This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good day and thank you for standing by. Welcome to the Q3 2021 Valley National Bank Corp Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Travis Land, Head of Investor Relations. Please go ahead.
spk09: Thank you, and good morning, everyone, and welcome to Valley's third quarter 2021 earnings conference call. Presenting on behalf of Valley today are President and CEO Ira Robbins, Chief Financial Officer Mike Hagedorn, and Chief Banking Officer Tom Iadanza. Before we begin, I would like to make everyone aware that our quarterly earnings release and supporting documents can be found on our company website at valley.com. When discussing our results, we refer to non-GAAP measures, which may exclude certain items from reported results. Please refer to today's earnings release for reconciliations of these non-GAAP measures. Additionally, I would like to highlight slide two of our earnings presentation and remind you that comments made during this call may contain forward-looking statements relating to Valley National Bank Corp. and the banking industry. Valley encourages all participants to refer to our SEC filings, including those found on Form 8K, 10Q, and 10K, for a complete discussion of forward-looking statements. With that, I'll turn the call over to Ira Robbins.
spk04: Thank you, Travis, and welcome to those of you on the call. As usual, I will provide some big-picture thoughts on Valley's position and future opportunities before turning the call over to Mike to discuss the quarter's results. In the third quarter of 2021, we reported net income of $123 million, earnings per share of 29 cents, and return on average assets of 1.18%. The quarter's strong financial results benefited from our differentiated loan growth, which helped to absorb a $10 million sequential reduction in PPP income. Our net interest margin remains stable, and our strong loan growth pipeline should result in continued non-PPP revenue growth going forward. I am proud of our financial results and the progress that we have made as an organization over the last few years. When I took over as CEO, we laid out a plan to enhance our profitability improve our funding base, and bolster our capital and reserve positions. Despite a challenging operating backdrop, I believe that we have achieved each of these goals. Since the end of 2017, our ROA has improved from 80 basis points to 120 basis points, while the balance sheet grew by over $17 billion, or 70%. We have brought our loan-to-deposit ratio well below 100%, while significantly improving our low-cost core deposit base. Our tangible common equity ratio has increased 100 basis points, and our allowance to loans is up over 40 basis points. While we have developed a leading regional bank, our sights are now set on positioning Valley for continued success during the next phase of our evolution. We have begun to introduce and expand nationwide business capabilities that are not constrained to our legacy geographic footprint. These capabilities will be the result of both internal development initiatives and the acquisitions that we have announced over the last few months. From an organic perspective, we have developed robust HOA, cannabis, and digital banking offerings, which each contribute valuable funding diversity and represent levers for continued growth. We also operate national lending verticals most notably in the equipment finance, premium finance, and healthcare areas. We have also leveraged our relationship-focused commercial lending expertise to enter new markets, including Philadelphia, Nashville, and Atlanta. On the acquisition front, we have sought out like-minded partners that we believe will accelerate the next phase of our evolution. Bank Luimi's technology banking and private banking businesses will continue to expand Valley beyond our legacy markets. LUIMI's differentiated commercial funding verticals will augment the Valley-specific initiatives that I mentioned previously. As we continue to capitalize on these unique funding niches, we will continue to be less and less reliant upon our branch network. This will enable us to reduce our physical infrastructure and invest in technologies and differentiated business capabilities. This strategy has not been set in a vacuum. and we are not sitting idly by as the banking industry undergoes massive change. Historic levels of bank M&A have left a void for companies like ours that are able to combine comprehensive and differentiated private offerings with the agility and high touch service of a smaller organization. As we capitalize on disruption around us, Valley is positioned to be a high performing and highly valued company that succeeds in the new age of banking. With that, I'll turn the call over to Mike Hagedorn to discuss some of the quarter's financial highlights.
