Q1 2022 Peoples Bancorp Inc Earnings Call
[music].
Good morning, and welcome to the peoples Bancorp's incorporated conference call. My name is Chuck and I'll be your conference facilitator today's call will cover a discussion of the results of operations for the quarterly period ended March 31st of 2022.
Please be advised that all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer period, if he would like to ask a question. During this time simply press Star then one on your telephone keypad and questions will be taken in the order. They are received if you or if you would like to withdraw your question. Please press Star then two.
This call is also being recorded if you object to the recording please disconnect at this time.
Please be advised that the commentary in this call will contain projections or other forward looking statements regarding peoples' future financial performance or future events. These statements are based on management's current expectations.
In this call, which are not historical fact are forward looking statements and involve number of risks and uncertainties detailed in Peoples' Securities and Exchange Commission filings.
Management believes the forward looking statements made during this call are based on reasonable assumptions within the bounds of their knowledge of peoples business and operations. However, it is possible actual results may differ materially from those.
These forward looking statements.
Peoples disclaims any responsibility to update these forward looking statements. After this call except as may be required by applicable legal requirements.
Peoples' first quarter 2022 earnings release was issued this morning and is available at peoples Bancorp Dot com under the Investor Relations tab.
A reconciliation of the non generally accepted accounting principles or GAAP financial measures discussed during this call to the most directly comparable GAAP financial measures is included at the end of the earnings release.
This call will include about 20 to 25 minutes of prepared commentary followed by a question and answer period, which I will facilitate an archived webcast of this call will be available on the peoples Bancorp Dot com in the Investor Relations tab section for one year participants in todays call will be Mr. Chuck So the risky president and Chief Executive Officer.
M S. Katie Bailey, Chief Financial Officer, and Treasurer, and each will be available for questions. Following.
Opening statements.
Mr sold Ritchie you may begin your conference. Thank.
Thank you Chuck good morning, everyone. Thank you for joining us as it relates to our results for the first quarter. We have several positives to point out our net interest margin expanded four basis points compared to the linked quarter. Excluding the vantage acquired loan pay offs of previously acquired loans.
Given this the P. P P loans, our loan growth for the quarter was 12% annualized and our asset quality remained stable with meaningful reductions in non accrual loans since year end and improvements in delinquency rate.
To summarize our financial performance, we reported earnings of $23 6 million or 84 cents per diluted share for the quarter.
As I mentioned in our guidance last quarter, our first quarter results are impacted annually by certain expenses, which include.
Stock based compensation expense for certain employees, which was 926000 or three cents per diluted share and employer contributions to health savings accounts totaling $620000 and negatively affecting diluted EPS by two cents.
We also had acquisition related expenses totaling $1 4 million, which reduced diluted EPS by for that.
During the quarter the completion of the vantage acquisition also including store expenses, which was not included in our guidance from our call last quarter.
Our allowance for credit losses declined since year end, and we reported a release of provision for credit losses of $6 4 million, adding 18 cents to diluted EPS for the quarter.
This amount includes $341000 for the establishment of the allowance for credit losses for the leases acquired from granted.
We had several previously acquired premier loans pay off during the quarter, which further reduced the required allowance.
Continue to see improvement in the economic forecast that loss drivers and when compared to the linked quarter. These contributed to the release of provision for credit losses.
Our allowance for credit losses comprised one 2% of total loans at quarter end compared to one 4% at year end, while we could experience modest decreases in our allowance and the remaining quarters of 2022 .
We do not anticipate it dropping meaningfully below current levels.
Moving on to our loan portfolio compared to year end, our loan balances grew $66 million, which was driven primarily by the vantage acquisition.
We acquired $140 million in lease balances, which is net of purchase accounting adjustments at the close of March seven.
Excluding the acquired leases total loans declined by $87 million, which was driven by the payoffs of some previously acquired premier alone since year end and forgiveness of P. P. P loans.
