Good morning, and thank you for joining Bank of Marin Bancorp's earnings call for the fourth quarter and year ended December 31, 2021. I am Andrea Henderson, Director of Marketing for Bank of Marin. During the presentation, all participants will be in a listen only mode. After the call, we will conduct a question and answer session. At that time, if you have questions, please press one followed by four on your telephone. If at any time during the conference call you need to reach an operator, please press star zero.
This conference call is being recorded on January 24, 2022. Joining us on the call today are Tim Myers, President and CEO, and Tani Girton, Executive Vice President and Chief Financial Officer. Our earnings press release, which we issued this morning, can be found on our website at bankofmarin.com, where this call is also being webcast.
Before we get started, I want to note that we will be discussing some non-GAAP financial measures on the call. Please refer to the reconciliation table on page three of our earnings press release for both GAAP and non-GAAP measures. Additionally, the discussion on this call is based on information we know as of Friday, January 21, 2022, and may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements.
For a discussion of these risks and uncertainties, please review the forward-looking statements disclosure in our earnings press release, as well as our SEC filings. Following our prepared remarks, Tim and Tani will be available to answer your questions. Now I'd like to turn the call over to Tim Myers.
Thank you, Andrea. Good morning, and welcome to the call. I'd like to begin my first earnings call as CEO of Bank of Marin by affirming that we remain laser-focused on serving our customers and communities while consistently driving long-term value for our shareholders. We generated solid results for the Q4 and full year of 2021 while maintaining capital, liquidity, and overall credit quality. These are the hallmarks of our consistent performance.
Our acquisition of American River Bank shares in 2021 expanded our footprint into Greater Sacramento, one of the fastest-growing regions in California. Importantly, it provided us with better scale to maximize efficiencies and drive growth into the future. The integration of American River is on track as we approach core systems conversion in late March. We also continue to make strategic hires and develop our teams to support growth.
Several of our key hires have been in the Greater Sacramento region, and I'd like to take a moment to highlight one of them. In late 2021, we hired Deepak Bhakoo as Senior Vice President, Commercial Banking Sales Manager. In this newly created position, he will oversee the bank's commercial banking growth initiatives across our entire footprint.
Deepak is a great example of the talent we continue to attract as we grow. With nearly 20 years of commercial banking expertise, including deep lending experience in the Greater Sacramento area, he has a strong track record of building successful teams. This will serve us well as he expands our new client acquisition efforts and helps guide our growth initiatives. For the full year, we generated strong loan production in Napa, Marin, Oakland, and Walnut Creek.
Late in the year, our commercial banking teams in these and other key markets, including Sacramento, were successful in bringing new clients to the bank and expanding existing relationships. These efforts helped generate a notable lift in loan production in the Q4, and we expect that drive to continue. The pandemic is still with us, but we continue to adapt as necessary and manage the business for ongoing growth. We, along with our customers, have learned a great deal over the past two years. I am confident we will continue to accelerate momentum gained through the past year to deliver value for our shareholders in 2022 and beyond. Now for some key highlights.
Net income for the full year was $33.2 million or $2.30 per share, representing a return on assets of 0.94% and return on equity of 8.4%. Excluding one-time merger-related and conversion costs, net income would have been $38.1 million, or $2.64 per share, representing a return on average assets of 1.08% and return on average equity of 9.67%. Loans increased 8% to $2.3 billion at year-end 2021, up from $2.1 billion at December 31, 2020. Year-over-year growth was driven by the American River acquisition and non-PPP commercial loan originations, the majority of which were investor commercial real estate loans.
$181.7 million in non-PPP loan originations were distributed across our footprint. Loan growth was offset by PPP forgiveness, commercial real estate asset sales, and commercial payoffs due to ongoing borrower deleveraging. As of December 31, there were 368 SBA PPP loans outstanding, totaling $111 million, net of $2.5 million in unrecognized fees and costs. Deposits grew $1.3 billion or 52% in 2021 to $3.8 billion, including $790 million acquired from American River Bank on August 6.
