Hello and welcome to today's Dime Community Bancshares, Inc. second quarter earnings call. My name is Bailey, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for Q&A at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. Before we begin, the company would like to remind you that discussions during this call contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contained in any such statements, including as set forth in today's press release and the company's filings with the U.S. Securities and Exchange Commission, to which we refer you.
During this call, references will be made to non-GAAP financial measures as supplemental measures to review and assess operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. For information about these non-GAAP measures and for reconciliation to GAAP, please refer to today's earnings release. I would now like to pass the conference over to our host, Kevin O'Connor, CEO of Dime Community Bank. Kevin, please go ahead.
Thank you, Bailey. Thank you all for joining us this morning for our second quarter earnings call. With me today are Stu Lubow, our President and COO, and Avi Reddy, our CFO. I'm excited to discuss our second quarter results as I believe they provide a clear illustration of the earnings potential of Dime and the quality of our execution. I'd like to give full credit to each of our 800+ employees on delivering record growth in loans and earnings, which excluding one-time items, were in excess of $1 per share. Capitalizing on the strong loan pipelines we've discussed on prior calls, the loan growth was broad-based across all major categories. Especially pleasing was the growth in business loans, which were up 17% annualized versus the prior quarter to almost $2 billion.
When we began the year, we expected net loan growth of 4%-6% for 2022. In early June, we revised the guidance to the top end of this range. Given our continued strong pipelines and the traction of our recent hires, we are now comfortable increasing the loan growth guidance again to 6%-8%. Stu, I'm sure, can provide more color on the current pipeline and the mix in our Q&A section. Apart from strong loan growth, we continue to execute well on our strategic plan priorities, managing our cost of funds, prioritizing NIM expansion, prudently managing expenses, and maintaining solid asset quality. Cost of deposits was up only 5 basis points for the quarter and continues to compare favorably to our local competitors. The level of DDA on our balance sheet remains a clear differentiator versus other community banks in our footprint.
These were in fact up $283 million versus the year-ago quarter. The uplift in our loan portfolio rates more than offset the increase in our cost of deposits, contributing to the linked-quarter margin expansion. Our core efficiency ratio this quarter was 46%, and for the year, we've operated at 48%. Again, within our stated goal of operating a sub-50% efficiency ratio regardless of the prevailing environment. Our asset quality remains strong, with NPAs representing only 30 basis points of total assets. Despite the growth in loans, our loan loss provision for the quarter was fairly immaterial. The provision for growth was largely offset by improvement in the reserves on loans which came on as part of our merger transaction.
Like everyone else, we are vigilantly watching for any signs of deterioration in our local economies, and thus far, we've not seen any meaningful early warning indicators of credit concerns within our portfolio. As you know, we are primarily a secured lender with conservative underwriting standards. Our credit losses have been well below the bank index over multiple cycles. Underpinning our strong historical credit performance has been our bulletproof multifamily portfolio that has come through every cycle unscathed, including the COVID-induced shutdown of New York City. The LTV on our multifamily portfolio, which represents 38% of loans, is approximately 55%. This portfolio will clearly outperform in any recessionary environment. Similarly, the LTV of our Manhattan office portfolio, which represents only $123 million of balances, is only 51%. Again, very well secured and monitored. Turning to capital.
In the month of May, we successfully issued $160 million of sub-debt at a rate of 5%. While it was a challenging environment for the capital markets, we were pleased to get our issuance done. We subsequently used the proceeds to redeem two legacy debt instruments. Similar to the rest of the banking industry, we did see the impact of rising rates on the fair value of our AFS securities portfolio, which contributed to a $27 million decline in AOCI. Despite this, tangible book value per share increased by $0.02 from the prior quarter. Importantly, our regulatory capital ratios remain strong. Our Tier 1 leverage ratio increased by six basis points in the quarter and stands at a healthy 8.71%.
