Q1 2024 Dime Community Bancshares Inc Earnings Call
Okay.
Operator: Good day, and thank you for standing by. Welcome to the Dime Community Bancshares First Quarter Earnings Call.
Good day, and thank you for standing by welcome.
To that time community Bancshares first quarter earnings call at.
Operator: At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stuart Lubow, President and CEO. Please go ahead.
Speaker Change: At this time, all participants are in listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising your hand is grace.
Speaker Change: Your question. Please press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Stuart Lebow, President and CEO. Please go ahead.
Stuart H. Lubow: Thank you, Marvin, and thank you all for joining us this morning for our first quarter earnings call. With me today is Avi Reddy, our CFO. Dime has begun 2024 on solid footing and on a positive growth trajectory. In the first quarter, we grew core deposits by 19% on an annual basis and paid down our federal home loan bank borrowings by 41%. Maintain solid asset quality, increase our risk-based capital ratios, prudently manage expenses, and importantly, saw our net interest margin expand in the month of March versus year-end and January levels.
Stuart H. Lubow: Thank you Marvin and thank you all for joining US this morning for our first quarter earnings call with me today is Avi Reddy, our CFO.
Stuart H. Lubow: <unk> begun 2024 on solid footing and on a positive growth trajectory in the first quarter. We grew core deposits by 19% on an annual basis paid down our federal home loan bank borrowings by 41%.
Stuart H. Lubow: Maintain solid asset quality increase our risk risk based capital ratios.
Stuart H. Lubow: We didn't lean managed expenses and importantly saw a net interest margin expand in the month of March versus year end and January levels.
Stuart H. Lubow: We have been active on the hiring front, and since the middle of March, we have added over 30 extremely talented revenue-producing bankers. I would like to provide some color on why these bankers joined Dime. As you know, the first group of bankers we hired in 2023 have been very strong advocates of Dime and have spread the word that Dime is the premier platform for talented bankers. They have seen firsthand how nimble we are as a bank, how our staff is aligned to make the customer experience outstanding, and how flat our organizational structure is. The bankers hired in 2023 have grown their deposit portfolios to approximately $600 million.
Stuart H. Lubow: We have been active on the hiring front and since the middle of March we've added over 30 extremely talented revenue producing bankers I would.
Stuart H. Lubow: I'd like to provide some color on why these bankers joined dine.
Stuart H. Lubow: As you know the first group of bankers, we hired in 2023 have been very strong advocates a dime and have gotten the word out of diamonds to premier platform platform for talented bankers.
They have seen firsthand how nimble we are as a bank our staff is aligned to make the customer experience outstanding.
Stuart H. Lubow: And how flatter organizational structure is.
Stuart H. Lubow: The bankers hired in 2023 have grown their deposit portfolios to approximately $600 million.
Stuart H. Lubow: Suffice to say, we believe that our business model provides a conducive environment for talented bankers to succeed. Secondly, our technology and treasury management systems are state-of-the-art and superior to all other local banks. We know this because all the groups that we recruited in 2024 did detailed demos of our systems, and to a person, they were all significantly impressed.
Stuart H. Lubow: Nice to say, we have proved that our business model provides a conducive environment for talented bankers to succeed.
Stuart H. Lubow: Secondly, our technology and Treasury management systems are state of the art is superior to all other local banks. We know this because all the groups that we recruited in 2024 detail did detailed demos of our systems and due to a person. They were all significantly impressed and our feedback from new customers has been outstanding.
Stuart H. Lubow: And our feedback from new customers has been outstanding. Finally, Dime's brand name and reputation in our local market are second to none. We have 60 branches from Montauk to Manhattan, and our reputation has always been that of a strong community bank. Customers like working with strong community banks where they have access to decision makers and get things done quickly. Four of the deposit groups that we hired are based in Brooklyn, and one is based in the Five Towns area of Nassau County.
Stuart H. Lubow: Finally dies brand name and reputation of our local market is second to none we have 60 branches for montage to Manhattan. Our reputation has always been that have a strong community bank.
Stuart H. Lubow: Customers like working with striking to me banks, where they have access to decision makers and get things done quickly for the deposit groups that we hired are based in Brooklyn. One is based in the five towns area of Nassau County, We're also very excited to enter Westchester County, specifically White Plains Westchester Ism.
Stuart H. Lubow: We're also very excited to enter West Chester County, specifically White Plains. West Chester is a market we've looked at for a long time, and we finally found the right bank to lead our effort. In the first quarter, we closed the first health care loan in our new vertical.
Stuart H. Lubow: Market, we've looked at for a long time and we finally found the right back to lead our efforts here in the first quarter, we close the first health care loan or a new vertical or health care team is actively in the market at the moment.
Stuart H. Lubow: Our healthcare team is actively in the market at the moment, and our pipeline is robust at $150 million with a weighted average yield of 8%. We expect this vertical to contribute to our overall loan growth and aid in the diversification of our balance sheet. As I mentioned in our prior earnings call, this is an important component of our strategic plan. In summary, I am pleased that the investments that we put into the business in 2023 are starting to pay off, and I am very optimistic about the hires we have just announced. Dime has been navigating the macro environment well and will continue to do so, while simultaneously playing strategic offense and taking advantage of the opportunities on our market. With that, I will turn it over to Avi. Thank you, Stu.
Stuart H. Lubow: Health care.
Stuart H. Lubow: Pipeline is robust at $150 million with a weighted average yield of eight 8%.
Stuart H. Lubow: We expect this vertical to contribute to our overall loan growth and eight and the diversification of our balance sheet.
Stuart H. Lubow: As I mentioned in our prior earnings call. This is an important component of our strategic plan.
