Q4 2021 ConnectOne Bancorp Inc Earnings Call
Yeah.
Greetings and welcome to connect one Bancorp, Inc, fourth quarter 'twenty to 'twenty one earnings call.
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I would now like to.
The conference over to your host C. All of NCR.
Vice President of marketing connect one bank.
Thank you. Please go ahead.
Good morning, and welcome to today's conference call to review connect one's results for the fourth quarter of 2021 and to update you on recent developments on today's conference call will be Frank Sorrentino, Chairman and Chief Executive Officer, and Bill Burns Executive Vice President and Chief Financial Officer, the results as well as notice of this call on a listen only basis over the internet.
Were distributed this morning in a press release that has been covered by the financial media at this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, such forward looking.
Statements are subject to numerous assumptions, uncertainties, and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward looking statements included in this conference call are only made as of the date of this call and the company is not.
Obligated to publicly update or revise that in addition, certain terms used in this call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed today on form 8-K with the SEC and may also be accessed through the company's website at IR Dot connect one.
<unk> dot com each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release I will now turn the call over to Frank Sorrentino. Frank. Please go ahead. Thank.
Thank you Sarah and good morning, everyone. We appreciate you joining us today.
We're very pleased to report another strong quarter capping off what was truly an exceptional year for connect one and I'm extremely proud of our entire team's effort to help achieve these results.
Highlights for this quarter includes some of the best metrics evidenced by our strong return on assets and our strong return on tangible common equity.
This resulted in our pre provision net revenue metric exceeding 2% for the sixth quarter in a row.
And over 20% organic loan growth on an annualized basis, all while we improved our sub 40% best in class efficiency ratio.
2021 reaffirmed our operating philosophy that our focus on organically driven growth and efficiency through investment in technology, coupled with our strong client centric culture leads to create greater financial strength and ultimately the creation of shareholder value.
As many of you are aware stock price performance for the entire banking sector was strong over the course of 2021 with the BK Ax index rising by about 35%, while connect one stock price increased by over 60%.
We saw our market capitalization increased from about $800 million at the start of 'twenty, one to approximately $1 4 billion today.
Tangible book value per share increased three 5% for the quarter and by more than 15% for the year.
Speaker 1: percent for the quarter and by more than 15 percent.
Speaker 1: Yet we still train to discount to our peers, and we firmly believe we're still undervalued.
Yes, we still trade at a discount to our peers and we firmly believe we're still undervalued.
Speaker 1: We entered 2022 uniquely positioned to continue to deliver long-term sustainable growth and industry-leading returns.
We entered 2020 to uniquely position to continue to deliver long term sustainable growth and industry, leading returns in our existing markets are growing and we expect to further capitalize on opportunities to expand our valuable franchise.
Speaker 1: Our existing markets are growing and we expect to further capitalize on opportunities to expand our valuable franchise.
Additionally, the expansion of our team is paying dividends, while gaining momentum translating into meaningful organic growth.
Looking ahead, our current pipeline remains robust robust across all business lines. The outlook for the economy remains relatively strong and client confidence seems to remain high.
We continue to strengthen our position in the New York Metro market. While also successfully expanding into new markets that are a natural progression for us such as eastern long Island and southeast Florida.
Further we have a solid team of bankers with a proven ability to execute and we continue to be our first choice for top talent in the industry seeking a dynamic growth focused organization.
Additionally, our investments in both like continue to produce opportunities to deepen existing relationships and expand the potential of this platform.
And lastly, we have built a strong technological foundation and are well positioned to take advantage of the competitive fintech environment I expect to hear more about this as the year progresses.
So notwithstanding all this we certainly see several headwinds forming which may slow some of the extraordinary growth rates, we experienced in 'twenty one as.
As we move through the new year, we expect competition to heat up and the fed's anticipated tightening could slow overall economic growth.
But just to repeat we are still experiencing strong growth in 2022, but it will likely be somewhat subdued from what we experienced in the latter half of 'twenty, one and probably land somewhere in the low double digits.
