Q1 2024 Flushing Financial Corporation Earnings Call
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Unnamed: BF-WATCH TV 2021
Operator: Good day, and welcome to Flushing Financial Corporation's first quarter 2024 earnings conference call. Hosting the call today are Mr. John Buran, President and Chief Executive Officer, and Ms. Susan Cullen, Senior Executive Vice President and Chief Financial Officer and Treasurer. Today's call is being recorded. After today's presentation, there will be a question and answer session. To ask a question, you may press star then one, and to withdraw your question, please press star then two.
Good day and welcome to Flushing Financial Corporation's first quarter 2024 earnings conference call hosting the call today are Mr. John Buran, President and Chief Executive Officer, and MS. Susan Cullen Senior Executive Vice President and Chief Financial Officer, and Treasurer today's call is being recorded after today's presentation there will be an.
Operator: A copy of the earnings press release and slide presentation that the company will be referencing today is available on its investor relations website at FlushingBank.com. Before we begin, the company would like to remind you that discussions during this call may contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risk and uncertainties and other factors that may cause actual results to differ materially from those contained in any such statements, including as set forth in the company's filings with the U.S. Securities and Exchange Commission, to which we refer. During this call, references may be made to non-GAAP financial measures as supplemental measures to review and assess operating performance.
A question and answer session to ask a question you May Press Star then one and to withdraw your question. Please press Star then two.
A copy of the earnings press release, and slide presentation that the company will be referencing today.
It's available on its Investor Relations website at Flushing Bank Dotcom.
Before we begin the company would like to remind you that discussions during this call may contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995, such statements are subject to risks and uncertainties and other factors that may cause actual results to differ materially from those contained in any such statements include.
As set forth in the company's filings with the U S Securities and Exchange Commission to which we refer you.
During this call references may be made to non-GAAP financial measures as supplemental measures to review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with the U S. GAAP.
Operator: These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and for any reconciliation to GAAP, please refer to the earnings press release and this presentation. I would like to introduce Mr. John Buran, President and Chief Executive Officer, who will provide an overview of the strategies and results. Please go ahead, sir.
For information about these non-GAAP measures and for any reconciliation to GAAP. Please refer to the earnings press release and over these this presentation.
I would like to introduce Mr. John Buran, President and Chief Executive Officer, who will provide an overview of the strategies and result. Please go ahead Sir.
John R. Buran: Thank you operator, good morning, and thank you for joining us for our first quarter 2024 earnings call.
John R. Buran: Thank you, operator. Good morning, and thank you for joining us for our first quarter 2024 earnings call. The operating environment in the first quarter was dominated by three events: rising yields on the long end of the curve due to changing expectations of the Fed lowering rates; weak loan demand due to the lack of applications that meet our underwriting and return criteria; and negative activity around one of our largest competitors. With regard to that competitor, we see its situation as largely unique to that institution, with opportunities that may be available to us as a result of the stated contraction in their business.
John R. Buran: The operating environment in the first quarter was dominated by three events.
John R. Buran: Rising yields on the long end of the curve due to changing expectations of the fed lowering rates.
John R. Buran: Weak loan demand due to the lack of applications that meet our underwriting and return criteria.
John R. Buran: And the negative activity around one of our largest competitors.
John R. Buran: With regard to that competitor.
John R. Buran: We see its situation as largely unique to that institution.
John R. Buran: With the opportunities that may be available to us as a result of the state of contraction in their business.
John R. Buran: Against this backdrop the company reported first quarter 'twenty 'twenty four GAAP EPS of <unk> 12 cents and core EPS of 14 seven.
John R. Buran: Against this backdrop, the company reported first quarter 2024 gap EPS of $0.12 and core EPS of $0.14. Despite largely benign credit trends for community banks, concerns about commercial real estate lending exposure in office and multifamily persist. Consistent with our history, we posted strong credit results for the quarter and continue to manage a low-risk portfolio that has been the hallmark of our company. Turning the slide forward, we're proud of our credit culture, which has produced excellent results over the long term. And the results in the first quarter support this.
John R. Buran: Despite largely benign credit trends for community banks concerns about commercial real estate lending exposure in office and multifamily persist.
John R. Buran: Consistent with our history, we posted strong credit results for the quarter and continue to manage a low risk portfolio that has been the hallmark of our company.
Turning to slide four we're proud of our credit culture, which has produced excellent results over the long term.
John R. Buran: And the results in the first quarter support this.
John R. Buran: Net charge offs for the quarter were only $4000 or less than one basis point of loans.
John R. Buran: Net charges for us for the quarter were only $4,000, or less than one basis point of loan. Non-performing assets were flat quarter over quarter and total 53 basis points. Our future credit quality indicators show no issues. 30- to 89-day loan delinquencies were only 24 basis points, and criticizing classified loans stand at 87 basis points, down 23% quarter over quarter. There are several reasons behind these excellent metrics; we are a conservative underwriter. We originate loans with low loan-to-value ratios and high cash flows.
John R. Buran: Yeah.
John R. Buran: Nonperforming assets were flat quarter over quarter.
John R. Buran: In total 53 basis points.
John R. Buran: Our future credit quality indicators show no issues.
John R. Buran: 30 to 89 day loan delinquencies were only 24 basis points and criticized and classified loans.
John R. Buran: Band at 87 basis points.
John R. Buran: Down 23% quarter over quarter.
John R. Buran: There are several reasons behind these excellent metrics.
John R. Buran: We're a conservative underwriter we.
We originate loans with low loan to value ratios and high cash flows we have a long history with our borrowers and our credits have strong sponsor support.
John R. Buran: We have a long history with our borrowers, and our credits have strong sponsor support. We believe the results speak for themselves, but on the next couple of slides, let me show you how we compare versus the industry and peers.
John R. Buran: We believe the results speak for themselves.
John R. Buran: The next couple of slides, let me show you, how we compare versus the industry and peers.
John R. Buran: Slide five shows the results of our underwriting over time.
John R. Buran: Slide 5 shows the results of our underwriting over time. Both our net charge-offs and non-current loans have historically been significantly better than the industry. Our underwriting includes a stress test of higher rates at origination.
John R. Buran: Both our net charge offs and non current loans have historically been significantly better than the industry.
John R. Buran: Our underwriting includes a stress test of higher rates at origination.
John R. Buran: In fact, stressing our portfolio with a 200 basis point increase in rates and a 10 percent increase in operating expenses yields a pro forma debt coverage rate of 1.3 times. At quarter end, we have less than 1% of loans that had an LTV of 75% or more, and about a quarter of these loans have mortgage insurance. The low-loss history conservative underwriting, strong LTVs, and debt coverage ratios further demonstrate our low-risk
John R. Buran: In fact, stressing our portfolio with a 200 basis point increase in rates and a 10% increase in operating expenses yields a pro forma debt coverage rate 1.3 times.
John R. Buran: At quarter end, we have less than 1% of loans that had an LTV of 75% or more.
John R. Buran: About a quarter of these loans have mortgage insurance.
