Investors Bancorp, Inc. (ISBC) CEO Kevin Cummings on Q1 2021 Results - Earnings Call Transcript

Investors Bancorp, Inc. (ISBC) Q1 2021 Earnings Conference Call April 29, 2021 11:00 AM ET

Company Participants

Kevin Cummings - Chairman & CEO

Sean Burke - CFO

Domenick Cama - President & COO

Conference Call Participants

Jared Shaw - Wells Fargo Securities

Mark Fitzgibbon - Piper Sandler

Steven Duong - RBC Capital Markets

Michael Perito - KBW

Laurie Hunsicker - Compass Point

Matthew Breese - Stephens

Operator

Good morning, and welcome to the Investors Bancorp's First Quarter Earnings Call. [Operator Instructions] Please note this event is being recorded. We'll begin this morning's call with the company's standard forward-looking statement disclosure. On this call, representatives of Investors Bancorp, Inc. may make some forward-looking statements with respect to its financial position, results of operations and business. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond Investors Bancorp's control, are difficult to predict and which can cause actual results to materially differ from those expressed or forecast in these forward-looking statements.

In last night's press release, the company included its safe harbor disclosure and refers you to that statement. That document is incorporated into this presentation. For a more complete discussion of the certain risks and uncertainties affecting Investors Bancorp, please see the sections entitled Risk Factors, Management Discussion and Analysis of Financial Conditions and Results of Operations set forth in Investors Bancorp's filings under the SEC. And now I'd like to turn the call over to Kevin Cummings, Chairman and Chief Executive Officer of Investors Bancorp. Please go ahead.

Kevin Cummings

Okay. Thank you, Betsy. Good morning, and welcome to the Investors Bancorp First Quarter Earnings Call for 2021. Last night, the company reported in its press release, net income of $72.3 million or $0.31 per diluted share for the quarter ended March 31, 2021. This compares to $75.1 million or $0.32 per diluted share for the quarter ended December 30 last year and $39.5 million or $0.17 per diluted share for the three months ended March 31, 2020. The fourth quarter of last year, we recorded some noncore transactions that impacted results and improved earnings to $84 million or $0.35 per share. The difference in core operating results of approximately $9 million for the fourth quarter were due to a $6.9 million reduction in prepayment fees, which are included in interest income.

This decrease in fees caused a reduction in our net interest margin of eight basis points. Excluding these penalties or these penalty fees, our core margin increased by two basis points. The quarter was also impacted by a reduction in gain on sale of loans in mortgage banking activities of $1.7 million and a more favorable tax rate due to R&D credits recognized in the fourth quarter. These decreases in revenues were offset by cost control by reduced core operating expenses of $2.7 million in the first quarter. All things considered, it was a solid quarter for the bank and a good start to 2021. This time last year, there were major concerns about liquidity, capital and where the credit cycle was going to go.

And I'm happy to report that the company declared its cash dividend of $0.14 per share to be paid in May, and this reflects a $0.02 increase from the dividend paid at the height of the pandemic last May of 2020.

These results reflect our third straight quarter of double-digit return on tangible equity, and our return on average assets has averaged over 1.07% over that 3-quarter period. When I look back to where we were a year ago, it is remarkable what we have accomplished through this pandemic. A year ago, we were in the midst of the PPP process. Customers and our employees were in fear of touching doorknobs or speaking with each other. There was uncertainty and no one felt comfortable with the normal routines of everyday life.

Through grit and determination, we were able to take care of our customers, keep all our retail branches open, and most importantly, protect our employees. Today, we are a stronger bank. Our capital ratios are up approximately 30 basis points. Our credit culture is stronger than ever. And our outlook for 2021 is bright. We are anxious to get all our corporate employees back to the office and look forward to being that bank that serves our customers and communities in both good times and times of crisis. On the credit front, our nonaccrual loans are down $23.8 million or 22% for the fourth quarter and $48.7 million or 37% from September 30 of last year.

This reduction in nonaccrual loans was completed with no cumulative net charge-offs as our net charge-offs in the last six months were negative and resulted in net recoveries of $5.7 million for the last two quarters. Our loan loss coverage ratio to nonaccrual loans is 341% this quarter versus 248% last year at March 31. In the commercial portfolio, our total nonaccrual loans of $37.6 million, consisting of 53 loans for an average loan of approximately $709,000, which is down from $79.8 million at September 30 of last year.

