Earnings Call: Q3 2021

Oct 13, 2021

Greetings, and welcome to First Republic Bank's Third Quarter 2021 Earnings Conference Call. Today's conference is being recorded. During today's call, the lines will be in a listen only mode. Following the presentation, the conference will be opened for questions. I would now like to turn the call over to Mike Ioanilli, Vice President and Director of Investor Relations. Please go ahead. Thank you, and welcome to First Republic Bank's 3rd Quarter 2021 Conference Call. Speaking today will be Jim Herbert, the Bank's Founder, Chairman and Co CEO Gaya Erkan, Co CEO and President and Mike Roffler, Chief Financial Officer. Before I hand the call over to Jim, Please note that we may make forward looking statements during today's call, which 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, Please see the bank's FDIC filings, including the Form 8 ks filed today. All are available on the bank's website. And now I'd like to turn the call over to Jim Herbert. Thank you, Mike. Good morning, everyone. It was another strong quarter With robust growth in loans, deposits and wealth management assets, First Republic's unique simple Client centric business model continues to perform very well across all of our segments and our markets. Since 1985 First Republic's success has been grounded in a culture of exceptional service, taking care of each client one at a time, Serving our existing clients exceptionally well. Nothing has changed. It is a story of straightforward execution of our model, which results in consistent compounding, Organic growth year after year. This quarter was not an exception. Let me review briefly the results for the Q3. Total loans outstanding were up 18.8% year to date annualized. Total deposits have grown 39% year over year. Wealth Management assets were up 50% year over year to a total of more than 250,000,000,000 This across the board organic growth drove our very strong financial performance for the quarter. Year over year, total revenue has grown 30%. Net interest income was up 27%. And quite importantly, tangible book value per share increased almost 19%. The safety and soundness of the bank continues to reflect very strong credit quality. Net charge offs for the quarter were only 292,000 Just a fraction of a basis point. Non performing assets at quarter end were only 7 basis points of total assets. As always, we're very focused on capital and liquidity. During the Q3, We raised $1,200,000,000 of new Tier 1 capital to support our continued growth. This included common equity As well as our Series M perpetual preferred stock, which was issued at our lowest dividend rate ever actually 4%. At quarter end, our Tier 1 leverage ratio was 8.55%. Our HQLA liquidity level at quarter end was 16.7% of total average assets. This included very strong cash levels. We continue to be focused on strengthening our communities as we have been for 36 years. For example, this month, we participated in a capital raise for the supportive housing fund managed by SDS Capital Group. These funds will be used to address the homelessness challenge in California by providing additional permanent housing. Our participation in this initiative is Only a modest part of our long term focus on investing and strengthening our communities. Overall, 2021 so far has been Strong and successful year. Now let me turn the call over to Guy Erken, Co CEO and President. Thank you, Jim. It has indeed been a strong year thus far. The simplicity of our business model allows us to deliver consistent performance quarter after quarter, while remaining We are very focused on the long term success of the franchise. Our strong performance supports further investments in the delivery and scalability of our client service model. For example, we continue to invest in our colleagues, New talent and operational infrastructure to support our growth new preferred banking offices to deepen our presence in our existing markets And technology and digital enablement to further empower our colleagues and reinforce our trusted client relationships. Let me now provide some additional detail on this quarter's performance. Loan origination volume was very strong at $15,500,000,000 up meaningfully from a year ago. This is our best third quarter ever. Single family origination volume was strong at $7,000,000,000 Single family continues to be a key driver of our growth, representing more than 75% of our year to date loan growth. I would note that the weighted average loan to value ratio of single family originations year to date was just 59%. Refinance accounted for 53% of single family residential volume during the quarter. A large proportion of refinance activity continues to come from clients with loans at other institutions, providing us with great opportunities for new client acquisitions. We continue to maintain our stringent underwriting standards. In terms of funding, it was an exceptional quarter. Total deposits were up 39% from a year ago. At quarter end, checking deposits represented 69% of total deposits. Business Deposits represented 62% of total deposits, up slightly from the prior quarter. The average rate paid on all deposits for the quarter was just 6 basis points, leading to a total funding cost of 17 basis points. Turning to Wealth Management. Assets under management increased to $252,000,000,000 This is an increase of $57,000,000,000 year to date, Over 60% of which was from net client inflows. Year to date, wealth management fees were up 47% from the same period a year ago. The strength of our integrated model continues to attract very high