Earnings Call: Q3 2021

Oct 22, 2021

Good day, and thank you for standing by. Welcome to the WSFS Financial Corporation Third Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a As a reminder, this conference call is being recorded. I would now like to turn the call over to Dominic Penuso, Chief Financial Officer. Please go ahead. Thank you, Charlie, and thanks to all of you for taking the time to participate on our call today. With me on this call are Roger Levinson, Chairman, President and CEO Art Bacci, Chief Wealth Officer Steve Clark, Chief Commercial Banking Officer and Rick Wright, Chief Retail Banking Officer. Before I begin with remarks on the quarter, I would like to read our Safe Harbor statement. Our discussion today will include information about our management's view of our future expectations, plans and prospects that constitute forward looking statements. Actual results may differ materially from historical results or those indicated by these forward looking statements due to risks and uncertainties, including but not limited to the risk factors included in our annual report on Form 10 ks and our most recent quarterly reports on Form 10 Q, as well as other documents we periodically file with the Securities and Exchange Commission. All comments made during today's call are subject to this Safe Harbor statement. Good afternoon, everyone, and thank you for joining us on the call. Our earnings release and investor presentation, which we will refer to on today's call, can be found in the Investor Relations section of our company's website. We had another solid quarter consistent with the first half of the year, driven by our diversified business model and the strength of our strategic position in our marketplace. Local economic activity continued to rebound throughout the summer and into the fall across our footprint, bolstered by very positive sentiments from our customers, growth in our commercial loan pipeline, continued strength across our fee based businesses and positive credit trends. Highlighted on Slide 4 of our investor presentation, 3rd quarter core net income was $56,700,000 a $1.19 earnings per share and a 1.48% return on assets. Reported net income was $2,300,000 lower than core results, primarily driven from corporate development costs related to the BMT combination and in line with original deal model expectations. Excess liquidity continues to have a significant influence on our near term performance, including impacts on our net loan growth, deposit levels, growth in our treasury investment portfolio and diluting NIM, PPNR as a percentage of assets and ROA. As seen on Slide 5, net growth in loans in the quarter when excluding PPP and purposeful runoff portfolios was down $80,000,000 We had another strong quarter of new commercial loan growth originations near $400,000,000 as seen on Slide 6. This is relatively consistent with 2Q, continuing our recovery nicely from prior year lows and almost fully back to pre pandemic levels. And our loan generation should go from those levels that we were before the full opportunities of Beneficial, the benefits from our investment in delivery transformation and additional strategic RM hires. However, existing commercial loan payoffs remain elevated in this environment with heightened payoffs in construction and commercial mortgages along with a reduction in our held for sale resi portfolio in the quarter. Consumer loans grew 5% annualized in the quarter as we launched our new digital consumer lending product powered by Upstart. Our lending partnerships including Spring EQ, LendKey, Cred AI and Upstart now account for almost $500,000,000 in total consumer loans. Customer deposits grew another $64,000,000 in the quarter from seasonal growth in municipal and public funded accounts. Customer deposits are now up 14% or $1,600,000,000 year over year and up 35% or $3,300,000,000 from March 2020 at the onset of the pandemic. This excess liquidity is the positive outcome from our strong response to our customers' PPP needs, our relationship based business model and the diversity of our deposit base with over 50% of deposits coming from commercial, small business and wealth management. Total deposit costs are now at a very low 10 basis points and our loan to deposit ratio is at 63%, providing significant capacity for future low cost loan growth. We have put this excess liquidity to good use by paying down over 90% of our wholesale funding over the past 6 quarters and over doubling our treasury investment portfolio from $2,100,000,000 at the beginning of 2020 or 17% of assets at the time to $4,300,000,000 currently, which is 28% of assets. These additional investments are comprised of high quality, marketable, investment grade securities consistent with our overall investment portfolio strategy. In the quarter, excess liquidity, including the impacts of these incremental investments, reduces ROA by 23 basis points and net interest margin by 61 basis points. We expect some additional treasury