On the deposit side, our focus has always been on core noninterest bearing demand and in that regard, we expect those balances to keep pace with our loan growth.
The next one has a long standing and proven track record of prudent and profitable growth supported by our people first philosophy and a stellar reputation among our business lines.
Additionally, the continued disruption caused by M&A is providing us even more opportunities to gain new clients and hire experienced bankers from revenue generators to tech talent.
And speaking of M&A, while our last transaction was completed in January of 2020, we expect that strategic acquisitions will continue to be a part of our long term growth plans.
We of course are maintaining our disciplined approach when evaluating potential partners and providing that provide a number of synergies with kinect, one and strengthen our franchise.
So now let me turn to our capital base, we currently stand with capital levels and earnings strength to support our projected growth.
We also plan to be opportunistic with regard to share repurchases being mindful of market conditions and actual growth in our balance sheet.
Further as you May know our board increased connect one's cash dividend twice during 2021 for a combined total of 44% and dividend increases during the year.
Our board will continue to evaluate future dividend increases during 'twenty two and beyond.
I want to reiterate that we are building on the solid momentum we've achieved and will continue to take an opportunity opportunistic approach to our growth, including continued strategic investments in technology and talent acquisition.
As a result expense growth is expected to accelerate at a pace that is faster than we have seen historically bill will provide a few more details on these projections in a minute.
However, we continue to generate favorable operating leverage, which ultimately empowers us to continue to invest in kinect, one while maintaining superior financial returns in summary, I am pleased to report that the company experienced a very successful year, both financially and operationally and we believe connect.
<unk> is poised to deliver on its long term objectives.
Now I'll turn the call over to Bill to provide some more details on this quarter's financial performance Bill.
Okay. Thank you Frank.
Everyone. So as Frank mentioned, we are very pleased to report another great quarter and year with financial metrics that place us among the highest performing banks in the country.
Of particular note our pre provision net revenue as a percentage of assets increased for the seventh consecutive quarter to $2, two 8% and the net interest margin widened for the eighth consecutive quarter to 375.
There is another metric that is very important to many of our investors and to us as well and thats the upward trajectory of tangible book value per share.
We surpassed $20 per share at year end, reflecting a 15% increase over the past year and that comes on top of a 10% increase for each of the prior two years and that type of book that growth comes from strong earnings that are primarily organically driven combined with financially disciplined M&A.
As Frank alluded to.
Our stock price performance in 'twenty, one was exceptional.
We still traded at discount to peers on a p/e basis, and so that plus the fact, we probably should be trading at a premium based on performance metrics and our growth. It leads me to believe there is significant room to further outperform.
Our loan portfolio portfolio, excluding the Pvp continues to grow at a double digit pace, while credit quality remained sound.
Our deferred loans under the cares Act is now down to almost zero charge offs. This quarter were next to nothing.
Non accruals declined during the most recent quarter.
And even with the strong balance sheet growth our capital ratios continue to increase the tangible common equity ratio on a consolidated basis surpassed 10% at year end.
And that puts us in a great position to do all or a combination of the following.
Grow organically at double digits, we purchase stock increased dividends and we also have the flexibility to utilize cash in an acquisition.
Let me dive a little deeper into our financial results first with the net interest margin.
As we mentioned earlier our margin has continued to expand whereas the industry is mostly contracted in fact, the NIM here at connect one on a GAAP basis has expanded eight consecutive quarters. That's been a result of a number of structural factors related to our earnings interest, earning assets and loan portfolio, including for US. We just have a low percentage of immediate.
Repricing loans and a high percentage of floors in place on those floating rate loans.
We also have significantly less exposure than most banks to prepay mortgage interest with interim instruments, and then on top of that going way back to the beginning of the pandemic, we were very aggressive a repricing of our deposits.
Now as rates rise will be several factors in play with determining our margin going forward.
First on the positive side, we're going to benefit from utilizing excess cash we don't have as much as some banks, but we have a good $100 million or so that we can put to work.
During the latter half of last year, we locked in in excess of $500 million of fixed funding rates.