quality wealth management teams to First Republic. In total, we have welcomed 9 new teams year to date. This includes 1 team in the 3rd quarter And another team already this quarter. Our 3rd quarter performance demonstrates the power of our service model and the ongoing dedication and care of our amazing colleagues. Now I would like to turn the call over to Mike Roffler, Chief Financial Officer. Thank you, Gaia. Our strong Q3 results reflect the consistency of our business model. Revenue growth for the quarter was exceptional, Up 30% year over year. This was driven by strong organic growth across the franchise, including loans, deposits and wealth management assets. Our net interest margin for the Q3 was 2.65%. This reflects the impact of our elevated cash position from fiscal and monetary policy, which has resulted in significant deposit growth. We continue to expect our net interest margin for the full year 2021 to be in our previously communicated range of 2.65% to 2.75%. Importantly, net interest income was up a very strong Let me now provide a brief update on our core banking system conversion. We're very pleased with the progress of our core conversion and are in the final phase of delivery. We now expect to complete the conversion in the Q1 of 2022. This extension of 1 quarter will give us time for additional in person testing and training That has been delayed due to the COVID-nineteen Delta variant. I would note that our efficiency ratio guidance for the full year 2021 Remains unchanged at 62% to 64%. For the quarter, our provision for credit losses Was $34,000,000 which is reflective of our strong loan growth. As Jim noted earlier, We are particularly pleased with our Series M preferred stock offering in the Q3. In the Q4 of 2021, Our preferred stock dividend will be approximately $33,000,000 Turning to the tax rate. Our effective tax rate for the Q3 was 21.4%. Under current tax law, we continue to expect our tax rate for Full year 2021 to be in the range of 20% to 21%. Overall, this was a strong quarter. Now I'll turn the call back over to Jim. Thank you, Gaia. Thank you, Mike. First Republic's time and cycle tested Quite straightforward business model remains very focused on delivering the highest possible level of client service, Staying focused on doing only what we do best and operating safely and soundly. We'd be delighted now to take your questions. Thank you. We'll take our first question from Steven Alexopoulos with JPMorgan. Good morning, everyone. I wanted to start with a big picture question for Jim. And Guy, feel free to add on as well. Jim, when I look at your key growth metrics, we have business bank deposits up 50% year over year, wealth management assets up 50% year over year, Loans are up 23% and it's your best quarter ever for the 3rd quarter originations. When I look at the company, it's growing faster now at 170,000,000,000 It was $70,000,000,000 in terms of assets. As you analyze the key business drivers, what in your mind explains Much stronger than expected growth being delivered and across the entire company. Thanks, Steve. Well, The growth is embedded in the nature of the model, in that we take Extremely good care of our existing clients, so we don't lose them and they compound and grow. But also and they refer their friends. And the more you have of happy clients, the more you're going to get referrals. And if they stay with you and you don't lose them, you don't lose their business. This adds to the compounding or network effect of the franchise. But I'd also add and it's very important not to take credit for what you don't shouldn't have credit for. We're in a very good market and we're and things are going up very nicely in the stock market and in deposits and loans. And we're benefiting from all of the liquidity in the system and a rising equity market. So it's very important to take that into account too. And let Let me turn this over to Gaia for some more detail. Absolutely. When we look at our loan growth, over 70% of our loan growth Single family residential loans were up 30% year over year. And I would note that the loan to value ratio of all single family residential loans originated in the last 12 months was under 60% as is our portfolio. And then Steve, you mentioned the business deposits. As Jim mentioned, Our model continues to benefit from the liquidity and the activity in the market. This is reflected in the higher account balances. Half of the increase in the business deposit we have seen driven by increased average account balances with our existing well known clients. And we have also seen very strong client activity and continued referrals. So for example, our business households We're up over 20% year over year. And with regards to AUM, S and P 500 was up 28% year over year, So our AUM does reflect the strong stock market as well as quite strong client inflows from both existing as well as new clients, As you mentioned earlier, so the model continues to perform nicely and benefit from what's going on in the market. Okay. That's helpful color. Maybe for Mike Roffler on the margin, given the recent move higher in the 10 year, how does this impact Your appetite to invest some of the excess cash that's building up. And if the tenure holds at least at the current level, do you think that NIM has bottomed here? So one of the things that is impacting the margin, and I think we called this out a little bit, is the level of liquidity and cash on the balance sheet. It's continued to go up and it was up another $2,000,000,000 on average during the quarter. And so that caused the decline this