Customers Bancorp Inc (CUBI) 2016 Q1 法說會逐字稿

Good afternoon and welcome to the 2016 first-quarter Customers Bancorp, Incorporated earnings conference call. Today's conference is being recorded. At this time, I'll turn the conference over to Matthew Selinger. Please go ahead.

Thank you, Jessica. Thank you, everyone, and good afternoon. This is Matthew Selinger from Three Part Advisors. We are the IR firm of record here with Customers Bancorp. Welcome again to Customers Bancorp first-quarter 2016 earnings call. The earnings release was issued today after the close and is posted on the Company's website at www.customersbank.com. Representing the Company on the call today are Jay Sidhu, Chairman and Chief Executive Officer, and Bob Wahlman, Chief Financial Officer.

Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially, including the risk that results are different than currently anticipated. Please note that these forward-looking statements speak only as the date of this call and undertake no obligation to update these forward-looking statements in light of new information or future events except to the extent required by applicable securities laws.

Please refer to our SEC filings included on our report on Form 10-K and also 10-Q for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC by visiting the investor relations site -- section of our website. At this time, it is my pleasure to introduce Jay Sidhu, Customers Bancorp Chief Executive Officer. Jay?

Thank you very much, Matt, and good afternoon, ladies and gentlemen. Welcome to Customers Bancorp first-quarter 2016 call. Joining me over here today in Pennsylvania also are Dick Ehst, the President of Customers, Bob Wahlman, our Chief Financial Officer, as well as Steve Issa, our Chief Lending Officer.

Customers Bancorp, or CUBI, as we call it, is very pleased to report another strong quarter. This quarter was perhaps one of our cleanest quarters compared to the last couple of quarters. Other than a $1.2 million special reserve that we've set aside for a potential or possible regulatory charges sometime in the future and some related legal expenses that might go with it, this quarter was absolutely clean. We ended up at about $9 billion in assets and as you know, we have only 21 field offices.

Our deposit growth was strong, much stronger. It went up by about $635 million. In terms of the composition, CDs were flat, money market accounts went up by about $500 million during the quarter and demand deposits were up by about $135 million during the quarter, hence our average branch size went up from $330 million at the end of the year to about $380 million in deposits per branch. Our cost of funds went up about three basis points due to the fed increase.

On the lending side, it was another strong quarter for us. Commercial real estate went up only about $100 million because that is not a major focus of our Company. The major focus of the Company is C&I. Our C&I loans are broken into C&I for the manufacturing service industry, than the normal community banking activities and special C&I services to the privately held mortgage companies. Our C&I loans to privately held mortgage companies, that was -- went up by about $300 million on March 31.

Our average balances for the fourth quarter in our mortgage warehouse were -- for the first quarter were almost right on top of our average balances for fourth quarter 2015. That's the nature of the business. That's why, looking ahead, you got to look at when I comment on capital, you got to keep that in mind at looking at our capital planning strategies.

In terms of multifamily, a part of our strategy is that if we expect mortgage warehouse businesses to fluctuate, we have a consistency of balancing that with some multifamily growth. They were up about $300 million on an average in the first quarter compared to the fourth quarter last year. As you know, the net income was up 17.5%. Our EPS was up about 16.5%. Our return on common equity was almost 13%. Our tangible book value per share increased by about 12.5% and our return on assets was about 85 basis points.

Now I'd like to invite Bob Wahlman, our CFO, to go over details and financial and after Bob is done, I'll come back and talk about our expectations for the future and also comment to you on various aspects of our business as well as the economy and such and, of course, BankMobile technologies. Bob?

Thank you, Jay. Good afternoon, everyone. As Jay described to you, Customers is very pleased to report a great start to 2016, a start that's very consistent and in line with the earnings guidance that we had previously provided for 2016 of $2.40 to $2.50 per share. Also as Jay noted, in the first quarter Customers' net income to common shareholders was $16.4 million, or $0.57 per share. In comparison, the first quarter of 2015 net income to common shareholders was $14 million, or $0.49 per share. First quarter of 2016 net income to Customers' shareholders was up approximately 17% over a year ago on growth and top-line revenue of approximately 22%.