Our three largest nonaccrual loans at March 31 are: a multifamily loan for $4.6 million, a CRE loan for $3.1 million and a business loan for $2.6 million. The remaining 50 loans in the nonaccrual group reflect an average exposure of $550,000 and is similar to the exposure in our mortgage and consumer portfolio, which has an average loan, nonaccrual, of $191,000.

We have a war room mentality with respect to credit but still believe we have a lot of work to do to get through this operating environment and the post effects of the pandemic. Almost every week since June, we have met to discuss our loan exposures and trends in deferred loans due to this pandemic. At March 31, our total deferrals were down to $582 million and include approximately $500 million in loans that are currently paying us interest and are keeping their taxes current. We have made a concerted effort to reach out to our customers during this time to work with them through the crisis. And in a period of uncertainty, we see these times as an opportunity to help our customers and build long-term relationships.

With respect to principal and interest deferrals, we have approximately $83 million, of which $23 million in the entertainment category commenced payments as of April 1. The remaining $60 million is made up of 20 loans. And the two largest loans are both multifamily loans for $37 million and $10 million. So of the remaining $50 million -- $60 million, the remaining $60 million, $37 million and $10 million are in two loans. We have recently visited those two properties earlier this month. And the Washington loan -- one loan is in Washington, D.C. with an average loan per unit of approximately $70,000.

The complex was recording stronger cash collections in March that we collected at pro forma cash flow of a 1.2% debt service. It is a well-maintained property and should retain its value, and we expect it to be back to full payment at the end of the deferral period. The other loan is in Brooklyn, which we visited earlier this month, and is a 20-unit relatively new building that is fully occupied and is recovering its cash flows after concessions to new apartment dwellers and should not be a problem due to the strong sponsorship, the quality of the building and its amenities. The remaining exposure in this principal and interest deferral is $13 million, which is made up of 18 loans for an average loan of approximately $722,000.

So at the end of the day, we feel we have a great handle on the exposure of this $60 million of principal and interest deferral. There's a lot of discussion of what's going on in Manhattan. And in that deferral portfolio, our Manhattan exposure is mainly in the hotel sector for $196 million of the total $367 million that we have in the Manhattan area. All of the loans in the hotel sector and in Manhattan are paying interest and are showing improving trends. The hotels are seeing increased tourist activity but little business travel. These properties are family businesses for multi-generations and have strong sponsorship.

The remaining exposure in Manhattan is in multifamily and CRE for $88 million and $38 million, respectively, and have good sponsorship and improving operations and do not show any major issues at this time. As I mentioned earlier, our credit and first-line teams have been meeting on a weekly basis to discuss the progress of the deferral portfolio and other trends in the total commercial portfolio. Last week, we met for several hours to discuss our office portfolio, where we reviewed the top 25 loans for approximately $620 million. All of these loans are current as to interest and principal and there was nothing discussed that would set off alarm bells at this time.

We will continue to monitor this and other portfolios at the highest level of management to make sure we stay ahead of the leasing activities in both retail and office and the impact of changes in business practices and workplace activities. Today, we feel we are doing everything possible to manage this credit risk with strong reserves, low delinquency trends and a strong credit and monitoring team in place to manage us through this pandemic. With respect to loan growth, our commercial loans grew 1.3% in the quarter compared to a reduction in loans of 1.4% in the 2020 first quarter. The first quarter is usually a slower quarter for us, and we are optimistic of the activity we are seeing in the marketplace. Our lending teams are engaged and are making calls in the market. They're out in the market, out of the office.

We have a strong commercial pipeline, which totals over $3.3 billion and compares to $1.5 billion last year this time and $2.2 billion at year-end. We believe we can grow our loans at a 7% to 8%, maybe 9% pace for 2021. On the deposit front, deposits were down $534 million, which related to planned runoff of higher-costing brokered deposits of $534 million and government deposits of $327 million as our cost of deposits went down 19 basis points for the quarter. Our consumer and business deposits were up $328 million with our noninterest deposits increasing $174 million or 4.8% for the quarter. Noninterest deposits now comprise 20% of deposits, which is a first for the company.