In addition, our core noninterest bearing relationship balances have been increasing significantly over the past year that number is up more than 20% commensurate with the loan growth and that source of funds will help drive net interest income and a higher rate environment.
But there are also several factors working against the margin first as a reduction in market liquidity, that's coming in that's going to lead to deposit pricing competition.
And then we have pricing competition on loan originations and that's already taking place and that is compressing spreads on new business today.
And then there's prepayment activity and therefore fees theres been a lot of that in 2021 that is expected to decline in a rising rate environment.
And there's a day we've been operating at the widest net interest margin in our history and I expect some margin compression in 2022.
Next I want to talk about progress we've made on non interest income initiatives.
Core non interest income is up 10% year over year.
Our newly formed SBA team is generating meaningful success in originating and selling SBA loans, we continue to invest and bolster resources. There also are CRE origination for sale platform continues to accelerate and expand its reach so natural progression for us.
Given our ability to generate strong credits with favorable terms.
Markets, where others may lack our origination power.
Next with regard to both lie we continue to invest in that platform as well as its marketing and product development. The number of franchisers franchise or is using our proprietary products is accelerating in the pipeline for fee generation is increasing.
And you know you may be aware, we do not rely significantly on overdraft fees. So fees at risk are relatively low or connect one.
So with all of that on conservatively conservatively predicting approximately 15% increase in noninterest income in 2022.
Let me turn to the Opex in the fourth quarter was about flat from the sequential third quarter as I expected, but now going into 2022, we will see an increase in expenses, especially on the comp line.
This is due in part to wage inflation, which impacts not just our existing staff, but also new hires and it's frankly was alluding to we are expanding organically into new markets capitalizing on disruption caused by M&A, which has been driving revenue generating talent connect one.
In addition, you should expect increased technology expenses here, including enhancements to our bank infrastructure build out of our product offerings and continued investment in both eyes digital platform. So together. These items are driving expense growth, which I estimate to be approximately 3% to 5% in the first quarter over the sequential fourth quarters of three.
Went to 5% sequential growth.
Estimate that expenses will continue to increase over the remainder of 2022, but but at a slower sequential pace than I just mentioned.
Turning to credit quality.
<unk> always had positive trends in that speaks highly to the strength of the portfolio and how our team has responded to the pandemic we.
We are seeing a reduction in non accruals, that's attributable to bolt solid underwriting and our proactive workout philosophy delinquencies continue to remain extremely low deferral.
Deferrals I mentioned before is down next to nothing we have one loan left.
In regards to see so I've said this before and it still holds true. It's just a complex and difficult thing to project over any reasonable horizon, especially in a volatile economic periods like we're in today.
For the quarter, we provided a small addition to our ACL, primarily due to significant core loan growth.
Offsetting the increase in the provision due to growth were releases generated by our seasonal model were.
Reflecting improved economic forecast as well as qualitative factors related to the reduction in deferred loans as well as lower levels of delinquencies and Paramount.
So going forward I think it's fair to project provisioning commensurate with portfolio growth. Although everyone is in the same boat with regard to economic forecasts, which are uncertain.
Wanted to also mentioned our tax expense line, our effective tax rate jumped a little up to 27% for the quarter and that reflected a significant increase in taxable income going forward.
We'll have more room to invest in tax advantage investments, but my expectation is that our effective tax rate will increase over the full year 2021 effective rate in 2021, the annual effective tax rate was 25, 5%.
And so the forecast for the increases based bolt on more growth in our <unk> and.
Our expanding geography, which can reduce the benefit of some of our tax strategies and.
That's the end of my remarks, and I will now turn it back over to Frank for concluding remarks, well. Thank you Bill as you just heard connect one delivered a record financial performance during 'twenty, one and we had great success in creating positive operating leverage was drove our sub 40% efficiency for the year.
We drove this efficiency not by being a cost cutter, but rather the direct opposite.
And we are continuing to make all the necessary investments in Kinect one.
As we move into 2022, I'd like to reiterate a few points for.
We're projecting strong organically driven growth.
