Citizens Financial Group, Inc. (CFG) Earnings Call Transcript & Summary

Good morning. This is our last session before lunch, and we're very pleased to have today with us Don McCree from Citizens Financial Group. Some of you may know that Don is Vice Chairman and Head of Commercial Banking. And Don joined Citizens back in 2015, if I recall, when in prior to that, he had many responsibilities at JPMorgan Chase in the commercial area. So welcome, Don. Thank you for coming back.

Good to be here. Thanks for having us.

What we'd like to do is maybe start with something on a more broader scale or macro outlook. Obviously, you keep your fingers on the pulse of what's going on in the commercial markets in both commercial real estate and C&I lending. But maybe when you look at the economy and how it's impacting your customers, what are you guys seeing? Because there's so many crosscurrents today with the economy. And what are you seeing from your customers?

Well, certainly a lot going on. And it's hard to generalize, but I would say that in a general sense, everyone's feeling okay. Obviously, economy is still going pretty well with I was saying this morning in terms of need to do more faster. So the top lines are holding in pretty well. There's a little bit of supply chain, but that's cleaning up pretty well. Labor is definitely still an issue in terms of the cost of labor, and all those things are having a modest impact on margins. You add interest rates on that and the cost of financing, and that squeezes margins a little bit more. But the most frequent thing that I hear is we could be selling more if we could get labor and get goods. So they feel like they're doing pretty well, but they could be doing even better. I would also say that the client base, in general, think about the pandemic, and we went through a just shock to the system. So CEOs and CFOs got really serious about cost structure, about debt levels, about inventory control. And so I think, whatever we're headed into in terms of a mild recession, a deep recession or no recession, they're a little more prepared to -- prepared than they were. And so that feels pretty good.

And I think that's underappreciated by investors on having to go through the pandemic. And what they did, I think, lean is hopefully paying off benefits in the next potential slowdown. Are there any indicators that you watch closely, weekly, monthly, just to keep your pulse on what you see going on in the market?

Yes. We certainly are watching interest coverages and debt service coverages, so that's probably something you can look at constantly even against a flat cash flow, number one. And then number two, just the broad economic indicators to see if there's any cracks materialize, and we don't really see them yet. You see a little bit at the low end of the consumer, that's not really our business, but it could impact some of our consumer-oriented commercial clients. So we definitely are watching the low end of the consumer, feels pretty good so far. And then we just watch the unemployment data, which is going nowhere, and we watch the economic data, which feels like it's pretty good.

And it's interesting with your footprint. Obviously, the branch footprint is the Northeast, but your business is much broader. Are there any parts of the country or lines of businesses, whether it's lending to industrials in the Midwest or tech companies out West, what are some of the areas you're keeping an extra eye on?

Good news is we don't have a lot of loans for tech companies at West. That's obviously a sector that's going through a pretty significant correction right now and will come. But our higher growth areas of the country are the growth -- the areas we expanded into. So I took the view when I first got to the company that it's great, that we're in New England and the Mid-Atlantic. We have really deep market shares. We have great penetration with clients. We're #2 in both of those markets, so that feels very good. The strategy in those markets was very much deepening with clients, building more capabilities and servicing them in a broader way, but they're low GDP growth areas of the country. And so we took the decision 6 years ago that we needed to move into the Southeast and into Texas and into Southern California, and we've built pretty nice businesses down there. Our strategy at the time was we hired teams of local bankers, so we hired out of Truist in the Southeast, and we hired out of actually JPMorgan out of Texas and people that have been in the market for a long time, they knew the clients, the clients knew them. So our book built much faster than what we tried to send a bunch of guys down from the Northeast to Texas bankers.

Yes. And when you won over those new business bankers in those markets, do generally -- how long does it take for them to bring their customers over? I assume they bring some of them over.

We planned on a 3-year kind of time frame to build critical mass, and we got there a little faster than that. And I think it was the quality of the hires. And a lot of banks like we were, which were in some of those markets, we're adjusting for their portfolios. We constantly are turning our portfolio and reducing some names and adding some names, so that goes on generally in the marketplace. The one thing that I didn't do and that we still won't do is go deep into the middle market, in expansion markets because I'm very nervous about adverse selection. And so we said, let's stick with a little bit more of a mid-corporate strategy, we'll build it slowly as long as we can get to returns that are adequate over a 3-year period, we'll keep going. So far, so good.

