Earnings Transcript for LBAI - Q4 Fiscal Year 2021

Operator: Good morning and welcome to the Lakeland Bancorp, Inc. Fourth Quarter Earnings Conference Call. My name is Victoria and I'll be coordinating today's call. You have the opportunity to ask a question at the end of the presentation. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mary Russell, Assistant Controller and Director of Financial Reporting. Please go ahead, ma'am.

Mary Russell: Thank you, Victoria. Good morning, ladies and gentlemen and thank you for joining us for our fourth quarter earnings call. Today's presenters are President and CEO, Thomas Shara; and Executive Vice President and Chief Financial Officer, Thomas Splaine. Before beginning the review of our financial results -- we ask that you please take note of our standard caution as to any forward-looking statements which may be made during the course of today's call. Our full disclaimer is contained in this morning's earnings release which has been posted to the Investor Relations page on our website, lakelandbank.com. Now, it is my pleasure to introduce Thomas Shara, who will offer his perspective on our fourth quarter.

Thomas Shara: Thanks, Mary and good morning, everybody and thanks for joining us. We're pleased to discuss our fourth quarter and full year earnings results. Before going through our results, I just want to remind everybody that we closed our merger with 1st Constitution during the first week of January. Like us, 1st Constitution had a very strong fourth quarter and full year and finished the year with $1.9 billion in assets. Our systems conversion is scheduled for February 14 and things are in good shape with three weeks to go. As an additional reminder, both banks are on the same platform of Fiserv. As a result of our strong fourth quarter, we do expect to grow over $10 billion as of March 31, 2022. This is a bit earlier than we anticipated when we announced the acquisition back in July. There have been no surprises since the integration process commenced, all employee selections have been made and key lending and retail teams are in place. We remain comfortable with the cost saves previously announced. As it relates to our fourth quarter, our net income for the quarter was $22.2 million or $0.43 of EPS with $0.01 of merger-related costs included. Our return on assets for the quarter was 1.06%, return on equity 10.70% and return on tangible equity was 13.26%. Loan growth for the quarter ex-PPP was 2.5% and we experienced growth in nearly every category with the exception of construction loans and consumer. PPP loans finished the year at $57 million and were down $52 million for the quarter and were down $228 million for the year. C&I was up nicely linked quarter with line utilization starting to move back up. Loan growth for the year, ex-PPP was up 3% which is a bit disappointing but in spite of strong originations, prepayment penalties were elevated for most of the year. Loan originations were strong in the fourth quarter. Originations were 8% better than the fourth quarter of 2020 and were comparable for the year of 2020 which was our best origination year ever. The pipeline starting the year was solid and we anticipate mid-single-digit growth in 2022 with rates moving up of late, we are hopeful that prepayment penalties will lessen and allow us to grow even more in 2022. Credit trends remain exceptionally strong. We ended the year with nonperforming assets of only $17 million or 21 basis points with reserves of $58 million or 0.97 basis points of loans. Net charge-offs for the year came in at $2.2 million or 4 basis points with a small recovery in the fourth quarter. For the full year, earnings totaled $95 million with EPS of $1.85, a record. ROA for the year was 1.19%. Return on equity was 11.95% and return on average tangible equity came in at 14.93%. Regarding the New Jersey economy, we continue to see generally positive trends across the board. New Jersey's unemployment rate has continued to improve and now stands at 6.3%. At this point in the cycle the state has recovered, nearly 80% of the jobs lost during the pandemic and look positive from here. All asset classes, with the exception of hospitality, are performing well and we're hopeful that these trends will continue in 2022 now that Omicron seems to be abating. For the balance of the first quarter, we refocused on the conversion and integration of 1st Constitution, we remain incredibly positive on the 1st Constitution merger. Our new associates are excited about leveraging our balance sheet and expanded products and services and we are looking forward to strong growth potential in our expanded markets. With that, I'd like to turn the call over to our Chief Financial Officer, Thomas Splaine, Tom?

