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Dime Community Bancshares (NASDAQ:DCOM)
Q4 2019 Earnings Call
Jan 23, 2020, 5:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Dime Community Bancshares Fourth Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]

I would now like to turn the conference over to Ken Mahon, President and CEO. Please go ahead.

Kenneth J. Mahon -- President and Chief Executive Officer

Thank you, Sean. Thank you everyone for joining us this evening. On the call with me today are Chief Financial Officer, Avi Reddy; and our Chief Accounting Officer, Leslie Veluswamy. In our prepared remarks, we'll pick up some of the broad themes that underlie the earnings release and then add our outlook for the fiscal year 2020. Opening remarks will be brief so we can take some questions at the end.

Three years ago at the beginning of 2017 we took steps that reformulate our business model from that of a broker driven multifamily thrift model into a full-service commercial bank. This effort culminated in the adoption of a commercial bank charter in spring of 2019. Our primary impetus for the change that was clear to us, that the community commercial bank model enabled the possibility of a more diversified balance sheet and better returns for shareholders in the future, reflected in the form of structurally higher net interest margin, return on equity and ultimately to better trading multiples, both to book value and to earnings.

To that end, Dime's strategic plan is built upon improving five fundamental metrics. One, grow our total checking account balances. Two, increase low cost business deposits. Three, grow relationship-based commercial loans that have better risk adjusted returns than multifamily loans. Four, reduce our regulatory CRE concentration ratio. And five, diversify the sources of non-spread revenue, while increasing the contribution of non-spread revenue to total revenue. Of those five metrics, how did we perform in 2019?

Starting first with growing our checking account balances. On a year-over-year basis, average non-interest bearing and low interest bearing checking accounts increased by 20.4% to $605 million. Every dollar of low cost deposits that we raise increases the franchise value of our company. From every member of our executive teams on down to our entire customer-facing staff, our compensation plans are highly focused on incenting low-cost deposit gathering.

The second metric is increasing low-cost business deposits. Total commercial banking deposits from our Business Banking division plus our legacy multifamily division increased by almost 31% or approximately $133 million on a year-over-year basis. Commercial deposits now comprise 13% of total deposit, as compared to approximately 10% of total deposits a year ago.

Our third financial metric is the growth of relationship based commercial loans. Business Banking division's portfolio crossed the $1 billion threshold at the end of the second quarter of 2019 and ended the year at $1.28 billion, compared to $648 million at the end of 2018. This represents year-over-year growth of 97%. The Business Banking portfolio now after three years represents 24% of total loans.

To provide some historical context, we initially started this business build-out in early 2017, and in the first year, we achieved approximately $240 million of net portfolio growth. In 2018, $410 million in net portfolio growth, and now in the third year, $632 million of net portfolio growth. Well within striking distance of the net growth target we established for our bank at the start of the year.

Importantly, we continue to attract high quality commercial bankers to our staff. From a standing start in 2017 the Business Banking group has now grown to 64 bankers, including approximately 17 of whom our frontline business producers. Our four targeted metrics is the lowering of the commercial real estate concentration -- real estate concentration ratio, which not long ago was Dime's Achilles' heel. We've now reduced our consolidated regulatory CRE concentration ratio to 663% at year-end 2019.

As many of you remember, Dime was well over 900% only a few years ago. This is not an insignificant achievement and has reduced the headline risk associated with the legacy multifamily Dime model significantly in my opinion. Final metric as it relates to non-spread revenue, we've invested in our SBA business, developed a commercial swap program for our loan clients, and improved our commercial service fee income generation capability.

We grew annual non-spread revenue excluding securities gains and losses by over 37% on a year-over-year basis. To summarize, we've made quantifiable progress on all five fronts and you can start to see some positive patterns and trends emerging. We plan to make even more progress in the years ahead. And I'm confident with the existing team in place and the new hires we continue to attract, Dime is on the path to be one of New York's preeminent community commercial banks. In fact, I've challenged the staff with the following goal for 2020. I want Dime to be the best business bank in New York. Our brand name already resonates in our local markets. Now, we increasingly have the people and the products to achieve that goal.

