Beacon Financial Corporation ($BBT)

Thank you for standing by. My name is Tina, and I will be your conference operator today. Operator Instructions] At this time, I would like to welcome everyone to the Beacon Financial Corporation First Quarter 2026 Earnings Conference Call. It is now my pleasure to turn the call over to Dario Hernandez, Corporate Counsel. You may begin.

Thank you, Tina, and good afternoon, everyone. Yesterday, we issued our earnings release and presentation, which is available on the Investor Relations page of our website, beaconfinancialcorporation.com, and has been filed with the SEC. This afternoon's call will be hosted by Paul Perrault and Carl Carlson. During the question-and-answer session, they will also be joined by Mark Meiklejohn, the Chief Credit Officer. This call may contain forward-looking statements with respect to the financial condition, results of operations and business of Beacon Financial Corporation. Please refer to Page 2 of our earnings presentation for our forward-looking statements disclosure. Also, please refer to our other filings with the Securities and Exchange Commission, which contain risk factors that could cause actual results to differ materially from these forward-looking statements. Any references made during this presentation to non-GAAP measures are only made to assist you in understanding Beacon Financial's results. and performance trends and should not be relied on as financial measures of actual results or future predictions. For a comparison and reconciliation to GAAP earnings, please see our earnings release. At this time, I'm pleased to introduce Beacon Financial's President and Chief Executive Officer, Paul Perrault.

Thanks, Dario, and good afternoon, everyone, and thank you for joining us for our first quarter earnings call. I'm pleased to share that we achieved a major milestone in our integration process in the first quarter with the successful completion of the core systems conversion in mid-February. I would like to recognize the hard work and dedication of our teams in executing on this very critical step and just as importantly, their efforts to achieve strong client retention throughout that process. That outcome reflects months of preparation, disciplined execution and a continued focus on serving clients during a period of significant change. From a financial perspective, I am very disappointed with our first quarter results. Loan growth and the margin fell far short of our expectations and reflects some near-term pressures, uncertainty in the economic environment and the tail end of merger activity. GAAP earnings for the first quarter were $0.55 per share and operating earnings were $0.70 per share, excluding merger-related charges. While operating results were below both of our prior quarter and our expectations, the core returns remained good with operating ROA just over 1% and operating return on tangible common equity of 11.25%. As we discussed coming out of the fourth quarter, the operating environment during the first quarter remained quite challenging. Balance sheet contraction, margin pressure from declining rates and lower fee income all weighed on our results. Importantly, several of these headwinds are not structural in nature. They were influenced by seasonal dynamics, timing and the uncertainty created in economic environment from persistent inflation, extremely thin pricing, global events and the prospect of rent control legislation in our major markets. Collectively, these headwinds impacted loan volumes. While the pipelines remain strong, clients are cautious yet optimistic as the economic environment remains quite fluid. On the positive side, we continue to make progress on the strategic priorities we laid out at the time of the merger. Expense discipline remains strong. Core funding costs improved sequentially. Capital levels are robust with CET1 at 11% and tangible common equity at just over 9%. And while credit metrics moved modestly higher during the quarter, they remain manageable and well reserved, reflecting proactive credit management in a still uncertain environment. Now that the systems conversion is behind us and merger charges are largely complete, our focus shifts squarely to execution, stabilizing the balance sheet, restoring growth momentum and fully capturing the revenue and efficiency benefits we outlined when we announced the merger. We believe the pieces are now in place to close the gap between current performance and our planned runway as we move through the remainder of the year. Before I turn it over to Carl, I'll note that our Board approved a quarterly dividend of $0.325 per share, consistent with our commitment to returning capital to stockholders. In addition, the Board authorized a $50 million stock repurchase program, subject to regulatory approval, reflecting our confidence in the franchise, our capital strength and long-term value creation opportunity that we see ahead. I will now turn it over to Carl to walk us through the financial results in some more detail. Carl?