Stuart H. Lubow: In summary, I am pleased that the investments that we've put into visits into the business in 2023 are starting to pay off and I'm very optimistic about the hires we have just announced.
Stuart H. Lubow: China has been navigating the macro environment well it will simultaneously, while simultaneously playing strategic office offense and taking advantage of the opportunities in our market.
Stuart H. Lubow: With that I will turn it over to Avi.
Avinash Reddy: Thank you, Stu. The reported EPS was $0.41 per share. In line with our expectations, the NIM bottomed in January and expanded to $2.23 in the month of March. The exit NIM would have been even higher by around three basis points had we not carried some excess liquidity in February and March as a precaution given the disruption caused by a large regional bank in our footprint. We normalized our liquidity position towards the middle to the end of March, and as such, the second quarter should not have this liquidity-related drag going forward.
Avinash Reddy: Thank you Stu reported EPS was <unk> 41 per share in line with our expectations. The NIM bottomed in January and expanded to $2 23 in the month of March the exit NIM would have been even higher by around three basis points had we not carrying some excess liquidity in February and March as a precaution given the disruption.
Avinash Reddy: It's been a large regional bank in our footprint.
Avinash Reddy: We normalized our liquidity position towards the middle to the end of March and as such the second quarter should not have this liquidity related drag going forward.
Avinash Reddy: We are cognizant of the overall environment and continue to manage expenses prudently. Our focus is on being as efficient as possible. Core cash operating expenses for the first quarter, excluding intangible amortization and extinguishment of debt, were 51.7 million, or down 3% versus the prior quarter. Non-interest income for the first quarter was $10.5 million.
Avinash Reddy: We are cognizant of the overall environment and continue to manage expenses prudently.
Avinash Reddy: <unk> is on being as efficient as possible core cash operating expenses for the first quarter, excluding intangible amortization and extinguishment of debt was $51 7 million or down 3% versus the prior quarter.
Avinash Reddy: Noninterest income for the first quarter was $10 5 million. This included a gain on the sale of a branch that we did a sale leaseback on.
Avinash Reddy: This included a gain on the sale of a branch that we did a sale lease back on. We had a $5 million loan loss provision this quarter. The allowance to loans increased to 71 basis points. In light of the overall environment, our posture as it relates to the balance sheet is to build capital methodically. This will, in turn, support our clients when they need it. Our common equity tier one ratio improved to 10%, which is an optically important benchmark in our minds. Our reported total capital ratio was 13.8%. However, incorporating the full impact of AOCI, it would have been 13%.
Avinash Reddy: We had a $5 million loan loss provision this quarter the allowance to loans increased to 71 basis points.
Avinash Reddy: In light of the overall environment, our posture as it relates to the balance sheet is to build capital and methodically.
Avinash Reddy: This will in turn support our clients when they need it.
Avinash Reddy: Common equity tier one ratio improved to 10%, which is an optically important benchmark in our mind.
Avinash Reddy: Our reported total capital ratio was 13, 8%.
Avinash Reddy: Operating the full impact of LCI it would've been 13%.
Avinash Reddy: As you know, the focus these days is on capital with the AOCI impact, and in this regard, compared to banks between $10 and $100 billion of assets, our total capital ratio, inclusive of AOCI, of 13%, would put us in the top third of our peers. Next, I'll provide some updated thoughts on our expense guide for 2024. For those who follow Dime closely, in 2023, we were able to absorb the cost of the new deposit gathering groups into our organization, along with the addition of various corporate staff to support them by rationalizing expenses across the organization.
Avinash Reddy: In all the focus these days is on capital with the OCI impact and in this regard compared to banks between 10 and $100 million of assets. Our total capital ratio inclusive of Aoc IL, 13% would put us in the top third of our peers.
Speaker Change: Next I'll provide some updated thoughts on our expense guide for 2024.
Speaker Change: For those who followed US closely in 2023, we were able to absorb the cost of the new deposit gathering groups into our organization along with the addition of various carpet stopped to support them by rationalizing expenses across the organization.
Avinash Reddy: As part of our 2023 efforts, we significantly expanded our treasury management and back office staff and intentionally built the bank for future expansion. As a result, we don't expect any meaningful additional staffing in corporate support areas to support the new hires we have made in 2024. Said differently, any expense bill in 2024 is primarily for revenue-generating staff that is expected to pay for itself relatively quickly. At the start of the year, we had guided to a range of $210 to $212 million of core non-interest expense x intangible amortization. We are now increasing the guide to a range of 214 to 216 million.
As part of our 2023 efforts, we significantly expanded our treasury management and back office staff and intentionally built the bank for future expansion.
Speaker Change: As a result, we don't expect any meaningful additional staffing and corporate support areas to support the new hires we have made in 2024 seven.
Speaker Change: Said differently any expense build in 2024 is primarily for revenue generating staff that is expected to pay for itself relatively quickly at.
At the start of the year, we had guided to a range of $210 million to $212 million of core noninterest expense X intangible amortization.
Speaker Change: We are now increasing the guide to a range of $214 million to $216 million.
Avinash Reddy: This represents the cost of all the new groups hired to date and is net of the benefits of additional bank-wide efficiency initiatives we have planned for 2024. On a standalone gross basis, we expect the new group hires to begin generating pre-tax income by the third quarter and be cumulatively break-even inclusive of all the startup costs in the fourth quarter. Starting in 2025, they will contribute to growth in earnings and book value per share versus our prior stand-alone numbers without the 2024 new hire.
Speaker Change: This represents the cost of all the new groups higher to date and is net of the benefits of additional bank wide efficiency initiatives, we have planned for 2024.
Speaker Change: On a standalone gross basis, we expect the new group hires to begin generating pre tax income by the third quarter and cumulatively breakeven inclusive of all the startup costs in the fourth quarter.