spk03: Mike Hagedorn Thank you, Ira. Turning to slide four, you can see Valley's recent net interest income and margin trends with and without the impacts of PPP. Net interest income was flat for the quarter despite a $10 million reduction in PPP income. This reflected funding cost reductions and higher non-PPP loan income resulting from our strong growth over the last few quarters. On a reported basis, net interest margin declined three basis points to 3.15 percent. However, exclusive of PPP income, the net interest margin would have been flat at 3.07 percent. With fewer opportunities to redeem higher cost debt, we utilized cash to modestly grow the securities portfolio during the quarter. As cash balances remain elevated, we are likely to continue this deployment for the next few quarters. Despite our efforts, the higher average cash balance weighed on our quarterly net interest margin by approximately two basis points. Slide five illustrates the ongoing transition of our funding base. Over the last few years, we have refocused and accelerated our commercial deposit growth and rolled out new funding niches that will provide additional sources of low-cost sticky deposits going forward. These efforts have enabled us to reduce our reliance on higher cost CDs and borrowings to 22 percent of funding from 44 percent at the end of 2019. Our continued focus on scaling these initiatives will benefit us as the liquidity environment normalizes. We continue to transition deposits from CDs to lower cost transaction accounts. Our active management of deposit costs in all buckets has also contributed to our recent margin stability. During the quarter, our CD and non-maturity deposit costs declined 11 basis points and two basis points, respectively. Over the next 12 months, we have approximately $3.3 billion of CD set to mature at an average cost of 31 basis points. While this represents another opportunity to reprice funding costs lower, the potential impact will be less meaningful and what we have experienced over the last few quarters. Slide six details our loan balances and origination trends over the last few quarters. We continue to experience very strong lending activity across our markets and asset classes. The quarter's loan originations were split almost evenly between commercial, southeast commercial, and residential and consumer. Importantly, our average origination yield increased five basis points and spreads remain attractive. Exclusive of Triple P, loans increased 2% from the prior quarter. You can see at the top left the composition of our portfolio. Based on our view of the portfolio, approximately 45% is commercial real estate and 28% is commercial business, which includes owner-occupied CREI. Our diverse loan portfolio is a key differentiator for our organization, and the multiple growth levers have contributed to our strong year-to-date results. We continue to believe that loan growth will remain at the high end of the middle single-digit guidance we provided previously. Our loan pipeline stands at approximately 3 billion, and recent lending hires are beginning to contribute more production to our portfolio. Moving to slide seven, we generated non-interest income of $42 million for the quarter. The $3.7 million decline in gain-on-sale income was largely mitigated by higher swap income, service charges, and other income. Earlier this month, we announced the acquisition of Dudley Ventures. Dudley generates fee income through the placement and management of tax credit investments and will support our efforts to build differentiated sources of non-interest income. On slide eight, you can see that our reported expenses were $175 million for the quarter. Exclusive of tax credit amortization and both merger charges and a litigation reserve which flowed through our professional fee line, adjusted expenses were $168 million. The adjusted increase was concentrated in compensation costs, consulting fees, and the other expense category. There were a few key drivers of higher compensation costs during the quarter. The first is elevated origination activity over the last few quarters, which has impacted performance-based compensation accruals and commissions. We also increased our branch compensation to preserve staffing and service levels and to keep pace with the increases in wage demand across the industry. We continue to invest in areas that we believe will drive outsized revenue growth in the future. During the quarter, we rolled out a new national deposit group and continue to attract leading talent in our digital products area. We utilize consultants to assist on other process improvement initiatives. We expect that these consulting costs will fluctuate going forward. We also recognize nearly 2.5 million of other periodic costs and fair value marks during the quarter. These expenses are difficult to predict from a timing perspective. While we do not expect these elevated costs to continue in the fourth quarter, some are market driven and activity based. Since the beginning of 2018, our revenue growth has outpaced expense growth 42 percent to 17 percent. This is a strong track record in a challenging environment and we will continue to produce positive operating leverage over time. In the short term, we may absorb expenses that position us for