BankUnited (BKU) Q3 2026 earnings call transcript

Thank you. Good morning, and thank you, everyone, for joining us today for Bank United Inc. 's third quarter 2026 results conference call. On the call this morning are Raj Singh, Chairman, President, and CEO, Jim Mackey, Chief Financial Officer, and Tom Cornish, Chief Operating Officer. Before we begin, please note that our remarks today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect current expectations and are subject to various risks and uncertainties that could cause actual results to differ materially. The company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise.

Additional information regarding these risks can be found in the company's annual report on Form 10-K for the year-ended December 31, 2025, and any subsequent quarterly report on Form 10-Q or current report on Form 8-K, which are available at the SEC's website.

With that, I'd like to turn the call over to Mr. Raj Singh.

Thank you, Jackie. Good morning, everyone. Thanks for joining us. Usually, we always have this issue that we come out with earnings and there are eight other banks doing their calls at the same time. My team tells me that we somehow got lucky and we picked a day when not many banks are coming out. So we'll have your undivided attention. That's awesome.

Let me start by just before we talk about our numbers, just talk about the question that I often get from investors, what do you see in the economy and how are things out there on the mainstream?

And my answer is going to be similar to last quarter, which is while there are geopolitical risks and energy is a little out of control and there are concerns around inflation, the economy itself is doing quite well. GDP rates are strong. Unemployment is historically low. and in our particular markets, even more so, both those things. So we are benefiting from that, but keeping an eye on making sure it continues that way.

What has changed from the last time that we spoke is the interest rate environment is quite different. Fed is no longer in a hold or loosening monetary policy stance. It's gone the other way. We've had our first rate hike. But more important than the rate hike also has been what's happened with the rest of the yield curve.

So that is a big change from last time, and we're paying extra attention to it and make sure that we have all our bases covered. That's really been the big change.

Overall, our numbers, I'll walk through them really quick, and of course Tom and Jim will then get into some detail. Net income came in at $72 million or $1.01 per share. I know you guys love to exclude anything on the securities front, so if you take out some securities losses we had, net income was $74 million, and EPS was $1.03 per share.

If you compare that to last quarter, I think we were at $0.96 last quarter, and a year ago we were at $0.94, so making progress. ROA on an adjusted basis was 84 basis points, and ROE is now pretty damn close to 10%, but still not at 10%. It's at 9.8%. So basically, ROA, ROE, margin, EPS, everything improved, and it all happened on the back of basically gaining market share and deepening client relationships.

So quickly, the highlight of the quarter was margin. We had given you guidance that by fourth quarter, we will be at 315 NIM. We're happy to be actually at 316 already in the third quarter. A bit of a deja vu moment for me. I think this time last year, we had the same dynamic play out. We had promised you a margin for the fourth quarter, but we achieved that in the third quarter and then expanded from there. So it's going to be a very similar story. And we'll talk about guidance a little bit, but margin is looking very good.

And the reason it's good is because we have been very, very laser-focused on pricing and profitability and refused to do business just for volume sake. So that's the trade-off we've made, and it's showing. If you dissect this a little bit deeper, where is the margin growth coming from? Well, it's coming from both sides of the balance sheet. commercial loan yields are up, but average deposit costs are down.

I tend to read not every bank that comes out for the earnings before, but I do selectively pick up earnings releases from other banks. And I have yet to see a bank that has, maybe there is some bank, but I haven't seen a bank that has actually reduced deposit costs last quarter, so quarter over quarter. So we're very proud of that. And by the way, that happened not because our DDA grew this quarter. Actually, our average NIDDA was flat this quarter. So this is really all coming off the back of interest-bearing deposits. So we're very proud of that.

So printing a number below 2%, I think that makes me very happy. Talking about deposits, our franchise continues to perform well.