Thank you, Paul. I'll begin with a high-level summary of the quarter and then walk through the income statement, balance sheet and credit trends in more detail. First quarter operating results declined sequentially, driven primarily by balance sheet contraction, modest net interest margin pressure tied to the rate environment and lower noninterest income. GAAP earnings totaled $46.2 million or $0.55 per share. Operating earnings were $58.4 million or $0.70 per share, which excludes $13 million of onetime pretax merger-related charges. Operating return metrics remained healthy. Operating ROA was 1.01% and operating return on tangible common equity was 11.24%, reflecting continued expense discipline and solid core profitability even with lower revenues. Turning to the income statement in more detail. Net interest income was $190.8 million, down $8.9 million or 4% from the fourth quarter. This decline was driven by lower average earning assets and a modest reduction in asset yields as rates moved lower in late 2025. The net interest margin declined by 4 basis points to 3.78%. Importantly, funding costs improved sequentially. Interest-bearing deposit costs declined 17 basis points, and we expect continued improvement as pricing actions taken continue to flow through. As balance sheet growth resumes, we believe this positions the margin more favorably looking ahead. Noninterest income totaled $23.9 million, down $2 million or 8% from the prior quarter. The decline was primarily driven by lower deposit fees and reduced gains on loan sales as SBA activity moderated from a very strong fourth quarter. These declines were partially offset by higher mark-to-market income on derivatives, tax credit investment income and relatively stable wealth management fees. On the expense side, operating costs remained well controlled. Total noninterest expense was essentially flat compared to the fourth quarter and came in nearly $1 million below budget. This performance reflects disciplined cost management and continued execution against merger synergies, offset modestly by seasonal increases in occupancy costs and a true-up in FDIC insurance. Excluding merger charges, the operating efficiency ratio for the quarter was 59.5%, underscoring the underlying expense discipline in the business. Now turning to the balance sheet. Total assets declined $992 million to $22.2 billion, driven primarily by lower cash balances associated with point-in-time payroll fulfillment deposits. Loans declined approximately 1%, reflecting continued runoff in the commercial real estate and consumer portfolios, partially offset by growth in core commercial lending. Loan originations and draws were $734 million with a weighted average coupon of 628 basis points. 67% of originations were floating rate. Deposits declined 6%, driven largely by payroll deposits and brokered balances. Excluding payroll and broker deposits, core customer deposits declined approximately 2%, reflecting typical seasonal outflows related to tax payments and commercial activity. Turning to credit. Credit metrics deteriorated modestly during the quarter. Nonperforming loans increased to 83 basis points of total loans, driven primarily by migration of Boston office exposure and several rent-controlled multifamily properties in New York City. Net charge-offs totaled $13.6 million or 30 basis points annualized, reflecting resolutions of a small number of larger credits. The allowance for loan losses closed the quarter at $244 million, representing 1.36% of loans. Given portfolio composition and current risk trends, we believe reserve coverage remains appropriate. Provision expense declined modestly from the prior quarter, and we continue to expect provisioning to be less than net charge-offs as we work through existing criticized credits. Capital generation remains a clear strength. CET1 ended the quarter at 11%, tangible common equity at 9.1% and tangible book value increased $0.16 to $22.48 per share. Importantly, with the core systems conversions completed in early February, we have now recognized the final significant merger charges. Total merger costs were in line with expectations and management is confident the announced cost synergies of the merger have been realized. Looking ahead, we anticipate improving earnings momentum now that the merger costs and system conversions are completed and announced expense synergies have been realized. We expect loan growth to remain soft in the second quarter then strengthen throughout the remainder of the year. We expect the margin to stabilize around 380 basis points and gradually improve. While near-term macro and rate uncertainties remain, we believe the franchise is well positioned to improve performance and close the gap to our targeted run rate over the coming quarters. That concludes my prepared remarks. Back to you, Paul.

Thank you, Carl. We will now be joined by Mark Meiklejohn and Michael McCurdy, and we'll open it up for questions.

[Operator Instructions] And our first question comes from the line of Justin Crawley with Piper Sandler.

Just wanted to start out on the margin and the outlook there. Can you just, Carl, maybe provide a little more detail on the reset on accretion expectations? Just what changed from the original assumptions that went into that? And what got you from $15 million down to that $12 million number just on a go-forward basis?