quarter. With respect to your question about the 10 year, I do think there's probably a little bit better buying opportunities in securities, yields are a little bit higher. But we're always going to be prudent and methodical. Just because we have the cash here, we're going to deploy it in a in a rational and methodical manner and most importantly, respond to client demand from a lending standpoint. Okay. So do you think NIM has bottomed based on that? Would that be the best guess at this point? Honestly, a lot of it in the near term is based on the cash levels. If the cash levels were to dissipate a little bit, then you'd probably see the NIM up a little a couple of basis points. Okay. And then a final question, if I could squeeze one more in. It's been quite a few quarters that the loan growth just continues to run above the mid teens guidance. Just staying with the tenure, if that continues to grind up, this cools the refi market a bit. I'd imagine this pandemic buying wave will burn out at some point too. Do you think in that environment you guys could still deliver mid teens loan growth? Thanks. Thanks, Steve. Well, The answer is the short answer is yes. We went back and looked at 93% to 95%, 99% to 2000%, 204% to 2006 And 15% to 19%, all of which had a rising rate environment, and each one of them was up 19%, 21%, 22% and 19% year over year Loan growth. So it doesn't really it shifts a little bit in single family, which is the backbone of our growth as Guy just indicated, Over 70%, I think. It shifts from purchase to refi, but remember rates going up, good economy And so more activity. Okay, great. Thanks for taking my questions. Thank you. We'll take our next question from Ebrahim Poonwala with Bank of America. Good morning. Good morning. Just following up on the loan growth, Jim. If we think about so activity is strong, I guess, your business client acquisition is strong. On the other side, you have higher rates And supply chain constraints in the housing market. Just talk to us, 1, in terms of what do you expect the refi mix to look like If rates stay where they are and we go forward, then how big of a deal is the lack of supply in the housing market as you think about growth over the next year? In our markets, we can't speak for the whole country, of course, but in our markets, the supply constraint is still Pretty tight. It is getting a little better. Listings are up slightly, and prices appear to have Maybe topped a little bit. I don't want to say they're done rising by any means. But on the other hand, we do see an occasional deal transacting below asking Very little, and so it's not quite as frothy as it was, which I consider to be good. I think we probably all do. And But our refinance volume, if you go back many years, basically has always been about 40% or greater of our total single family loan volume. And so we seem to have a base there. And to some extent, that's driven by the very nature of just human activity, adding a room, refinancing, moving, job, etcetera. So there seems to be a pretty good base under it. Got it. And I guess just a separate question, Mike, you mentioned the systems conversion In 1Q 2022, remind us once the conversion is over, what that means, if anything in terms of Efficiencies or in terms of even revenue synergies that might come through once you move to the new system? Yes. I mean, I think we're excited about the progress and the new system and the things that will help with our colleagues and serving clients. So I think that's what we're really excited about. But I would say that we're always investing for client service And continuing to support and serve our clients. And so there's always something we're going to do. This will make us, I think, operationally a bit more efficient. And also some of the costs of implementation go away, but there are other things we like to do and make sure we're serving clients well. Got it. Thank you. We'll take our next question from John Pancari with Evercore. Good morning. Good morning. On that same systems Topic, the delay, was there any related expense impact from that? And then separately also on expenses, just wanted to see if you could talk a little bit about Wage inflation, and if you are seeing that impact across your business, just given that you're still active on the hiring front And that you're investing pretty heavily still in technology, which is an area that has seen notable impacts from wage inflation. Thanks. Yes. First on the conversion, really no change to our expense outlook or guidance. It was a planned 4th Quarter, so those expenses are were already projected and they're still there. And in the Q1, it's very modest in terms of a little extra. And then the second in terms of wage inflation, I mean, the one thing I would highlight is we did recently increase our minimum wage to $30 For colleagues for all colleagues across the bank. And so we think that's a great step for our colleagues. And I think in terms we have been hiring And it is very competitive from a hiring standpoint. And so I don't think it's necessarily meaningful, but we have seen a little bit more competition for new hires And some of that does come down to wages. Got it. All right. Thanks, Mike. And then separately on the loan growth front, on your Production figures on Page 13, I know multifamily, CRE, construction also very strong production Can you just talk about what you're seeing there in the CRE book that's starting to result in some improving production there? Thanks. Yes, absolutely. As we have pointed out, both multifamily and commercial real estate, we have seen some