Thomas Splaine: Thank you, Tom and good morning, everyone. As Tom mentioned, our net income for the fourth quarter was $22.2 million or $0.43 per diluted share which is consistent with the reported results we had from Q3. Q4 earnings were notable regarding the provision for credit losses as we recorded a provision for credit loss of $408,000, as compared to a benefit of $2.7 million of negative provisions for credit losses in Q3 as well as a cumulative benefit of $11.3 million in negative provisions during Q1 through Q3 of 2021. In addition, Q4 was unfavorably impacted by $710,000 in merger-related expenses. These items were offset by the continued earning asset growth, a remixing of the balance sheet into higher-yielding assets and a reduction in the cost of our deposits. Pre-provision net revenue was $29.3 million or 1.41% annualized return on average assets. Our net interest margin compressed 12 basis points versus the trailing quarter, as excess liquidity remained high during the quarter before being deployed into loan growth and in the investment portfolio towards the later part of Q4. As a result, our average cash balance in Q4 remained elevated and comprise 6.6% of average total assets as compared to our more normalized level of 2.3% of average total assets which is where we finished the year. On the balance sheet, as Tom mentioned, we are pleased that the loan portfolio, excluding PPP loans, grew $148 million in Q4 as we experienced growth in multifamily, CRE, C&I and the residential mortgage portfolio during the quarter. Loan prepayments remain fairly elevated but reduced from their prior two quarters' rate and PPP loan forgiveness continued to decrease that portfolio. The investment portfolio grew significantly in Q4 as we deployed the excess liquidity to increase net interest income and improve our earnings. Investments increased $372 million or 30% compared to the trailing quarter and the portfolio now stands at $1.62 billion or 20% of total assets. Total deposits increased $35 million in Q4 or 0.5% compared to Q3, including noninterest-bearing deposits. Our total cost of deposits fell to 19 basis points this quarter from 23 basis points in the trailing quarter and continue to remain one of the best in our bank peer group. We continue to remix the deposit portfolio by growing noninterest-bearing deposits and interest-bearing transaction accounts while continuing to run off higher rate time deposits. Our capital position remains strong and we continue to accrete capital through earnings retention. We did not repurchase any common stock during 2021 under our existing stock repurchase program as stock valuations were not favorable. Our tangible common equity to tangible asset ratio is 8.31% at 12/31/2021 and all of our regulatory capital ratios have increased since the end of 2020. Our tangible book value per common share of $13.21 has increased 10.4% since the prior year. On the income statement, our provision for credit losses was an expense of $408,000. Our current quarter provision reflected organic loan growth in Q4, excluding PPP loans and increased uncertainty in the economic conditions based upon the dramatic surge in the pandemic during the fourth quarter. Nonperforming assets increased to 21 basis points of total assets from 15 basis points at September 30, primarily due to placing one C&I loan on nonaccrual status. The allowance for credit losses represents 98 basis points of total loans as of December 31, 2021, compared to 100 basis points in the trailing quarter. Noninterest income increased $395,000 to $5.9 million versus the trailing quarter due to additional income on wealth advisory services and loan fee income, partially offset by a lower gain on sale of residential loans into the secondary market, as part of our strategy to remain -- to retain more residential loans in our portfolio during 2021. Q4 operating expenses were negatively impacted by nonrecurring merger-related expenses of $710,000. Excluding the merger-related expenses and long-term debt prepayment fees during Q3, operating expenses decreased $465,000 from linked quarter due to lower medical costs and lower benefits expenses. Our efficiency ratio of 53% for the fourth quarter of 2021 compares to 54% in the trailing quarter as well as 54% for the fourth quarter of 2020. Our effective tax rate dropped to 23.4% in Q4 compared to 26.4% in Q3 and this resulted in an effective tax rate of 25.4% for the full year of 2021. Regarding our outlook for 2022; the forecast is complicated by the rapidly changing interest rate environment and the Federal Reserve Bank's anticipated move to curb rising inflation as well as our successful completion of the acquisition of 1st Constitution Bancorp in January of 2022. We believe that we are well positioned for rising interest rates. Our projected consolidated Lakeland and 1st Constitution interest rate risk position, prior to any purchase accounting adjustments, show that we are asset-sensitive and increases in interest rates experienced in parallel across the curve will add net interest income over the subsequent year. In addition, 1st Constitution has a higher percentage of variable interest earning assets which will assist us in an increasing interest rate environment. We anticipate that the net interest margin has reached an inflection point and will increase 5 basis points due to the deployment of funds into loans and securities late in Q4 of 2021. As Tom discussed earlier, we expect the loan portfolio to grow organically in the mid-single digits in 2022 and asset quality to remain high. The day two credit-related fair value mark related to the acquired 1st Constitution loan portfolio is estimated at approximately $16 million which will be recorded to provision for credit losses during Q1, in addition to any provisions for Q1 organic loan activity. Noninterest income for 2022 is expected to grow from $27 million in the current year to $40 million due primarily to expanded residential loan secondary marketing and SBA loan generation capacity acquired in the 1st Constitution merger. Noninterest expenses for 2022, excluding merger-related costs, are anticipated to be in the high $170 million range. With a higher run rate in Q1 as merger-related cost saves will not be achieved until the conversion of IT systems is completed at the end of the quarter. Salary and benefit expenses are estimated to be higher than previous years due to the hiring conditions companies in our markets are facing and the continued development of our digital initiatives. Income tax expense for 2022 is forecast to remain consistent with the current year at approximately 25.5%, pending any changes to federal and state tax rates. That concludes our prepared remarks and I will turn the call back over to Victoria to start with any questions.