Sure. Thanks for the question. And so when we first estimated the purchase accounting, we tried to take out the impact of prepayments and things of that nature. And we're estimating at around $15 million. A lot of the schedules suggested that. We've got these all set up in our systems to track as loans pay down, and it's coming in a little bit lower. And we're not seeing any kind of prepayment activity at this point that's meaningful to the amounts. And so we're -- it's coming -- for this quarter, it came in at $12.1 million. I believe it was over $13 million last quarter. And so I'm feeling more confident that the $12 million range is something now that the systems conversions have been taking place. We're all on the -- we had 2 general ledger conversions and old systems conversions onto a new system. I feel more confident that this will be the number going forward.

Okay. Understood. And just, I guess, some of the moving pieces there. If I look at the average balance sheet and just loan yields, what they did for the quarter, that 5.96% was down over 30 basis points. And you pointed it out, but without a huge, huge swing in accretion income. And I know we had lower rates filtering through, but it seemed like a big move. So I was just curious if there's anything else underneath the surface there that just drove that yield down for the quarter.

So as you mentioned, the purchase accounting did come down in the quarter from 13.8% to 12.2%. And so that's about -- that was $1.6 million of the impact, which was about 7 basis points. On the other side, it's just the movements last quarter or the fourth quarter in rates, 75 basis points basically moved by the Fed. We saw that throughout the quarter really impact Q1 as you see the full impact in the quarter. And you still have some loans that are repriced every 3 months and things of that nature coming in and repricing down as well. So I'd say we're not particularly surprised by where the yields came in when you exclude the purchase accounting impact. What didn't help us here is we expect a little bit more loan growth and at more current yields. And so we're originating loans in the 620s right now. And so you're not getting that lift from new originations as much.

Okay. And then just one other one, sticking with the margin. Can you just flesh out a little more just your thoughts on deposit costs from here? We've heard from a lot of your competitors that we're at a point where there could now perhaps be some upward pressure on funding just given competition and with rate cuts off the table for the time being. It sounds like you said there's some more room to go lower there. So just was wondering what factored into that and just what repricing may be left on the book.

Sure. So again, we're going into a systems conversion and we're probably lagging our deposit costs on moving down our nonmaturing deposit costs a bit. So I think we'll see the benefits of that more so in the second quarter and into the third quarter. And so that's where we are on that. We probably could have done a little bit more, but we're going into a systems conversion, didn't make a lot of sense to be moving rates at that point. And so on the nonmaturity deposits, we see opportunity there. The CD book is roughly $1.4 billion, $1.5 billion that will be repricing. I don't see tremendous opportunity there. I think things that are rolling off, the rates that they're rolling off, they kind of -- there'll be some opportunity, 10, 20, maybe even 30 basis points there. But the competition is pretty tough. So we've got to be competitive in the market. And on the rest of the funding book, the Federal Home Loan Bank advances and brokered deposits, we're basically at market at this point, not a lot of benefit on that side. Things are kind of rolling into current -- at rates that are current rates now.

The margin gain is going to be with better loan production. In that environment. That's the better lever that I can see as I look a few months down the road.

Your next question comes from the line of David Bishop with Hovde Group.

Quick question, Paul, Carl. In terms of the investor CRE, I appreciate the slide in the back there. It looks like a slug of that is coming up for maturing or repricing. Just curious in terms of the risk you point out there. Is that more of a debt service coverage risk or refinance risk or both? I'm just curious...

I didn't catch the preface, David. I couldn't clearly hear what the preface was. What is it that you're asking about?

On the investors CRE portfolio that's coming up for maturity here in the next couple of quarters. I think in the slide deck, you mentioned some risk factors there. Just curious if that's more pertinent in terms of debt service coverage risk, refinance risk or a combination of both? Where do you see the risk in that book?

Mark will answer that.