stronger revenue growth down the road, but we remain thoughtful in the investments that we make and ensure that we execute on the significant opportunities available to us. While the timing of certain expenses and investments may cause volatility in our operating leverage in the near term, We remain committed to continuing to deliver positive operating leverage over the long term. Turning to slide nine, you can see our credit trends for the last five quarters. Our allowance for credit losses declined to 1.12% of non-PPP loans at September 30th from 1.14% at June 30, 2021. Third quarter net charge-offs were de minimis and our $4 million provision was the result of the strong loan growth during the quarter. For the second consecutive quarter, an improved economic forecast led us to reduce our weighting on Moody's downside scenarios. Our model is now currently 70% weighted to the baseline scenario, which has positively impacted our reserve levels. Our non-accrual loan balances ticked up to 77 basis points from 68 basis points of total loans in the prior quarter. This increase was driven by three commercial real estate credits that transitioned out of early stage delinquency. The credits total $33 million and carry a specific reserve of nearly $4 million. Early stage accruing past due loans declined during the quarter and our COVID-related deferrals fell below $100 million. COVID deferrals now stand at just 0.3 percent of loans, and additional detail on outstanding loan deferrals can be found in the appendix. Slide 10 illustrates the consistent growth in our tangible book value and our continued capital strength. Tangible book value has increased 9 percent in the last 12 months driven by our strong earnings performance. Our tangible common equity to tangible asset ratio increased to 7.95 percent as September 30th from 7.73 percent at June 30, 2021. Triple P loans reduced our tangible common equity ratio by approximately 18 basis points at the end of the quarter. Total risk-based capital declined 12 basis points in the quarter as a result of the partial disallowance of certain legacy subordinated debt tranches. You will recall that our successful subordinated debt offering during the second quarter was done partially to pre-fund this disallowance. We remain very comfortable with all of our capital ratios and believe that our strong earnings will support our organic growth efforts going forward. With that, I'll turn the call back over to the operator to begin Q&A. Thank you.
spk00: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Stephen Alex Topolis from J.P. Morgan. Your line is now open.
spk07: Hi. Good morning, everyone. Good morning, Stephen. Good morning. I wanted to start on the expense side. Quite a few items came in a bit above what we were expecting. Do you guys consider the $168.5 million adjusted as a good run rate? And how should we think about expense growth just given the wage pressures that you guys called out?
spk03: I'll take a stab at this one, Stephen. When we look at the current expense level, we expect the fourth quarter expenses to be within a range of roughly $165 to $170 million. But as I said in my prepared remarks, some of those expenses are in people and compensation-related areas that address specifically what you asked around higher compensation costs, especially in the retail part of our business. We also have hired, as I mentioned, a national deposits group. And we also have significant hiring in our digital group as well. You might have seen recently our cannabis-related digital product offering that was recently at a trade show was preeminently sent as seen as a new product in the marketplace. So we're making investments up front in these areas that will result in higher growth and higher revenue down the road. They don't always obviously line up with one another.
spk07: Okay. Thank you. Actually, I wanted to follow up on the launch of Valley Pay. Will that platform apply only to the cannabis business, or is it more broad? And maybe could you just walk us through the benefit that that will provide to companies in the cannabis industry?
spk05: Thanks, Stephen. I think it provides the beginning of a payment platform for the industry, which really doesn't exist today. We're trying to work with our customers here to figure out a solution as to how they can connect with their customers in a safe and secure manner. So while this closed-loop platform provides the initial ability for them to accept payments from a digital perspective, we do believe that there will be alternative offerings as we continue to really grow this. So we do believe that there is additional opportunities associated with this. And that said, I think as we think about the growth here and whether it applies to different industries, I think there's definitely opportunities. And one of the things that we're fortunate to be is the size organization we are. We're able to hire some wonderful talent to come here and look at doing things a little bit differently. We were able to stand up this platform in six months, which I think is unique compared to what other organizations are able to really do. And that culture, that environment, I really do think creates opportunity when it comes to a multitude of different product sets throughout the organization.
