Frank Schiraldi: And then just wondering about the potential to accelerate some of this reduction in concentration. You obviously moved some stuff out of CRE at par this quarter and obviously, it seems like there’s been some opportunity on the commercial side. We’ve certainly seen commercial teams moving around, I’d say, given to a greater degree, given some of the dislocation in the marketplace, let’s say. So I’m just curious as you think about that, if that’s something that you guys are seeing potential there to maybe accelerate this through greater mix shift in the near term?
Ira Robbins: I think maybe I’ll start, if you don’t mind, and then I’ll turn it over to Tom. But I think one of the constraints that we’ve always operated in here is what that tangible book value number. And it’s really been a focus within the organization to not dilute shareholders through a tangible book value transactions. As we mentioned earlier, whether it’d be through silly M&A transactions that have very long buybacks or through balance sheet restructures. I mean, we see that today in what’s happening with some securities books, we see what’s happening with also sales. So I think that’s a constraint that we look at to make sure what alternatives are that we have to make sure that that tangible book value and capital really continue to grow within the organization. That said, we were able to execute a lot at par today.
Tom Iadanza: Frank, in your reference in question regarding deposit driven commercial teams, we have opportunistically added teams in certain markets, including the Southeast and the North.
Frank Schiraldi: I guess the big — it just seems like there’s a lot of movement. I don’t know if maybe some of these things end up being too expensive on the front end of things. Obviously, you guys reduced your expense guide a bit. So I was just curious and maybe there was a significant pickup opportunity here just in the near term. We’ve obviously seen some other press releases from other places. And so I was just curious about anything in the near term of size.
Ira Robbins: Maybe that I misunderstood your question at first, and I apologize. I thought you were going a little bit more on the loan side, and I should just defer to Tom right off the bat. Look, I think as we mentioned on the call, we’re seeing a lot of growth in that Southeast market. So some of the dislocation that you’re seeing up here in the Northeast with people coming with teams, they obviously come at a significant expense, we’ve looked at some of them and the marginal cost to bring on some of those deposits. When you combine it with the expense of those teams, we’re finding much, much cheaper alternatives elsewhere, and that’s where we intend to allocate a lot of our resources to.
Operator: Our next question comes from Emily Lee from KBW.
Unidentified Analyst: It’s Chris. In terms of the — Ira, the capital, the 9.8 by the end of the year and 10 plus over the next 12 to 24. How did you get to those numbers? I’m just interested in kind of — I understand the mechanics of how you would get there. But how did you get, I guess, more importantly to the 10 plus? Some of your peers are kind of mid-10s, even 11?
Ira Robbins: I think, look, overall, Chris, we’ve talked a lot about relative to our peers that our allowance and capital ratios, we’ve justified them being slightly below where peers are, understanding that they still need to be higher than where we are today. So I don’t know if your question is on kind of the immediate term or kind of where we view ourselves in the long term. But if you look at that near term expectation column, all these metrics reflect kind of organic efforts or things on the margin like what we did this quarter in terms of selling off certain commercial real estate loans at par. So there’s no significant rash actions that are embedded in the near term expectation column. And then it’s a continuation of those efforts over time that gets you over to the right hand column. So not sure if that’s the answer, but…
Unidentified Analyst: Just a follow-up on that. Would there be any situation where you would do like a credit linked note or some sort of RWA mitigation to accelerate that? You’ve seen some peers do that with success.
Ira Robbins: I would say that all RWA optimization opportunities are on the table and there are — but there are certain portfolios that lend themselves more to that than others. But we have a very diverse balance sheet and we have portfolios like auto and residential that could be good opportunities for transactions like that.
Unidentified Analyst: And then maybe just two housekeeping. Do you have, maybe I missed it, CRE concentration metric in the first quarter and then also the quarter-on-quarter change in the criticized classified special mentioned? I know you mentioned a little bit high level, but any specifics there.
Ira Robbins: The CRE ratio is going to be about 464%, so it should be down about 10% from December 31st. And Mark?
Mark Saeger: On the migration, as we mentioned, approximately 500 migrated into criticized for the quarter. A little granularity on that disproportionately in office, which should not be a surprise with what’s going on in the market today.
Operator: Our next question comes from Jon Arfstrom from RBC Capital Markets.
Jon Arfstrom: Just a follow-up on the last answer to Chris’ question. Are you guys telling us just to expect higher criticized and classified loans each quarter? It sounds like you’re doing a deep dive maybe every quarter. But how do you want us to think about what’s ahead just to prepare us for that?
Mark Saeger: Just pointing to what Ira spoke to before. We did a special review on the sensitive asset classes and overall portfolio touching a little over 60% of the portfolio in the first quarter with a focus on rent stabilized and office. So while I anticipate because of the high rate environment that we will continue to have some migration throughout the year, we do believe that the first quarter migration was elevated because of the focus of the reviews and the percent of the portfolio that was reviewed.