Yes. So I'll take that. We have the... The maturity and refinance, there's a fair amount coming up over the next 4 quarters. As we look forward through it, I was taking a look at it the other day, and there's one substandard loan in that portfolio. It's one that is a property that's being redeveloped. We expect that to work itself out, and there are 2 smaller criticized loans. The rest of that is a past book. So I think we feel pretty good both with maturity and repricing as we move through those maturities, whether they're hard maturities or pricing maturities.

Got it. And then I noticed just the linked quarter trends, the loans 90-day past due seem to decline the same amount. nonaccruals went up. Was it the right way to read into it that they just sort of migrated to nonaccrual from past due?

Yes, I think that's fair to say.

Got it. Then just one follow-up in terms of, Paul, the Board approval for the buyback there. Any color or indication when you might be getting regulatory approval? I don't know if there's any sort of a time frame you feel comfortable.

No, there is a little time frame. I never try to predict exactly what the Federal Reserve is going to do, but we expect that to happen reasonably quickly within the month.

Your next question comes from the line of Karl Shepard with RBC Capital Markets.

Just maybe to get ahead of ourselves a little bit on the regulatory approval of the buyback. But maybe just high-level thoughts, how do you want us to think about what could go into your decision-making process, if you want to go ahead and use it? I know you have the CRE issue or concentration, but you also have lots of capital. So maybe can you frame up a little bit.

We're actually pretty far ahead on the real estate piece for the leverage of concentration. So we've created an opportunity to do these kinds of things with that. Go ahead, Carl. Any other... Factors?

No, I think we still remain committed to that 300%. The Board is certainly behind that and wants us to hit that and stay on target. But as capital continues to grow and the size of the balance sheet, I think we're in good shape to be able to continue to move forward with at least this initial authorization.

Okay. But let me just try it one more time, I guess. If you feel like you're on pace to get under the $300 million by the end of '27, you're comfortable using a little bit of buyback. Is that a fair way to think about it?

Yes, particularly when you couple it with the current shrinking of the balance sheet with originations being off -- way off from what we're used to and payoffs being still coming in. So when you look at the current environment, the idea of a buyback seems to fit in very nicely.

Great. I appreciate that. I know it's a topic for investors. And then I guess on a follow-up question here for you guys. Both of you used the term close the gap. And I was wondering if you can help us understand what gives you the confidence that some of the macro environmental headwinds you guys saw this quarter are starting to fade? And then what -- as you get 1 quarter past the conversion, what kind of tailwinds do you see at the core then from not having to spend the time and energy and focus on getting that right?

Well, I expect people to move from making sure we have customer retention and problem solving. You always have those things associated with a massive conversion like this. And we're at the point now where I think of it as like you build a new home and when you move in, there's a punch list of things that need to get done, and that's kind of where we are. So I'm expecting that our bankers and support personnel will now continue to shift toward loan production and fee income production, which will sort of get us on the right track to where we had hoped we would be. Carl, do you want to add anything?

No, I think -- and just the uncertainty in the market. So we feel good about our loan pipelines. We feel good about what's going on out there. But we know they could be better. And there's just a lot of uncertainty in the market when late February and then we've got the geopolitical things that are going on. But then also with -- we've seen interest rates increase, particularly the yield curve steepened, which sets people back even if it's momentarily. And we also have the multifamily proposals for rent control in the Boston market, which has a lot of folks putting things on a wait-and-see mode.

And in Rhode Island.

And Rhode Island was passed in Providence, right? So there's a number of things that we think will get resolved sooner rather than later or hope to get resolved sooner rather than later that takes some of that uncertainty off the table and move things forward.

Your next question comes from the line of Steve Moss with Raymond James.

Carl, maybe just starting for you, I'll just circling back to the margin here. In terms of just thinking about the day count here, you do have -- it looks like 5, 6 basis points drag or increase potential in the upcoming quarter on the margin. Just curious like maybe if you could be a little bit over the 3% number for the second quarter here.