spk03: And I'll add one more thing maybe to the end of that. As I said in my prepared remarks, operating leverage is very important to us. And so we haven't lost sight of that over the long haul, and neither should any of the sell-side analysts as well. But as you well know, cyclicality and expenses sometimes come into play, and there's times to invest. when the market conditions are right and there's times to scale back. And it's our belief at this point right now that scaling up in certain areas makes sense given what's going on in the broader economy. Okay.
spk07: Thanks. And then my final question, just on this acquisition of Dudley Ventures, can you just walk us through their business model and what type of financial contribution should we expect from that deal? Thanks.
spk03: Yeah, the financial part of it we haven't talked about publicly, so it's not going to be material from a financial perspective, but essentially what Deadly does is they are a tax credit recipient from the federal government, and then they work with clients who want to have tax credits as part of their investment portfolio. So they're the entity that makes sure that those credits get to other right places. There have been several banks that have been in this industry as well. But I think the bigger part of this is it's another thing that we can do, do effectively and sell into our existing customer base. That's really the reason that we did this.
spk07: Okay.
spk03: Okay.
spk07: Okay. Thanks for taking my questions. Thank you.
spk00: Thank you. Our next question comes from the line of Michael Perito from KBW. Your line is now open.
spk01: Hey, everyone, thank you for taking my questions. Appreciate it. I wanted to stick on the cannabis sector for a second. You know, I was wondering, Ira, if you're willing to kind of try and size up the market share opportunity in some way or the addressable market there for us. I mean, it seems like there's only a handful of banks really operating in the space in any way today, and most of them, at least that I read, it's more of just like, hey, we're willing to take your deposits today. So not really anyone that's trying to really provide kind of solutions to any points of friction like value pay theoretically might solve. So just curious if you could help us maybe kind of think about the overall scope of that market. I mean, it seems like you guys are kind of fast movers here and just trying to get a better handle of that.
spk05: Thank you. I definitely think our approach is very differentiated. To your point, Michael, most of our competition in the space has looked at it as how it can benefit them from a deposit or from a fee perspective. And our approach has been very different in talking to our potential customers and current customers as to how we can be advisory and think about solutions for them that really make sense. So we've started out targeting the multi-state operators and And we have a very strong relationship with each of them as to how we think we can provide benefits to them as they think about growing their overall businesses. Keep in mind, it's a very immature business at this point, which creates a lot of opportunity for us to think collaboratively with them as to how we can provide value for them, which also nourished our overall bottom line. It's a very segmented business today, and we think that we provide a leading opportunity to gain significant market share in this business today.
spk01: And is the value pay – are there deposit opportunities around this payment infrastructure? You know, like I'm trying to kind of – Think about the technology itself and, like, think of some of the other, like, you know, there's some of the real-time payment platforms that some of your competitors have done where there's actually decent deposit generation because people have to hold cash with the bank to move it around. I mean, is there kind of longer term as more people adopt this payment technology that you guys are rolling out, is there kind of deposit growth opportunity that kind of moves lockstep with it?
spk05: Absolutely. This is a closed loop platform, which basically provides an opportunity from a deposit perspective from the dispensary side, as well as from the consumer side. So we think we'll be able to gain deposits on both sides. And once again, it's a market that is very difficult to enter today. It took us 18 months to begin to get into this as to how we thought about the risk appetite, the compliance components associated with it, and then stand up the overall platform. And once again, work with our customers to make sure that we're providing a value-added service to them. So we think there's absolutely a deposit opportunity on both sides here because it's a closed-loop platform as well as being a fee opportunity.
spk01: Great. Two more things I wanted to hit on quickly. Mike, I was curious if you could maybe provide an update on how you think the balance sheet is positioned for higher short-term rates. Obviously, there's a lot going on kind of beneath the engine here, and then the funding base is kind of moving towards some lower costs, seemingly maybe more sticky instruments, and the loan portfolio is more diverse than it's been historically. I was wondering if you could just provide some updated thoughts once all these deals are kind of put together, where you think the bank positioning stands.
