Q4 2021 First Republic Bank Earnings Call

Greetings and welcome to first Republic banks fourth quarter and full year 2021 earnings Conference call. Today's conference is being recorded during todays call the lines will be in a listen only mode.

Following the presentation the conference will be other questions to join the queue. Please press star one on your telephone keypad at any point during the call I would now like to turn the call over to Mike I in Italy, Vice President and director of Investor Relations. Please go ahead.

Thank you and welcome to first Republic banks fourth quarter 2021 conference call speaking today will be Mike Rossler, President and acting co CEO .

Mike Selfridge, Chief Banking officer.

Bob Thornton, President private wealth management, and Olga <unk>, Chief Accounting Officer, and acting Chief Financial Officer.

Before I hand, the call over to Mike. Please note that we may make forward looking statements. During today's call that are subject to risks uncertainties and assumptions for a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward looking statements see the banks.

D I SEC filings, including the form 8-K filed today all available on the bank's website.

And now I'd like to turn the call over to Mike Rustler.

Thank you Mike.

Let me begin by sending our best wishes to Jim Herbert the bank's founder and co CEO , who recently began a temporary medical leave of absence.

Jim I'm sure you're listening and we look forward to your healthy return.

2021 was another very strong year for first Republic.

This was the bank's 36th consecutive year of profitability since it was founded in 1985.

First Republic continues to deliver safe consistent organic growth by doing what we do best providing exceptional client service.

Now let me cover a few key results for the year.

Total loans outstanding were up 20%.

Total deposits have grown 36%.

I would note the checking deposits made up 72% of total deposits at year end.

And wealth management assets increased 44%.

This strong growth in turn led to strong financial performance.

Year over year, our total revenues have grown 29% to more than $5 billion.

Net interest income has grown 26%.

Earnings per share have grown a very strong 32%.

And tangible book value per share has increased more than 17% during the year.

Importantly, our credit quality continues to be excellent.

Consistently strong credit has been a hallmark of first Republic since our founding.

Net charge offs for the fourth quarter, we're only $64000.

Net charge offs for the entire year were only $2 1 million.

Less than one basis point of average loans.

Nonperforming assets ended the year at only eight basis points of total assets.

Our capital remains very strong at year end, our tier one leverage ratio was 876%.

This includes the benefits from five successful capital raises in 2021.

Well, we'll go we'll touch on this momentarily.

This year's results demonstrate the power of our client service culture.

Our culture is our competitive advantage.

Each one of our 6300 colleagues is dedicated to serving our clients and one another.

The result is a client satisfaction level as measured by our net promoter score that is over two times the banking industry average.

Preliminary results from our 2021 net promoter score survey indicate that our service level actually increased during the year.

Importantly, a greater percentage of clients now consider us their lead bank.

Finally differentiated service drives our organic growth through repeat business and client referrals each year more than 80% of the bank's growth comes from these two sources.

Our colleagues focus and dedication are the foundation of our success as a leadership team. We are collectively focused on empowering our people to be their best.

Let me take a few moments to cover some of the other highlights of the year.

Leveraging technology to drive client satisfaction and scale, our client facing colleagues remains a top priority.

To this end in 2021, we continue to invest in technology, and our regulatory infrastructure to further strengthen first Republic and enhance our client service model.

For example, we have made significant progress on our core system conversion an important project for first Republic.

This initiative remains on schedule.

In addition.

We recorded a tax credits for research and development for the first time, reflecting our continued investment in client service innovation.

Olga will speak more about this in a moment.

Taking care of our colleagues and communities also remains a top focus of first Republic.

In 2021.

We expanded our employee base by 15% to support the continued growth of the franchise.

We also raised our minimum wage to $30 per hour.

We supported the volunteer efforts of our colleagues who contributed more than 22000 hours to nonprofit organizations.

We also launched the first Republic foundation, which expands and complements our existing philanthropic initiatives.

And we enhanced our commitment to the environment by becoming carbon neutral for the first time and purchasing 100% renewable energy to cover our electricity needs.

The simplicity of our business model has enabled us to remain focused on delivering exceptional client service in.

In 2021.

The outcome once again with strong financial performance.

Thank you to all of our colleagues for their great teamwork and collaboration and serving our clients.