Total payoffs and amortization of the acquired loans during the first quarter with over $166 million, while P. P. P loans declined $45 million, while we are disappointed by the lack of loan growth. We remain optimistic about the full year a strong commercial production was more than offset by the fourth quarter loan sale and the.
First quarter payoffs from the Premier acquisition.
We anticipated, losing a portion of the premier acquired loans over time going forward, we continue to see robust pipelines and a slowdown in premiere payoffs.
Right the large volumes of payoffs, we experienced we do not like the we do like the improvement in our credit quality over the last six months and the reduction in out of favor portfolios.
For instance, our hotel portfolio declined $19 million due to our fourth quarter loan sale and another $11 million from recent payoffs for the full year of 2022, we are lowering our projected loan growth from 6% to 8% to 5% to 7%.
These payoffs muted the progress we made in loan production, excluding these declines commercial and industrial loans grew $33 million or 16% annualized.
While construction loans increased over $28 million premium finance loans were up $10 million or 28% annualized non acquired leases grew nearly $8 million or 25% annualized.
We have also seen some growth from the new geography added by the Premier.
Acquisition as we continue to develop and cultivate relationships with vehicle dealerships, we added over 20, new dealerships and over $2 million in consumer indirect loans during the first quarter from a credit quality perspective, our metrics remained stable compared to year end.
Our non accrual loans declined by nearly $3 million or 8% compared to December 31st 2021.
Contributing to the decline was a 1.5 million commercial we.
At $1.5 million commercial relationship that paid off during the quarter.
A portion of our loan portfolio considered current stood at 99% compared to 98, 8% at year end.
As we have indicated in our guidance last quarter, our quarterly annualized net charge off rate increased to 17 basis points as we have been experiencing low levels of net charge offs in recent periods.
For the quarter, we had a $163000 charge off of one acquired commercial and industrial relationship from Premier.
Criticized and classified loans were relatively stable for the quarter. We did have an increase at all loans 90, plus days past due and accruing which was driven by the addition of the vantage leases.
On March 7th we completed the acquisition of Vantage financial L. L C, which is a specialty equipment leasing business.
Its addition, built up the capacity and growth potential we have already seen in our leasing division.
Excited to expand our specialty finance business suite and we are equally pleased with the talent. We gained from vantage as I previously mentioned, we continue to seek acquisition opportunities within our fee based businesses.
I'm happy to announce that as of April <unk>, we completed the acquisition of an insurance agency with five offices located in eastern Kentucky, which serve thousands of clients.
The footprint of the agency complements the geographic locations of our branch offices in that area as well as adding opportunity in our insurance and other lines of businesses all clients as far as our community involvement during the first quarter, our charitable foundation awarded grants to nonprofit.
<unk> totaling 158000 lots.
<unk> contributed $100000 to a junior achievement financial literacy program that'll take place over three years for high schools throughout Ohio, We continued to strive to make meaningful investments in all communities and within our company, we take pride in providing a quality workplace for our associates and worried $20.
22 recipient of top workplaces USA National Award from inner gauge a technology company that empowers workplace excellence, we were recognized for providing an exceptional workplace culture and we're one of 1100 organizations acknowledged for their people first culture.
This year, we are celebrating our 120th anniversary and in celebration of our teams are delivering 120 acts of kindness throughout our footprint, we will continue to seek opportunities to improve our workplace and make a positive impact in our communities I will now turn the call over to Katy for additional details around our financial performance.
Sure.
Thank you Chuck.
Our net interest income for the quarter declined 1% compared to the linked quarter, while our net interest margin grew by four basis points.
The decline in net interest income was largely due to lower loan income driven by payoffs of loans during the quarter.
At the same time, our loan yields increased by four basis points with the increase driven by higher accretion on commercial real estate loans.
Our quarterly loan yields were also impacted by the addition of vantage, which had an outstanding leases with a lower yield than our historical lease portfolio, but still much higher than our typical loan product.
The recent increase in the federal reserve benchmark interest rate was not meaningful for our first quarter results, but we should start to see some of that some of our variable rate loans repricing soon and making a positive impact on net interest income and margin in future quarters.
