Dime Community Bancshares, Inc. (DCOM) Q4 2019 Earnings Report, Transcript and Summary

Good day, and welcome to the Dime Community Bancshares Fourth Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] after today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ken Mahon, President and CEO. Please go ahead.

Thank you, Sean, and thank you everyone for joining us this evening. On the call with me today are Chief Financial Officer, Avi Reddy; and our Chief Accounting Officer, Leslie Veluswamy. In our prepared remarks, we'll pick up some of the broad themes that underlie the earnings release and then add our outlook for the fiscal year 2020. Opening remarks will be brief so we can take some questions at the end. Three years ago at the beginning of 2017, we took steps to reformulate our business model from that of a brokerage driven multifamily serve model into a full service commercial bank. This effort culminated in the adoption of commercial bank charter in spring of 2019. A primary impetus for the change that was clear to us that the community commercial bank model enabled the possibility of a more diversified balance sheet, and better returns for shareholders in the future, reflected in the form of structurally higher net interest margin, return on equity, and ultimately to better trading multiples, both to book value and to earnings. To that end, Dime's strategic plan is built upon improving five fundamental metrics: one, grow our total checking account balances; two, increase low cost business deposits; three, grow relationship-based commercial loans that have better risk adjusted returns than multifamily loans; four, reduce our regulatory CRE concentration ratio; and five, diversify the sources of non-spread revenue while increasing the contribution of non-spread revenue to total revenue. Of those five metrics how did we perform in 2019? Starting first with growing our checking account balances. On a year-over-year basis, average non-interest bearing and low interest bearing checking accounts increased by 20.4% to $605 million. Every dollar of low cost deposits that we raise increases the franchise value of our company. From every member of our executive teams on down to our entire customer-facing staff, our compensation plans are highly focused on incenting low-cost deposit gathering. The second metric is increasing low-cost business deposits. Total commercial banking deposits from our Business Banking division plus our legacy multifamily division increased by almost 31% or approximately $133 million on a year-over-year basis. Commercial deposits now comprised 13% of total deposit, as compared to approximately 10% of total deposits a year ago. Our third financial metric is the growth of relationship based commercial loans. Business banking division's portfolio crossed the $1 billion threshold at the end of the second quarter of 2019 and ended the year $1.28 billion, compared to $648 million at the end of 2018. This represents year-over-year growth of 97%. The Business Banking portfolio now after three years represents 24% of total loans. To provide some historical context, we initially started this business build-out in early 2017, and in the first year, we achieved approximately $240 million of net portfolio growth. In 2018, $410 million in net portfolio growth; and now in the third year, $632 million of net portfolio growth. Well within striking distance of the net growth target, we established for our bank at the start of the year. Importantly, we continue to attract high quality commercial bankers to our staff. From a standing start in 2017, the Business Banking group has now grown to 64 bankers including approximately 17 of whom our frontline business producers. Our four targeted metrics is the lowering of the commercial real estate concentration ratio, which not long ago was Dime's Achilles heel. We've now reduced our consolidated regulatory CRE concentration ratio to 663% at year-end 2019. As many of you remember, Dime was well over 900% only a few years ago. This is not an insignificant achievement and has reduced the headline risk associated with a legacy multifamily Dime model significantly in my opinion. Final metric as it relates to non-spread revenue, we've invested in our SBA business, developed a commercial swap program for our loan clients, and improved our commercial service fee income generation capability. We grew annual non-spread revenue excluding securities