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: Hello everyone and welcome to the Berkshire Hills Bank Corp third quarter 2022 earnings conference call. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. I will now hand over to your host, Kevin Kahn, investor relations officer to begin. Kevin, please go ahead.
spk07: Good morning and thank you for joining Berkshire Bank's third quarter earnings call. My name is Kevin Kahn, investor corporate development officer. Our news release is available in the investor relations section of our website, berkshirebank.com, and will be furnished to the SEC. Supplemental information is provided in an information presentation at our website at ir.berkshirebank.com, and we will refer to this in our remarks. Our remarks will include forward-looking statements, and actual results could differ materially from those statements. Details, please see our earnings release and most recent SEC reports on Forms 10-K and 10-Q. In addition, certain non-GAAP financial measures will be discussed in this conference call. References to non-GAAP measures are only provided to assist you in understanding our results and performance trends and should not be relied on as financial measures of actual results or future projections. A comparison and reconciliation to GAAP measures is included in our news release. On the call today, we have Nitin Mahatre, President and Chief Officer of Berkshire Hills Bank, Sean Gray, our Chief Operating Officer, Brett Berbovic, our Chief Accountant and Interim CFO, Greg Lindenmuth, our Chief Risk Officer, and Steve Finocchio, our Treasurer. At this time, I'll turn the call over to our CEO, Nitin Mahatre.
spk01: Thank you, Kevin, and good morning, everyone. I'll begin my remarks with the financial performance highlights for the quarter. followed by an update on the CFO departure before coming back to the highlights for the balance sheet and the progress on the best strategy in the quarter. I'll begin my comments on slide three where you can see the highlights of the quarter. Overall, this was a strong quarter with continued improvement across all key financial metrics. Adjusted revenues were up 10 percent quarter over quarter and 17 percent year over year. driven by strong net interest income growth. Revenue growth was driven by growth in loan balances and improved margins, which more than offset the headwind in the non-interest income. Adjusted expenses were up modestly, quarter over quarter and year over year, and were around the high end of the range we provided as guidance in July. Resultant was up 28% quarter over quarter and up 53% year over year. Adjusted earnings per share of 62 cents was up 21% quarter over quarter and up 18% year over year. This quarter was our highest quarterly adjusted earnings per share since 2019. Adjusted return on tangible common equity improved to 9.92%, and adjusted return on assets was 99 basis points. Matrix nearing the end for our 2024 best targets. Before I comment on the balance sheet and the best progress, a quick update on the people front. As you may have seen from our press release last week, CFO Shubhadeep Basu has resigned earlier this month for personal reasons, and to pursue other opportunities. Shubhadeep has been a key member of my team since he joined us 18 months ago, and I'm appreciative of his efforts and important contributions. As this was a strictly personal decision, out of respect for Shubhadeep's privacy, I won't make any further comments about his departure itself, but will add that he has agreed to help us in a consulting capacity through the year end. the Board of Directors, and I thank you for your service and wish them success and happiness for the future. I also want to reiterate that there are no accounting improprieties or disagreements regarding financial reporting related to Shubhadeep's departure, and we remain confident about our 2022 guidance that was provided at our previous earnings call. As stated previously, we will provide 2023 guidance during the fourth quarter earnings call in January 2023. We have retained a leading executive search for a steward to do a nationwide search for the CFO position. Our Chief Accounting Officer and Interim CFO, Brett Berbowick, will cover the financial details of today's presentation. Brett joined us 10 years ago from KPMG and was promoted to the Chief Accounting Officer position in 2015. Both Brett and Steven Finakia, our head of treasury and planning, will be available to respond to the questions following our remarks. We are blessed to have a deep bench strength in our finance team. And collectively, the totality of the Berkshire team is enthusiastically marching forward on our journey ahead. Coming back to the highlights of the quarter on slide three. On capital front, our balance sheet remains strong. We ended the quarter with a common equity tier one ratio of 12.7% and a tangible common equity ratio of 8.1%. We have ample capital to both fund growth and continue stock repurchases. This past quarter, we returned about $26 million of capital via dividends and stock repurchases. And over time, we expect to resume the growth of our dividends. Our credit matrix remains strong in the third quarter, thanks to the tremendous work by Berkshire team members across frontline to the workout group. Brett will review our credit matrix in detail in a moment. And Greg Lindenwood, our chief risk officer, is on the call to assist on any credit-related questions. On the best strategy front, we continue our optimization, including real estate optimization and consolidation of five branches in the quarter. We continue to make steady progress against our ESG priorities. You may recall that we issued $100 million sustainability bond this summer, and we've been actively deploying those proceeds within our sustainable financing framework into projects in renewable electricity, green buildings, and affordable housing. As I always do, I would like to thank all of our Berkshire Bank colleagues for their continued hard work and passionate commitment to our vision of becoming a high-performing, leading, socially responsible community bank. Their commitment to our strategy and dedication to our customers is what is driving our ongoing and accelerating performance improvement and progress. With that, I'll turn the call over to Brett to discuss our financials in more detail. Brett?