We are seeing great activity from the investments we have made in 2019 and 2020 with our business lenders and business development teams generating core deposits and relationships and business loans. We are moving forward with our Berkshire acquisition, which will bring approximately $300 million in loans and $600 million in deposits. We recently agreed to a marketing partnership with the Trenton Thunder, a local Minor League Baseball team in Trenton in the Berkshire market and have been active in coordinating activities with the retail and business teams in that market. It is a great opportunity for us. And we will expand our brand with two additional branches in Bucks County in Pennsylvania.

Going into the year 2021, we have strong momentum and continue to see great opportunities in the marketplace as larger banks are not showing the love or paying attention to the middle market during this pandemic. It takes a bank that sees the long view, whose management teams are local and has access to decision-makers and will be there for their customers and their prospects during these difficult times. We are that community bank, and we are looking forward to a record year in 2021. Now I'd like to turn the meeting over to Sean Burke, our Chief Financial Officer, who will give us some commentary on the operating results for the quarter. Sean?

Sean Burke

Thank you, Kevin. What a difference a year makes. Year-over-year net income and earnings per share were up over 80% with net income for the first quarter totaling $72.3 million or $0.31 per diluted share. Our net interest margin dropped eight basis points quarter-over-quarter to 2.9% with prepayment fees driving the decline. Our core net interest margin, however, expanded two basis points quarter-over-quarter as we continue to benefit from declining deposit costs.

On an encouraging note, we have seen prepayment fees rebound and totaled $4.5 million in the month of April alone and expect our second quarter margin to rebound accordingly. Total noninterest income totaled $20 million, a decrease of $2.7 million on a core basis quarter-over-quarter. Year-over-year, however, noninterest income increased $5.3 million or 36%, driven by mortgage banking, swap fees and wealth advisory fees. Total noninterest expenses totaled $104 million for the first quarter, a decrease of $38.5 million quarter-over-quarter.

The decrease was driven by $23 million of costs from the early extinguishment of debt and $12 million of branch closure costs in the fourth quarter. Excluding these items, noninterest expenses were down $4 million compared to the fourth quarter. The decrease was primarily driven by incentive compensation. Provision for credit losses was a negative $3 million for the first quarter compared to a negative $2.7 million release for the fourth quarter.

The decrease was primarily driven by an improving economic forecast and net loan recoveries in the quarter of $2 million. Our total loan balances were flat quarter-over-quarter, while C&I loans grew $66.5 million or 2% quarter-over-quarter. Total deposits were down $534 million quarter-over-quarter, driven by the intentional runoff of brokered deposits; while noninterest-bearing deposits were up $174 million or 5% quarter-over-quarter.

Our percentage of noninterest-bearing deposits to total deposits improved to 20% at March 31 compared to 13% a year ago. Asset quality, liquidity and capital continued to remain in a solid position at quarter end. Nonaccrual loans represented 0.4% of total loans at March 31 compared to 0.51% at December 31 while our allowance for loan losses to loans remained unchanged at 1.44%. Our common equity Tier one ratio was 13% at quarter end. Now I'd like to turn it back over to Kevin for concluding remarks.

Kevin Cummings

Okay. Before I open up to questions, I just want to -- just give a sort of like the longer view. The last 12 months have been an unbelievable year of social unrest and economic turmoil. And when I look back on the last year, I see the bank's leadership team that has grown in confidence and competence as they've executed through this storm as we continue to provide a platform for our employees for personal growth and successful business careers. There is great optimism in the bank and in the communities that we serve. We continue to serve our customers, employees and our communities in partnership with our foundation.

It is part of our brand to be the different community bank that makes a difference. This is not a new trend to our bank, it is part of our DNA. And with all the discussions of corporate social responsibility, we are and have been on the front lines in supporting and serving the underserved. Let your sermons be said without words, and our actions speak volumes of who we are and what we have accomplished.

Our foundation and bank have donated over $70 million since 2005. And our return to shareholders has been almost 280% since that time. This compares very favorably to local community thrifts here in New Jersey, up 42%; and New Jersey commercial banks, up 58%. And if you compare our return to the national banks during this period, the four largest national banks, we surpassed them 2.5 times with that 280% return for investors versus 78% for the large national banks.

We have always taken the long-term view, something that our society or government sometimes has difficulty doing. In the words of my predecessor, Bob Cashill, we understand that we can do good and do well. We recently added two new directors to our corporate Board, and I'd like to welcome Kim Wales and John Harmon to our Board. They both bring a broad range of experience to our team, and we are happy to have them. Their diverse background and experience will make us stronger. With respect to DE&I, we recently held a town hall meeting with Dom and I taking questions on how we can create greater opportunities for our customers, employees, our vendors and the communities that we serve. And we are constantly looking forward to better communications and listening better.