Looking behind the net income number into the drivers of Customers' performance, I think it's important to focus on the following matters. First, Customers income-producing assets and cash total $8.9 billion of a $9 billion balance sheet. There's only $100 million that we have for receivables and other non-income generating assets. Secondly, the principal driver to Customers' growth and profitability was the growth in income-producing loan balances. Customers continued to see strong demand for multifamily and commercial loans, including loans to mortgage bankers to finance their inventories.

Q1 2016 to Q1 2015 average loan balances were up $1.5 billion. Multifamily loans made up the bulk of that at $933 million. Commercial loans were up average balances $564 million and loans to mortgage banking companies were up $276 million. That loan growth was funded largely with growth in deposits, which was up $1.4 billion and capital, which was up $133 million. Within deposits, average deposit loan balances, Q1 2016 compared to Q1 2015, were up $753 million for money market deposits, $561 million for certificates of deposit and $102 million for demand deposits, of which $69 million were non-interest-bearing demand deposits. That was the primary driver for Customers' growth was the increase in average loan balances.

However, Customers' net interest margin for Q1 2016 was also up at 2.87%. That is up four basis points from the prior quarter although it was down two basis points from a year ago, and it's up 14 basis points from the NIM low of 2.73% in Q2 of 2015. The net interest margin was helped in Q1 2016 by the increase in yields on its variable rate loan products, particularly the mortgage warehouse loan portfolio rates increased nearly 25 basis points quarter over quarter. We gave some of that money back because that portfolio, which is short-term and variable in nature, is also funded by short term borrowing, which also increased, but it's not 100% funded by that, so we ended up with a net increase. Net interest margin was helped with fees from early prepayments of penalties totaling just $1.1 million in Q1 2016, or about 3.5 basis points in yield. Prepayment penalties last quarter were $976,000 and were about $600,000 in Q1 of 2015.

Moving on to the balance sheet, to the income statement, non-interest income in Q1 2016 was $5.5 million and was clean. It did not contain any unusual items and did not include gains on sales of multifamily loans. We did not sell any multifamily loans in Q1 of 2016. On 2016 non-interest income was not significantly different from non-interest income in Q1 2015 of $5.7 million.

Non-interest expense totaled $33.9 million in Q1 2016, or up $6.4 million, or 23%, from the Q1 2015 amount of $27.5 million. The increase in non-interest expense came from a number of different areas as we are a growing bank and as we've said, as the bank grows we are going to be increasing additional cost to meet our obligations and service our customers.

Salaries and benefits were up $3.4 million. Salaries and benefits constitute about 50% of our total expenses and so it makes up about 50% of this increase here, a little more than that. FDIC insurance assessments and regulatory fees were up $0.7 million, or $700,000, and professional services were up $700,000.

Customers, as I said before, has noted that these expenses increases result from costs incurred to run growing business. As our business increase, it does take more people, it does take more office space and our costs will increase accordingly. The regulatory-related costs are largely due just to the size of the balance sheet, so these things are what we consider to be normal cost increases. We do think it's important to compare the 23% increase in operating expenses of $6.4 million in Q1 compared to a year ago to the 27% increase in loan balance and the 22% increase in revenues of $14.7 million over that same time period.

Moving on to the provision for loan losses, the provision for loan losses at Customers totaled $2 million for Q1 2016, down approximately $1 million from Q1 2015. The Q1 2016 provision included an amount for growth in the loan portfolio net of qualitative factors of $800,000 and impairment estimates on specific loans reviewed up $1.4 million. And then we had better-than-expected performance on loans purchased at a significant discount. That is the old SOPO 3-3 loan of $300,000, so those loans, we're collecting on higher than we had previously estimated.