Got it. It's been really interesting when we look at what's happened over the last 12 months. In fact, we had earlier David Solomon from Goldman Sachs, who pointed out literally a year ago this month, interest rates were still 0 to 25 basis points, and they were still buying back a considerable amount of -- I'm sorry, issuing QE was still there. And so -- then we have seen rates increase dramatically to about 4.50% to 4.75%. There's talk of them going over 5% in Fed funds. And there hasn't been any calamities in the market. When we turn back the clock and look at '94, '95. In '94, the Fed took rates up from 3% to 6%, and Orange County went bankrupt. And Mexico was having serious problems. Any suggestion -- What's your view?

It's interesting you say that because I gave a little talk to clients down in Atlanta about 6 months ago. I said, what are you worried about. I said systemic risk. And we just haven't seen it. And I think chuck it up a little bit to regulators and a lot of things that were put in place at the back end of the Great Recession, I think, are servicing the world economy well. There's -- remember, there's a lot of money sloshing around still. So the money supply still is relatively high. And I think, again, I go back from a client standpoint and maybe even from a government standpoint or whatever, this period that we went through with the pandemic kind of made people stronger. And remember, we still -- you got to think forward because even as recently as 6, 9 months ago, there was still massive excess liquidity in the system. And let's not forget that there's massive spending that's going to come in the form of fiscal spending that hasn't even started yet. So I think there's a lot of cross countries that are providing liquidity in the market. They're avoiding some of the systemic risk you might otherwise see. I do worry not our business, but I worry about dollar and debt at LDC countries, and you're starting to see a few cracks there. But other than really Sri Lanka, you haven't seen anything catastrophic yet.

Right, right.

And remember, the U.K. pension system is also little bit of an [indiscernible].

We always going to keep our eyes out. That's for sure. You've built up your capabilities, both through organic investment and a handful of acquisitions over the last 3 years. What do you think are some of the real opportunities now for your business as you look forward?

So Gerard, I think I've summarized the strategy of capability sets to stay with our clients through good and bad. So that's what we've been trying to build. When we took the company public, we basically lent money and did some cash management, we really didn't have investment banking businesses, we didn't have public securities businesses, and it was incredibly frustrating to be sitting in my seat in the first year I was there and watched 50-year relationships get sold to Goldman Sachs since you mentioned Goldman Sachs. And we said that's not going to happen anymore. So we started by building out our hedging businesses, so interest rates, currencies and commodities. We added public securities businesses, so asset-based high yield, high grade. And then we turn to M&A, and we've bought 4 M&A boutiques along the way, really sector-focused where we thought we could make a difference. And then we bought JMP Securities at the end of last year, which brought us into the equity market and the new economy in a way that we haven't been. And -- 2 years ago. And in that -- in '21, it all came together. And our fee lines were up at $200 million, and our investment banking fee lines. And you could see the potential there. Not to mention the fact, we also have built a Wealth business and -- so the transactions that we were doing where we're taking a long-term client, we were advising them on the sale of the client, we were financing the buyer, which generally was private equity, we do the hedging connect with the transaction, we captured the wealth under the Wealth business, and the client didn't [indiscernible] of the portfolio, which if Goldman sold would have gone, it was just like a trifecta or even better than that, that actually showed us the power of the franchise. It's obviously been tough with interest rates and the volatility in the markets, but we're really happy with what we've got. We're getting great feedback by clients. Our M&A capture out of our existing client base is in the 75%, so -- which is I've never seen that in my career. If it goes to the power of that long lending relationship with a capability set that's very valuable for that client.

Yes. A few of your peers, KeyCorp is one, that has had the investment banking and commercial banking businesses together for quite some time. How do you incentivize your commercial bankers and investment bankers to kind of work as a team and not in silos?

Yes, that's the biggest trick. First of all, you don't buy turnkey investment bankers, right? So I've been in investment banking for a long period of time, and I can walk into a room and know the person I'm talking to pretty quickly. So I probably looked at 75 different acquisitions over the last couple of years, and half of them I just walked out and say not going to be part of our company. So we think we bought really, really good cultures and people that actually were more about creating something like the 1 plus 1 equals 3. They could do better as they were part of Citizens than they could do if they're alone. And then we actually fully integrated it. I think the challenge you get when you buy investment banking firms is if you leave them off to the side, you have the risk of 2 cultures developing, and it's us versus them culture. So we actually put some people in charge of kind of almost being the conduit between the new company and the old company. We basically pay people based on how they perform, irregardless of which part of the division they're in. And we share the wealth with everybody. And we're small enough. So my entire division is 1,500 people, including operations, which is about 400 or 500. So we can have our fingers on everything. And as a management matter, it's just about reinforcing and reinforcing and reinforcing, and putting things up in lights that work well and kind of focusing on things that need some fixing here and there.