As I've mentioned before the build-out of the Business Banking division was a very timely strategic decision for Dime, we now have in place a robust and growing platform to generate high quality loans -- high quality commercial loans, with good risk adjusted profitability. We are no longer reliant on transaction and refinance volume activity in the New York City multifamily markets. Those volumes appear to have been impacted by the rent regulated rule changes, but Dime is no longer a significant player in that market.

Turning to deposits, in the span of just three years, our Business Banking group now manages a bigger composite portfolio of about $357 million at the end of the year than that of the legacy multifamily business. Deposit to loans for the Business Banking division are running at approximately 27% of that loan portfolio, compared to approximately 5% for the legacy multifamily business. Therein lies a tremendous opportunity for Dime as we remix our balance sheet and as the contribution of Business Banking grows over time.

The Business Banking division build-out has had an important ancillary benefit on how we operate our legacy multifamily business as well. Historically, Dime had only the multifamily business to achieve balance sheet growth. We basically took what the market gave us in terms of rates. Now we have the flexibility to look for multifamily transactions that meet our return hurdles, while keeping in mind our goal to improve the quality and composition of the balance sheet. I'm very proud of the work done by our multifamily team as they've adapted to our new mission of focusing on important relationships and prioritizing solid margins and returns above chasing balance sheet growth.

For those of you who have seen our investors slide deck, my favorite page and one I point to all the time is the page comparing our loan yields and our deposit costs to 13 individual peer institutions in our New York market. As of the quarter ended September 30th, which is the most recent period that we have peer information -- for which we have peer information available. Dime lagged the median loan yield of the peer group by about 37 basis points in total. The peer group of the median at September was 4.3%. By comparison, in the fourth quarter the weighted average rate on our total Business Banking originations, both real estate and C&I was 5.39%, 101 basis point higher than the peer group median portfolio yield. That shows the earning power of the new model. I'm confident that now we have the infrastructure in place to close the gap with the peer group yield in due time.

On the other side of the balance sheet, our progress on the deposit front has likewise been commendable. If we go back to the fourth quarter 2016, just prior to the onset of our transformation, Dime very nearly had the highest cost of deposits when compared to those 13 peer banks. Now, our cost of deposits has moved meaningfully lower than many of those same competitors. And with the recent decline in cost of deposit we experienced in the fourth quarter of 2019, we're fast approaching the peer median of cost of deposit. Avi will provide more detail on the cost of deposits in his remarks.

Our team is certainly confident that we can continue to do better in terms of improving our non-interest bearing deposit percentages on our way to becoming not only a high performing commercial bank, but in fact, the best business bank in New York. On a year-over-year basis, we grew the non-interest bearing deposit ratio by approximately 210 basis points. Our goal is to get to 20% non-interest bearing deposits as quickly as possible.

Now, I'd like to turn the conference call to Avi who will provide some color on the fourth quarter results and the outlook for 2020. Avi?

Avinash Reddy -- Chief Financial Officer

Thank you, Ken. I'll first start with our fourth quarter results. Core EPS was $0.27 this quarter, compared to $0.13 for the linked quarter. Included in this quarter result was a $7.5 million provisions related to a previously identified C&I relationship that had already been placed on non-accrual status. As mentioned in the press release, being fully reserved against this relationship is a prudent course of action given what appears to be a very protracted settlement process.

We want to share a few details on the credit. The borrower was a subcontractor which has performed significant work on municipal projects and private projects in the metro New York area for over 20 years. The borrower filed for bankruptcy in the third quarter prior to which they were current on all payments. Dime has extended $20 million of credits to this borrower. We're currently working with the bankruptcy trustee to maximize returns for ourselves and other unsecured creditors.

From all accounts we've received to date this appears to be a highly unique situation where the subcontractor was pressured to complete a major public works project on an accelerated time frames, which led to bankruptcy. The charged-down balance of the loan is $10 million, of which all of it is non-accruals. As mentioned previously, we're fully reserved for this $10 million exposure. Beyond that information, we will not be providing any more commentary on this individual credit in the Q&A as the loan is still in the workout process. I'm sure you can all respect that position.

