Q1 2024 ConnectOne Bancorp Inc Earnings Call

Participants

Siya Vansia; Chief Brand & Innovation Officer; ConnectOne Bancorp Inc

Frank Sorrentino; Chairman of the Board, Chief Executive Officer; ConnectOne Bancorp Inc

William Burns; Chief Financial Officer, Executive Vice President; ConnectOne Bancorp Inc

Daniel Tamayo; Analyst; Raymond James

Frank Schiraldi; Analyst; Piper Sandler

Tim Switzer; KBW; KBW

Presentation

Operator

Thank you for standing by. My name is Marvin, and I will be your conference operator. At this time, I would like to welcome everyone to the connect one Corp. First Quarter 2024 earnings call. (Operator Instructuions) I'd like to turn the conference over to your badge, Chief Brand and Innovation Officer.
You may.

Siya Vansia

Good morning, and welcome to today's conference call to review Connect one's results for the first quarter of 2024 and to update you on recent developments on today's conference call will be Frank Sorrentino, Chairman and Chief Executive Officer, and Bill Burns, Senior Executive Vice President and Chief Financial Officer. I'd also like to caution you that we may make forward-looking statements during today's conference call that are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings. Forward-looking statements included in this conference call are only made as of the date of this call, and the Company is not obligated to publicly update or revise them.
In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables and schedules which have been filed on Form eight K with the SEC and may be of and may also be accessed through the Company's website. And I will now turn the call over to Frank Sorrentino. Frank, please go ahead.

Frank Sorrentino

Thank you, Susan, and I appreciate everyone joining us this morning to discuss Connect one's first quarter performance. We entered the first quarter firmly on the offensive. And despite the backdrop of a challenging landscape, we remain dedicated to our relationship banking model, the efforts of our team, the investments we've made in our future in the U.S. and our unwavering commitment to our clients is paying dividends and demonstrating the strong forward direction.
As you've heard me emphasize before, supporting our clients is connect one's top priority, an approach that has consistently proven effective and has enabled us to expand our banking relationships, grow in the number of verticals and expand into new markets while also reducing exposure to non-relationship businesses through the aligned efforts of our entire team. We began to see an increase in deposits in the fourth quarter of last year, and that momentum is continuing during this first quarter. We're optimistic that this trend will continue throughout the year. Bill will get into this future, but the sources of deposit growth include building our C&I client list. Our recent entry into the Long Island market and the ongoing expansion of our presence in Florida.
As for the loan portfolio, we continue to see opportunities from our existing clients, particularly in the C&I and construction verticals, and we've begun to manage non-relationship loans off the balance sheet. These actions are intended to improve our loan-to-deposit ratio and lower our CRE concentration.
Shifting to net interest margin. We're already seeing a gradual expansion in our net interest margin ahead of Fed rate cuts. And as Bill will cover in more detail, our NIM. showed a favorable trajectory during the first quarter.
Turning to credit, several important credit quality metrics improved during this first quarter. Nonaccrual loans declined. Criticized and classified loans continue to decrease, and delinquencies remain very low. These efforts all reflect our long-standing high credit standards, our relationship-based client philosophy and our track record of avoiding riskier subsegments, such as the New York City office, which represents just 1% of our total loans and New York City rent-regulated, where the exposure is less than 5%.
In terms of capital, our regulatory ratios remain well above required minimums and our tangible common equity ratio was 9.25% at the quarter end, affording us the flexibility to repurchase stock during times of slower growth, and we expect to continue repurchases under the current operating and economic environment. Those who follow us closely know, we've had an excellent track record in growing tangible book value and once again, our tangible book value per share increased during the first quarter and is up over 5.5% from a year ago. Additionally, reflecting the confidence in our future profitability and a solid capital base we're pleased to announce a $0.01 increase in our cash dividend to $0.18 a share. This is our fifth dividend increase since 2021, and our Board of Directors will continue to evaluate future dividend increases in the future, supporting our focus on driving growth. We continue to hire high-performing talent, adding to an already experienced team of bankers here at Connect, Ron, this is nothing new for us as we've always taken an opportunistic approach to talent acquisition and the shifts in our market and among the competitors that have provide lucrative opportunities for us. And I'm also pleased to note we're seeing compelling opportunities for noninterest income growth, including within our both live platform. The platform continues to onboard new franchise or brands while expanding the use of its hallmark product B verify through the company's franchisee base.
As we look ahead, we continue to explore opportunities to build that ecosystem around the needs of franchisees.
In summary, I'm pleased to report the Company delivered a good start to the year, both financially and operationally, and we believe connect one is well positioned to execute on our long-term objectives.
So with that, I'll turn it over to Bill give us a little bit more depth and some color on the results.
Bill and Keith.