Non-interest bearing deposits increased $556 million in 2021 and made up 50% of total deposits at year-end. Our already low cost of deposits decreased further to 7 basis points for the full year of 2021, down from 11 basis points in 2020. We reported a net increase in substandard loans in the Q4 , primarily due to one borrower with two secured investor commercial real estate loans that were negatively affected by the pandemic.
However, non-accrual loans represented only 0.37% of the bank's loan portfolio as of December 31. The $8.4 million in non-accrual loans at year-end included two secured owner-occupied commercial real estate loans totaling $7.1 million, which were placed on non-accrual status in the Q4 of 2020.
Bank of Marin Bancorp continued its share repurchase program, repurchasing 149,983 shares totaling $5.6 million in the Q4 of 2021. Given our continued strong capital position and solid 2021 results, our board of directors declared a cash dividend of $0.24 per share on January 21, 2022. This represents the 67th consecutive quarterly dividend paid by Bank of Marin Bancorp. Now I'll hand the call over to Tani to discuss our financial results.
Thank you, Tim. Good morning, everyone. Q4 2021 represented the first full quarter with the combined assets of Bank of Marin and American River Bank. Net income of $9.7 million increased from $5.3 million in the Q3 and $8.1 million in the Q4 of 2020. As shown in the earnings release reconciliation of GAAP and non-GAAP measures, Q4 net in come would have been $10.5 million and earnings per share $0.66 without the merger-related one-time and conversion costs. Return on average assets of 0.9% for the Q4 would have been 0.97% without those costs, and the 8.5% return on equity would have been 9.19%.
While non-PPP loan originations exceeded payoffs by $7 million in the Q4 , total loans decreased by $61 million, due to $54 million in PPP loan payoffs and changes related to scheduled amortization and utilization. $80 million in non-PPP loan originations for the quarter was up significantly from $43 million in the Q4 of 2020. Quarter-over-quarter, average loan balances increased $80 million and the yield increased 10 basis points to 4.43%, mostly due to lower rate PPP loans paying off. While average yields on investment securities decreased 36 basis points, higher balances significantly contributed to an increase in quarterly net interest income. Q4 2021 net interest income of $30.6 million increased $2.9 million over the Q3 .
Net interest income increased $7 million over the same quarter last year due to higher loan balances and a 52 basis point higher average loan yield resulting from accelerated fee recognition on PPP loan payoffs. Incremental balances in the investment portfolio added $2.4 million to net interest income despite the lower average yield. Overall, average interest earning assets increased $1.3 billion. The tax equivalent net interest margin was 3.03% for the Q4 of 2021, compared to 3.15% in the prior quarter and 3.4% in the Q4 of 2020. The 12 basis point decrease from the prior quarter and the 37 basis point decrease from the same quarter a year ago were primarily due to a higher proportion of investment securities in the growing balance sheet.
The balance sheet continues to be asset sensitive and well-positioned to benefit from rising interest rates. Non-interest income totaled $2.7 million in the Q4 , compared to $3.6 million in the prior quarter and $1.8 million in the Q4 of 2020. The decline from the Q3 was largely due to $1.1 million in bank-owned life insurance benefits collected in the Q3 . The increase over the Q4 of 2020 was spread across most categories and largely resulted from increased activity related to our expanded deposit base. Non-interest expense of $19 million in the Q4 of 2021 declined $3.7 million from Q3 , mostly due to lower merger-related one-time and conversion costs.
Higher loan originations in the Q4 led to more deferred costs which reduced salaries and benefits, while year-end true ups to incentives and benefits had the opposite effect. Full year non-interest expense of $72.6 million increased $14 million over 2020. $6.5 million of that increase came from acquisition-related one-time and conversion costs. Additional personnel from the merger, annual merit increases, lower deferred loan origination costs, and year-end true ups to incentives also increased salaries and benefits. Other increases included consulting expenses related to PPP forgiveness and higher data processing expense associated with increased transaction activity.