Operator: [Operator Instructions] And our first question comes from Frank Schiraldi from Piper Sandler. Please go ahead. Your line is open.

Frank Schiraldi: Good morning.

Thomas Shara: Good morning, Frank.

Thomas Splaine: Hi, Frank.

Frank Schiraldi: I wanted to ask on the mid-single-digit loan growth expectations for next year. Just wondering what that assumes for 1st Constitution's mortgage warehouse business?

Thomas Shara: Yes, Frank, it assumes a small increase for the year. As you know, mortgage volumes are expected to come down a bit but we have passed them with growing the existing portfolio. If you recall, within 1st Constitution, it was a bit constrained for growth because of the size of the balance sheet. So we've asked them to go out and find some new customers which they are doing. We have been talking to existing customers and raising existing lines of credit. It will just be a function of the volume in the mortgage markets that drive that business along with some seasonality. So we expect it to be up modestly in year one.

Frank Schiraldi: Okay. So that doesn't sound like that's necessarily additive to maybe it grows at a slower pace than the overall loan growth in the overall mid-single digits?

Thomas Shara: No, at the same pace or actually slightly better. But it is included in the mid-single digit growth.

Frank Schiraldi: Got you, okay. And then in terms of outlook for -- there's obviously some positive mix shift within deposits. Do you think that deposit balances are sort of flattish this year? Or are there additional opportunities to build the securities book in 2022?

Thomas Splaine: Right now, the forecast is that deposit growth will continue, albeit at a slower pace now that some of the stimulus has come out and interest rates starting to possibly rise but we still have liquidity on the balance sheet coming to us from the 1st Constitution merger that we'll be looking to deploy. So in the short term, we might be pushing more into the securities portfolio. But over the duration of the year, in the rising rate environment, we would be looking to possibly use some of the liquidity coming off the securities portfolio to fund the loan growth.

Frank Schiraldi: Got you, okay. And then, just finally for me; just wondered if you could share with us your thoughts on what you get for an initial 25 basis point rate hike in terms of NIM improvement?

Thomas Splaine: Yes, Frank, I'd like to share the interest rate risk sensitivity with you. Right now, it's still going through purchase accounting marks and things like that. So I don't want to quote a number that we can't stand behind but we are slightly asset sensitive. We've positioned the bank that well -- that way historically. And 1st Constitution only makes us a little bit more asset sensitive right now. So I can't quote you a number but we'll have more information for you as we get the merger done and all the purchase accounting marks taken care of.

Frank Schiraldi: Okay, fair enough. Thank you.

Thomas Splaine: Thanks, Frank.

Operator: Thank you, Frank, for your question. And our next question comes from Manuel Navas from D.A. Davidson. Please go ahead. Your line is open.

Manuel Navas: Good morning. Given your loan outlook, do you have a breakdown of like the mix of what type of loans are coming in in that outlook; I think in more resi versus commercial?