And deposits, remember the seasonality in our deposit. Second quarter is always the strongest quarter. and then things tend to moderate in the third and fourth quarter and first quarter is our weakest quarter. So average NIDDA was essentially flat this quarter. To be honest, I was expecting a little bit of growth, but in September or late August into September with the mortgage origination business getting impacted pretty severely by rising 10-year rates, that took a hit. Our title business took a hit for that. Now, we grew our title business in terms of customers. We brought in more clients this quarter, and we couldn't even do that every quarter, but the average activity in those accounts was lower and directly attributable to what's happening long end of the curve.

NIDDA now stands at 32% of deposits. Again, compared to a year ago, it was 30%, so there's growth. We still have 10% growth in NIDDA year over year. I'm talking about averages. Just remember, we've told you time and time again, don't look at period ends. Always look at averages. That's what drives the P&L, and that's a better representation of how our business is doing.

Quickly talking about lending. Again, we had a pretty decent quarter in terms of production, but payoffs have been high again. And loan production, you know, year over year, our core loans, which we define as a commercial CRE and small business and mortgage warehouse lending as well, grew at about 4%, about $700 million. But the average C&I balances from last quarter did decline by 300. Some of it is attributable to some loans that slipped over into the fourth quarter, but generally that has been fairly, you know, it's all coming back to the discipline that we're trying to maintain on two fronts. One is trying to get the full relationship and not just to transactional business, and second is spreads.

So that's directly attributable to that. Having said that, fourth quarter is always our biggest quarter. If you go back and look at last year or the year before, you'll see fourth quarter tends to be the blowout quarter for us, and we expect the same this year. I will say one more thing about CNI. I've been trying to look at a lot of what our competition is doing. A lot of CNI growth, especially over the last couple of years for the industry, has come for but at least greatly benefited from NDFI expansion.

We have actually taken a more selective path, and instead of increasing our NDFI exposure, we've been decreasing it. It's a call on risk for no other reason, and we think it's the right thing to do long-term. We're okay with doing investment-grade capital call business, a little bit of that, but other categories of NDFI we have been taking down. Also, we have steered clear of some of the flashier asset classes like data centers and AI. We don't think a bank our size really is geared towards participating in that, and I know some of our peers are actively participating in that growth as well.

There's no way we're getting deposits out of that business if we ever do that, put it that way. Quickly, a comment or two on credit. Credit is fairly benign, and the charge-offs were pretty low, just like last quarter. provision would have actually been zero if we had just gone with the model. But given all the geopolitical and other risks that are out there, we used qualitative overlays and built reserve to about 93 basis points.

Capital, because the stock was weak this quarter, we took this opportunity to step up our buyback speed, and we bought back a lot more shares this quarter than previous quarters. I think we bought back 2.1 million shares for about $97 million. So year-to-date, if I combine dividends and share repurchase, I think we've returned $278 million in the first nine months of capital.

And having done that, SET1 still remains robust at 12.1%. And I know your question is going to be, so what happens in the fourth quarter? Well, most likely we will finish whatever is remaining in this authorization and we'll go back to our board in the fourth quarter. We have meetings coming up in November, December, and we'll discuss this with them. They'll probably want to see a detailed business plan for next year and revise forecasts for actually not just the next year, but the next three years, and they'll make a decision based on that.

But I'd be shocked if we don't re-up the buyback. With that, quickly on margin, I've already said this, expect margin to expand again modestly in the fourth quarter, quite like it did last year.

I'm sure you'll all be tempted to ask us about what will happen past fourth quarter, and we're not ready for that yet. We will give you that guidance in January like we always do.

With that, let me turn it over to Tom, and then Tom will turn it over to Jeff.

Great. Thank you, Raj. So as Raj mentioned, average NIDDA remained essentially stable from the prior quarter despite the normal seasonal activity that we have. So some parts of the businesses, you know, we operate different businesses that have different cycles. Some parts were down. Some parts were up across the quarter from an average perspective, but overall up 10% from a year ago. So we finished with total NIDDA at 32.2% of total deposits compared with 30.1% a year ago, so we were pleased with that.