purchases in 4Q to bring the investment portfolio asset mix into the low 30s as a percentage of assets, which will blend down to the mid-twenty percent post BMT. We anticipate the impact on net interest margin from excess liquidity come down to approximately 50 basis points by the beginning of 2022. And down from there as excess liquidity runs down and the cash flows from the investment portfolio is consumed by net loan growth that we anticipate and are well positioned for. Net interest margin in the quarter detailed on Slide 6 is 3.05%, which includes 18 basis points of purchase accounting accretion and 5 basis points of PPP income, both more than offset by the 61 basis points of negative impact from excess liquidity. Excluding PAA, PPP and excess liquidity, underlying NIM increased 2 basis points over prior quarter. 3rd quarter fee revenue again demonstrated the strength and diversity of our fee products and services, especially in this lower interest rate environment. Core fee revenue was a healthy 30% of total revenue when excluding PPP and supported by 16% year over year growth in wealth management and 10% year over year growth from Cash Connect. These were offset by lower mortgage banking fees as the consumer refi market slowed from record highs in 2020. As seen on Slide 929, overall credit quality continued to trend favorably following the peaks in late 2020. Criticized assets were down $93,000,000 in the quarter to $532,000,000 and down $233,000,000 or 30 percent from the peak. And delinquencies were down to 0.57% of assets from the peak of 0.88% in late 2020. Combined with a continued positive economic outlook, the ACL declined $27,500,000 to $104,900,000 or 1.30 percent of assets, which is a 1.58 percent when including estimated remaining credit marks from acquired portfolios. We continue to generate significant capital through earnings and have a strong capital position heading into the combination with BMT, with a TCE of 9.17% and bank CET1 ratio of 14.59%. Our Board of Directors approved a quarterly cash dividend of $0.13 per share of common stock and no shares were purchased in the quarter as we have paused repurchases until the close of the BMT transaction. We are optimistic and excited about our future prospects given our unique competitive and strategic position in our markets, the strength of our national fee based businesses along with the upcoming combination with BMT. Regarding BMT, on July 21st, the OCC, our primary regulator, approved the transaction. As we await final regulatory approval from the Federal Reserve in Washington, Our highly engaged teams at BMT and WSFS continue to work together diligently preparing for quick close of the transaction and the bank conversion and integration planned for early 2022. Thank you, and we will be happy to take Your first question comes from the line of Michael Turbino, KBW. Please go ahead. Hey, guys. Good afternoon. Thanks for taking my questions. Hey, Michael. A few things I wanted to hit. First, just on loan growth. I realize the environment and with the pay downs is a little uncertain, but you do have pretty good line of sight on kind of the planned runoffs and when that should run its course. And I guess just the simple question is, I mean, when do you think it's going to start to get realistic to assume you guys can return to a net growth posture? I mean, I realize the origination side of that might be a little bit more complicated. Are we thinking like middle of next year? Or do you think post trademark close, the runoff could push it out further than that? Just curious if you're well for any color around that. Michael, this is Steve Clark speaking. So actually, the production side of our business, we feel really we're very pleased with the production side. As Dominic mentioned, the fundings in the Q3 following a really strong Q2. And we definitely are seeing increased activity since September, more opportunity coming our way. So we feel good about our pipeline and production forecast. The commercial 90 day weighted pipeline is about $250,000,000 We have a small business, the 4th quarter pipeline of another $30,000,000 dollars And when you look at the combination of that, along with our strategic partnerships on the consumer side and what New Lane Finance is generating, we feel that the production will be there. What we cannot control really is the payoff side. So your question is really hard to answer, but we think we're really positioned well to take advantage of our current market position here in the greater Philly area. And Michael, this is Dominic. Just to add to that, pertaining to your question around the runoff portfolios, and we had mentioned this as of last quarter that really all of the commercial lending that we acquired from the Beneficial that was non relationship based has pretty much run its course at this point. So we don't anticipate really a net impact further from that. What's really remaining is the residential mortgage, which will run off based on its average tenure