John R. Buran: The low loss history of conservative underwriting strong ltvs and debt coverage ratios further demonstrate our low risk profile.
John R. Buran: Slide six shows some.
John R. Buran: Slide six shows some Credit Metrics Compared to Peers. We had quarter-over-quarter improvements in non-performing assets to assets and criticized and classified loans to gross loans. However, our criticized and classified loans to gross loans are expected to continue to remain below peer levels.
Credit metrics compared to peers.
John R. Buran: We had quarter over quarter improvements in nonperforming assets to assets and criticized and classified loans to gross loans.
John R. Buran: Our criticized and classified loans to gross loans are expected to continue to remain below peer levels.
John R. Buran: 30 to 89 day delinquencies remain low while the peer median is similar to our performance three peers have ratios over 50 basis points.
John R. Buran: 30- to 89-day delinquencies remain low, while the peer median is similar to our performance. Three peers have ratios over 50 basis points. Our allowance for credit losses is presented by loan segment in the bottom right chart. Overall, the allowance for credit losses to loans ratio increased slightly to 60 basis points during the quarter.
John R. Buran: Our allowance for credit losses is presented by loan segment in the bottom right chart.
John R. Buran: All of the allowance for credit losses for loans ratio increased slightly to 60 basis points during the quarter.
John R. Buran: We're particularly comfortable with our credit risk profile, especially in light of key industry concerns. Slide 7 shows a summary of these portfolio segments and key potential risk metrics. The multifamily portfolio is the largest portfolio, but it's very granular, with an average loan size of $1.2 million. This portfolio has a weighted average LTV of 45% and a debt coverage ratio of 1.8 times. There are minimal credit issues with low, non-performing loans, delinquencies, and criticized and classified loans.
John R. Buran: We're particularly comfortable with our credit risk profile, especially over key industry concerns.
Slide seven shows a summary of these portfolio segments and key potential risk metrics.
John R. Buran: Our multifamily portfolio is the largest portfolio, but it's very granular with average loan size of $1.2 million.
John R. Buran: This portfolio has a weighted average LTV of 45%.
John R. Buran: With a debt coverage ratio of one eight times.
There are minimal credit issues with low nonperforming loans delinquencies and criticized and classified loans.
John R. Buran: Investor commercial real estate is our next largest portfolio and share similar characteristics.
John R. Buran: Investor Commercial Real Estate is our next largest portfolio and shares similar characteristics, like small average loan size, low LTVs, high debt coverage ratios, and excellent credit performance. We have zero non-performers in this portfolio. Our office portfolio is less than 4% of loans. Less than 1% of loans are Manhattan office buildings, none of which are non-performing.
John R. Buran: Like small average loan size low ltvs high debt coverage ratios and excellent credit performance.
John R. Buran: We have zero non performers in this portfolio.
John R. Buran: Our office portfolio is less than 4% of loans less than 1% of loans, our Manhattan office buildings, none of which are nonperforming.
John R. Buran: This portfolio has a weighted average LTV of 49 percent, debt coverage ratios of two times, and low levels of criticized and classified loans. We believe these metrics provide a clear overview of our low-risk and strong credit culture that has performed well over time. I want to go a step deeper on our multifamily portfolio.
This portfolio has a weighted average LTV of 49% debt coverage ratios of two times and low levels of criticized and classified loans.
John R. Buran: We believe these metrics provide a clear overview of our low risk and strong credit culture that has performed well over time.
John R. Buran: Wanted to go deeper on our multifamily portfolio.
John R. Buran: Slide 8 outlines our key credit quality statistics compared to peers. As of year end, our rating assigned multifamily loans with 27 basis points of total multifamily loans, which is at the low end of the peer group. At the end of the first quarter, this ratio was 54 basis points, which would still rank at the lower end of the period.
John R. Buran: <unk> eight outlines our key credit quality statistics compared to peers.
John R. Buran: As of yearend, our criticized and classified multifamily loans with 27 basis points of total multifamily loans, which is at the low end of the peer group.
John R. Buran: At the end of the first quarter. This ratio was 54 basis points, which would still rank at the lower end of the peer group.
John R. Buran: We use a quantitative model to risk rate are real estate loans. This model has been in use for many years and has proven its value through several credit cycles.
John R. Buran: We use a quantitative model to risk rate our real estate loans. This model has been in use for many years and has proven its value through several credit cycles. The model has four main inputs: property condition, current DCR, current LTV, and long payment history. The DCR and LTV account for 70% of the rating, and the rating cannot be upgraded for any qualitative factors. It can only be downgraded.
John R. Buran: Model has four main inputs property condition current D C. Our current L E D.
John R. Buran: No payment history with.
John R. Buran: The D C O N E D account for 70% of the rating and the rainy cannot be upgraded.
John R. Buran: Qualitative factors it can only be downgrade.
Susan K. Cullen: At year end, the multifamily reserve to critique and classify multifamily loans was 147%, or at the high end of the peer group. At quarter end, this ratio was 73%, which would still put us at the high end of the peer group. Given these metrics, we see limited risk on the horizon. I'll now turn it over to Susan to provide more detail on our other financial metrics. Susan.
John R. Buran: At year end, the multifamily reserves to criticized and classified multifamily loans was 147% were at the high end of the peer group.
John R. Buran: Quarter end this ratio was 73%.
John R. Buran: Which would still put us at the high end of the peer group.
John R. Buran: Given these metrics, we see limited risks on the horizon.
John R. Buran: I'll now turn it over to Susan to provide more detail on our other financial metrics Susan.
Susan K. Cullen: Thank you John Slide nine outlines the net interest income and margin trends the GAAP and core net interest margins declined 23 of 25 basis points respectively.
Susan K. Cullen: Thank you, John. Slide 9 outlines the net interest income and margin trends. The GAAP and CORE net interest margins declined 23 and 25 basis points, respectively, to 2.06% during the first quarter. In the absence of episodic items, the NIM declined 13 base points quarter-over-quarter to 2.01%.
Susan K. Cullen: Oh, 6% during the first quarter.
Susan K. Cullen: Absent the episodic items, the NIM declined 13 basis points quarter over quarter to 2.11%.
Susan K. Cullen: The NIM decrease in the quarter was about 10 basis points from episodic items, CD growth, and repricing, and a seasonal increase in cash. Going forward, the primary factors impacting NIM are loan originations, loan repricing, and CD repricing. While the market determines if rates will remain higher for longer if the federal government begins to cut rates, the long end of the curve has increased. This is Dampened Loan Demand, and we remain committed to our pricing and underwriting standards.
Susan K. Cullen: And then decreased in the quarter was about 10 basis points from episodic items C D growth and repricing and the seasonal increase in cash.
Susan K. Cullen: Going forward the primary factors impacting them as loan originations.
Susan K. Cullen: Pricing and CD repricing.
While the market determines if rates remain higher for longer if the fed will begin to cut rates the long into the curve has increased.
Susan K. Cullen: This is dampened loan demand and we remain committed to our pricing and underwriting standards.