And average total deposits, excluding broker deposits, increased by approximately $1 billion from a year ago. Commercial operating balances continue to remain strong. Pipeline continues to remain strong. So as Raj mentioned, we're having good success in adding new relationships. So one thing I always talk about is the progress we're making on service charges on deposits. If we look at Q3 2026 compared to Q3 2025, we're up 19.4%. So we're really happy about that. I think it shows good product penetration across the treasury services business, strong operating account business and strong discipline on the pricing of products and services that we offer through the platform.

The quality of the funding base continues to improve as we add more operating accounts and expand relationship banking. Production, as Raj mentioned, we were happy with for the quarter, just slightly over $1.1 billion. We've had a quarterly increase of production for each major line of business for each quarter this year, kind of building up to what is our normal very large fourth quarter, which we anticipate, and we've already seen a good level of closing activity early in the quarter so far for this year.

Loan balances for the quarter were impacted by some payoffs, some delayed closings, and just ongoing portfolio positioning. Average core loans increased by $706 million, or 4% from a year ago. Areas where we saw some growth in the quarter, average Cree loans increased by approximately $75 million from the prior quarter and 10% a year ago. Again, as you can see from the detailed additional information in the deck, that's very balanced across all major asset categories within Cree. There's no particular imbalance, and the overall pre-portfolio still remains with a 1.8 average debt service coverage ratio and a 54% loan-to-value profile, so we feel very good about that.

Average mortgage warehouse balance has increased approximately $133 million, or 18% from the prior quarter and 35% from a year ago. The growth in CRI and mortgage warehouse partly offset the CNI payoffs and the timing of closings We continue to remain focused on growing core loans while remaining disciplined around pricing and full relationship economics Jim and Raj and I were looking at some numbers this morning, kind of tracing spreads from a year ago to today on a quarter-by-quarter basis. and despite substantial competition in the market, I think we're holding spreads very, very well and staying really disciplined on that.

Continue to see healthy flow of opportunities. As Rod said, we're in great markets. The markets continue to do well. Virtually every market we're in, we're seeing good opportunities in Florida. Florida remains strong. The New York market has been very good to us, particularly over the last year in terms of growth, particularly in CNI. area, and our newer markets like Atlanta and Charlotte and Dallas are really, really doing well. So we're confident heading into the fourth quarter and looking forward to a very strong quarter.

So with that, I'll turn it over to Jim.

Thanks, Tom. As Raj mentioned, we had adjusted net income of $74 million or $1.03 per share. I won't repeat some of the statistics that Raj mentioned, but I do want to dive just a little bit deeper in some of the numbers.

The only adjustment we made was related to security sales. We normally have flat to slight gains on this line item, but this quarter we had $2.3 million loss. And what drove that is with the market volatility this quarter, it gave us an opportunity to sell some shorter dated season securities where spreads had come in and tightened, and we were able to reinvest those in longer-dated securities at more attractive yields.

It certainly helps NIM, but more importantly, it complements our slight asset-sensitive balance sheet profile, and that's why we wanted to take those actions now.

Now, while we only adjusted earnings for the security sales, there were a couple other notable items I just want to call out at the beginning of my comments. Both are down in non-interest income. First is leasing. We had the opportunity to sell some, I'll call it challenging lease assets at attractive prices. You know, we're continuing to sort of de-emphasize that leasing portfolio. So when we have that opportunity, we want to take advantage of it.

We recognize the $1.1 million loss on these transactions. But, you know, with residual gains and losses on equipment sales, it's a normal part of the business, and we have it regularly. This was just a little bit larger than usual. so I wanted to call it out. On BOLI, we had a $1.9 million decline this quarter. These plans are designed so that the asset liabilities largely offset over time, but there are quarterly mismatches in periods where rates are volatile. And if you look back over the last couple years, you'll see it bouncing around, and usually when there's a big movement up or down in rates.

We would expect this to normalize pretty quickly over time and start to see, you know, the quarterly BOLI performance level out consistent with where you've seen it over time. On net issuers income and margin, you know, as Raj mentioned, both have improved this quarter, reflecting our improved funding mix, lower deposit costs, and higher asset yields.