life and impacts from the resi mortgage. On the net loan growth side, as Steve mentioned, lots of opportunities on commercial, as we discussed, both from the Beneficial integration that we really never took full opportunity of because of COVID, the upcoming BMC opportunity, investments in delivery transformation and successful hires over the last few years. But round that out with continued additions of strategic partnerships and products on the consumer side, including the Upstart product we just launched in the Q3, along with opportunities we see in our new lane leasing business. So across all of our platforms, we see a lots of positivity and activity from our customers and anticipate that to lead to net growth in the future. Helpful. And the reason to phrase a question like that and alluded to my question is just around employment post Bryn Mawr, right? I mean, obviously, I think the expectation that you guys are guiding to is that the core portfolio can grow. And with all the contributors that you guys just named, I think that seems very reasonable. But assuming that the net isn't overly robust for the next 1, 2 or 3 quarters, I mean, is it fair to assume that the buyback authorization will be used as it has been historically to deploy capital until there's growth that requires the excess capital? Yes. Great question. As we've said, we have paused our share repurchase program, and we are generating significant capital. We're pleased with the amount of capital that we have going into the combination. As we have done historically, when we look at excess liquidity, we look at the economic environment, our organic opportunities and inorganic opportunities. And we believe that we'll see in a very strong position to reengage with share repurchases after the close and still have capital remaining for the investment on the organic side of the loan book. Helpful. And then just last one for me. I mean, we saw a big merger that I think they had pushed back their closing date waiting for the Board of Governors from the Fed to give them the final results. You guys still committed sorry, you still indicated the Q4 close was expected, but just curious if there's any kind of insights or color or concern that that's back as you wait for that final approvals? Hey, Michael, it's Roger. And the short answer to your question is no. We said early 4th quarter. And as we outlined in Domin's comments, we were pleased that we received the OCC approval in mid July. As it relates to our Fed approval, we understand that we provided all the information that they need to vote on the application at some point. But as I'm sure you've seen, there are others that the Fed is in the process of evaluating. So they're just going through their process. We're respectful of that. And I think the important thing is once we receive that, we're ready to close immediately. And most importantly, the integration is going really, really well. The teams have come together well. We are moving full speed ahead and planning for that the conversion to happen in early 2022 and continue to move in that direction. Perfect. That's really helpful insights. Thank you guys for taking my questions. Appreciate it. Thanks. Your next question comes from the line of Eric Uggs with Boenning and Scattergood. Please go ahead. Hey, good afternoon guys. Hey, Arthur. Just to stick on the loan growth theme for a second. Dominic, in your comments, you mentioned seeing some good growth in the commercial pipeline. I think Steve, you added some commentary there. I wonder if you could add maybe just a little more color in terms of the maybe types of industries that are supporting the growth and strength there as well as kind of the average yields that you're seeing in the pipeline that you expect to bring on to the balance sheet at some point? Yes. So of our existing pipeline on the commercial side, about $174,000,000 of that is C and I. So we're really pleased to see that versus about $77,000,000 in CRE. So as you know, our strategic focus continues to be C and I and that's what we're seeing really across a broad spectrum with no specific industry. On the CRE side, we still are seeing many opportunities in the multifamily space and in the kind of residential development, sold units, some A and D work, but really all underwritten around takedown agreements with National Builders. So those are kind of the 2 factors that we're seeing. On the yield side for the quarter, new loans originated and funded during the quarter had a yield of about 3.79 versus kind of payoffs in the quarter of 3.58. I think as important to me year to date, those new funding yields have been about 3.65. So we're targeting mid-3s versus payoffs that year to date actually have been higher as you would expect of a 3.93. So Eric, this is Roger. And just to add into some additional color and maybe reinforce a couple of the points on our loan growth outlook. So as you heard from both Dominic and Steve that we're very fortunate that while staying consistent