spk03: Yeah, I think our positioning is probably never been better in the history of the company, to be honest. I know in the last decade plus, we've never had a lower cost of deposits at 18 basis points. And as you can see in the investor presentation, the loan yield on newly originated loans is actually up five basis points. So we feel really good about both sides of the balance sheet as it relates to how we're funding ourselves. The growth there speaks for itself. It's been unbelievable. and what's going on on the lending side, which on an 8% linked quarter annualized basis, we feel, you know, it's right in line with what we've talked about, but we feel very good about that as it relates to the future. As it relates to changes in interest rates, you know, you can see that in our SEC filings. We are asset sensitive, and maybe not so much to your question, but I think it's important, you know, Leumi, that will be part of our organization, you know, someone get approvals, will be part of our organization next year, they're also asset sensitive, and that's going to help us become even more asset sensitive. Just to dimension that, in an up 100 basis point parallel change in interest rates, our net interest income would be expected to go up somewhere in the neighborhood of around 4% or so. And I think as we continue to work with our cash balances as well, you're only going to see that number increase.
spk01: And that 4%, that's just where the balance sheet stood at quarter end? Correct. Added it to that, correct? That is correct. Okay. That's perfect. Thank you. And then just lastly, and then I'll hop out, is just on the credits, appreciate the color. You know, there were a pickup in non-accruals, some pickup in delinquencies across several of kind of some of the reporting New York City Metro banks, what we'll generally call it, and just curious if there's anything, you know, kind of more brewing or anything you're keeping your eye on. I mean, it seems like the incidents were fairly isolated, but to see it happen at a few banks, I'm just curious if there's some kind of real estate churn that might, you know, maybe get value down or anything that we should be mindful of on the credit side as we move into next year.
spk11: Hey, it's Tom, so I'll give you an answer on that. Yeah, as you saw, our accruing past dues went down pretty much in relation to the increase in those delinquencies, specific to three loans totaling $33 million, all independent, separate borrowers. All three were in COVID-impacted industries, two in retail, one in hospitality. We certainly watch it very, very closely. We're properly reserved. We don't expect any losses. We have good loan-to-values and guarantees where appropriate. Just want to remind you, our portfolio continues to be very granular and very diverse. Our loan production on the real estate side for the third quarter, the average loan size was $3.6 million. So we still look at that, maintaining our underwriting standings, maintaining a granular portfolio, much more suburban than urban on what we do. On the commercial deferrals, we have $79 million in commercial deferrals. 96% of that is current on interest. Only a very small percent has principal deferrals. So we don't expect any material migration into any further non-accruals.
spk01: Great. Thank you very much for all the insights, guys. Appreciate it.
spk04: Thank you.
spk00: Thank you. Our next question comes from the line of Stephen Duong from RBC Capital Markets. Your line is now open.
spk08: Hey, good morning, guys. Just on the rate sensitivity, just curious on the 100 basis points of 4% uptick in NII, what's the beta assumption behind that? Is there a lag to the beta at all?
spk09: Steven, it's Travis Lance. So, no, I mean, that's an instantaneous shock. And our assumption there is that all the brokered and CD stuff reprices at 100 percent beta or beta of one, I guess. And then the more transaction oriented accounts reprice with the beta between 20 and 35, basically. So that's the assumption that gets based in there or baked in there. You can see in our last queue, and you'll see in our upcoming queue in a couple of days, right, that plus 100 basis points in the last queue changed NII by 3%. So I don't think any of this is directionally inconsistent with what you would have expected before. Yep, appreciate that. Thank you, Travis.
spk08: And then just on the Valley Pay app, Is that an app that you guys are developing in-house, or is this a white-labeled app?