You know, NII up $5 million from the last quarter, $11 million from a year ago. NIM up 10 BIPs from last quarter, 16 BIPs from a year ago.

Related to the 10 BIP improvement from last quarter, it's really driven primarily by improved asset yields. Our security yield went up 10 basis points, and that added 4 BIPs to NIM.

And this reflects the portfolio actions that I mentioned earlier, as well as various purchases that we made earlier in the year. Core loan yield increased four basis points, also adding four BIFs to NIM. That was largely due to the favorable repricing and the improved mix within the loan book. The remaining two BIFs of improvement is due to funding optimization where we relied on less wholesale funding during the quarter. And as Roz mentioned, deposit costs were $1.99, or sorry, 1.99% down six BIPs from last quarter.

NIM improved year over year by 16 BIPs, and that was mostly due to improved funding mix. Both sides of the balance sheet saw the impact of lower rates. However, the funding costs just declined more than enough to offset the decline in earning asset yields. On the non-interest income and expense, non-interest income was $20 million for the quarter, which is down $9 million from last quarter and $6 million from a year ago. As I talked about at the beginning of my comments, the biggest drivers were the, I'll call it the notable items that happened during the quarter. I will acknowledge capital markets revenue was down $1.8 million from last quarter, and it was flat to the same quarter last year.

Really, there were two things that drove that decline. One was there were several lending transactions that slipped from third quarter to fourth quarter, so that creates some noise between the quarters. And while our pipeline of transactions was strong, just the interest rate volatility this quarter, frankly, just resulted in a lower average revenue per transaction. So that weighed on it a little bit. Not much to say on non-interest expense. It was stable at $175 million. You can see it's up from a year ago. That's just inflationary, higher compensation costs, investments we're making in our business, and elevated deposit costs as our NIDDA continues to grow. On credit, just a couple things to say. Our net charge-offs, as Raj mentioned, remain low this quarter.

Just want to give a public service announcement that don't just look at one quarter. Look at this over time. It can bounce around given the nature of our portfolio.

Criticize and classify down 14% year-over-year. Non-performing loans are down 30%. Our NPA ratio improved to 77 basis points from 110 basis points and provision expense at only nine million you know really reflecting the low level of charge-offs but importantly we increased the the covered two basis points and we did that through the addition of qualitative factors given the low level of charge offs so let me finish by turning to our guidance update you know obviously as we're almost at the end of the year. We focused our guidance just on the fourth quarter.

Again, we'll come back to you in January to talk about 2027. I'll note our fourth quarter guidance assumes one more rate increase in December, 25 basis points. So let me tick down the metrics that we provided. Core loans, we're forecasting at a range of $17.6 to $17.7 billion ending balance. months. That reflects our seasonally strong fourth quarter. We've got a healthy production pipeline, so lots of good opportunities for the growth. The one thing that's always a wild card you can't predict is timing of payoffs or what utilization rates may be. So that's why we're giving you a range. NIDDA, $8.65 billion. Again, consistent with the seasonal patterns and also keeping in mind what's going on in the mortgage market related to the title business.

NIM, as Raj mentioned, we expect to continue to improve in the fourth quarter. We're pegging that at around 3.2%. The impact from the September Fed increase and the fact that we're slightly asset sensitive certainly will help. Net interest income of $265 million, just to remind everybody, that's sort of as reported, so a non-FTE basis. I know some model looking at it on FTE basis, but then that just reflects the higher NIM and the increase in earning assets during the quarter. Non-interest income, we do expect to return more back to the normalized levels.

You know, we would certainly expect to see some improved capital markets revenue in the quarter and a non-repeat from some of the notable items that we discussed. Expenses around $178 million, just normal quarterly variability, nothing really to call out there. All that sort of drives the PPNR of $115 million. And lastly, credit provision, it's a little hard to peg, but we put it at $15 million, which is sort of our normal kind of run rate, if you will.