Our stock price suffered in late October after our third quarter earnings release, likely as a result of the aforementioned non-accrual announcement. We took that as an opportunity to repurchase shares at attractive levels given the confidence we have in our business plan and the underlying fundamentals. As such, we ramped up our repurchases of stock in the fourth quarter and purchased over 750,000 shares for a total cash outlay of approximately $15 million. The repurchases in the fourth quarter represented approximately 2% of shares outstanding. In addition, our Chief Banking Officer purchased approximately $125,000 worth of stock in the fourth quarter.

This morning, our Board authorized a 14th share repurchase plan that will allow us to repurchase up to 7.5% of year end shares outstanding following completion of the previously authorized 13th share repurchase plan. Importantly, core pre-tax pre-provision income excluding the FHLB extinguishment expense and expenses associated with the branch consolidation was approximately $18.7 million for the fourth quarter of 2019, compared to $16.8 million for the linked quarter and $16.9 million for the year-ago quarter. That represents 11% year-over-year growth in pre-tax pre-provision income.

The net interest margin excluding loan prepayment fee income increased by 18 basis points on a linked quarter basis to 2.47%. As Ken mentioned, driving a structurally higher NIM is one of the key tenets of our business model transformation and we were pleased with this quarter's results. The increase in core NIM was driven by a 20 basis points decline in our cost of deposits, as well as holding our loan yields fairly steady. In fact, the weighted average rate on our total loan portfolio, which excludes prepayment fees and deferred fees and costs increased by 2 basis points on a linked quarter basis.

Based on the earnings releases we have seen so far, we believe this decline in cost of deposits could be among -- the most significant among our peers. The continued uptrend in the weighted average rate on loans is due to the Business Banking portfolio becoming a larger percentage of the overall balance sheet.

During the fourth quarter and as previously disclosed in our third quarter 10-Q filing. We restructured a portion of FHLB borrowings. In total, we repaid $207 million of borrowings with a weighted average rate of 2.65% and the realized expenses associated with the extinguishment was approximately $3.8 million. The borrowings were prepaid over the course of the quarter, starting in late October and continuing till year end. And as such, the full run rate benefit was not fully realized this quarter. Within the 18 basis points of core NIM expansion I discussed, only approximately 1 basis point was related to the benefit of the lower cost new borrowings that we put on. Next quarter we should get an additional basis point of expansion from the restructuring.

Adjusted for non-core items, our efficiency ratio of 57% and the expense to assets ratio remained relatively well controlled at 1.55% and this compares well with other community commercial banks. Apart from improving the quality of our balance sheet and risk-adjusted margins, a critical part of the Business Banking build out is the addition of non-spread income. In 2019, we definitely saw promising early signs of increasing non spread revenue. In the fourth quarter, we recognized approximately $400,000 of customer-related loan level swap income, developing an interest rate swap program for our commercial customers was the next natural step in our commercial bank evolution and we are happy to note that we are now able to provide this service to all of our commercial clients.

In addition, our SBA team has been gelling very nicely with our branch network and produced approximately $300,000 in gain on sale income in the fourth quarter. Our SBA team has impressed us with their professionalism and size and growth of that pipeline, and we expect them to be a major contributor to fee income in 2020.

Non-performing assets and loans 90 days or more past due dropped by 25% versus the linked quarter to $12.6 million and represent only 20 basis points of total assets. We ended the year with a tangible common ratio of 8.59% and the risk based capital ratios grew on a linked quarter basis with a common equity Tier 1 ratio ending up at a very healthy 11.15%.

Now, I'll move on to the outlook for fiscal year 2020. We expect net portfolio growth for the Business Banking division of approximately $600 million for FY 2020. This accounts for amortization and payoffs in the existing portfolio that is seasoning as time passes. We are seen growing demand for a responsive customer focused platform as we demonstrate longevity and commitment to the commercial bank models we've provided -- we've been provided more opportunities to add high quality individuals from our competitors.