Speaker Change: Starting in 2025, they will contribute to growth in earnings and book value per share versus our prior standalone numbers without the 2020 for new hires.
Avinash Reddy: With respect to our positioning on lending, our strategy is to ensure we continue to support our key clients, and we continue to see growth in our business lending portfolio. Growth in the business lending portfolio will offset declines in multi-family lending while we are still servicing existing relationships. On an aggregate basis, we expect loans year-over-year to be up in the low single digits. With that, I'll turn the call back to Marvin, and we'll be happy to take your questions.
Speaker Change: With respect to our positioning on lending strategies to ensure we continue to support our key clients and we continue to see growth in our business lending portfolio.
Speaker Change: Growth in the business portfolio will offset declines in multifamily inquiry, while we are still servicing existing relationships.
On an aggregate basis, we expect loan year over year to be up in the low single digits.
With that I'll turn the call back to Marvin and we'll be happy to take your questions.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Steve Moss of Raymond James. Your line is now open.
Marvin: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Marvin: Our first question comes from the line of Steve Moss of Raymond James Your line is now open.
Stephen M. Moss: Hi, good morning.
Stephen M. Moss: Hey, Stu. You know, maybe just starting with the new hires here from Signature, just, you know, curious if you could size up the deposit potential and any specialties with the group.
Stephen M. Moss: Hi, Steve.
Stephen M. Moss: It's due.
Stephen M. Moss: Maybe just starting with the new hires here from signature.
Stephen M. Moss: Curious if you could size up feed.
Stephen M. Moss: The deposit potential and any special specialties with the group.
Stuart H. Lubow: Yeah, sure, Steve, I'll take that to start with. I mean, the groups, as we said in our press release when we put it out, have managed several billion dollars of deposits recently. The groups really fit with our existing business model, very plain vanilla, community commercial banking. Four of the groups are based in Brooklyn, where we have an existing branch presence. One of them is based in the Five Towns area, and then the last one is in Westchester.
Stephen M. Moss: Yeah, sure, Steve I'll take that stock with I.
Speaker Change: I mean, the groups as we said in our press release, when we put it out more.
Speaker Change: Most recently the amount of several billion dollars of deposits.
Speaker Change: The group clearly fit with our existing business model very plain vanilla community commercial banking.
Speaker Change: Four of the groups are based in Brooklyn, where we have an existing branch presence one of them is based on the five towns area and then the last one is in Westchester.
Stuart H. Lubow: The groups, in general, are slightly bigger than the groups we hired last year. The teams are generally between four and six people, which is more than what we had last year. I think we laid out the groups last year at around $600 million in deposits. Our expectations for these groups are higher than that, given their books of business, as well as given the size of these groups, as well as some of the improvements that we made over the course of the year in terms of our technology, our platforms, and our operations. So they're really going to start hitting the ground running here in the first quarter onwards.
Speaker Change: The groups in general are slightly bigger than the groups. We hired last year. So the teams are generally you know between four and six people, which is higher than what we had last year. So I think we've laid out.
Speaker Change: The group's lofty around $600 million of deposits are.
Speaker Change: Expectations for these groups ought to be higher than that given that book of business as well as you know given the size of these type of these groups as well as you know some of the improvements that we made over the course of the year in terms of you know our technology our platforms. Our operations. So they are really going to start hitting the ground running here in the first quarter onwards, just as some in terms of.
Stuart H. Lubow: Just in terms of some context, last year the groups we hired were managing about $1.1 billion in deposits. And if you recall, I said at that time if we got to 50%, I thought it would be a home run in terms of what they brought over. They're currently at $600 million.
Speaker Change: Some context last year the groups, we hired had about it.
Speaker Change: We're managing about 1 billion won in.
Speaker Change: And deposits and if you recall I said at that time, if we if we got to 50% I thought it would be a homerun in terms of.
What.
Speaker Change: What over and Theyre currently at $600 million.
Stuart H. Lubow: So we're excited about the new hires. I will say in the first three weeks of their coming on board, we've opened up over 1,000 accounts for the groups in total, and we are very active. We have people working weekends opening accounts. So we're excited by the opportunity, and we're very positive that they're going to be successful, which will accrue greatly to our benefit.
Speaker Change: So.
Speaker Change: We're excited about the new hires I will say in the first.
Speaker Change: Three weeks of their coming on board.
Speaker Change: Opened up over 1000 accounts for the groups.
Speaker Change: In total in very active we have people working weekends opening accounts. So we.
Speaker Change: We're excited by the opportunity and you know were very positive.
This is going to occur.
Speaker Change: <unk> greatly to our benefit.
Stuart H. Lubow: Okay, appreciate that. And so just as we think about the deposits coming on here, you know, I hear you guys in the press release highlighting that it starts to be core funded here. Should we expect a similar type of cost of funds for the deposits coming on like last year's group?
Speaker Change: Okay.
Speaker Change: And so just as we think about the deposits coming on here.
Speaker Change: I hear you guys in the press release, highlighting that you expect to be core funded here.
Speaker Change: Should we expect a similar type of cost of funds for.
Stuart H. Lubow: Yeah, I mean, they pretty much had a very similar book in terms of, you know, a very high percentage of DDA. Obviously, the rate environment is, you know, even more competitive at this point, you know, given the Fed's posture, but our focus is really on, you know, core deposits, low-cost deposits, and as you said, Steve, the plan over the next six to twelve months is to use that to continue to pay down FHLB and broker deposits and really drive NIM expansion through that going forward.
Speaker Change: The deposits come on like the like last year's groups.