And a lot of it will depend on where charge-offs and other things land during the quarter. So with that, I'll turn it back to Raj.

All right. I think I was just looking through my notes here. One comment that I wanted to make, which I forgot, is it's a detailed point, but it's an important one. In our C&I business, you just see a C&I number. There are actually a few businesses that add up to that. And there is a large corporate business, which is a larger ticket business.

There is a middle market, or what we call commercial banking, and there is a very small ticket business, which we do out of our branches.

The middle one, the commercial banking, is what we've been really focused on the last two years and has been growing at double digits. This will be its third year of growing double digits. That is a business that we tend to capture the full relationship. We tend to have 100% loan-to-deposit ratios. The deposits come in, and generally the deposits are the lowest cost of all of our business lines. So we are very focused on growing that. It doesn't show up in the numbers and still not going to be big enough to move the needle. I think the whole book is about a couple of billion dollars split between New York and Florida.

But that's what is growing. and where the margin pressure is the biggest and we don't get enough deposits is the large corporate business. And that's the one that actually is a little bit behind in terms of its overall balances. We still want to grow that business too, so don't get me wrong, but I'm really excited about commercial banking, which is that small ticket, the $5, $10 million ticket-sized business, doing as well as it has.

And in the next two, three years to come, I expect that business to really become a big enough business to stand on its own as a separate line of business. But we've had a lot of success there. It's taken a long time.

We've changed leadership over here. It may not change, but we added to the management bench over there. And we're expanding that into our new markets as well, which we have not done to date, so in Texas and eventually Atlanta as well. So we're very excited about that. So you'll hear me talk about this more and more over the course of next year or two. So just one point that I wanted to make that I forgot.

Let's open it up for Q&A.

In the fourth quarter, I think it's largely the asset sensitivity. You know, the NIDDA, obviously, is the seasonal, so it declines. I mean, we continue to have non-core loans running off, so on the margins, that is helping. And as Raj and Tom mentioned, we're holding the line on loans, so it's really just – or loan yields. So it's really just the deposit cost resetting slower than the benefit of the loans repricing up.

I think there are two things here. One is just the lag effect from rate hikes, which I think is really a sharper point to talk about the fourth quarter.

Eventually, lag effects only help you for a period of time after the lags catch up with your deposits to price back up. But our stated strategy always has been to not be asset sensitive or liability sensitive. We try and manage as close to zero as possible. That's on a static basis. On a dynamic basis a new business coming on naturally we become asset sensitive So you know it is and even now I mean Alco is going to meet next week as well We will try and, again, rejigger to make sure that we're not, because we really don't know where rates are headed. It feels like they're headed up, but they could be headed down, you know, within three months.

So we're not trying to make a call on rates. We're trying to be as, you know, the static balance sheet to be as neutral as physically possible. and just slight asset sensitivity from the new business that's coming on.

Yeah, it's right. I mean, our deposit betas, I think, during the last rate hiking cycle was, you know, like 80. And, you know, we would expect that to be the same. But it's not linear, right? In the earlier cuts, it's much lower.

Morning.

Yeah, I would say if you look at what we've done maybe over the last 12 months, we've had more Cree growth as a percentage of that number. I would expect it to be a little bit less. You know, I think that we will probably have about two-thirds of the growth across the sort of segments that make up CNI, including corporate banking, commercial banking, you know, retail small business. And about a third of that would likely be, you know, in the Cree business. We are seeing a bit more, probably won't impact us as much in the fourth quarter, but we are starting to see, you know, the consistent movement up in perspective that rates will move up being a little bit more impactful in Cree deals that are coming together now.

Not what's in the pipeline, not what's closing in Q4, maybe not what's closing in Q1, but you are starting to see a lot of retrading of deals going on in the market. So I think when we look at the next quarter and even quarters after that, I'm expecting that our growth will probably be more like two-thirds to 70% in the CNI world and a third to 30% in the Cree world, just because of kind of the rebalancing of that.

Well, I mean, average DDA will decline in the fourth quarter. You know, that's just the normal seasonal, you know, seasonal trend.