spk05: It's really – I mean, definitely I think you should be thinking more about a whole digital playment ecosystem, Stephen, as opposed to just what this individual app is. It's something we've been able to build internally with our partners, obviously, and working with partners as we continue to roll this out – We do believe there is opportunity, once again, from a fee income perspective, not just directly for this, but from a fee income perspective as to how we think about working with other banks that do potentially look at getting into this business down the road. Got it. Got it. Okay.
spk08: And then just maybe just one last one, just on the non-accruals. We go back, you know, in time. Your non-accruals right now are 77 basis points. Do you, is there a kind of a level that you see that you guys are, when would you not be comfortable with the non-accrual levels?
spk11: I think we're confident that the non-accrual levels, you know, should not migrate upwards from where they are. And, you know, again, we monitor, watch closely, maintain our underwriting standards in a very granular, diverse portfolio.
spk03: You know, and I'll add to that real quickly that while I'm not going to give you a number, because I think it's market dependent and obviously depends upon the size of the portfolio as well. I think the bigger issue here is these are still very low numbers on a relative basis. And as you look backwards, since you asked about looking backwards, if you look backwards, you'll notice that our loss history, including non-accruals migrating to loss, is roughly half of what our peer group was. So our credit quality, we still feel very comfortable based upon the fact that that's been the history of what we've been able to put up.
spk08: I appreciate that. Thanks for taking my question.
spk00: Thank you. Our next question comes from the line of Ken Zerbe from Morgan Stanley. Your line is now open.
spk02: Great. Thank you. Good morning, everyone. Good morning, Ken. Good morning, Ken. I will limit my questions out of respect for everyone else on the call. But in terms of loan growth, your comments about the high end of the mid-single-digit guidance, When you think about growth over the next 12 months, does it really come from more of the same? I'm looking at slide six, like the non-owner-occupied CRE, auto. I guess that's the first part of the question. Also, what would it take to drive higher core C&I balances? Thanks.
spk11: Hey, it's Tom Iadanta. One thing that I'll point out here is that We had a 5% increase in our CNI commercial line commitments during the quarter. What we don't have is yet utilization. We're really not going to benefit from that growth until the utilization returns to pre-pandemic norms. So we are increasing CNI customers. The new hires that we onboarded, they represented about 7% of our quarterly production and 55% of what they produced was CNI-related. So we are starting to see that. And keep in mind, previously we put together a focused CNI sales process that we've been running for a couple of years here now. It's got slowed down a bit during the pandemic, but we are very focused on generating CNI business. We're seeing it through the new hires. We're seeing it in our line commitment growth. And ultimately, we're going to see it in the utilizations.
spk02: Got it. Sorry. And then the rest of the question, just in terms of like other areas of growth.
spk11: I'm sorry, I didn't get that second part.
spk02: Oh, sorry. The first part of my question was just, you know, I appreciate your comment on CNI. My point was in terms of the other areas of growth.
spk11: Yeah, I got it. Yeah. Yeah. I think you're going to see consistent in those same buckets. You're seeing growth in that owner occupied real estate, which is really CNI related growth. That represents probably 30% of our production during the quarter. We have expanded into Pennsylvania, Nashville, Atlanta. We're seeing strong growth in pipelines and production in each of those markets. And I'll just remind people, it's a very methodical approach to how we enter. They're contiguous to offices we presently have. We go in there first with customers, understand the markets, And then we add local lenders and leadership in that market to grow it further. You're starting to see traction there. Pipeline in Pennsylvania alone is almost $300 million. And in Nashville, Atlanta, it's in that $250 million range. And we've already produced and closed loans in each of those markets. So you'll continue to see that. That's going to be primarily real estate related. We continue through these new hires to focus on CNI. We're seeing their production increase quarter to quarter.
spk02: All right, thank you very much.
spk11: I guess you asked also about the consumer piece. Strong pipeline still on the resi side. We are experiencing what we had reported last quarter, a reduction in the auto side, mostly due to supply chain, and we're seeing a strong migration on the resi purchase piece down in Florida, which now represents 26% of our production up from 20%.