William Burns

Thanks, Frank, and good morning, to everyone. I'd like to start off by giving everyone on the call, just a general view on where Connect one's financial statements and where our metrics are headed this year. So notwithstanding the Fed's continued hawkish stance, our goal and our outlook to finish 2024 with an even stronger balance sheet and increased profitability. First, we see a wider net interest margin coming from connect one, which will drive improved profitability.
Second, we are aiming for slow, but smart phone growth, which will contribute to wider margins, improve our loan to deposit ratio and reduce our commercial real estate concentration, regulatory metrics. And third, of course, we want to maintain our sound capital base and credit quality.
Lastly, I want to mention that we remain very close to the 10 billion threshold, not there right now or if we're going to cross-sell the 2024 early 25. But we want to make it perfectly clear that we have been and continue to be well prepared with our regulators. The Durbin hit would be small and expenses associated with the threshold are already in our expense base between our regulatory risk-based capital ratios remained strong, as does our tangible common equity ratio, which is in excess of 9% at the holding company in excess of 10% at the bank level. These TCE ratios have largely been unaffected by AOCI. due to the hedging that we put in place several years ago. Our current capital plans call for continued stock repurchases, along with today's modest dividend increase. But also we are targeting to end 2025 capital levels at or above where they are now. So the margin did compress slightly during the first quarter from the sequential fourth quarter. But the good news is that the margin appears to have bottomed out in January and is now headed upwards. Our February, net interest margin was 2.66, and that widened by six basis points to 72 of March and April is also off to a good start. The margin stabilization comes as our cost of funds is remaining relatively constant. That's helped in part by growth in non-interest bearing demand and the fact that we've probably hit our terminal beta same time. The loan portfolio yield continues to inch up. Recently, we've been booking loans at about 8.5%, while loans rolling off are at 6.5% below 13 Our loan pipeline predominantly consists of wider spreads, C&I and construction, while tighter spread multifamily originations have been limited and we foresee that trend continuing. So if those dynamics over the past couple of months continue. And we believe a well our projections indicate that even without any rate cuts through 2024, our margin could expand upwards of 15 basis points between the first quarter and what we expect for this year's fourth quarter. And on top of that, I stick with my previous guidance, which stated that for each 25 basis point Fed cut, our margin will expand almost immediately by five basis points for the first quarter. Deposits grew while loans decreased. As Frank alluded to, deposit traction is building through several sources including our C&I team continuing to onboard new clients, continued build of our South Florida foothold and entry into the loan market.
In terms of loan growth, we will continue to prioritize relationship-based non-CRE lending while placing less emphasis on commercial real estate lending and proactively reduce non-relationship credits, all of which is expected to result in subdued if not flat, net loan growth switching over to net non-interest income, the quarterly run rate has been approximately 3.7 million and projecting modest increases here are coming from higher SBA loan loan sale gains, higher fee revenue above FLY. And we also expect to implement a tax base restructuring of some of our outstanding billing policies.
All in all, I'm just projecting that we'd have about 10% growth in noninterest income by year end. In on the OpEx side, sequential growth from the fourth quarter was 3.7%, not unexpected. It's typical to connect one for the first quarter and going forward, I'm estimating 1% to 2% sequential growth in expenses throughout the rest of 2024. Now that expense growth rate could be higher or lower. It could be influenced by actual revenue growth. But as Frank has mentioned many times, we are committed to investing in our infrastructure as well as taking advantage of opportunities created by M&A to structure them.
In terms of credit, we continue to feel very comfortable with overall portfolio credit quality. Nonaccrual loans fell by about 10%, while our 30 to 89 day delinquencies were nine and historic low at just 0.04% of loans. The total criticized assets came down again to fifth straight declined to 1.3% of loans. Our provision for the quarter was 4 million, approximately in line with Street expectations. We had 15 basis points of charge-offs in the quarter coming from a handful of partial charge-offs related. If the loans acquired as part of an acquisition, we could see similar levels of charge-offs for the remainder of 2024. But my expectation is that the charge-off level is likely to subside as we get beyond the end of the year. Adding to the provision for the quarter were some modest upward adjustments to our CECL qualitative factors and that push the allowance percentage to above 1% at this point in the economic cycle, we certainly believe it makes sense to be conservative by increasing allowance coverage as a reminder, our exposure in New York City offices 1.2% and all New York City multi-family is 7.5, but only a portion of that 7.5 are rent regulated loan. So the risk exposure is even less than I'd say it's in that 4% to 5% range. We can continue to scrutinize and stress our rollover repricing risks we do this both on a top-down basis utilizing electronic analyses as well as bottom up loan by loan reviews when needed. The results of those stress tests analyses show a limited potential impact on credit cost going forward.
And just one more item for centers of back to Frank, I want to give you guidance on the effective tax rate for the quarter. Was 25.5%. That was helped by the exploration of New Jersey store tax rate that had been in place for several years going forward.
Our effective tax rate could increase due to growth in taxable income. And we always tried to mitigate some of that increase with additional tax-free income sources.
So with that, Frank, back to you.