You know, so then obviously the ending balance will be down as well, and that'll be your exit rate in the next year. I'm not sure what else to say on that other than, you know, a lot of it will depend on the next quarter. It's a slight decline in the fourth quarter, not as much as it happens in the first quarter.

But if you go back and look at fourth quarter decline last year or maybe the last couple of years and average that, it's probably our best guess.

All right. Thanks.

I mean, I wouldn't characterize it as a restructuring necessarily. It was sort of just our normal asset liability. It just was maybe a little bit more concentrated in one quarter. So I would say, again, we were selling assets that were highly seasoned. So we've been holding them for a while. They're less than a year maturity and reinvested in our normal profile, which is more in the three to five range.

And that's what we did. It's more driven by Alco than anything else.

Yeah, exactly.

Jared, if you look at our origination now for the last three or four years, CNI is almost all floating rate. CRE also is largely floating rate. So we really have stayed away from the fixed business for now three, four years. So as new production comes on, all loans pay off. If you just think about the fixed versus floating, that on the left side of the balance sheet, that keeps going more and more in the floating rate side.

So we have to, every now and then, step up and rebalance. And we don't use loans to rebalance. We use securities.

Good morning.

Yeah. It would be great. I think balances, because we saw a sharp decline in the month of September, I'm attributing it largely to what happened to the mortgage market and what happened to rates.

The competitive pressure is definitely higher this year than last year, and last year was higher than the year before. But that is manifesting itself through pricing more than balances. So the pricing has gotten less favorable. That's our competitors basically coming in, somebody new coming in, they generally leave with price. And we're the incumbent and we are reacting to that price.

But in terms of volume, I think it's more to do with what's happening in the mortgage market. And in terms of picking up clients, we are picking up the same number of clients every quarter roughly that we have been for quite some time now.

The other thing to add, and again, we'll be able to talk more about it in January, but just looking at the Mortgage Bankers Association projections of purchase mortgage market, most industry participants are saying purchase mortgage market will be flat next year to this year. It's sort of at a, it can't go much lower just mathematically. And the purchase mortgage market drives more of our balances than the refi market. Clearly, the refi market has completely dried up right now. Purchase mortgage market, as Raj said, certainly the quick movement in the 10-year and the quick movement in rates sort of stifles things. But generally, the market thinks that it will kind of normalize and be flat year over year.

So really, if that plays out, then the big driver for us on trends will be continuing to grow share and generate our fair share of those, you know, call it flat year-over-year volumes.

I think, you know, it's a full spectrum. I know of a small sort of sub-$5 billion bank that is trying to make a mark in this. I know of a bank in the mid-cap space. But then I also know, you know, the money center banks trying. Money center and the very large banks, when they try, but they have all the technology in the world. They can do it, but they can't get out of their own way to focus on this business.

You know, it's not just about technology, Dave. It also is about processes in the back office that are tailor-made for this business. Fraud, OFAC, BSA, ML, they all have to be fine-tuned to serve this client base. And large companies find that specialization very hard to achieve. It's not about technology. If they could get those ducks in a row, then they could do something. I'm not worried about them at all because they try and then they go away.

Smaller players are more nimble and hungry. and there I think they just come out with price as the weapon to try and dislodge customers. They haven't been very successful, but they certainly are making the market more competitive.

Yeah. No, that is, you know, there are a handful of banks, I would say about 10 or 12, you know, that are doing that as a separate business line, and some of them are much bigger than us and others are our size.

The trick is to focus on the low end of the market and not the really big property management companies. That's our differentiator. That's why I think the profitability of our HOA business is much more different than somebody who's playing at a different scale. If you really want to be at a scale three, four, five, six times bigger than us, you have to go to the very large property management companies, and there the profitability is just very different. It's a different ballgame. We've avoided that really upper end of the market and stayed focused on the smaller associations.

It's a much harder way to build business. It takes much longer. It has taken us four or five years to get here, but that's okay. I'd trade speed for profitability.