Susan K. Cullen: We did purchase a residential mortgage pool of approximately $50 million of loans towards the end of the quarter, which has helped them in the second quarter along with the continued loan reprice. The timing of the purchase is at the end of the quarter, so the full quarter income benefit will occur in the second quarter.
Susan K. Cullen: We did purchase a residential mortgage pool, approximately $50 million of loans towards the end of the quarter, which will help them in in the second quarter, along with continued loan repricing.
Susan K. Cullen: The timing of the purchase was that the ended the quarter sort of full quarter of income benefit will occur in the second quarter.
Susan K. Cullen: Well the balance sheet is relatively neutral to 100 basis point change in interest rates I wanted to spend a minute to talk about the nuances in the model.
Susan K. Cullen: While the balance sheet is relatively neutral to a 100 basis point change in interest rates, I wanted to spend a minute talking about the nuances in the model. We assume a conservative deposit beta is the model for the reduction of rates, and we expect we will have opportunities to reduce rates faster than what is assumed in the model for certain products. This should lead to minimum expansion, all else being equal.
Susan K. Cullen: We assume a conservative deposit betas in the model for reduction of rates and we expect we will have opportunities to reduce rates faster than what is assumed in the model for certain products.
Susan K. Cullen: This should lead to NIM expansion all else being equal.
Susan K. Cullen: Taking all this into account, we feel the NIM is close to the bottom and should start to expand. Our deposit portfolio is on slide 10. Average deposits increased 4% year-over-year and 3% quarter-over-quarter. The quarterly increase is partially attributable to seasonality and growth in CDs. Average CDs increased 3%, quarter over quarter, to $2.4 billion. Average non-interest-bearing deposits decreased 4%, quarter over quarter. Check-in count openings were down 21% year-over-year as 2023 was elevated due to promotional activity.
Susan K. Cullen: Taking all this into account we feel the NIM is close to the bottom and should start to expand.
Susan K. Cullen: Our deposit portfolio is on slide 10.
Susan K. Cullen: Average deposits increased 4% year over year, and 3% quarter over quarter.
Susan K. Cullen: The quarterly increase was partially attributable to seasonality and close the C. D's average Cds increased 3% quarter over quarter to $4 billion.
Susan K. Cullen: Average non interest bearing deposits decreased 4% quarter over quarter.
Susan K. Cullen: Checking account openings were down 21% year over year, It's 2023 was elevated due to promotional activity.
Susan K. Cullen: Despite these challenges and non interest bearing deposits. This is a focus for all of our product groups as incentive plans are heavily weighted to checking accounts.
Susan K. Cullen: Our loan to deposit ratio has improved to 94% from 102% a year ago.
Susan K. Cullen: Despite these challenges and non-interest-bearing deposits, this is a focus for all of our product groups as incentive plans are heavily weighted to checking accounts. Our loan-to-deposit ratio has improved to 94% from 102% a year ago. Slide 11 provides more detail on our CD portfolio. Total CDs are $2.5 billion, or 35% of total deposits at quarter end. About $1.7 billion of non-swap CDs are expected to mature over the next year at a weighted average rate of 4.56%.
Susan K. Cullen: Slide 11 provides more detail on our CD portfolio.
Susan K. Cullen: Total Cds of $2 $5 billion or 35% total deposits at quarter end.
Susan K. Cullen: About $1 $7 billion of non swap C. D's are expecting mature over the next year at a weighted average rate of 456%.
Susan K. Cullen: Historically, we retained about 80% of the retail Cds that mature.
Susan K. Cullen: Current rates range from three point, something five to $4 two 5%.
Susan K. Cullen: With approximately $450 million of Cds maturing in the second quarter the level of these Cds reprice why they have significant impact on our net interest margin.
The Cds that are repricing in the second half of 'twenty 'twenty four the increase in expected repricing rates should be minimal this should help stabilize our funding costs.
Susan K. Cullen: Slide 12 provides more detail on the contractual repricing the loan portfolio.
Susan K. Cullen: Approximately $1.2 billion or 18% of our loans are replaced short term indices.
Susan K. Cullen: Historically, we retain about 80% of the retail CDs that mature, and our current rates range from 3.75% to 4.25%. With approximately $450 million of CDs maturing in the second quarter, the level at which these CDs reprice will have a significant impact on net interest margins. For CDs that are repricing in the second half of 2024, the increase in expected repricing rates should be minimal.
Susan K. Cullen: Our interest rate hedge position on these loans increased this percentage 25%.
Susan K. Cullen: For the remainder of 'twenty 'twenty four $583 million of loans is due to be priced at 212 basis points higher than the current yield.
These rates are based on the underlying index at March 31, 2024, and it did not consider any future rate moves, including approximately 40 to 50 basis point move in the five year Federal home loan bank rate since the end of the quarter.
Susan K. Cullen: This repricing should drive net interest margin expansion once the funding cost stabilize.
Susan K. Cullen: Slide 13 outlines our interest rate hedging portfolio we.
Susan K. Cullen: One $7 billion interest rate hedge is split between asset hedges of approximately 900 million and funding hedges of $777 million. The combined benefit on these asset yields it's about 24 basis points and benefit on the funding side is about 35 basis points. The portfolio does not have any significant maturities in 2020.
Susan K. Cullen: This should help in stabilizing funding costs. Slide 12 provides more detail on the contractual repricing of the loan portfolio. Approximately $1.2 billion, or 18% of our loans, are repriced to short-term indices. However, our interest rate hedge position on these loans increases this percentage to 25%. For the remainder of 2024, $583 million of loans are due to be priced at 212 basis points higher than the current yield. These rates are based on the underlying index at March 31st, 2024, and I do not consider any future rate moves, including the approximately 40 to 50 basis point move in the five-year federal home loan banker rate since the end of the quarter.
Susan K. Cullen: For these hedges moved the balance sheet to an effective neutral interest rate position was 100 basis point change in rates.
Susan K. Cullen: The interest rate hedges helped mitigate NIM compression from rising wage and provided immediate income.
Susan K. Cullen: Yeah.
Susan K. Cullen: Our capital position as shown on slide 14.
Susan K. Cullen: Book value and tangible book value per share increased year over year.
Susan K. Cullen: Angel common equity ratio decreased by 24 basis points quarter over quarter to seven 4%.
The decline is primarily due to the $300 million increase in securities during the quarter, we purchased $393 million of floating rate securities as we invest it's all about $438 million deposit growth.
Susan K. Cullen: Overall, we view our capital base as a source of strength and a vital component of our conservative balance sheet.
Susan K. Cullen: This repricing should drive net interest margin expansion once funding costs stabilize. Slide 13 outlines our industry hedging portfolio. We have $1.7 billion of industry hedges split between asset hedges of approximately $900 million and funding hedges of $777 million. The combined benefit on these asset yields is about 24 basis points, and the benefit on the funding side is about 35 basis points. The portfolio does not have any significant maturities in 2024.
Susan K. Cullen: On slide 15, we discuss our Asian markets.