Accretion income net of amortization expense from acquisitions with $2 $7 million compared to one $1 million in the fourth quarter, adding 17 basis points and six basis points, respectively to margin.
P. P M commerce, becoming less impactful and only added five basis points to net interest margin for the quarter compared to six basis points for the linked quarter.
Our average cash balance declines compared to the linked quarter, reflecting the impact of the vantage acquisition payment, but still continued to be a drag on margin negatively impacting it by 17 basis points for the quarter.
As we noted last quarter, we did not anticipate that our cash balances would decline significantly in the first quarter of 2020 two as we continued to have strong core deposit trends.
The second quarter of 2022 we expect to have some runoff of governmental deposits due to seasonality along with the reinvestment of cash into investment securities anticipated mine grass and pay off some of the acquired vantage borrowings during the second quarter.
Our net interest income grew by 53% compared to the first quarter of 2021 and our net interest margin expanded by 15 basis points.
The improvement has been driven by our acquisition coupled with core growth.
Loan yields improved by 24 basis points compared to the first quarter of 2021, which was driven by the addition of the lease portfolio.
Our investment portfolio yield improved 33 basis points as we have worked to reinvest into higher yielding securities during recent quarters.
We closely controlled our funding costs and our deposit costs declined 19 basis points compared to the prior year quarter.
For the quarter, our reported efficiency ratio increased to 66, 8% compared to 62, 7% for the linked quarter.
When adjusted for noncore items, our efficiency ratio was 64, 8% and also grew compared to 61, 5% for the linked quarter. However.
However, we anticipate that this metric will improve group as the year progresses.
Contributing to the increase in the adjusted efficiency ratio for the quarter were the annual items. We noted earlier such as the stock based compensation expense and health savings account employer contributions.
For the first quarter, our fee based income grew $1 million or 5%.
This increase was driven by higher insurance income, which result from.
From annual performance based commissions that we typically recognized in the first quarter of each year.
These annual performance based commissions totaled $1 3 million for the first quarter of 2022.
In recent months, we have seen an increasing referral pipeline for trust and then that's when our customers from the near New Premier footprint and are actively gaining new fee income from this geographic area.
Compared to the prior year quarter, our fee based income was up $2 8 million or 16%.
POS of account service charges grew 73% as we have benefited from increased customer activity along with a higher number of accounts associated with the Premier acquisition.
Electronic banking income grew 34% compared to the prior year quarter due to more customer activity in the acquired Premier accounts.
Moving on to our expenses total noninterest expense increased 8% compared to the linked quarter.
A large portion of the growth was in salaries and employee benefits, which was impacted this quarter by higher base salaries due to annual merit increases that occur at the beginning of each year.
Increased medical costs, which were up $724000 over the linked quarter and were driven by the health savings account employer contributions that Chuck mentioned earlier.
Along with higher payroll taxes and stock based compensation.
Typically our payroll taxes are higher in the early part of the year and decline of associates meet maximum as the year progresses.
We also had increased professional fees in conjunction with the vantage acquisition that we completed during the quarter.
Compared to the prior year quarter, our total noninterest expense grew 36%.
The increases were in almost all categories and were largely due to our recent acquisition and associated ongoing cost.
From a balance sheet perspective, most of our asset growth compared to year end was related to the vantage acquisition.
We maintained our investments to total assets ratio of 24% consistent with year end.
As we had anticipated we had further deposit growth during the quarter, which was up 140 million or 2% from year end.
The majority of this increase was driven by seasonally higher governmental deposits, which grew $118 million.
From a capital perspective, our regulatory capital ratios declined compared to year end and were driven by the vantage acquisition, which was an all cash deal and added risk weighted asset.
Our tangible equity to tangible asset ratio was six 8% at quarter end and declined compared to year end.
Our book value per share was $28.41, which also declined compared to year end.
These decreases were driven by the vantage acquisition and whats known in which we issued no equity, while we added assets, including intangible assets compared to the prior period.