Also, another thing I might add is a lot of the M&A activity is sort of at the upper end of the market. And so if you're fishing consistently at the upper end of the market versus kind of the client segment that Raj is talking about, you're susceptible to a lot more M&A activity creating volatility in the business for you.

I don't have that in front of me, but I'll say, you know, title I know is more than 50%. So it's a majority, and HOA I don't have in front of me, but it's a fairly large number in HOA as well.

Good morning. Good morning.

It's the usual stuff that happens. One or two loans go back and forth between this. There's nothing that we're losing sleep on. This does happen. We've always said our portfolio is lumpy, and even just two loans moving, migrating from one bucket to another can cause this.

and Tom, do you have any? It's basically what Rod said. I mean, there's nothing systemic or correlated in that that we look at. If we look at the one number that moved to NPL this quarter from being a criticized loan, it was a company that's in the, I would broadly call it in the weather disaster recovery business And I'll say this tongue-in-cheek. Unfortunately, there's not enough weather disasters going on right now. And, you know, their business is soft. We haven't had significant hurricane activity. We haven't had significant hailstorm activity. And, unfortunately, that's the business they're in. And so that business is a little bit softer That was kind of a highlight loan of the quarter that moved from one category to another but beyond that it kind of just sort of episodic That's why I gave the public service announcement.

Just, you know, look at the trends over a few quarters, and, you know, the general trends year over year have been quite positive. That's probably a more indicative measure of the status of credit.

we look at some of the businesses I mean let's say we have a muni business we force out some broker deposits we have some other price center deposits and we're always looking at them and you know quarter over quarter month over month you can find one segment get overheated another one a little less like last quarter we were telling you that brokered market had gotten ahead of itself, and we had backed off brokered in a big way.

This quarter, we felt the other way. Actually, Muni was a little ahead of itself, especially in Florida. So we backed off on Muni, and brokered actually came in line with what our expectations would have been from brokered. So we found more opportunities there than in Muni. So we're fine-tuning this almost on a weekly basis. but this quarter it was a drop in muni and increase in brokerage and we picked up 5-8 basis points on similar duration assets, sorry, liabilities.

So beyond that it wasn't really anything of substance. We're not the highest rate out there. We're still getting pretty good roll forward of our CDs. We're still capturing 80-85% of the rates we have, so we monitor it very carefully. But promotional money market rates and promotional CD rates in our market, I think nationally, have taken off. Deposit competition is pretty intense.

But we're monitoring that very, very closely, and that was the only notable thing. Uni versus Brokered kind of flipped on itself this quarter from last quarter. You know, we're trying to be flexible and optimistic when there's opportunities for imbalances.

Yeah, I think so. We feel good about that. I mean, at the beginning of the year, I would have said we would progress towards that target a little faster. But as you know, the loan growth, you know, we've been pretty diligent on that. So, loan growth hasn't been as high as we originally modeled. So we've been buying back the same volume of shares that we projected, it's just the investment in the balance sheet's been a little bit slower. So as we think about the next round of share repurchases, we'll want to be mindful of where the balance sheet's going and all that. Yeah, and the fourth quarter, that number might come down, not just from the remaining buyback, but also from some balance sheet growth.

So we'll see where we end the year, and then most likely. I can't say anything about the buyback until the board authorizes us, but we'll be discussing that with them very soon.

Yeah, just to remind you, in 11.5, we came up just sort of middle of the pack. We're looking at peer sets and capital ranges, and we don't want to be on the low end or the high end.

Yeah, I would say it's different in different segments, but if you kind of average it all together, I would say the C&I compared from a SOFR perspective, I would probably give you an average of about 225 to 240 in range. Spread. in general spread, depending upon what segment you're in.

And CRE is lower. CRE is lower. CRE is with a one handle, between 160 to 180 in that range.