Our charter conversion from a thrift to a commercial bank, which became effective in April 2019 following all applicable regulatory approvals is testament to the fact that the board and management team are fully invested in our business model transformation. Our 2020 ending total assets figure will be a function of future pay offs in the multifamily business. Ultimately, we are most focused on improving the quality and remixing of our balance sheets. We refer to this internally as building a new balance sheet inside the old balance sheet.

In terms of the actual balance sheet size, we will manage it based on the growth opportunities at hand and return capital to our shareholders as circumstances present themselves. In this regard, and based on all the stress testing we've completed, we expect to run the company with a Tier 1 ratio in excess of 10.5% and a tangible ratio of approximately 8.25% to 8.5% during FY 2020.

As we demonstrated in the fourth quarter, we don't have to grow the balance sheet in order to grow our core earnings power per share. We can grow EPS by improving our margins and using the excess capital generated to buy back shares. Buying back our shares continues to represent an attractive investment with a TBV earn back of approximately four years.

As you well know by now, we don't provide quantitative NIM guidance. I want to provide our rationale for taking this contrary approach. We are a business model in transition and we do not want to manage the balance sheet by chasing quarterly earnings targets. We're truly trying to build a business for the medium to long-term, and this quarters NIM expansion was validation of our thesis.

Inherently, the direction of the NIM depends on a number of extraneous factors that are outside of our control including future actions from the fed, the shape of the curve, and the competitive pricing environments for deposits. What we can say on the NIM is this, the weighted average rate on the $1.3 billion business banking portfolio was approximately 4.95% at the end of 2020 and it was accompanied by $356 million of self funding deposits at a weighted average cost of 69 basis points.

This leads to an implied Business Banking portfolio NIM in excess of 3.75%, which is far above the NIM on our overall balance sheets today. While there are various factors that will affect the changes in NIM on a quarter-to-quarter basis, the medium to long-term trajectory of our NIM is clearly upward, as the business banking portfolio becomes a larger percentage of the balance sheet over time.

We have approximately $515 million of multifamily loans with a weighted average coupon of approximately 3.32%, which are scheduled to reach that contractual replacing date in 2020. Clearly replacing these legacy loans with business banking loans which have much higher yields and more associated deposits will aid with a continued upward trajectory of our NIM.

We're projecting non-interest expenses for fiscal year 2020 of approximately $98 million. While this may seem like a higher expense growth rates than some of our peers, I'd like to point out two key important points. First, we are highly confident in our business model transformation and the early returns have been on track and very promising, so it makes sense for us to continue to invest in productive lending capacity. As such, we want to continue to reinvest in the business and support staff to aid in our continued transformation.

Second, our expense to assets ratio of 1.55% continues to compare favorably to commercial bank peers. As we grow the business over time, the revenue side of the equation will catch up with some of the expenses and this will help with the efficiency ratio over time. I will point out again that we still have over 70% of our balance sheet in lower yielding legacy broker driven loans, which remains a drag on the revenue side of the equation. As time progresses, I'm confident this -- we will be able to transform the NIM with having more of our balance sheet in Business Banking loans. As it relates to non-interest income, we had very positive progress on the SBA front this year. After somewhat slow start in 2017, we hired a new leadership team in late 2018 and they made very good progress this year.

Our short-term goal is to have the SBA business reach a $2.5 million plus annual fee income run rate as soon as possible. We continue to gain significant traction with our clients on a commercial swap program. We expect this business to be over a $1 million plus revenue for us -- revenue plus business for us in 2020 from effectively no contribution up to the second quarter of 2019.

We continue to optimize our core technology platform to help drive commercial banking fees. As we acquire and onboard more clients, this fee source will grow as well. Finally, with respect to the effective tax rate for 2020, we expect it to be approximately 22.5% to 23%.

With that, we can turn the call over for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Mark Fitzgibbon with Piper Sandler. Please go ahead.

Mark Fitzgibbon -- Piper Sandler -- Analyst

Hey, guys. Good afternoon.

Kenneth J. Mahon -- President and Chief Executive Officer

Hi, Mark.

Mark Fitzgibbon -- Piper Sandler -- Analyst

As you grow your C&I originations, I'm curious, are there any areas or industries that you're focusing on? And also, who you taking share from, is it from a larger banks or is it other community banks?