Asset quality continues to be very strong at Customers as we continue to adhere to the underwriting standards we first put in place subsequent to the new ownership taking control of the bank back in 2009. Nonperforming loans were only 20 basis points of total loans outstanding at March 31, 2016, roughly flat compared to March 31, 2015, of 19 basis points. Looking at that 20 basis points, approximately 11 basis points are the nonperforming loans and virtually all of our REO assets results from problem loans that we acquired in FDI assisted or other strategic bank acquisitions made back in the 2010 and 2011 time period. So only nine basis points result from loans that were originated or purchased by Customers outside of these specific -- outside of these problem bank acquisitions since 2009. Customers is very pleased at the continued loan performance of its portfolio.

Looking quickly at the sequential quarter performance, Customers' Q1 2016 performance is measured by earnings of $16.4 million and $0.57 per share is very comparable to net income of $16.8 million and $0.58 per share for Q4 2015. Comparing Q1 2016 to Q4 2015, net interest income increased $4.2 million in the -- quarter over quarter as the average loan balances increased by approximately $600 million and net interest margin widened quarter over quarter by four basis points. Again, margin widened because the benefit received from interest rate increase in December on -- largely from our mortgage warehouse loan portfolio.

Non-interest income was down $3.9 million to $5.5 million because of the unusual positive events we enjoyed in the fourth quarter that were not repeated in Q1 2016. Particularly, we received a $2.4 million non-tax bearing payment on our bank-owned life insurance policy. We had loans in the fourth quarter -- gains on loan sales of multifamily loans of $500,000 versus none in Q1 2016 and we received a one-time swap premium gain on a back-to-back swap of $800,000 in Q4 2015 and we had none in Q1 of 2016.

Non-interest expense increased $2.1 million, Q1 2016 compared to Q4 2015. Salaries and benefits were the principal drivers to that increase, but much of this increase we saw in that area relate to such things as you'll often times see in the -- in Q1, such as the increase in FICA taxes as everyone who had reached their maximum in 2015 and hadn't been paying any FICA taxes at the end of that year now are subject to the FICA taxes. There's the bonus accrual true-up and a variety of things like this.

But all the things that led to that increase were planned and were considered in our earnings forecast. So other than salaries and benefits, the increases and decreases in expenses were largely offset with notably the decrease in professional and services down $1 million as a number of one-time projects, special projects that we had ongoing in the fourth quarter, were wrapped up and we no longer have those -- that expenditure for those outside resources and we did end up -- but that was offset by a like accrual in Q1 for a couple of legal matters.

Finally, the provision for loan losses decreased $4.2 million in Q1 2016 compared to Q4 2015, largely attributable to that $3 million provision recorded in the fourth quarter, the fully reserved for the fraudulent loan that was first described to you during the second-quarter earnings release. That loan is fully reserved and is fully charged off at this point in time and we continue to -- our efforts to collect on the loan so we can only have a positive effect in the future at some point in time down the road. Jay, that concludes my comments on the financial overview for the first quarter and I'll be happy to answer any questions at the conclusion of our remarks here.

Thank you very much, Bob. Let me just comment a little bit on a few items, starting with the banking strategy first. As you know, our deposit growth over the last five years with absolutely no acquisitions has averaged about 40% a year compounded annual growth rate and our DDAs are up about 51% a year CAGR and our total deposits for branch over the last five years, they have gone from about $112 million of branch and they were 6.5 years ago as low as $40 million a branch and today they are $380 million a branch. How have we been doing it? On the lending side, our CAGR is about approximately 47% and five years ago 75% to 80% of all our loans were mortgage warehouse and today they are about 20%, 23%.

That all results from our core strategy of what we call the single point of contact strategy that I am sure you've heard from a few other high-performing institutions. That strategy is very much what we also call high touch supported with high tech where you hire bankers, private bankers, we call them, who are at least 15 years of experience. You combine them with concierge bankers, or the people who have an experience in selling personal banking services and you have a client only make one call to the bank.

And you have decision makers help the clients with all their business banking services, their consumer banking services and any other noncredit services. These are very experienced teams that provide exceptional service that are supported with top-notch technology and we compensate these teams with risk-based incentive compensation plans. As a result of this, 95% of all our revenues are coming from business segments.