God gave you two ears and one mouth for a reason. And I'm happy to report that our workforce is 56% women and 41% diverse and our offices are 42% women and 28% diverse. And at the most senior level, the EVP level, it's 24% women and 60% diverse. The journey is the destination, and we are on a journey of continuous improvement, getting better every day. I don't want to be better than Dom, but I want to be better than I was yesterday and getting better and being a servant leader who serves. And our leadership teams continues to be selfless in their service to others.

We have accomplished a lot in the past 15 months. We've accomplished a lot in the last 15 years. But we are stronger today and certainly more hopeful. And as I said last year this time, when I was one of five employees at the bank, let's be faithful and not fearful. The future looks bright. There was certainly great hope and optimism in the President's speech last night, and I look forward to a record and great year in 2021. I'd like to now turn it over to questions and open the lines up to hear from you. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Jared Shaw with Wells Fargo Securities.

Jared Shaw

Good morning, guys. Maybe starting off on the funding side, with the runoff of that higher cost funding, your loan-to-deposit ratio is still pretty high. Are you seeing good trends sort of in the DDA growth that should be sustainable and that we should see maybe a faster pace of deposit growth from here? Or how should we be thinking about funding and deposit growth in light of loan growth expectations?

Domenick Cama

I think that we'll continue to see an increase in our funding on the deposit side. Noninterest-bearing has been a nice surprise for us. This quarter, I think Sean mentioned that we were about $180 million in noninterest-bearing growth. Total deposit growth though was about $350 million in the branches. So I think when you compare that to $1.2 billion in growth in 2020, I think we're on pace to match what we did in 2020.

Jared Shaw

Okay. And then when you look at the loan growth outlook, what category should we see that in? What's your appetite, I guess, for taking on additional New York City CRE at this point? Has pricing improved at all? Or has it gotten tighter, I guess? What does the growth mix outlook look like?

Domenick Cama

Yes. The way the pipeline is broken out, I mean, the CRE pipeline is about $2.4 billion and the C&I pipeline is just about $900 million. That equates to the $3.3 billion Kevin referred to earlier. We have seen some Manhattan business pick up, especially on the CRE side and on the multifamily side. Things are getting better. They're not where they were pre COVID, but they are getting better. And to the extent that we need some additional risk mitigants in the CRE space, we're doing that. We're doing that in the form of PGs.

We're doing that in the form of asking customers to put six months of payments in escrow with us. And yes, so we're pretty comfortable. Fortunately, we do a lot of business in New Jersey also, so New Jersey is contributing nicely to the pipeline. But we're not running away from Manhattan at this point, we're simply being more cautious as we make those loans. When you look at a loan that comes in from Manhattan, the first question you ask is, "How were you impacted during the COVID crisis?" And then you work from there.

Jared Shaw

And then just finally for me, we're seeing some deal activity in your markets over the last few weeks. How do you think that impacts your ability, I guess, to potentially hire some people or target some customers that maybe you weren't able to get before? And then what's your outlook in terms of a participant in the M&A environment at this point?

Domenick Cama

Yes. I think, Jared, from the perspective of competitive forces, I think you're exactly right. I mean, while a number of these institutions are doing their deals and trying to integrate their respective financial institutions, I think there'll be an opportunity for us to bring over additional lending teams or to capture some additional business in our market. I mean we're starting to see a little bit of that already, quite honestly.

As far as the deal activity, I mean, clearly, I see, and I think we agree as a management team, that there is a compelling reason to do deals like that in terms of just being bigger, having more funds to contribute to technology investments and just being more diversified. So as far as the institutions that I know personally, those in our area, I congratulate them on the deals. I thought they were good deals for both institutions, and I wish them well.

Kevin Cummings

Yes. Jared, I think the strategic opportunities will always be evaluated here, we've always said that. The core pillars of organic growth, M&A, both as either a buyer or a strategic partnership, dividends and stock buybacks. And certainly, those things are the pillars of our strategy moving forward. There is a lot of chatter, we're talking to a lot of people, a lot of opportunities out there, and I think it's an exciting time. But either way, the long-term view is we're in a very good position. And either way, there are great opportunities ahead of us.

Jared Shaw

Thank you, I appreciate it.