Avinash Reddy -- Chief Financial Officer

Mark, I think just to answer the second question. Yes, the larger banks out there. We've said in the past, we really have a unique opportunity here, because we're really the only bank that has a $600 million capital base that's highly focused on this with a brand name that resonates. So that's kind of where the opportunity is at this point in time.

I think right now, there's no specific industries that we're significantly focusing on, we provided some details on our portfolio in our last investor presentation, but it's typical cookie cutter community commercial bank type credits.

Mark Fitzgibbon -- Piper Sandler -- Analyst

Okay. And then prepayment penalty income was strong this quarter. I assume you think that that will decline a bit in, in coming quarters?

Avinash Reddy -- Chief Financial Officer

Mark, typically what we're seeing with that, I guess, with our portfolio is Q2 and Q4 are typically fairly strong quarters for us. And then Q1 and Q3 seem to be less, to be just with the borrowers trying to get their stuff done by midyear and end of the year. So, that's hard to predict. I think in general, loans are staying on a little longer, they're getting closer to their reset days before prepaying. But, I think what the size of the portfolio that we have, I think for the full year, it's hard to see us having less than $4 million or $5 million of prepayment revenue and therefore for the full year, which kind of a $1 million per quarter-ish. This quarter, obviously, we had a little bit more than that. But I think, given the fact that we still have a portfolio that's over $3 billion, you probably should see a $1 million plus of repayment fees, but any individual quarters can go up and down.

Mark Fitzgibbon -- Piper Sandler -- Analyst

Okay. And then, I know that you all are deemphasizing multifamily and there haven't been a lot of multifamily sales recently in the metro New York market. But what's your best guess as to how much values have gone down in the last year on buildings that have rent control rent stabilized stuff in places like Brooklyn and Queens?

Kenneth J. Mahon -- President and Chief Executive Officer

Cap rates really have stayed low, Mark. So, that's part of what did drive the value calculation. And then, Dime's haven't really done loans based on pro forma rents or anything. So, I mean, clearly it's impacting the transaction volumes, but it's hard to estimate what that has done. I do think the cap rate have been a big help, the low cap rates have been a big help to that math, we're not really seeing too much disturbance in that marketplace.

Mark Fitzgibbon -- Piper Sandler -- Analyst

And then lastly, I know its small members, but the construction portfolio is like $118 million now, but it's been growing pretty fast. I guess, I'm curious, what kind of construction projects you are doing and what are your largest construction loans in terms of size?

Avinash Reddy -- Chief Financial Officer

Mark, it's a pretty cookie cutter construction portfolio. Typically what happens with construction loan is that, you make them and then takes a while for them to fund. I mean, we obviously have internal limits on those and less than 5% of our loan portfolios, it's very manageable, but it's just the standard, no different than any other community commercial bank is doing.

Mark Fitzgibbon -- Piper Sandler -- Analyst

How big loans are we talking about? I know they're not all drawn right away, but...

Avinash Reddy -- Chief Financial Officer

Yeah. I mean probably if all being drawn, less than $10 million of size, I mean, that's kind of the size, less than that.

Mark Fitzgibbon -- Piper Sandler -- Analyst

Okay. Thank you.

Operator

Our next question will come from Collyn Gilbert with KBW. Please go ahead.

Collyn Gilbert -- KBW -- Analyst

Thanks. Good evening, guys. Just want to dig in a little bit to the loan book and just starting with the multifamily. I know, Avi, you had said that you had [Indecipherable] $500 million or some odd million that was contractually due to mature in 2020, and I think that number was like $600 million or something like that last quarter. But you guys saw pay down, I think that were higher than what you would have anticipated in the fourth quarter, because I think you were thinking that maybe the paid down in multi would be matched with the growth in business and that balances with the whole flat? So just trying to get a sense of where are the behavior you kind of expect on the multifamily side? And maybe, do you anticipate pay downs to sort of accelerate? Or how we should sort of think about the rate of pay downs within that book?