And we also had a large swing in our accumulated other comprehensive loss, which was further reduced by nearly $51 million and was driven by the increased interest rate environment.
In an effort to continue to provide an excellent return to shareholders earlier. This morning, we announced an increase in our dividend to <unk> 38 cents per share. We are pleased to be able to grow our dividend grow our dividend for the seventh consecutive year and we'll continue to monitor our dividend payout ratio.
I will now turn the call back to Chuck for his final comments.
Thank you Katie with our recent acquisitions, we are poised for success and growing our lines of business with opportunities from our many new clients. We maintain a focus on providing the large bank products and services, but didn't make community bank setting.
Also offer our clients, a diversified product offering including insurance investments leasing and premium finance, which differentiates us from competitors.
Themselves on doing the right things for our clients we win clients because our go to market proposition is different from others in our associates genuinely care about our clients and their needs. We are excited about the potential positive impact that future interest rate hikes will have on our earnings as we proceed throughout the year.
While there are no guarantees we believe the improvement in net interest income and net interest margin, resulting from rate increases could be substantial.
The remainder of 2022 was promising here are a few updates to our guidance, we expect loan growth between five and 7% excluding P. P P loans and potential growth from the vantage acquisition.
We believe the anticipated stabilization in credit cost will occur this year and want to reiterate that our annual gross charge off rate, which includes leases will likely return to a more historical level of between 25 to 40 basis points as a percent of balances while there is much uncertainty.
Around the potential of interest rate increases this year, we estimate that for every 25 basis points increase in interest rates net interest income will benefit by $1.5 million annually.
If we get eight maybe nine additional rate increases during 2022, we estimate that the benefit to net interest income will be between 6 million and six and a half million in 2022.
Based income growth is expected to be between 25, and 30% compared to 2021, which includes the impact of the acquisitions. This year we.
We are increasing our anticipated quarterly total noninterest expense guidance to between 50 and $52 million, which is consistent with our prior guidance, but includes the cost advantage and insurance acquisition.
And we are still on track to have the efficiency ratio of below 60% during the latter half of the year.
The full year of 2022 .
This concludes our commentary and we will open the call for questions. Once again. This is Chuck seller risky and joining me for the Q&A session is Katie Bailey, our Chief Financial Officer, I will now turn the call back into the hands of our call facilitator. Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we'll pause momentarily to assemble our roster.
And the first question will come from Scott tires with Piper Sandler. Please go ahead.
Good morning, everybody. Thanks for taking the question.
Oh, Gosh, Scott Hey.
Hey, Chuck was hoping you could expand upon your loan growth comments I'm sort of the small down shift in expectations from the old 6% to 8% to the new five to seven how much of that would you say is sort of noise from premier payoffs and sales and how much is any change in the sort of the demand side that youre seeing or in other words. The go forward outlook.
It's a more premier than it is the market.
To be honest with you Scott several years ago, we got out of the blocks are slow in the first quarter and we said we would still make the numbers and you all beat me up every quarter, we did make the numbers at the end of the year and I didn't want to live that again, so I lowered the 5% to 7%, but we feel pretty good.
Okay, perfect and then just for clarity so it sounded like the 5% to 7% loan growth. This year that does not include growth from vantage and it's also exclusive of PPP do you do.
Just I guess for simplicity sake, just sort of an all in expected loan growth.
It kind of expectation for that for the year.
Yeah, it's probably close to 9% 8% to 9%.
Okay, and that would be sort of off of.
The year end 'twenty, one base is that correct.
Perfect Alright, thank you very much thank you.
The next question will come from Ben Garner linger what hub Degroup. Please go ahead.
One of the more hi, Ben Hi, Ben.
Theres a lot of guidance, especially with the mix shifts planned for two Q and then also the.
Right.
I was curious.
So I mean, if you go to if you could give us kind of a spot rate so to speak once your chain.
Change average earning assets.
And then assuming the couple of rate hikes from here in the second quarter do you guys have a I see where your margins might be.
And then kind of juxtaposed against that Chuck you said or.