As we've said before, a low-risk balance sheet, which performs favorably in stress testing, has provided us the opportunity to be active on the capital return front. During the second quarter, we increased the pace of our stock buyback and repurchased $22 million worth of stock. In the month of May, our board authorized a new share repurchase plan, and we continue to be an active purchaser of our stock. To conclude my prepared remarks, we had a strong quarter and our year-to-date core return on assets was 1.24%, providing good visibility into the earnings power of our company. As mentioned in our press release, I'd really like to thank our entire employee base for their daily efforts in furthering our goal of being the premier business bank in our footprint.
In this regard, it's especially gratifying to have our CRA rating upgraded by our regulators to an outstanding designation. This quarter's results make me even more excited for Dime's future. We have a tremendous opportunity in front of us as a pure-play community commercial bank, highly focused on being responsive to our customers' needs. At this point, I'd like to turn the conference call over to Avi, who provides some additional color on our quarterly results as well as our expectations for the rest of 2022.
Thank you, Kevin. Our reported net income to common for the second quarter was $36.7 million. Excluding the impact of loss on extinguishment of debt and severance expense, adjusted net income to common would have been $39.3 million or $1.01 per share. The reported NIM and the adjusted NIM for the quarter was 3.29%. The net accretion balance from purchase accounting currently stands at approximately $1.9 million. While purchase accounting accretion was fairly immaterial this quarter, as mentioned previously, there could be some lingering impact on income statement in the future depending on payoff activity on premium and discount loans. We grew spot period-end deposits by approximately $135 million in the second quarter while keeping our cost of deposits relatively well controlled.
The average cost of deposits increased by 5 basis points compared to the first quarter. The spot rate on deposits at quarter end was approximately 24 basis points. While we were pleased that our deposit betas significantly lagged the level of set funds increases in the second quarter, given the rapid pace of rate increases, we do expect deposit betas to increase from the low levels seen in the second quarter. Offsetting future increases in deposit costs is the repricing opportunity on our loan portfolio. As you would expect, given the current interest rate environment, we are proactively managing our loan pricing. The rate on new loans that are in various stages of closing is approximately 4.25%, and new additions to the pipeline are in the 4.50%-4.75%` area. This is significantly higher than our existing portfolio rate at June 30 of 3.95%.
Core operating expenses, excluding loss on extinguishment of debt, severance expense, and intangible amortization for the second quarter came in at $48.5 million. Expenses on a year-to-date basis have been in line with our expense guidance for the full year. Non-interest income for the second quarter was approximately $12.1 million. Included in non-interest income was $2.2 million of BOLI income related to mortality proceeds from a death claim. As we mentioned on our first quarter earnings call, after a slow start to the year, we were expecting a pickup in fees from our SBA division and from our back-to-back loan swap program in the second quarter, both of which came to fruition. Moving on to credit quality, our provision for the quarter was $44,000.
Basically, provisioning on the loan growth was offset by improvements in our individually analyzed PCD loans. As we have mentioned before, a meaningful portion of our reserve is contained within individually analyzed loans as part of our merger-related accounting. The reserve level on these loans improved this quarter as credit quality on this sub-portfolio has been better than what we projected at the time of the merger. When looking at our individual core loan segments, our one-to-four family portfolio is reserved at approximately 55 basis points, our multifamily portfolio is reserved at approximately 20 basis points, our CRE portfolio at approximately 50 basis points, and our C&I portfolio at approximately 1%. Assuming no change to the Moody's forecast, these portfolio-level reserves should serve as a guide for future provisioning on net loan growth.
For reference, we use the Moody's June forecast, and our models incorporate both the Moody's baseline scenario as well as the Moody's downside S4 scenario. Our existing allowance for credit losses of 82 basis points is still above the historical pre-pandemic combined levels of the legacy institutions. During the second quarter, we bought back approximately 717,000 shares at $31.91. We believe share repurchases continue to be attractive given our trading levels, our organic prospects, and strong balance sheet that performs favorably under stress testing. We will continue to manage our balance sheet efficiently and our tangible equity ratio of 8.02%, including the full impact of AOCI, and 8.55%, excluding the impact of AOCI, is within our comfort zone. As Kevin noted, our Tier 1 leverage is very strong at 8.71%. Now let's turn over to guidance and targets.