spk10: Thank you, Ned, and good morning, everyone. Slide four shows our quarterly income statement. Please see the appendix for reconciliation of GAAP and adjusted financials. My comments will be on an adjusted basis and not GAAP. Revenues were up 10% quarter over quarter and about 17% year over year. Net interest income grew 13% sequentially due to loan growth, increased asset yields, and stable funding costs. Fee revenues were down about 3% versus the second quarter, and I'll speak to those in more detail in a moment. Expenses were up low single digits on both a quarter-over-quarter and year-over-year basis, and close to the higher end of the $68 to $70 million quarterly range we've guided to in the past. Our efficiency ratio was 62% in the quarter, and above our best target of 60 for 2024. We recorded restructuring charges of $11.5 million pre-tax and $80.7 million after tax, or approximately $0.20 per share, due to the consolidation of five branches and Firestone exit. At this time, we do not anticipate any material restructuring charges in the fourth quarter. We had a provision expense of $3 million this quarter, and our credit allowance remained relatively stable at $96 million. Adjusted after tax income rose about 19% and 9% quarter-over-quarter and year-over-year, respectively. We also had positive operating leverage quarter-over-quarter and year-over-year. Slide 5 highlights the changes in our earning assets. As Nathan mentioned, we had another quarter of loan growth with a 5% increase in average loans with growth across most of our business loans. Residential mortgage balance growth continued, even in a difficult environment, largely driven by new loan officers hired over the last few quarters. Loan yields rose 55 basis points versus the second quarter as a result of the rising rate environment and the shift in our balance sheet from lower yielding cash investments to higher yielding loans, which also drove the growth in our NIM and NII. Slide six shows our average liabilities. Total deposits declined 1% and 3% quarter-over-quarter and year-over-year, respectively. Non-interest-bearing deposits were flat, both quarter-over-quarter-year. Our cost of deposits was at 33 basis points, up 16 basis points from the second quarter. The Fed raised rates by 150 basis points in the quarter, so our deposit beta for the quarter was about 12. While our deposit costs have remained relatively stable due to high deposit market share and relatively less competitive markets, we do expect deposit costs to increase over the coming quarters. We still expect deposit betas through the cycle in the 30% to 40% range. Slide 7 shows more detail on our net interest income and margin. Net interest income grew 13% and 29% quarter over quarter and year over year, respectively. While we were pleased with the lift in our NIM, we expect a relatively modest lift going forward in the fourth quarter. Turning to slide eight, we show our fee revenues, which were down about 3% versus the second quarter. Strengthened deposit-related fees and other fees, which includes adjustments, were offset primarily by declines in loan fees and wealth management fees. Deposit-related fees were higher on more consumer activity and interchange income, And loan fees were down on lower SBA gain on sale and lower swap fee revenues, which are currently running well below our normal run rates. On slide nine, we show our expenses, which are up below single digits, both quarter over quarter and year over year. We continue to benefit from expense saves from vendor management, branch consolidations, and other real estate optimization efforts, which have resulted in lower occupancy and equipment costs. Compensation was up mid-single digits on modest wage inflation and commission expenses related to sales and origination activity. Slide 10 is the summary of our asset quality metrics. Our credit quality remains solid. Delinquent and non-performing loans were down 16% versus the second quarter and flat year over year. Delinquencies at 74 basis points of loans remain well below our long-term historic range of 85 to 115 basis The increase in non-performing loans and the $6 million in net charge-offs primarily reflect a small number of isolated . While we are monitoring credit closely, we are not seeing any broad-based portfolio credit deterioration and are encouraged that accruing delinquent loans or early-stage delinquencies were down 51% versus the second quarter. Slide 11 shows details of our liquidity and capital positions. Our loan to deposit ratio was 80% this quarter. Our common equity tier one capital ratio ended the quarter at an estimated 12.7%. Our TCE ratio ended the quarter