The upside on an annualized basis is that kind of even throughout a 12 month period or is that kind of more frontloaded.
Yeah. So I'll start on the margin than what you saw we printed a $3 41 for Q1 are with rate increases and then some of the mix shift you talked about and the addition of vantage for the full quarter, we think that could get up to $3 45 to $3 55 in the second quarter. So it'll increase.
And there won't be some cash deployment in that to again, he's always sat on a fair amount of cash in the first quarter. We used some related to vantage, but he is a little more related to vantage and paying off some debt that they had that we had not yet paid off as of 331.
And then as far as the loan growth question second quarter will be stronger than the first quarter of third quarter will be stronger than the second and the fourth quarter should have growth, but probably not as much as the growth between the second and third quarter.
Gotcha, I'm, sorry, and then just one.
It's finalized I hear that you said about the net rate hike benefit on an annualized basis is that something we should expect.
I won't kind of even keel and that was really going to be hard to measure because as we're seeing now.
So.
Yeah. So we quantified that at 25 basis point rate hike would have one and a half million dollar benefit to annually again.
Eight to nine rate hikes, we quote it in here.
Let's change pretty regularly as you have experienced I'm, sorry that had the one in March I think we estimated the two in May two more in June and then 25 basis points. Thereafter, so again that six six or the six to six and a half we quoted would be the benefit of those rate.
In the calendar year of 'twenty, two not an annual number.
The annual number for 'twenty two's impact, but you would have been a benefit going into 'twenty three for the full year benefit of those those rate hikes in that period gotcha. Okay.
I understand what you're saying and then finally when you think about.
Your share price today is there any sort of a ranking order of how you would you would view things like share repurchases or would you potentially think another small bolt ons to you in the near future any kind of guidance on what you would put at the top of the list. When you saw that we just increased the dividend.
Yeah, we can.
<unk> to the dividend I don't see us doing a bank M&A with the stock at the current price.
Anytime soon.
So I would say you should do you know I would probably rank the dividend a buyback and then and then M&A.
Okay. That's great I appreciate it that's all good stuff.
At least for the guide it seems like you have a upward revision here.
Thank you.
The next question will come from Steve Moss with B Riley Securities. Please go ahead.
Hey, this is good schwartzman sees associates subbing in for him today. Thanks for taking my question I guess the first question I have is that ex the.
Acquisition expenses, we still are looking at this quarter's expenses being $50 million or so kicked up the guidance a little bit 50 to 52 million. So we're still at that lower end just sort of curious yeah is that something that you guys expect the expenses are going to feel a little bit more pressure in the second half with some of the loan growth drivers start to pick up.
Let me just get a little bit of clarity for you on the expense base. So on the expense base as you've quoted for the first quarter on a core excluding acquisition cost like you said its the $50 million that does include as we had referenced in the fourth quarter and in the script here today that doesn't include.
<unk> Q1 expenses that are not are not reoccurring for the remaining three quarters of the year that being the $920000 of stock expense and then Theres a 620000 dollar expense related to employer contributions to health savings accounts for employees.
So that brings the expense base down a little bit from Q1 to Q2, but on the flipside of that then you'll have the full quarter impact of vantage given you only had a partial month in the first quarter. So that's how you get from our guidance of 46 to 48 that we gave in the fourth quarter. So that's 50 50.
Two that we gave this quarter.
Okay Awesome very helpful.
Following up as well it feels like you know rates have moved a lot year to date, just sort of curious I mean, we still think of the portfolio is still being about 50 50 in terms of variable and fixed and any changes to the deposit beta assumptions here.
No I think that those are all still fair and the deposit betas are still running about a 25% deposit beta.
Okay Awesome and then the last question from me just a cleanup question I may have missed it in the release just curious if you guys could give me the PPP loan Bell.
The P. P. P loan balances are about 40 43 million and $42 million.
And it was about 87 at 12 31, so it went down about half in the quarter.
Okay awesome. Thank you very helpful.
The next question will come from Michael Perito with K B W. Please go ahead.
Hey, Chuck Katy how are you guys. Okay My mic.