increased activity. Multifamily, let me start with that, is performing strongly across all of our markets. You're seeing new leasing activity being very robust, driving down vacancy rates. And Multifamily lending has been driven mostly by the California, the West Coast and majority of it is refinance activity with existing clients. On the commercial real estate front, as you know, us at smaller deals, we don't do large loans. And that's mostly focused in either multi use or office type of buildings, but on the smaller scale and Class A buildings. And we don't have much exposure as you know to retail and hospitality. That's the one area macro wise. It's still Struggling a bit, but it's great optimism and tailwinds there as well with RTO and potential opening of international travel. Got it. All right. Thanks, Kaya. Appreciate taking my questions. Thank you. Thank you. We'll take our next question from Dave Rochester with Compass Point. Hey, good morning guys. Nice quarter. I just wanted to start on the deposit side. Growth was fantastic yet again this Can you just talk about any specific drivers impacting those trends? And I know you generally have stronger deposit growth in the back half of the year, so Just kind of wanted to confirm, you still expect that momentum to carry into 4Q? Yes, absolutely. So we have Seeing the deposit growth coming in both in terms of increased average account balances that we have seen across consumer as well as business And quite strong client activity and referral activity, especially on the business side. Across client types, regions and industries and a healthy mix of both new and existing clients. In terms of consumer, we have seen again a healthy mix from new and existing client referrals. And business side, technology, private equity and real estate has been performing greatly. About half of our growth is coming from these particularly Strong sectors, but no vertical in our deposit franchise accounts more than 12% of our total deposits. So Happy colleagues, Epic lines and more referrals we're seeing that on the business side as well. That's great. Appreciate that detail. And then maybe just a quick one on the borrowings front. Can you just remind us how much of that matures in 4Q and then what the maturity schedule looks like for next year? And I guess bigger picture question, now that you've got your cash balances materially exceeding the balance of those FHLBs, is there any reason to hold on to those? Yes, we have about just over $1,000,000,000 in the 4th quarter and an additional $3,000,000,000 in the next So call it just over $4,000,000,000 coming due. And depending on the rate environment and deposit flows that we'll make decisions as we go opportunistically on those, but it does provide some room for improvement on the yield side given the yields that they're carrying. All right. Great. Thank you very much. Thanks. We'll take our next question from Bill Carcache with Wolfe Research. Thanks. Good morning. Jim, your comments at The start of the call around the consistency of the model make a lot of sense, but I wanted to ask if you could comment on how you're thinking about the pace of Deceleration in loan origination growth from here. Last quarter was your strongest ever and this quarter was your strongest third Quarter ever, so it would be natural to see some deceleration off of these very high levels, especially as you go up against tougher comps. So just would be curious to hear your thoughts there on the pace. And then Separately, if you could also discuss what kind of impact, if any, you think the Fed's tapering could have on your mortgage business? And Gaia, please would also love to hear your thoughts. I think the loan volume is never forced. Let me the reason I'm hesitating is just how to say this. We never force our loan volume. We do as many good deals as we are exposed to opportunistically. But I would take you back to our investor deck, where about 80% or 85% of our business and over 60% is done with existing clients And 85% roughly is done with existing clients and their direct referrals. That activity Does not really reflect a lot of volatility. The refinance component of it has some volatility in it, But those clients are there, they're doing, they're active, the economy is quite active and they will bring their business to us at the pace at which they bring it to us. And we will compete for it and in most cases we'll win it. When you have a net promoter score of over 70, you tend to win the business with your existing clients or their referrals. And that's the backbone of the model. And so it's not as Nearly as much a market condition driven model as it is a client need and demand model. And right this moment, our clients are very active. In terms of rising rate or tapering, if you want to, Let me just comment on this and then turn it to Guy for maybe additional comments. But because we grow, We have between the growth volume, which remind you, maybe it's intrinsic in this, but to state the obvious, New volume is always priced in current market. And so if you have new volume and you put it together with variable rate loans, repayments, You've got about 52% of our assets or our loan book is repriced in the year, Over half. So if you look back at the company in rising rate environments, we've done just fine. Yes. I would just add that the Various cycles that we have seen in a rising rate environment, refinance active single family residential has been the majority of the driver and it's Diversified a lot with the known clients and refinance activity has remained largely above 40% of our