Several other categories increased due to the bank's larger size, and charitable contributions decreased due to supplemental contributions in 2020 related to the pandemic. The efficiency ratio for the quarter, excluding merger-related one-time and conversion costs, was 53.6% and improved from 56% in the Q3 and 55.9% in the Q4 of 2020. The effective tax rate increased 50 basis points to 26% in 2021, primarily as a result of nondeductible merger-related expenses. In closing, 2021 presented both challenges and opportunities, and we effectively navigated the environment while staying committed to the principles underlying our long-term success. We are pleased with these results and are ready to take on the new year. Now Tim would like to share some final comments.
Thank you, Tani. Bank of Marin continued to deliver solid performance in 2021 while growing and expanding our footprint. We enter 2022 confident in our ability to navigate the remaining stages of the pandemic and respond to our customers' needs as we continue our transition to a post-pandemic economy. Following our acquisition of American River, our ongoing efforts to attract skilled leaders and revenue-generating talent will help us further build out our team in Sacramento and drive growth across Northern California. Thanks to everyone on today's call for your interest and support. With that, we will open the call to your questions.
Thank you. If you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt acknowledging your request. If your question has been answered and you would like to withdraw your registration, please press one, three. Questions can also be submitted via the webcast page by clicking the Ask Questions tab and typing your question into the box that appears below the tab. One moment please for the first question. Our first question comes from the line of Jeff Rulis, D.A. Davidson. Please go ahead.
Thanks. Good morning, Tim and Tani.
Morning, Jeff.
Morning, Jeff.
Wanted to get into the expenses. You know, I think the core is running a little lower than I had anticipated. Maybe you're capturing the American River cost saves ahead of time. Could we get just a catch up on how successful you've been on obtaining cost saves to date and then what the I think, Tim, you mentioned the conversion occurring in March, what that might do to the absolute number as well.
Yeah. Thanks, Jeff. I'll start high level and then Tani can take over. As of right now, we're tracking ahead of plan on one-time costs and cost saves going forward. Tani can give any specifics there.
Yeah. I would say if you look at Q4 without the acquisition cost, that's a pretty good indicator of our run rate. I think that also, if you look at what the conversion and one-time expenses that were included in the Q4 , that's a good indicator of what might show up in the Q1 because our best estimate of what is going to be expensed over the course of the conversion is accrued over the course of the conversion.
Okay. If we get back to that core run rate, if you think something just below $18 million is the core. Do you—if we just focused on sort of non-one-time merger costs, I guess post-conversion, is there more savings to go, or is that sort of from there, it's going to be offset by maybe the wage inflation and others so that, you know, $18 million run rate and then it kind of carries on from there post-conversion, I guess, in as we get into the Q2 ?
Well, when we model our cost savings, we model those to increase over time with, you know, with inflationary and merit increases and that sort of thing, but the absolute expenses, obviously over time will go up because for those same reasons.
Okay. If I read you right, post-conversion, you wouldn't anticipate the run rate to be meaningfully disrupted, and then over time, it probably reverts to some growth.
That is correct.
Okay. Gotcha. Thanks. Switching gears just on the margin and the securities investment or that build, you know, understandable, you know, with what's happened with loans as well as the transaction on liquidity. Just wanted to see about the balance of 2022, how you manage. Is there additional interest in the securities portfolio? I think, you know, the short answer would probably be prefer loans. How does that manage? With the backdrop, you've said you remain well positioned on rates. How you manage the balance sheet versus what you think the output on the margin would be.
I'll just quickly say, Jeff, to your point about we would much rather prefer and are targeting putting more money to work in loans. We talked about in the release hiring Deepak Bhakoo to have a disciplined, consistent sales process across the footprint, really hammer home the relationship banking, which done correctly helps with the yield. But certainly Tani has a lot to do on the security side.