Thomas Shara: Yes. We expect strong growth in the resi portfolio. We'll continue to sell the predominantly 1st Constitution originations which are still strong. We have a correspondent mortgage program that we've launched. We're keeping that in the portfolio and then cherry picking some of the legacy Lakeland origination. So there'll be good growth in the resi portfolio and we're seeing good growth on the C&I side. We're starting to see line utilization start to move back up again which is great. And we continue to see mid-single-digit growth within the free portfolio as well.

Manuel Navas: Okay. Switching over to asset sensitivity. You've brought down deposit costs, kind of, what are you assuming on deposit betas, I guess, more on your own disclosures -- I guess you have to get your hands around both entities soon but kind of what are you assuming with deposit betas in your own asset sensitivity disclosures?

Thomas Splaine: Yes. Right now, for sensitivities, we planned around a sensitivity around 40% to 50% based upon different assets -- deposit categories. The real expectation will be when rates do rise and the Fed starts to move rates, what happens in the local markets as well. So modeling could be a little different than what happens actually as rates begin to rise. There has been some chatter that maybe the first -- the betas remain extremely low like they were last time in the cycle when we went through a rising rate environment where the betas were close to 0 for the first couple of moves and then progressed upward as rates continue to rise the last time Fed raised rates. So we're kind of anticipating something more along that line as we head into 2022 right now.

Manuel Navas: Okay. And then my last question is on, you discussed the NIM being 5 basis points higher. Is that just entering this year? Or is that kind of for the first quarter of '22? How should I think about the NIM kind of near term given that expectation?

Thomas Splaine: Yes, that's probably more from a historical standpoint of where Lakeland was on a stand-alone basis heading into '22, deploying all the funds, taking the liquidity off the balance sheet late in Q4. So we will have hidden inflection point heading into 2022 from our legacy portfolio. When you look at the impact of 1st Constitution, they have a higher net interest margin than we do based upon the characteristics of their portfolio and that will assist us as well as we go forward.

Manuel Navas: Thank you. Thank you very much.

Thomas Splaine: Thanks, Manuel.

Operator: Perfect. Thank you so much, Manuel, for your question. And we will now move on to Chris O'Connell from KBW. Please go ahead. Your line is open.

Chris O'Connell: Hi, good morning, gentlemen.

Thomas Splaine: Good morning, Chris.

Chris O'Connell: I don't want to beat a dead horse here but I just want to make sure that I'm getting it clear. So the 5 bp increase for the NIM guide, is that just for all in with 1st Constitution first quarter '22 impact?

Thomas Splaine: No, that's more from a historical standpoint right now of where we're coming from, from a legacy Lakeland standpoint.

Chris O'Connell: For the first quarter, though? Is that first quarter not full year?

Thomas Splaine: Yes, it's first quarter.

Thomas Shara: First quarter, yes.

Thomas Splaine: And then as we employ....

Chris O'Connell: They should be somewhat additive to that, right?

Thomas Splaine: Yes, they will be additive to that as well in Q1. And then as we deploy -- currently, they have some excess liquidity on their books as they finished off the year of 2021. We'll be looking to put that to use as well as we go forward. And then the purchase accounting marks come into play on the assets, the fair value marks. So there's a lot of moving parts. I understand it's a little confusing right now. But we're well prepared for rising rates in '22.

Chris O'Connell: Understood, that's helpful. And so even without any rising rates, it seems like this is the true inflection point that the NIM would be kind of migrating higher, about like modestly without rates throughout the year?

Thomas Splaine: That is correct, Chris.

Chris O'Connell: Great. And then as far as expenses go, I know that given the system conversion and it's great to have a full year guide. But is some of the compensation items that got brought down this quarter, are those expected to pop back up or rebound at all in the first quarter or getting a starting point kind of as how you're thinking for the first quarter of the year expenses? Any color around that would be helpful.

Thomas Splaine: On the expenses side, I think, that the -- some of the decrease of this quarter was just looking at ensuring up some benefit costs and claims history. I don't see that really significantly moving on a go-forward basis. But we'll be reverting back to -- our Q1 rate tends to be a little bit higher than the rest of the year because of bonus payments as well as equity awards being given out in the first quarter based upon performance of the prior year. So that just tends to be our typical cyclical rate and expenses.