Speaker Change: Yes, I mean, they pretty much had a very similar bulk in terms of being a very high percentage of DDA. Obviously the rate environment is even more competitive at this point given the.
Speaker Change: The fed's posture, but our focus is really on core deposits low cost deposits and as he said Steve.
Speaker Change: The plan over the next six to 12 months of use that to continue to pay down <unk> and broker deposits and really drive NIM expansion through that going forward.
Stuart H. Lubow: And then just in terms of the loan pipeline here, here in the health care vertical, but just in aggregate, just curious, what's the size of the total pipeline and kind of how you're thinking about that?
Okay.
Speaker Change: And then just in terms of the loan pipeline here.
Speaker Change: Hear you on the health care vertical, but just in aggregate just curious.
Speaker Change: What's the size of the total pipeline and kind of.
Stuart H. Lubow: All right, so you know today it's 1.1 billion dollars with an average yield of 814 in C&I and Owner-Occupied Cree. It's...
Speaker Change: How are you thinking about that.
Speaker Change: Alright, so today, it's $1 1 billion.
Speaker Change: Billion weighted.
Speaker Change: Weighted average yield of eight $8 14.
Speaker Change: In C&I and owner occupied Cree it's.
Stuart H. Lubow: It's over $600 million, and as I mentioned, healthcare is approaching – actually, today, it's a little higher, almost $180 million. And then, you know, the important thing is, and the other thing I want to mention is we have approximately $200 million, $206 million, approved and waiting to close that we expect to close in the next 30 to 90 days. So we think the next several months are going to be very busy in terms of new loan bookings.
Speaker Change: It's over.
Speaker Change: $600 million.
Speaker Change: And as I as I mentioned.
Speaker Change: The health care is approaching.
Speaker Change: Today is a little higher almost $180 million, but.
Speaker Change: <unk>.
Speaker Change: And then.
Speaker Change: The important thing is.
Speaker Change: The other thing I want to mention is we have approximately $201 million $206 million approved waiting to close that we expect to close in the next.
Speaker Change: 30 to 90 days, so we think the next.
Speaker Change: Several months are going to be very busy in terms of.
Stuart H. Lubow: And so the pipeline is active. We are seeing, you know, some nice new activity coming in. As we announced earlier this month, we did hire two middle market bankers from another institution, who already have some deals in the pipeline as well, and they're primarily C&I lenders. We are seeing demand pick up and activity pick up, and our pipeline is pretty robust.
Speaker Change: New loan bookings and so the pipeline is active we are seeing you know some some nice new activity coming in.
Speaker Change: As we announced earlier this month, we did hire two middle market bankers from another institution.
Speaker Change: Who who already have some deals in the pipeline as well.
C&I lenders.
Speaker Change: So.
Speaker Change: We are we are seeing demand pick up and activity pick up and our pipeline is pretty robust.
Stuart H. Lubow: Appreciate that. And maybe just one last one here. I'm just curious about the NPA. The NPA looks like maybe just one NPA in A, D, and C. Just curious as to the dynamics of that property and any color you can give there.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: I appreciate that and maybe just one last one here.
Speaker Change: Just curious on the.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: The NPA it looks like maybe just one NPA and AT&T.
Speaker Change: Just curious as to the dynamics with that property.
Speaker Change: Any color you can give there.
Stuart H. Lubow: Yes, Steve, we actually did a reappraisal on that, and you know, very, very well secured from a collateral perspective. A couple of tenants that are going to be moving in.
Speaker Change: Yes, Steve we exited a reappraisal on that and you know very very well secured from a collateral perspective, a couple of tenants that are going to be moving in.
Stuart H. Lubow: So we don't expect any lost content at all. But just from an accounting standpoint, we conservatively moved it into NPA. You know, we hope to get it resolved in the second quarter or third quarter, but we don't see any lost content.
Speaker Change: To that so we don't expect any loss content at all but just from an accounting standpoint, we conservatively moved it into NPA, we hope to get resolved in the second quarter or third quarter, but don't see any loss content there at all.
Stuart H. Lubow: Okay, so maybe just to clarify, is it just kind of like a timing issue with completion and rent, or, you know? The building is complete, 100% complete.
Stephen M. Moss: Okay, maybe just to clarify is it just kind of like a timing issue with completion.
Stephen M. Moss: Sure.
Stephen M. Moss: The building is completely 100% complete.
Stuart H. Lubow: It's tentative with a significant medical facility. They're doing – they're going to be doing their build-out. The rent starts, you know, this month.
Stephen M. Moss: It's tentative with a significant medical facility.
Stephen M. Moss: Theyre doing theyre going to be doing their build out the rent starts.
Stephen M. Moss: No.
Stuart H. Lubow: So – and, you know, we've got an updated evaluation, and we're pretty comfortable that, you know, this is going to be resolved in the second quarter. Okay. Appreciate it. I'll call her. I'll step back. Thanks. Thank you.
Stephen M. Moss: This month so.
Stephen M. Moss: We've got an updated evaluation and we're pretty comfortable that the.
Stephen M. Moss: This is going to be resolved in the second quarter.
Stephen M. Moss: Okay.
Speaker Change: Appreciate all color I'll step back thanks.
Speaker Change: Thanks, Steve.
Speaker Change: Thank you one woman for next question.
Operator: Our next question comes from the line of Mark Fitzgibbon of Piper Sandler. Your line is now open.
Speaker Change: Our next question comes from the line of Mark Fitzgibbon of Piper Sandler Your line is now open.
Mark Thomas Fitzgibbon: Hey guys, this is Greg Zagone stepping in for Mark at the moment. How are you? Hey Greg, how are you? The new expense guide includes the new teams hired to date, but how many more hirings can we expect this year?