Yeah. The balance sheet is, you know, remains asset sensitive, as I mentioned. Last quarter, we reported on a static balance sheet in an up 100 basis point environment, an increase in first year NII of about 2.8%, and in the second year, 6.9%. That's pretty well balanced and a little bit heavily weighted towards an increasing rate environment. We're probably a little bit lower on asset sensitivity than we were then because we have deployed some of our cash into securities. Remember, that's a static balance sheet. To the extent that we grow loans, that's going to be improved. Also, you know, with the probability that interest rates will go up, that is definitely a tailwind for us.
PPP loans, we've got about $2.5 million in fees net of costs left to amortize. After that goes away, that's a bit of a headwind. You know, another tailwind we have is that we've got a ton of liquidity. That supports our ability to lag deposit rates on the way up when interest rates increase. The last point is that, as we've deployed cash into the investment portfolio recently, most recently with rates up, we've been able to do that at a yield that is higher than the average yield on the portfolio.
Okay. Got it. It sounds like on the loan, you know, securities to loans or that mix in the near term. Well, I mean, you're growing NII on some volume and sounds good on the rate outlook going forward. I appreciate the detail. I'll step back.
Thanks, Jeff.
Our next question comes from the line of David Feaster with Raymond James. Please go ahead.
Hey, good morning, everybody.
Morning, David.
I just wanted to start on the organic growth outlook. Great to see the new hires. Looks like origination's really accelerated in the Q4 , but you know, payoffs and pay downs are still a headwind. Maybe just could you talk about some of the puts and takes with loan growth as we're looking forward? What do you think you've kind of dropped here on a core basis, and just how you think about organic growth heading into 2022? Yeah, it's a key focus of ours, David. Certainly one of the nice things, if you look on a group by group basis across our commercial banking office network, we had much more even production in the year. We're really seeing some of the newer offices or the offices that were not just Marin.
I mean, for the full year, Marin was a third of our total production. We're seeing some really good production out of regions like Napa, Oakland, but also key areas like Walnut Creek and San Mateo that were you know, Walnut Creek was started shortly before the pandemic and was completely diverted to. That was our PPP team. They had one of the better production years this year as the time demands on them declined with PPP. We're seeing good activity in San Mateo, which was started right in the middle of the pandemic, which is, you know, horrible time to start a commercial banking office and a relationship banking model. I think, you know, with Deepak coming in and continue to drive that consistent sales process, I feel very good about that more even growth.
It really gives us an opportunity to drive the kind of targeted loan growth that we want. Certainly, there are headwinds. The payoffs, a lot of those have been out of our control with asset sales and cash pay downs due to de-leveraging. We did have a fairly large amount of third-party refinancing. We've really made an attempt to tackle that in terms of, you know, calling on our customers, making sure we're getting in front of issues. You see that in some of the NIM decline is the loan yields. You know, in targeted areas, being more aggressive on loan pricing to retain and attract new customers, it is better to put that money to work in loans. We will continue all those approaches to continue the organic growth.
We have a good pipeline right now. We don't comment on amounts, but despite the amounts that funded in Q4, we have a healthy amount of loans we're expecting to fund. The new team that we've hired out in Sacramento has developed a good pipeline already, and we'll just continue to hammer on those key factors.
That's great.
Does that answer your question?
Yeah. No, that's extremely helpful. Maybe just any thoughts on the additional new hires. There's been a lot of disruption, you know, in the market. Just curious, you know, whether you're seeing more opportunity for new hires and just how you think about, you know, new hires going forward.
Well, that disruption goes both ways, David. I mean, we've had good people come. We've had good people, you know, people leave. It's an aggressive market and that again works both ways for us and against us. That team in Sacramento is a really good example. Our scale, our ability to do loans out in the Sacramento market allows to attract people that have done very well in prior jobs. Like I said, they already have a considerable pipeline. In Deepak's role, he'll be pushing that out to our other regions as well. Again, it can work both ways, but we've certainly benefited, and we are looking to fill key positions still going forward.