Operator

[Operator Instructions] Our next question comes from Mark Fitzgibbon with Piper Sandler.

Mark Fitzgibbon

Hey guys, good morning. Kevin, I love the uplifting comments.

Kevin Cummings

Okay, Mark.

Mark Fitzgibbon

First, I wondered if you could give us any update on the timing of the expected closing on the Berkshire Hills branches, when that might be?

Domenick Cama

We'll probably get that closed before June 30, Mark.

Mark Fitzgibbon

Okay. And then secondly, on the expense front, you guys did a nice job managing cost this quarter. I wondered if you could, Sean, maybe share with us your outlook for expenses for the next quarter or two.

Sean Burke

I think we should be in a very good spot, Mark, there. We've provided a guide, I believe it was around $425 million, and we're doing a bit better than that. So next quarter, I expect it to be in a similar spot. The Berkshire transaction, when it closes, will add some additional cost when that comes in. But as Domenick mentioned, probably not until sometime in the second quarter. So just looking forward to second quarter, expense is probably in a very similar spot that they are in today.

Mark Fitzgibbon

Okay. And then last, given the increased digitization of the business, are you guys thinking more about being proactive with branch consolidations in the rest of your network?

Domenick Cama

Yes, we are, Mark. I think we mentioned in earlier releases, we planned on closing 10 branches. We closed those branches earlier this month, as a matter of fact, I think, on April 9. And so I think that we need to continue to evaluate those opportunities. We continue to develop online products, which that technology and that progress has been moving along nicely. And I think that will be a catalyst for us to continue to trim the branch network around the region.

Mark Fitzgibbon

Thank you.

Operator

[Operator Instructions] Our next question comes from Steven Duong from RBC Capital Markets.

Steven Duong

Hey, good morning guys. Sean, I just want to make sure I heard it right. The prepay income through April so far, was that $4.5 million?

Sean Burke

That's correct. $4.5 million in the month of April.

Steven Duong

Okay. So you're on pace to be above the fourth quarter level then?

Sean Burke

Yes. I wouldn't go that far, Steven. I think the fourth quarter was elevated as far as our guidance for NIM that we gave for the full year, the 3% area. We were modeling in less than where we were in the fourth quarter, candidly. Our budget was $4 million to $5 million of prepayment fees per quarter built into our budget and built into our guidance. But we are seeing a nice rebound there. We do expect the margin to pop back up, maybe eight to 10 basis points in the second quarter.

Kevin Cummings

Usually, it's seasonal in the fourth quarter because of tax reasons, 1031 exchange, whatever it might be, =usually prepayments are highest in the fourth quarter.

Steven Duong

Right. Right. That makes sense. So I guess maybe we just drill down on just the loan yields. If we were to strip out just the prepaid income, I don't know if my calculation is right, but I'm getting your core loan yield down around 13 basis points. Does that sounds right? So I'm just wondering if you maybe just explain what the dynamics were with the core loan yield ex the prepay income.

Domenick Cama

Steven, I think the best way to try to answer that question is just to go through kind of the average coupons that we're seeing based on the categories, four major categories. When we look at resi loans these days, resi loans are coming on the balance sheet at just probably around 3%, I'd put them right there. Multifamily is coming on somewhere between 3 1/8%, 3.125% and 3.20%. CRE is coming on at about 3 1/4% to 3 3/8%. And then C&I, as you know, has become more competitive, especially here in this market, and those yields are coming in somewhere between 3 3/8% and 3 3/4%. So obviously, the interest rate environment has benefited us on the liability side, but clearly, it's having an impact on the asset side, too. So I hope that answers your question.

Sean Burke

And Steven, it's Sean. Your math is approximately correct. And just to add on, where we probably saw the most compression is in our residential portfolio. The current market rates are around the 3% area. Our portfolio is yielding, the residential side was yielding higher than that. And so it's kind of coming back down to the norm. So that's probably the spot where we're seeing the most compression.

Steven Duong

Got it. So I guess, if rates are static, I guess, would you think that we'd just be around this level on the core loan yields?

Sean Burke

Yes. I think that's fair. We took more compression this quarter. And I think moving forward, as we look through the year, we're not expecting to see that much compression on the loan yield side, some but not to the degree that we saw in the first quarter.