Those business segments are banking to privately held businesses make up about 40% of our portfolio. Banking high-net-worth families, we concentrate pretty much almost exclusively on the multifamily portfolio of these high-net-worth families. That made up at March 31 about another 30% of our portfolio. And the normal commercial real estate that you find at majority of the banks, that made up only 15% of the portfolio and our consumer loan portfolio was only about 5%.

Now let me comment on each one of these loan portfolios and where do we see things going ahead forward. In our C&I private and commercial banking which is served by the various teams, we added about three or four teams in the last four months and those teams are off and running. We expect a good performance from those teams. You have to put a lot of business on in the C&I business because you have the normal payoffs from the good companies that you are doing a lot of business with.

These teams, we execute on our single point of contacts. We have these teams located in New England and they are both in Boston, they are in New Hampshire as well as in Providence in New England. These teams are in New York. In New York, we have teams located in Manhattan, we have teams located also on the Long Island and we are looking at teams in other areas of New York.

And then we have specialized team also of SBA lenders that we have recruited, very, very experienced and they are located in all of our markets, including New England where we have now recruited a team of SBA lenders. In New England, we have a team which we call special -- or equipment finance team that also does leasing. That team serves our business customers throughout our franchise as does the SBA team serve our clients throughout our entire franchise. At the end of March, we had more in deposits from the business segment than we had loans. We had $3.3 billion in deposits from the commercial segment and we had $3.1 billion in loans from these commercial segment.

In terms of the next business segment, and that happens to be the multifamily segment. That one is predominantly New York. We decided to give you a little bit more flavor on that segment because lots of people are raising some questions about the multifamily business. But New York multifamily is very, very unique. Our average loan size is $4 million to $6 million and it's -- as I mentioned to you, it's pretty much that we lend to high-net-worth families rather than REITs or to other types of private equity funds so those kind of developers because most of our borrowers do not even have an elevator in the buildings that we are financing.

Our annual debt service coverage ratio is almost 140%. Our loan-to-value ratio is 70% or less and our loans, we stress each and every loan for cap rates going up and by about 1% to 2% in every case and from 1.5% to 3 percentage point increase in interest rates over a three-year period, which we believe is possible so that when the loans so come up for renewal that those customers can still be able to afford them and if not, we require from all of those customers personal guarantees.

All of these properties are inspected prior to the loans being granted and they are obviously monitored by an independent group of our portfolio managers and all our credit is centralized and all our credit officers in every single area of our business report to our Chief Credit Officer, Tom Jastrem, who is very, very experienced. No wonder our customers have not seen any 30 day or more delinquency in any -- from any one of our multifamily loans at all this year.

Now talking about the mortgage warehouse business a little bit, the yield curve went flat as you know this quarter. Our expectations were that we would see about $200 million average outstandings to be about $200 million lower, which is normal seasonal reductions in that portfolio and instead of those $200 million lower, we saw a $200 million higher balances. But not on an average basis; actually $300 million higher balances. On an average, like I said, they were only $10 million more than what they were in the fourth quarter. So the bottom line is, our net income was not materially impacted at all by the mortgage warehouse business but our capital was materially impacted at March 31 by the mortgage warehouse business.

Let me talk about capital while we are on it. Recognizing that we were expecting the yield curve to sort of get flattish, we took some steps in January and raised $25 million of preferred so our tier 1 equity to average tangible assets, even though you saw a surge in the mortgage warehouse business on the last business day of the first quarter, that remained flat at 7.15% which is our tier 1 equity to average tangible assets. But our common equity to average tangible assets did drop from 6.37% at fourth quarter down to 6.17% and that is not something that we want to see continue. We are going to take steps by controlling our asset growth to make sure that this trend reverses. We do not intend to issue any comment equity at all, I say that once again, but we will manage our balance sheet to take our common equity to asset ratios up.

Our tangible book value per share went up to over $19 and so that continues to show that we have over the years actually had a 13% average annual compounded growth rate over the last five years in tangible book value per share without ever having issued equity above book value. It's all as a result of our doing the fundamentals and producing earnings.