Okay. That's helpful. Just one other quick one. Could you just remind us of the seasonal expenses that you'd expect in the Q1 ? I guess maybe we should expect, you know, a little bit of a bump in that Q1 before kind of coming back to that upper $17 million run rate that you were kind of talking about.
Yeah, that's exactly right. We typically have a bump in the Q1 relative to the resets of the 401K contributions related to the bonus payouts and 401K payments associated with that. That's a really good point. We had a question on the webcast regarding that as well, asking if $18 million per quarter sort of was the run rate based on Q4 minus the acquisition expenses. That is correct, but that $18 million would not include that Q1 cyclical bump.
Okay. All right. That's helpful. Thank you.
Our next question comes from the line of Matthew Clark with Piper Sandler. Please go ahead.
Hey, good morning.
Good morning, Matthew.
Maybe just to round out the expense-related discussion and get more specific, I guess how much of the $6.1 million of annualized cost savings have you realized so far, and what do you think the upside is to that $6.1 million when it's all said and done?
Sorry, Matthew, I'm not sure where the $6.1 million is coming from. Are you running that number based on what American River Bank costs were prior to the merger?
Yeah, I'm sorry. Yeah, I guess I'm using the targeted percentage based on their last twelve months, but it might be different relative to what you guys are-
Okay.
You know, attempting.
Okay. We'll just talk conceptually. Yeah. First of all, we used consensus estimates when we ran our model. We only estimated about a 25% realization of cost savings in the Q1 . It's very early days on that. I think in general, when we look at where most of those cost savings come from is in salaries and benefits. When we look at where we are and where we're headed, you know, over the course of the acquisition and post-conversion, right now it looks like we're going to exceed the projected cost savings. We also modeled a 75% realization of those in 2022. The accretion numbers that we quoted in the investor presentation, remember, were on a fully phased in basis.
Fully phased in would be, you know, 100% realized in 2023. That's because we've got a quarter of conversion in 2022.
Okay, got it. The bump in reserves this quarter, and I guess, where do you feel comfortable with that coverage ratio longer term based on, you know, the mix of your loan portfolio, in terms of, you know, what you're targeting for your loan mix longer term?
Yeah. The increase in the reserves due to CECL were really not necessarily a reflection of the credit quality in the portfolio. We feel good about the credit quality. We did have the one downgrade, but we feel like, you know, we have our arms around that. It was really an adjustment to the factors in the model that we mentioned in the earnings release, management and other factors. So I don't think there's any reason to think that will worsen or continue. You can't predict, you know, when some of these credits will deteriorate, but we feel very good about our loan portfolio credit quality and don't see anything in our plans in terms of portfolio mix that would materially impact that.
Okay. Shifting gears to the margin outlook and your asset sensitivity, what's the underlying loan and deposit beta that you're using for up 100 basis points, if you have it offhand?
I'm gonna pull that for you, Matt. I just have to go through some papers.
No worries.
Give me a minute on that. You can move on to your next one.
I'll try to shift away from questions for you, Toni. Maybe Tim, on the buyback, you still have, I think, about $40 million left under the current authorization. I guess, what's your sensitivity to price? Is there a limit at which you will no longer buy back stock?
Yeah, I think we have $35 million left on the approved program, and the volume has slowed. We're gonna look as we go forward, Matthew, about our other, you know, repurchase activity relative to other investment priorities. Just because it's approved, I'm not ready to say at this point that we're gonna continue on that pace irrespective of price. We have to weigh as we go into 2022 and looking ahead what our investment priorities are and what the right thing to do is.
Okay. The last one for me, follow-up one for Tani. Do you happen to have the purchase accounting accretion embedded in net interest income this quarter from American River?