Susan K. Cullen: Which account for a third of our branches, we have over $1.3 billion of deposits and 746 million of the loans in these markets.
Susan K. Cullen: These deposits are 18% of our total deposits and while we only have a 3% market share of the $41 billion market. There is substantial room for growth.
Our approach to this market is supported by a multilingual staff, our Asian Advisory Board and support of cultural activities to participation and corporate sponsorships.
Susan K. Cullen: This market continues to be an important opportunity for us and one that we believe will drive our success in the future.
Susan K. Cullen: On Slide 16, you can see community involvement is a key part of our strategy beyond just our Asian franchise as outlined previously during the fourth first quarter, we participated in numerous local events to strengthen our ties to our customer base.
Susan K. Cullen: These hedges moved the balance sheet to an effective neutral interest rate position with a 100 base point change in rate. The interest rate hedges helped mitigate MIM compression from rising rates and provided immediate income. As shown on slide 14, book value and tangible book value per share increased year over year. The Tangible Common Equity Ratio decreased by 24 base points quarter over quarter to 7.4%.
Susan K. Cullen: Recent highlights include the lunar new year parade in Flushing and are very popular lunar new year took bad giveaway.
Susan K. Cullen: It dissipating in these types of initiatives has served us as a great way to further integrate ourselves down in local communities, while driving customer loyalty.
Susan K. Cullen: Slide 17 provides our outlook, where we share a high level perspective on our performance in the current environment.
Susan K. Cullen: We continue to expect stable loan balances.
Susan K. Cullen: And this is typical we expect certain deposits experienced normal seasonality in the winter months and decline in the summer.
Susan K. Cullen: The decline is primarily due to the $300 million increase in securities. During the quarter, we purchased $393 million of floating rate securities as we invested some of our $438 million in deposit growth. Overall, we view our capital base as a source of strength and a vital component of our conservative balance sheet. On slide 15, we discuss our Asian market, which accounts for a third of our branches. We have over $1.3 billion in deposits and $746 million in loans in these markets.
Susan K. Cullen: In terms of them then the two big factors are loan originations and the repricing of Cds.
Susan K. Cullen: We feel the NAV is close to the bottom and should start to expand in the second half of 'twenty 'twenty four.
Non interest income should primarily be driven by the fees earned from back to back swap loan closings.
We expect noninterest expenses to follow normal seasonal patterns with the sequential quarter decline in the second quarter and the full year growth of low to mid single digits remains intact. As this remains one of our top priorities for 2024.
Susan K. Cullen: Well tax rates can fluctuate, we expect a mid twenty's effective tax rate for 'twenty 'twenty four.
Susan K. Cullen: Now I'll turn it back over to John.
John R. Buran: Thank you Susan.
John R. Buran: Turning to slide 18, I wanted to share how we think about long term success and what that means for profitability.
Susan K. Cullen: These deposits are 18% of our total deposits, and while we only have a 3% market share of the $41 billion market, there is substantial room for growth. Our approach to this market is supported by our multilingual staff, our Asian Advisory Board, and support of cultural activities through participation and corporate sponsorship. This market continues to be an important opportunity for us and one that we believe will drive our success in the future.
John R. Buran: Nearly our profitability levels are pressured and this is largely a function of net interest margin.
John R. Buran: The impact on the margin can be separated into areas, we can control and the market impact.
John R. Buran: We control lending spreads on new production and we're working to improve results, we're prepared to sacrifice volume to ensure we're getting favorable spreads.
John R. Buran: Loans will reprice higher through the year according to their contractual terms.
John R. Buran: We're also focused on funding cost because we've taken a harder look at C. D rates and are incentivizing sales of noninterest bearing checking accounts.
John R. Buran: The return of the normal positively sloped yield curve should help widen the spread between our assets and funding yields.
Susan K. Cullen: On slide 16, you can see community involvement as a key part of our strategy beyond just our Asian franchise, as outlined previously. During the first quarter, we participated in numerous local events to strengthen our ties to our customer base. Some of our recent highlights include the Lunar New Year Parade in Flushing and our very popular Lunar New Year Tote Bag Giveaway. Participating in these types of initiatives has served us as a great way to further integrate ourselves with our local communities while driving customer loyalty.
John R. Buran: Despite a neutral balance sheet position and a 100 basis point move in rates a reduction in rates will help reduce pressure on funding costs.
John R. Buran: Have opportunities to shift our funding mix.
John R. Buran: Bending the expense curves one of our four areas of focus and we will continue to evaluate all expenses.
John R. Buran: Lastly, we believe our strong underwriting and conservative risk profile should keep credit costs low.
John R. Buran: Taking all these factors into account, we expect the NIM should trend to 3% plus with a double digit return on average equity over time.
Susan K. Cullen: Slide 17, provides our outlook where we share a high-level perspective on performance in the current environment. We continue to expect stable loan balances. As is typical, we expect certain deposits to experience normal seasonality in the winter months and decline in the summer. In terms of NIM, the two big factors are loan originations and the repricing of CDs. We feel that NIM is close to the bottom and should start to expand in the second half of 2024.
John R. Buran: While we control some of these factors, we need a positively sloped yield curve and a more certain rate environment.
John R. Buran: On slide 19, I'll wrap up our key takeaways.
John R. Buran: We're concentrating on four areas of focus in this environment.
John R. Buran: Looking to increase our NIM and reduce volatility.
John R. Buran: So I can see progress during 2024.
John R. Buran: We're maintaining our credit discipline.
John R. Buran: Our low risk credit profile.
John R. Buran: Capital and liquidity are strong.
John R. Buran: I expect it to remain that way.
Susan K. Cullen: Non-interest income should primarily be driven by the fees earned from back-to-back swap loan closings. We expect non-interest expenses to follow normal seasonal patterns with a sequential quarter decline in the second quarter, and the full year growth of low to mid-single digits remains intact as this remains one of our top priorities for 2024. While tax rates can fluctuate, we expect a mid-20s effective tax rate in 2024. I will now turn it back over to John.
John R. Buran: Lastly, we are looking to ban the expense curve and expect lower expense growth in 2024.
John R. Buran: While the environment remains challenging we are controlling what we can control and setting the foundation for improving profitability over the long term.
Speaker Change: Operator, I'll turn it over to you to open the lines for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at anytime. Your question has been addressed you would like to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our ROI.
John R. Buran: Turning to slide 18, I wanted to share how we think about long-term success and what that means for profitability. Clearly, profitability levels are under pressure, and this is largely a function of net interest margin. The impact on the margin can be separated into areas we control and marketing.
Speaker Change: Foster.
Speaker Change: And your first question will come from Mark Fitzgibbon with Piper Sandler. Please go ahead.
Mark Thomas Fitzgibbon: Hey, guys good morning.
Mark Thomas Fitzgibbon: Good morning Rod.
Mark Thomas Fitzgibbon: Excuse me just to clarify you mentioned you had grown securities this quarter with some of the excess liquidity and I think you had mentioned they were floating rate securities what sort of initial yield our ore Ramos.