at 8.1 and included cumulative OCI bond marks of 183 million on an after tax basis. The cumulative bond marks include 61 million booked in the third quarter. We believe our bond marks have been in line with peers. and those bonds will pull par over time, and the marks are not included in our regulatory capital ratios. Our tangible book value per share ended the quarter at 20.4, and I want to be clear that this is a non-GAAP adjustment, but excluding the AOCI mark, the total tangible book value per share would increase by $4, making it the highest TBV per share historically for Berkshire at 24.5. We provided a gap to adjusted TBV reconciliation in the appendix. Our top priority is to deploy capital to support organic growth. We are biased to opportunistic stock repurchases, given our relatively low stock valuation and tangible book value. We repurchased about 705,000 shares for $20.2 million in the second quarter. And as Nitin mentioned, we also expect to grow our cash dividends over time. Finally, we're going through our annual budgeting process over the next month or so, and we'll share 2023 guidance on our fourth quarter call in January. And with that, I'll turn it back over to Nitin for further comments. Nitin?
spk01: Thank you, Brett. On slide 12, we have our best program North Star chart, which shows our progress on five key performance matrix. As you will see, our financial matrix of ROC and ROA are just below the low end of our stated three-year goal. We're also encouraged that our annualized PPNR was 154 million, well above the 102 million in 2021, and heading towards our 180 to 200 million dollars best target in 2024. Our ESE score remained in the top quartile at 23rd percentile nationally, and we've enhanced our NPS score measurement processes through daily power to provide us with a net promoter score directly through our surveys. With an increased sample size, we hope to have a relative ranking versus New England banks by first quarter 2023. On slide 13, you can see some examples of how we are reinvesting our expense through best optimization initiatives in people and technology. On investments in people front, We continue to complement our strong existing team of frontline bankers with new bankers with solid experience in the market who want to join our purpose-driven transformational journey. We have benefited from the disrupted market environment with high-quality talent across our business lines, commercial, 44BC, wealth management, private banking, retail, and mortgage lending from a broad spectrum of banks. We have also made significant investments in coaching and promotions of our bankers. On the technology investment front, the right-hand side of this slide highlights how we're bringing our DigiTouch architecture to life. What that essentially means is we're well on our way to create a top-notch digital experience offered by large banks while creating an ability to retain the personal touch of a community bank. It's possible because the investments made in the foundational elements with best-in-class partners and platforms, which include data warehouse through Snowflake, middleware integration through MuleSoft, digital acquisition and onboarding through Narmi, CRM and sales platform through Salesforce.com, etc. We truly believe that in medium term, our technology solutions will become a differentiating mode for Berkshire Bank, I'll close my remarks with comments on the economy. As the Fed raises rates to battle inflation, we are seeing a wide dispersion of outlooks for near to medium term. The equity market seems to be pricing in a hard landing. We are fortunate to be operating primarily in the steady eddy new inlet market, which remains on a solid relative footing. As we talk to our customers, we are seeing a bit more caution driven by title inflation and supply chain concerns, but the and corresponding demand still seems to be supported by the recovery from the pandemic . We're also supporting the comeback for various communities across our footprint and are highly encouraged by the initiatives by local leaders in those markets. In markets like Syracuse, we're excited about investments being made through local government and private companies like Micron that will be investing over $100 billion in creating one of the largest microchips plants in the nation. We are and will continue to remain vigilant and stand ready to navigate through the changes in the macro environment while providing exceptional service to our customers and continue our progress. towards becoming a high-performing, leading, socially responsible community bank. And with that, I'll turn it over to the operator of questions. Nadia?
spk00: Thank you. If you would like to ask a question today, please press star followed by one on your telephone keypads. If you choose to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. And our first question today comes from Billy Young of RBC. Billy, please go ahead. Your line is open.
spk12: Hey, good morning, guys. How are you?
spk01: Good, Billy. How are you?
spk12: Good. I might have missed a comment on what some of the drivers were for the higher NPAs and NCOs this quarter. So I apologize if I missed this. But did you disclose what types of credits these were?
spk10: Yep, Billy. This is Brett. Those were primarily related to C&I credits. Greg, I don't know if you want to provide any additional color.
spk02: Yeah, absolutely. Thanks, Brett. Yes, the NCOs for the quarter were really episodic in nature. Some were driven by D&I loans on the portfolio. But I think it's also important to note that management was also proactive in its credit risk management practices. And we took advantage of a very attractive market to sell troubles assets this quarter. So roughly about a million dollars of the charge-offs do relate to problem loan sales that we took advantage of at almost higher than 90 cents on the dollar for those loans. So some of that is a proactive decision on the part of management.
spk12: Are any particular sectors that these credits are exposed to and it sounds like these may have been known issues?
spk02: Oh, yes. All were known issues and included in our prior classified criticized balances, which we do expect to try and lower.
spk12: Okay. Thank you. Appreciate that. Can you maybe elaborate a little bit on the expectations, your expectations for the modest lift in 4Q spread revenues? Do you expect to see more of a bigger step up in deposit betas versus the pretty low levels today?
spk01: Billy, the short answer would be yes, like the betas to grow as compared to third quarter. But like Brett said in his remarks, I think we're blessed to have a good market share in a relatively less competitive market. So we've been able to contain our beta as well. Our beta for the quarter was about 12 and our cumulative beta so far in the cycle is about six. And I think that's a reflection of the fact that the markets that we are in and all of the programs that our retail team has put together to proactively manage the customer relationships.
spk12: Got it, got it. And lastly, just a quick question on loan activity and growth. Obviously, bottom line trends are solid and consistent with your outlook. It seemed most of the growth this quarter was driven by the mortgage side, and it seemed there were a little bit more pressures on commercial. So could you just speak to maybe some of the drivers of growth in general over the next few quarters and what you're seeing in commercial? Does mortgage perhaps drive a bigger piece of growth in the near term with your expanded mortgage team?
spk01: Sure. Billy, we couldn't hear you well, but I think I got the gist of the question. The quarter was relatively soft on the commercial originations, but the pipeline has built by the end of the quarter, so we expect to have a stronger quarter for commercial going into the fourth quarter. And the residential quarter would be similar to the levels that we saw in the third quarter. So the overall fourth quarter should be stronger than the third quarter. And we're pleased with the momentum that we're seeing across the board.
spk12: Okay. Thank you for taking my questions. Thanks, Malik.
spk00: Thank you. And our next question goes to Mark Fitzgibbon of Piper Sandler. Mark, please go ahead. Your line is open.
spk08: Hey, guys, good morning. I wondered if I could follow up on one of the last questions about the C&I delinquencies. I'm not sure, Greg, you had answered that in terms of which sectors of the C&I portfolio were negatively impacted by or showed up in delinquencies there. Any particular industries, any particular geographies or types of C&I lending?
spk02: No, actually. It's just a one-off transaction, not related to any portfolio or segment deterioration whatsoever. So it's very specific to the borrowers in question.
spk08: Okay. And then secondly, Brad, I wondered if you could share with us, if you have at your fingertips, what the spot deposit rates today are?
spk10: I don't think I have those right. I can get back to you on that.
spk01: Are you talking about the cost of deposits, Mark?
spk08: Yeah, today, you know, currently.
spk01: Yeah, today I think we ended the quarter at about 33. I think today's part would be about 41, 42. Okay, great.
spk08: I know you had said there would be no more charges in the fourth quarter, but do you have plans for more branch consolidations maybe in early 23 or beyond?
spk01: We were used to be, you'll recall, Mark, you've been tracking us for a while. We used to be about 130 branches network. We've been, you know, and the network is now close to 100. We believe the overall number will be relatively steady. And I think we might still have some consolidations and relocations, but they will be a wash. So we don't expect the number to change now in terms of the branch count. I think branches will continue to play an important role to us as a community bank. And the roles of the bankers have changed from being transaction processing to solutions providers and digital ambassadors. So we believe that we're pretty much very close to that inflection point.
spk08: Okay. And then lastly, Nitin, given that you've, you know, the bank has continued to see some turnover in recent years, I guess I wondered if you could comment on what sorts of things, you know, the organization is doing to stem that.
spk01: Yeah, you know, we've done a tremendous number of things in terms of employee engagement, and starting with different types of engagement activities, town halls, communications, keeping a real good mix of folks with institutional knowledge and the new folks that are coming in and how do we get the ability for them to interact in this relatively hybrid work environment that we are in. And we actually just completed our employee engagement survey. So we're actually waiting to see what that shows us. And we ended up last year at about 68% employee engagement rate. And typically, if you're 70 and above, it during the top quartiles. So we expect, we're hoping, that we'll get there this year. So it's a wide slew of activities, and the team is pretty energized about the future.
spk08: Thank you.
spk00: Thank you. And our next question goes to David Bishop of Hovd Group LLC. David, please go ahead. Your line is open.
spk03: Yeah, good morning. How are you, then?
spk08: Morning, Dave.
spk03: Hey, a quick question. Notice the past couple quarters, from a funding perspective, looks like you're leaning on the securities book to fund loan growth and some of the deposit outflows. Do we expect the overall balance of securities to continue to attract into the fourth quarter, maybe into next year? Just curious how you're thinking about funding incremental loan growth.
spk05: Yeah, David, this is Steven Fanocchio. Yeah, I think that has been part of the strategy is to let the loan portfolio continue to run down. Obviously, that pace has slowed down. Sorry, securities loans. And that portfolio has obviously slowed down a little bit, but we continue to use that as part of the strategy in the short run.
spk03: Do you know what the cash flows are per month?
spk05: About $25 million a month.
spk03: Got it. And then just looking, you know, turning back to the margin discussion, you know, noted what you said in terms of the deposit front, but sort of circling in on the loan yields, I noticed residential mortgage loan yields were down and, you know, obviously mortgage rates are trending up. Anything driving that phenomenon where we're seeing a sort of decline or decrease in residential mortgage yields?
spk10: This is Brad. So what we actually noticed was last quarter we had a little higher than normal deferred costs, late charges, and purchase loan accretion in Q2 that did not reoccur in Q3.
spk03: So the expectation is, do you think that trends up over time though? Just curious, and maybe review the types of mortgage loans you're putting on the book, the 10 or duration yields tax.
spk10: The residential loans were currently on around four.
spk01: Yeah, the third quarter, but the originations that invariably has the lag were about four handle. The fourth quarter should have, you know, five to six handles.
spk03: Got it. And then just In terms of the movement in the deposit rates there, are you seeing, I should say, sort of a dichotomy in terms of rates across maybe your core Massachusetts footprint and upstate New York? Just curious if there's a big differential in terms of deposit pricing within those markets.
spk01: Yes, I think our core markets in central mass, you know, the Worcester, the Berkshires, Springfield, Yeah, they're relatively less competitive, and we have the flexibility to then price them accordingly while managing the customer relationships. And the ultra-competitive markets, whether it's Boston and New York, we are staying competitive. But I think the focus is on relationships, and I think our retail team, commercial team is doing a great job of managing that. Commercial team is also focused on getting operating accounts every time we have lending conversations. So all of that is helping us. and we feel reasonable that our betas will continue to be lower than the market.
spk03: Got it. Then one final question for me, I think, you know, to the preamble. Expense run rate probably near the top end of the guidance for the quarter at a little bit about $70 million. Any thoughts in terms of where we should be thinking about the expense run rate moving forward off this level? Thanks.
spk10: Hi, this is Brett again. I think we're comfortable with the guidance that we provided last quarter. I think we expect to see expenses in that range.
spk03: That's the $68 to $70 million range, correct?
spk04: Correct. Got it. Thank you. I'll hop off.
spk00: Thank you. And our next question goes to Laurie Hunziker of Compass Point. Laurie, please go ahead. Your line is open.
spk06: Great. Hi. Thanks. Good morning. I wondered if we could start with the 11 million of restructuring charges you took. What was the breakdown between Firestone, Write Down, and the five branch closings? How did that break out?
spk10: The Firestone closings? It was about $2 million split between lease terminations and severance. And the remaining was primarily related to the five branches.
spk06: Got it. Okay. Okay. That's helpful. And then can you just give us a refresh on specifically Upstart and Firestone in terms of where they are on a non-performing loan balance and also charge-offs in the quarter. I'm just kind of looking, obviously, and I think others had asked this question, but lean quarter, your C&I non-performers went from 5 million to 21 million, and your C&I charge-offs in the quarter went from 200,000 last quarter to 4.9. So I'm thinking a lot of it is there, but can you help us think about specifically what the dollar amount of non-performers are in both of those categories and then the charge-offs in the quarter? Sure.
spk07: Hey, Lori, this is Kev. We're not sharing any of the delinquency or nonperforming loan data on either of those books because they're not, the books are in really good shape. They continue to run down. So we're happy to share exposure data on loan buckets because I know you usually have questions on many loan buckets. But for any of the buckets, we're not going to share delinquencies or charge off numbers or, or anything like that at this time.
spk06: Okay, well then, maybe can you comment specifically on the jump in C&I, like quarter non-performers and charge-offs? What was that? And how should we be putting that together in terms of loan-off provisioning?
spk02: Hi, Lori. Yeah, again, just a hand... Yes, thanks. Hi, Lori. Again, Lori, it's just a handful of one-off um cni credits uh that's related to that we've um you know previously uh identified as problem assets okay and okay okay um great i'll leave it there thank you actually i'm sorry
spk00: Laurie, I'm going to reopen your line now.
spk06: Oh, great. So sorry. One last question. Can you just refresh us on your total SBA and what the unduaranteed piece of that is? Thanks again.
spk07: Laurie, I've got 15 loan buckets of exposure that we can share with you. That is one that we do not share. But Sean can provide some color commentary on that one. Sure.
spk09: You know, we've had strong historic performance. You know, I do think it's important to note we booked the unguaranteed portion at fair value. Good recovery history, and we can pro rata apply that to the stub. Weighted average coupon, 10 plus 2 and a quarter, and 40% of this is secured by real estate.
spk06: Great. Thanks for taking my question.
spk04: Thank you, Laurie.
spk00: Thank you. And our next question goes to Chris O'Connell of KBW. Chris, please go ahead. Your line is open.
spk11: Morning. Morning, Chris. I wanted to start off on the deposit flows and if you guys could give an update on what the overnight payroll deposit balances were at the end of the quarter.
spk10: End of the quarter, they were approximately around $1 billion. And that's generally in line with what we've seen in the last two quarters.
spk11: Yeah. So moving forward, do you expect that book to be more stable?