You know, it's pretty evenly spread across all markets. I mean, Florida's been good in basically every major area of the state. We've seen good strength in New York, particularly in the mid-sized business category that Raj has mentioned. The commercial banking segment in New York has been really, really strong. And the new markets all continue to perform well. It's pretty broad. Production is evenly spread. Payoffs are not, obviously. Payoffs are in the more mature markets where we've been, you know, that's Florida and New York. So not much payoffs in the new market for obvious reasons.

Morning, morning.

Yeah, that's a good question. I don't think so, is my quick answer. And the reason is, you know, if you have a 3.5% mortgage, whether primary mortgage rates are at 7% or 7.5%, I don't think it really impacts CPR that much. I think a lot of this is just now either arms that are resetting, which are causing runoff, or regular amortization, or just, you know, people have divorces, people die, you know, stuff happens. and it is not active refi that is creating the CPR.

So, yeah, the refi market is very sensitive to where rates are, but that's not what's causing a 3.5% mortgage to go away. It's more regular stuff that happens.

We've reduced our REZI portfolio very nicely now over the last three years. We are coming up to a time where the first step will be to not reduce it, to actually flatline it. And then there'll be a time, maybe a year or two after that, we'll grow it as well. It's not that we want to drive this to zero like we did the multifamily business in New York many years ago. That's not the goal. The goal is that we were too heavy in this asset class and we need to bring it down. So we've been at it for three years. We're doing a lot of work.

The spreads in the business will do change from time to time, but that'll dictate how aggressively and when we want to step back in. But, you know, if you take a finer point to it, in our portfolio, you have some 30-year fixed. You have some five-year arms, seven-year arms. You know, there's a big difference between how much I like the 30-year and how much I like the five-year. I hate the 30-year and I like the five-year. So I would like to run that 30-year down, you know, for a very long time.

You know, we don't want to grow that. But there will be a time, and we'll give you guidance on that maybe in three months, on when we will start to actively engage again on the 5-1 to 7-1 part of the business.

I think the dynamics that I've been playing are still very much the same. Balance sheet is still changing left and right side, so as long as we keep doing that, there's no reason why a margin cannot keep expanding.

The only caveat I will give you is that there is a seasonal trend from quarter over quarter. So just be careful of that. But if you ask me year over year, do I expect NIMM to keep improving, the answer is yes.

I don't think there's anything more that we feel compelled to do. This was a call we made actually earlier in the year, last quarter. not third quarter but second quarter.

So unless something changes out there in the NDFI space that we start to see more risk, I don't really expect this to change that much.

Yeah, I would add that if you look at the NDFI exposure, there is diversity within that overall number, right? So a part of it is the capital call business. We don't, that's largely an investment grade short-term business that we're not concerned about, and we'd be willing to expand that. We have a lot of things that run through the NDFI category, like tax certificate financing, and there's a lot of different industry segments that fall into that category that we feel good about and would grow. The part where we are very light and have been careful on has been essentially the lending to private credit funds.

You know, that's anything in the kind of B2B business development corporation type world. That's where we've been careful. And most of that is what's been sort of the reduction. I think late last year we were at about a billion five. Today we're a little under a billion two. Most of that couple of hundred million dollar reduction has been in that area. That's where we'll continue to be very careful because I think the impact in that industry segment from rising rates and heavy use of leverage as we head into next year is not going to be great.

But the overall number is not as significant as that component of the number.

It was probably front-loaded. Most of it was at the front end of the quarter, and I don't have the exact – well, I mean, I know securities as a whole had a, you know, four basis point NIM impact for the quarter. But, you know, again, most of that was from the actions we took earlier in the year, a little bit on this quarter. But I don't have the exact yield pickup that I can give you on this call.

But, I mean, again, the yield pickup is going to be going from less than a one-year duration security out to a three- to five-year set of securities. And, you know, it was north of a billion, you know, north of a billion, less than two billion that we're really talking about here in book value.

Thank you.

Thank you so much, guys. Thanks for joining us. and I'm sure there are more questions that will pop up. Jim is here. I will probably be on a plane in a short while, but we will as well. Thanks. We'll talk to you again in 90 days. I'll probably have a conference before that. Bye.