John R. Buran: We control lending spreads on new production, and we're working to improve results. We're prepared to sacrifice volume to ensure we're getting favorable spreads. However, loans will be priced higher through the year according to their contractual terms.
Mark Thomas Fitzgibbon: Around 670 <unk>.
Rod: That's well it's floating rate so they have a pretty high coupon right now.
Speaker Change: Okay, Great and then secondly, do you happen to have your March net interest margin.
Speaker Change: Oh, Yeah, yeah yeah.
John R. Buran: We're also focused on funding costs as we've taken a harder look at CD rates and are incentivizing sales of non-interest-bearing checking accounts. The return of a normal, positively sloped yield curve should help widen the spread between our assets and funding yields. Despite our neutral balance sheet position and 100 basis point moving rates, a reduction in rates will help reduce pressure on funding costs, and we will have opportunities to shift the funding mix.
Speaker Change: Obviously, we do I don't have it right.
Speaker Change: Uh huh.
Speaker Change: 205.
Speaker Change: Okay. So am I reading the tea leaves correctly, you're suggesting that you think the margin will be flat in the second quarter and then it starts to expand a little bit in the back half of the year.
Speaker Change: That's that's what we have shown yes.
Speaker Change: Okay.
Speaker Change: And then it's sort of a bigger picture you know I guess I'm curious are you trying to shrink the rent regulated multifamily portfolio is that is that sort of the plan over time.
Speaker Change: Well I think we want we wanted to do there was clearly improved the spreads on that portfolio.
Speaker Change: And we obviously want to be sure that we stick with our long standing.
John R. Buran: Defending the Expense Curve is one of our four areas of focus, and we'll continue to evaluate all expenses. Lastly, we believe our strong underwriting and conservative risk profile should keep credit costs low. Taking all these factors into account, we expect the NIM should trend to 3% plus with a double-digit return on average equity over time. While we control some of these factors, we need a positively sloped yield curve and a more certain rate environment.
Speaker Change: Excellent credit metrics that are in that area so that.
Speaker Change: Clearly this particular quarter as.
Speaker Change: Oh, that's caused us not to not to grow loans significantly at all.
Speaker Change: But.
Speaker Change: We still think it's a.
Speaker Change: We still think it's a viable category. We think we can we will continue to be a lending in that.
Category, but we also want to be sure that we're getting the spreads that makes sense for us and and credit quality that we can count on.
Speaker Change: Okay. John I'm curious I think you have like 246 million of these kinds of loans coming due between now and the end of the year do those borrowers have anywhere else. They can go or is it a situation where all the banks are basically being forced to roll their own paper, because there's nowhere else to go for those borrowers.
John R. Buran: On slide 19, I'll wrap up our key takeaways. We're concentrating on four areas of focus in this environment, looking to increase our NIM and reduce volatility, and we expect to see progress during 2024. We're maintaining our credit discipline and our low-risk credit profile. Capital and liquidity are strong, and they are expected to remain that way. Lastly, we are looking to bend the expense curve and expect lower expense growth in 2024. While the environment remains challenging, we're controlling what we can control and setting the foundation for improving profitability over the long term. Operator, I'll turn it over to you to open the lines for questions. We will now begin the question and answer session.
Speaker Change: So that was a repricing marks not not not maturing.
Speaker Change: Gotcha.
On loans that are maturing them.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: The next question will come from Steve Moss with Raymond James.
Stephen M. Moss: Right right.
Stephen M. Moss: We have an answer for you on maturing off the top of our heads.
Stephen M. Moss: So we havent someplace in the numbers, but I can't recall, what it is what it is at this point.
Stephen M. Moss: Okay.
Stephen M. Moss: And then.
Speaker Change: One other question I guess is.
Speaker Change: Yeah.
Speaker Change: I'm sorry can you hear me.
Speaker Change: Yeah, Yeah, well I think when you look at slide 12 of the presentation, we're showing that we have $580 million worth of bonds to replace an old mature and if you'd like to put it right. The relationship. The what's maturing is a very small number.
Speaker Change: Okay, It's the gray bar if.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Mark Fitzgibbon with Piper Sandler. Please go ahead.
Speaker Change: If you see that.
Speaker Change: Got it. Thank you and then and then one last question if I could.
Speaker Change: You know with the stock trading at about 50% of book value I guess I wonder if it makes sense to grow at all to do any lending.
Speaker Change: And then would it make sense to kind of dramatically shrink the balance sheet a bit.
Speaker Change: Build capital and buy back a lot of stock at these levels.
Speaker Change: So we are we've we have been planning and we've been talking about.
Speaker Change: Pretty much maintaining the the level of.
Speaker Change: Lending in the.
Speaker Change: In the not only the multifamily space with pretty much a pretty much across the board.
Mark Thomas Fitzgibbon: Susan, just to clarify, you mentioned you had grown securities this quarter with some of the excess liquidity, and I think you had mentioned they were floating rate securities. What sort of initial yields are they?
Speaker Change: Banks are continuing to refinance our loans, maybe pricing us being a little bit more aggressive in our.
Speaker Change: And they're in their pricing, but as I said, we're going to stick with our pricing at this point in time.
Susan K. Cullen: LLM is around 670. The floating rates, they have a pretty high coupon right now.
Mark Thomas Fitzgibbon: Okay, great. And then secondly, do you happen to have your March net interest margin?
Speaker Change: We budgeted in order to May.
Speaker Change: Maintain.
Speaker Change: Credit levels throughout this period kind of waiting for a better opportunity to.
Susan K. Cullen: Uh, yeah, yeah, obviously we do. I don't have it right at my, at, uh, 205.
Speaker Change: To grow the loan portfolio. So in this particular quarter for example.
Speaker Change: We put on more some floating rate securities.
Mark Thomas Fitzgibbon: So, am I reading the tea leaves correctly? You're suggesting that you think the margin will be flat in the second quarter and then it starts to expand a little bit in the back half of the year?
Speaker Change: Obviously, it could be available in the event of a.
Speaker Change: In the event of a better market for Lindsay.
Speaker Change: Right I guess I'm, just suggesting if if you think you're going to go from a 2% of our ROE to a double digit Roe.
Susan K. Cullen: That's been our, what we have shown, yes.
Speaker Change: And you can buy the stock back today and have a tangible book value.
Mark Thomas Fitzgibbon: And then it's sort of a bigger picture, you know, I guess I'm curious whether trying to shrink the rent-regulated multifamily portfolio is that sort of the plan over time? Well, I think what we want to do there is clearly improve the spreads on that portfolio. And we obviously want to be sure that we stick with our longstanding excellent credit metrics in that area. So clearly, this particular quarter has caused us not to grow loans significantly at all.
Speaker Change: It is hard to imagine there's any other investment opportunities for a dollar of capital that are better than the buyback.
Speaker Change: It's a valid point.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thanks Mark.
Speaker Change: Question will come from Steve Moss with Raymond James. Please go ahead.
Stephen M. Moss: Good morning.
Stephen M. Moss: Good morning, Steve maybe.