Speaker Change: Hey, guys. This is Greg <unk> stepping in for Mark at the moment how are you.
Speaker Change: Hey, Greg how are you.
Greg: The new expense guidance includes the new teams hired to date, but how many more hiring can we expect this year.
Stuart H. Lubow: So we're still talking to several teams, and we probably expect an announcement from at least one more team relatively soon. And we'll continue to have conversations and take advantage of opportunities. The disruption in the marketplace has never been so great here in the New York metropolitan area. It takes time. We've interviewed a number of teams that are available, and so I don't expect at this point to double what we have per se, but there are still conversations happening, and opportunities, we believe, will benefit us.
Greg: So we're still talking to several teams.
We probably expect.
Speaker Change: Announcement of at least one more team relatively soon.
Speaker Change: And we will continue to have conversations.
Speaker Change: And you know take advantage of opportunities you know there's disruption in the marketplace has never been so great.
Speaker Change: Here in the New York Metropolitan area, but.
Speaker Change: You know it takes time, we've interviewed a number of teams so within.
Speaker Change: That are available and so.
Speaker Change: I don't expect at this point.
Speaker Change: You know to double what we have per se, but there are still conversations happening and opportunities. We believe it will benefit us.
Stuart H. Lubow: So depending on how many teams you bring on board for the remainder of the year, could that $214 million to $216 million in expenses kind of trickle up a little higher?
Speaker Change: So depending on how many teams you bring on board the remainder of the year could that Q $14 million to $16 million in expenses kind of trickle up a little higher.
Avinash Reddy: Yeah, but Greg, I think the way to look at it is, you know, these groups are producing revenue, right? So that was my initial comment, that on a cumulative basis, we expect the groups to be break-even in 2024. So when you're thinking about your model going forward, it's really accretive starting in 2025 with no, you know, deterioration in 2024 from an EPS perspective.
Speaker Change: Yes, Greg I think the way to look at it is these groups are producing revenue rate. So that was my initial comment that on accumulative basis, we expect the group to be breakeven in 2024, so when you're thinking about your model going forward, it's really accretive starting in 2025 with no debt.
Speaker Change: Generation in 2024 from an EPS perspective, as I said also we're not really adding any we don't really need to add any additional support staff with them because we built the company for growth. So.
Avinash Reddy: As I said, also, we're not really adding any, you know; we don't really need to add any additional support staff with them because we, you know, built the company out for growth. So look, we're always judicious on expenses. We're telling you where we are right now based on, you know, who's joined the company right now. And in the future, you know, we always look to hire productive people. So, you know, we'll keep you updated as we go along.
Speaker Change: Look we're always judicious on expenses, we're telling you where we are right now based on who has joined the company right now.
Speaker Change: And in the future, we always look to hire productive people. So we'll keep you updated as we go along.
Avinash Reddy: With all the people you're bringing on board and your expectation of accelerated balance sheet growth, do you anticipate needing additional capital in the near future?
Speaker Change: Okay.
Speaker Change: With all the people you are bringing on board and your expectation for accelerated balance sheet growth do you envision needing additional capital in the near future.
Avinash Reddy: The plan right now is really to remix the balance sheet with what we have. We have around $700 million of FHLB on the balance sheet. Our broker deposits, while a lot lower than a lot of our local peers, are probably around $750, plus or minus.
Speaker Change: Yeah look I mean, the plan right now is really to remix the balance sheet.
Speaker Change: What we have we have around $700 million of that <unk> on the balance sheet, our broker deposits while in a lot lower than that than you know a lot of our local peers is probably around $7 50, plus or minus so we.
Avinash Reddy: So we really have a pathway there to remix the balance sheet by paying off some of these items. Obviously, supporting our clients is the most important. We said multiple times on the investor career and multifamily side that we expect those to pay down slowly over time. So you're going to get some cash flows out of that, and we're going to grow the business portfolio. So I think with the groups that we have right now, we're confident that we can remix the balance sheet.
Speaker Change: I only have a pathway there to remix the balance sheet by paying off some of these items, obviously and are supporting our clients is the most important we said multiple times and on the Investor Korean multifamily side, we expect those to pay down slowly over time, so you're going to get some cash flows out of that and we're going to grow the business portfolio. So I think with the groups that we have.
Speaker Change: Right now we know we're confident that we can remix the balance sheet.
Avinash Reddy: And our capital is very strong. Our common equity tier one ratio is 10%. Like I said, our total capital ratio is 13.8. Even with the impact of AOC, it's 13. So we feel pretty good about the remixing story and supporting our clients with our existing capital.
Speaker Change: Our capital is very strong our common equity tier one ratio was 10% like I said, our total capital ratio was $13 eight.
Speaker Change: Even with the impact of <unk>, So we feel pretty good about the the Remixing story and supporting our clients.
Avinash Reddy: Thank you guys so much. Thank you. One moment for our next question.
Speaker Change: With our existing capital base.
Speaker Change: Alright, Thank you guys so much.
Speaker Change: Okay.
Speaker Change: Thank you one moment for our next question.
Operator: Our next question comes from the line of Manuel Navas of D.A. Davidson & Co. Your line is now open.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Manuel Menendez.
Manuel Antonio Navas: Davidson <unk> co. Your line is now open.
Manuel Antonio Navas: Hey, good morning. Could you guys speak a little bit about your comfort level around the reserve level of around 71 basis points? Should we kind of expect a methodical build from here?
Manuel Antonio Navas: Hey, good morning could you guys speak a little bit on your comfort around the reserve level around 71 basis points should we kind of expect a methodical builds from here.
Stuart H. Lubow: Manuel, we're comfortable. Otherwise, we wouldn't be reporting earnings where we are. So we're comfortable.