We're continuing our digital enhancements and investments on both the connect one and both light platforms, our margins and efficiencies are expected to remain among the best in the industry, our balance sheet and credit are in good shape, and we continue to pursue attractive opportunities to further maximize long term shareholder value.
So we're excited about our future and look forward to updating you in the quarters ahead and with that we're happy to take your questions operator.
Thank you.
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One moment, please while we poll for questions.
Yeah.
The first question comes from.
Frank Schiraldi with Piper Sandler. Please go ahead.
Good morning.
Good morning, Frank.
Just on the.
First of all on the on that.
Outlook for the.
The margin.
Any sort of guide or color you can give bill on your thoughts.
What a given 25 basis point rate hike.
How that would impact NIM here.
And sort of what sort of deposit betas, you're thinking about right out of the gate.
I don't think its going to have a major impact on our margin for the reasons that I.
Just spoke to a lot of moving parts.
And at the end of the day it doesn't have a significant impact that alone.
Okay. So.
More neutral I.
I would say it's neutral right.
And then just in terms of growth.
The growth outlook is a little bit better I think than.
Than you.
Noted last quarter in terms of 2022, I think you talked about maybe 10% growth.
Now you're talking low double digits. So just.
Wondering in terms of geography.
I know you have.
Paul amount of Floodings in Florida is that additive to that growth rate or is that going to grow faster than the overall bank or about the same.
Yeah.
Well I think theres a lot of different things, we're doing here at connect one that may have higher growth rates than the overall growth of the balance sheet. So.
Some of the obviously just the rule of smaller numbers smaller footings in certain places may have may have.
Higher growth rates, but yes.
I think somewhere around the 10% low double digits is within the realm of what where what we think we see as we sit here today now theres lots of things that could impact that going forward.
But we have more lines of business.
More in the way of geography more in the way of what we're building out more opportunities to hire revenue producing individuals than maybe we've ever had before and so.
I think I think pegging it down at the low low double digits is probably the right place for us to be thinking about it.
Got you Okay I appreciate the color. Thank you.
Youre welcome Thanks, Greg.
The next question comes from David Bishop with Seaport Research partners.
Please go ahead.
Yeah, Good morning, Dave.
Hey, David Paul as well.
Frank just curious sort of circling back to that you mentioned the opportunity to hire revenue producers.
It obviously impacts the expenses, but just curious in terms of the types of.
Backers, you might be targeting or these more C&I or CRE focused and just curious how many maybe individuals we added this year and maybe what the budget could be for this year.
Aye.
Hard to say, who is going to pick up the phone call is tomorrow, but we are seeing inquiries from various.
Types of individuals as well as entire teams.
Both in the C&I and commercial real estate and in other specialty type markets. So really hard for me to predict what those are going to be I would.
Venture to say and I would believe based on where we are the banks that theyre calling from.
That there'll probably be some mix of C&I and commercial real estate.
We are in we are targeting other.
Potential verticals as well.
As you know we're building out our expertise relative to our <unk> platform and some of the franchise lending there. We are a healthcare group that's been building.
We have our SBA team that we've been building as well so certainly those things rise to.
The top of the pile as.
As far as the numbers go.
I think I mean, I think I made it an advertisement on our last call. If you're interested please call us I'll make it again.
Sort of no cap on what we'd be willing to look at it.
Relative to the number of people that we'd be willing to hire in 2022, we'll take those opportunities as they come because some of them are just great opportunities there almost once in a lifetime opportunities.
But I think in 2021 we hired probably about a dozen.
Doesn't doesn't have individuals over the course of 'twenty one.
I think we're going to see similar growth in 2022.
Got it.
And Frank you had mentioned one potential use of excess capital.
M&A.
Would your preference to be looked at in terms of the target bank would it be something that.
It would be core deposit driven.
Something that augment your fee income generation is there sort of a.
Topline characteristics, you're looking for in terms of a potential acquisition targets.
I think we made a list of all the reasons why we would.
Even entertain an M&A transaction I would say, yes to all of them.
We don't generally.