gains and losses by over 37% on a year-over-year basis. To summarize, we've made quantifiable progress on all five fronts and you can start to see some positive patterns and trends emerging. We plan to make even more progress in the years ahead. And I'm confident with the existing team in place and the new hires we continue to attract Dime is on the path to be one of New York's preeminent community commercial banks. In fact, I've challenged the staff with the following goal for 2020. I want Dime to be the best business bank in New York. Our brand name already resonates in our local markets. Now, we increasingly have the people and the products to achieve that goal. As I've mentioned before the build-out of the Business Banking division was a very timely strategic decision for Dime, we now in place a robust and growing platform to generate high quality loans -- high quality commercial loans, with good risk adjusted profitability. We are no longer reliant on transaction and refinance volume activity in the New York City multifamily markets. Those volumes appear to have been impacted by the rent regulated rule changes, but Dime is no longer a significant player in that market. Turning to deposits, in the span of just three years, our Business Banking group now manages a bigger composite portfolio of about $357 million at the end of the year, than that of the legacy multifamily business. Deposit to loans for the Business Banking division are running at approximately 27% of that loan portfolio, compared to approximately 5% for the legacy multifamily business there. Therein lies a tremendous opportunity for Dime as we remix our balance sheet and as the contribution of Business Banking grows over time. The Business Banking division build-out has had an important ancillary benefit on how we operate our legacy multifamily business as well. Historically, Dime had only the multifamily business to achieve balance sheet growth. We basically took what the market gave us in terms of rates. Now we have the flexibility to look for multifamily transactions that meet our return hurdles while keeping in mind our goal to improve the quality and composition of the balance sheet. I am very proud of the work done by our multifamily team, as they've adapted to our new mission of focusing on important relationships and prioritizing solid margins and returns above chasing balance sheet growth. For those of you who have seen our investors slide deck, my favorite page and when I point to all the time is the page comparing our loan yields and our deposit costs to 13 individual peer institutions in our New York market. As of the quarter ended September 30th, which is the most recent period that we have peer information -- for which we have peer information available. Dime lagged the medium loans yield of the peer group by about 37 basis points in total. The peer group of the median at September was 4.3%. By comparison, in the fourth quarter, the weighted average rate on our total Business Banking originations books real estate and C&I was 5.39%, 101 basis point higher than the peer group median portfolio yield. That shows the earning power of the new model. I'm confident that now we have the infrastructure in place to close the gap with a peer group yield in due time. On the other side of the balance sheet, our progress in the deposit front has likewise been commendable. If we go back to the fourth quarter 2016, just prior to the onset of our transformation, Dime very nearly had the highest cost of deposits when compared to those 13 peer banks. Now, our cost of deposits has moved meaningfully lower than many of those same competitors. And with the recent decline in cost of deposit we experienced in the fourth quarter of 2019, we're fast approaching the peer median of cost of deposit. Avi will provide more detail on the cost of deposits in his remarks. Our team is certainly confident that we can continue to do better in terms of improving our non-interest bearing deposit percentages on our way to becoming not only a high performing commercial bank, but in fact, the best business bank in New York. On a year-over-year basis, we grew the non-interest bearing deposit ratio by approximately 210 basis points. Our goal is to get to 20% non-interest bearing deposits as quickly as possible. Now, I'd like to turn the conference call to Avi who will provide some color on the fourth quarter results and the outlook for 2020. Avi.