Frank Sorrentino

Thanks, Phil. In summary, our operating results remained solid. Our balance sheet remains strong and our credit metrics remain resilient. Looking ahead, we're optimistic about 2024. There are attractive opportunities in the markets we serve, and we're confident that by diligently pursuing our strategic objectives, connect one is well positioned for enhanced profitability and sustained success, which would also be amplified by set by the Fed lowering rates. As always, we appreciate your interest and connect, Ron, and thanks again for joining us today. And operator, we'll now open the line for any questions.

Question and Answer Session

Operator

(Operator Instructions) Daniel Tamayo, Raymond James.

Daniel Tamayo

Thank you. Good morning, Frank and both. First, I guess on the on the loan growth guidance, you mentioned you're going to be managing non-relationship balances off the balance sheet and then some remixing or reducing the commercial real estate concentration. So just curious, kind of how you're thinking about non-relationship balances off that you've got right now, what that might look like in terms of runoff? And then on the on the other side, just where you're expecting to see growth not in multifamily or commercial real estate?

Frank Sorrentino

I would say, Dennis, Frank, I would tell you that we go through our portfolio on a one-by-one basis. It's not that we're looking at of a spreadsheet of numbers. These are relationships or people that have promised us relationship of true relationships that consist of deposits and loans in the cases where we find that that those things are not true or not to the to the and to the point where we're comfortable with them. We've asked those people to look for other other places to do their banking. And in most cases and part of the reason you saw the increase in deposits this quarter, we did get people to recommit some of their efforts to us. Part of that was because of a lot of disruption in the market. But part of. It's also just because we're out there asking the right questions and holding people accountable for what they promised us in the past. We've always been a relationship bank here at connect one. And so that means doing having a full relationship, which includes your deposits and your loans. But as you know, some people make promises of we're generally the type that put our best foot forward. First, we trust everyone, and now we're in the verify part. And if we don't like what we see, we're asking people to move out. So very difficult to say with any certainty what the numbers would look like. It is a very general theme around the entire organization and it is showing up in the numbers we do have an emphasis today on we have had for quite a while on our C&I portfolio, and that's showing some results too, which is also showing up in the deposit growth numbers and there it's almost I almost guarantee that if we're taking on a C&I relationship, we are getting the deposits along with the with the loans. And we also have since our inception almost 20 years ago. We've always been pretty active in the construction marketplace. I like that business. My background is in it. We think there's a lot of compelling projects around the New York metro market that make a hell of a lot of sense, especially with the housing dynamics here. And we like the types of relationships that that that brings to the table. So we've had a bit of a focus there as well.

Daniel Tamayo

I appreciate that, Frank and Dan, it's Bill.

William Burns

You know, just to give you some guidance on how we get to a growth rate likely to see some decline in multi-family. And then overall, this would just be an educated guess here. You know, it's hard to be precise with these projections, but I'd say very low growth anywhere from zero to say, 2.5% total growth in the portfolio, including declines in multi-family.

Daniel Tamayo

Okay. Um, on the personnel side, I guess, given that shift from these lenders that are some of these lenders historically just commercial real estate and multifamily and or multifamily lenders, they are they going to be kind of just shifting over to looking at construction and C&I, meaning Alistair, do you expect to be going out and looking to hire new lenders or teams to accelerate that growth?