Don't generally get to pick exactly what it is.
Is going to present itself as an opportunity.
But there are so many different reasons why and I think even if you look at some of the transactions we've done in the past whether it was bringing on another line of business, whether it was expanding a geography, whether it was.
Other sources of income whether it was moving more in the technology World.
Each acquisition brings its own unique strengths.
Through the transaction and I think we've developed a reputation here at connect one of being quite opportunistic and when we see opportunities that fit within particular disciplined financial model and provide some other.
Expansion of our existing franchise.
That expansion is human capital geographic or whatever we will take advantage of that when we think when we think all those things line up the right way now all that being said our some of our best performance has come from straight out organic growth in the vast majority of our growth has been organic and we continue to.
Develop resources to attract that organic growth.
But coupled with that organic growth and with the with the concept that we continue to grow capital I do believe that M&A.
Selected M&A and disciplined M&A can player can play a really valuable role in our future growth plans.
Got it maybe question for Bill I think you had mentioned.
In terms of the NIM competitive pressure on the loan front, just curious what youre seeing in terms of loan spreads currently versus maybe last quarter.
Yes, My most recent reading of it.
Spreads were coming in 35 to 50 basis points, which is a lot.
Got it thanks.
Thank you.
Next question comes from Matthew Breese with Stephens, Inc.
Please go ahead.
Good morning.
Good morning, Matt Hey, Bill back going back to the NIM. So you mentioned in the prepared remarks that you expect some pressure from here and along those lines one of the things I struggle with is the sustainability of the overall core loan yield which still comes in I think I think a little bit north of $4 50.
So can you discuss where new loan yields not the spreads are actually coming on what portfolio has kind of come above $4 50 and one.
The blended new rate is relative to that.
Yes, it depends.
Hands on the portfolio, obviously construction lending in C&I.
Well over 4%.
As we get into.
Owner occupied.
On an occupied commercial real estate, it's a little bit lower and then multifamily is will allow us to those.
The overall spread is I think the overall loan origination rate is about 25% to 30 basis points below where we are.
It's about it's about that about third maybe 35% to 40 basis points lower than we are today.
For new loans.
But our cost of funds continues to go down it's just.
It's.
The other aspect to it is that the growth when you look at the margin as the growth in noninterest bearing demand. So when I put all those things together and none of those.
Assumptions that <unk> made our projections are certain I can.
Come out.
I expect some margin compression.
Not not and again, we I've talked about before we arent the highest level we've ever been at a 375, so even if our margin compressed by 10 or even 20 basis points. We're still in really good shape in terms of driving return on equity.
Okay, and then just considering the absolute level of loan yields it still strikes me as quite a bit higher than a lot of your peers.
Is that is it come down to the relationship driven model or is it the structure of the loans, maybe give me a little bit more insight there.
I think part of it is the relationship aspect of it where we're getting something more than the market.
<unk>.
And <unk> two a quarter higher on that we also have less residential mortgages than most and those tend to be lower yielding so when you put it all together I don't think we're that far off market, where we're not out there.
It's not an indication that there are riskier assets okay.
It is it is.
The proof is in the pudding our performance in our portfolio.
We're very careful in how we lend and we don't we don't chase yield down.
We were able to say no. If we don't if we don't want to compete at a given rate.
Got it Okay and then the last one I think all things credit quality related are on very solid ground at this point.
Kind of the lone remaining asset class I get questions on is office, particularly in New York City Office.
And I'm just curious your thoughts on the on the health of that segment over time and do you see any kind of incremental anecdotes that give you.
Our feeling one way or another whether or not there's real valuation impacts to be had there.
I would tell you that first off we don't have a lot of office on our portfolio, but that being said.
The New York Office market is actually pretty strong it's hard to find offer everybody thinks everyone's just leaving the keys on the baskin walking out of their offices, that's not what's happening the offices, maybe partially vacant today.
Because of all the COVID-19 issues, but that that's very very rapidly changing.
Bye Bye traffic index at how many minutes. It takes me to get from the city to angle clips and Thats continuing to increase so traffic is going up and.
