Q3 2021 Valley National Bancorp Earnings Call
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Good day and thank you for standing by welcome to the Q3 2021 Valley National Bancorp 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 one on your telephone please be advised.
Today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Travis Lan head of Investor Relations. Please go ahead.
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 I'd answer.
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 Dot 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 Bancorp and the banking industry Valley encourages all participants to refer to our SEC filings, including those found on form 8-K, 10-Q, and 10-K for a complete discussion of forward looking statements with that I'll turn the call over to IRA Robbins.
Thank you Travis and <unk>.
Welcome to those of you on the call.
As usual I will provide some big picture thoughts on valleys position and future opportunities before turning the call over to Mike to discuss the quarters 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 quarters strong financial results benefited from our differentiated loan growth, which helped to absorb a $10 million sequential reduction in triple T 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've 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% loss.
While significantly improving our low cost core deposit base.
Our tangible common equity ratio has increased to 100 basis points.
And our allowance to loans is up over 40 basis points.
Well, 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, theyre, not constraints, where legacy geographic footprint.
These capabilities will be the result of both internal development initiatives and the acquisitions that we've announced over the last few months.
From an organic perspective, we have developed a 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 health care areas.
We have also leveraged our relationship focused commercial lending expertise to enter new markets, including Philadelphia Nash.
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 Leumi technology banking and private banking businesses will continue to expand valley beyond our legacy markets.
Louima's differentiated commercial funding verticals will augment the value 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 the 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 Hagadorn to discuss some of the quarters financial highlights.
Thank you IRA.
Turning to slide four you can see valleys 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 315%. However exclusive of PPP income the net interest margin would have been flat at 3.07%.
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 to 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% of funding from 44% 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 are active management of deposit costs. In all buckets has also contributed to our recent margin stability.
During the quarter, our Cds 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 than 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 of approximately 45% is commercial real estate and 28% as commercial business, which includes owner occupied Cree.
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 noninterest income of $42 million for the quarter with.
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.
Dudley generates fee income through the placement in management of tax credit investments and we will support our efforts to build differentiated sources of noninterest income.
On slide eight you can see that our reported expenses were $175 million for the quarter.
Excluding tax credit amortization, and both merger charges and a litigation reserve, which flowed through our professional fee line adjusted expenses were $168 million the.
The adjusted increase was concentrated in compensation costs consulting fees and the other expense category.
There were a few key drivers of higher compensation cost 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.
During the quarter, we rolled out a new national deposit group and continue to attract leading talent in our digital products area.
We utilized consultants to assist on other process improvement initiatives, we expect that these consulting costs will fluctuate going forward.
We also recognized 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% to 17%.
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 and 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 112% of non Triple P loans at September 30th from 114% at June 32021.
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 and improved economic forecast led us to reduce our waiting on Moody's downside scenarios.
Our model is now currently 70% weighted to the baseline scenario, which has positively impacted our reserve levels.
Our nonaccrual 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 totaled $33 million in curious specific reserve of nearly $4 million.
Covid deferrals now stand at just 3% 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% in the last 12 months driven by our strong earnings performance.
Our tangible common equity to tangible asset ratio increased to 795% at September 30th from 773% at June 32021.
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.
As a reminder to ask a question you will need to press star one on your telephone.
Sure. Your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Steven Alexopoulos from Jpmorgan. Your line is now open.
Hi, good morning, everyone.
Wednesday 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 is a good run rate and how should we think about expense growth just given the wage pressures that you guys called out.
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 million 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 deposit group and we also have.
Significant hiring in our digital group as well you might have seen recently are.
Cannabis related digital product offering that was recently at a trade show.
Predominantly sent as seen as a new product in the marketplace. So we're making investments upfront in these areas that will result in higher growth and higher revenue down the road. They don't always obviously lineup with one another.
Okay.
Thank you actually I wanted to follow up on the launch of valley pay well 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 the company's in the cannabis industry.
Thanks, Steven 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.
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 as 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 amongst different product sets throughout the organization.
Okay, and I'll add one more thing maybe to the end of that.
As I said in my prepared remarks.
Operating leverages 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 in 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.
Thanks, and then my final question just on this acquisition of Dudley Ventures could you just walk us through their business model and what type of financial contribution should we expect from that deal. Thanks.
Yes, 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 there a tax credit.
<unk> from the federal government and then they work with clients, who want to have tax credits as part of their investment portfolio. So there the.
Entity that makes sure that those credits get too are the 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 to effectively and sell into our existing customer base. That's really the reason that we did this guy okay.
Thanks for taking my questions.
Thank you.
Thank you. Our next question comes from the line of Michael Perito from <unk>.
Your line is now open.
Hey, everyone. Thank you for taking my questions I appreciate it.
Yes.
I wanted to stick on the cannabis sector for a second.
I was wondering if youre willing to kind of try and size up the market share opportunity.
Why are the addressable addressable market there for us I mean, it seems like there's only a handful of banks really operating in this 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.
Not really anyone that is trying to really provide kind of a solution to any points of friction Mike like valley pay theoretically might 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.
Fast movers here and I'm, just trying to get a better handle of that.
Thank you.
I think our approach is very differentiated to your point, Michael most of it most of our competition in this space has looked at it is how it can benefit them from a deposit or from a fee perspective, and our approach has been a very different and talking to our potential customers and current customers as to how we can be advisory and thinking about solutions for them that that really makes sense.
So we started out targeting the multistate operators 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 nurse to our overall bottom line.
It's a very segmented business today, and we think that we provide a leading opportunity.
<unk> gained significant market share in this in this business today.
And as the valley pay.
Are there.
Deposit opportunities around this.
Payment infrastructure.
Trying to kind of think about the technology itself and Mike think of some of the other like there is some of the real time payment platforms that some of your competitors have Dom whether theres 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.
Opportunity that kind of move lock step with it.
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.
Once again, it's a market that is very difficult to enter 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.
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 is absolutely a deposit opportunity on both sides here because.
Because it's a closed loop platform as well as being the opportunity.
Great.
Just two more things I want 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 is a lot going on in kind of beneath the engine here and then the funding basis kind of moving towards some lower cost 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 stance.
Yes, I think our positioning is.
Probably never been better and 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 were funding ourselves. The growth. There has been 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.
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 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.
Les you me that will be part of our organization you know assuming we get approvals.
We'll be part of our organization next year Theyre also asset sensitive and thats going to help us become even more asset sensitive.
And just to dimension that in an up 100 basis point.
Parallel change.
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 youre only going to see that number increase.
And now 4%, that's just where the balance sheet stood at quarter end or so.
Would be additive to that correct that is correct.
Okay.
That's perfect. Thank you and then just just lastly, and then I'll hop out is just on the credits I appreciate the color.
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 will generally call it and just curious if theres anything.
Kind of more brewing or anything youre, keeping your eye on it I mean, it seems like the incidence for 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 maybe get value down or anything that we should be mindful of on the credit side as we move into next year.
It's Tom So I'll give you an answer on that as you saw our crewing passengers 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 or and Covid impacted industries two in retail one in hospitality.
<unk>, 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 on that 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 standards, maintaining a granular portfolio much more suburban than urban on what we do.
On the commercial deferrals, where you 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 of migration.
And two any further non accruals.
Great.
Thank you very much for all the insights guys I appreciate it.
Thank you.
Thank you. Our next question comes from the line of Steven Duong from RBC capital markets. Your line is now open.
Hey, good morning, guys.
Just on the rate sensitivity.
Just curious on the 100 basis points.
4% uptick in NII, what's the beta assumption behind that is is there a lag to the beta at all.
Yes.
Steven It's Travis Lan, So I mean, thats, an instantaneous shock and our assumption there is that all of the brokered CD stuff re prices at a 100% beta or a beta of one I guess.
And then the more transactional oriented accounts repriced the debate between 20 and 35 basically.
So that's the assumption that gets based on there are baked in there.
No you can see in our last Q and Youll see in our upcoming Q in a couple of days right.
That's 100 basis points in the last few changed NII by 3%. So I don't think any of this is directionally inconsistent with what you would have expected before.
Yes, I appreciate that thank you Travis.
And then.
Just on the.
The valley pay App is that an asset you guys are developing in house or is this a white label that.
It's really.
Yeah.
I think you should be thinking more about a whole digital payment ecosystem, Stephen as opposed to just what this individual app is.
Something we've been able to build internally with it with up 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 bank.
Banks that that do potentially look at getting into this business down the road.
Got it okay.
Then just maybe just one last one just on the non accruals.
We go back.
In time.
Non accruals right now are 77 basis points do you is there a kind of a level.
You see that you guys or when would you not be comfortable.
The non accrual levels.
I think where we're confident that the non accrual levels.
Should not migrate upwards from where they are and I guess.
Again, we monitor watch closely and maintain our underwriting standards and a very granular diverse portfolio.
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 it 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.
As you look backwards since you asked about looking backwards.
If you look backwards youll notice that our loss history, including non accruals migrating to loss.
