Q1 2024 BankUnited Inc Earnings Call

Participants

Susan Greenfield; Corporate Secretary; BankUnited Inc

Rajinder Singh; Chairman of the Board, President, Chief Executive Officer; BankUnited Inc

Thomas Cornish; Chief Operating Officer; BankUnited Inc

Leslie Lunak; Chief Financial Officer; BankUnited Inc

Benjamin Gerlinger; Analyst; Citi

Stephen Scouten; Analyst; Piper Sandler Companies

Jared Shaw; Analyst; Barclays

Woody Lay; Analyst; Keefe, Bruyette & Woods North America

Steven Alexopoulos; Analyst; JPMorgan

David Bishop; Analyst; Hovde Group

Presentation

Operator

Good day, and thank you for standing by. Welcome to BankUnited First Quarter 2024 earnings conference. (Operator Instructions) Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Susan Greenfield, Corporate Secretary. Please go ahead.

Susan Greenfield

You will be a good morning and thank you for joining us today on our first quarter 2020 for Cobalt's conference call. On the call this morning are Raj Singh, our Chairman President and CEO, Lesley Luna, our Chief Financial Officer, and Tom Cornish, our Chief Operating Officer.
Before we start, I'd like to remind everyone that this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. That reflects the Company's current views with respect to, among other things, future events and financial performance. Any forward-looking statements made during this call are based on the historical performance of the Company and its subsidiaries are the Company's current plans, estimates and expectations. Inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations contemplated by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including without limitations, those relating to the Company's operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by external circumstances outside the Company's direct control such as adverse events impacting the financial services industry. The Company does not undertake any obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors should not be construed as exhaustive information on these factors can be found in the Company's annual report on Form 10 K for the year ended December 31st, 2023, and any subsequent quarterly report on Form 10 Q or current report on Form eight K eight K, which are available at the SEC's website, www.SEC.gov. With that, I'd like to turn the call over to Mark.

Rajinder Singh

Thank you, Susan, and welcome, everyone. Thanks for joining us, which I'm quickly into the numbers we announced this morning of an EPS of $0.64 per share a net income of 48 million I checked?
Yes, of day before yesterday, I think a consensus was at 60. So pretty happy about where we came out of these numbers. Do include there's not much noise in the numbers this quarter. There's only one item to point out because the $5.2 million on additional FDIC special assessment other than that is a pretty clean set of numbers.
The highlights for this quarter, our deposits grew very nicely. Again, not just the number. We grew non-broker deposits by 644 million, but a large part of that growth was DDA, 404 million of it was DDA. So our DDA to total deposits, now it's back up to 27%. As we have done in the previous quarters, we continue to pay down wholesale funding, which is down 1 billion for this quarter.
So if I look back the last 12 months since March of last year, our total deposits have grown by 1.3 and we have paid down FHLB advances by 3.6 billion. In fact, I think FHLB advances are now at their lowest level, not just in the last year, but in the last two years since going back all the way to first quarter 22. So we're very happy about how much you've improved the balance sheet and the funding mix. Cost of deposits was up 27 basis points excuse me, on the average cost of deposits. For the quarter came in at three 18. But the more most important thing to note here is that we think looking back at the last three, 3.5 months is that we have now flattened out on the cost of deposits, the cost of deposits at the beginning of the quarter or during the quarter or at the end of the quarter, was all pretty much the same number. So we had a pretty big remediation cliff that occurred this quarter. And despite that, achieving that inflection point of cost of deposits is actually a pretty important thing to point out. And even into this quarter, it's only been a couple of weeks, but it looks like we have achieved that stability, which obviously means it's good news for margin because that's what happened in the second quarter, but it happened a little bit earlier. We're happy about that as we continue to reposition the balance sheet on the left side, residential loans like they have been declining, declined again by $152 million. And we want to keep continuing on that trend for the rest of this year and commercial loan growth. This is always our slowest growth in terms of production. Production did come in exactly where we had projected, but we did have some payoffs that were a little bit unexpected and some line utilization that drop off for that reason, loan growth was negative and the top of the margin for the quarter came out at two 57. I think last quarter we worked to 60. We have told you that margin will be somewhat stable, maybe down a couple of basis points, which came in pretty much where we thought it would. Credit looks good. Our nonperforming assets are down. Nonperforming loans are down. Charge-offs are down to almost nothing this quarter. Charge-offs came in at two basis points. I think last year annualized was at nine basis points. Npas are at 119 million, down from $131 million last quarter. So excluding SBA guaranteed loans. Npl ratio is down to just 23 basis points. That's a couple of basis point improvement from December capital, strong liquidity, strong book value, tangible book value, all built up. So pretty happy about how the quarter shaped up and also and Tom will talk more about this, but the pipelines are pretty decent, both on the loan side and especially on the deposit DDA side. So in terms of guidance, you know, if you put these plans together, which is late in the year as to what will happen over the course of next 12 months. You put those together, we give you guidance in January and very often, Neil coming up of this guidance is not a not easy, especially in a volatile environment and often numbers can go off here and there fairly quickly. But this time around, I would have to say that so far, we're tracking so close to what we thought we would do that. I'm very happy.
So in terms of guidance, no changes, what we told you in January stays margin will grow over the course of next three quarters. Deposits should grow loans, not crazy, but I think we'll keep declining. So all the guidance we've given you stated no change in that.
And what else here, let me turn it over to Tom, and he can get a little more into the details on the numbers before.