Stephen M. Moss: Morning, maybe on the fee.
Stephen M. Moss: The income side of things just curious here about you know the pay for swap activity and your expectations there for the upcoming quarter or two.
Yeah.
Stephen M. Moss: Our loan pipeline is.
John R. Buran: But we still think it's a viable category, and we think that we will continue to be lending in that category. But we also want to be sure that we're getting spreads that make sense for us and credit quality that we can count on. John, I'm curious. I think you have about 246 million of these kinds of loans coming due between now and the end of the year. Do those borrowers have anywhere else they can go, or is it a situation where all the banks are basically being forced to roll their own paper because there's nowhere else to go for those borrowers?
Stephen M. Moss: Yeah.
Speaker Change: As eyal.
Speaker Change: I'm sorry, my allergies are acting up there about $174 million of which 22% is related to the swap program of the $174 million. So our novel pull through rate is between 70 and 80%. So we would expect that continued pull through rate and.
Speaker Change: Yeah, just straight line everything.
Speaker Change: Okay.
Speaker Change: Okay great.
Speaker Change: Okay.
Speaker Change: So that's helpful. And then in terms of the residential mortgage pool that was purchased late in the quarter what was the yield on that portfolio.
Speaker Change: Well after the discount is about $5 80.
Speaker Change: No.
Speaker Change: Okay.
So that's 35 I'm sorry.
Speaker Change: Yeah.
Mark Thomas Fitzgibbon: So those are repricing marks, not maturing. Gotcha. Well, just on loans that are...
Speaker Change: And with that you know.
Speaker Change: 15 year fixed or 30 year fixed how do we think about the structure.
Mark Thomas Fitzgibbon: Gotcha. Well, just on...
Speaker Change: The adjustables.
Speaker Change: Okay.
Stephen M. Moss: The next question will come from Steve Moss with Raymond James.
Speaker Change: And do you guys anticipate any additional purchases along those lines going forward.
Mark Thomas Fitzgibbon: And then one other question, I guess. Sorry, can you hear me? Yeah, Mark. If you look at slide 12 of the presentation, we're showing that we have $583 million worth of loans to reprice and or mature, and if you look at the number, you know, the relationship, what's maturing is a very small number.
Speaker Change: You know we look at this opportunistically.
Speaker Change: Okay.
Speaker Change: I appreciate that and then in terms of the you know expenses I realize there's a million six of seasonality here.
Speaker Change: So is it fair to assume $38 3 million a good run rate here.
Speaker Change: Yes, it should be you know pull out the one six that would be a good run rate.
Mark Thomas Fitzgibbon: It's the gray bar if you see that.
Speaker Change: Okay perfect.
Mark Thomas Fitzgibbon: Got it. Thank you. And then one last question, if I could. With the stock trading at about 50% of book value, I guess I wonder if it makes sense to grow at all, to do any lending. Would it make sense to kind of dramatically shrink the balance sheet, build capital, and buy back a lot of stock at these levels?
Speaker Change: Most of my questions have been answered here, so I'll step back. Thank you.
Speaker Change: Great. Thank you again.
Mango Novice: The next question will come from Mango novice with D. A Davidson. Please go ahead.
Well Emmanuel good morning Manuel.
Mango Novice: Hey, good morning.
Mango Novice: Any thoughts on if rates stay the same and you start seeing that NIM expansion in the back half of the year what type of pace it would be.
Speaker Change: So I think it's going to be obviously, a gradual pace because what were what were the factors. Obviously are what's happening with loan originations are currently you were talking about the 7% level the seven handle there.
Mark Thomas Fitzgibbon: So we are. We have been planning, and we've been talking about pretty much maintaining the level of
John R. Buran: The Multifamily Station is pretty much across the board. Banks are continuing to refinance our loans, maybe pricing us, being a little bit more aggressive in their pricing, but as I said, we're going to stick with our pricing at this point in time. We budgeted in order to maintain credit levels throughout this period, kind of waiting for a better opportunity to grow the loan portfolio. So in this particular quarter, for example, we put on some floating rate securities that could obviously be available.
Speaker Change: In addition, you have the.
Speaker Change: Loan repricing that we talked about which is around the six 680 plus area.
Speaker Change: And then of course, the CD the CD portfolio.
Speaker Change: Which are some maturities coming in at rates closer to what I'm going to.
Speaker Change: <unk>.
Speaker Change: Retaining Cds at today. So I think those factors are just like for a slower movement in the <unk>.
And the margin and margin improvement absent of course any.
Mark Thomas Fitzgibbon: in the event of a better market for lending. Right. I guess I'm just suggesting if you think you're going to go from a 2% ROE to a double-digit ROE, and you can buy the stock back today at half the tangible book value, it's hard to imagine there are any other investment opportunities for a dollar of capital that are better than the buyback.
Speaker Change: Activity that the fed would do in the second half of the year. So that has no debt.
Speaker Change: The we do expect to see.
Speaker Change: NIM bottoming, even without a change in rates.
Speaker Change: Okay I appreciate that.
Speaker Change: Okay.
Speaker Change: Can you go into any more detail yet on some of the opportunities that you could take advantage out of a set.
Stephen M. Moss: The next question will come from Steve Moss with Raymond James. Please go ahead.
Speaker Change: Some issues with a large competitor in your space.
Speaker Change: Is it already helped trends at all just just kind of late at least some of that out for me. Please.
Stephen M. Moss: [inaudible] Morning. Maybe, you know, on the fee income side of things, I'd be curious about the pace of swap activity and your expectations there for the upcoming quarter or two.
Speaker Change: Well our pipeline has grown month by month since the beginning since the beginning of the year. So we're starting to see some activity already and.
Speaker Change: It's really across the board and what we're bringing on board is really more a function of.
Susan K. Cullen: So, our low pipeline is, you know... I'm sorry, my allergies are acting up today, about $174 million, of which 22% is related to the swap program of $174 million. So our normal pull-through rate is between 70% and 80%, so we would expect that continued pull-through rate, you know, just straight line, everything. Okay. Okay, great.
Our desire as I said earlier to stick with our.
Speaker Change: We're very strict credit.
Speaker Change: Critical criteria.
Speaker Change: While we look for improving yields in the loan portfolio.
Speaker Change: So you would say that some of the loan pipeline has benefited from there. Some of it has some of the deposit growth benefited from this as well.
Speaker Change: Yes, both.
Speaker Change: And then have you seen any talent.
Speaker Change: Shake loose that interest you.
Stephen M. Moss: So that's helpful. And then, in terms of the residential mortgage pool that was purchased late in the quarter, what was the yield on that portfolio?
Speaker Change: We've had we've had limited not as many as are some of our competitors have announced.
Speaker Change: Okay.
Speaker Change: And then with the better deposit growth this quarter.
Susan K. Cullen: After the discount, it is about $5,000.
Speaker Change: Is it going to somewhat slowing from here just because of seasonality next quarter.
Susan K. Cullen: 635, I'm sorry, and we're the, you know, 15-year-old.