You mentioned the acquisitions you've done in the past, and you've integrated those into the organization. Is the product center or the services set complete? Or do you still think you can enhance what you have with further acquisitions?

I think for our clients, they're complete. I would like to get some exposure in a couple of other areas of the M&A suite. Like health care is a big part of the economy. We feel a little bit underweight. So if a health care advisory firm came along, we'd probably be interested, but it's got to be the right size, the right price, the right people, as I said before. So now for me, it's really -- we can go into the trading businesses or the CLO business or something like that, but it's not really what we are. So we're not going to do it just to generate a fee stream or generate a revenue stream. So I think the name of the game for us now is scaling it, just adding people, making a little bit bigger and taking full opportunity -- advantage of the opportunity.

You mentioned a moment ago when you first got into the seat that it was frustrating to see some of your clients go to a competitor and, therefore, you built these capabilities. When you're out there on the front lines, who are some of the real good competitors that you bump into regularly?

It's everybody. The one thing I've never had a shortage over my career is competitors. And so you say some competitors are the nonbanks who represent a larger piece of the financing puzzle. So the nonbanks were also clients of ours who we sell our syndicated loans to. So they're a competitor in the client. You've got the big bulge brackets that we see generally when we're around private equity, so we run up against Goldman, we run up against JPMorgan, BofA a lot because they're big in New England, P&C a lot because they're big in Pennsylvania. But we're -- we win our fair share against all of those banks, including the bulge bracket. So we think when we are involved, the secret sauce is we have extremely, extremely experienced good people against the middle market. So when you're in a very large bank, this is a gross generalization that they have the really, really, really strong people against the $5 billion deal. So we play in the $250 million to $1 billion transaction range, whether that's syndicated loans, whether that's bonds, whether that's valuation levels and it's -- we think we have better people, frankly, and we put it together better as we hear back from our clients.

Got it. Obviously, you're responsible for the commercial side of the house. When we look at the weekly H.8 data, C&I loans year-over-year are still growing double digit now sequentially, and they have started to come down. What are you guys seeing?

We're seeing some interesting things in our loan book, and it's really strategically what we're trying to do. First of all, we're not chasing loan growth, right, because I think we don't know where we're going. It's going to be pretty unusual that we bring on a lot of new clients right now because we're just going to be a little bit risk-averse in the way we approach it. We are demanding a lot more right now in terms of return, including deposits. So if a company is not hurdling at the point of the loan, it's not happening, and part of that is to basically not have to go and chase those high-priced deposits right now. So we're seeing things -- we'll grow a little bit this year, I think, but we're not looking to grow a lot. The other thing we're doing is we're taking the opportunity. You've heard us talk about balance sheet optimization. We've accelerated that, and that really is going back through the book and saying, "All right, if we thought XYZ company was going to be returning 14%, 15%, 16% with a full relationship, and guess what we're just making alone when that comes up for renewal, it's going out the back door, right? That's being offset a little bit. So that's a little bit of weakness in how we're originating new loans, it's being offset by virtually no refinancings coming out of the portfolio because the bond markets are quiet, and a lot of the syndicated loan markets are little bit quiet right now. So the book is a little bit more stable in terms of ins and outs that it would usually be.

Are there any areas that where there is better growth opportunities on the C&I loan side, whether you mentioned Atlanta or Texas, what are you guys seeing, geographically speaking?

I don't think it's really geographic. I think obviously, the P/E guys are pretty quiet right now because the deal math doesn't work the way it needs to work. And I'd say there's -- I'd say the biggest kind of conversation we're having with clients is I don't want to go to the bond markets right now. Will you make me an incremental loan and bridge me to when we get some volatility in the bond market or better rates? So those seem to be a pretty decent flow. And then smaller ticket M&A financing is happening. And so you're not going to see a lot of financing in the multibillion dollar M&A space, but if someone needs to borrow $100 million to close a deal, those kind of transactions are getting done. And then we've seen a general rotation. We've seen our C&I business and the growth in our C&I business slow, and we've seen growth in things like subscription lines and for the private equity firms, and some we call it capital markets credit, which has been this insatiable demand and it's extremely well priced right now.