Thomas Cornish

Leslie, we've got great next roadshow. So first, I will start off on deposits as Raj mentioned, total deposits grew by 489 million for the quarter, non-brokered grew by 644 million, and then ID and EBITDA grew by 404 million. And so obviously, we're very excited about the NIDDA. number. I mean that's a big number. We feel like we've got great momentum and growing core operating business within the company. And what was particularly exciting about this quarter and even beyond the four oh four number is looking at like where it came from and how broadly based it was across all geographies and all lines of business. So really every team contributed to this. And there were no enormous numbers in terms of any one client or one piece of business that drove it dramatically. It was kind of everywhere, which is really good to see. As Raj mentioned, the new business pipeline from a deposit perspective on the treasury management side is really good over 1 billion in near term deposits and particularly coming off of such a strong quarter. We were pleased to see that the leading indicators going into this quarter and the next quarter look really good in terms of number of deals out there, number of proposals, acceptances, things of that nature. So we felt really good about that.

Rajinder Singh

Tom asked if I may. Interject one point that I want to make about this quarter's DDA growth was it did happen in the 3rd month of the quarter. So it happened more in March than in the first two months. And what that means is it didn't really benefit our margin this quarter as revenue that should benefit going forward.

Thomas Cornish

So just a detail point on the loan side, the overall loans were down 407 million quarter over quarter, with revenue down $152 million in C&I in creased segments down a total of $226 million. As Raj mentioned, production was actually really good for the quarter. That was in line with what expectations were we did have what I would say is an unusually high number of line paydowns in certain segments and that really ended up impacting the quarter more than we originally expected to see as we look forward into the rest of the year, particularly in all of the core C&I segments, corporate banking, commercial banking and small business up pipelines are really robust as we come into the second, third and fourth quarter. So we continue to feel good about loan growth overall for the year.
Other other businesses kind of performed as we expected franchise equipment, municipal finance were down modestly. Mortgage warehouse did have a bit of an uptick on this quarter. But overall, I would say, as we look forward, the pipelines for business. Look very good to spend a few minutes on CRI since obviously we know that's of great interest to everybody. I refer you also to slides 12 through 15 of the supplemental deck where we provided some detailed disclosure. So overall, as we've talked in the past, our CRI exposure as a percentage of the total bulk and risk-based capital is modest in our view, it's 24% of total loans create a total risk-based capital is 166%. Just as a comparison, if you look at the 1231 23 call report data for banks in the 10 billion to $100 billion range. The average is 35% for the total portfolio and total creative risk-based capital of 225%. So you kind of compare us to the core group that we would normally sit into from a peer comparison were, I think, well, below where everyone is in the market predominantly. And I'd also point out our construction loan book has always been relatively modest and there's less than 10% of the total UPB within Creek, I feel like some of the data points. As of March 31st, the weighted average LTV of the credit portfolio was 57% and the weighted average debt service coverage ratio was 1.83. About 15% of the credit portfolio matures in the next 12 months and about 6% matures in 12 months. It is fixed rate nonperforming loans in the portfolio other than the guaranteed portion of SBA loans are negligible.