Avinash Reddy -- Chief Financial Officer

Collyn, again, it's seasonal, right? I think in the first half of the year pay downs were a little bit slower as people were waiting for the rent regulated rule changes to go into effect. And then, we have this seasonal Q4 where our pay offs pick up. So, it's hard to predict with that portfolio, but I think the way to think of our -- we have that -- we have capital, we have a balance sheet, if we have more pay offs then things going to be -- balance sheet is going to be slightly smaller, but we're going to return that capital to shareholders, managing around the capital ratio constraint I described. So, our story is not really about a balance sheet growth story, it's about a remixing story. And if the payoffs are higher than what we think, we'll return that capital to shareholder over time.

Kenneth J. Mahon -- President and Chief Executive Officer

Really in the multifamily portfolio, a lot of the loans that are there are raised that borrowers could get today. So, there's no incentive for them to rush into refinance. And there's really -- going back to Mark's question a little bit earlier, there's nothing -- there used to be a lot of juice in those values. They come and take more money out. Those days seem to have passed us by.

Collyn Gilbert -- KBW -- Analyst

So then within that, Ken, would you -- then these loans could see their contractual maturities versus prepay ahead?

Kenneth J. Mahon -- President and Chief Executive Officer

Yes, it's correct. Either they're refinancing debts or their maturities, correct, right.

Collyn Gilbert -- KBW -- Analyst

Okay. And then just -- I hear you on all the moving parts on the NIM and unwillingness to give NIM guidance, but just wanting to understand sort of this strategic direction of how aggressive you guys want to be in pushing out some of the higher college deposits, specifically kind of in that online channel? It seems like that part you do have some control over. So just wanted to kind of get a sense for how you're thinking about pushing through these lower deposit rates and pushing out some of these higher cost accounts?

Avinash Reddy -- Chief Financial Officer

So Collyn, on the Internet side, the DimeDirect piece that we referenced, we're down to around $100 million on that. So, I mean, our rates are below our peers. It's not a big portfolio at this point. I think, when you think about deposit cost, we do have CDs maturing over the next three months. There is around $330 million of CDs and the rate on those CDs are anywhere between 2.10% and 2.20%. And right now, we're retaining probably 70% to 80% of that at a rate that's around, call it 40 basis points to 50 basis points lower than that. So, I think the next leg in the cost of deposits decline is going to be driven by a decline in our CD book.

I mean we've made a lot of changes on the multifamily -- on the money market side and we will continue to tweak that on the margin. But I think on the CD side, there should be some declines as a lot of our competitors have dropped rates too. I think, overall, it's -- we're trying to manage client expectations and also in our competitive environment. So there is not any one area I'd point to, but the CD piece is probably one that naturally, you have a level of retention and we're seeing around 75% to 80% there with much lower rates.

Collyn Gilbert -- KBW -- Analyst

Okay, that's helpful. And then I just want to make sure I heard you correctly on the expanse guide. Did you say $98 million for 2020?

Avinash Reddy -- Chief Financial Officer

That's correct. Yes.

Collyn Gilbert -- KBW -- Analyst

Okay. And then just curious. So the FDIC -- how we should be thinking about the FDIC expense within that? Will that come back up to normalized levels, kind of similar to what you posted in 1Q and 2Q of last year?

Avinash Reddy -- Chief Financial Officer

Yes. I mean, it's just -- again, they do the calculation. And I mean we're not going to get any more credits going forward and that's all in the run rate of $98 million.

Collyn Gilbert -- KBW -- Analyst

Okay. And then just on the credit, I just want to make sure I understand the steps that you guys have taken to date. So you started -- if you could just walk through that with me again. You started with the $20 million of outstanding, you took a $5 million charge-off in the third quarter, another $5 million, if I read that right, charge-off in this quarter, but then you had a specific reserve. And I'm just trying to get the math there as to how you now feel like you're fully reserved on that $10 million that's left?

Avinash Reddy -- Chief Financial Officer

Collyn, we started off with $20 million, we charged off $5 million, and we made an adjustment to the reserve associated with that. So it's only a $15 million loan at September 30th. At September 30th, we took another $7.5 million specific at that point. So we were only not reserved for $7.5 million of that loan. We charge the balance of the loan down now to $10 million and we took another reserve right now of $7.5 million.