with our relationship based strategy focus on this region, we have multiple levers to pull on the loan growth side and that we're very optimistic about the combination with BMT. Offers were made to all of their lending team to come over with us. There's I think, as I mentioned, there's a lot of good and positive momentum on the integration planning with those teams and having a bigger balance sheet and more robust product set, I think, bodes well for growth from those folks. And then just as a reminder, the 11 lenders that we've brought over, many of them were just crossing the 1 year anniversary in this quarter. And so their business is building and growing. And so I think all of that will help to contribute to the loan growth going forward. That's great. I really appreciate the detail there. And with regard to the new Upstart partnership, any color you can provide in terms of what you expect for average loan size, credit risk profile and just kind of the growth outlook going forward? Yes, sure. So obviously, it's in the early stages. This is a primarily unsecured product. And as we've seen, it's more of a debt consolidation. The yields are in the low single low double digits, so 12% to 14%. Average loan is about $15,000 All of this is within our footprint, utilizing our underwriting approach and strategy, applying Upstart's AI proprietary scoring system and all with the opportunity to build into further relationships beyond the loan into deposits, mortgage and deepening the relationship across WSFS. Thanks, Dominic. And just one last one for me, maybe for you again. Do you have the remaining for the PPP loans, the remaining fees as well as maybe your expectation for forgiveness timing? Yes. So we anticipate almost all the remaining PPP loans, the $67,000,000 at quarter end to be forgiven or in process of forgiving. At this point in time, they will begin to accrue interest. But there could be maybe $5,000,000 to $10,000,000 that ultimately doesn't get forgiven and stays as loans. The impact going forward from the unaccretive fees would be nominal around 1 basis point beginning in the Q4 and going forward. Okay. Thank you. That's all for me today. Thanks for taking all my questions. Thanks, Eric. Thanks, Eric. Your next question comes from the line of Russell Gunther with D. A. Davidson. Please go ahead. Hey, good afternoon, guys. Hey, Russell. Wanted to ask, I always appreciate the Slide 5 that tracks the loan growth in moving pieces. Could you remind us as the beneficial commercial runoff is almost done, will there be any adds to either commercial or resi runoff portfolios once the Bryn Mawr transaction is closed? Sure. Yes, there will be some additional resi mortgage added to this runoff population as BNP continues to originate and hold assets versus our originate and sell. There is very small pockets, nominal amounts of C and I that we believe would be non relationship based or not on strategy. So probably $50,000,000 to $100,000,000 in that range. Okay. Got it. Thanks, Dominik. And then you've had commented about strategic RM hires. I think Roger mentioned 11 just crossed the 1 year anniversary. Could you talk to any additional adds in the quarter, where these guys are kind of coming from in terms of contributions across the loan portfolio and geographies and any planned additions? So Russell, it's Roger again. I just want to make clear, we hired 11, but many of those 11 were just crossing their 1 year anniversary, some might be here a little bit longer. But I think the broader point, what's really positive about this is, we're seeing this impact all of our businesses and all of our geographies. So we've added people in C and I, in the city of Philadelphia, in the western suburbs, in South Jersey, And we continue to receive a lot of and we've also hired folks in our private banking group. And we continue to receive a lot of inbound inquiries, particularly from RMs that are working at larger banks that either are going through some of their own changes or for some reason they feel like they don't have the ability to serve their customers in a way that they used to serve. But I would tell you our bar is pretty high. We clearly are only going to bring over people that we feel are consistent with our business model, relationship driven and that can bring a book of business because of the significant investment we already have. So, we continue to have those conversations. We added another one this recent quarter, and we will continue to talk to folks, moving forward. But I would tell you, and there's a slide in there that outlines the commercial business that we have. We have just significant people in the street in this region right now. And I wouldn't expect that you would see a significant add to that going forward, unless some very unique opportunity came about. Post BMT, we just feel really good about the team that we have and the opportunity we have to grow the loan book. I appreciate the color, Raj. Thank you. And then just final loan growth