Yes. Coming back to the private equity math, if you will, or penciling it now, what kind of environment do we need for the sponsors to get really active again, do you think?

Zero interest rates. I think it's a question of buyer, seller valuations, right? So the first thing you need to do is you need to understand what the EBITDA strip is. There's so much noise, whether it's -- I couldn't get goods or I had a boom during COVID. And so getting to a stabilized earnings before depreciation, interest and taxes line is step number one. Step number two is if it's a private equity transaction, what used to be 6.5x is probably 4.5x, just due to the effect of interest rates. So that means the returns for P/E goes down. So they either have to get comfortable with lower returns. If they really like a business or they see an opportunity to grow it in a different way or the seller's price has to come down. And you're seeing -- we're seeing actually a fair amount of M&A activity, and you've got some exhausted private owners right now because they wanted to sell in the -- great Recession, they couldn't do it, then they want to sell them the pandemic, they could do it and now they're 70 and their kids don't want to be in the business, and they're sellers. So we're seeing a couple of things that are interesting. One is, what I will call, 2-stage transactions where we'll go to a client and we'll say, "You know what? I know you don't like the valuation now? Why don't you sell 60% of your company to XYZ private equity firm? That private equity firm will probably triple the size of that company over the next few years. Your residual 40% is going to be worth a lot more than the original 60. So when you do the blended return and we're doing 2 or 3 of those right now." So that seems to be a deal structure that's resonating. And then the other thing that you're seeing done, and I think it was Blackstone just did a recent deal where the private equity firm is overequitizing the transaction, and then we'll come back when the environment gets a little more stable and relever the transaction. Some of that's built into the deal terms. Not a lot of those yet, but that's the strategy we're seeing.

Coming back to the C&I comment you made about making sure that you're getting deposits and other fees and services, how hard is it to get that deposit relationship to really make it worth your while from optimizing your profitability?

It's gotten easier because we prioritized it as a cross-sell. So we're having that conversation with every single client we're lending money with right now, whereas 2 years ago, that would have been a conversation. We've been talking about hedging, we've been talking about -- so we put it up in terms of the bankers' scorecards. Obviously, there's a lot of companies that don't have a lot of deposits, so we're tied to our operating services business and some of our core deposits. And we've done a lot of things in our deposit business over the last 5, 6 years where we've built new products. We've got brand-new technology. We've got all sorts of deposit bankers now that just didn't exist. And so the quality of the franchise is much better than it was. We're at a fair degree of success. And interest rate, I mentioned those BSO clients. We have an interesting dynamic time. So we say to a client, " All right, we're out." And they say, "We don't want you to be out. Why don't I ship you over $50 million in deposits?" And so it's getting -- I wouldn't say it's easy, but we're having a fair degree of success on it right now. And it goes without saying, it's getting really competitive. Every bank has kind of do the same thing. There's nothing super usual about us.

Speaking of competition for the deposits, can you share with us treasury management services, which is another critical area to get that total relationship and build the profitability? But it seems that area is also very competitive.

And we've put a lot of investment in that over the last 6, 7 years, really, to build out what we think is a best-in-class group of capabilities. Our growth rates in that business are actually higher than the industry. So we're growing at 8%, 9%. So it's working. And we've won some quite substantial mandates with some very big companies recently. So that gives me confidence that the product set is there, and it arrives. And we've arrived. We're now -- we just started maybe a year ago an enterprise payments effort at the company where we're bringing together commercial and consumer payments. You'll see us probably do a lot more with fintechs. You see us do a lot more around industry specialization. And to be honest, some of our competitors are ahead of us on the industry side of things right now, but we want to catch up fast. It's probably one of the 5 or -- 3 or 4 biggest investment areas that we're going to focus on as a bank.

Got it. We heard on one of the company's fourth quarter calls, PNC and KeyCorp we were talking to yesterday, and they both been surprised that spreads haven't widened as much on the C&I book as they would have expected, not the large corporate, but more like all of your guys kind of go-to middle market, small corporate.

We're actually just starting to see it. okay? So it's been incredibly stubborn, we've been frustrated that people haven't taken -- everybody got a very nice lift from the rate increase and what it did to NIM. So people maybe just weren't that focused on it yet. But as that has begun to kind of -- until this morning began to stabilize in terms of the interest rate rises, I think people have kind of come to their senses about return. The way we think about it, Gerard, is we think about relationship returns. So yes, we're focused on NIM, and we're actually doing pretty well on the NIM line. But we're really focused on, can we drop 15%, 16% return on capital that we've invested in a client to the bottom line when we look at all of our products. And that is why that capability build is so important from a financial standpoint. In addition to a client service standpoint, we've put a little bit more focus on NIM recently because we think there's an opportunity there. But we're finally seeing a little bit of spread increase, which is nice.