Frank Sorrentino

I wouldn't see it as a shift. I do think we have expertise in particular areas, and we continue to maintain that expertise in the various verticals that we represent. I think it would speak more to who we're hiring, what teams we're enhancing or building or creating as opposed to. I think it's hard to take somebody who's been whatever in one particular vertical and move them immediately to the other. I'm not so sure that's the best way to go about it. But when we're thinking about adding folks or people who have a desire to come to work for connect one. We've gotten a lot of inbound calls. We're picking and choosing the folks that will help expand the areas that we think makes sense for us. To expand in the markets in which we are hope to do that as well.

Daniel Tamayo

Okay, great.
Thanks.
And then just just a small one on the loan to deposit ratio. You said you're going to manage that down. Obviously, the loan growth from being close to flat will help do that. But do you have a target that you want to get to before some loan growth starts to ramp back up.

Frank Sorrentino

So I don't want to really give a target out here, Dan, but rather to say that we're working towards reducing that ratio over time.

Daniel Tamayo

Okay, fair.
All right.
Well, thanks for taking my questions.

Operator

Your next question comes from the line of Frank Schiraldi percentage.

Frank Schiraldi

Good morning.
Frank. Talk to also talk a little bit about growth into Long Island and some continued firm growth in South Florida. I wondered if you could just talk a little bit more about your strategy in those two geographies and kind of where you guys are at this point and total loans deposits?

Frank Sorrentino

Yes, I'll let Bill give you some actual figures, but on Long Island has been actually both markets are what I consider to be adjacent markets. And even though one of them has got 1,000 miles between us, but are there adjacent in that, that's where our clients either live or work or have business interests or are developing or whatever. And we find in Long Island to be almost an exact mirror image of what we've created in the northern New Jersey market. We've been very successful in hiring some some really terrific folks that represent that market and the way in which we go about doing business that care about their clients. And we're finding that there's not a whole lot of really strong competition in that Long Island market for that type of relationship business. So we've had a lot of success there. We're continuing to have success. We're going to continue. You're going to continue to hear. We're making hires there. We're putting brick and mortar there, and we're picking up a significant amount of business in that marketplace. Florida, I would say is almost exactly the same thing we have a lot of our New York New Jersey base is also planting roots in Florida, and we're supporting that. And as word is getting out about the way in which we do business, the types of businesses that we've been supporting, we've also been getting organic growth in that Florida market as well. We're very excited about the folks that are supporting our team down there. And we've had, I think, some really good successes for the short amount of time that we've represented that market. Now we've we've always had some assets in Florida, I'd say always probably for the last 10 or 15 years, but it got to a critical point where we really needed to have a substantial boots on the ground effort there. And that is now paying some very, very nice dividends. But I don't know if you want to add some color to that.

William Burns

I know we have close to $500 million of deposits that are domiciled in Florida. So that's a nice number. The loan totals about 200 to 250 million down there and growing and done in Long Island and where we've always done some business in Long Island. So it's part of our balance sheet and this close to 500 million in deposits there, and we're going to continue to make the right inroads grow in that region.

Frank Schiraldi

Okay, great. And then just in terms of, you know, with a little bit of a mix shift anticipated on the on the loan side. I'm wondering, can you just remind us where your credit concentrations are currently in, where do you think you'll get to or what are you anticipating to get to on that front, say by year end?

William Burns

Accessit is a private similar to the loan deposit ratio. There's there's no one out there forcing us to lower our power concentration levels. But on we recognize that the market likes to see lower levels. So we are moving that ratio down slowly. I think it's been down the last five quarters, at least, and we're somewhere in the four 35 range as a percentage, and that's down from the previous quarter.

Frank Schiraldi

Okay. So it will continue to fall, but there's no hard-and-fast rule requirements on price.
And then just lastly, on the O&M you guys talked about in the release it's a $20 million, 90 days plus still accruing, and Brad talked about low LTV. And I wonder if you could just give us a little bit more color on that front in terms of farm?
Yes, location, is this, I guess, the investor CRI and and on that loan to value ratio, how updated is that appraisal?
Yes.

William Burns

So it's a New Jersey multi-family properly property on the loan to value at 60% is on a very recent. We just got a recent appraisal on it and on the owners' just going through some negotiation issues with the purchaser and that's what's holding it up, but you know what very well secured.