So let's turn to office for a little bit. So we have a total office portfolio of $1.8 billion. Of that, about 300 million is medical office. So traditional office would be about to about $1.5 billion. It's made up of 99 loans. I have all of them in front of me on time here, and we follow each one closely by individual loan by market segment on a quarterly basis. So we're very familiar with the entire portfolio. The weighted average LTV of the office portfolio was 65%. Weighted average debt service coverage ratio was 1.7 at March 31st, there's breakdowns in the supplemental deck on the office portfolio by geography that you can look at as our largest loan is only CHF50 million.
Yes, our average load in the book is actually about $18 million. The vast majority of them ranging between 15 and 25 is the majority of the portfolio, 59% of the office portfolio is in Florida where the demand and demographics continue to be generally favorable substantially. All of the Florida portfolio was suburban our overall exposure to Central Business District type towers. It's very modest maybe at the 99 loans, we have about 12 of them that I would actually call kind of downtown office tower buildings. The rest are all suburban by property and against substantially in Florida. There's some charts on slide 15 that will give you further geographic break down of that.
With respect to the New York tri-state portfolio, again, not much difference 43% is in Manhattan, about 181 million of office in Manhattan at 96% occupancy within that book and a 12 month lease rollover a 4% rent rollover in the next 12 months, a small portion of the office portfolio at about 10%. We have seen some increases that we have expected to see in criticized and classified office loans. I thought I'd give you a little bit of a sense of kind of what does issues look like some by maybe pointing out a couple of situations. So when we when we look at loans that are in that category, generally, what we see is office buildings undergoing lease transition and they fit into a couple of categories one of our largest criticized classified loan happens to fit into this, where it's a office building in suburban Miami and a high demand area where the actual occupancy today is 98%. But unfortunately, you have one large tenant that came in as a new tenant at six or seven months ago. And the demand these days generally allows for credit tenants to get 12 months of concessionary lease payments. So you have a period of time where the accurate occupancy, the actual occupancy of the building is 98%, but the economic occupancy is far less. So we know when those lease payments will start, we kind of have it on a calendar. We know when what the pro forma debt service coverage will look like once the lease payments to start, but regardless of who the tenant is, I mean it could be the US government. We don't start to count that in place. Cash flow until it's paid until we have a maturity on the lease payments, which is normally 90 days after the commencement of the lease payments. So we have several buildings that are kind of in this sort of transitionary stage where you have occupancy that really is in the 90% range where you have pro formas, that would be well above kind of past loan policy guidelines, but they're in this kind of transition stage with new tenants. And we also have loans that like everyone is seeing in the market where you have some vacancies where you have lease up going on and properties being subdivided and whatnot. But there are situations where we see activity and lease up in the market, particularly in the Florida suburban market. So you might have a 20,000 square foot at least that that goes vacant. And then you have to subdivide the property and it just takes time to kind of work through this in general, we think the asset owners are supporting their assets to putting money into them. They're making investments in the properties. They have significant equity in it and I think we'll just be in a handful of these situations for a period of time as we work through this kind of lease transition phase. But I did want to provide you a little bit of anecdotal information that I thought would be helpful for sort of understanding the dimension of the office book that we have. So hopefully that was helpful with that, I'll turn it over to Leslie.