Any further to the third way. So what Yes. Day counts always come into play here a number of -- as far as -- I'm less concerned about the margin number and more concerned with the actual net interest income that we earn. And just to give you a little sense around that, Payroll deposits are something that drags us on the margin, right? So we have average payroll deposits and that are substantial. And in the first quarter, they're about $1.2 billion in average balances. Now they're highly volatile during the week. And so depending on what day of the week we close on for the quarter, that's kind of the ending balance of those balances. But that's $1.2 billion. And usually, the first quarter -- and trust me, I'm just learning all this. Usually, the first quarter is the highest quarter for average balances. And that's because of taxes and other things that go through that. And that's just -- it's a little bit more than -- it was $200 million more than the fourth quarter. And we expect that to drop. So the average balance in Q2 will be lower, and it will be lower still, I think, in Q3 and then bounce back in Q4. So -- but that's -- those balances, we have a very, very little spread on, right? That's mostly a fee income business, and the margins around that may be around 35, 40 basis points. And so that's something that we want to keep in mind that as those balances move, it could move the margin overall.

So as Carl is learning about the payroll business, it's not because he's not doing his job, it's because it was a legacy Berkshire business that they have been in for some time. But it is quite volatile. I look at it daily and it goes -- I think the lowest I've seen is about $600 million in deposits to a little over $2 billion in deposits. So we don't employ it as we do our other sources of funding.

But on the loan side, we do have a lot of -- so on the commercial side, you look at the CRE loans and the C&I loans, those are actual basis loans and the others are 360. And so we'll get a pickup. There's an extra day next quarter that we get. I'll let you guys figure out how you want to calculate the margin. I see it get calculated lots of different ways.

100% on that. Okay. That's fair enough. And then I guess the second thing here for me, just in terms of credit and the provision and charge-off guidance. So provisions exceed charge-offs kind of how are you thinking about the level of charge-offs for the remainder of the year?

So I think we're expecting that -- I think we provided some guidance on the provision. I think those are good numbers, probably trending a little bit towards the high end of that guidance. Charge-offs, I expect to be -- I expect to exceed the provision. And that's as a result of the aggressive reserving that we have in place and the credit marks that we have in place. As an example, we have about $80 million on our substandard portfolio. And net of substandard, we're at about 91 basis points coverage. So I think what we'll be doing is those charge-offs will effectively be funded out of that reserve. And so I expect provision will run lower than charge-offs.

Okay. So pretty substantial charge-offs then as the year goes on.

That's hard to say. It depends on how we resolve some of these loans. I'll say they'll be in excess of provision.

Okay. Okay. Fair enough. And then just sticking with credit for a moment here in terms of the office loan that went to nonaccrual here in the multifamily, maybe just kind of color around the LTVs and kind of debt service cover ratios for those properties and timing on resolution?

Yes. So I'll start with the larger loan, which is the office property. That is a downtown Boston property. It's a larger loan. We have a participant in that deal. Our share of that deal is around $17 million in change. There's about 50% occupancy, about 0.7% debt service coverage. On that particular loan, we are working with the sponsor on a potential sale of that property. And between specific reserves and then customer reserves that we hold against the loan, we've got about 40% coverage on that loan. So I think we feel pretty good. Even though it's a somewhat new nonaccrual, I think we feel like we're in a pretty good place from a reserving perspective, and we'll be able to work with the borrower through that. As far as the rent control, I just want to make a comment on New York rent control. I think this came up last quarter, but we only have 7 rent control properties in New York. It's a total of $18 million. So that represents the entire portfolio. This was 2 particular loans. They are related to each other. They totaled $9 million. I don't have the statistics on those loans, loan-to-value debt service coverage. But again, I will say that we're about 40% coverage on a reserve basis, and we're potentially looking at selling either the notes or the loans near term.

Okay. Great. Appreciate that color there. Maybe just on the loan growth outlook for the second quarter and the pipeline here. Just kind of maybe wrestling a little bit with the flattish comment for the upcoming quarter. Is it just maybe more CRE runoff at the end of the day than you guys expected that kind of drives that versus the pipeline? Or really driving maybe.

It might be equal, but it's the distraction and it's the internal focus that everybody has had now for a number of months, coupled with more prepayments than we expected, coupled with customers and prospects aren't moving as quickly as we might have thought on purchases or activity that would cause loan drawdowns, if you will. And to get that cranking again, it's going to take a little while, but we're on it. I think it will happen. How quickly and how deeply I would be speculating, but we're all knowing what we need to do to get there.