We are again increasing our loan growth guidance for calendar year 2022 to approximately 6%-8%, excluding PPP. This would equate to spot balances at year-end, excluding PPP, of between $9.7 billion and $9.9 billion. We are pleased with our performance at the halfway point of the year and expect to build on the pipelines and momentum we have created thus far. As you know well by now, we don't provide quarterly quantitative NIM guidance. We do wanna provide you some directional perspective. Based on the current market expectation for rate increases in 2022 and then some rate cuts after, we see the NIM being approximately 3.35% by the middle of 2024. As Kevin mentioned, NIM prioritization is a firm-wide focus for us.
Given the day count convention we use, we expect the NIM to be impacted by a few basis points in the third quarter, and we also expect prepayment fees, which have been contributing approximately 5 basis points to the margin for the first and second quarter of 2022, to start drying up. In the second quarter, we had a small recapture of interest income from prior non-accruals, and this is also not expected to continue. In addition, our deposit betas will pick up in the second half of the year. All that being said, as the impact of rate increases work their way through the loan portfolio and we reprice into a higher rate for originations, we expect the margin to get to 3.35% by the middle of 2024.
We are reiterating our full-year guidance for core cash non-interest expense, excluding intangible amortization, to be between $197 million and $199 million. This quarter, we had a $2 million benefit to the non-interest income line item from a BOLI claim. Excluding the impact of this, our year-to-date non-interest income would have been $17 million. As we've mentioned previously, the impact of the Durbin Amendment will kick in starting in the third quarter of this year. We continue to expect full-year non-interest income, excluding the previously mentioned BOLI benefit to be within our $33 million - $34 million guidance. Finally, with respect to the tax rate for the remainder of 2022, we expect it to be approximately 28%. With that, I'll turn the call back to the operator for questions.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. The first question today comes from the line of Mark Fitzgibbon from Piper Sandler. Please go ahead. Your line is now open.
Hey, guys. Good morning and nice quarter.
Good morning, Mark.
First question I had, Avi, I missed what you said about the margin being impacted by a few basis points in the third quarter. Could you just clarify why that was?
Yeah, no. The overall comment, Mark, on the margin is, you know, we don't provide quarterly guidance. You know, in general, you know, the day count convention that Dime uses, you know, we typically see the Q1 margin, you know, being higher just given there's fewer number of days in that quarter. We also just mentioned, you know, prepayment fees, you know, which have been around 5 basis points on the margin. You know, for the first and second quarter of this year, we expect that to dry up, you know, going forward. You know, just given the fact that, you know, payoffs are probably gonna slow. You know, we've also seen deposit costs, you know, be very moderated so far.
You know, that being said, at some point, you know, deposit costs are going to go up. Our spot rate was 24 basis points on deposits at June 30th. I mean, that being said, our loan rates were, you know, 4.05%, you know, at the end of the quarter. You know, currently actually so 10 basis points up. So, you know, you put all that together, you know, on an individual quarter, the margin may be up, may be down. You know, our real guidance is, you know, when you exclude some of these, you know, one-time items. We had a little bit of non-accrual interest recaptured this quarter, which is a couple of basis points as well.
Stripping all that stuff out, you know, the margin is gonna expand going forward, you know, in the medium term. We do expect it to get to around 3.35% by, you know, the middle of 2024. We're also probably, you know, guiding to higher average interest earning balances just given the loan growth is higher. You put that all together, the net interest income guide is, you know, definitely higher than what it was, you know, last time around.
Gotcha. On the deposit front, it looked like you had kind of a big swing out of money market account balances into savings. Was there a promotion or something that kind of drove that or anything there?