There is more and more people in the city subways are filling up.
There is still large firms executing large leases in Manhattan.
And I think that trend is only going to only going to continue to rise.
There is actually some some conversation about shortage of.
Office space in the city that we see going into the future. So I wouldn't be overly concerned properties are trading at.
Pretty good valuations going forward.
So it doesn't give me a lot of concern even though it's an incredibly small part of our portfolio.
Okay.
Great well I appreciate you taking my questions. That's all I had thank you.
Hey, Matt.
Okay.
Ollie's on there.
Thank you. The next question comes from William Wallace with Raymond James. Please go ahead.
Putting it all the morning logged with good morning, good morning, with the expense pressures that you are talking about and then potential for.
Margin pressures I'm, just kind of curious.
What do you think efficiency can can do in.
In the year with the loan growth.
In terms of efficiency ratio.
Yes, yes, yes.
I think it will I think it will trend up a little bit but.
Not too much a few percentage points and maybe we could we could reach 40%, but as we get bigger I think in the long run I think in the long run will soon be able to drive efficiencies down even further.
As we increase our size.
But for this year.
Given the wage inflation and the margin pressures that you could see some pressure on the efficiency ratio.
Okay.
Thats helpful.
And then my last question.
Frank you kind of teased us a little bit in your prepared remarks, I believe you said something along the lines of the potential opportunities that.
So slide technology technological platform might profile might provide to stay tuned I'm wondering if you might.
Maybe give us a little bit maybe some handset just kind of like what what kind of opportunities.
Get a platform like that provide other than expanded.
Articles or something.
Well the platform itself today from when we bought it has more than doubled the amount of business than it does with individual franchise ores, which then in turn opens up the channels for more franchisees to make applications to both lie.
So just when we look at the original platform and what <unk> mission was weak.
We've created a lot of efficiencies there in that part of it's growing and it's growing on top of a marketplace, where there are more and more people who are interested in franchise opportunities. So you put all that together.
Pretty.
Im confident that that platform will continue to grow over time and get some meaningful scale relative to.
What the marketplace provides but then you start to look at all of those clients that we have access to and the franchisee space and what other products they need.
As they grow their business is outside of what <unk> primary mission is.
And we're starting to take advantage of using their technology using some of our technology using our <unk> platform using lots of other tools we have here.
Both the connect one in both lie to take advantage of those opportunities just like we do at connect one when we try to onboard a client and get the entire relationship where you start thinking about people that are coming through that platform and the reach of that platform, which as you know is national.
There's a lot of great opportunities there for fee income opportunities without the use of connect one's balance sheet.
To grow that platform and so we've been making investments there we're seeing those opportunities.
I don't want to I don't want to put any numbers to the paper today, but.
We're seeing clear and consistent growth not only in the platform itself, but in the other.
The expansion of that platform into other verticals into other.
Types of business and then when you take one more step away from it and say okay. That's the franchise world. There are other places where this applies to so for me every dollar we're putting into that platform has some multiplier effect to it.
As we continue to expand what we're doing there and Mike Rozman and his team are just doing an outstanding job of building that out and utilizing the resources that we're giving him to be able to do that so.
So that's why I say I think I think as we go through 'twenty to 2020 one were challenging years for both lie because think about it.
All the food franchisers.
The automotive franchises and every month they were basically shut down from parts of that timeframe.
We're all roaring back and.
And there is more and more franchise opportunities. They are a franchise aggregators that are now interested in the <unk> platform you can't be in the franchise space without knowing about both light today. So.
So we're pretty optimistic about what our what our possibilities are there and I think as the year goes on we're going to see we're going to see some muscularis that will start to show up in some of the numbers and we'd be happy to report that when it happens.
Okay, great Yeah. Thanks, Frank that's that's helpful. I appreciate that additional commentary and we'll look forward to kind of watching how it unfolds.
Thank you that's all I had.
Thank you Wally.
Okay.
Thank you.
Again, if you would like to ask a question. Please press star one on your telephone keypad.