Leslie Lunak

Thanks, Tom. And as Rob said, net income for the quarter was $48 million or $0.64 per share. The margin was 57 this quarter compared to 60 last quarter. The yield on loans was up from five 69 to 5 78. That's just really portfolio transition as new production is coming on at higher rates and lower yielding loans, including ready loans are paying down. Yield on securities decreased from five 73 to 5 59. This was really driven by retrospective accounting adjustments that we booked in the fourth quarter. That means that fourth quarter yield, I guess, for lack of a better term artificially high. What you're seeing now is part better sense of the run rate. The cost of deposits was up 22 basis points from two 96 to 3 18. And as Raj mentioned, this appears to be stabilizing. So that's that's really good news for the margin going forward.
The average cost of FHLB advances was down to four 18 this quarter from 48 last quarter. As we are paying down those higher rate advances.
Our new guidance, we do continue to expect margin to expand for the full year 24 compared to 23. And we think Q1 was the low point. I'm going to remind you again that this guidance is based on our continued success in transforming and remixing the balance sheet on both sides much more than on anything that the Fed might or might not do. In fact, in answer to a number of your questions, we ran a scenario with the same balance sheet transition assumptions and no cuts in 2024 and it moved the margin by one basis point and it moved it up either way. It just doesn't really matter what's going to drive our margin is our success in doing what we're trying to do to the balance sheet provisioning reserve. The provision was this quarter was 15 million. The ACL to loans ratio increased from 82 basis points to 90 basis points, and the ratio of the ACL to nonperforming loans increased to one 88 from one 60. The big drivers of this quarter's provision and the increase in the ACL and the biggest one was an increase in qualitative reserves and a lot of that related to the office portfolio and other driver was risk-rating migration and those were partially offset by improvements in the economic forecast.
And you can see a chart on slide 17 in the deck that kind of gives you a waterfall of the changes in the ACL, the reserve on the commercial portfolio. And when I use that term, I'm talking about all C&I, all Cree in that franchise, finance and equipment finance, not mortgage warehouse in Pinnacle because those have unique risk profile. So they're not in this number, but that commercial reserve was one 42 at March 31st. The reserve on the office portfolio was 26 at March 31st. And most of that build was qualitative and really prompted by the fact that we have seen some risk rating migration there. As Tom spoke to earlier. I would also point out that our total CRI reserve right now is about six times our lifetime historical loss rate. So pretty pretty generous set reserve there. Noninterest income and expense, not much to comment on here for us, referred to the 5,000,005.2 million of additional FDIC special assessment this quarter, and we had about 6.5 million in residual losses on lease equipment last quarter compared to 2.7 million in residual gains this quarter. So that caused the swing in the fee line. The ETR was a little high this quarter because of one discrete item. But our guidance around that going forward hasn't changed.
And with that, I will turn it over to Raj for any closing comments and then we can take your questions.

Rajinder Singh

But we'll this is about it clean and as good a quarter, we could report nine days ago, very happy with where I think landed and looking forward to the rest of the year, very optimistically.

Question and Answer Session

Operator

(Operator Instructions) Benjamin Gerlinger, Citi.

Benjamin Gerlinger

Q1 was a quarter.

Rajinder Singh

Our hedges

Benjamin Gerlinger

belabor the point too much.
First, curious if you could just talk through this theory provision increase.
I know you talked through the qualitative overlay and then there's there's quite a bit in terms of like the office. And I think a lot of that is really, really helpful.
But and just kind of trying to square the circle, it sounds like things are good, but then you also did increase the reserve a healthy amount. So just kind of thinking about the dynamics associated with that, are you expecting losses or is it more CECL accounting? I'm just trying to square those two circles because they sound good.
But then you also did increase the reserve share.

Leslie Lunak

You guys have been asking us to increase the reserve. If no, I'm just kidding. That's not why we did it in the SEC has looked like. So that's the method that No. I mean, I think then we don't expect we expect any losses in our credit portfolio to be very manageable. I think it's also prudent for us to recognize that, you know, the environment, particularly around office is challenging, and we have seen some risk rating migration going on there. And so what we did to kind of come up with that qualitative reserve as we just make some broad assumptions around. So what if cap rates increase a lot more than current commercial property forecasts indicate that they're going to and what impact might that have had. So that was sort of how we thought about it. And I do see we are not expecting a lot of loss content in this portfolio. But we do recognize that the environment is challenging and we're seeing some risk rating migration. Hope that helps.

Rajinder Singh

I noticed that I want to add one thing, a general comment about risk rating migration. We take out of risk rating, the intellectual honesty that goes into this trading very seriously. We don't ever tried to break into that, we call the risk the way we see it. We don't tried to say we are overly conservative or overly not conservative. We tried to be as down the middle of the pack because risk ratings are whatever you call the Motorola. They're not going to determine if eventual performance actual performance for London determined by what a customer does or does not do our borrower does or does not do this rating is what you think of that loan along the way. And if you if you tried to play games with that, you just lose credibility with your stakeholders, whether it's regulators or investors or what have you. So we tried to be as straight down the path on risk rating and when we see risk build up, we call it out and we will press ratings down. I think that that's a very important aspect of running a company and having credibility as a long term. I will point to the fact that doing COVID also, we called out risks early and our risk ratings, we downgraded them because we saw risk. And I we saw a lot of our peers not do that and scratch our heads like company or not. You don't call the situation more risky, given that we've had the biggest health crisis in the industry, the country. So I'll just just just a comment about a bit is obviously more risk in office today than it was, you know, a few months ago and we're calling it out and we're also reserving qualitatively, but reserving for that.