As roughly half of what our peer group was so our credit quality, we still feel very comfortable based upon the fact that thats been the history of what we've been able to put up.
I appreciate it thanks for taking my questions.
Thank you. Our next question comes from the line of Ken Zerbe from Morgan Stanley. Your line is now open.
Great. Thank you and good morning, everyone.
Good morning, Catherine and 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.
You think about growth sort of over the next 12 months does it really come from sort of or the same I mean, if I'm looking at slide six the non owner occupied CRE.
Auto.
So I guess, that's the first part of the question.
Also what would it take to drive higher core C&I balances.
Hey, it's Tom I'd dance.
One thing that I'll point out here is that we had a 5% increase in our C&I commercial line commitments during the quarter, what we don't have as yet utilization, we're really not going to benefit from that growth until the utilization returns to pre pandemic norms. So we are increasing <unk>.
Ni customers, the new hires that we on boarded.
They represented about 7% of our quarterly production and 55% of what they produced with C&I related. So we are starting to see that and keep in mind previously we've put together a focused C&I 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 we are very focused on generating C&I 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 utilization.
Got it sorry.
The rest of the question just in terms of like other areas of growth.
I'm, sorry, I didn't get that second part.
Sorry, the first part of my question was just you know.
I appreciate your comment on C&I and my point was in terms of the <unk>.
I got it yes, yes, I think youre going to see consistent and those same buckets youre seeing growth in that owner occupied.
Real estate, which is really a C&I related that represent probably 30% of our hot production during the quarter, we have expanded into Pennsylvania Nashville Atlanta.
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 their contiguous two offices. We presently have we go in there first with customers understand the market and then we add local lenders and leadership in that market.
To grow it further.
<unk> to see traction there pipeline in Pennsylvania alone has almost $300 million in the Nashville, Atlanta, it's in that $250 million range and we've already produced and closed loans in each of those markets. So youll continue to see that that's going to be primarily real estate related we continue through these new hires to focus on C&I, we're seeing there.
<unk> increased quarter to quarter.
Alright, Thank you very much.
And you just 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 20% 26% of our production up from 'twenty.
Alright, Thank you perfect.
Thank you. Our next question comes from the line of Matthew Breese from Stephens, Inc. Your line is now open.
Morning.
Matt.
First going back to expenses, you mentioned, the 165 million to $170 million for the fourth quarter is that all in or excluding amortization.
Excluding the tax credit amortization that we typically back out that'd be adjusted expenses. So if you look at our adjusted expenses this quarter to 168 and a half we think its 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 some impact on top of that from Westchester, which we expect to close.
On December one.
There will be obviously noise related to merger charges on both transactions.
Got it Okay and then you mentioned also that.
We should expect some fluctuation and 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.
Theres not a band but.
This kind of follows investments right, mostly around technology. So when there is a ramp up you have an increase in that honestly. The reason, they're not called off are called out on slide eight is individually any one of them isn't material from our perspective from a GAAP perspective.
<unk>.
Maybe they're not quite material, but they are they are getting there and that that expense is going to move up and down based upon the various needs that we have in 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.
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.
Matt.
There is 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 <unk>.
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 okay.
That's helpful. Thank you and then last one for me you mentioned expanding into Philadelphia that totally makes sense given geography, but you also mentioned Nashville, and Atlanta, which are new markets to me.
Those are extensions of the Birmingham presence you have could you just give us some some update on infrastructure of personality personnel you have in Nashville, Atlanta, perhaps some indication of what loans and deposits are there already.
Sure.
<unk>.
Nashville, and Atlanta, Yes, as an extension of our Birmingham business in 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 number.
<unk> on it we have already closed about $70 million of loans in those markets I mentioned the pipeline before of around 200.
$60 million.
And we've 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 learn those markets and once we're comfortable we'll move into those markets with staff in.
In each of those cities.
Got it the same way we did in Philadelphia, We started Philadelphia following customers. We now have a staff of four people based in Philadelphia.
Great. Okay. That's all I had thanks for taking my questions.
Thanks, Matt.
Thank you. Our next question comes from the line of David <unk> from Wedbush Securities. Your line is now open.
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 gain on sale.
Yes on the on the swap side, it's even though it was higher than our question relatively consistent except for one very large quarter. We had last year, we expect it to stay at that level for the fourth quarter and into the foreseeable future based on existing pipeline the same with the gain on <unk>.
We expect it to be in a similar level to what we reported in the third quarter.
Great. Thanks very much.
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.
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.
This concludes today's conference call. Thank you for participating you may now disconnect.
Sure.
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