single family originations, Given that majority of that comes from clients with loans at other institutions and a great acquisition tool, so that stays pretty much steady across different rate cycles. And The tapering potentially curve steepness, if that were to be the case, would also be helpful. And in a rising rate environment, The balance sheet growth safe, mostly with known existing clients, known credit, that's in mid teens Plus the repayment that we are seeing even though it slows a bit, it still continues, plus the floating rate assets. So over 50 That's really helpful. Thank you. On the Wealth Management side, you highlighted the success that you continue to have adding teams and that's been a nice Contributor to your client inflows, have you had any notable outflows recently? If you could speak broadly to whether Have any concerns around attrition at all? And also discuss how the pipeline looks? Any color you can give on the Expectations on the ongoing addition of new teams. We've not had any notable attrition Either in teams, people or assets. The pipeline is an ongoing process. It's a little It's unpredictable because it's the hiring of individual teams. Those are highly specialized folks and We have conversations going on at all times. I would I think this year's effect as This year rate is probably reflective of what we could expect going forward, but it's very hard to predict and it's certainly hard to predict quarter to quarter. We just have what is happening, however, is that we have within the teams that we hire a bit of a network effect. Just like we have client network effect, we basically have people talking to cohorts, to their friends back at where they came from saying, come on over, the water is fine. Very helpful. If I could squeeze in one last one. Mike, you addressed the Labor market shortages and the impact on the competitive labor market is having on you guys. But I was wondering within Business Banking, Is your client base can you give a little bit of color on any of the challenges that they're Bringing up with you guys around labor market shortages and the supply chain constraints that they're facing? Or would you say Your business banking customers are sort of in verticals that are relatively more insulated From some of those issues perhaps than what we're hearing from others? Yes. I don't think I think the challenges That we talk about in terms of hiring that's sort of consistent. I don't think I'd point out anything that's unusual relative to us or what you're hearing. Okay. Thank you for taking my questions. And we'll take our next question from Casey Haire with Jefferies. Great. Thanks. Good morning, guys. Follow-up on the NIM. Where are new money loan yields today as well as Securities Reinvestment Rates. So we are seeing the real estate new money yields blended is about $290,000,000 Single family is a little lower around $275,000,000 $280,000,000 ish multifamily at $3.25 and CRE, we are seeing at $3.5 And when it comes to securities portfolio, the investments, the traditional pass through type of investments are coming in around 1.5% to 2%. The short term, we have done some short term HQLA purchases, but it was a blend of floaters and short duration CMOs and project loans. That's coming in about 75 basis points blended. And then on the muni side, we did do some purchase on munis and that said high 2 slow 3s on TUI. So the new money yields to summarize coming around $290,000,000 with a marginal funding cost At about 15, 20 basis points and then you add on the elevated cash levels that brings you to the lower end of our guidance, 265 to 275 guidance. Excellent. Thanks for the color. And then on the $7,000,000,000 set of single family resi originations, Can you just give a breakdown of how that's coming across geographically through your markets and how that compares versus historical? Is it Pretty consistent or is there one market that's pushing a little harder than others? Actually, we are seeing the activity Quite robust across all of our markets and Manhattan has been catching up quite a bit as well. Both Now what we are seeing is suburbs have been active and city centers are also getting very active, including Manhattan. So when you look at the months of Supply across all of our markets with the exception of Manhattan is within 1 to 2 months, whether it's Florida, Los Angeles or Boston or San Francisco. And in Manhattan, we're seeing that to be more of a 5 months of supply, but the activity is robust, especially on the purchase side across all of our markets. Interestingly enough, that just to add to this thought, interestingly enough, the demise of the Center City has I've been very prematurely announced. The activity in the Center City, San Francisco, New York, Boston would say that The core of the cities is in fact quite strong. Understood. Just last one, big picture question on efficiency. You guys year to date running at 62%, the low end of your guide. And that's in spite of a lot of things happening that are a drag on the efficiency ratio, wealth management, NIM compression, you got the conversion going on and your Hudson Yards build out. It just feels like you guys I have figured out a way to run more efficient. I'm just curious, are you guys is this how do you guys feel about Improving that efficiency ratio or at a minimum running towards the lower end of that 62% to 64% next year and beyond? Yes. I mean, we're obviously pleased that at 9 months in that we've been running at the low end of the range and this quarter was a little bit even lower. I would note that our revenue and expense growth