question. You guys mentioned total consumer loans about $500,000,000 from your digital partnerships. Could you kind of frame up what you think the aggregate growth rate could be from those partnerships going forward? Yes. We do anticipate the opportunity to continue to grow those. We haven't necessarily communicated our 2022 plan and assumptions yet, which we will along with the Q4 results in January, but we see tremendous opportunity to build relationships through those partners. Obviously, the Spring in Q product is a function of the mortgage market, LendKey a function of the student lending, but we do see the opportunity with Upstart to see some incremental net growth to that population and then to continue to build those relationships from there. Okay, great. Thanks, Dominic. And then just final question. Roger, you mentioned expectations to kind of stick with the early next year conversion of Bryn Mawr. So I just want to make sure you guys are still comfortable with the timing and magnitude of cost savings there. And then as a follow-up, any color you can provide in terms of framing up where that expense run rate could shake out as cost saves are realized and franchise investment continues? Thank you. Sure. This is Dominic. I'll start on the cost saves. As part of the combination modeling and expectations, really the bank conversion integration starts off the phasing of the cost, primarily with the branch closures and consolidations, followed by some staff savings and ultimately technology saves. And those will occur throughout the year with the expectation by the end of the year, we're hitting close to 100% of the anticipated cost saves that we've communicated as part of that combination, such that in 2023, we would have really the full impact of those saves. And Russ, I would just add to that, that the confidence we have on the timing in addition to what's going on with the regulatory approval is because we have a playbook and that playbook has gotten better as we've gone through these combinations, including the Beneficial, which is actually a little bit larger in terms of size than Bryn Mawr is. And as I said, the teams have been working together really, really well now for over 8 months on planning for this. So sitting here today, we feel good about that timeline. Thank you both for taking my questions. Thank you. Your next question comes from the line of Brody Preston with Stephens Inc. Please go ahead. Good afternoon, everyone. Hey, Brody. Dominic, I just wanted to ask on the provision guidance, the negative $90,000,000 to negative $100,000,000 on the year. So year to date, you all are at negative $109,000,000 on the loan loss provision. And so the guidance would seem to imply that excluding Bryn Mawr, you think you'd return to a positive provision from here, which is given that you're still 30 bps or so on an ex PPP basis above your day 1 CECL adjusted reserve. Why is the guidance indicating that you'd see a positive provision in the Q4 here? Sure. And thanks for that question. The full year 2021 core outlook that we laid out on Slide 10 really is just communicating what we had presented as part of our midyear update. And we didn't want to take that out of the deck so that we're transparent around full year expectations that we had communicated. Clearly, we're running ahead of that on the provision and favorably given the release in the Q3. I think we're at the 130 basis point mark. It's unlikely that we ever get back to the day 1 CECL just as the way the model works incorporating most recent behaviors and trends. But we would expect, given where criticized and classified loans are, that if there's continued reduction in that, there could be opportunity to release additional reserves, but ultimately anticipate with loan growth that we would build reserves in the future that correspond with the net growth rate. Got it. Okay. Thank you for the clarification. And just on the criticized loans, just down in the deeper parts of the deck, you have you kind of outlined select portfolios. I just wanted to ask on the hotel and the food services. I understand that those are challenged kind of areas over the last 18 months or so. But so. As I think about a normalization of that criticized rate percentage, what do we need to see before those kind of normalize over the next couple of years? So this is Steve again. Bert, on the hotel side, I just think we need to see continued improvement in occupancy and ADR. Are criticized in the hotel book, I think, peaked at around 50% of that book. It's down to 33% now. And we continue to see really, really strong performance on the leisure side of that business, about 35% of that book is leisure. And in fact, that's the Jersey Shore and the Delaware beaches. The performance of those properties has exceeded 2019, in many cases, significantly. I think what we need to see is continued improvement in the kind of in the business sect, primarily the Philadelphia market. We do see improvements coming out of market data and