You should expect our capital ratios to continue to start to change and they will be going up starting the second half of the year. Over the next 18 to 24 months you should not expect more than 5% or so average annual growth rate in deposits -- in assets because we intend to stay about -- at about $10 billion -- below the $10 billion in assets as such and build a stronger balance sheet and get to a 1% ROA and still with higher capital ratios show above-average ROE. That is our priority for the next two years because we believe the shareholders will gain the most by us executing this strategy as such, especially in times that are somewhat uncertain.

Let me comment on the economy that we will be hearing from all our customers. We had a meeting yesterday talking to all our lenders. What we are hearing from them is that they are somewhat cautious. They don't believe it's affecting significantly their businesses but they are baffled as to what does the market see that they don't see. That's why they are cautious and our business customers have become more cautious about making capital investments.

Number two, we heard clearly from every one of our lenders that there's a discussion taking place among all our business customers as to what might be the outcome of the elections and what it might do to the monetary and fiscal policies and the overall markets sentiment and that's another reason why we believe that you are not going to see a very strong growth in our economy. That is our view based upon what our customers see even in the second half of this year. We are being very prudent about it.

We've approached asset quality since 2009 that we got involved with this Company as if it's something which is very critical at a time when nobody was even asking us any questions about credit quality. We have been making loans as if the economy is going to be weaker tomorrow. We think that's prudent and definitely right now we are operating in that kind of a [style]. You should not expect any negative impact or negative surprises. To the best of our ability, we will have, even if we have here and there some nonperforming loans, we believe you should not see significant charge-offs coming from us and that's why in this quarter, even though our nonperforming loans went up by about $4 million, we don't expect any charge-offs coming out of that at all.

Let me talk a little bit about BankMobile now. BankMobile, the growth of the customer accounts continues to exist. We have over 100,000 checking account customers today. By the end of this quarter, we'll have 2.1 million checking account customers banking with BankMobile. They are principally all millennials and that obviously growth -- significant growth will come as a result of our closing the deal with Higher One's disbursement business and we are very focused on continuing to build out BankMobile.

This as a huge opportunity for us to really take advantage of the platform and to make these customers for life. That is a future opportunity and we will continue to be focused on taking advantage of it. In the next six months we hope to attract between 500,000 to 600,000 new millennial students to become our customers. They will have a checking account with us.

We have taken some very significant time to work with our colleagues who will be joining us from Higher One to come up with business strategies and so we hope to discuss with you in a lot more detail our strategies and introduce to you our Management team also that will be running the BankMobile on June 3 when we have our Analyst Day for 2016. That Analyst Day will be held at New York Stock Exchange offices on June 3. We remain very bullish on the future of BankMobile. With that, Jess, I'll ask you to open it up for any questions that anybody may have.

(Operator Instructions)

Bob Ramsey, FBR.

Hi there. Good afternoon. Good, thank you. I guess the first question I had for you, I appreciated the loan growth guidance to sort of expect something like 5% annualized growth over the next year or so. How should we think about deposit growth? You had very good deposit growth this quarter.

I know you touched on that in the intro comments. Maybe any more color on what really drove that this quarter? I'm assuming the deposit growth will stay much stronger than loan growth and I guess we should expect the loan-to-deposit ratio to sort of trend lower over the next year?

That is absolutely correct, Bob. I think you should expect our deposit growth on an average to remain similar to what you saw in the first quarter. And that also is that if at a certain date, 18 months or 2 years from now, we do choose to divest BankMobile technologies that will take some deposits out of CUBI so that we intend to build a much stronger deposit balance sheet so that Customers Bancorp itself doesn't have a weaker balance sheet or weaker deposit base by the time we're ready to execute on that.

Okay. That's helpful. Any more color on what really drove the loan growth this quarter?

We decided -- yes, Bob, we decided as a strategy that there's a seasonality to our business, the mortgage warehouse business. With the Fed increase in rates there was some uncertainty in the marketplace.

The average -- we saw average yields of 3.4% in the high-quality multifamily business that we could put on our balance sheet. And based upon our market position, we decided to take advantage of that and really build a very strong pipeline at a time when many of our competitors were sitting on the sideline wondering what the Fed was going to and what that might impact it might have on the rates of multifamilies, so -- and we were expecting, like I said earlier, our mortgage warehouse business perhaps to be down by $200 million.

So looking ahead in the second quarter, you should expect us to have some nominal continued growth in multifamily but not to the same extent you saw in the first quarter. But I would be surprised. This yield curve, consumer is very smart and this yield curve is really driving a lot of volume of refinancing adjustable rate mortgage loan specialty into 7-year and 15-year fixed rate loans.

We are seeing a huge increase in that business, which obviously our clients are looking for credit lines from us, so that bodes very well for our second-quarter profitability and that's why bottom line is that we may not be able to show you significantly better capital numbers in the second quarter. But you will start to see our capital, especially the tangible common equity to average tangible assets, start to go up more so in the second half and on an average, you will start to see the loan growth being greater than 5% in certain of our core businesses and less than 5% perhaps based upon our estimates, significantly less than 5% in the mortgage warehouse business.

Okay. Do you have the tier 1 risk-base capital ratio and total risk-base capital ratio for the first quarter handy by any chance?

Bob, we don't -- we haven't -- we have preliminary numbers, Bob, but nothing that we publish at this point in time. That's consistent with our past practices. We wait until we issue the call reports.

But they were all pretty much consistent, Bob. You can see that our tier 1 equity was 7.15%, so raised some. They were all --

Generally consistent with last quarter's.

Okay.

We will give them to you. You can call us before the call report, Bob. We'll give them to you as soon as we are done.

Okay. Last question and I'll hand it off to someone else. Any sort of preview you can provide for the upcoming Analyst Day in New York? I'm curious how much of the focus is going to be on BankMobile and what should we be looking for?

Sure, Bob. It's going to be minimum 50/50, but it's possible it might be 60%, 70% BankMobile and the rest would be on the rest of Customers Bank because there are more questions and there are more -- lots of our shareholders are really looking forward to what it might mean for BankMobile technologies divestiture because right now, last year there was a [$7.some] million expense and zero valuation given to us by our shareholders. We are getting a lot of questions about BankMobile so in response to that, it's probably going to be 60% or 70% BankMobile on the rest will be commercial -- the rest will be the commercial banking operations of Customers Bank.

Great. All right. Looking forward to it. Thank you, guys.

Joe Gladue, Merion Capital Group.

Good afternoon. I just had one question. You did mention you've added some teams in the last three or four months but wondered what the outlook for the rest of the year is as far as addition of more teams?

Joe, we have added approximately 14, 15 or so folks in the last six months in our various teams and we are going to pause. The best opportunities are right after you get those bonuses or those kinds of things so there's a lot of hiring that takes place between February and March and we did our share and so you shouldn't expect any other significant increases in our teams.

We are expecting reasonably strong growth in C&I business but not a huge bit based upon what we are seeing in the market place. We will be looking at simply doing the fundamentals and having a much stronger balance sheet for the next year or two and you should expect, like I said earlier, us to get close to 1% ROA within this 18 months to 2-year period.

All right. Thank you.

(Operator Instructions)

Kelly Motta, KBW.

Hi. This is Kelly Motta on for Chris McGratty. Thanks for taking my question. Your loan growth is particularly strong in Q1, partly impacted by no loan sales. Can you describe what your near-term outlook is for loan sales, particularly with respect to managing your overall capital levels?

Sure. Kelly, we will do loan sales whenever we feel there is an opportunity for us to get a nice good price for it because we are not in the business of multifamily. It's not a mortgage banking operation; it is a business that we are in for holding them in portfolios.

In the first quarter we didn't do any loan sales because there was somewhat of uncertainty in the marketplace as to the valuation of these multifamily portfolios, but you shouldn't be surprised if we do, do a loan sale of multifamily in the second quarter. And then going forward, we are seeing payoffs and prepayments add up to somewhere between $150 million or so a quarter of multifamily loans and so if we do book more -- significantly more than that it's probably because, like you said so correctly, that we see opportunities for loan sales and we are very focused on improving our capital ratios without sacrificing earnings growth.