Question around the kind of loan growth strategy and you know I think looking at it with all these deals done now it seems like you guys have a few different buckets that can contribute you know maybe one one quarter is not so great here, you know leasing or something else is better there, but just wondering if Chuck you could give us some overall guardrails of.
How you want the loan book to expand over a multiyear period here I mean are there any.
Areas I imagine like leasing and premium finance that youre, hoping or larger percentages like how big do you think the consumer book you guys would be comfortable getting just anything you could provide there just kind of some guard rails would be helpful.
Sure well first off the businesses that will grow the fastest will be the specialty finance.
Mrs.
The small ticket the vantage that we just acquired in the premium finance business and we see growth in all three of those.
You know north of 20 plus.
Percent.
For the year on the retail side mortgages.
Have some headwinds so we suspect the on balance sheet and the fee income will continue.
To decline as rates go up and we have inventory issues.
Automobile has done well for us and we anticipate that continuing to do.
Do well, but there are supply chain issues potential risk with that I'm handing over to the commercial side.
We believe we will see a fair amount of funding on the CRE excuse me on the construction stuff that we booked.
Last year C&I has been going very strong for us we don't see any of that.
Slowing down and in fact, we see opportunities that we alluded to in the script.
As we begin to do more with the automobile is it in the new footprint, we think over time that'll help us not only on the indirect that we mentioned in the script, but also our dealer floor plan.
You know that business and there's still a lot of demand for CRE, particularly in central Ohio.
So we see that having a robust growth.
Pretty even.
With your finance businesses being the plots are mortgage probably being a laggard, we've never been a big mortgage bank. So you know relatively it doesn't hurt us that.
That much.
And really expect pretty strong consistent CRE a C.
Activity.
Okay.
Hum if I look at the historically, the consumer residential real estate that the home equity and the consumer.
You know it.
Few years back I think it was like a little over 40% of loans you know today, it's like 34 mm.
I mean is it fair to think of you guys, though in that 60 40 commercial consumer type of split give or take but put the commercial pie will just start to tilt a little bit more towards the leasing and premium finance stuff, which will grow more rapidly as you laid out I think generally you disagree with that thought process or no. We would like it to be more balanced in fact.
We are I think one is if you go back in ancient history, when I arrived here.
It was all very little consumer and.
I think at the Hyatt, we drove it up to about 47% and consumer at one point, but as we bolted on the specialty finance business it's shifted its.
It shifted the other way so we would have appetite for more consumer lending.
Right now we are home equity is a we're doing a great job of increasing origination.
Of lines, but we're not doing a great job of increasing utilization.
But that'll likely come automobile as well.
It's good for us for over a decade in terms of growth gets a little bit more challenging as the portfolios you know over a half billion. Yeah, you know over half a billion dollars. So.
We would like to see more consumer consumer growth overtime.
Helpful and then on the charge offs that the 25 to 40 basis points give or take obviously.
Chuck you I've always felt like you've been fairly conservative on that front, historically, and unfortunately, I've always been pretty firmly below that at least as long as I've covered the company, but with the the leasing company in and some of the assets added that you're expecting to ramp I guess do you do you feel that the probability of being within that range.
Or a multi year periods a bit higher than maybe the conservatism. It was historically or just just trying to gauge you know.
Not that you guys are looking to take significant credit risk here, but just trying to gauge how some of the loss content might evolve as the mix shifts.
I think that's.
The three specialty finance businesses have different risk characteristics, but I think that they have the chance for more charge offs on a percentage than the bank in total I would say from my perspective, the premium finance business you know the charge offs are really more operating issues there.
They are credit issues yeah.
Vantage that we acquired had no losses last you know last year and.
The the Northstar group up in Vermont.
You've got a you know a.
15% plus you know our margins so far on a risk adjusted basis. It's a it's a beautiful beautiful business in general I think a risk for all banks.
Our inflated asset prices on the consumer segment, 82% of the cause in America are sold over sticker and there's so much mortgages being done today on the consumer side.