Yeah, no. Just managing customers, you know, via rate. I mean, basically, savings and money market are the same product. I mean, with you know, some of the regulations out there on the savings account, you know, you can do unlimited numbers of transactions right now. It's just managing customers, you know, in the individual products, you know, and just managing our cost of deposits. As you see, the cost of deposits is only 5 basis points, so it's not really, you know, significant amount of promotions. We've kind of stayed away from any promotional money markets at this point in time. It's just getting customers in the right product for us.
Yeah. Mark, that's really a change into business savings accounts. We really were managing, you know, the individual customer relationships as opposed to changing, you know, the base rate on the entire money market portfolio.
Okay. Stu, what's the loan pipeline size at the end of the quarter?
Right now it's about $2.7 billion. The yield on that portfolio is 4.64%. The weighted average rate on what's in the pipeline today is about 4.64%.
Okay. The last question I had is, I think the CRE to risk-based capital ratio is, I think, 534%. How much higher are you comfortable letting that go?
Yeah, Mark. I mean, generally, we'd like to be, you know, high 400s, low 500s. You know, we're pretty comfortable with where it is right now. You know, obviously, we've bought back a lot of our stock because we believe it's very cheap. You know, we do see significant growth in our C&I portfolio. Stu can talk a bit about, you know, how the pipeline is weighted towards C&I credits. We're really focused on doing owner-occupied loans. I mean, that being said, look, our company has a long history of being over 300%. You know, we do a significant amount of stress testing.
You know, we get, you know, approvals from the Fed every time we do a buyback, and they're very comfortable with our concentration. It comes down to credit quality at the end of the day, and our credit quality's been pretty pristine, you know, through the current cycle and prior cycles.
Thank you.
Thank you. The next question today comes from the line of Manuel Navas from D.A. Davidson. Please go ahead. Your line is now open.
Hey, just adding to questions about deposit trends. You had a little bit of a mix shift away from DDA. Anything just to add there and still, you know, you're still above peer there, but just kind of any color to add on that shift?
Yeah, Manuel, not much of a change. I mean, looking at spot balances is pretty hard. You know, I would really point you to the year-over-year increase in DDA. You know, there's a lot of seasonality. We do have some municipal deposits. I mean, we actually grew business deposits by around $150 million on a year-to-date basis. You know, we've seen, you know, some, you know, minor outflows in consumer overall. But you know, we are, you know, trying to be more competitive on rate, you know, as, you know, rates do go up. So, you know, really nothing that, you know, to be concerned about. You know, we do see, you know, us, you know, growing DDA over time, and, you know, all our, you know, internal plans are still based on growing DDA.
You know, obviously as rates keep going up, you know, you have some customers that, and you've heard this from, you know, a lot of our peer banks, you know, looking to, you know, take idle cash and putting it into treasuries, you know, to some extent. But beyond that, you know, our portfolio is pretty granular and we feel pretty, you know, good with where we are.
You know, in looking at the loan pipeline, we have about $500 million in C&I business in the pipeline, and about two-thirds of that is new business. We would expect that, you know, deposits would be garnered once those loans are closed and we open the operating account. You know, we feel pretty comfortable that we can continue to enhance and grow our business DDA going forward.
That's helpful.
Yeah, Manuel. Just one other clarification. We do pay out our escrow deposits at the end of the first half of the year and the end of the year. When you optically look at the end of Q1 versus Q2, it's always gonna be lower just due to the payout of escrow deposit. Fair enough.
That's at the end of 2Q or at the end of 1Q?
The end of 2Q. We pay people's real estate taxes get paid in the second quarter, so that comes out of the escrow balances.
Perfect. One little clarification on the fee guidance. Did I hear you right that you're including the $2.2 million BOLI death benefit in the fee guidance for the year?
No.
He's excluding it.
Oh, okay. You're excluding.
Yes.
Perfect. It was nice to see that the SBA fees and swaps bounce back up. Any change to budget there for the year?