Manuel Antonio Navas: Now we're comfortable otherwise we won't be reporting earnings where we are.
Speaker Change: We're comfortable.
Stuart H. Lubow: Okay, how have repricings gone year-to-date across either multi-family or any other CCBs?
Speaker Change: Okay.
Speaker Change: How have repricing has gone year to date across either multifamily or any other.
Stuart H. Lubow: We've had no issues. Loans have been repriced. I will say our criticized and classified is actually down 9% on a year-to-date basis. We're probably down around $5 to $10 million on the pre- and multifamily side, and probably down around $30 to $35 million on the owner-occupied side. So I'd say overall, it's business as usual. As we've always said in the past, we don't have a lot of maturities and repricings in 2024 and 2025, and we're not really seeing anything unusual at this point.
Hi.
Speaker Change: CRE loan.
Speaker Change: Yes, we've had no issues.
Speaker Change: <unk>.
Speaker Change: I will say our criticized and classified is actually down 9% on a year to date basis.
Speaker Change: It's probably down around $5 million to $10 million on the tree and multifamily side, and probably down around $30 million to $35 million on the owner occupied side. So.
Speaker Change: I'd say overall, it's business as usual.
Speaker Change: As we've always said in the past, we don't have a lot of maturities and repricing in 2024 and 2025.
Speaker Change: And we're not really seeing anything unusual at this point.
Speaker Change: Great.
Avinash Reddy: As you think about the balance sheet remixing, kind of shifting over to the NIM, it seems to be improving on a monthly basis. But can that kind of improved pace continue in the near term?
Speaker Change: Okay.
Speaker Change: As you think about the balance sheet remixing kind of shifting over to the NIM.
Speaker Change: It seems to be inflicted on a monthly basis.
Speaker Change: Kind of improved pace continue near term.
Avinash Reddy: Yeah, I think the way to think about NIM a little bit is that the month of February and March was probably the first month in the last 15 to 16 months that deposit costs actually declined. So the spot deposit cost at the end of March was $268. The cost of deposit for the full quarter was $270.
Speaker Change: In general.
Speaker Change: Yes, I think the way to think about the NIM a little bit is.
Speaker Change: The month of February and March was probably the first month in the last 15 to 16 months that the deposit costs actually declined so the spot deposit cost at the end of March was $2 68.
Speaker Change: The cost of deposits for the full quarter was $2 70.
Avinash Reddy: So, you know, we did see some competition in December and January, and the January NIM was really a bottom in our minds. So going forward, especially with these new groups coming on, you should see, you know, stability in the cost of deposit. So then it's just going to be a function of how quickly, you know, originations come on board.
Speaker Change: We did see some competition in December and January and the January nimble, Australia Barton online so on a going forward basis, especially with these new groups coming on you should see stability in the cost of deposit. So Dennis is going to be a function of how quickly originations come on board and if you go back to the month of September.
Avinash Reddy: And if you go back to the month of September, the weighted average rate on the loan portfolio was around 520. In December, that went up to 529. That was based on around $200 million of originations for Q4. Q1 was a little bit slower in terms of originations, and that's the seasonal period where you close a lot of loans at the end of the year. But because we did half the originations, the weighted average rate on the loans only increased by five basis points.
Speaker Change: The weighted average rate on our loan portfolio was around 520 in December that went up to 529 that was based on around $200 million of origination for Q4, Q1 was a little bit slower in terms of originations and that's the seasonal way you close a lot of loans at the end of the yellow, but because we did half the originations the weighted average rate on the loans.
Avinash Reddy: So you go back to Stu's point about the pipeline; if you assume around $200 million of originations every quarter, that should lead to an increase in the weighted average rate by around eight to 10 basis points on the loan side. So on an average basis, you're probably going to get a four to five basis point benefit on the margin there. So I think overall, we're thinking about NIM with an upward bias going forward. And obviously, the cost of deposits is the biggest piece of that. And we do believe that that stabilizes to a larger level.
Speaker Change: Only increased by five basis points. So you go back to Stuart's point about the pipeline.
Speaker Change: If you're going to assume around $200 million of originations every quarter that should lead to an increase in the weighted average rate by around eight to 10 basis points on the loan sites on an average basis, you are probably going to get a four to five basis point benefit on the margin. There. So I think overall, we were thinking about the NIM with an upward bias going forward.
Speaker Change: And obviously the cost of deposits is the biggest piece of that and we do believe that <unk> talked to a large extent.
Avinash Reddy: That's great. I really appreciate the color. Thank you, guys.
Speaker Change: That's great I really appreciate the color. Thank you guys.
Operator: Thank you. One moment for our next question. Again, as a reminder to ask a question, you will need to press star 11 on your telephone. Our next question comes from the line of Chris O'Connell of KBW. Your line is now open.
Speaker Change: Thank you Amit for next question.
Speaker Change: Again as a reminder to ask a question you will need to press star one on your telephone.
Speaker Change: Our next question comes from the line of Chris O'connell, Okay. BW. Your line is now open.
Chris O'connell: Thank you, Chris. Great question. Thank you. Just on the new deposit team ads and kind of that break-even point that you're targeting to hit in Q4, what's the deposit level for them to hit break-even?
Chris O'connell: Hey, good morning.
Chris O'connell: Chris Hey, Chris.
Chris O'connell: Just on the.
Chris O'connell: The deposit new deposit team ads and kind of that breakeven point.
BW: We're targeting to hit in Q4.
BW: Whats the deposit level.
BW: For them to hit breakeven.
Avinash Reddy: Yeah, so, on an average basis, Chris, they probably should get to around, you know, call it around $400 million in deposits plus or minus, maybe between 350 and 400, 400 million, by that point, you know, for Q4. Basically, when you look at that run rate, then it starts becoming, you know, break even to, you know, positive at that point.