You know without.
Appraisals without inspections.
And bidding and a lot of markets over.
Market prices that you know that.
It's something that.
Given the country's gonna have to digest the good news for US is that our footprint most of our footprint is more conservative yeah, we don't see the volatility of price movements, one way or the other but.
But I think that's something on a national level.
It needs to be thought of.
Okay.
Helpful. Thank you and then just one last one I apologize if I missed that I don't think I heard it but just any.
Any thoughts on the tax rate for the balance of 2022 here it seemed a little high in the first quarter. I think you guys mentioned a couple of items on the scrip. Just curious if you have any thoughts about where that could shake out moving forward.
Yeah, I think it's going to stay in that roughly.
21% and it's mainly driven more by the addition of states that we've entered into with the specialty finance businesses and the Premier acquisition I'm driving that rate up.
Beth.
Oh.
Got it. Thank you very much appreciate it. Thank you. Thank you.
Yeah.
The next question will come from Russell Gunther with D. A Davidson. Please go ahead.
Hey, good morning, guys are opening Russell.
I appreciate your comments in terms of growth expectations within the specialty finance businesses could you give us a sense of where you would expect that those related loan yields to trend that's embedded in the NII guide provided.
Oh, Yeah, I I'll give a stab on that and I'll, let Katie.
Fix me up if I blow it.
Premium finance I think would be between five and a half and 6%.
The.
The North Star leasing.
The business.
It's currently around 15% and we see that trending higher.
Think in the fourth quarter that'll be back to the 17, 18% level and the vantage yields.
Margin are in the 7% area, but we also get.
We also get.
Get additional income.
From a phone to.
The ending of the leases and the residual value values.
And that's about an additional 5%.
And I would just clarify there is just on the premium finance business the yields that Chuck quoted or the gross yields that you're seeing come through with that.
Margin are the right volume variance, we put in the document and it's more than that you know, there's some referral fee amortization and so forth that's netting that down.
A little bit.
Okay. That's really helpful guys. Thank you.
And then just a follow up.
Last one for me in terms of deposit betas. So that 25% guide is that of a total deposit beta on interest bearing deposit beta.
If you could give us some thoughts about how you'd expect that to trend in the early innings of a hike versus call. It. The first 100 basis points your model versus the next such yeah. So that's that is total and.
Sure leading to I think that all it'll be lower than the early onset of the rate hikes, and then it'll progress closer to that as we get later in the stages of rate hikes.
Based on what we've seen today and where people where we believe everybody is sitting on to excess cash and heavy deposit balances.
Okay great.
That's it for me thanks for taking my questions. Thank you Russell.
Again, if you have a question. Please press Star then one our next question will come from Scott tires with Piper Sandler. Please go ahead.
Hey, guys. Thanks for taking the follow up Canada was hoping you can unpack the fee guide a bit more if I heard it correctly and it's quite possible.
But I thought you said 25 to Oh, I thought you guys said, 25% to 30%.
Fee growth this year, which compares to the 14% to 16% previously and I think the Delta is just you've got vantage now, but I want to make sure I understand sort of the movement in and out of how we go from the prior guide up to the new one just aren't that missing anything no I think you touched on and its largely driven.
And by the vantage transaction or the vantage transaction, then what Chuck alluded to as it relates to the end of life leases and the related residual valuations there that historically they have experience. So there may be a mix shift over time some of that.
Currently reflected in that guidance it may move to margin.
As we refine the residual valuation.
Going forward under our ownership.
Okay perfect. Thank you and then other otherwise, though like if if we didn't have vantage and there would you still be kind of thinking sort of.
Ganic growths in that 14% to 16% range. This year, yes, that's right.
Okay perfect. Good. Thank you for that clarification. Thank you.
At this time there are no further questions. Sir do you have any closing remarks, yes, I want to thank everyone for joining our call. This morning. Please remember that our earnings release and a webcast of this call will be archived at peoples Bancorp Dot com under the investors Relations section. Thank you for your time I wish every.
One good health and have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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