have been pretty well matched throughout the last few quarters. And part of that, I know there was a question about wage inflation, but what's really driving the increase in salaries Is the growth from production? And so you're seeing increases in assets under management, increase in deposits. There's an expense associated with that from an incentive standpoint that's matching pretty well with, the growth in revenues, which is really Over a long horizon is probably more of our focus than squeezing the last dollar out, Right. We're investing for client service in the future and so it's important those things align over time. And that's what I think we're most I could comment on this for just one second. It goes to the core of the model. The comment that Mike just made about the bonus component of our compensation, Remember that we do have an incentive approach to both deposits, AUM and loans with callback on the loan side. But Our attrition of appliance is somewhere in the 2% range. So our approach Trying them, getting them up in net promoter square into the 70s 80s, is a lifetime approach To the value of the client, that's all we think about. And the question is, if you're going to have a client for 20, 30, 40 years, The upfront compensation to bring them in and land them happily Thank you. We'll take our next question from Ken Zerbe with Morgan Stanley. Great. Thanks. Good morning, guys. Good morning. Actually, maybe a question for Mike to start with. Just I don't want to ask another big picture question, so I won't. But specifically in terms of 4th quarter efficiency ratio, Like obviously, you're averaging so far this year, call it very low 62%. I guess my question is, what are you expecting in 4th quarter? Because I'm just trying to figure out why you wouldn't change your guidance to be a little more closer to the very low end of that 60 2 to 64, Unless you expect something more material or materially higher expenses in Q4. Thanks. There's I wouldn't say there's anything we're staring It's unusual in the Q4 with 9 months in, Ken, I think your observation is right. We'll probably be towards the lower end on an annual basis, which puts us sort of in the right around 62 probably in the 4th quarter. As Jim just mentioned, we talked about production does lead to incentives. And so some of those We get looked at the end of the year based on where final balances end up and sometimes you see a little bit of extra there, But there's nothing unusual staring at us that doesn't tell us we're sort of in the lower end of our range. That's good to hear. And then just a different question. In terms of foreign exchange fees, I know they're like last quarter they were fairly high and I think you guys mentioned they were They were sort of represented a healthy level of client activity. This quarter, they're even stronger. Can you just talk about the outlook for foreign exchange fees? I mean, are we at Quite frankly, it's hard to answer. The foreign exchange activity is very strong and the folks that are running that have done an Extraordinary job of building the business. It's tremendous. And the adoption of foreign exchange of us for their foreign exchange activities Our clients continues to ramp up and we've added people in the area to service our clients. Having said all that, it's quarter to quarter a little bit. It's driven mostly by the velocity of business activity And business activity generally is strong and picking up. And so the foreign exchange activity will parallel pretty much that Plus the growth we have by having new clients adopt us for their provider and adding some people in terms of delivery of service and sales. Got it. Understood. All right. Perfect. Thank you very much. We'll take our next question from Chris McGratty with KBW. Hey, great. Good morning. I think in the prepared remarks, you guys mentioned that Capital call utilization was up around 100 basis points. I wanted to number 1 confirm that and also provide any see if you could provide any color on driving factors. Thanks. Yes. Just to confirm, our capital call utilization was just over 37% At quarter end, and it was just under 36% at the end of last quarter. So it is up just about 1.5%. Yes. And it is in our historical range that we have See mid-30s to low-40s. So the slight increase in the utilization is driven by increased deal activity. We're seeing the PEVC fundraising, deal activity and exits to remain quite strong and expected to continue. The deal activity is doubled the pre pandemic levels, more dry powder above the pre pandemic levels and the PVC life cycle is a bit shortening from Fundraising investments to exit coming a little ahead of schedule, so it's reflected in that. But it's hard to anticipate. So it has been in the mid-30s to low-40s. Okay. Thank you. And we'll go to our next question from Andrew Liesch with Piper Sandler. Hi, good morning, everyone. Thanks for taking my questions. Excuse me. Mike, just curious, were there any one time performance fees And the Investment Management fee income line this quarter? No, there were not. That was just the Investment Management Based on where AUM ended last quarter. Got it. Okay, thanks. And then Jim and Gaia, Everything seems to be firing on all cylinders of balance sheet growth and wealth and new client acquisition. And this has been going on quite rapidly since the onset of the Pandemic. So I guess my question is, what can disrupt this momentum in these trends? What's worrying you right now? Well, I think the thing that worries us pretty much all the time is, 2 things. 