Thank you, Ken. I'll first start with our fourth quarter results. Core EPS was $0.27 this quarter compared to $0.13 for the leaf quarter. Included in this quarter results for the $7.5 million provisions related to a previously identified C&I relationship that had already been placed on non-accrual status. As mentioned in the press release, being fully reserved against this relationship is a prudent course of action given what appears to be a very protracted settlement process. We want to share a few details on the credit. The borrower was a subcontractor, which has performed significant work on municipal projects and private projects in the metro New York area for over 20 years. The borrower filed for bankruptcy in the third quarter prior to which they were current on all payments. Dime has extended $20 million of credits to this borrower. We're currently working with a bankruptcy trustee to maximize returns for ourselves and other unsecured creditors. From all accounts we received to-date this appears to be a highly unique situation where the subcontractor was pressured to complete a major public works project on an accelerated time frames, which led to bankruptcy. The charged-down balance of the loan is $10 million of which all of it is a non-accrual. As mentioned previously, we're fully reserved for this $10 million exposure. Beyond that information, we will not be providing any more commentary on this individual credit in the Q&A as a loan is still in the workout process. I'm sure you can all respect that position. Our stock price suffered in late October after our third quarter earnings release likely as a result of the aforementioned non-accrual announcement. We took that as an opportunity to repurchase shares at attractive levels, given the confidence we have in our business plan and the underlying fundamentals. As such, we ramped up our repurchases of stock in the fourth quarter and purchased over 750,000 shares for a total cash outlay of approximately $15 million. The repurchases in the fourth quarter represented approximately 2% of shares outstanding. In addition, our Chief Banking Officer purchased approximately $125,000 worth of stock in the fourth quarter. This morning, our board authorized a 14th share repurchase plan that will allow us to repurchase up to 7.5% of the year end shares outstanding following completion of the previously authorized 13th share repurchase plans. Importantly, core pretax, pre-provision income excluding the FHLB extinguishment expense and expenses associated with a branch consolidation was approximately $18.7 million for the fourth quarter 2019 compared to $16.8 million for the linked quarter and $16.9 million for the year ago quarter. That represents 11% year over year growth in pretax pre-provision income. The net interest margin excluding loan prepayments fee income increased by 18 basis points on the linked quarter basis to 2.47%. As Ken mentioned, driving a structurally higher NIM is one of the key tenets of our business model transformation and we were pleased with this quarter's results. The increase in core NIM was driven by 20 basis points decline in our cost of deposit as well as holding our loan yield fairly steady. In fact, the weighted average rate on our total loan portfolio, which excludes prepayment fees and deferred season costs increased by 2 basis points on the linked quarter basis. Based on the earnings releases we've seen so far, we believe this decline in cost of deposits could be amongst the most significant amongst our peers. The continued uptrend in the weighted average rate on loans is due to the Business Banking portfolio becoming a larger percentage of the overall balance sheet. During the fourth quarter and as previously disclosed in our third quarter 10-Q filing, we restructured a portion of FHLB borrowings. In total, we repaid $207 million of borrowings with a weighted average rate of 2.65% and the realized expense associated with the extinguishment was approximately 3.8 million. The borrowings were prepaid over the course of the quarter, starting late October and continuing till year end. And as such, the full run rate benefit was not fully realized this quarter. Within the 18 basis points of core NIM expansion I discussed, only approximately 1 basis point was related to the benefit of the lower cost new borrowings that we put on. Next quarter, we should get an additional basis point of expansion from the restructuring. Adjusted for non-core items, our efficiency ratio was 57% and the expense to assets ratio remained relatively well controlled at 1.55%, and this compares well with other community commercial banks. Apart from improving the quality of our balance sheet and risk adjusted margins, a critical part of the Business Banking goes out in the addition of non-spread income. In 2019, we definitely saw promising early signs of increasing non-spread revenues. In the fourth quarter, we estimate approximately $400,000 of customer related loan level swap income. Developing an interest rate swap program for our commercial customers was the next natural step in our commercial bank evolution, and we are happy to note that we are now able to provide this service to all of our commercial clients. In addition, our SBA team has been gelling very nicely with our branch network and produced approximately $300,000 in gain on sale income in the fourth quarter. Our SBA team has impressed us with their professionalism and size and growth of their pipelines, and we expect them to be a major contributor to fee income in 2020. Non-performing assets and loans 90 days or more past due dropped by 25% versus the linked quarter to 12.6 million and represent only 20 basis points of