Yes, -- very nice. Moving over to an area that you're very knowledgeable about is leverage lending. With the rate rise that we're seeing, can you share with us any impact to -- and also, as you saw -- that will be the next question, so I'll stick with one.

So let me just center people. So we have a big leverage lending business. We distribute the vast majority, so it doesn't really sit on our balance sheet. So I think we have about $2.7 billion of leveraged lending. This is about 1.7% of the overall balance sheet, so not that big. We're real hawks on diversification, so our average hold -- or average is like $11 million, so a very diversified portfolio. So if one of those goes bad or two of them goes bad, it's not the end of the world. But so far, so good. And one of the things that we know about private equity, which is the vast majority of the leverage lending, is their financial engineers. And they're tinkering with the capital structures all the time. You're not seeing a lot of dividend deals and things like that happening right now, but we're not seeing any more distress in the lending book that we're seeing in any of the other books. So it's holding up pretty well so far.

And then the leverage lending outstandings, what would be the larger number of -- you say you have $2.7 billion on the balance sheet, what would that -- when you look -- what you sold off?

I saw something that was the top 10% of the book, something like 14%, 15% of the exposure. So a little bit bigger, but not $200 million. And we've lost some transactions over the last few years, either to the direct lenders who are doing much bigger numbers, and even some competitors who are beginning to hold more. And we just -- I've been doing leverage line for 35 years. We're going to stick to our guns on that.

You're a good one to ask this question then. You just mentioned direct lenders. How -- what's the second derivative for the banking industry? Because the direct lenders seem to be really shadow banking, that's where maybe more of the risk is. And so do you see any kind of over -- if they ever get in trouble...

We were watching during the pandemic and saying, maybe this is the time when the direct lenders won't be able to service their clients. It didn't really happen. The deal math for them is difficult right now with high interest rates because they have to charge a lot more, because their cost of funding is higher. So you're seeing less go into the direct lenders right now. But the thing I've always been worried about, and I don't know how it would happen is if the regulators decide that they want to try to regulate the direct lenders through the banks. And I don't know actually what that would look like. But I've seen creative regulators in my career. So they could do something around, you can't distribute to them. Or -- but we haven't -- I haven't heard it from a regulator, and I haven't seen it yet, but you're right saying it's becoming a big unregulated piece of the global markets.

Yes. In fact, the Fed has done what they said they were going to do following the financial crisis is pushed a lot of the risk outside the banking system. But when it got a bit blows up, they have less control of how to fix it versus when it was in...

Right. And the thing you worry about, the things -- the thing that we talk to companies about is if you're borrowing at a really high leverage point and your lender can't restructure you or help you and all of a sudden disappears on a refinancing, you're going to have a lot fewer financial alternatives if you're that company in that situation. So that's the way we try to market, I guess.

Sure. The other area of commercial lending that is always of great interest in Shared National Credits. We just had the exam results released in February. They were surprisingly good. I know there's another exam underway for this period. So 2 questions, I guess. What's your view of what's going on in Shared National Credits? And is it a business that you could do well in?

I never understood the fascination with Shared National Credits. I don't care. And it's a big piece of our business. What we've tried to do is occupy the lead position. So we've taken our lead in Shared National Credits from like 15% to 30% over the last couple of years. I don't look at any client differently, whether it's sourced directly through a bilateral relationship or whether it's part of a syndicate alone. And what we look at is, does the client want to have a wholesome relationship, can we make an adequate return? And is the credit, okay? So we are not in the business of just buying off syndication desks. We actually won't do a transaction with another bank unless we have sat down with the company, spent the time with them, done our diligence and have the conversation about cross-sell. Now as part of the BSO, there was a lot of participations put on 8, 10 years ago that we've been kind of cleaning out if we can't migrate up in that relationship. So as you said, we just went through the exams that was remarkably clean. I don't -- if we had downgrades, we had very few downgrades. But the discipline we have around that book is exactly like any other book of the bank.

Got it. obviously, the investors acquisition is completed. Can you share with us what the early read is for your area within -- I know investors was not a C&I lender, of course. It was more commercial real estate. Maybe give some color on what you're thinking about that.