So, we've taken the full reserve, there's no more income statement volatility on this reserve. It's just how the accounting works. You probably have to think about it a little bit more. But from our perspective, we've taken the full $20 million of provision in -- on the loan, both on a specific reserve and general reserves that we've taken against it. So there will be no more income statement volatility on it because we've taken the full $20 million. Anything that we collect on the loan, it will, obviously, be in recoveries going forward.

Collyn Gilbert -- KBW -- Analyst

Okay. That's helpful. And then did you -- have you offered or can you give us any updates on CECL?

Avinash Reddy -- Chief Financial Officer

So we'll have a range in our 10-K, Collyn. All I'd say right now is, we don't have a big consumer portfolio. We don't have any long duration portfolios. We have very small residential book. So I think when you look at the guidance that a lot of the other people have out there, you can draw some conclusions to that. But when we file our 10-K there will be a range in there.

Collyn Gilbert -- KBW -- Analyst

Okay. That's helpful. And then finally, just one quick thing on the borrowing repay. So you paid down -- just wanted to go -- so you paid down at 2.65% and you refinanced at what rate?

Avinash Reddy -- Chief Financial Officer

I mean there's a mix of overnight, two years, three years, five years, the curve is pretty flat all across, so it's probably like 1.75-ish. So you're really making up 90 basis points over there on $200 million. So that's like a $1.8 million basically per year of annual run that we're saving. The actual $1.8 million to $1.9 million, the charge was around $3.8 million. So that's why we've got the two year earn back on that.

Collyn Gilbert -- KBW -- Analyst

Okay. And that was laddered throughout the quarter. I mean, I know you had indicated 1 basis point of NIM benefit happening in the first quarter tied to that, but just the timing on when you started [Indecipherable].

Avinash Reddy -- Chief Financial Officer

I mentioned in my prepared remarks, Collyn, we started the transactions at the end of October and then we went from October all the way till the end of the year. So that's why -- if we done it throughout the quarter, it would have been a half quarter impact, but it really only started on October 30th-ish, that time frame. So -- and I gave the guidance that it helped this quarter by one, it's going to help an additional one next quarter.

Collyn Gilbert -- KBW -- Analyst

Okay, great. I'll leave it there. Thanks, guys.

Operator

Our next question will come from Matthew Breese with Stephens. Please go ahead.

Matthew Breese -- Stephens -- Analyst

Good evening.

Kenneth J. Mahon -- President and Chief Executive Officer

Hi, Matt.

Matthew Breese -- Stephens -- Analyst

Just thinking about the municipal deposit effort. I know it's in its infancy right now, but as we think long term, perhaps over the next two to five years, what portion of the overall deposit book do you want that to take up? And then just as a follow up there, just curious about the on-boarding costs of those deposits and how they react to moves in fed funds?

Avinash Reddy -- Chief Financial Officer

Matt, I think what we said in the past is, a lot of our peers have between 10% and 15% of their deposit base in municipals. I think there's no reason why Dime can't get to that stage. It's obviously a long term target for us. So if you think about deposit base, cost going down $1 billion [Phonetic], $500 million of that should have been municipal, if we had the capability to take it. Obviously, we're new to the business, but we have people who have been in the business a long time with significant established books of business.

We ended the year with around $20 million in deposits. We're already up to over $50 million as of today. The rates in that right now are probably between $175 million and $195 million. That's obviously when you onboard a new client. It's obviously giving them a rate that's able to lure them away from some of our competitors as well. But I think over time, we should be no different than some of our peers over there. And what it's really done is, it allows us not to focus on promotional deposits on the consumer side. And obviously, on the consumer side, when you raise deposits, it's not just the promotions, it's taking up time from people in the branches, it's advertising, it's all of that.

Here with the much leaner infrastructure, we're able to raise those deposits. So, in fact at the start of the year, we have checking accounts as well associated with that. So that $50 million of the deposits is probably $5 million to $6 million checking accounts associated with that. So, again, it's a huge opportunity for us and one of the key things management team and board looked at when we thought about the charter change.