Susan Greenfield

Maybe the follow-up to Roger's comment, and I'm hoping all of them. We downgraded loans. We increased our reserve and we never saw any loss content and enough resource to actually sell.

Rajinder Singh

Yes, yes.

Benjamin Gerlinger

Yes, that helps us are sufficient now to just kind of pivot here for the next one I know that you guys are kind of basing the Asian growth. I think you said higher loan balances ending the year over year. Just kind of curious on the cadence of that growth where it might come from? Because I'm really trying to back into like was the mix of the asset side of the balance sheet is really going to be the driver of PP&R from this point, it seems like so I'm just trying to get a sense of like where your exit margin might see based on that growth and because of the pricing and only kind of touching the third rail, but just kind of curious if you can narrow it down considering rate cuts are fairly de minimus for your margin outlook of United States.

Leslie Lunak

Similar to what we told you last quarter, we expect the margin to be in the high twos by the end of the year. That's not that guidance is unchanged from what we told you last quarter. We expect the resi portfolio to continue to amortize down at about the pace you've seen over the last four quarters. So Heather, yes, for the year, probably 800 million or so. We expect the growth to come from our core middle market, commercial portfolio, primarily C&I, maybe some some creep is primarily C&I and we expect double digit growth in that segment. I'll ask probably the SOPs, which are now getting very small, but Pinnacle and gradual, probably not brokerage will probably continue to wind down Pinnacle for the time being given pricing dynamics in that market as well?

Benjamin Gerlinger

Yes.
Okay, helpful. I appreciate that, Kim.

Operator

Stephen Scouten, Piper Sandler.

Stephen Scouten

Because I was curious, one, I mean, you guys took up your dividend here this quarter and I was wondering if there's any updates on thoughts around the share repurchase capital continues to build. You've been building the reserves. It seems like at these levels you might be more apt to do to do a buyback. So I just wonder any updated thoughts there.

Rajinder Singh

Yes.
There's not an update. We do continue to talk about it at each of our board meetings. So the May board meeting, we will again have a conversation, but I'm not expecting a buyback. A yes, we are changing our mix of our balance sheet. So keep in mind from a risk-weighted asset perspective, we are talking about taking down low risk-weighted assets by crazy and replacing them with higher risk-weighted assets CNI. So yes, capital does build up, but capital ratio or TCE will build up a second one doesn't build up quite as much because of the change of mix of assets, which is necessary, of course, improved margins. So we will the Board had we talked about the buyback back in February when we took the action on dividend. We will talk about it in May and I don't want to get in front of that discussion. But I think buyback is probably more of a it's probably in the second half of the year is when it will, it will get, you know, we'll take a harder look at this. I doubt if it will be in May.
Okay. That's really helpful, Russ, thanks for that. And then I'm just kind of curious on thinking about the loan loss reserve obviously went up eight basis points and your incrementally more protected. But if I look at that waterfall chart, and I see that our economic forecast component kind of going down was that I'm reading that right, where there is some scenario weighting adjustments that you guys made to take that number down or what's kind of the dynamics of that around the economic forecast.

Susan Greenfield

Most of that is just a forecast better than it was three months ago.

Rajinder Singh

Okay.
So no change to the way you guys are waiting to the various scenarios from a trend that every quarter.

Susan Greenfield

But really we're just seeing better forecast and model loss results are coming out coming out of Toronto.

Rajinder Singh

And then just last thing for me obviously, great momentum on noninterest-bearing deposits done. Like Tom said, the pipelines, we're pretty good on the treasury side as well. Kind of curious what you think you can do there I know it's hard to predict through the full year and then maybe kind of an update on Dallas in particular and what sort of progress you've seen, how much that may or may not be contributing to the positive momentum there. It's too early for Dallas to contribute anything meaningful. So these numbers are not really because of doubt. There is there's obviously some growth there, but it's small compared to the total number.