Thank you.

It appears there are no further questions. I'll turn the conference back over to our presenters for any additional or closing remarks. Actually, I apologise. It looks like we do have a question now coming in. Frank from Sandler O'Neill.

Hi, Frank Schiraldi. How are all you guys. Good. Thanks. I just wanted to ask about BankMobile, the 100,000-plus accounts I think it is that you have. Is there any color you can give on percentage of those accounts that are direct deposit? What's driving those accounts? Are they in part reflect graduates coming from Higher One deposits? If you could just give any color there. Thanks.

I think all of the above. We are attracting the graduates. We're doing a lot of testing on various approaches that work. We have a BankMobile list program which is at non-Higher One colleges and universities who are bringing in a lot of these customers to us.

About all I can say to you is that direct BankMobile to consumer is not a frictionless process. Indirect BankMobile through someone else, whether it's affinity group or its colleges and universities, whether it's BankMobile list, those kinds of things are much more effective that we are finding and much more cost-effective and a better quality of the customer that we are finding. We will be talking a whole lot more about this, Frank, on June 3.

Okay. Do have that handy, just the direct deposit number, or is that something you guys will give out at the Analyst Day?

We will give it out on the Analyst Day and we will also share with you what our goals are at our Analyst Day.

Okay, great. On the growth in deposits, I see obviously a big chunk was in money market. Jay, did you say that, that was reflective of -- that came from your commercial customers primarily? What's --

All of it. Almost all of it. 98% came from commercial customers.

Okay. What's the yield, the average yield on the -- just curious, on the deposits coming on the books in the quarter?

Our average cost of funds on deposits for the quarter went up by about three basis points. Bob, do you have it broken down by different categories?

Yes, I do. I can tell you on -- I can't answer his question specifically in terms of those specific assets --

Money market deposits.

There's no reason to think these are different. Money market deposits are at 58 basis points, Frank, and these are coming on in that 50 to -- in that -- generally in that price range.

Okay. Great. That's helpful. Just finally on multifamily, just in terms of competition in New York, we have heard about it's heating up in terms of pricing and terms and heard a bit about offerings coming in with interest-only initial terms, sometimes for multi-year periods. Just wondering if you could talk about the competition and multifamily, specifically in New York and how you guys approach that, what you are willing to do on the I/O side.

We are not willing to do any of the things that you heard from our competitors, Frank. Let me just make that clear. There's nothing new about competition. This is -- as banks woke up in the last two years to say, my God, we got to start generating more revenues, how do we do it? And then they all sort of realized the ones who are generating revenues are the banks who happen to be doing a lot of New York multifamily and you've seen a lot of new entrants in the marketplace and the only way that they believe they can compete with us and with Signature and with New York Community is by price.

Well, I can tell you this; this is not just a price-sensitive market. This is very much of a relationship business. Even though it's done through brokers predominantly, it is entirely a relationship business. And we are not going to be playing the price game with any of our competitors, even if it means we have to stay out of the market.

We have never made a multifamily loan below 3.25%. We told you our average yield on the business we put on in the first quarter was 3.4%. (Multiple speakers) No I/O. No 10 years. So that tells you it's not a commodity.

Okay. So competition hasn't necessarily got -- it's just been fierce all along. It hasn't necessarily changed and to your point, the relationship is important.

Yes, and if it changes we will change our business focus too rather than just match them.

Okay. Thank you.

Anybody else, Jessica?

It appears there are no further questions.

Thank you very much. In summary, I would like to once again state that we made public our goals for 2016 to be between $2.40 to $2.50 in operating core earnings per share and we are right on target and see no reason to change that guidance that we have given to you.

Thank you very much for dialing in and please give us a call if you have any other questions. Otherwise, we hope to see many of you and your clients on June 3 in New York. Thank you.

This concludes today's presentation. Thank you for your participation.