Steven Duong

Got it. Okay. And then just last one for me. Just on your borrowings, I know that you're planning to prepay $250 million concurrent with the Berkshire deal this quarter. But you still have, as of right now, about $3.6 billion of borrowings. What are your thoughts about doing more prepayments, given that they're right now over 200 basis points?

Domenick Cama

Yes. Steven, we obviously, we're looking at that. As you point out, we have the $3.5 billion or so at over 2%. So there's an opportunity to pick up some NIM thereby, frankly, burning capital by paying the prepayment fees. We'll look at that. We've been talking about doing a larger trade than the one that we projected for the Berkshire transaction. And so just given the Berkshire transaction, we may supersize, if you will, the prepayments using the Berkshire transaction as a catalyst for doing that.

Steven Duong

Got it, appreciate that. Thank you guys.

Operator

[Operator Instructions]The next question comes from Michael Perito with KBW.

Michael Perito

Hey guys, I appreciate taking your time. I was wondering if, first, you can just expand a little bit more on the residential mortgage gain on sale pipeline, sorry, if I missed it. And is it fair to think that that number could bounce back a little in the second quarter before normalizing presumably over the back half of the year?

Domenick Cama

Are you talking about the income that we generate, the mortgage banking income?

Michael Perito

Yes, the mortgage gain on sale, correct.

Domenick Cama

Yes. Mike, we see activity has slowed on the mortgage banking front, and we think that that number will trend down for the next quarter. As a matter of fact, when we did our budgets, we actually projected that, that number would come down in 2021. So I think the answer is yes, that number will continue to trend down as we head through the rest of the year.

Sean Burke

Mike, it's Sean. I just wanted to add though that, as Domenick mentioned, we are expecting that to trend down. But we are expecting swap fee income to offset some of that decline as we go throughout the year. So that's how we see fee income unfolding, where we're going to lose a little on the mortgage banking side, but we're going to pick up and gain an offset with swap income as we go throughout the year.

Michael Perito

Got it. Thanks for that, and then just lastly, the loan growth, 7% to 9%, pretty strong. How do we balance kind of the provision expense here between the improving economic conditions, but clearly the accelerating loan growth? Do you guys have any kind of initial thoughts on that?

Sean Burke

I think our models were showing, obviously, this quarter, improved economic conditions. We think that can continue to improve if we stay on the current trajectory that we're on. I think the New York City area has been a little slower to improve from a modeling perspective and a forecasting perspective than some other parts of the country. But we do believe it's trending in the right direction. And if we keep on the current path, that will mean maybe when we get toward the back half of the year, there could be more release coming in the provision line item.

Kevin Cummings

I hate to say it, but hopefully, we'll have some loan growth that will offset that release. So we're looking for loan growth, okay?

Michael Perito

Yes. No. I think that would probably be a scenario everyone would be very happy with. Thank you guys for taking my question, I appreciate it.

Operator

[Operator Instructions] Our next question is from Laurie Hunsicker with Compass Point.

Laurie Hunsicker

Yes, hi, good morning, can you hear me now?

Domenick Cama

We can.

Kevin Cummings

Hi, Laurie.

Laurie Hunsicker

Okay. Great. Sorry, don't know what I did. Of your $582 million in deferrals, how much of that is New York City?

Kevin Cummings

$341 million, I believe.

Laurie Hunsicker

Okay. Great. And then will you just remind us, of that, how much is multifamily in New York and how much is office in New York?

Kevin Cummings

One second.

Domenick Cama

Laurie, are you talking about New York City specifically, right, Manhattan, the Manhattan borough?

Laurie Hunsicker

Yes, exactly, New York City-specific. And maybe along those lines, too, just of your $1.2 billion in office, how much of that plays into New York City as well? And if you don't have these, I can follow up with you offline.

Kevin Cummings

Yes. We will follow up with the office. In Manhattan, $88 million is multifamily, CRE is $38 million, lodging is $195 million, C&I loans is 0.

Laurie Hunsicker

C&I is 0. Okay. Great. And the buybacks, love seeing them. Obviously, they were a little slower this quarter. Any comments around that?

Domenick Cama

I think, Laurie, obviously, we saw our stock price accelerate pretty quickly. So it gave us a reason to pause on our buybacks there and just trying to understand how tangible book value would compare to where we're trading on a book value basis. So we'll continue to evaluate that. The stock got up there around $15. So as I said, it just gave us reason to pause and just monitor how stable that would be going forward.