Thomas Cornish

But yet when we look at the markets that we're in, I would say this was this last quarter was a particularly good hiring timeframe for us. We added so the teams in Atlanta, we added to the teams in Dallas. We made some really good key hires in the corporate banking space in Dallas. It is too early for any major results to kick in yet. We are we are seeing good activity, good pipeline build some business coming in, but that's not predominantly driving the numbers that you see in the 400, 4 million and an EBITDA growth, ours really more across existing geographies and existing lines of business.

Rajinder Singh

Got it. Got it. And think that progress can continue based on what you're seeing in the pipeline, I guess, the general message. So that's fantastic. Thanks for the color, and congrats on all the progress.

Stephen Scouten

Thank you, Kim.

Operator

Jared Shaw, Barclays.

Jared Shaw

Hey, good morning, everybody for it. Maybe just following up on on the deposits and funding with the trends we're seeing in GTA one, I guess would you say are you also seeing continued remix from existing customers offset by the new new customers bringing money in or do you feel like?
Yes, on an average account basis, we're sort of at the bottom on average DDAs, and it's a little hard to say.

Rajinder Singh

I think there is still some bleed happening on older relationships, which is what you're seeing, the 400 million or so is net growth. So I think there's still some some of that happening, but we're trying to kind of out we are not trying, but we are out running it with new business that is coming in the front door. I think there's still a little bit of a leaky bucket, I think if that's what you're asking about.
Yes. But yes, I think there's some some of that's still happening. You do wonder like we haven't woken up yet they are one of the passenger yield, but I think the leaky bucket phenomena is still true, but we have a lot of momentum on filling the bucket with new business and based on what business was closed this quarter, but also based on what's in the pipeline.
Okay.

Jared Shaw

And then on the deposit beta, do you think we've seen the peak here even if we don't get rate cuts, should we expect to start to see a gradual decline either from that remix of DDAs or not having to pay up as much in market two to retain some of those interest-bearing deposits.

Rajinder Singh

I certainly hope so at least stability, you know, seeing the numbers from Jan, Feb, March and into April, we're seeing a complete stability which has been absolutely flat. I get a report every morning what the deposit book look like the night before and usually I look at EBITDA and total Clementia, it's nice to see the far right column, which is the fact that the cost of funds basically or change in cost of funds are looking pretty stable. So yes, it looks like it's stable when will it start declining without the Fed moving it deviate keeps building up the way we are thinking it will start declining as well. But yes, we have reached that inflection point, it certainly feels better.
Okay. And then finally for me on the office side, you talked about some of the rent concessions you get new tenants.

Thomas Cornish

Have you been noticing landlords having to increase the either the rate or pace of concessions to attract those new tenants is one part of it.
And then I guess what gives you confidence at the the expected lower occupancy levels are temporary. Is that just you have you have some insight into the pipeline for those for those landlords?
Yes, I would say two things that I don't think in most of the markets that we're in, the concessionary period has expanded. Now, you know, if you're in San Francisco or Chicago, I'm sure that's true. But in better growth markets generally, you're seeing kind of a 12 month you a period of time, and we're not seeing any major changes in that. The confidence really comes from sort of the underlying demographics of what's happening in the market so that if you look at markets where we have, you do have significant office exposure like spread out through Florida. For example, if you look at the underlying demographics in and flow business migration, new business startups and whatnot in Miami and Fort Lauderdale and Palm Beach and Tampa, it's good. I mean, there's really that activity and you're saying the lease up activity from that. I mean, the amount of new migration of companies that come to market expansions that are being done is just really strong throughout virtually every market in Florida. So that's that's what gives you confidence to see that as you're looking at, you know, very, very strong population and business growth that requires a lot of these a lot of these buildings are professional services oriented technology-oriented, and you're just seeing growth across all of those industry segments within Florida.

Susan Greenfield

And I would also point out here in Manhattan, in particular, the rent rollover in the next 12 months is only 4%.

Thomas Cornish

So yes, I mean, even if you look, there was a recent report in the journal. I think yesterday that said, New York, the New York City led the country in creating new tech jobs. And while we don't have a lot of buildings in New York I think they had a 3.5 number is the growth in the tech related return to office and new job environment that that comes in. So those buildings. So the markets that we're in, I think are generally giving us reasonable confidence that we're seeing business activity that will lead to leasing activity.