Matthew Breese -- Stephens -- Analyst

Okay, understood. And then, going back to the multifamily question. I understand you have $515 million set to hit their contractual resets this year. But we've been in the business banking, that initiative has been off the ground for some time now. You've adjusted your multifamily prices for some time now. As you've gone through the quarters, and a number of multifamily loans have hit their contractual reset. Even though you're pricing is a little bit out of the market, what's the recapture rate.? Like, how much of that $515 million, if we were to apply what you've done historically, do you expect to maintain and keep?

Avinash Reddy -- Chief Financial Officer

Matt, it really depends on the rate, because there's competitors out there who are pricing a lot below us. And so it depends on where it's at. I think we're keeping customers with us who've been with us a long time and who don't want to move to another bank. But if somebody is just going straight after the rate, a lot of those accounts would go elsewhere.

Matthew Breese -- Stephens -- Analyst

Can you give us an idea of where you are rate wise versus the market right now?

Avinash Reddy -- Chief Financial Officer

Yeah. We're probably in the high 3s to low 4s on the multifamily side. Again, a lot of the customers with us have been with us a long period of time, and they're OK paying slightly above market rate, but that's kind of where we're at, high 3s to low 4s.

Matthew Breese -- Stephens -- Analyst

And with the adjusted pricing on a quarterly basis, could you give us an average of how much of that product you're actually able to originate?

Avinash Reddy -- Chief Financial Officer

Yeah. We had a -- there's a table in our press release, which has the breakdown of it. So, what we started doing is, on the origination side we break it out between business banking and non-business banking. And so for business banking, we've done around -- we did around $85 million real estate loans at 5.11%. All other loans were on $65 million at 4.08%. Within that $65 million there is around $30 million of residential originations at a rate of around 3.75%. The remainder is probably multifamily, which is around $30 million of multifamily at a rate slightly north of 4%.

Matthew Breese -- Stephens -- Analyst

Okay. That's all I had. I appreciate taking my questions.

Operator

[Operator Instructions] Our next question will come from William Wallace with Raymond James. Please go ahead.

William Wallace -- Raymond James -- Analyst

Thanks. Good evening, guys. Avi, in your prepared remarks you said you've got $550 million, I believe, of multifamily that's reaching its contractual repricing date in 2020, is that correct?

Avinash Reddy -- Chief Financial Officer

Yes. I said $513 million, I believe.

William Wallace -- Raymond James -- Analyst

$513 million, OK. And then what did you say that weighted average yield was?

Avinash Reddy -- Chief Financial Officer

3.32%.

William Wallace -- Raymond James -- Analyst

And if it reprices rather than prepays, what are the characteristics of those? How much will they price up?

Avinash Reddy -- Chief Financial Officer

I mean, generally, they're FHLB plus 2.50%, Wally, but in reality, I mean, our customers have been a very good, solid customers. I mean they can get a rate somewhere else that's a lot lower than that.

William Wallace -- Raymond James -- Analyst

So, they're more likely to leave?

Avinash Reddy -- Chief Financial Officer

Right. I mean, some of them would stay on, I mean, the ones that have been with us for a significant amount of time. But then they're not going to reset at the FHLB plus 2.50%. We're going to find something in between that works for both of us.

William Wallace -- Raymond James -- Analyst

Okay, got you. Okay. All right. Fair enough. Okay, thank you. That's really the only question I had. Appreciate it.

Operator

This will conclude today's question-and-answer session. I would now like to turn the conference back over to Mr. Mahon for any closing remarks.

Kenneth J. Mahon -- President and Chief Executive Officer

Thanks folks for tuning in. We were pleased with the -- some of the fundamentals in the financials this quarter, because we're focused on the foundational things that are going to move the stock price and the earnings over time. So, appreciate the questions and look forward to talking to you on the next earnings release. Thanks.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Kenneth J. Mahon -- President and Chief Executive Officer

Avinash Reddy -- Chief Financial Officer

Mark Fitzgibbon -- Piper Sandler -- Analyst

Collyn Gilbert -- KBW -- Analyst

Matthew Breese -- Stephens -- Analyst

William Wallace -- Raymond James -- Analyst

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