total assets. We ended the year with a tangible common ratio of 8.59% and the risk based capital ratio grew on a linked quarter basis with a common equity Tier 1 ratio ending up at a very healthy 11.15%. Now, I'll move on to the outlook for fiscal year 2020. We expect net portfolio growth for the Business Banking division of approximately $600 million for FY 2020. This accounts for amortization and payoffs in the existing portfolio that is seasoning as time passes. We have seen growing demand for responsive customer focused platform as we demonstrate longevity and commitment to the commercial bank models we've been provided more opportunities to add high quality individuals from our competitors. Our charter conversion from a thrift to a commercial bank, which became effective in April 2019 following all applicable regulatory approvals is testament to the fact that the board and management team are fully invested in our business model transformation. Our 2020 ending total assets figure will be a function of future pay offs in the multifamily business. Ultimately, we are most focused on improving the quality and the remixing of our balance sheets. We refer to this internally as building a new balance sheet inside the old balance sheet. In terms of the actual balance sheet size, we will manage it based on the growth opportunities at hand and return capital to our shareholders as circumstances present themselves. In this regard, and based on all the stress testing we've completed, we expect to run the Company with a Tier 1 ratio in excess of 10.5% and a tangible ratio of approximately 8.25 to 8.5 during FY 2020. As we demonstrated in the fourth quarter, we don't have to grow the balance sheet in order to grow our core earnings dollar per share. We can grow EPS by improving our margins and using the excess capital generated to buy back shares. Buying back our shares continues to represent an attractive investment with a TBV earn back of approximately four years. As you well know by now, we don't provide quantitative NIM guidance. I want to provide our rationale for taking this contrary approach. We are a business model in transition and we do not want to manage the balance sheet by chasing quarterly earnings targets. We're truly trying to build a business for the medium to long-term, and this quarters NIM expansion was validation of our thesis. Inherently, the direction of the NIM depends on a number of extraneous factors that are outside of our control including future actions from the fed, the shape of the curve, and the competitive pricing environments for deposits. What we can say on the NIM is this, the weighted average rate on the $1.3 billion business banking portfolio was approximately 4.95% at the end of 2020 and it was accompanied by $356 million of self funding deposits at a weighted average cost of 69 basis points. This leads to an implied Business Banking portfolio NIM in excess of 3.75%, which is far above the NIM on our overall balance sheets today. While there are various factors will affect the changes in NIM on a quarter-to-quarter basis, the medium to long-term trajectory of our NIM is clearly upward, as a business banking portfolio becomes a larger percentage of the balance sheet overhead. We have approximately $515 million of multifamily loans with a weighted average coupon of approximately 3.32%, which are scheduled to reach that contractual replacing date in 2020. Clearly replacing these legacy loans with business banking loans which have much higher yields and more associated deposits will aid with a continued upward trajectory of our NIM. We're projecting non-interest expenses for fiscal year 2020 of approximately $98 million. While this may seem like a higher expense growth rates than some of our peers, I'd like to point out two key important points. First, we are highly confident in our business model transformation and the early returns have been on track and very promising. So, it makes sense for us to continue to invest in productive lending capacity. As such, we want to continue to reinvest in the business and support staff to aid in our continued transformation. Second, our expense to assets ratio 1.55% continues to compare favorably to commercial bank fields. As we grow the business over time, the revenue side of the equation will catch up with some of the expenses and this will help with the efficiency ratio over time. I will point out again but we still have over 70% of our balance sheet in lower yielding legacy broker driven loans, which remains a drag on the revenue side of the equation. As time progresses, I'm confident this, we will be able to transform the NIM with having more of our balance sheet in Business Banking. As it relates to non-interest income, we have very positive progress on the SBA front this year. After somewhat slow start in 2017, we hired a new leadership team in late 2018 and they made very good progress this year. Our short-term goal is to have the SBA business reached a $2.5 million plus annual fee income run rate as soon as possible. We continue to gain significant traction with our clients on a commercial swap program. We expect this business to be over a $1 million revenue plus business for us in 2020 from effectively no contribution up to the second quarter of 2019. We continue to optimize our core technology platform to help drive commercial banking fees. As we acquire and onboard more clients, this fee source will grow as well. Finally, with respect to the effective tax rate for 2020, we expect it to be approximately 22.5% to 23%. With that, we can turn the call over for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Mark Fitzgibbon with Piper Sandler. Please go ahead.

