for getting a lot bigger the next year I mean, I know the company has changed a lot and I'm not sure how comparable ratio is kind of pre pandemic.

Three months ago.

Honest with you that is not a ratio we've ever measured maybe that's a good idea.

That'll be a takeaway is that that's not a ratio that I've ever really been focused on.

Okay.

But that's not a ratio of at site.

Struggling to answer your question, because it's not something that we really have measured and tracked very diligently.

That'd be my takeaway.

I would hope for Bell.

But I don't have.

Protection on that economy that I can speak to.

Sure.

Great I'll circle back on that and then just a quick one Raj as you've entered new markets like Atlanta is there a deposit component that you expect to see down the road here.

Inc.

Absolutely so when we announced our efforts in Atlanta, where if you get into you know another market. It's always a combination of loans and deposits. It's never just on loan production office.

Because we're defining.

<unk> business is one where people eventually give us their operating accounts.

If the relationship may start with the loan but it has to entry ended up for the deposit so deposits would obviously part of it.

Great. Thanks for all the information this morning, we appreciate it.

Thanks.

Thank you.

And we have a follow up question from the line of Dave Rochester.

Your line is open.

Hey, sorry to make a long call even longer here, but.

I just had a quick follow up on the bank M&A questioning earlier.

I'm clear on your messaging there on your approach, but I was just curious just given all the deal announcements recently.

We are seeing any noticeable pickup at all in inbounds or interest from larger banks looking to pick up some scale, Florida.

I'm looking to partner out to do that.

Yeah, I'll give you on generic answer which is this year the activity will be higher and there is more talk this year than last year not sure everyone was so focused on just getting back from the storm.

And now everyone is kind.

Kind of feels they are p<expletive>ionate.

And there is certainly more dialogue up and down the food chain.

And in Bank M&A World.

Okay, great. Thanks, again guys okay.

Okay.

Thank you.

I'm showing no further questions in the queue I will now turn the call back over to Mr Singh for closing remarks.

Well certainly.

Has been a long call. So I'll just say thank you very much for spending time with us and listening to our story.

You know how to reach me at Leslie anytime you'd like a little bit.

Otherwise, we'll speak to you again in 90 days. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

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