spk02: All right, thank you. Perfect.
spk00: Thank you. Our next question comes from the line of Matthew Brees from Stevens, Inc. Your line is now open.
spk10: Good morning. Good morning, Matt. Hey, first, going back to expenses, you mentioned $165 million to $170 million for the fourth quarter. Is that all in or excluding amortization expenses?
spk09: excluding the tax credit amortization that we typically back out of the adjusted expenses. So if you look at our adjusted expenses this quarter, the 168 and a half, you know, we think it's kind of right in the middle of what that range we laid out for the fourth quarter would be. Because don't forget in the fourth quarter, we're also going to have, you know, some impact on top of that from Westchester, which we expect to close on December 1st. And there will be obviously noise related to merger charges on both transactions.
spk10: Got it. Okay. And then you mentioned also that we should expect some fluctuation in consultant-related expenses. Is there a band of fluctuation you can share with us that we should just be aware of and grow accustomed to, at least in the near term?
spk03: No, there's not a band, but this kind of follows investments, right, mostly around technology. So when there's a ramp-up, you have an increase in that. Honestly, the reason they're not called off or called out on slide eight is because Individually, any one of them isn't material from a gap perspective. Collectively, maybe they're not quite material, but they're getting there. And that expense is going to move up and down based upon the various needs that we have and the various technology projects that we have. So it's very difficult for us to look several quarters into the future and say with certainty what those expenses will be.
spk09: Maybe I can just add a little bit on top of that, too. If you back out the merger and the litigation reserve from that professional fee line, Matt, there was about a $2.5 million increase quarter over quarter. About a half million of that was on the legal side, and the other 2 million were in the consulting side. And there were a couple of consultants in there that would not recur in the fourth quarter, but it's not to say that we wouldn't have other costs to kind of backfill it. So that's why we say fluctuate, if that makes sense.
spk10: Okay. Yep. That's helpful. Thank you. And then the last one for me, you mentioned expanding it to Philadelphia. That totally makes sense given geography, but you also mentioned Nashville and Atlanta, which are new markets to me. I guess those are extensions of the Birmingham presence you have. Could you just give us some update on infrastructure, personnel you have in Nashville, Atlanta, perhaps some indication of what loans and deposits are there already?
spk11: Sure. The Nashville and Atlanta, yes, is an extension of our Birmingham business and office. We have a real estate team in Birmingham. We have a strong customer base that are doing business in both Nashville and Atlanta. So our initial foray is following them into those markets. Just to give you kind of some numbers on it, we have already closed about $70 million of loans in in those markets. I mentioned the pipeline before of around $260 million. And we've, you know, in the last quarter, we did about 65 million of new loans in those markets. So it's going to be, again, a slower go to start utilizing the staff that we have in Birmingham, their customers to learn those markets. And once we're comfortable, we'll move into those markets with staff in each of those cities. Same way we did in Philadelphia. We started Philadelphia following customers. We now have a staff of four people based in Philadelphia.
spk10: Great. Okay. That's all I had. Thanks for taking my questions. Thanks, Matt.
spk00: Thank you. Our next question comes from the line of David Chavarini from Wedbush Securities. Your line is now open.
spk06: Hi. Thanks for taking the question. I wanted to ask about Fee income, you mentioned about swap income was higher in the quarter. I was curious about the outlook for the swap fees as well as commentary around mortgage banking and gain on sale.
spk11: Yeah, on the swap side, even though it's higher in the quarter, it's been relatively consistent except for one very large quarter we had last year. We expected to, you know, stay at that level for the fourth quarter and into the foreseeable future based on existing pipelines. The same with the gain on sale. We expect it to be in a similar level to what we reported in the third quarter.
spk06: Great. Thanks very much.
spk00: Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Ira Robbins for closing remarks.
spk05: Thank you, Gigi, and thank you, everyone, for taking the time to to listen to our comments today. We look forward to speaking to you next quarter. Have a great day.
spk00: This concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer