Webster Financial Corporation

Q4 2021 Earnings Conference Call


spk_0: good morning and welcome to the webster financial corp fourth quarter two thousand and twenty one on and conference call at this time up with depends on a with the only mode the question and answer session will follow the formal presentation funny wants require apparatuses since during the conference please press start zero on your telephone keep it please note this event is being recorded i would now like to introduce wetsuits director of investor relations christmas internally to introduce the call was originally please go ahead
spk_1: thank you barrel good morning and welcome earlier this morning we used primarily to announce one from financial corp fourth quarter twenty twenty one earning i'm confident we will provide for brief comments regarding the company fourth quarter for the presentation five hundred and who's been on the company and been thoroughly and one thing before we begin our mom and went on a minute that the commentary by management me include forward looking statements within the meaning of a private figure you would have use your form of ninety ninety five and are subject to be impossible preserve uniform look into flame on in the proper language into the hunter lead them presentation for more information about race and unfancied which may affect us are now introduce webster's chairman and ceo john fewer thanks for instance good morning and thank you for joining webster's fourth quarter earnings call fearful a mcguinness know you're here
spk_2: you're and snowy waterbury to review our performance for the quarter and four year twenty twenty one i was and provide a status update on our strategic initiatives and are impending merger with sterling after which glenn and i will take your questions twenty twenty one was a transformational year for webster we delivered strong financial in strategic performance to dynamic economic environment while navigating the challenges of the continued pandemic as we move ahead and twenty twenty two we continue to see robust economic activity across are expanding footprint and strengthening confidence from our business and consumer clients with respect to demand for products and services and lending activity has continued to accelerate the look for the interest rate environment is looking more promising and macro trend for which we are very well positions benefits our credit metrics also reflects both the solid economic backdrop and the quality of our risk management process overall despite the continued uncertainty surrounding the ongoing impact of the pandemic we are optimistic about the trajectory of our business as we head into two thousand and twenty two with respect to our internal transformational project we continue to make significant progress on revenue enhancements and an official efficient is throughout the organization which will complement the merger as we integrate the two companies on the revenue supplied we enhanced digital customer experience is across all business lines to targeted technology
spk_3: the investments
spk_2: lol expenses fell modestly above our fourth quarter twenty twenty one target the delta was driven largely by incentive compensation accruals reflecting strong production by our bankers when compared with four to twenty twenty we made significant progress in reducing core compensation and occupancy expense in fact year over year we reduced or real estate square footage by more than fifteen percent and materially and permanently reduced our overall operating cop structure we receive federal reserve approval for a merger with sterling on december seventeenth and we plan of clothes on february first or integration planning process is complete and we are ready to bring these two strong organizations together i'll begin the financial report on slide to with an overview of the quarter which reflects our strong performance or adjusted earnings per share and queue for were a dollar thirty one up from ninety nine cents a year ago or fourth quarter performance includes thirteen point seven million dollars of net pretax charges related to the merger and our strategic initiatives or fourth quarter adjusted return on common equity was fourteen point six percent and the adjusted return on tangible common equity was seventeen point seven percent excluding ppp late quarter loan balances grew by sixteen percent annualized tangible common equity grew by eight percent in his two hundred and eight million dollars higher than a year ago top just revenue into for was six and a half percent higher than a year ago while adjusted expenses decreased three percent demonstrating strong operating leverage are efficiency ratio improved to fifty five percent a decrease of five hundred and forty two basis points from a year ago a provision with a fifteen million dollar benefit as both our credit metrics and the forecast for economic conditions continue to improve the provision release with met other twelve million dollar reserve build tied to loan group underlying asset quality is solid npl met charge offs and commercial classified loans all as a percentage of portfolio improved from a year ago ah now on five three excluding ppp total loans grew over a percent from a year ago led by record commercial loan growth of one point three billion for nearly ten percent commercial banking again increase loan originations accelerating the one point eight billion up solidly from a year ago driven by growth and commercial real estate sponsoring specialty and business banking verticals commercial own funding of one point three billion were up fifty percent from a year ago reflecting the expertise of our bankers and improving client loan demand consumer loans grew five point two percent or three hundred and fifty one million dollars compared to the prior year driven by robust residential mortgage activity and or late twenty twenty decision to balance sheets conforming production and now on slide for deposits grew nine point two percent year over year with growth across every business one cor deposits grew by three point two billion and represent ninety four percent of total deposits compared to ninety one percent a year ago as cds decreased six hundred ninety million dollars from a year ago and our deposit cause continue to decline and and our total cost in the quarter was five basis points for all deposits on slide five you'll see the full year twenty twenty one financial highlights on a full year gap basis our pp an arm proved to four hundred and seventy nine million from four hundred and eighteen million a year ago or full year he p s of four dollars and forty two cents is a record for webster as our net income of three hundred ninety nine million and tangible what value per share with thirty dollars and twenty two cents we were able to achieve this strong year over year growth even as we reduced core operating expenses and are real estate footprint as i mentioned earlier slide six provides an overview of the transaction and integration timeline for a merger with sterling we're excited to begin operating as a combined company as we approach the legal merger day we have a detailed conversion and integration plan in place and we are positioned to begin operating as one organization on february first we began welcome clients to the new webster and plan to convert all legacy sterling customers to the webster brand immediately upon close with a primary focus on optimizing customer experience during the integration we plan to fully consolidate the operations over the next eighteen months with that are now and call over to gland for more do tailed financial review
spk_4: thanks john anger morning everyone
spk_2: we reported solid results in the quarter evidenced by strong long road favorable credit performance and continued execution on our strategic a merger initiatives
spk_4: i'll begin with our average balance sheet on slide seven average security is increased one point four billion linked corner and represented twenty nine percent of average total assets
spk_2: during the corner we purchased approximately one point six billion and securities a weighted average yield at one point four four percent and a duration of four point one years securities paul mcchord or paid down total the pop pop pop and only five hundred million that a yield of to point out four percent average cash balances hell that the fed told one point two billion a decrease of one point one billion length quarter as we deployed liquidity it alone growth and the securities portfolio average loans and priest three hundred sixty four million or one point seven percent link quarter primarily driven by increases and see and i commercial real estate and residential mortgages this was primer front partially offset by ppp loan forgiveness and lower consumer long bounces during the quarter forgiveness and ppp loans told one hundred eighty three million an outstanding balance is a year and were two hundred and fifteen minutes and queue for we recognize seven point five million of ppp deferred the accretion which was down from sixteen million prior porter remaining deferred ppp these totaled eight million
spk_4: excluding ppp average loans grew six hundred and seventy seven million or three point two percent average commercial loans good four hundred fifty four million or three point two percent while residential mortgage loans increased two hundred seventy three million or five point four percent
spk_2: average deposits crew two hundred and seventy million or point nine percent linked quarter the increase was driven by continued growth and commercial transactional deposits which were partially offset by a seasonal decline and public funds and a reduction in higher costs cds they give you some business line trains on a period and bases commercial banking deposits are up eighteen percent from a year ago while consumer and small business grew five point three percent and fourteen point three percent respectively ages a deposit good four percent year over year or seven percent on a core basis and totally to say footings go eleven and a half percent year over year
spk_4: average boys were effectively flat to que three and down seven hundred fifty million for prior year lonely deposit ratio was seventy four point six percent on december thirty first the common equity tier one ratio decrease five basis points link quarter to eleven point seven two percent dependable common equity ratio increased twenty six basis points the seven point nine seven percent and tangible book valuable two percent length quarter and seven point eight or sent from prior year flight eight highlights or gap performance and adjustments to report an income available a common during the porter we recognize a net of ten million after tax charges related to our murder and strategic initiatives
spk_2: on an adjusted basis income available the common was one hundred nineteen million or dollar thirty one per share resulting in a fourteen point six percent return on average common equity and seventeen point seven percent return on tangible common equity on slide nine we provide are reported to adjusted income statements net interest income decreased by three million linked quarter driven by lower ppp of the accretion of and a half million and a lower yield on the securities portfolio partially offset by continued longer of net interest margins was two point seven three percent down seven basis points length quarter just was the net result of a ten basis point we dogs in the lower ppp be accretion offset by three bases point improvement in our porn him as compared to prior year net interest income agree six million driven by strong growth and reduced funding cost not interesting can increase six point three million linked quarter primarily driven by higher realize games and fair value judgments on direct investments polian gum and again on a sale of a commercial long compared to prior year non interesting some good thirteen point four million is largely reflects an increase of a point nine million related to the factors highlighted in the quarter over quarter variance as well as an increase in deposit service and wealth management fees adjusted non interest expense increased one point eight million from prior quarter reflective of seasonal increases in temporary stamping and medical expenses versus par your non interest expense the point five million dollar previously announced efficiency initiatives resulting in lower occupancy past compensation and other expenses which were partially offset by an increase in performance based compensation pre provision never ever know was one hundred forty one million and you for this compares the one hundred thirty nine million acute three and one hundred sixty nine and prior year
spk_4: lol most provision in a quarter was a net benefit of fifteen million and he adjusted tax rate was twenty two point two percent an increase of one hundred fifty eight basis points and quarter the result is an adjusted net income of honor nineteen million or a dollar thirty one per share an increase of twenty three cents over the prior quarter
spk_2: on fly time we have provided an update our strategic initiatives we are pleased to cheap have achieved ten million and quarterly run rate expense savings which was driven by a reduction of approximately fifteen percent in both have to eat and occupancy square footage in the fourth quarter this was partially offset by seven million and expenses we do not interested
spk_4: paid and our runway going forward
spk_2: the increase was primarily tied to performance based and cent of of rules driven by loan and revenue growth credit quality and progress on our strategic initiatives we also delivered on other initiatives in technology including a new digital on boarding experience for consumers along with various initiatives to support growth in the commercial bank in the second quarter we will launch a new digital experience for employers of our age as a business
spk_4: we will continue to capitalize on strategic initiatives as we begin our integration with sterling
spk_2: turning to side eleven i'll redo the results of our fourth quarter allows for mom loss under cecil in the porter were reported a net provision benefit of fifteen million or allowance of three hundred one million was down fourteen million the net result of and twelve my and reserves for long growth which was more than offset by the benefits of continued improvement and as equality trends and are macro economic outlook the allowance coverage ratio excluding ppp loans was one point three seven percent side twelve highlights are key as a quality metrics we fighting strong credit quality performance trends nonperforming loans and yet the left increase nine million from cute rate increases were concentrated and see and i have partial offsets a commercial real estate and residential mortgage npr as percent of total loans or forty nine basis points down from seventy eight basis points a year ago in terms of net charge offs in the upper right we realized the one point two million net recovery and a quarter for the full year will recorded four million in that charges which is it's lowest for your level since two thousand and five commercial classified long in the lower left decrease ninety million from two three and represented a hundred eighty six basis points of total commercial loans side thirteen highlights are strong capital levels regulatory capital ratios exceed well capitalized levels by substantial amounts are common equity tier one ratio of eleven point seven two percent exceeds well capitalized levels by more than one point two billion likewise are tier one where speed capital of four point three two percent it feeds while capitalized levels by a billion with that are turn things back over to john for closing remarks thanks glen it's been a uniquely advanced or year here at webster in addition to executing through year impacted by the pandemic we delivered on the internal initiatives we outlined the year ago while also announcing or merger with sterling throughout it all we managed to generate strong performance broadly and particularly from alone growth acid quality and customer service perspective i want to give a special thank you all our bankers for continuing to perform at such a high level during a period of challenge and rapid change throughout the year we've been recognized by a number of third parties for outstanding performance market leading customer satisfaction and experience and for being a great place to work today i can share that for two thousand and twenty one webster was once again the top as be a lender like all around volume in new england reflecting the work of outstanding bankers finally i again want to express how enthusiastic i am about depending close of our merger this is a transformative transaction that will greatly benefit both banks clients colleagues communities and shareholders we're creating a you need financial institution a bank with a differentiated funding based that include age as a bag and are combined consumer and commercial banking businesses we have a broad range of regional and national asset generation capabilities particularly to a growing commercial banking franchise with deep industry specialization and a growing geographic footprint we were highly dams and economically robust core footprint we have the ability to draw an outstanding talent from within both organizations and we are the optimal size to be nimble and responsive to our clients while having the scale sophistication and balance sheet to meet all of our clients from our needs with that darryl glenn and i am prepared to take questions
spk_0: thank you having getting a question and answer session he would like to ask the question please press dar one on your telephone keep it at operations on educate your line is in the question kill him a press start to he would like to remove your question from the queue for participants using speaker equipment may be necessary to pick up before pressing the snarky one moment please what we call for your questions our first question dump line of christmas grabby with kbw please proceed with your questions
spk_5: take one it but
spk_6: warner bros
spk_0: the job maybe a ask the question i have and the merger with announce that asked about the performer growth rate of the company
spk_7: clearly you're your numbers are or had been the right direction and is sterling's are to hello look at more bumpy get update us on i kind of how we should be thinking about the combine organic growth into a to issue
spk_2: sure and all on all of throw the general of thought out there that with respect to all of the guidance we put out in on the nineteenth of april seems like a long time ago because it was a that we're gonna still sticking to those assumptions as we look at the marketplace now so you're obviously we did have really strong growth in the fourth quarter we had record originations we also had record pay offs sterling had good solid core alone growth you know couple of well where mortgage warehouse in a couple of other areas work a little bit more volatile but i still think we think eight to ten percent annual total alone growth for the next couple of years is doable is our target taking into consideration you know more competitive in by armin but also a and continually improving economic environment with better loan demand more business confidence more consumer confidence so from an asset growth perspective i still think we dialing to eight to ten percent on that growth expectations of the combined organization ah in over the next couple years
spk_7: that's great and then my father of would be given that the capital position that you're and the strong capital positions
spk_8: how do i
spk_0: i think about potentially gained eight ten vs you're using a buyback that you've talked about the bass
spk_2: yeah i mean i think you know with respect the capital of you know all of the executives on both sides that are involved or are in in alignment we have definitely access capital some six hundred seven hundred fifty million dollars depending on kind of one time expenses you know we modeled in a four hundred million dollar share buyback ah because we wanted this sort of show usage of capital in our original model but you know as we do all the time we kind of prioritize deploying capital first to organic growth portfolio acquisitions ah horizontal products for some of our differentiated business lines ah obviously we then look at our play out ratio are david and and depending on market conditions you know we have opportunistic opportunity to buy back shares so you know it's it's still on the table we're looking at it but i think we're going to be kind of discipline did we always are make the right economic decisions and be opportunistic or chris with respect to share buybacks
spk_7: i said so so so on the table but damn perhaps maybe not for four hundred given the momentum and growth that there because i'm sure of it for think it
spk_0: thank you our next questions come from the line of brock mannerly with you yes please proceed with your questions
spk_9: a good morning
spk_10: more month thanks to the morning
spk_11: they sequester just fine upon not on the merger one it he could just review the size and the mortgage or warehouse or folio on a pro forma basis second half how you looking at that as a potential headwind especially with no rates up pretty smartly here haven't jumped off a lot of tension rifai activity and more looking like a smaller and smaller and smaller driver in in in addition is as we think about in a longer not going forward are you likely to continue to our portfolio this news agency lungs it as you have been or would you look to have for to sell mothers
spk_2: yeah i'll give you the general thugs thing we're to look up the number on on mortgage warehouse so we've been really consistent and what we're going to do is ah we're going to continue the activities in both organizations on february one kind of full speed we love the levers there aren't a any asset classes or business lines right now that we think are you know either too volatile to credit risky don't make sense and and we love having expanded geography is and a ton of you know probably more than twenty separate commercial or and consumer lending activities to to drawn which means we don't have to throw the bomb or take incremental risk or giving too bad pricing conditions in in any one of them so what i would say is ah first it it relates to mortgage warehouse ah you know their it is dependent on what the market conditions are will make the right decisions in terms of putting down the accelerator or backing off depending on the risk return metrics and where we are which really apply rock every single one of the activities are you know were involved in having all of that diversification and geographic diversity is what gives us confidence and being able to grow loans at age ten percent in areas that have good risk return metrics and what we've said in all of our nine euro chosen at the beginning is then over the course of the next a twelve to eighteen months as we always do will be looking at capital deployment and saying hey or saudis business lines not a strategic or the market dynamics not ah really favorable for us are we too small to really make a difference and so will obviously redeploy capital into those areas where we can generate the most economic profit generate the most growth so ah i don't have a i don't have any concern or view or worry about any of the asset classes i don't think that something like mortgage warehouse on the side balance sheet we have pro forma will stop us from getting to our net loan growth numbers even if things aren't tonic cranking there so i'm as kind of that kind of where we sit and will make the appropriate capital allocation decisions farther down the road
spk_12: gotta okay
spk_11: the pursued car and just as a a quick follow up in there been any listen the sea and i utilization rate yet or is it still kind of stuck or it's been
spk_2: you know there has been as a matter fact i was a slut reviewing that so i know a b l for us which is a relatively you know god a small but it's a it's it's not a driver of overall alone world but it had really good increase in utilization are both when quarter and significantly from last year which was pretty much a low oh point back up to around fifty percent i think which portends well for you know generalized i conversion cycle working capital usage building of inventories are i the rest of our commercial utilization with up slightly so i would say ah overall see an eye line utilization is up materially from the low a year ago are not quite back to pre pandemic utilization levels
spk_11: that's great thanks for the culture
spk_13: you gotta bring
spk_0: thank you our next questions come the line of laurie have second with up it's point please proceed with your question
spk_14: hadn't the morning at a lorry
spk_15: the second with a theme of them
spk_16: it's you best performer
spk_14: think about what your margin look like a look at it as ppp
spk_17: lang
spk_4: i'm majoring in the debt restructuring and and any other restructuring that you're dealing has to be be thinking shall a lorry it's going to let me give you some context and that and so i think when we look at our we look at our margin were probably at a starting point of about two ninety five on him and on a combined basis of i look at that are sort of as and for the fourth quarter anyway i'm we are still working through ah yeah we're still working through most of the assumptions
spk_2: on on accretion and marks and things like that but i can tell you that would generally in line with the disclosures that we've made on the announcement will give you an update on that during our for archie one earnings call
spk_4: funny with respect to out looking out and as insensitivity i in one of the things that we are looking at is you know you know that both organizations are are very essence sensitive and the if we look at this and we say were forecasting three rate increases in two thousand and twenty two one in may one in july on december as he
spk_2: don't really get that for your benefit of the of that one in december but the impact just to give you a sense of that are on net interest income is about three percent i'm in in in two thousand and twenty two and a full year basis meaning getting the benefit of three rate hikes on an annual basis it's probably double little more than double that and and
spk_4: a dynamic pairs of course that you know we have we have our of or long bug which is about sixty plus percent of floating and periodic and so are some floors against that but generally that's what's driving yes insensitivity the other sumption of courses on a deposit beta where where where it's currently at about eleven twelve percent
spk_2: beta for the first fifty
spk_18: days his point move and then it probably goes up to the closer to like twenty elicits our forecasts tasigna third
spk_4: for the third movie
spk_14: found that gives you some some sense of our thinking about of from an acid sensitivity stemple
spk_4: yeah they they have for answers quick question and and into said your silicon dread that anything it's you can give us in terms of as the christening come with that with that number is gonna look like on your mark and either and dollar now you know where we're working for the pct not a c d e o nexus as we speak as we had hosted it to legal day once a week
spk_15: we'll give you an update on at as we get with you on earnings
spk_4: and then perform performer intangibles you have a repressed on my back and a look like
spk_14: same same thing with site so it's all it's all related as we make our marks and stuff like that
spk_15: that it epic and then just stand on credit to helping that you can come comment a little bit you know and and a commercial and years the and i know farmers are pretty sharply in the corner and then from the standpoint of as stl
spk_2: they had another cream loans they all looked like the charge up there with nine and a half percent it is that to sort of fourth quarter clean up in terms of of how as yeah was looking at the korea a by the and valley men are special mention and substandard are have how are you approaching that and is anything you can gather around and around the neither sure like know i think your characterization of the acid failed at sterling it is is right it's sort of green up an opportunistic without taking significant loss in not the teacher gas as which i think it's prudent you know for us you a like we as too commercial loans that that ended up going and pl you know on a on a huge obviously fourteen billion dollar loan portfolio so we don't see anything in there that that sad that significant and obviously we have adequate reserves and we've been really pleased quite frankly you know our and peels came down significantly because we sold a bunch of consumer an older npl consumer law and ah actually and we were were able to get our a recovery up at that price we told him for so we don't think that this take up as material we're not seeing any negative trending or overall risk rating and weighted average was quitting the portfolios really strong so ah the a worked i've i've said you know him in many forms i think it's almost those silly how good the acid quality is but obviously we're being very careful thinking about whether in any see any sectors are industries there's any kind of ah than no structural weakness as we can hopefully out of the pandemic
spk_14: people having operated in this environment but we really see straight and see and i think they seat on the other side or focused on office in the long term ah how people work and and an office but i think everybody's on both sides sterling and webster have very low loan to value and conservative underwriting so feel really go
spk_19: about the and i am theory across the board and both banks
spk_0: i think i'll either
spk_20: that's laurie
spk_21: thank you our next question come from the line of matthew presplit stevens please pretty with
spk_2: good morning a man unpaid six of the presentation you know you mentioned in over the next eighteen months you intend to on unlock revenue synergies from sterling deal he also mentioned ah the consolidation of facilities are you hoping you could flush those two items out a little bit and one of the piano and balanchine impacts that euro you're living too and ah man i think it's i think it's a bit on the costs i glenn can walk you through kind of the high level or you know we're still working through quantifying the revenue synergies as we bring the to back together and we're going to give you a lot more detail and a lot more guidance for over the next twelve months in the first quarter combined earnings call
spk_22: so i'll leave it there you know i'd mention things like larger hold levels obviously that's something that we're already benefiting from if you will with respect to our pipeline and are opportunities ah you know we'd goddamn morphy up the revenue opportunities across wealth and we've all or we've seen some momentum there would got great cross a
spk_4: opportunities with hs a both third selling on are larger commercial companies and customers across both banks to as a and a to say that helping us with the with with others were able to invest and we are got a pretty good road map on on digital investment on you know banking is a service some of the stuff he saw sterling do with respect the chain and there's just a lot of exciting things going on were quantifying the economic benefits none of that is kind of in the as we said in the april nineteenth two thousand and twenty one you know forward forecast so we'll we'll be able to provide you can have more more economic ah information around those activities in the first call understood okay get a man
spk_2: yeah i'm i believe it a little more contacts and our thinking listen
spk_4: yeah so we we look at our our core operating expense for both organizations in the fourth quarter and they combine till about two hundred eighty seven million so you know that that's basically are starting point based on the fourth quarter you can you can sort of analyze that say that that that sort of the court fees and then as you know at the time and as and we've we've we said we we thought we could achieve on and twenty nine or ten percent of the for the combined organization that it we continue to believe that that that's achievable over the two year period so that no over two years you expected to come out and we also set of the time and as we thought we get about seventy five percent of that are ninety million and a farcical calendar year and ya the time we thought were going to close on on october the first and as nails or motive edouard first and so that that's why did add a little these from a calendar year standpoint and so now we estimate two thousand twenty two will probably get about sixty million or that or fifty percent and remain fifty percent again we feel really good about getting and in two thousand and twenty three so you can sort of get it you can sort of take that those issues or data points you know the core operating expense and what our target is for two thousand and twenty two as well as to tell them twenty three so i get a sense of of of how the expenses are gonna roll out the only thing i would say is yeah there's gonna be seasonality in a quarterly expensive oh mercy of even to see that jozy in the first quarter we see i
spk_2: your fica taxes and things like that and the or korea is he is so ramping up a little and temporary spent for for a to say and any other thing i point out is that none of these include any any you know impact of inflation to the corps base and so that something that we're we're we're we're keenly taking a look at and then of course yeah as and more he answered the question at more yes the question but things like intangible city eyes pct non pct and i'll have an impact on on earnings as well and and lastly any additional investments and we can of is as we decide year that the to do a lift out or something like that there's nothing on the radar but if we decided to something like that of course it expected the expense
spk_21: as to reflect that it at the end of the day i will be able to provide a lot more clarity on on our first quarter earnings call an hour thinking about the rest of years months two thousand twenty three and and to put a five point glum been mentioned wage inflation other inflationary pressures on costs me i think we would wouldn't be genuine if we didn't think that that could be a headwind but i will say that to the extent that also results in more interest rate
spk_2: increases over time obviously will benefit on the top line so with respect to deliberate for you know the rotc targets be roşia targets loan growth targets we feel pretty confident that regardless of the environment will be able to deliver on those understood effect next one for me i just the two potter on each side you know the first one he just any sort of color on your first quarter account opening to skin where we are in roman season and then the second part is your eyes we were wind to keep a little bit you know and think about webster progressing through the last rate hiking cycle you know for a to say also recall it being a time where you are heavily investing in infrastructure that business says you think about the next read hiking cycle free to say the profitability of the underlying subsidiary be that much better or exceed were cycle because somewhat to the infrastructures already been built yeah we'll on take the second one first i think the answer's yes we should have more operating leverage as we move forward i'm taking oh operations are more resilient we've invested in kind of infrastructure you know as glen said in the second quarter were rolling out kind of a more bespoke customer experience readers portal we've been working on so i i do think in a while they'll be kind of variable cost with respect to growth at their opportunities that the ah we we should be able to capture more of the value as interest rates increase as it relates to this in rome and season it's too early to tell our current reports are that we're looking similar to last forever with respect to new account
spk_21: growth and i'm matt similar kind of dynamics were we're continuing to do better in bringing in new employers are direct to employ you know that been in offices a for us over the last say three to five years and that's really been satisfying force what's interesting is we still are seeing a bit of a muted environment in terms of new account enrollments with existing employers and for that probably is a result of you know the continued you do well employment growth and and not a lot of hiring going on across our employer customer base because if you recall the convention used to be year in and year out some seventy five eighty percent of our new accounts actually came from existing partners and existing customers that numbers with that going down a little bit even as we're bringing in more employer so i think that means we'll have more opportunity hopefully if we get a more robust hiring environment or to have some organic account growth but we still think it's about kind of flat the last year when we look at january over january but i have he sees you know we only have a little bit of insight into the full a norm appeared in the quarter right now
spk_2: it's understood okay last month for me your earlier this month sterling put out a press release and occasionally rejoin the the u s the consortium you'd mentioned block chain as can't a catalyst in the future you know where this has been most effective real time payments has been when it's applied to certain ecosystems and i couldn't help but think that with a to say your you have a health care related ecosystem were real time payments could be impactful so one maybe just curious your thoughts on real time watching they will payments thanked bank and secondly in a produce be something that gives you like up on the competition a to say was at all had thank you yeah great question and the smart one matt so i don't want to get too far ahead of ourselves and obviously we operate both of these banks completely separately till we get to february first but we're we're obviously in a intimately aware of and excited about them the relationships that the sterling folks have had gone into and sort of be an effective way to be of effective economic way to be a first mover to learn a lot and there are tons of use cases with respect her you know the u s d f ah announcement you know you think about mortgage lending consumer lending you think about real
spk_0: time twenty four hours sleep payments are you think about information with respect to be a say a amount of and also to your point five point we do think there are opportunities given where we sit in the healthcare ecosystem
spk_23: to to deploy this technology to differentiate
spk_24: our our business they are so are you know our expectations now are we we got a lot of smart people thinking about this or this gives us a front row seat i think there will be use cases that will actually be deployed in two thousand and twenty two we don't have any economics built in
spk_23: with respect to are you know two thousand and twenty two forecasts because we want to be conservative but one of the more exciting opportunities is caught in the healthcare payments space because we're already you know kind of nestle grading them so the answer's yes
spk_4: thank you our next questions come from the line of casey air with jeffries please proceed with your question yeah c'mon guys pick a clumsy
spk_2: i wanted to touch on capital so you guys you and serling both have a lot above eleven percent t t one you know so you eat legal they want you guys going to me any in great shape capitalized to use give us a refreshes as to what ratio you on it is most important you and him and what what what you'll manage to pro forma yes or a bad case it's glen and i think you know that data as we said we're going to canada tier one and were looking at a ratio a target ratio of the course of two years to because of the template ten point five percent and if you look at where we are today pro forma that implies family at as capital about seven or fifty million your point now they will be some one time charges against that
spk_24: but yeah that's where we are a casey i answered as of the first question added a gate to help you are you know i think we'll put a and four hundred million dollars and ah stock buybacks into our model because we wanted to mile and a an effective use of capital
spk_4: you know when we've shared in every non deal roadshow throughout and and in our last earnings call we're going to continue to apply of disciplined approach ah to capital management here meaning first prize is deploy that capital into organic asset growth ah a know complimentary products for differentiated businesses you know portfolio purchases and then obviously we look at market conditions where our capital is and think about opportunities on the on it on the dividend and and stock repurchasing will be up of opportunistic it's clearly on the table we definitely have access capital but you know we're going to take the same disciplined approach to making the right economic decision given market conditions and the time
spk_2: okay understood and and positive i miss those but the securities portfolio stepped up nicely in the fourth quarter i am in you guys in outline that but he's give us an update is to you know what's the appetite to continue to to grow that and then in a where our new money yields today vs that one forty gallon level in the fourth yeah so
spk_24: so you know where twenty nine percent had to get all time high don't go back a couple years ago wear a size thirty two thirty three percent of total assets inside i don't see it and of directly with a consolidation they'll come back down to answer the loved ones are one of the things we will do casey is blue gill for the most part the styling portfolio will be pumped as a a fast so that will give us thousand applicants will be sixty forty say fs and then i'll give us optionality on on an investment portfolios well but i'm yeah we we took those actions a you know given or excess liquidity we withdrew down at the excess liquidity that were hired that about a billion one
spk_2: and we thought that was prudent we still have significant cash flow of you look at our investment portfolio to that five hundred million of color and stylings is this a two hundred and fifty so he starts again in casual on both sides there and and get along casual on top of it so i think we presently we did this we took a little more duration of balance sheet at the same four point one years on what we purchased a we also are preserved a lot of optionality going forward okay great injustice last for me or on the new money loan yields i know i haven't stripped out the their the triple be impact but damn you know they're obviously that was lower but we're in three forty three overall went where are they today and and and specifically the commercial at for one to you know what were those coming in
spk_24: well you know in our yield arctic you've got a significant variability in the yield depending on the mix of loans or i would say let me start from a from a credit spread perspective were continually see pretty bad
spk_25: competitive market and so i'd say year over year we look at the origination spreads you know they're down marginally ah but you know what we have from a coupon perspective you think about i'll give you in the quarter in are sponsored specialty business at like a for forty five and you know our commercial real estate institutional grade more closer
spk_0: two percent to twenty five so you know what we think obviously with a significant percentage of our see and i commercial real estate loans floating we get some rate increases we could see material lifting in yielded and obviously a delay and in an increases our deposit cause is what we're thinking but i would say loan yields are you know they were three twenty four
spk_2: on origination in commercial ah on a blended basis which has driven you know again largely by what were those originations come from
spk_0: great thank you

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