1, an anecdotal whoops Somewhere in the portfolio, we don't see them now, but they are by nature anecdotal. And then number 2, a rising rate environment Initially reflects a strong economy, but in due course can go too far. We don't see that happening in the near future. And then I guess the third thing always everybody worries about is some Black Swan event around the world. Got it. Thank you. Thanks for taking the questions. We'll take our next question from Terry McEvoy with Stephens. Hi, good morning. Just one last question on my list. Within the wealth management assets, most of the growth occurred in brokerage and money market mutual funds, pretty limited growth within the investment management area. And I guess my question is from a profitability and revenue standpoint, where would you like to see that growth? And how much of an impact does growth And the mutual fund kind of impact quarterly performance and any commentary on why the investment management was flattish in Q3? So, the investment management also depends on the client activity. So we have seen strong client inflows when you look at year over year, as opposed to quarter over quarter. So and majority of what we do with our clients is investment management. And brokerage had some transactions and higher transaction volume this quarter, so we are seeing that reflected. But we are very pleased that Insurance Trust foreign exchange in addition to Investment Management continues to drive the growth. We used to have our PWM fees to revenues at about 5% or so in the last decade, and now we're at over 15% shares, so we are very pleased with the continued growth. And that speaks to the holistic approach of banking And the management of the client and the teamwork that drives that internally. So that's where we differentiates us the most. It's not some separate silo transactions. It is mostly driven by holistically serving the client with an amazing teamwork Cross Banking Professionals and Wealth Management Professionals. And the cash that was elevated, we did move some of it to off balance sheet tools in the toolkit. That's what you're seeing in the money market mutual funds growing, but that profitability and revenue off of that is small. Great. Thanks for the incremental color. Appreciate it. Thanks. We'll go to our next question from David Chiaverini with Wedbush. Hi, thanks. Couple of follow-up questions. The first on capital call lines. When you went through the loan pricing metrics and maybe I missed it, but did you Provide the pricing on capital call lines. I did not. Thank you for bringing that up. So it's usually around prime And then a Follow-up on the performance fees. Usually, you guys have some come through in the Q4. Do you have a sense of the magnitude those could be? Or is it too early to tell? So you're right, the last 2 quarters the last 2 years we have had a 4th quarter fee. It's probably too early to tell, but sort of The preliminary is we don't expect it to be a meaningful amount like it has been the last couple of years. And so I don't expect to see a bump from that in the 4th quarter. Great. Thanks very much. We'll take our next question from Tim Coffey with Janney. Thank you. Good morning, everybody. We've seen some movement in real estate values over the summer. And I'm wondering as it relates to your commercial real estate and multifamily investor clients, Do you think that move encouraged them to get off the bench and put some of their dry powder to work? Yes, a little bit. Commercial Real Estate and of course buried in that is retail and all kinds of things office, is still slow. Multifamily on the other hand has picked up And multifamily values are stabilized at good levels, high levels and rents And vacancy is stabilizing, and there's a lot more forward vision in the issue of Rent subsidies, and so that is stimulating multifamily activity. The good news is there's also a fair amount of new multifamily activity going on, Which I think the country definitely needs. So we're seeing a pickup as Guy indicated earlier. Okay. And then, Jim, if I can stick with you. Have you seen a migration, meaningful migration of your clients from the coast to more inland areas where you're not currently you don't currently have footings? We've heard news about Texas. Both in Montana certainly has seen a lot of inflow. I'm wondering if you've seen any migration like that? Actually, majority of clients that do move have stayed within our market, so the migration activity has The changes, although limited, whether it's the Florida or Wyoming, we welcome those clients over there as well. So majority of that migration has been within First Republic footprint. Okay, great. Thanks, Guy. And then just one last question. Last quarter, you kind of expressed some interest in maybe perhaps expanding the personal line of credit And I'm wondering, did you do anything on that in the quarter? Not That product is going very, very well. We're running at a rate of around 6,000 new households per year, And we're very, very comfortable with that rate. If it could go up without credit change, we'd be delighted and we're working on that. But remember, it's only about a year old now, a year and a little bit. And the results have been actually stunning. As a cohort, we have greater deposits than we have money out of. Great. Thank you. Those are my questions. And that concludes today's question and answer session. At this time, I will turn the conference back to Jim Herbert for closing remarks. Thank you all very much for joining us today. Have a good day. This concludes today's call. Thank you for your participation. You may now disconnect.