Leslie Lunak: Well, I mean the total losses of that stress are $97 million, which I consider to be a bad quarter, but an extremely manageable number.
Broderick Preston: Understood. Leslie, just on the expenses, just wanted to clarify if the expense guidance that you gave last quarter for the full year was still intact.
Leslie Lunak: Yes, I think we’ll probably end up more towards the higher end of that guidance, but yes.
Broderick Preston: Okay. Okay. And then could you remind me — two things, just the floating rate loan percentage that you all have and then the interest-bearing beta that you all are assuming when you do your sensitivity analysis?
Leslie Lunak: Yes. First, let me throw in the answer to the question about the preferred securities. That’s $69 million left in that portfolio segment. And those are not in the available-for-sale portfolio, like Raj said, they get mark-to-market every quarter. But it’s $69 million at March 31st, and that sits at the holding company. Betas, the total deposit beta to date this cycle through the end of the quarter is about 43%. That’s all in. That’s about 62% for interest-bearing deposits, excluding CE including CD, it’s 70 — it’s 45% all-in and 61 for the cycle. So that’s where the betas are landing and somebody is getting me that floating rate portfolio information. So I’ll throw that one in again as soon as it becomes available.
Broderick Preston: Got it. And then I just had two last ones. Just on the bigger deposit outflows that you called out, the 10 relationships, how much of that one point — I think it was 1.9, how much of that was non-interest bearing?
Rajinder P. Singh: $1.9 billion on the top 10 customers who left, how much was interest bearing, how much noninterest bearing.
Leslie Lunak: I do not have that in front of me.
Broderick Preston: Okay. And then the last one was more, Raj, for you on the ROA improvement, I heard you earlier about kind of remixing and it will take place over time. So I guess just as we think about where the loan-to-deposit ratio is right now, you’re kind of pulling back on loan production, at least from a non-relationship perspective right now. I guess like what is your — what is your long-term goal for the ROA, and I guess, when do we get there because it seems like it will probably take a couple of years just given the economic outlook and the fact that the securities portfolio is still relatively large.
Rajinder P. Singh: Yes. It’s a resi portfolio that will drive it more than the securities portfolio. Securities portfolio while it’s large, it is 68% or 70% floating rate. It’s the resi portfolio, which the runoff of that portfolio at current CPR rates is slow. That can change rapidly in a slightly different interest rate environment. So the speed with which we can remix will depend a little bit on that. And it’s that remixing, which will cause the returns to get better. So I’m not trying to evade your question, but it really — it’s very hard to say when that will happen and how fast that will happen. It could happen relatively fast. Rates went up very fast. They could move down. I mean I know nobody is talking about risk moving down right now.
. So yes, I mean, the goal is still 1% ROA and low double digits ROE and this model should get there. We expect it to get there. That’s what we’re driving for. But the time line is harder for me to say, your guess probably a couple of years is probably right.
Broderick Preston: Got it, thank you very much for taking my questions. Yeah, go ahead Leslie, sorry about that.
Leslie Lunak: 10% of the loan portfolio that’s floating, the commercial loan portfolio, excluding Pinnacle and Bridge is 67% floating, including those at 61% floating.
Broderick Preston: Got it, thank you very much for taking my questions everyone. I appreciate it.
Operator: Thank you. One moment for our next question. And that will come from the line of Steven Alexopoulos with J.P. Morgan. Your line is open.
Steven Alexopoulos: Hey, good morning everyone.
Leslie N. Lunak: Good morning Mr. Alexopoulos.
Steven Alexopoulos: Hi Leslie. I wanted to start, so going back to the $1.8 billion of outflows, can you just give us more color on where that money moved to and why you…?
Leslie Lunak: Almost all of it went to your bank, Steven.
Steven Alexopoulos: Well, let me say this, why couldn’t you make greater use of the insured deposit network because I would think that’s lower cost than FHLB?
Leslie Lunak: They were not interested. Their Board — for the most part, their Boards made a major decision over the weekend to move all of their money out of midsized banks, not just out of BankUnited, and we had long conversations with these folks for the most part. Their Board decreed that all money would be moved out of midsized banks. And I believe when I looked at it, about 95% of it is now on your balance sheet Steven.
Thomas M. Cornish: Because generally when we talk to the management team Steven they were supportive and open to the idea in the future, but they were not in a position to negotiate with their own Boards over this.
Leslie Lunak: So that’s really kind of what happened.
Steven Alexopoulos: And what’s your latest thought on where the mix of noninterest-bearing deposits bottoms?