Speaker Change: Yes, so so.
Speaker Change: On an average basis Chris.
Speaker Change: We should get to around.
Speaker Change: Call it around $400 million of deposits plus or minus maybe between $3 50 and 400.
Speaker Change: $400 million.
Speaker Change: By that point.
Speaker Change: For Q4, basically so that when you look at that run rate that it starts becoming breakeven to positive at that point.
Avinash Reddy: And as far as the balance sheet movements in the quarter, you know, on an end-of-period basis, the borrowings were a lot lower than on an average basis. I mean, were those paid off pretty late in the quarter? And do you have any sense of how that's going to impact, you know, the margin going into 2Q? I mean, was it included in the March 2-23 margin, or is there further benefit to that coming into the second quarter?
Speaker Change: Got it.
Speaker Change: And as far as the balance sheet movement in the quarter.
End of period basis, the borrowings were a lot lower.
Speaker Change: Then on the average basis, I mean, where those paid off pretty late in the quarter.
Speaker Change: If you have any.
Speaker Change: Sense of how thats going to impact.
Speaker Change: The margin going into Q I mean was it included.
Speaker Change: March $2 23 margin or is there further benefits of that coming into the second quarter.
Avinash Reddy: Yeah, a little bit further benefit, Chris. So, if you look at, I mean, the easiest way to look at it is if you look at our, you know, the short-term investments that we had, they were around $300 million more this quarter than we had last quarter. So, for the full quarter, the impact was greater, but in my prepared remarks, what I tried to say was, you know, in the month of March, we paid down the borrowings starting, you know, on March 1st, but we were probably done by around March 20th.
Speaker Change: Yes little bit further benefit Chris. So if you look at I mean, the easiest way to look at it is if you look at our the short.
Speaker Change: Short term investments that we had it was around $300 million more this quarter than we than we had last quarter.
Speaker Change: For the full quarter the impact was more but in my prepared remarks, what I tried to say it was.
Speaker Change: In the month of March.
Speaker Change: We paid down the borrowings starting starting on March for us, but we've probably done better on March 20th So there's probably around a three basis point drag even for the month of March So that $2 23 margin for March was probably more like $2 25 to 226 as an exit run rate going going forward.
Avinash Reddy: So, there's probably around a three basis point drag even for the month of March. So, that $223 margin for March was probably more like, you know, $225 to $226 as an exit run rate going forward, you know, into the second quarter. And that doesn't include the benefits of any further paydowns that we'll have on borrowings or broker deposits going forward once, you know, the deposit starts coming in.
Speaker Change: Into the second quarter and that doesn't include the benefits of any further paydowns that we will have of borrowings and broker deposits going forward once the deposit starts coming in.
Avinash Reddy: Great, you know, and I know you guys don't give short-term, you know, margin guidance, but based on that commentary, is it kind of safe to assume that, you know, your trend back up to, you know, close to the levels that you were at into Q4, you know, of 23, and kind of migrate consistently upward from there as asset, kind of overall balance sheet repricing occurs going forward. Yeah, I think, you know.
Speaker Change: Great.
Speaker Change: And I know you guys don't.
Speaker Change: Give short term margin guidance.
Speaker Change: Based on that commentary is it kind of safe to assume.
Speaker Change: That trend back up to.
Speaker Change: Close to the levels that you were at into Q4.
Speaker Change: 'twenty three.
Speaker Change: Kind of migrate consistently upward for their as asset.
Speaker Change: As kind of overall balance sheet repricing occurs going forward.
Avinash Reddy: Yeah, I think, you know, overall, the way we describe it is an upward bias. You know, I think last quarter our guidance was, you know, the margin would be within a few basis points.
Speaker Change: Yes, I think overall the way we would describe it as an upward bias.
Speaker Change: I think last quarter. Our guidance was you know the margin will be within a few basis points and I think without this liquidity build it would've been within a few basis points and obviously is a little bit down, but I think it's fair to say upward bias.
Avinash Reddy: And I think without this liquidity build, it would have been within a few basis points, and obviously, it's a little bit down. But, you know, I think it's fair to say an upward bias, you know, the individual factors are, you know, stabilization in the deposit cost, which helps, not having a liquidity drag, which helps. And then there are two points, more originations on the loan side, which also helps. And then, you know, as you see, more pay downs.
Speaker Change: The individual factors or stabilization in the deposit cost, which helps not having liquidity drag which helps and then just to find more originations in the loan side, which also help.
Speaker Change: And then as you see more paydowns in the third quarter, we have some treasuries maturing, we probably have around $70 75 million I believe in the third quarter right now the yield on those strategies I'd like 1%. So that's going to help as well so you're going to see a little bit of that into Q3 and into Q4. So.
Avinash Reddy: And, you know, in the third quarter, we have some treasuries maturing; we probably have around 70, 75 million, I believe, in the third quarter. You know, right now, the yield on those treasuries is like 1%. So that's going to help as well. So you're going to see a little bit of that, you know, in Q3 and in Q4. So I think I'll leave it at, you know, an upward bias, and it'll be a function of, you know, closings on the loan side.
Speaker Change: I think I'll leave it at.
Upward bias and it'll be a function of closings on the loan side.
Speaker Change: Great.
Stuart H. Lubow: There were some changes announced impacting, you know, the overall, you know, New York multifamily space with the budgeting being passed in the past week or so. Any thoughts or color as to how you guys think that will impact the market and if it will be significant at all, and just any general thoughts on the state of the New York multifamily market and how you expect to manage your exposure going forward? Yeah, so.
Speaker Change: There is some changes announced impacting the overall New York multifamily space.