No. I think, you know, the way we look at those, you know, two businesses are, you know. You gotta look at it over a multi-quarter time horizon. I mean, our annual run rate, if you take the first half of the year, we feel, you know, the SBA business was light in Q1. You know, our team was, you know, very busy with PPP and forgiveness. We feel the SBA. That's a pretty good run rate, you know, going forward. You know, $750,000-$1 million ±. Obviously premiums have come down a bit in that business, but our team, you know, is growing and we feel very comfortable with that.
On the swap product, you look, there's a minimum amount of swap fee revenue we'd like to generate, you know, every quarter, you know, we like the floating rate assets that it provides. You know, constantly adjusting pricing on that product to get our fee income and our, you know, ALM profile to where we need. You know, in the long run, you know, that should be a $4 million-$5 million annual run rate business for us. Obviously Q1, some of the transactions flipped over into Q2. You know, overall we're pretty happy with our performance the first half of the year.
Thank you.
Thank you. The next question today comes from the line of Matthew Breese from Stephens. Please go ahead. Your line is now open.
Good morning, everybody. I wanted to touch on multifamily. You know, growth this quarter was stronger than we've seen in quite some time. I'm curious just what happened there. You know, was it a slowdown in prepay and continued originations? Or did you find the rate characteristics of that product better this quarter? Just some color there and maybe some specific outlook on how that can proceed from here.
I think you answered the question, Matt.
Yeah, you know, just to give you a little bit. You know, first of all, the multifamily is a bit grossed up because we had about $70 million of construction multifamily go permanent. Those were loans that were already in the book. The construction was completed, they were fully leased up, and they converted to permanent multifamily loans. The other is, you're right, prepays were down a bit. We did have a hangover from the first two quarters, you know, the first part of the year, in terms of the pipeline. Today, you know, total applications in the multifamily portfolio is about $55 million, and the rate is about 4.75%. We're really not focusing on that. We priced it up.
You know, we are basically now looking at multifamily, more in terms of servicing our existing relationships in that business, but really not, because our pipeline is so strong, really not out there in the market, chasing product. Although rates have, you know, improved dramatically. The current rate in the market is probably in the 4.75%-5% range. But we have a significant pipeline in the other categories, particularly C&I and owner-occupied. It's really a kind of a hangover from an existing pipeline, prepayment slowdown.
Some gross up because we had a transfer of $70 million odd from a construction portfolio into the permanent portfolio.
Yeah. Hey, Matt.
Okay. Is that?
Another point. Yep. Hey, Matt, just one other point. You know, you go back to the time, you know, the balance sheets came together, you know, go back to March of 2021. Our multifamily book was $3.6 billion then. It's basically $3.6 billion now. You had a lot of, you know, payoffs, you know, over time, and we're just back, you know, the same dollar balances at the time of the merger, really.
Got it. Okay. I mean, I was trying to translate what happened this quarter and maybe get a good read on, you know, the increased loan growth guidance. Was it, you know, was it due to increased ability to generate multifamily? It sounds like it's more, you know, C&I, commercial real estate and more activity there. Is that an accurate read?
That's correct.
Yes.
Got it.
Yeah.
Yeah. Okay. Avi, you mentioned a couple of times that your expectations, and not unreasonable, is that, you know, deposit betas will pick up here at some point. Obviously, your beta cycle to date has been excellent. I'm curious when you talk about deposit betas accelerating, what does it mean for you, just given the level of non-interest-bearing? It could be better than peers would expect it to be.
Yeah.
Just curious how you think about it.
Yeah, I think, you know, the spot rate, Matt, at quarter end was, you know, 24 basis points. You know, the rate on deposits today is 27 basis points. You know, even assuming no change between now and, you know, the end of the quarter, you know, we're gonna see, you know, a double-digit increase in deposit costs, you know, for next quarter and all else equal, holding it flat. I mean, that said, the Feds raise rates more. I think the one thing we all need to wait and see is you probably heard this from some other banks, you know, at some point, you know, deposit costs are gonna get into the system. We've lagged so far, and we continue to lag.