As you grow your C&I originations, I'm curious, are there any areas or industries that you're focusing on? And also who you taking share from, is it from a larger banks or is it other community banks?

Mark, I think just to answer the second question. Yes, the larger banks out there. We said in the past, we really have a unique opportunity here because we're really the only bank that has a $600 million capital base that's highly focused on this with a brand name that resonates. So it's that's kind of where the opportunity is at this point in time. I think right now, there's no specific industries that we're significantly focusing on, we provided some details on our portfolio in our last investor presentation, but it's typical cookie cutter community commercial bank type credits.

Okay. And then prepayment penalty income was strong this quarter. I assume you think that that will decline a bit in, in coming quarters?

Mark, typically what we're seeing with that, I guess, with our portfolio is Q2 and Q4 are typically fairly strong quarters for us. And then Q1 and Q3 seem to be lapses to be just with the borrowers trying to get their stuff done by midyear and end of the year. So, that's hard to predict. And I think in general loans are staying on a little longer, they're getting closer to their reset base before prepaying. But, I think what the size of the portfolio that we have, I think for the full year, it's hard to see as having less than $4 million or $5 million of prepayment revenue and therefore for a full year, which kind of a $1 million per quarter-ish. This quarter, obviously, we had a little bit more than that. But I think given the fact that we still have a portfolio that's over 3 billion, you probably should see a 1 million plus of repayment fees, but any individual quarters can go up and down.

And then, I know that you all are deemphasizing multifamily and there haven't been a lot of multifamily sales recently in the metro New York market. But what's your best guess as to how much values have gone down in the last year on buildings that have rent control rent stabilized stuff in places like Brooklyn and Queens?

Cap rates really have stayed low Mark. So, that's part of what did drive the value calculation. And then, Dime's haven't really done loans based on pro forma rents or anything. So, I mean clearly it's impacting the transaction volumes, but it's hard to estimate what that's done. I do think the cap rate have been a big help, the low cap rates have been a big help to that, and we're not really seeing too much disturbance in that marketplace.

And then lastly, I know its small members but the construction portfolios like $118 million now, but it's been growing pretty fast. I guess I'm curious what kind of construction projects you doing and what are your largest construction loans in terms of size?

Mark, it's a pretty cookie cutter construction portfolio. Typically what happens with construction loans you make them and then takes a while for them to fund. I mean, we obviously have internal limits on those and less than 5% of our loan portfolios, it's very manageable, but it's just the standard no different than any other community commercial bank is doing.

How big loans are we talking about? I know they're not all drawn right away, but…

Yes, I mean probably if all being drawn, less than $10 million of size, I mean, that's kind of the size, less than that.

Our next question will come from Collyn Gilbert with KBW. Please go ahead.

Just want to dig in a little bit to the loan book and just starting with some multifamily. I know, Avi, you had said that you had, where it was a 500 or some odd million that was contractually due to mature in 2020, and I think that number was like 600 million or something like that last quarter. But you guys saw a pay down, I think that were higher than what you would have anticipated in the fourth quarter because I think you were thinking that maybe the paid as a multi would be matched with the growth in this business and that balances with the whole flat? So just trying to get a sense of use, where are the behavior you kind of expect on the multifamily side and maybe, do you anticipate pay downs to sort of accelerate or how we should sort of think about the rate of pay downs in that book?

Collyn, again, it's seasonal, right? I think in the first half of the year, pay downs were a little bit slower. People are waiting for the rent regulated rule changes to go into effect. And then we have this seasonal Q4 when pay-out pick up. So, it's hard to predict with that portfolio, but I think that we have to think about. We have capital, we have a balance sheet. If we have more pay offs that things going to be, balance sheet going to be slightly smaller, but we're going to return that capital to shareholders, managing around the capital ratio constraint I described. So, our story is not really about a balance sheet growth story, it's about a re-mixing story. And it's the payoffs are higher than what we think we'll return that capital to shareholder over time.

But really in the multifamily portfolio, a lot of the loans that are there are raised as far as he gets it. So, there's no incentive for them to rush in to refinance, and there's really going back from Mark's question a little bit earlier. There's nothing -- there used to be a lot of juice in those values. They come and take more money out. Those days seem to have passed us by.

So then within that, Ken, would you -- then these loans could see their contractual maturities versus prepay head?

Yes, it's correct. Either they're refinancing debts or their maturities, correct, right.

And then just I hear you on all the moving parts on the NIM and unwillingness to give NIM guidance, but just wanting to understand sort of this strategic direction of how aggressive you guys want to be and pushing out some of the higher college deposits specifically kind of in that online channel? It seems like that part you do have some control over. So just wanted to just kind of get a sense for how you're thinking about pushing through these lower deposit rates and pushing out some of these higher cost accounts?