Speaker Change: And kind of thoughts on that loan to deposit ratio across the year.
Speaker Change: Yeah. So there is a there is some seasonality built into that timeframe.
Susan K. Cullen: 15-year fixed or 30-year fixed; how do we think about the structure?
Susan K. Cullen: They're adjustable. And do you guys anticipate any additional purchases along those lines going forward? We look at this opportunistically. Appreciate that. And then in terms of the expenses, I realize there's a million six of seasonality here. So, is it fair to assume 38.3 million's a good run right here?
Speaker Change: So we normally expect to see a little bit of a dip in the in the summer months.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Alright, and then I guess just my.
Speaker Change: And my last question is can you just comment on multifamily.
Speaker Change: Policy and how it could impact you that there's a number of issues in the budget going through it they're not finalized just where do you stand on on how that could impact you if at all.
Stephen M. Moss: Yes, it should be, you know, pull out the 1.6. That would be a good run rate. Okay, perfect.
Speaker Change: Well obviously.
Stephen M. Moss: Okay, perfect. Most of my questions have been answered here, so I'll step back. Thank you.
Speaker Change: There's a there's a.
Speaker Change: Our range of of.
Speaker Change: Possibilities there is a yeah, you're talking about some pretty draconian things, which appear to be off the board right. Now so what what is being spoken about is based upon our understanding is a little bit less a little.
Manuel Antonio Navas: The next question will come from Manuel Navas, with D.A. Davidson. Please go ahead. Good morning Manuel. Morning Manuel.
Manuel Antonio Navas: Hey, good morning. Any thoughts on if rates stay the same and you start seeing that NIM expansion in the back half of the year? I think it's going to be obviously a gradual pace because the factors obviously are what's happening with loan originations, and currently, we're talking about the 7% level, the seven handle there.
Speaker Change: Little bit less stressful than the most extreme versions of the of the legislature. This clearly not a lot of detail that we can get into yet until we've been.
Speaker Change: Getting gotten really a full examination of the entire budget and its implications but.
Speaker Change: And at least.
Speaker Change: I think some of the more.
Speaker Change: Dramatic or drastic things have been.
Susan K. Cullen: In addition, you have the...
Susan K. Cullen: The loan repricing that we talked about, which is up around the $680 plus area. And then, of course, the CD portfolio, which has some maturities coming in at rates closer to what we're retaining CDs at today. So I think those factors just make for a slower movement in the margin improvement absent, of course, any activity that the Fed would do in the second half of the year. So that is, you know, that we do expect to see limb bottoming even without a change in rates. Okay, I appreciate that.
Speaker Change: Well, let's take it off the board clearly it looks like they may be watered down so the expectation of a major disaster.
I think is.
Speaker Change: Little bit less less so, but I would reserve judgment until we actually are able to pick apart pick apart all the nuances of the of the.
Speaker Change: Station.
Completely understood. Thank you for the comments.
Speaker Change: Thank you.
Speaker Change: The next question will come from Chris O'connell with K B W. Please go ahead.
Chris O'connell: Hey, good morning.
Chris O'connell: Right.
Chris O'connell: I was hoping you.
You can provide just when the timing of the loan purchases and the securities investments were in the quarter just any sense of you know what you know those additions given the timing.
Manuel Antonio Navas: Can you go into any more detail yet on some of the opportunities that you could take advantage of some issues with a large competitor in your space? Has it already helped trends at all? Just kind of lay some of that out for me.
Chris O'connell: You know the kind of net impact or add to it.
Chris O'connell: Their impact on the <unk> margin.
Chris O'connell: So the loan purchase was late in the late in March.
Chris O'connell: And the bulk of the investments were bought in.
John R. Buran: Well, our pipeline has grown month by month since the beginning of the year, so we're starting to see some activity already, and it's really across the board, and what we're bringing on board is really more a function of our desire, as I said earlier, to stick with our very strict credit and credit criteria while we look for improving yields in the loan portfolio. So would you say that some of the loan pipeline has benefited from this? Has some of the deposit growth benefited from this as well? Yes, well. And then, have you seen any talent?
Chris O'connell: Late February.
Chris O'connell: Through March.
Speaker Change: Got it.
Speaker Change:
Speaker Change: And so is the expectation that you know that their benefit to the margin kind.
Speaker Change: Kind of offsets any lingering you know funding pressures from repricing and into Q.
Speaker Change: Well, you know everything else being equal they would improve the NIM. Since you know they have a 670 or so handle and the funding is still has a three handle so that you know just mathematically, but increase the NIM everything else being equal.
Got it.
Speaker Change:
Speaker Change: Great and then just kind of following up on the general discussion on you know the multifamily market.
John R. Buran: shake loose something that interests you. We've had limited, not as many as some of our competitors have announced. And then with the better deposit growth this quarter, is it going to somewhat slow from here just because of seasonality next quarter? and Kenneth Thompson on the loan to deposit ratio across the year.
Speaker Change: You know it.
Speaker Change: Do you have any kind of additional color as to you know what you're seeing from the borrowers in your market you know, particularly I guess with you know Q1 maturities and repricing and as you guys are you know looking and talking to your borrowers about no repricing set for this year.
Manuel Antonio Navas: Yeah, so there is some seasonality built into that timeframe. So, you know, we normally expect to see a little bit of a dip in the, during the summer months. All right, and I guess just my last question, can you just comment on the multifamily policy, how it could impact you? There's a number of issues in the budget going through; they're not finalized yet. Just where do you stand on how that could impact you, if at all?
Speaker Change: You know where debt service coverage ratios are migrating to and you know.
Speaker Change: You know just how you think about.
Speaker Change: The long term viability are you know.
Speaker Change: You know being in this asset class.
Speaker Change: Well I think the demand for affordable housing in New York, it's not going to.
Speaker Change: Certainly not going to abate in it and I think it is.
Speaker Change: Some of what you would you hear nationally on the on the Green side is associated with some overbuilding, which is clearly not occurring in the in the New York market. So.
Manuel Antonio Navas: Well, obviously, you know, there's a range of possibilities. There's a, you know, you're talking about some pretty draconian things which appear to be off the board right now. So, you know, what is being spoken about, based upon our understanding, is a little bit less, a little bit less stressful than the most extreme versions of the legislation. There's clearly not a lot of detail that we can get into yet until we've gotten really a full examination of the entire budget and its implications, but at least I think some of the more dramatic and drastic things have been, while not taken off the board, clearly, it So the expectation of a major disaster is a little bit less, but I would reserve full judgment until we are actually able to pick apart all the nuances of the legislation.
Speaker Change: With respect to what we're seeing in our portfolio.
Speaker Change: We still see a very solid debt coverage debt coverage ratios we.
Speaker Change: We've seen our.
Speaker Change:
Speaker Change: The.
Speaker Change: The borrowers who moved up in rate or able to are able to accommodate them.
Speaker Change: And you know frankly, we're keeping a very close watch on our customers are reaching out to them.
Speaker Change: 18 months before any any majority so we've got a.