The next question comes from Michael Perito with Gabe VW. Please go ahead.
Hey, good morning.
Hi, Michael.
Couple, but most of my questions been asked but just a couple of follow up sorry, if I missed this but on the SBA gain on sale.
I was curious if you guys could provide any outlook commentary for 2022 I mean, it seems like you guys are have good momentum, there and or maybe gaining some market share with some hires you've made but the overall 700 market I imagine we'll take a step back just from the record levels that was that last year. Just curious if you could.
Kind of break out what you think you see there.
And on the gain on sale margin side, too which were elevated in the last couple of quarters.
Okay.
This is bill speaking.
I don't want to give any exact projection because we don't know ourselves, but it is going to be up significantly. We're hoping we're actually hoping to double the amount of gains that we had in 2021.
And I think the margins are holding in there pretty.
Pretty well.
So with me to be seen but we are we're continuing to put resources, there and building it.
And as most of your production today on the <unk> side or are you guys doing anything else within the SBA product verticals.
But mostly it's mostly that.
Okay.
That's helpful and then just.
Lastly, curious on the <unk>.
The low double digit.
Well, you know 10 plus percent loan growth.
Great.
I know you guys spent a bit of time on it already but just.
We try to understand kind of.
Geographically, where some of your opportunities are just curious if there's anything specific you're willing to add in terms of you down in Florida or some of the M&A disruption in New York City particular kind of <unk>.
<unk> locations or verticals that seem to kind of have a little bit more momentum or strength possible for next year that we should be mindful of.
I mean.
The general answer is yes.
We see it we're going to see it from everywhere and it's pretty much going to come.
In my opinion from all the various markets verticals and various teams that we have I think when you look at the company at the end of 2022, you'll see.
The pie of distribution is probably going to be about the same across verticals markets geographies, maybe some of the smallest geographies seeing a little somewhat of an increase just because of the nature of their size, but might not forget we're in the we're in the New York Metro market.
Enormous market and we have such a tiny.
Market presence that.
We can do big numbers and still not change.
Anybody's.
In our market presence. So I think when you look at how connect one is structured both geographically and in different lines of business.
You can see similar story, when we get to the end of the year.
I just wanted to add you know we continue to be disciplined both in terms of quality of deal and pricing.
So having all these ways to grow was very helpful. We don't need any one of them and it contributes to sustainable.
Sustainable margins and high returns.
And Mike Let me just add too you mentioned specifically, Florida.
I mentioned on the previous call or maybe the one before that that Florida was more of a defensive strategy for us not an offensive strategy. So it's almost hard to differentiate when we do alone in Florida is not really New York business or is it Florida business, just because the assets in Florida may not mean necessarily that that we brought on a new business relationship.
As I mentioned, a lot of our New York and now New Jersey.
Relationships here are also expanding their presence into Florida. So.
Again, that's why I say I think when you look at the balance sheet, you'll see hopefully a similar but larger balance sheet at the end of 'twenty two.
Got it very helpful. Thank you and then just just lastly, a little bit to conduct a question here, but just on the NIM outlook the compression expectation.
So what do you think the best.
What type of starting point or are you using IV because obviously the net Charleston really good expansion in the year are we talking compression all kind of the the exit core in the fourth quarter kind of year on year, just just trying to get a better gauge.
Yes, I would start I'm looking I'm looking for where are today and what's going to happen.
Going forward and obviously internally I look at it month by month, but what I can report to you on a quarterly basis.
Nope, that's perfect. That's what I figured just wanted to double check. Thank you guys I appreciate it. Thank you Michael Thanks, Mike.
Thank you.
Ladies and gentlemen.
We have reached the end of question and answer session and I would like to turn the call back to the management for closing remarks. Please go ahead.
Well I want to thank everyone and especially thank all the great questions. We were asked here today and thank you for joining us on our year end conference call and certainly look forward to speaking to you through the year of 2022, so thank you and enjoy.
Yes.
Thank you. This concludes today's conference you may disconnect your lines at this time.
Thank you for your participation. Thank you.