Our next question comes from the line of Laurie Hunsicker with Seaport Research.

Just to stay with credit here. So just -- and I really appreciate the details on Slide 16. The $192 million criticized office, how much of that is coming due this year and next year? Are there any lumps, any color you can give us? Obviously, you referenced some maturing. I just didn't know the amount.

Yes. So that was -- the answer would be the same -- I'll cover it again for you, Laurie, but the answer would be the same as the previous. Over the next -- I have the next 4 quarters in front of me. And in terms of criticized and classified, the total is -- about $55 million, $20 million of that is substandard. Again, I mentioned earlier, that's a property that is being redeveloped for a major retail tenant. That's a relatively new event, a new happening. So I think that's going to help us with some sort of a favorable resolution there, sorry. The other 2 loans are both special mention, and they have very strong sponsors. I don't expect any issues with those. One is $18 million maturing in the third quarter and the other is $17 million maturing in the first quarter of '27. And that represents the total of criticized or classified loans in office.

Okay. And I'm sorry, just to clarify, the $18 million and the $17 million, those are office?

Correct.

Okay. Okay. Great. And how much office charge-offs were there this quarter?

So it was -- I think it's in the deck, but there was a single charge-off for just under $7 million, and that represented the resolution of a downtown office property that we've had in nonaccrual for some time. We took the charge-off in the first quarter. That loan will actually resolve in the second quarter. The deal has been inked. We're just waiting for it to close. But we went ahead and took a charge on that.

Okay. And I'm sorry, what is the total balance of that loan?

$23 million.

$23 million. Okay. So great. So all of your CRE charge-offs this quarter were office. Okay. And then...

It was a single loan, Laurie, just to be clear, it was one single loan.

One single loan, right. Yes. Okay. Great. And then your C&I charge-offs of $6.6 million. I'm thinking most of that is that the discontinued specialty vehicles or the Eastern funding? Or can you help us think about what that is and what the nonperformers are on those categories?

Yes. So that was split pretty evenly between SBA and Eastern Funding. In the case of Eastern Funding, it was a charge down of a loan that's been a long-term workout. And in the case of the SBA, it was -- well, it was just an SBA charge-off. In terms of the nonperforming balances, Vehicle was at $3.9 million. Macro lease is at $5.5 million. That's down pretty significantly from prior quarter. We did have a -- we had a resolution of an $11 million loan that was that Orange Theory franchise that we had talked about last quarter, I believe. So that was resolved itself, and I expect we'll be back accruing within the current quarter. And I'm sorry, it is accruing already. It will be upgraded within the current quarter. And then you didn't ask but Firestone is a little under $1 million.

That's great. Okay. Okay. Great. And then just one last question for me. I guess, Carl, this is to you. So your final onetime charges of $13 million, a little bit higher than the $10 million you had expected. Can you just help us think about what were the differences there?

Sure. So on the compensation side, those numbers came in a little bit higher. Accounting and tax came in a little bit higher and some of the contract terminations came in a little higher than I expected for the month for the quarter. But overall, we came in on top of what we originally announced of $93 million. That was our original estimate when we announced the transaction. We came on basically right on top of that number. In different buckets than we thought, but the IT folks did a great job of negotiating and executing on a lot of the contracts and the conversion costs, which helped pay for some of the things that went over. But at the end of the day, it came in right on top of the original $93 million. And merger charges are over now. They're done. Basically, everybody knows that. We did a great job of getting around that and controlling that cost. And if anything sneaks through, it's not going to be a margin driver just going to the operating run rate.

Next question comes from the line of David Konrad with KBW.

I just want to circle back on the NIM a little bit because it's pretty important with what the stock is doing today. I just want to clarify the kind of language of the 580 stabilized NIM or the 380, sorry. Are you thinking about that for the second quarter and then build from there? Or is 380 kind of the full '26 average NIM in your thoughts?