You know, based on models and based on we've seen historically, we're trying to be conservative there. I think the other piece is, you know, our loan growth guidance, right? We've gone from 4% - 6% to 6% - 6% - 8%. We see a lot of demand there. If you're gonna grow the balance sheet more on the margin, you know, you're gonna have to pay up for some deposits, you know, over time. I think we'll, you know, keeping that all in mind, you know, when we initially came out, we said we thought deposit betas would be, you know, 20%-25% this cycle. If you ask us now, it's probably, you know, 25% is probably our best guess in terms of, you know, where we end up.
I think we're gonna do better than our local peers for sure. That said, you know, we're in a competitive market, and we're gonna see, you know, where we need to be on deposit costs.
Got it. Okay. You know, Kevin, I think in the past you've talked about longer term, you know, maybe by that, you know, 2024 area, you can get to that 1.25% type ROA. You know, looking at this quarter's results, maybe you get there faster than you initially thought. You know, maybe some thoughts around, your ability to achieve that sustainably in the near term or exceed that, profitability target. Just some general thoughts there.
Well, I mean, I think, you know, Avi, listen, it builds off the margin. The discussion about the margin at that, how that impacts it. We still feel comfortable that 1.25% is really where we can sustainably run the organization.
Got it. Okay. Any update on M&A activity, discussions, willingness to participate in this kind of market?
As you can see what we've accomplished this quarter, the focus really is growing what we have. You know, I think that would be a distraction that would take us away. I mean, I think, you know, people sitting around this table and the employees we have listening on the phone are excited about what we're doing every day, and how this company is coming together. I think that's gonna be the focus. Those are the opportunities in front of us. You know, we keep bringing on some new people to increase the loan portfolio. The systems are getting better. The processes are getting better. I'm excited about what we can do organically.
Great. I appreciate you taking my questions. That's all I had. Thank you.
Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. The next question today comes from Chris O'Connell from KBW. Please go ahead. Your line is now open.
Hey, good morning. Just wanted to circle back on the deposit commentary. One is, I mean, do you guys have a sense of, you know, where you think, you know, or I guess in your modeling, you know, where deposit betas are gonna be over the course of this tightening cycle?
Yeah, Chris, I think you know, from the start of the cycle, you know, probably 25% is probably our best guess at this point. You know, I think that being said, you know, a model is a model. It's only as good as you know, the assumptions in there. I think you know, the pace of increases this quarter has been faster than what anybody thought. I think on the flip side, though, it's really about you know, having the DDA, managing that, growing that, and then repricing your loan portfolio. It's not a one-sided equation. I think if deposit betas are gonna be higher, we're gonna see you know, higher loan betas as well over time.
We feel pretty comfortable with, you know, the overall NIM getting to 3.35%, you know, in a couple of years and managing, you know, around that, you know, as it relates to deposits and loan growth and loan mix.
Okay. Got it. For the NIM on the 3.35%, how does that change, you know, even if you don't give a number, just directionally, if there's no cutting in the back half of 2023?
It doesn't change much because, I mean, our assumptions are for, you know, middle of 2024. You know, by the time you cut rates, it takes a while for it to go through the system. Not much of a change, you know, at that point in time.
Okay. Just going into, you know, I think, you know, you probably have a pretty good look into, you know, this next quarter or so. You know, as we move into, you know, 2023, you know, how are you guys thinking about, you know, deposit growth and core customer growth? I know it's, you know, underlying growth, it sounds like, you know, you feel good about right now. I mean, you know, is there another shift to kind of, you know, lock in rates and utilize CDs a little bit more? You know, how are you thinking about kind of long-term deposit growth, you know, given the tightening conditions?
Yeah, I think for now we're you know pretty comfortable with our liquidity position. We're also comfortable taking the loan-to-deposit you know between 95%-100%. You know historically you know that's been a fine number for us to run our liquidity. In multifamily you know it's a pretty fast cash flowing asset you know in most times. We feel comfortable you know growing loans a bit quicker than deposits in the near to medium term. You know I think at the end of the day it's about just managing the balance sheet at the lowest you know cost for the medium term and not you know damaging the franchise you know in the near term you know in terms of you know the rate setting.