Frank Schiraldi

Okay.
And let's assume I'm sorry, you said the borrowers going through some negotiations with the buyer?

William Burns

Went and yet our larger cadre seller is there and it's under contract greater.

Frank Schiraldi

Okay.
Okay. That's great.
And on and then just a point of clarification of Bill, you mentioned I think 10% growth in fee income was year over year or what was the guide there.

William Burns

But Brown, I'm hoping that the fourth quarter will be 10% higher than the first quarter.
Okay.
That's my objective.

Frank Schiraldi

Okay.
All right.
Fair enough. Thank you.

Operator

Your next question comes from the line of Tim sweet Kerry with KBW.

Tim Switzer

Good morning, thank you for taking my question. Our LRD. I appreciate morning.
Yes, I appreciate the color on the degree of expansion you guys expect over the rest of the year without any Fed rate cuts. Kipp, can you maybe help us quantify, you know, the magnitude of net expansion once we get maybe one or two Fed rate cuts in the back half of the year and you know, the deposit beta expectations you guys have on that first.

Frank Sorrentino

I love your optimism that we're going to get one or two rate cuts at the end of the year.
And I think that that's starting to get a little faded, but let's hope you're right, we did I don't I'm not sure if you on the last call but we have a formula that for every 25 basis points of sidecar will improve ROE margins by five basis points. And of course, that that's on top of the you know, margin expansion going on without any rate cuts. And yes, it's dependent upon kind of what the beta might be. Some of us believe that the banking issues is waiting for a rate cut and it's going to be a very high beta on the way down. It depends how tight money is right and whether or not we're still fighting over funds so it's a it's a mix, middle of the road data that we use for that for that.
Yes.
Okay, that's helpful. And do you think that five basis points changes, one way or the other as we progress through the cycle. I know this could be getting really optimistic, but if we get a series of rate cuts on, does that change over time, you know, maybe deposit competition lessens as you get deeper?
Yes, it's always subject to price volatility, those estimates. And as we pass through to, let's say, that were, let's say, for example, there were no rate cuts for five years, okay.
We would continue in our view having improvement in our margin. And so the rate cuts would have less of an impact. But I'm looking out right now in my head. Let's say we're going to go through the end of the year with no rate cuts, and that's going to start next year and then those estimates have a standby.
Okay, because that helps you and that does make sense.
Just looking at business our business for connect one, I'm much less concerned about the rate cuts?
I almost don't. I don't honestly, I don't care, but I almost don't care about the rate cuts. I care a hell of a lot more about the liquidity that's available in the marketplace and the ability to attract deposits in the bank. And what you mentioned is competitive environment to me that's way more important, whether our margin goes up or down or stays flat, then whether the rates are state, I actually would prefer a market where the rates stay right, where they are, but liquidity interim and right. And we're not fighting as hard for every next dollar.
Yes, that makes sense. I think a steeper yield curve would be helpful as well file.
Well, health therapy one.
Yes, I was going to have you guys started seeing maybe lower deposit rates in certain categories or certain markets at all? And what's kind of been the customer response to that?
It's hard to say on. And that's an ongoing challenge. Two to see how low we can go. We think it's we think it's over the time when people said, hey, my deposit, I'm only getting 50 basis points. Why am I not getting for 50 or five? And so today, we do feel there's some room to lower rates to some extent without losing deposits. So we are looking into that and sort of, as you know, this, the whole deposit portfolio was a little bit complicated, whether it's commercial customers, big retail customers, small retail customers in different products. And so where it would, as you said, we should be testing those things.
And we are also thanks for taking the questions.
You're welcome.
Again, if you would like to ask a question, press star then the number one on your telephone question comes from the line of Matthew Breese.
Yes, and good morning and good morning, Matt.
I did want to go back to the loan growth discussion. And I was curious how long you think it'll take you to kind of deemphasize non-relationship lending. Is that is that isolated to just 2024, do you expect that to continue into 2025?
Yes. I think the most of it occurs this year as we go through a complete cycle or cycle point of bringing loans up on review going through the entire portfolio and getting the message out there that this is that we're pretty serious about this aspect of the business. So I yes, I would say by year end, I look, I think it's I think it's a continuous a practice continuous practice because, as you know, Matt, everybody promises of the world on the day, you sign all documents and we're, you know, someone needs something from you. And then a year later, you look back and you say wait a minute, this isn't what we all signed up for. So I got to believe that's going to continue in the future as well. But we certainly have a very laser focused eye on those types of relationships and whether or not people did in fact do what they said they were going to do and how we write those things.