The first thing is we did the conversion over the [indiscernible]. It was flawless. We had virtually no issues. So we're really happy about that. And we have huge teams working the whole week and to make sure that everything went well. What we are going to -- what I get from it is New York brand in the way I've never had, and it's really -- I know you a little bit North, and I had to live with the New England Patriots for 7 years, and now the Bank of the New York Giants. So it's really satisfying from that point of view. We got brand, we'll have branches. We've got 200 branches in the Tri-State area. You see Citizens green everywhere. So people -- and people are already noticing that. The second thing is I get is an expense base. And you'll see us, we actually made 2 big hires last week, and we will kind of take the investor's franchise, particularly on the C&I side, because they were trying to pivot to C&I and have a whole different level of products available, a whole different level of services available, and we'll try to go up market a little bit more in terms of the size of the clients of that bank. We got about 1,000 qualified prospects that we've identified in New York that we're already kind of going -- we're already talking to. And I've had a ton of meetings in New York over the last couple of months. And remember, we had a New York business already. It just gives us an ability to scale it and make it much better. So I'm excited about it. And I think -- remember what I said about the middle market. So the fact that we have middle-market bankers on the investment platform that are in the New York markets and know the clients, that will allow us to do the middle market, small business thing in the New York tri-state the way we do it in New England and Pennsylvania. So it's pretty exciting. We have pretty high hopes for it, actually.

Yes. And coming back to the commercial real estate mortgage portfolio, how does that interject with what you guys already have on your books? And what's the outlook there?

It's very different. They're kind of small multifamily, so think about walk-ups in the boroughs and things like that. So really safe, fixed rate. It doesn't have interest rate risk on a lot of it and quite complementary. We have related in the big sponsors. So there's really no overlap in the real estate books. We've about doubled our real estate business, so we've got about $28 billion of total real estate right now, but it's quite diversified. And we're obviously, if you ask me what am I most focused on from a risk standpoint right now, it's real estate and office real estate in particular. So we didn't get a lot of incremental risk with them on the real estate portfolio.

Yes. Well, you read my mind. That's my next question. It's going to be on credit. So maybe you could share with us your thoughts on credit, what you're seeing, what -- you just mentioned a little bit...

We're seeing a little pressure here and there, but nothing too bad right now. Obviously, the place we're most focused is office real estate. We have about $6.2 billion of office real estate. About $2.2 billion of that, just put to the side because it's a credit tenant, meaning Fortune 500 company, purpose-built building, hell or high water lease, that's fine. And then there's a bunch of life sciences in there, also some labs and things like that, which are fine. So we've got about a $4 billion office portfolio that we're focused on. It's largely suburban. It's largely A, and those are 2 places you want to be. It's very diversified across the country. We're not in a lot of bad cities. So MSAs are important. So I mentioned to you before, we we're not in San Francisco in any kind of size, which is probably the toughest place. And we've got excess reserves. We said during earnings, we had about 5% reserves against that $4 billion of office exposure. So we think we will work through it. What will happen on all of these transactions is if the sponsor likes the building, they'll tend to recapitalize it or help it along until rates go back down. There's a bunch of interest rate hedges on those buildings already, so they'll roll off in 2 or 3 years probably. And we'll just work through it loan by loan by loan. In fact, we had like probably 3 weeks ago, a sponsor completely recapitalized the project and fix the capital structure. So we've got -- the first thing we do is pick the sponsors carefully. Second thing we do is we have intense credit scrutiny on it. We try to mitigate the risk through structure and hedging and the like. And then we try to identify problems early.

And not to disclose or ask about who the customer was that you just mentioned, what you said is so interesting because everybody is worried that, that cannot happen. So was it the sponsor put more equity in? And was it -- what type of property?

[indiscernible].

Okay. It was.

And I'm not -- don't get me -- I don't have my head in the sand. There's going to be some problems in the office portfolio. But I think relative to a portfolio that you like to construct, we like what we construct.

Out of the $4 billion, like you said, the $2-plus billion plus is none to worry about. Do you have much exposure in our bigger cities with the longer communities, meaning New York or Boston or Philly?

I can't remember the number, but I want to say it's like 70% suburban outside the city center, which is purposeful.

Yes. Absolutely, along with the Class A versus B and C and that stuff. But the red light has gone off, and I know lunch is waiting for everybody. So Don, thank you so much. Please join me for round a applause.

Thanks, everybody. Thank you.