So Collyn, on the Internet side, the DimeDirect piece that we referenced, we're down to around $100 million on that. So, I mean, our rates are below our peers. It's not a big portfolio at this point. I think when you think about deposit cost, we do have CDs maturing over the next three months, that's around $330 million of CDs and the rate on those CDs are anywhere between 210 and 220. And right now, we're retaining probably 70% to 80% of that at a rate that's around call it 40 to 50 basis points lower than that. So, I think the next leg in the cost of deposits decline is going to be driven by a decline in our CD book. We made a lot of changes on the multi-fam -- on the money market side and we will continue to tweak that on the margin. But I think from the CD side, there should be some declines as a lot of our competitors have dropped rates too. I think overall it's we're trying to manage client expectations and also in our competitive environment. So, there is not any one area point to, but the CD piece is probably one that naturally you have a level of retention and we're seeing on 75% to 80% that was with much lower rates.

Okay, that's helpful. And then I just to make sure, I heard you correctly on the expanse guide. Did you say $98 million for 2020?

That's correct. Yes.

Okay, and then just curious. So the FDIC, how we should be thinking about the FDIC expense within that? Will that come back up to normalized levels kind of similar to what you posted in 1, 2Q of last year?

Yes, I mean, it's just, again, they do the calculation and we're not going to get any more credits going forward and that's all in your run rate of 98.

Okay. And then just on the credit, I just want to make sure I understand the steps that you guys have taken to-date. So you started -- if you could just walk through that with me again, you started with the 20 million of outstanding, you took a $5 million charge-off in the third quarter, another $5 million, if I read that right, charge-off in this quarter, but then you hit had a specific reserve and I just trying to get the math there as to how you now feel like you're fully reserved on that $10 million that's left?

Collyn, we started off with 20, we charged off 5 million, and we made an adjustment to the reserve associated with that. So, there's only a $15 million loan as September 30th. At September 30th, we took another $7.5 million specific at that point. So, we were only not reserved for $7.5 million of that loan. We charge the balance of the loan down now to $10 million and we took another reserve right now of 7.5. So, we've taken the full reserve, there's no more income statement volatility on this reserve. It's just how the accounting works. You probably have to think about it a little bit more. But from our perspective, we've taken the full $20 million of provision in, on the loan, both on a specific reserve and general reserves that we've taken against it. So, there will be no more income statement volatility on it because we've taken the full $20 million. Anything that we collect on the loan, it'll also be in recovery going forward.

Okay. That's helpful. And then did, you -- have you offered or can you give us any updates on CECL?

So, we have a range in our 10-K, Collyn. All I'd say right now is, we don't have a big consumer portfolio. We don't have any long duration portfolios. We have very small residential book. So, I think when you look at the guidance that a lot of the other people have out there, you can draw some conclusions to that. But when we file our 10-K, there will be a range in there.

Okay, that's helpful. And then finally, just one quick thing on the borrowing repay. So you paid down, just wanted to go -- so you paid down at 265 and you refinanced at what rate?

I mean, as a mix of overnight two years, three years, five years, across pretty flat all across, so it's probably like 175-ish. So, you're really making up 90 basis points over there on $200 million. So, that's like a 1.8 million basically for your annual run rate that we're saving. The actual 1.8 million to 1.9 million the charge was around $3.8 million. So, that's what we got the two-year earn back on that.

Okay and that was laddered throughout the quarter. I mean, I know you've indicated one basis point of NIM benefit happening in the first quarter tied to that, but just the timing on when you started recently?

I mentioned in my prepared remarks, Collyn, we started the transactions at the end of October and then went from October all the way to the end of the year. So, that's why we've done it. Throughout the quarter, we've been a half quarter impact, but it really only started on October 30 that time frame. So -- and I gave the guidance that it's helped us quarter by one it's going to help an additional one next quarter.

Our next question will come from Matthew Breese with Stephens. Please go ahead.