out of our own customer data in occupancy and ADR certainly improved from 2020, but not back to 2019 or 2018. So we're just waiting to see if that continues. On the foodservice side, I think we need to see there's so much stimulus in those businesses and many of those businesses are still sitting on significant stimulus money. I really think we need to see that spent and then how do these companies perform. So a little bit of wait and see, but as you can see by our credit stats, looking at delinquency and such, all those businesses continue to perform and pay. Yes. The other thing I would add on the hotel sectors, I'm sure you saw in the release, We are very actively monitoring all of these portfolios, especially the hotel. And you might have seen that we did sell 2 loans related to one relationship in the hotel space, because we felt that that particular borrower, which was had been a classified asset for a while now, was very relatively weak global cash flow and concentrated in business travel. And we felt that that had a significant likelihood of going to NPA in the future if there was a situation where the recovery didn't continue. And just based on the nature of the relationship with the borrower, we decided to sell those 2 loans. I would say, we sold them for north of $0.90 on the dollar and we will continue to monitor that portfolio very actively. Thank you for that. I did see that, Roger, and you answered my question on what those note sales garnish. I appreciate that. On I also noted in the Cash Connect, you all called out some investments you made in personnel and armored carrier services. Given the growth given the successful growth of that business, were those investments done for growth purposes? Or was it for any other reason? Yes. No, it's primarily timing and consistent with our strategy with the business. We continue to look for positive operating leverage and invest in technology consistent with the overall delivery transformation strategy of the business to create back office efficiencies along with revenue opportunities. And at the end of the day, it's just somewhat of a timing play in the Q3, but continue to anticipate strong ROAs and top and bottom line growth in that business going forward. Got it. I just had a couple more. I'm a pretty simple guy in my thought process. And so I look at the channel strategy and digital adoption slide, and I see that you all are consistently on the branch transactions hovering around twothree of what you had been doing. And so I guess, the simple question would be why couldn't you just close onethree of your branches if transactions are down onethree? Or should we expect some kind of larger kind of branch rationalization coming down the pike as you evaluate the 2022 plan here at the end of the year? Yes. So Brett, I would just harken back to the announcement when we made Bryn Maw. Bryn Maw gave us the opportunity to take a look at the combined retail footprint that we had of the 2 organizations coming together. And as you know, we announced a very significant reduction in locations as part of that, which really incorporated not just geographic overlap, but foot traffic and all of the metrics of performance of those locations. But we did say at that point that we were going to continue to evaluate and it's likely we will do more. It will just be in smaller pieces. And that process continues as we speak. So net net, just as a starting point, we said we would be back to legacy WSFS totals once we got through the first phase of that. So we were at 89 locations before the combination. Bryn Maw brought over just over 40. We said we'd get back to around 89, and then we would go from there, but likely in pieces, the smaller pieces. But it's something we constantly evaluate. And it's also something that we look at the rollout of some of our investments in delivery transformation to make sure that we have the products that we feel can help those customers impacted by those closures to have a richer digital interaction with us. If I could just add. Yes, go ahead. So if you evaluate the branch count, clearly, transactions is part of it. As that has been the primary expectation in performance of a branch. But as the model shifts not only through the adoption of technology, these branches are as much sales centers. Our wealth business have folks there. Our small business utilize these offices for sales. So they are as much a sales center as they are transaction center, and that's part of the view in which we take when we evaluate the consolidations. Great. Thank you both for that detail. And my last one would be one of the real success stories for you all, for you all and for Bryn Mawr for that matter has been the growth of the wealth platform. And so I guess I wanted to ask, what is driving the market share gains that you all are seeing on the trust and then the bankruptcy side of the business? Is there anything specific to what you all are doing that is enabling you to take greater market share there every