I think it's going to be a function of, you know, how quickly we grow loans. As Stu said, you know, with more C&I business coming online, there's more deposits coming online with that. You know, we have our own niches here at the bank. You know, we're very focused on that. We have, you know, multiple, you know, different deposit gatherers who are just, you know, 100% focused on deposits. Look, I think at the end of the day, it's not repricing the base and waiting as long as you can. And, you know, hopefully we don't have to do that. There are going to be some customers who, you know, have—we have a lot of loan balances, deposit balances that we, you know, need to pay up for over time.
I think, you know, over time, you know, we feel pretty good about our liquidity position. You know, we have ample room to borrow if we needed to. We've not tapped that like a few, you know, other banks in our footprint. I'd say overall, it's still about growing DDA. My earlier comment was we've grown business deposits by $150 million year-to-date , and we need to still keep doing that. The consumer book at our bank, you know, it used to be, you know, 40%-45% of the overall portfolio when we combined both legacy institutions. That's down to, you know, probably 33% right now. At some point, that's going to level off.
I think once that levels off, you know, you're going to see some additional growth in the deposit book as you know, business becomes a bigger and bigger part of the overall pie.
Great. That was really helpful. And then, you know, last one for me is just in terms of like credit quality and opportunities that you guys are seeing in the market on the loan side, you know, where, you know, where are you seeing the most attractive, you know, opportunities today and and you know, what categories are you being the most cautious on?
Well, you know, we obviously are seeing a lot of business from some of our new teams and also our existing teams in the C&I world, obviously taking business from larger institutions and those that have been through mergers and have experienced disruption. We're seeing a lot of opportunities there. Our owner-occupied portfolio tied into the C&I business as well has a nice pipeline in place today and the CRE investment as well. What we are not really involved with is retail and office space. We don't have a big portfolio in that today, and we're really staying away from that. From a credit standpoint, you know, we're very careful. You know, our average LTV on the entire CRE portfolio is 57%.
What we're seeing today is not much different from that. We're in the 60%-65% on new deals. Back in the first quarter of February timeframe, we upped our stress testing on our underwriting. We basically increased qualifying rates by 1% over current rates, and we're still doing that, and then stress tested from there. We feel pretty comfortable from a credit perspective. You know, the areas that many people might be concerned about, maybe office building, Manhattan office, retail, you know, we've stayed away from historically and we continue to do so.
Great. Thanks for taking my question s.
Thank you. The next question today is a follow-up question from Manuel Navas from DA Davidson. Please go ahead. Your line is now open.
Hey, just following up on that, some of the competition commentary. Are you seeing any specific offers in market on deposit rates, or is this just an anticipated deposit rate increases? On the loan side, are you seeing pushback on pricing? Kind of speak to both sides on competition a little bit.
Yeah. I'll speak on the deposit side. I mean, in general, you know, our competitors have been pretty rational. You know, some of the larger mergers that have taken place, you know, it's really two rational competitors, you know, entering our market. Not really seeing a lot on the deposit side. Obviously, there are, you know, some customers just looking, you know, at the Treasury market and, you know, if they can get, you know, 2.5%-3% on treasuries, you know, that's a different type of discussion from, but from the banks in general, pretty rational.
Yeah. On the loan side, we're really not seeing a lot of pushback. We're winning deals with the rates that our rack rates. You know, we're looking at that daily, if not weekly. You know, the pushback has not been there. You know, activity's been robust. I think everything's pretty rational. You know, if pricing gets, you know, out of whack, you know, we're not following the market down. You know, we're very disciplined on our pricing.
I appreciate the color. Thank you.
Thank you. There are no further questions registered at this time, so I'd like to pass the call back over to Kevin O'Connor for closing remarks.
Well, I just want to thank everybody for your interest in the company, taking the time to participate today. Enjoy the Q&A and the dialogue back and forth, and everybody have a great weekend.
This concludes today's conference call. Thank you for your participation. You may now disconnect your line.