spk10: I would say the payroll always has a little bit of lumpiness to it. However, we're really around the $1 billion, $1.1 billion range most quarters.
spk01: Yeah, Chris, I would say first quarter there was an upward spike, but outside of that, I think your end of period is typically about a billion, and the average is $7.50, and that's been consistent over pretty much last eight quarters. I think we've seen maybe marginal improvement just as the more workforce, I think, comes back into the labor market, but otherwise it's been relatively steady.
spk11: Got it. And then on the margin guide for next quarter, I'm wondering if you could provide a little bit of detail around what exactly modest lift is encompassing, given how large the increases have been the past couple quarters, and then what exactly the sub-debt impact of the redemption is on the margin for next quarter.
spk01: Yeah, I think, Chris, I won't give specific NIM guidance, but I'll say it'll be higher. It won't be higher at the same clip as we saw in the second and third quarter, but we expect it to continue because the loan betas will continue to outpace the deposit betas. What we could say from a modeling perspective is the combination of balance will continue, albeit at a slower rate, and the margin expansion fourth quarter, think that income could be higher in fourth quarter compared to third quarter by, you know, 3 to 5%.
spk11: Got it. And I guess just given, you know, those comments around the margin and the reaffirmation of the overall guidance provided last quarter, I mean, it seems Like the NII guide, you know, should be moving higher, you know, given what you guys have already put up for this year and the nine to 11%, you know, gap growth for the year. Any updates on that NII guidance?
spk01: Yes, I think we will refresh the guidance, Chris, as we said, in January 2023, as we give the full year guidance for 23. So I think you would certainly hear at that point of time, we would complete our internal budgeting process by then. For fourth quarter, like I said, we expect it from, you know, three to five percent. Yeah, just talking about the 2022 guide.
spk11: Okay. Yep.
spk10: And, Chris, I believe you asked about the subject. yeah so i believe uh you know we called the sub debt the 75 million dollar sub debt in september about a 1.25 million dollar expense for the quarter great um
spk11: And on the fee guidance for the year, just wondering what you think the swap and loan fees will do from here based on the customer activity that you're seeing. And if you see a substantial uptick in the overall fee levels to get to the adjusted 10% to 15% guide.
spk01: I think fees are under pressure, especially with our loan fees, swap fees, and wealth management. All of them have the macro headwinds. But even within that context, I would say we expect, just based on the pipeline, a modest uptick on the loan fees and swap fees. So it should be a relatively similar quarter in the fourth quarter, maybe modestly higher.
spk07: And Chris, I don't know if it's helpful, but some of the line items in that loan fee and revenue are running at well below normal levels. So if you look at the last eight quarters, we averaged about something around $7 million in that line item. And obviously, we're running about half that this quarter. So we do expect there's nothing broken. It's just macros impacting wealth management, the SBA gain on sale book. So, you know, there are definitely a few line items in there that are running below normal.
spk11: Great. And on the loan yields, I mean, the uptake in CRE was fairly substantial. Anything unusual or, you know, one-off driving that uptake this quarter? And then if you could provide... the entirety of the loan portfolio that's percentage-wise that's floating or variable?
spk10: So I don't think there was anything that kind of stood out from that side. Nothing significant. We are currently booking somewhere in the mid for the commercial loans. And then To answer your second question, we're about $3.2 billion in three-month adjustable, which is mostly in-debt.
spk11: Great. And then lastly, you know, I think you guys had mentioned on last quarter's call that, you know, all else equal, you know, you intended to, you know, finish off the current buyback authorization by the end of the year. I believe you have around $35 million left. Any change in that outlook?
spk01: No, Chris. We're going to continue to manage through the authorization opportunistically in the quarter. Great. Thank you.
spk11: Thank you, Chris.
spk00: Thank you. We have no further questions. I will now hand back to Nitin Mahatrey, CEO, for any closing remarks.
spk01: Thank you all for joining the call today, and thank you for your interest. Be well.
spk00: Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.
Disclaimer