That one I will have to get back to you on. Same with the beta. I've got the average life here, which is roughly 6.5 years. The beta, I don't wanna quote a number off the top of my head because I don't wanna have to call you and say I got that wrong. I'll be back to you on both those questions.
Understood. No worries. Thank you.
Thank you, Matthew.
Next question from the line of Andrew Terrell with Stephens. Please proceed with your question.
Hey, good morning.
Morning, Andrew.
Hello.
Most of mine have been asked and answered already, but Tim was hoping you could maybe just provide an update on how you're thinking about M&A right now. Maybe just an update on appetite into 2022 or how kind of status conversations are going, or just where you might be focused at, and just any kind of color on M&A would be helpful.
No, I appreciate that, Andrew. Our focus is 100% right now on integrating and completing the successful conversion of a legacy American River Bank. That is our total intent focus at the time. Going forward, as you know, banks are sold, not bought, and you can't really control the timing. Part of my job is always to be out there talking to other investment banks and CEOs, and I will continue to do so, but there's nothing in the immediate works. We are 100% focused on integrating ARB.
Okay. Perfect. Thank you. Maybe one for Tani. Do you have the average yield for the new securities purchased in the Q4 just to kind of square away the margin? Thanks.
I have that, but not here with me, so I can get back to you on that, because you're talking about the entire quarter, right?
Yeah, that's right. Okay. That works. Thank you.
Mm-hmm.
Our next question comes from the line of Stuart Lotz with KBW. Please go ahead.
Hey, guys. Good morning.
Hi, Stuart.
Tani, I appreciate all the detail, particularly on your asset sensitivity. I guess, just kind of trying to piece that all together, how do we think about how quickly your loan book would reprice, you know, if we do get a hike here in March, just in terms of kind of overall composition between fixed and floating rates?
If you look at the whole book together, about 18% of our loans reprice in less than or equal to a year. Obviously that doesn't include securities. Our securities portfolio, the duration on that, is pretty short, and we get a lot of cash off of that portfolio. Then 63% of the loan book reprices in less than or equal to five years. Only 4% of the portfolio is in the money on floors. Roughly one-third of that would reprice upwards once rates go up 50 basis points. The other two-thirds, 100. That's a pretty small percentage of the overall portfolio.
Okay. It sounds like just from when you run your screen, from an asset sensitivity, you know, most of the upside is from deploying cash and, you know, with cash, you know, back to 8% today, where do you see that trending? Is that really just driven by, you know, deposit inflows and how quickly you can put, you know, money into, you know, better use, in the securities book?
Yeah. We have continued to have deposit inflows. As you mentioned, it is a little bit hard to keep up with it, you know, given where rates are, and we wanna make sure that we invest opportunistically, which is why we, you know, we had quite a few investments at the end of the Q3 and the beginning of the Q4 , and then again here more recently in the last couple of weeks when rates popped up again. We try to manage that. We have a lot of liquidity off balance sheet too that we can rely on, if we, you know, have the opportunity to invest at higher rates. Yeah, it's a full-time job keeping up with the deposit growth.
Great. Maybe just one more for me. If we could go back to the reserve outlook. You know, I think the provision this quarter was probably driven by just the stronger production. How are you guys thinking about, you know, kind of a quarterly provision run rate in 2022 if, you know, charge-offs remain at, you know, near zero and maybe we do see, you know, loan growth start to improve? Just kinda any color there. Thanks.
Yeah. We don't expect any change in the charge-off numbers. I'll let Tani answer some of the ongoing provision expectations.
Yeah. With CECL, that model is a lot more dependent on the underlying economic forecast. That's where you would get any fluctuations. Obviously if we grow the portfolio, we're gonna get some change associated with that. Normally with CECL, a very high percentage of the provision is based on the calculated or quantitative portion of the analysis. However, as Tim mentioned earlier, we have quite a few qualitative elements in there right now due to the, you know, the change in the executive management, the integration of the ARB team in terms of underwriting and all of that. That's typical to what we did during the last acquisition or during prior transitions from one, we'll say, Chief Credit Officer to another Chief Credit Officer.