Just thinking about the municipal deposit effort, I know it's in its infancy right now. But as we think long term perhaps over the next two to five years, what portion of the overall deposit book do you want that to take up? And then just as a follow up there curious about the on-boarding costs of those deposits and how they react to moves in fed funds?

Matt, I think what we said in the past is a lot of our peers have between 10% and 15% of their deposit base in municipals. I think there's no reason why Dime can't get to that stage is obviously a long term target for us. So, if you think about deposit base shifting across $4.5 billion, $500 million of that should have been municipal, if we had the capability to take it. Obviously, we're new to the business, but we have people who have been in the business a long time with significant established books of business. We ended the year with around $20 million in deposits. We're already up to over $50 million as of today. The rates in that right now are probably 175 and 195. That's obviously when you onboard a new client. It's obviously giving them a rate that's able to lure them away from some of our competitors as well. But I think over time, we should be no different than some of our peers over there, and what it's really done is, it allows us not to focus on promotional deposits on the consumer side. And obviously, on the consumer side, when you raise deposits, it's not just the promotions, it's taking off time from people in the branches, it's advertising, it's all of that. Here with the much leaner infrastructure, we're able to raise those deposits. So, in fact at the start of the year, we have checking accounts as well associated with that. So that $15 million of the deposits is probably $5 million to $6 million checking accounts associated with that. So, again, it's a huge opportunity for us and one of the key things a management team and board looked at when we thought about it the charter change.

Okay, understood. And going back to the multifamily question, I understand you have $515 million set to hit their contractual resets this year. But, we've been in the business banking. That initiative has been off the ground for some time now. You've adjusted your multifamily prices for some time now. As you've gone through the quarters, and a number of multifamily loans have hit their contractual reset. Even though you're pricing is a little bit out of the market. What's the recapture rate, how much of that 515 if we were to apply what you've done historically, do you expect to maintain and keep?

It really depends on the rate because there's competitors out there who are pricing a lot below us and so it depends on where is that. I think we're keeping customers with us who've been with us a long time and who don't want to move to another bank. But if somebody is just going straight after the rate, a lot of those accounts would go elsewhere.

Can you give us an idea of where you are rate wise versus the market right now?

Yes, we're probably in the high 3s to low 4s on a multifamily side. Again, a lot of the customers with us have been with us a long period of time, and they're okay paying slightly above market plus that's kind of where we're at high 3s to low 4s.

And with the adjusted pricing on a quarterly basis, could you give us an average of how much of that product you're actually able to originate?

Yes, we had a -- there's a table in our press release, which has a breakdown of it. So, what we started doing is on the origination side, we break it out between business banking and non-business banking. And so for business banking, we've done around 85 million real estate loans at 511. All other loans were on 65 million at 4.08%. Within that $65 million, there is around $30 million of residential originations at a rate of around 375. The remainder is probably multifamily, which is around $30 million of multifamily at a rate north of 4%.

[Operator Instructions] Our next question will come from William Wallace with Raymond James. Please go ahead.

Avi, in your prepared remarks you said, you've got 550 million I believe of multifamily that reaching its contractual re-pricing date in 2020, is that correct?

Yes. I said 513, I believe.

513, okay. And then what did you say that weighted average yield was?

3.32.

And if it re-prices rather than prepays, what are the characteristics of those? How much will they will they price up?

Generally, the FHLB plus 250, Wally, but in reality, I mean, our customers have very good solid customers. i mean, they can get a rate somewhere else that's a lot lower than that.

So, they're more likely to leave?

Right, I mean, some of them would stay on the ones that have been with us for a significant amount of time. But then they're not going to reset at the FHLB plus 250. We're going to find something in the scene that works for both of us.

This will conclude today's question-and-answer session. I would now like to turn the conference back over to Mr. Mahon for any closing remarks.

Thanks folks for tuning in. We were pleased with the, some of the fundamentals in the financials this quarter, because we're focused on the foundational things that are going to move the stock price and the earnings over time. So, appreciate the questions and look forward to talking to you on the next earnings release. Thanks.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.