Speaker Change: With the budgeting being passed in the past week or so.
Speaker Change: Any thoughts or color as to.
Speaker Change: How you guys think that will impact the market and if it will be significant at all.
Speaker Change: And just any general thoughts on that.
Speaker Change: The state of New York multifamily market and how you expect to manage.
Speaker Change: Your exposure going forward.
Speaker Change: Yes, so I mean.
Stuart H. Lubow: Yeah, so it's still a little early to ascertain what the ultimate impact is going to be. They still have to work out the details, and you know it's certainly better than what the advocates wanted, but it's not necessarily where all the landlords wanted to be. So I mean, I still think that has to work through. I think on the, you know, on the margin, it's... It could have been worse, and it's probably a net positive overall, but it's still got to work its way through the process, and we have to see how it actually affects the market.
Speaker Change: It's still early to to ascertain what the ultimate impact is going to be they still have to work out the details.
Speaker Change: Yes.
Speaker Change: It's certainly better than.
Speaker Change: What the.
Speaker Change: What the advocate's wanted.
Speaker Change: Not necessarily where all the landlords we wanted to be so I mean, I still think that has to work through I think on the on the.
Speaker Change: On the margin.
Speaker Change: <unk>.
Speaker Change: It could have been worse.
It's probably a net positive.
Speaker Change: Overall, but its still got to work through the through the process and we have to see how it actually affects the market.
Speaker Change: Okay.
Stuart H. Lubow: Got it. In any sense as to, you know, were there any rent-regulated multifamily maturities in the first quarter? And if there were, you know, where the new debt service coverage ratios were that
Speaker Change: Got it.
Speaker Change: And any sense as sue.
Speaker Change: Were there any rent regulated multifamily maturities in the first quarter.
Speaker Change: And if there was.
Speaker Change: There.
Speaker Change: The new debt service coverage ratios, where they are repriced.
Stuart H. Lubow: Yeah, I don't have that off the top of my head, Chris, but we had a very small amount in the first quarter, probably, I don't know, $30 million plus or minus in multi-families, and most of them took the option, basically, to reprice, and we can follow up after the call. Yeah, I mean, they're all paying, they're recurring, and it was a relatively small handful of loans that repriced during their period, and they just repriced, and the way it works in our world is if you take the repricing, you have to pay a fee, so they paid the fee, and they're repricing. [inaudible]
Speaker Change: Yes, I don't have that off the top of my head Christy our but we had a very small amount in the first quarter probably.
Speaker Change: 30 million plus or minus of multi families and.
Speaker Change: Most of them took the option basically to reprice and we can follow up after the call I mean, they're all paying their recurrent.
Speaker Change: And it was a relatively small small handful of loans that repriced during that period.
Speaker Change: And they just repriced.
Speaker Change: The way it works in our in our World.
Speaker Change: If you take the repricing you have to pay a fee so they paid the fee and the repricing.
Speaker Change: And.
Stuart H. Lubow: Great. And, you know, the near-term outlook, I know there are zero multifamilies on MPAs and zero loans on 90 days past due. As you guys, like, look through, you know, the maturities scheduled, which are fairly light, you know, over the next couple quarters, is there anything that concerns you in terms of, you know, credit quality after and coverage after repricing on the rent regulated book? No, not really, not especially.
Speaker Change: The current.
Speaker Change: Great.
Speaker Change: Near term outlook I know there is.
Speaker Change: Multifamily is on.
Speaker Change: NPA is in zero any loans.
Speaker Change: 90 days past due.
Speaker Change: As you guys look through the maturity scheduled which are fairly light over the next couple of quarters is there anything that can.
Speaker Change: <unk> you.
Speaker Change: In terms of credit quality after.
Speaker Change: Coverage after repricing.
Speaker Change: On the rent regulated book.
Stuart H. Lubow: No, not, not especially, you know, like I said, we monitor the criticized and classified very closely. The multifamily criticized classified was, I think, down, you know, four or five million. So, so at this point, nothing stands out.
Speaker Change: No not not.
Speaker Change: <unk>, especially.
Speaker Change: Like I said, we monitor the criticized and classified very closely the multifamily criticized classified was I think down $4 5 million.
Speaker Change: So at this point nothing stands out.
Speaker Change: Great. Thanks for taking my questions.
Operator: Thank you. I'm showing no further questions at this time. I would now like to turn it back to Stuart Lubow for closing remarks.
Speaker Change: Yes.
Speaker Change: Yes.
Thank you I'm showing no further questions at this time I would now like to turn it back to Stuart Lebow for closing remarks.
Stuart H. Lubow: Thank you, Marvin. Once again, I'd like to thank all of our team members for their support during our significant growth initiatives. Our philosophy of a single point of contact and a customer-centric approach to our customers remains first and foremost. Both new and old customers are the mainstay of our organization, and our continued success will accrue not only to the benefit of our customers but to the franchise value as well. We look forward to speaking with you all after the second quarter.
Stuart H. Lubow: Thank you Marvin once again I'd like to thank all of our team members for their support during our significant growth initiatives.
Stuart H. Lubow: She lives our philosophy of a single point of contact and customer centric approach to our customers remains first and foremost both new and old customers are the mainstay organization and our continued success will accrue not only to the benefit of our customers, but to the franchise value as well we look forward to speaking with you.
Stuart H. Lubow: You all after the second quarter.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Stuart H. Lubow: <unk>.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Stuart H. Lubow: Yeah.
Stuart H. Lubow: Okay.
Stuart H. Lubow: [music].
Stuart H. Lubow: Okay.
Stuart H. Lubow: Okay.
Stuart H. Lubow: Yes.
Stuart H. Lubow: [music].