Now I'll turn the call over to Mike Selfridge.

Thank you Mike.

Let me begin with an update on our lending activities.

Loan origination volume was a record for both the quarter and the year at $17 billion and $65 billion respectively.

Single family residential volume for the year was also a record at $30 billion.

Yes.

Refinance activity accounted for 55% of single family residential volume during the year and a large portion of refinance refinance activity came from clients with loans at other institutions.

This continues to create an ongoing opportunity for new client acquisition.

Multifamily volume for the year was also a record at $4 $8 billion.

In terms of credit we continue to maintain our conservative underwriting standards. The average loan to value for all real estate loans originated during the year was just 57%.

As we head into 2022, our clients remain very active and our loan pipeline is quite strong up from the same time last year.

I would note that loan originations have some seasonality with the fourth quarter typically being strong in the first quarter typically being somewhat slower.

Turning to business banking it was a very strong year, we continue to deepen our relationships by following clients to the businesses that they own or influence.

Our relationship based model also leads to a strong level of referrals to new business clients.

In 2021, our client business base grew by more than 20%.

Business loans and line commitments, excluding PPP loans.

Were up a strong 23% year over year.

During the fourth quarter, the utilization rate on capital call lines of credit increased to 42%.

This is at the higher end of our utilization range.

In terms of funding it was an exceptional year.

Total deposits were up $41 billion or 36% compared to a year ago.

We continue to maintain a diversified deposit funding base.

Checking deposits represented 72% of total deposits at year end.

Our highest level ever.

And business deposits represented 60% of total deposits at year end.

The average rate paid on all deposits for the quarter was just five basis points, leading to an overall funding cost of just 12 basis points.

Our preferred banking offices continue to provide an important service channel for our clients and drive deposit gathering.

In 2021, we opened two new preferred banking offices, both in New York.

And we plan to open another six offices across our footprint over the next 18 months.

Our strategy for acquiring and growing our next generation of client relationships a strategy that was in place well over a decade ago continues to deliver strong results.

In 2021, millennial households accounted for nearly half of our growth in consumer households.

Overall, our service model continues to resonate well with clients driving strong growth across the franchise now I'd like to turn the call over to Bob Thornton.

Thank you Mike wealth management had another very successful year.

Its under management grew 44% or $85 billion year over year of this $51 billion came from net client inflow.

Fourth quarter was particularly strong with AUM, increasing by $28 billion with nearly 60% from net client inflow. In addition, wealth management households grew nearly 20% this past year.

Wealth management fee revenue for 2021 was $760 million up 44% from the prior year. We also continued to further diversify our wealth management revenue growing our fee revenue for services that are less subject to market fluctuations brokerage insurance.

Trust and foreign exchange fees together grew 57% during the year. These accounted for 27% of total wealth management fees up 23% five years ago.

A key strength of our business model is a collaborative approach to serving our clients across our banking and wealth management needs.

The partnership between our bankers and wealth professionals reflects our non siloed approach.

This benefits clients and drive growth from both a strong level of internal referrals and deepening of our client relationships.

For example in 2021 I would note that our bankers referred over $7 billion of AUM to wealth management, an increase of 22% from the prior year. In addition, our wealth management colleagues referred over $3 billion of deposits to the bank.

Wealth management refer deposits and sweeps now represent over 13% of total bank deposits.

These deposits have grown at a compounded annual rate of 44% over the past three years.

It is our integrated banking and wealth management model that makes first Republic, an attractive destination for very successful wealth managers and other leading producers.

And once hired we continued to successfully integrate our new colleagues into our highly collaborative culture.

During 2021, we welcomed 11, new wealth management teams to first Republic.

And we're also delighted to have to have welcomed another highly regarded and teen New York just last Friday.

Overall, we're very pleased to have reached nearly 280 billion in assets under management in 2021 and we're looking forward to continued success in 2022.

Now I'd like to turn the call over to Augusto Goodbye.

Thank you Bob Let me review the results for the year and cooler and also offer some guidance for 'twenty 'twenty Chan.

Our capital position remains strong.

In 2021, we added over $2 $8 billion off net new tier one capital through five capital raises this includes $740 million a 4.5% perpetual preferred stock issued during the fourth quarter was this our weighted average cost of preferred stock.