Susan Greenfield

We are looking at it and only can kind of calculate that Tom really is sitting here. We have to take a stack of paper in front of them that has all the details of every single loan and the office portfolio. So I think the granular level at which we are monitoring and paying attention in gathering information about the loans in this portfolio, it is what gives us the confidence in this portfolio.

Rajinder Singh

We really do know what's going on with each and every one of the portfolio management has been an extraordinary level of service.

Thomas Cornish

And sometimes I mean, our teams are visiting these properties consistent later talking to the asset owners, talking to leasing agents, somebody they have a very granular level of knowledge of what is going on at each and every property.
Right.
Thanks very much.

Operator

Woody Lay, KBW.

Woody Lay

Big Morning, guys. Were already just one one follow-up question on the non-interest bearing deposits. As you mentioned, it looks like it all sort of came on in the final month of the quarter and all those deposits should be sticky. There's no seasonal factors there. And now as it happens, there are there are seasonal trends to certain of businesses that we're in, that our monthly trends there are seasonal trends. But you know that a lot of that growth was new business. Some of it was certainly seasonal as well. We had a decline in DDA last quarter, as always happens in December, and we're now seeing that build out that build up. It's not like we're in high season that will that will continue to happen. So we expect the seasonal changes to keep helping us as we get into the summer.
No, there isn't any lumpiness that I'm worried about that is, you know, here one quarter and gone the next next quarter no.
Got it. And then I wanted to shift there. I think in the release you mentioned you saw some shared national credit runoff. I was just wondering if you could quantify that on a dollar basis? And do you think that's a trend that continues from here?

Thomas Cornish

I don't have those numbers in front of me right now already, but I'll let Tom talk to you about expectations are, I would say, you know, when it comes to that segment, we consistently tried to look forward and see where we see risk in the economy and when we make those decisions to exit those credits and there were a couple of them this quarter there typically areas that we look at where we are not as optimistic about the trend lines in those industry segments some and that's typically where we make that kind of decision there, a bit more episodic based upon how we're viewing what might be happening in a given industry segment versus kind of I mean, our long-term strategy is to build bilateral business with operating accounts and treasury management business and whatnot. We do have we are in some shared national credits on both the corporate side and the real estate side. But we we generally think about it from, you know, do we have confidence in the next 12 to 24 months and where this sector is going. And when we don't, we tried to take opportunities to exit at maturity or write-downs.

Rajinder Singh

So the so those credits that were exited? I mean, did they have a deposit relationship with the bank? And does a variety of your national credit portfolio have have a full banking relationship?

Thomas Cornish

The credits that we have exited did not have depository relationships. We have a portion of our book. The shared national credit book breaks down into kind of different categories. For example of we are the lead bank in a shared national credit, which we are then we have the depository relationship in many of the shared national credits we're in. We may not be the lead on the credit, but where the depository agency agent for that for the relationship and some we have, it's now one broad statement across all our lines. But I would say in shared national credits where we are neither the agent nor the depository bank, our general bias would be those are relationships that are probably going to be deemphasized going forward.

Woody Lay

Got it. That's helpful commentary. That's all for me.
Thank you, Kim.

Operator

Steven Alexopoulos, JPMorgan.

Steven Alexopoulos

Hey, good morning, everybody. My team I know you've had a bunch of questions on office Cree, but I had a big bigger picture question for you guys. When investors or analysts as to larger banks, like what's your outlook where's the risk?
Inevitably, the answer is the regional banks are holding the risk on office creep. I didn't really hear that in your response to all these questions at time. You working through so many challenges. Do you guys agree with that, that the regional bank I mean, you see what your peers are doing. Do you think you're an exception to the rule of your peers are in trouble as asset class or what you're experiencing? Do you see it as fairly typical?