quarter? Hey, Brody. This is Art. Appreciate the comment. We've seen very strong growth on the corporate trust side, probably less on the bankruptcy. Clearly, there's not much activity going on there. But I'd attribute it to just we've brought on some new people in the business development side that have opened up some doors we didn't have before. So there's new relationships being formed. We've also formed some partnerships with friends like Portford and Intain where we're able to do some really interesting implement some really interesting technology that automates some of the reporting the trust company has to do. And I think when we package that up, all the services that we're putting together and going to the marketplace, it's resonating well. And as you noted, the market share growth, I think we went from 6% about a year ago to about 8% in the structured product market this year, and we just continue to see a good inflow. And we're living in an environment right now where the securitization market still remains very strong. Great. Thank you for answering that question. I appreciate you taking all my questions today, guys. Thank you. Thanks, Your next question comes from the line of David Bishop with Seaport Research. Please go ahead. Yes. Thank you. Good afternoon, gentlemen. Most of my questions have been asked and answered. But I was wondering, I don't think I heard this earlier, but commercial line usage, just curious where that stood this quarter versus last quarter or maybe the same time last year? So David, it's Steve again. So actually in the quarter, the utilization rate for commercial lines went down to 33.3%. So that was down from 35.4% the prior quarter. And that's about $35,000,000 of outstanding balances being paid back. I don't have year over year, quarter to quarter, but I can tell you from year end 2019, the utilization rate on commercial lines was 43.5% And compared to this quarter, that represents about $219,000,000 of balances paid back. Yes. I think, David, it's Roger. I think if we look historically, kind of mid-40s is where we were operating, mid-40% utilization pre pandemic, pretty consistently throughout various cycles. So moving back towards that would be an indication of, I think, where things stand in the economy. Got it. That's good color. And maybe another way to ask in terms of the consumer lending segments, maybe not so much the growth, but as you look, I think you said it was like 5 interventional loans. How big or I don't know if you thought it this way, but as a percentage of loans, just curious of how big you might see that the partnerships getting? Thanks. Go ahead. So I would just say broadly around consumer loans. We would like to have a nice mix on the balance sheet around 20% consumer loans, 80% commercial loans over time. It's going to take a little while for us to get there, particularly with that Bryn Mawr coming over. They add significant commercial loans and just as Dominic said, a modest resi mortgage portfolio. So that would be the sort of if you wanted to think about how we think about things over time, kind of where we would want to get to. But we are also entering a new phase here with some of these partnerships that we think has great promise, as Dominic said, not just from loan totals, but from a customer and relationship acquisition strategy. And so I think this will be something we'll have to watch as we grow. Great. Thank you. Your next question comes from the line of Eric Zwick with Boenning and Scott Scotiabank. Please go ahead. Hey, just a quick follow-up for me and apologies if I missed a discussion earlier. Looking at the core net interest margin at 2.82 percent today And Dominic, your comments about making putting some of the liquidity to work in 4Q into the investment securities portfolio. Is it right to infer then that 2.82% maybe a bottom for the core margin and we could see some expansion going forward? Yes. I think that's fair to expect. We do anticipate the drag from excess liquidity, as I mentioned in my comments, to continue to come back down closer to 50 basis points by the beginning of next year. That will remain in that area until really the excess liquidity runs off or net loan growth consumes the cash flow from that portfolio. And then at this point, it really comes down to the mix and the growth of the portfolio, we think, between Newlane and Upstart and some of those products, which have really nice yields relative to commercial, along with just where the pipeline is looking from a yield perspective that NIM should the core NIM there should expand from here. Thanks, Dominic. That's all for me. And that concludes the question and answer session for today. I'll now turn the call over back to Dominic Canusa for final comments. Thank you all again for attending today. Roger and I will be attending investor conferences and events during the Q4 and look forward to meeting with many of you then. Have a good weekend. Thank you. Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.