Rajinder P. Singh: Very hard to say. Very, very hard to say. I know you’ve been asking that question every quarter. Yes. I mean, it’s holding at 49% and yes, probably be under some pressure. I can say confidently, it’s not going back to what it was pre-pandemic, which was — it’s really hard to say is it going to 2028 or 2027 or where, but the Fed is hopefully coming to an end here. And while they’ll probably pause and stay here for a while, at least it’s not 75 basis points every time we turn around.
Steven Alexopoulos: Yes, okay. And then — so Raj, you’ve been working to improve the deposit quality, right, of the company for a couple of years now. I’m curious what lessons do you learn from what just unfolded, not just for you but for the whole industry and how does this change the go-forward strategy for the company?
Rajinder P. Singh: Yes. I mean listen, some things we already knew, but we now know even more. And in that category, things such as smaller is beautiful, right. Small is better and large is not. So no home runs, only singles and doubles, right. We’ve been saying that for the last two years and achieving it, but we had a lot of work to do when we were holding on to this, what I would say, a crutch. The crutch got knocked out from under us and now we just have to stand on our own legs, which is all singles and doubles. That’s one. I think another learning in general, not just for the deposit side, I would say, is we always considered reputation risk as something to pay even more attention to them all the other risk that we own cyber and credit and liquidity and all that.
But we always defined reputation risk as stuff that happens to us and bad press about us and monitoring BankUnited on social media and so on. What I learned through this is that guilt by association is something you also have to worry about a lot. The company, you keep so to say. We’ve agonized about this a lot, like what was that reaction on Monday, our business is so different from Silicon Valley and Signature and others that have very different businesses. There is some guilt by association. So, Silicon Valley we have little to no association with and didn’t really hurt us. I would say, Signature did because there is a little bit of , now it’s also creating the opportunity for us, by the way, but that’s sort of after the fact. So that was also a learning that you have to worry about your reputation, but also the company you keep and yield by association and getting caught up.
I mean Steve, the number of negative articles I have read about the banking — the regional banking business is enough to put me on some kind of an anti-depressive medication. It’s like everything you read, every newspaper article, every time you hear somebody on CNBC, you’re talking about there’s no need for a regional bank. And I’ve saved these comments for my closing remarks, but let me just add right here, the darkest time for me in this was actually not that Monday, but it was maybe a week or two into this reading all these articles talking about that America doesn’t need regional banks. And in that chaos, I actually got a phone call from a friend of mine who’s a venture capitalist and who was a Silicon Valley Bank for 20 years and had moved all of his money and portfolio companies over to — I won’t say which bank, but you can guess one of the bigger banks.
And two weeks had passed, and I asked him how were things, he said, I’m feeling much better, everything is in the safe place. And so sad to see what happened in Silicon Valley Bank. But then he said, it’s strange all the money that I have moved, I was trying to reach somebody in the bank the last couple of days, and they gave me an 800 number. I don’t do 800 numbers, were his exact words. And we’ll get used to it because that’s how it works. He said, really, I had the phone number for my person at Silicon Valley and then he said to me would you mind if I introduce you to this person, and she has a team of about eight people, and they’re wonderful. I said, I’m happy to be introduced to her, I’d love to talk to her. But we’re not in that business.
So I’m not sure that it will be very fruitful but that team is going to land somewhere. And that team looks after this person and other business like that in a way that larger banks cannot. Larger banks have a lot of benefits over us, a lot of advantages over our size and scale and brand recognition and so on. But the size and scale is what also gets in the way of closeness to customers. And for commercial customers, what matters more is not how many products you can offer, how big a check you can write and how many branches do you have. What matters more to middle market, commercial customers and small businesses is that I know somebody in the bank who is a decision maker. And then if something happens, I can always call someone and I know that I can reach someone with some authority.
That’s just not possible at a large bank where the 30 levels of — from where the customer touches the bank to where decisions are made. That is actually the most critical thing that a commercial customer looks for. And that’s why regional banks exist. That’s why we exist. That’s why we take market share away every day. That’s why we have a pipeline of business. So that is sort of to me, sort of personally speaking, that was my sort of inflection point in how depressing all of this was in March. After that phone call, after that realization I started getting out of this and started feeling good about, okay, this has happened. We’ll deal with it. There is an opportunity that comes with it. We’ll capitalize on it and we’ll continue to keep building the bank.
So now it’s been a hell of a what it six, seven, eight weeks now.