Rajinder Singh

Yes. So I'll start and Tom, you chime in. I think the first place where I would somewhat agree is the fact that regional banks do have more CRE exposure in general then of the top 10 banks, for example. So just look at that, you know, CRE to risk-based capital ratios like that?
Yes, smaller banks, community banks, although we have regional banks do have more CRE exposure. But from thereon, I actually will start to disagree. A different banks have different types of CRE and even have a regional bank with average ticket size of $1.5. Another one at, you know, $58 million like we do. And then there are regional banks that have a large exposure and each one of them will have a very different risk profile. So generalizing it beyond just saying, yes, generally speaking, regional banks have more CRE. That's the only statement that applies. But beyond that, you really have to dig into what kind of lending each bank is doing and it can be quite different from one regional bank to the next. We obviously know our book better best, and I can't really talk much about another bank that might be, you know, doing very small ticket CRE or very large CRE. Those risks might be quite different. But with the risk profile that we have, starting with the fact that we have much lower CRE than typically a bank our size would have. And the kind of CRE we've done, it's sort of the 15 to $18 million type of average ticket size. We don't have a super large loans, but we also don't have very small one, $1.5 million loans either. And the mix that we've formed and the markets that we serve, we feel pretty good about our portfolio. But to your bigger point, I think it's more complex than making a very generalized statement.

Thomas Cornish

Yes, I would say, but I would add, I would agree with what Rod said. I also think when you look at our portfolio in total CRI, you show about all of the banks in the 10 billion to $100 billion range. We're clearly at the lower end of overall credit exposure. And we have always, I think, maintained a good discipline around asset diversification within that book. No one asset is more than 25% or so of the entire base. And we spend a lot of time thinking about asset allocation within that book and asset allocation within the total portfolio and also project limits. So as Rod said, are generally our portfolio across all asset classes within Cree is what I would kind of call a middle market real estate portfolio, we're not typically in loans above the 15 to 30 million range. We're not saying with 100 million loans on towers and in major construction loans and the last part is I think generally over a long period of cycles, most people would agree that your risk is in the construction loan portfolio is a higher risk element and that's always been a very modest part of our overall portfolio. I think right now it sits at about 8% of the portfolio, the cream of the green portfolio, correct.

Rajinder Singh

And just one more thing. The difference between CBD and suburban is pretty stark and I think paying attention to that, you know, two banks with the same exposure, same numbers, but if it's up our CBD versus suburban, the alpha mix, the different banks.

Thomas Cornish

It can it could shed a lot more like, but where the risk is that even within submarkets, I'm staring at this piece of paper that we keep referring to and we break it down by submarket. No sub market is overweighted in any areas. So we pay attention to what's in Tampa, which in New York, what's in Miami, what's in Fort Lauderdale because all of these economies do have some levels of difference, different types of business mix. And we so we keep it at asset levels, asset allocation levels, submarket levels, project levels, we have pretty disciplined approach to this.

Rajinder Singh

Got it.

Thomas Cornish

My other questions have been answered.
Thanks.
Thanks for that detailed response.

Rajinder Singh

Thanks, Dave.

Thomas Cornish

Kim.

Operator

David Bishop, Hovde Group.

David Bishop

Good morning. Everyone was pretty low recourse, but I think you mentioned that there were some Bob, maybe waterfall payoffs or repricing on the CD book this quarter. I'm just curious maybe what that looked like and maybe what the repricing it looks like over the next quarter or two on that book and what the what the average rates looking like currently, I mean, we had about 900 million or so repriced in the first quarter up, I don't know, somewhere between 30 basis points, but that really was the cliff.

Susan Greenfield

I think going forward, it's pretty tame and spread out. So I think we're kind of past the cliff and you can see the impact of that embedded in the change in the costs as for the quarter.

Rajinder Singh

Got it. And then remind I know there was some noise. Obviously, it had fee income in the fourth quarter. I'm just curious if you think the first quarter rate represents a decent run rate or a good approximation heading out to the rest of the year?

Susan Greenfield

Thanks.
I mean for the most part, yes, these days leasing residual items are going to be episodic and sporadic. The portfolio is small enough that and those don't occur with a regular predictable cadence. So you saw some of that. We have seen a little bit of that every quarter in the last several quarters. And those those things will be sporadic, but if you pull that out, yes, probably Perfect.

David Bishop

Most of my questions have been asked and answered. Thank you.
Thank you, Kim.

Operator

And I see no further questions in the queue at this time. I will now turn the call back over to Mr. Raj Singh for any closing remarks.

Rajinder Singh

And thank you, everyone, for joining us and we will speak to you again and keep us in the meantime, we have a lot of retail.
Thanks, Bob.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now.