It was less than 4.5%.

Liquidity also remains strong high quality liquid assets or 17% of average total assets in the fourth quarter.

Our credit quality remains excellent.

For the fourth quarter net charge offs were only $64000.

Our provision for credit losses for the quarter was $24 million.

And almost entirely by our strong loan growth.

Our net interest margin was 268% for the fourth quarter.

And $2, 67% for the full year 2021 in line with our guidance.

Importantly, net interest income was up a very strong 26% year over year. This is primarily due to the robust growth in earning assets.

Our efficiency ratio was 63, 3% for the fourth quarter and 62, 5% for the full year 2021 also in line with our guidance.

The fourth quarter results included two unusual items. The first was a tax credit for our research and development activities.

Reflect innovation and technology enhancements made over the past few years.

This lowered our effective tax rate.

The second was the one time executive compensation expense.

This increased the fourth quarter efficiency ratio by approximately 180 basis points.

The net effect of these two items, mostly offsetting one another was the only a 3% decrease to earnings per share.

As previously disclosed we prepaid $4 billion of <unk> advances in October .

And the prepayment cost of $19 million is included in other expenses.

Our effective tax rate was 16 point of 1% for the fourth quarter and 19 point of 1% for the full year 2021 .

Now, let me provide some guidance for the full year 2022 .

Loan growth is expected to be in the mid teens.

Our net interest margin is expected to be in the range of $2 six five to seven 5%.

Given our high level of cash we currently expect to operate near the lower end of this range.

The efficiency ratio is expected to be in the range of 62% to 64%.

A reminder, our first quarter efficiency ratio is typically higher.

Due to the seasonal impact of payroll taxes and benefits.

With respect to income taxes, the full year tax rate is expected to be in the range of 20% to 21%.

Overall, it wasn't very strong quarter and year now I'll turn the call back over to my across there.

Thank you, Mike Bob and oil got it was a great quarter and year.

The Bank service model is as strong as ever.

Our entire team remains focused on executing our client service strategy.

This approach has driven a remarkably consistent results for many years and we have great momentum momentum heading into 2022.

Now we'd be happy to take your questions.

Yes.

And if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again press Star one to ask a question, we'll pause for just a moment to allow an opportunity to signal for questions.

Our first question.

From Steven Alexopoulos with J P. Morgan.

Hey, good morning, everyone.

Hi, good morning, Steve.

Mike I wanted to start so 2021 was clearly a great year for the company.

With that said given all of the management turnover recently that the market concern is how this might impact the performance of the company moving forward right and this is the first public call. Your hosting since news came out of Jim do you need to take medical leave and the news on Gaia resigning. So hopefully you can use this call to allay some market concerns.

Now that it's been two weeks since news broke on Gaia resigning can you offer any additional light on why you left the company.

Steve Thanks for the question and we are we certainly understand the comments and feelings out there.

Really we talked about it in our filing of our announcement in early January a guy who chose to resign from the firm. We appreciate all the contributions she made over the years and we really can't comment any further than that.

At this time.

Okay.

Are you able to answer whether her resignation was tied to some action from the company, which would entitle her to severance I know you said there was one time executive comp charge in the quarter I know, if it's related to that or whether you're just left to pursue an opportunity at another firm.

So she did resigned to pursue other opportunities and I think I think what we would say is what we disclose is really what we're going to talk about what what I really liked.

Sort of focus on a little is we have a terrific team in place.

And we have a fantastic client service culture and are focused on delivering to clients each and every day.

And so our business model and culture is what has prevailed over the years in spite of any challenges that might exist. In this this is an example of another one.

The board of directors and the leadership team.

The main incredibly optimistic about the prospects we have for the year ahead.

Our business model is resonating with clients our brand is very strong in the markets.

And clients clients are resonating with that and so.

We have dealt with challenges in the rest of the executive team is very confident with the opportunities in front of us and it's about looking forward.

And you know just to just an observation.

Jim is on a temporary leave.

He is he has helped us all collectively be ready for this kind of challenge and the board thinks about these things and we're ready to pick up the baton and keep running forward.

So Mike maybe to follow up on that.

What's been the impact to employee morale right given the announcements in it and has there been any disruption in client service or the business tied to these management changes.