I really like the 580 you threw out there. So we feel pretty good about the 380 for Q2 and feel like we'll be building on that. Again, a lot of this has to do with -- it's dependent on loan growth that really drives a lot of this. I think the second quarter will be more about the funding side as well as loan growth. But I expect that we'll get the funding where it needs to be, the funding -- the rates down to where they're supposed to be on some of our deposit products. Now of course, everything changes in the market, but we've got a little bit of a steeper yield curve. So I feel good about how things look going forward. Now if rates drop 25 basis points, just to throw that out there, even though there's no expectation of this right now, if rates happen to drop 25 basis points, that would cost us about $6.6 million, $6.8 million a year in net interest income, and that's a parallel move. But -- and I don't think anybody is expecting rates to go up, but we'll see what happens.

A lot of our loan originations are in the 5-year neighborhood, and those generations should -- that will be helpful as we go forward into the second and third quarter.

And so commercial yields, the commercial loan book at around 620, that's probably pretty good for now. So that will just benefit from the mix as it grows -- and then I guess the key is to grow the commercial real estate at 574 to get that up to the 620 range.

Yes. But I would add that we're still on track to target getting the 300% leverage of commercial real estate to capital. We're probably ahead of the original schedule. And so we've turned the real estate lenders back on because we can easily absorb some decent production and still make the targets to get to the 300% in plenty of time. So that's all good news on product.

No, I just wanted to add a little bit of color on the loan origination side of things. So we had -- as far as the loans that were originated this quarter, the CRE loans, the WACC on those loans were at 6.30%. The C&I loans were 6.34% and the consumer loans were coming at 603%. Just the spot weighted average coupon on those books at commercial real estate at the end of the quarter were 5.57% for CRE, C&I at 6.75% and consumer loans at 5.01%. So we're originating at higher coupons than what's on the book. Now those coupons don't include -- I don't think they include purchase accounting at all. So just keep that in mind. That's just the rate on the loan.

Right. Okay. And then last one, just building off of that on the bond book. You actually decent lift there. What is new money going in on the bond portfolio?

That's going in at around 29%. I think we purchased about $130 million during the quarter. duration about 3.5, .8 on that book.

And our final question comes from the line of Daniel Cardenas with Bring Capital Research.

Just a couple of follow-up questions on the office, the Boston office property that went on NPAs this quarter. Was that a Class A property or a Class B?

It's a B.

Okay. And so the occupancy rate that you gave out that 50%, is that kind of indicative of the overall marketplace?

No. I don't think so. I think it's -- there's certainly pressure and occupancy is down. I think it's 25%...

I was going to say 75% occupancy. About 25% in the central business district to be the number. So that's well. Now how much of that is being unused but still under good lease? You can speculate on what that may or may not be. But I think we read about some green shoots in leasing that have been happening, not the least of which is JPMorgan moving into the big new building over the South Station area, quite a few floors. So they'll introduce some competition maybe.

Got it. And so how does the rest of your portfolio? I'm sure you've taken a deep dive. I mean, are there any concerns in that Boston office portfolio?

Well, we have taken a deep dive. We have about $1.2 billion in office and only about $200 million is in downtown Boston. We've talked about problem loans on the call already, one that we took the charge-off on and then the new nonaccrual. Those actually are the 2 largest nonaccruals in our book. Beyond that, the portfolio is criticized, but we have good reserves, and we look very closely at all those loans, and we reassess the reserves all the time.

Okay. Perfect. And then last question for me as I think about operating expenses for you guys.

Daniel, I think we lost you, but you're asking about operating expenses. I've been getting this question all the time. So I'm going to guess what you're asking. We're certainly on target, if not better than what we originally anticipated targeted for an operating cost. And we've laid that out in the deck. So we feel good about where we are right now going forward.

Are you there Daniel?

We have lost Daniel. [With no further questions in queue, I will hand the call back over to CEO, Paul Perrault, for closing remarks.

Thanks, Tina, and thank all of you for joining us today, and we look forward to talking with you next quarter. Have a good day. Thank you again for joining us today.

This does conclude today's conference call. You may now disconnect.