Laurie Hunsicker

Got it. Okay. And then just last question, going back to what Jared asked, too, can you help us think a little bit about M&A? Obviously, it's been a year since we saw you close your last deal. Can you help us think about, as you look forward, whether it's a strategic partnership or you're a buyer or you're on the other side of it, how you think about asset size targets? What makes sense? What's ideal? How big would you go? How do you think about an MOE? How do all those things play into the very exciting M&A landscape we're seeing at the moment? Thanks.

Kevin Cummings

Laurie, I would say yes. Certainly, we're open to any strategic discussions from an MOE. I mean, Berkshire is a $600 million deposit branch acquisition. So if it fits in with the strategy, if you look at the last two transactions, Berkshire is on one side of our franchise, Gold Coast was on the east side of our franchise. And I think we closed the Berkshire deal on April 3, a year ago. In the height of the pandemic, we had get to out there and change all the signage. We were worrying about the police shutting us down from being outside during that period of time. And both those transactions are very promising to us. They're a little on the small size, takes a lot of energy. I think that $7 billion to $15 billion area would be a great lock-on-type transaction to do. But we're open, and we'll do whatever is necessary to enhance the shareholder value of the company. There are a lot of discussions going on, and we are certainly looking at a lot of opportunities in the marketplace.

Laurie Hunsicker

Right. Thanks for taking my questions.

Kevin Cummings

Laurie, just on the numbers, I had said them earlier. The total exposure in Manhattan is $367 million, of which the hotel sector is $196 million; multifamily and CRE are $88 million and $38 million, respectively. And as I mentioned earlier, pretty good sponsorship and improving operations. And they're all paying us interest, too. I want to emphasize that. There's no principal and interest deferral, they're all paying us interest.

Laurie Hunsicker

Okay, thanks.

Operator

[Operator Instructions] Our next question comes from Matthew Breese with Stephens.

Matthew Breese

Good morning.

Kevin Cummings

Hey, Matthew.

Domenick Cama

Good morning, Matthew.

Matthew Breese

I know we hit on a lot of the moving pieces, but maybe more directly talking about the core NIM, so ex prepayment penalty income, how do you think the year kind of unfolds for that metric and the cadence of expansion from here?

Domenick Cama

Matt, I think that we'll continue to see benefits from falling rates, especially in our deposit portfolio. Like for example, we still have some room to go in our government banking portfolio. We're working on that. We still have a number of CD buckets in that are maturing through the year and we'll see some benefit from that. So I think the core NIM will continue to expand. I know there was a lot of focus on the overall NIM and prepayment fees. But we just look at that as being seasonal. But I think you're right, focusing on the core NIM is reflective of the changes that we're making in our balance sheet, where resi and multi are falling and C&I and CRE are going up and noninterest-bearing deposits have hit 20%. So I think we'll continue to see benefit in the core NIM.

Matthew Breese

Got it. Okay. The other question I had was there's two pieces of legislation. In the State of New York, they're talking about this eviction without good cause. That's in committee. It seems like it would impact market rate apartments, and then it seems that President Biden is talking about the 1031 exchange. How do you kind of view these pieces of legislation impacting commercial real estate and multifamily? And how would you kind of assess the loan growth impact potential and credit quality impact potential?

Kevin Cummings

Matt, I think you have to look at it in light of the whole Democratic agenda, capital gains tax, things like that, it's not going to be good for business. So it's certainly not good for economic development, for productivity. It seems like everything is going to be free. And so I certainly don't think it's good for investment in the country. I have a tendency to listen to Fox Business a little too much. And I certainly think that it's certainly going to have a negative impact on business and business investment going forward. But I think getting it through and putting it in operation, you don't want to bite the hand that feeds you, and commercial real estate, especially in the multifamily sector, is a very strong sector and pays a lot of taxes. And they shouldn't bite the hand that feeds them as far as generating tax revenues in the city and the state.

Matthew Breese

Got it, that's all I have. I appreciate you taking my questions. Thank you.

Operator

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Kevin Cummings

Well, thank you for your participation today. I look forward to seeing you all at our shareholders' meeting in May. It will be a virtual meeting again. And I think 2021 is going to be a very strong year for the company, we've had three quarters of double-digit return on equity. And it's probably a record for the company in the last nine months, and I think it will continue throughout 2021. So thank you for your participation today. Have a great day, and enjoy your spring. Be well.

Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.