Jon Arfstrom: Mike, can you go over your margin expectations again? I think I heard you say that you feel like the margins troughed and we’re going to get a lift in the second quarter, but I just want to make sure I heard that correctly.
Ira Robbins: First, thanks for asking the question. I was feeling left out this morning, but good. I don’t believe I said the word troughed, but let me go back to the first quarter and then I’ll give you the guidance. So generally, the first quarter results were in line with our expectations on a day count basis. And the modest headwinds as it relates to net interest income were really the noninterest bearing deposits and slower loan growth, but those were also offset by some deposit cost reductions that we’ve spoken about as well, and we continue to look at that. The guidance being revised slightly down is again a function of a starting point with lower noninterest bearing deposits and again the slower loan growth that we talked about, especially when you consider the participations that we visited about being in the latter part of first quarter.
So that impact isn’t in the numbers in the first quarter as much as it will be in the second quarter. And then while we did assume fewer fed cuts, I would assume most people are doing that. Remember that long end rates are forecasted to be higher relative to where they were as the start off point in 12/31. So that on a net basis, the shifting yield curve, whether it’s on the higher or the short end is a modest benefit to us because we’re more exposed on the long end.
Jon Arfstrom: And Ira, if I heard you correctly, you said with these guidance changes, do you still expect relatively consistent PPNR to what you said before these adjustments, is that right?
Ira Robbins: Absolutely.
Jon Arfstrom: So it’s just — for us, it’s a question of trying to figure out what the provision is and that’s — and you’re just saying some modest growth in the reserve, PPNR stays the same, just the geography on the income statement is different. Is that right?
Ira Robbins: I think we’ve tried to give you some guidance as to where those numbers could shake out. But obviously, look, it’s market dependent, as Mark said. We’ve gone through and looked at a lot of the portfolio already. That said, we’re going to continue to monitor the portfolio and do the credit reviews. We believe that that’s really been a strong point for us and the ability to have the significant reviews that we do as it’s driven down to lower loss given default. So it’s been part of a hallmark of who we are in actively managing the portfolio and not just waiting for something to happen. So we are all over every single loan that we have and we continue to really be in as market conditions change, we’ll adjust them accordingly.
Operator: Our next question comes from Manan Gosalia from Morgan Stanley.
Manan Gosalia: With all the puts and takes on the loan side that you just discussed and given the fixed rate loan repricing and the 40% of loans being floating rate. How should we think about the loan yield expansion from this quarter’s levels under a three rate cut scenario?
Mark Saeger: Look, I think you’ve seen the pace of loan yield growth has slowed as rates have stabilized generally on the front end, so that immediate benefit has kind of played itself out probably. But you do obviously have some tailwinds. And when we show you — I think in the deck when we show that mature increase slide that may be a good kind of guide to help you in terms of what’s coming off and then where you’re putting things back on. We originated loans, loan yields this quarter still in the high 7s. So I think on a CRE perspective, our CRE origination yield was $7.80. So there’s still some opportunity to enhance loan yields there.
Manan Gosalia: And then you noted that you purchased some Ginnie’s this quarter. Is there more room to do that? And how should we think about the level of on balance sheet liquidity that you want to manage to over the next few quarters?
Mark Saeger: So the Ginnie Mae purchases, obviously, they’re zero risk weighted. They average about three to four years. And the yield on that portfolio on recent purchases, I should say, have been in the 5%, slightly more than 5% range. The runoff on the portfolio, there’s really no prepayments, so it’s going to be just the stated maturity payoffs run around $75 million to $90 million a quarter. And we would continue to add we believe in zero risk weighted Ginnies at probably 5% to 5.5%.
Manan Gosalia: So in terms of the on balance sheet liquidity you need to maintain from here, is there room for that to move up or do you think you’re at the right level? I ask in context of you also mentioned that the LDR should trend below 100% in 2025. So just want to get a sense of what the right level of liquidity is?
Tom Iadanza: I want to make sure I’m answering — you’re referring specifically to say FHLB or Federal Reserve availability?
Mark Saeger: I think overall, you’re probably going to see a little bit more on balance sheet liquidity, not to a significant degree, but part of getting the loan to deposit ratio down to 100 will definitely be a little bit of the core deposits coming on and being reinvested in securities as opposed to going into loans. But I don’t think you really need to look at a significant shift within what that securities book looks like.
Operator: Our next question comes from Jared Shaw from Barclays.
Jared Shaw: Looking at the CRE sales that you did this quarter, being able to do those at par is great. I guess that’s a little surprising though just given where rates are that there wasn’t even like a rate mark on there. Could you give any detail on the term and yield of the type of loans that were sale or sold and if there was any retained credit participation on that?
Tom Iadanza: These were participations for the most part. Those participation rates range probably from I think 7.4% and up, fixed side was 7.4% to 7.5%. They were all participated at par. We retained a portion as lead bank on those. On the floating side, they were mostly prime plus construction loans. And again, we retained a position in those.