So the simple answer to your second part is no client service has not been impacted clients remain very active business is starting off the year very strong Bob mentioned.

A terrific team in New York that joined US last Friday and our colleagues.

You know what you said there may have been some surprise, but you know what that gets over very quickly and we move forward and everyone. Here is very focused on serving clients.

Okay. That's.

That's great and just final question now that Korn Ferry's been hired I would assume they have started the process for the CEO search do you have a best guess what can you tell us in terms of when we might expect that process will be completed thanks.

Yeah no. Thanks for the question, Steve I mean, the the board is conducting a search with Korn Ferry's assistance to identify the best candidate for the CEO role, it's one of their top priorities.

I don't think there's going to be a rush because the focus is for finding the best candidate to carry on a very strong client focused culture and business model.

I think that's the focus versus speed.

But Mike, but your key message to everybody is because there's so much uncertainty there's speculation I have almost never seen this before is that.

Theres still a stability of the company, which is what first republic's known for and it's not having any notable impact.

Morale client service right, it's the things that led to a great 2021.

There's nothing that you see at this point that should derail that from having another great year in 2022 is that right.

It's absolutely correct morale is strong and the opportunities ahead of us are terrific and clients are very engaged and it's very active right now.

Okay.

Thanks for taking my questions.

Okay.

Take our next question from Bill <unk> with Wolfe Research.

Thank you good morning.

The higher compensation costs could you parse out how much of the increase was associated with the fact that you're just simply growing employee base versus how much is inflationary and if you could.

I'll give a little bit of color across your businesses.

Including some of the teams on the wealth management side that you brought on board how much more its costing you Tom board employees today versus last year.

So it's a good question I think more of our compensation related increases are tied to <unk>.

Production levels.

And growth in deposits wealth management fees and I can have Bob talk about the sort of the hiring practices I think from an inflation standpoint.

There is competition for what I would say new hires and people onboarding to the company, but I don't think that's a meaningful part of the increase is largely tied to a much greater production levels and on teams as Bob said, we're not we're not we're not the cost of hiring teams is not appreciably changed in the last year versus prior years or more recently.

Yeah.

Understood and you also mentioned that your core system conversion remains on schedule, but part of the increase in expenses was attributable to information systems initiatives can you give some color on what's behind those initiatives.

So in terms of overall initiatives like we've.

Nothing's changed from this aspect right, we continue to invest in the franchise.

For client service delivery, helping our colleagues.

Become more efficient and it allows them.

I would say is more emotional time or more more client time versus processing and so.

We're always investing in mobile we're obviously working on the core conversion conversion and just continue ways to help our colleagues and clients be more efficient with their time.

Got it so I guess sort of putting that altogether the message on expenses done that despite the the sort of the upward pressure.

Relative to expectations your outlook for operating efficiencies unchanged and does that then suggest that you don't expect those expense pressures to persist that's really just production driven.

Yeah, I would comment that we expect our expenses to grow in line with the growth of our revenues and this is what we have embedded in our guidance that we just provided.

That's great. Thanks, if I could squeeze in one last one.

I guess is there anything notable behind the acceleration in Nextgen loan growth that you saw this quarter.

And that's it for me thanks, very much for taking my questions.

No nothing unusual there and as I mentioned, that's a strategy that has been well in place for over a decade. So we're very pleased with our continued momentum and.

As you know of both our household debt refinanced product in our professional lines of credit have very solid momentum looking forward.

Okay.

Great. Thank you.

Our next question from Casey Haire with Jefferies.

Thanks, and good morning, everyone follow up question on the NIM.

One curious what are what kind of rate hikes R. R.

Into the.

The NIM guide as well as.

Liquidity excess liquidity deployment cash balances are up slightly on the quarter. Thanks.

So we anticipate three fed funds moves that during 2020 and slightly flatter yield curve and we still expect our cash levels to be elevated and this puts us in the lower end of our guided range.

Yes, I might I might add to that just a little bit Casey I think.

You've heard us talk about this in the past right. We're we're okay to carry elevated cash levels, given our strong deposit growth.

To deploy it first and foremost for client opportunity in client activity.

And investments on a on a strategic basis or on an additive basis.

The reality of it is we're focused more on net interest income growth than we are or what the reported margin might be and yes. It's been at the lower end of our range here for a while but if you look at our net interest income growth has been incredibly strong in the last several quarters.

Yes.

Yes for sure.

Okay and on the deposit growth.

36% year over year, I know, it's difficult to forecast, but are you still seeing.

Pretty strong momentum on that front or do you expect that to kind of moderate from this this pace seen in 2021.

Hey, Casey, it's Mike Yeah, obviously, it was an incredible year in terms of deposit growth.

There is a number of factors new household acquisition I'd say it was a good split between business and consumer probably two thirds business a third consumer increase in average balances overall and.

Given the general industry dynamics in excess deposits in the system stimulus driven the stimulus has stopped so.

That probably will moderate.

Deposit growth from 36%, but we're very optimistic about our ability to continue to do.

<unk> deposits and new households to support the.

The good loan growth that we've been able to demonstrate over years.

Okay, Great and then just last one for me on the <unk>.

Pretty dramatic.

Decline from that sort of 10% of the balance sheet <unk>.

Historically, a little under 3% are we how much of this do you anticipate being.

Permanent because obviously this that would be a very nice.

Positive mix shift to the funding funding base.

Yeah no. Thanks for the question Casey I mean, it sort of builds off what Mike Selfridge said, I mean, given the extremely strong liquidity.

Is that all banks have benefited from in their deposit base.

We've repaid as you've seen that's H L. B, we do like to use the <unk> as a duration match and so I think there will be a time, where it will increase again, but right now.

It doesn't feel like that sort of in the cards for a little while given how how strong our liquidity is in the banking system and including us.

<unk>.

Very good thank you.

So next to Terry Mcevoy with Stephens.

Hi, Thanks, good morning, everyone.

Okay.

Maybe first question were there any other employee departures in recent weeks that didn't warrant a press release or an 8-K filing but maybe were longstanding employees at the bank and in an important to the outlook.

No no nothing like that I would like to say something about this because you you mentioned something that's of interest so.

Periodically right.

Very longstanding employees.

To get to a point, where they like to retire including on the.

Relationship management side.

And just a comment on that like when they have happened their books of business a business in transition.

There is no disruption.

We have a very thoughtful approach when that happens because we discuss it with our colleagues and you transition the business to people who've worked with the clients and there is typically no disruption and frankly, it usually leads to a growth in the business because it's another contact point and our clients deeply appreciate the thoughtfulness with which.

We approach this.

And I would just add one that goes to the next generation relationship manager program that has been in place for almost seven years and Thats grooming. Our next generation of relationship managers to meet the needs of those next generation clients and so there's a combination of both hiring and grooming from from within and I think that.

Adds a lot to the depth of the franchise.

Yeah.

Okay I appreciate that and then.

Just to be clear to your first question No turn Oh no other turnover.

[laughter] great. Thanks. Thank you both and then as my follow up maybe a question on interest rate sensitivity. What you provided in the deck is as of September 30th. So I guess my questions are how does that change or did that change at all over the last three months and I know in the Q. It talks about incorporating future growth projections could you maybe just talk.

<unk> balance sheet dynamics and underlying growth that's behind the the one 4% increase in NII.

Yes no.

From quarter to quarter, those disclosures don't change a lot.

And that's largely because of how consistent and stable we are.

So we will have the year end numbers here in our in our 10-K in a bit.

You know a few comments on this because the bank has always been about.

Consistency and stability, especially when you think of financial metrics right. So our net interest margin.

Our efficiency ratio if you go through the two years of the pandemic frankly.

Much of that never changed right.

The efficiency you got better overtime.

And our margin we didn't deviate at all notwithstanding liquidity in the system the fed reducing rates very very quickly and if you go back over time, that's pretty much the case and so a few dynamics that help with that.

72% of our deposits are in checking that gives you some protection as rates start to rise.

And then one that's probably you highlight when you said it growth.

The loan portfolio growth at 15% to 20% per annum, coupled with 25% to 27% already floating leads to nearly half the portfolio repricing in a year.

And so again, what does that lead to consistency, especially as you can lag some of your deposit pricing.

And so when we provide our guidance that's all factored in also with a growing balance sheet and importantly, growing net interest income.

Yeah.

Okay. Thank you Mike.

Go next to John Payne carry with Evercore.

Hi, Good morning. This is Tom Stephens on for Jonathan Cart jump Bank I just wanted to talk about your.

Loan growth guidance for 2022 can you talk about some of the underlying.

Growth dynamics that you guys expect.

Typically on C&I capped call and Morgan Stanley .

Hi, It's Mike Selfridge.

We provided mid teens guidance, we're comfortable with that guidance and in terms of Mike Ralph alluded a bit to our positioning going into the market for 2022, our pipeline is strong up from last year.

There are some natural headwinds to refinance given the expected increase in interest rates, but having said that I would point you to our very modest market share our positioning as it relates to client loyalty and so we do expect continued growth.

For the year, both in single family multifamily and on the capped call line. It's been a very active you saw the increase in utilization rate given the activity in 2021, and our positioning in the in the business banking.

Sector looks very good looking forward.

Yeah.

Great. Thank you for that and then just quickly I know you guys pointed out that $19 million <unk> prepayment expense and other expenses.

Can you just talk about a good run rate going forward for that line item. Thank you.

So yeah, we had elevated levels zalviso this past quarter with a significant amount of pre pay swanson allow them to prepay, we have a prepayment cost like we had some small amount last quarter.

When you look at our outstanding F. I shall be advances are the next.

Maturity dates will be some time in 2023. So this is after next maturity of those somewhat unexpected.

Obviously this quarter was that elevated level, so I don't expect that going forward.

Okay.

Okay. Thank you for taking my questions.

Take our next question from Andrew Liesch with Piper Sandler.

Hi, good morning, everyone. Thanks for taking the questions.

Good morning.

On the Uh huh.

180 basis points or so.

Hit to the efficiency ratio on the salaries and benefits how much of that was.

<unk> versus say, just the true up and and bonuses.

So so what I'd say is this.

The there was a contractual arrangement that was entered into in July and we were paid in line with that contract and it includes what I call two items, one would be severance in the second would be.

The unamortized <unk> expense because those are continuing to vest under the terms of the contract.

Got it okay.

That's helpful. So if I take that out and take out the 19 million of the prepayment penalties.

I'm getting close to an efficiency ratio of 60% and your guidance is notably higher than that.

Is that just more of a return from a title or above.

Evelyn Entertainment costs more client events next year.

I'm, just I'm trying to figure out why the efficiency ratio could rise four percentage points from there.

So so you're correct when do we think about 'twenty 'twenty Chi, obviously omicron delay things quite a bit with we still plan to go back to the offices in 2022 and start hosting a client events, but at the same time, we don't slow down and continue investing in our franchise.

And this is what youll see are embedded in our guidance for 2022.

The other thing Andrew on where we are.

If you the way you just did that our efficiency ratio relative to third quarter relative to fourth quarter a year ago.

Our all in line.

Right. So again think about consistency over long terms.

Think about the business model over a long period of time and that consistency is sort of is a manifestation of that and you see that in in our overall results.

Got it okay. Thank you.

And then just on the on the mid teens loan growth guidance.

I think there are some headwinds on refi, but it seems like you still have a pretty good pipeline, especially bring over new clients.

That does sound like a slowdown from the last few years is there anything in there that could cause that put on or is this somewhat conservatism on the growth outlook.

Well I'd say, it's realistic and when we look at the opportunities ahead, it's what we feel comfortable with and I would note that even in rising rate environments. The last one being 2016 to 18.

Refis generally over 10 years.

Hum.

Gone below 40% of our <unk>.

Single family originations and so youll see a mix between purchase and refi.

In terms of the percentage and it's still a very active market is still very active purchase market I would note that's.

On the purchase side, an area, where we are very much excel as it relates to the competition, given our ability to execute and deliver for our clients.

The other thing I'd add is our win rates have been pretty low right now <unk> has been elevated.

And so youre seeing the growth that we have <unk>.

Produced the last couple of years, especially in that elevated environment. There is some impact that it will slow down a little bit.

As rates rise that said the volume of activity remains incredibly strong right now.

Got it okay. Thanks for taking the question.

Thank you our next question from Chris Mcgratty with K B W.

Hey, good morning.

I was wondering if you could start.

Provide a comment on new production yields and what youre buying in the bond book compared to last quarter.

Let me, let me start with the lending side and turn it over to Mike Earle go on the investment side, but single family originations are coming in right around probably 270.

Multifamily about 310 commercial real estate about 340 capped call lines of credit are probably in the prime minus 75 basis point range.

And on the investment side municipals have been sort of in the low threes up to three in a quarter.

HQ allay some of the recent activity we've seen is around 2%.

Okay.

Thanks for that.

Maybe the follow up would be.

With all the preferred actions in the quarter could you just help us with the run rate going forward Mike.

So sorry could you say that again, just I call. It just a new run rate for the preferred dividend because of the movement in the quarter.

Yeah. This was 38 million and it was expected to be in the first quarter.

Got it thanks.

Okay.

Take our next question from Jared Shaw with Wells Fargo Securities.

Hi, good morning, Thanks for taking my questions.

So maybe just on the on the pipeline you mentioned that it's up year over year going into the into the first quarter should we expect that that is more similar to the I guess the lower rate of annual growth that we saw this quarter or should should that recover back up to the.

So what we are higher level that we saw earlier in the year.

I assume youre referencing that loans grew about 5% quarter on quarter.

I guess I was looking at the originate at the origination level up 1% year over year versus where it was closer to 50%.

Yes, let me add some context.

Fourth quarter of last year, if you sort of recall.

What happened.

March April may.

It was a pretty big slowdown in 2020 of client activity because that was obviously the very first stay at home orders people had to figure out how to do appraisals and home visits and then there was an acceleration in so that the.

The typical path of originations last year was different.

This year it probably is more normal, but Mike Yeah, I think Jerry and particularly if you look at single family quarter over quarter. There was just a little bit of unusual bunching that occurred in 2020, given the pandemic.

Steer you more towards the.

Annual origination number which was a record of $65 billion up 23%.

Significantly in single family multifamily CRE and <unk>.

Capital call lines of credit.

Okay Alright.

Good color, Thanks, and then.

At capital, obviously, all the regulatory ratios look really strong.

GCE, though continues to trend down you know when you look at the you know in the past the desire to hold two years of capital or two years of growth capital do you feel that you're that you're you're there right now or could we see some additional capital bolstering to get that to your question again.

Thanks, Sharon for the question I mean, we were really pleased with the five offerings that we did in 2021.

And really bolstering the bank's capital and similar to the past, we're opportunistic and we look at both markets and depending upon.

The opportunities will will go into.

We will go into one or the other and we feel really good where we're at now and we think that this gives gives us running room and so we remain opportunistic but nothing from them.

The immediate standpoint.

Okay and then just finally for me I guess.

On the on the management front, one where there have there been any other internal promotions.

I guess, besides yourself and Olga over the last few weeks and then sort of second for a company that is really always prided itself on developing in house talent.

Does hiring Korn ferry for the CEO search signal a change in should we expect.

Potentially the next permanent CEO to be from the outside.

So in terms of the first question there have been promotions internally, we have promotions each year internally as people advance their career and take on more responsibility and we have a terrific team.

Deep team that has continued to take on these additional responsibilities in the face of this change.

In terms of the search process the board.

<unk> is conducting.

A thorough process and I don't think it signals.

Certainly a change in approach, but we've been working at succession for I've been at the bank 12 years.

I'm a product of that succession is I was hired as the deputy CFO before my with my predecessor, Willis Newton as the CFO , Mike Selfridges here as part of that and so the board has been focused on this and it's been one of their biggest priorities for the better part of a decade.

And the team in place is outstanding.

So the last part of this is is the CEO successor, and they are now focused on the right cultural fit to carry our business and business model forward.

Great I appreciate the color and taking the questions.

Okay.

And that concludes today's question and answer session. Mr. <unk> at this time I'll turn the conference back to you for any additional or closing remarks.

Thank you everybody for the questions I'd, just like to close with.

2021 was a terrific year with strong growth of growth across the board. We're starting 2022 with client satisfaction at an all time high our robust loan pipeline and great opportunities in front of US we're very optimistic about the future and are looking forward to the year ahead have a great day everyone.

Yes.

This concludes today's call. Thank you for your participation you may now disconnect.

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