Speaker Change: Very very clear picture of.
Speaker Change: How they would have they would operate under a.
Speaker Change: A more of a rising rate.
Speaker Change: New rising rate environment. So.
Speaker Change: We're seeing some obviously some positive benefits with a.
Speaker Change: 200 basis point, or so jump upward and we're seeing our borrowers able to accommodate that by and large.
Speaker Change: That's great.
Speaker Change: Anything more specific not necessarily exact.
Speaker Change: But as to you know where you've recently seen and kind of you know where you mapped out you know debt service coverage ratios moving to obviously the total portfolio very strong more specifically, referring to kind of you know recent repricing or forward re pricings.
John R. Buran: Completely understood. Thank you for the comment. Thank you.
Chris O'connell: The next question will come from Chris O'Connell with KBW. Please go ahead.
Speaker Change: Yes, I think we had one in a.
Speaker Change: In the deck that we had when you shut down a while ago, where we are.
Speaker Change: Yes, it did.
Chris O'connell: I was hoping that you could provide just when the timing of the loan purchases and the securities investments were in the quarter, just any sense of what those additions, given the timing, would have had the kind of net impact or add to their impact on the 2Q margin. So the loan purchase was late in the...
Speaker Change: Alone the slate is put on the books about a.
Speaker Change: A 200 basis point increase in the.
Speaker Change: In rates. So this was a loan that was in 'twenty than we did in 2019 the at that point in time the debt coverage ratio was $2 28.
Speaker Change: We stress that one when we stress that one up.
Susan K. Cullen: So the loan purchase was late in late March, and the bulk of the investments were bought in late February through March.
Speaker Change: <unk> up 200 basis points and we also stress the operating the operating environment.
Speaker Change: Went down to a $1 41 under a stress scenario and then.
Chris O'connell: And so is the expectation that, you know, their benefit to the margin kind of offsets any lingering funding pressures from repricing in 2Q? Well, they will.
Speaker Change: The repricing took place.
Speaker Change: You know the stressors might have been a little bit more so they came down to a $1 31. So you know when you're starting off with very strong debt coverage ratios. As we are about one 180 <unk> at this point in time across the portfolio you have a fair amount.
Susan K. Cullen: Well, they would, you know, everything else being equal, they would improve the NIM since, you know, they have a 670 or so handle, and our funding is, you know, has a three handle. So that, you know, just mathematically would increase the NIM, everything else being equal.
Speaker Change: Don't have willing to accommodate increases obviously.
Speaker Change: Borrowers or.
Speaker Change: No not necessarily like English and whats happening, but the reality is that we're not seeing any significant veteran detrimental performance on their part based upon our initial underwriting criteria in the stress testing we did at origination.
Chris O'connell: Great. And then just kind of following up on the general discussion on, you know, the multifamily market, you know, Do you have any kind of additional color as to, you know, what you're seeing from, you know, the borrowers in your market, you know, particularly, I guess, with, you know, Q1 maturities and repricing, and as you guys are, you know, looking and, you know, talking to your borrowers about, you know, repricing set for this year and, you know, where debt service coverage ratios are migrating to and, you know, just how you think about, you know, the long-term viability, you know, you know, being in this asset class.
Speaker Change: It seems to have held up helps us.
Speaker Change: That's great color. Thank you.
Speaker Change:
Speaker Change: And thinking about you know more strategically longer term.
Speaker Change: As you guys you know get towards the end of 'twenty 'twenty four.
Speaker Change: Any thoughts around you know balance sheet and you know overall loan growth as you move into you know 2025.
Speaker Change: Well, we hope 2025 is a better environment in 2024, and we'll be happy to talk about that.
Speaker Change: When we see it.
Speaker Change: We're going to maintain our pricing discipline so yeah.
John R. Buran: I think the demand for
Speaker Change: Depending on what's happening with rates and what the borrowers appetites are they're still sitting on the sidelines they seem to be doing a little bit today, yeah that will obviously influence growth into 'twenty five.
John R. Buran: Affordable housing in New York is certainly not going to abate, and I think some of what you hear nationally on the Greece side is associated with some overbuilding, which is clearly not occurring in the New York market. So with respect to what we're seeing in our portfolio, we're still seeing very solid debt.
Speaker Change: Great I appreciate the time thank you.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session.
Speaker Change: Like to turn the conference back over to Mr. John Buran for any closing remarks. Please go ahead.
John R. Buran: Thank you operator, and thank you all for attending our first quarter first quarter presentation, and everybody have a great rest of the day.
John R. Buran: The borrowers who moved up in rates are able to, um, are able to...
John R. Buran: will accommodate.
Chris O'connell: And, you know, frankly, we're keeping a very close watch on our customers, reaching out to them 18 months before any maturity. So we've got a very, very clear picture of how they would operate under a more of a rising rate, a new rising rate environment. So we're seeing some, obviously, some positive benefits with a 200 basis point or so jump upward, and we're seeing our borrowers able to accommodate that, by and large.
John R. Buran: I know what my.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: Yeah.
Speaker Change: [music].
Chris O'connell: That's great. Anything, you know, more specific, not, you know, necessarily exact, but as to, you know, where you've recently seen and kind of, you know, where you've mapped out, you know, debt service coverage ratios, moving to, obviously, the total portfolio very strong, or specifically referring to, you know, recent repricing or forward repricing.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
John R. Buran: Yeah, I think we had one on a deck that we...
John R. Buran: We sent out a while ago where we projected when the loan was put on the books about a 200 basis point increase in rate. So this was a loan that we did in 2019.
John R. Buran: At that point in time, the debt coverage ratio was 228. We stressed that one, and we stressed that one by 200 basis points, and we also stressed the operating environment. That went down to 141 under a stress scenario. And then when the repricing took place, the stressors might have been a little bit more, so that went down to 131.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
John R. Buran: So when you're starting off with very strong debt coverage ratios, as we are at about 180 at this point in time across the portfolio, you have a fair amount of room to accommodate increases. Obviously, you know, borrowers are not necessarily liking what's happening, but the reality is that we're not seeing any significant detrimental performance on their part based upon our initial underwriting criteria and the stress testing we did at origination. And that seems to have held fast.
John R. Buran: That's a great caller, thank you. In thinking about, you know, more strategically in the longer term, as you guys get towards the end of 2024, any thoughts around, you know, the balance sheet and, you know, overall loan growth as you move into, you know, 2025? Well, we hope 2025 is a better environment than 2024 and we'll be happy to talk about that when we see it.
Chris O'connell: We're going to maintain our pricing discipline, though, so depending on what's happening with rates and what the borrower's appetites are, they're still sitting on the sidelines like they seem to be doing a little bit today. That will obviously influence growth into 2025.
Chris O'connell: Great. I appreciate the time. Thank you.
Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. John Buran for any closing remarks. Please go ahead.
John R. Buran: Thank you, Operator, and thank you all for attending our first...
John R. Buran: our first quarter presentation, and everybody have a great rest of the day. Thank you. Bye now.
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