Yes.
I mean, the follow-up period in 2025, and I know it's a long way off when do we get to some normalcy in terms of loan growth, even even if it's kind of mid-single digits grocery, it was clearly can again for a great the more and probably a higher probability of higher growth.
And that and maybe that speaks more to why we should be voting for some Fed rate cuts, right? There's definitely parts of a variety of businesses that have been negatively impacted by higher rates. And so they're just borrowing less. So while we may be out there. And we may have a very strong pipeline of new loan product coming in, which now currently is being offset by loans that we're intentionally moving off the balance sheet at some point that's going to rightsize itself. And at some point, I would hope that liquidity comes back to the market rates begin to get more in line with a steeper yield curve and they'll just be additional opportunities. But I don't know. Can you tell me if that's going to be at the end of this year or the beginning of next year, or the end of next year?
Right.
I don't know the answer to that.
Neither do I but I did want to touch on Frank, maybe the priority stack of capital deployment options for you right now. I mean, obviously loan growth is going to be muted this year. If you have to deploy the next dollar, does it go into buybacks? Does it go into securities, where are you putting it right.
Well, I think our for First Choice is a wide spread lending business. So ours is a good deal. It's bringing in deposits that's going to be the priority on the dividend. It's kind of fix and whatever's left over as long as I'm saying, the capital ratios constant or inching up, we would go for that at this level, the two, we did 280,000 shares this quarter. That seems to be the right level the way things are going now in terms of buybacks per quarter.
Okay.
So we can assume kind of security portfolio flat at this point, that's not that's not going to move too much.
Yes, our securities portfolio has never really been a widely fluctuating lease.
I kept a certain amount, and that's about it, but it's some it's margin dilutive, right? Securities purchases on some of this belief that once upon a time. The securities portfolio was viewed as a place for liquidity today. I'm thinking more Why isn't readily available in cash this minute and security portfolio takes time to convert into cash. So we need the money today and may not be good out of that. So we place a great, not that we're not that we're cutting back the securities portfolio. We played a greater and greater emphasis on Align's readily accessible lines at the Federal Home Loan Bank in that side.
Right.
Okay.
And the last one for me is that you had mentioned that rent-regulated multifamily, it's less than 5% of loans. That's a tough one to define and company defining rent regulated differently. How are you defining it? Is that the bucket that's 100% rent regulated or 15 above or any thought we'd use about five a little under 5%, all of it at all that any any portion of it but has no rent regulated.
Utilities said it's not regulated because it has one, then it goes into the 5% bucket assets. If you go to the 50, I think we're down to 3.5, something like that.
Okay, so that makes sense.
Yes, that makes sense. And I guess as a follow-up there, in the state of New York, they're kind of slowly passing or looking to pass another kind of piece legislation on housing with a cap on on rents, market rate rents, some flexibility on the rent regulated stuff, but the big thing is just a cap on market rents. And I was curious your thoughts on potential impacts from that day.
I was having a discussion the other day with a couple of owners that, you know, one of the interesting things about the bill that is probably going to get I think it has been passed is that everybody is unhappy with it so it must be a pretty good bill. I I think that it's hard to argue against the fact that you can have up to 10% increases and still be within law. So I'm not too upset with that overall there very few times in history where you're entitled to more than a 10% increase. So I think that gives a lot of flexibility to a variety of owners. Now certainly, if you're way under market in our or rent-stabilized scenario or even a rent regulated scenario, 10% may not be enough, but it's better than what was on the table before by a significant margin. I think it helps for the new construction and development that we need in the New York metro market and I think it gives probably more than three-quarters of the market, the amount of relief that they really need in order to make a lot of these buildings viable. And then on the rent regulated side, the ability to have that ratio on the right on the right on the rent regulated side because before you had no opportunity to raise rents or very limited opportunity. So so now it's I put it in the reasonable bucket.
Great. That's all I had. I appreciate all the color. Thank you for your welcome.
Excellent.
There are no, that concludes our Q&A session. I will now I'll turn the conference back over to the management team for closing remarks.
Well, thank you, everyone, for joining us today and of course, thank you for all the great questions, and we look forward to speaking with you again during our second quarter. July, everyone enjoy.
This concludes today's conference call and you may now disconnect.