We just tend to bump those qualitative factors up a little bit, just because there's a little more risk. Another element of the qualitative factors is the model risk, and you will notice though that also in the qualitative factors, there was some reduction because we did have some improvement in some of the risks on classified and doubtful.
Yeah. We tried to take a conservative outlook on changes in leadership, integration of the ARB team, credit culture, et cetera. That drove a significant part of the increase.
Great. That's very helpful detail. Tim, maybe just kinda one more here.
Yeah.
Just if there's any update on, you know, utilization rates and where those are trending and, you know, have we seen any improvement, you know, in the Q4 and kinda going into 2022?
No, unfortunately, Stuart, no. I think our overall portfolio utilization declined 8% from 34% to 33% quarter-over-quarter, and at that level it sits exactly where it did at 12/31/2020. It has bounced around though. We've had months where we've had considerable improvement. We are still, you know, just like the banks, a lot of our customers remain very liquid, and so trying to predict when that utilization trend might reverse is really tough. There's a lot of liquidity out there in everywhere. That's, I think, that continues to drive the usage levels. I think it went from 34% to 33% September to December, but it's flat year-over-year.
Okay. Great. Thanks for taking my questions.
Oh, you're welcome. Thank you.
Once again, if you have a question, press one.
While we're waiting for the next question, I'll get back to Andrew Terrell from Stephens. On the securities purchased over the quarter, the yield was about 1.6% on average. Obviously some higher, some lower, but that was the average for the quarter.
We do have a question from the line of Tim Coffey with Janney Montgomery Scott. Please go ahead.
Thanks. Morning, Tim. Morning, Toni.
Morning.
How are you?
Hey, good. I had a question on the loan yields on loans you originated in the quarter. Can you talk about where they were relative to kind of the period end yield?
Yeah. I have some numbers here. I won't give exact numbers, but we did see a decline in loan yields, particularly on a new production on investor real estate, some on owner-occupied real estate. As I mentioned earlier in the call, you know, we've had a push to not just put cash to work, but play defense a little bit from really some of the highly competitive offers we see out in the market. We did go out with a lower loan yield on some of those. Most of the others are relatively close, we did see a decline in that investor real estate and owner-occupied real estate primarily.
Okay. The way to get offensive out there in this market right now, you talked about wanting to be more aggressive on pricing or at least competitive on pricing, I should say. Are these kind of like teaser rates or is this kind of just your how you're approaching the market right now?
No, we don't do teaser rates. This is just for a strong customer, a strong prospect, being competitive relative to what we're seeing in the market. We had a relatively small bucket that we allocated for that. You know, we continue to have an intense focus on that relationship banking model so we can get yields, you know, at a premium to market and certainly wanna improve our overall portfolio yield. We continue to focus on that. We're not explicitly saying let's be aggressive consistently. It's just being competitive where necessary to maintain and grow the loan balances.
Okay. Got it. Understood. Tani Girton, what's a kind of a good way to think about your tax rate going forward given the volatility we've seen in the last two quarters?
I think that if we would wanna ratchet it down a little bit versus the full year 2021 because we had some non-deductible merger expenses. I would say, you know, that was for the full year, that was worth about 50 basis points in the effective tax rate.
Okay. All right. Great. Thanks. Those are my questions.
Thank you.
Great. I'm gonna come back to Matthew's question on the betas. The average beta for the portfolio that we apply in our interest rate risk analytics is 58%, and that includes the 74% beta on our money market accounts.
We appear to have no further questions on the phone line. I'll turn it over back to our speakers for any closing remarks.
Thank you very much for joining us on the call. I appreciate it. If anyone has any follow-up questions, please let us know.
Thank you. That concludes today's call. We thank you for your participation and ask you to please disconnect your line.