Chris O'Connell: Got it. And can you -- and with the crossing of $10 billion, it sounds like Durbin is coming in now, first impact will be 3Q '23 -- July '23. And can you just remind us of what the annualized Durbin impact is?

Thomas Splaine: Yes. So we're looking at second half of 2023 impact and pretax basis is $3.3 million estimated and an after-tax basis about $2.2 million.

Chris O'Connell: Great. And then last question for me is just for the securities that you guys are putting on. What are those oncoming yields at?

Thomas Splaine: Blended yield coming on the books right now continues to tick upward as time goes on but mortgage-backed securities coming on the books somewhere in the 1.65 to 1.85 [ph] range and the municipal securities going on the books in the low 2s [ph].

Chris O'Connell: Great. That's all I had. Thanks for taking my questions.

Thomas Splaine: Thanks, Chris.

Operator: Perfect. Thank you, Chris, for your question. [Operator Instructions] And our next question comes from William Wallace from Raymond James. Please go ahead.

William Wallace: Thanks. Good morning, guys.

Thomas Splaine: Good morning, Wally.

William Wallace: So -- good morning. Tom, the Durbin commentary, the $3.3 million pretax impact, is that quarterly? Is that for just the back half or is that an annual number?

Thomas Splaine: That would be the annual number, Wally.

William Wallace: And then on the fourth quarter contribution from PPP, do you have that number, what the NII contribution was?

Thomas Splaine: Contribution was $2.0 million in Q4. It was $3.0 million in Q3.

William Wallace: Okay. And I understand your hesitancy on wanting to provide a margin -- a pro forma margin number but maybe help us in our model -- just to help us kind of get there, though, do you happen -- like do you have 1st Constitution's fourth quarter net interest margin, excluding PPP contribution? Maybe that could help us kind of triangulate where we're headed.

Thomas Splaine: I don't have that handy right now, Wally. But I can try to clarify that with you and the rest of the analysts as we look through some of the stuff.

Thomas Shara: We can get you that, Wally.

William Wallace: Okay. And then the 5 basis point NIM guide for expansion in the first quarter, is that off of your reported NIM, including the PPP? Or is that excluding the noise from the PPP?

Thomas Splaine: That would be on our reported NIM for Q1.

William Wallace: Okay. All right. So and you would -- I would assume, be expecting that the PPP contribution would decline some more, given we're kind of running a PPP loan is that...

Thomas Splaine: Correct.

William Wallace: Okay. And then your third quarter financial filings, you say a 1.9% NII contribution from 100 basis points of hikes and that assumes a 40% to 50% average deposit beta in your modeling?

Thomas Shara: Yes.

William Wallace: Okay, great. And FCCY is going to be additive to that level of contribution. They're more asset-sensitive, correct?

Thomas Shara: Correct. Yes.

William Wallace: Okay, that's helpful. All right. And then last question. Last quarter, I believe your utilization had dropped to like 32%. I think I heard you in the prepared commentary, say that increased. If you could, where is utilization now? And does your loan growth guide include continued increase in utilization? Or would that be icing?

Thomas Shara: Yes. The utilization was not included in the mid-single-digit while the utilization rate, your 32% was from the second quarter, was 34% in third quarter and 37% at year-end. So it is moving up and would be additive to loan growth.

William Wallace: Okay. Okay, thank you very much. That's all I had. I appreciate your time.

Thomas Shara: Thanks, Wallace.

Operator: Thank you so much. And our next question comes from Erik Zwick from Boenning & Scattergood. Please go ahead.

Erik Zwick: Hey, good morning, guys.

Thomas Shara: Hey Eric, how are you?

Erik Zwick: I'm doing well, thanks. Hope you guys are too.

Thomas Shara: We are.

Erik Zwick: Another question on loans. Tom Shara, I think, in your prepared comments, along with the mid-single-digit number you mentioned also that you're hopeful that prepays will slow and that could provide upside. So I guess I'm just curious in that current mid-single-digit guide, are you expecting prepay similar to what we saw in 2021 or how are you thinking about that? And how much of a lift could that potentially be if they do fall off due to higher rates or other market factors?

Thomas Shara: Yes. The assumption is that they'd be consistent year-over-year. It's hard to predict. But obviously, with rates moving up as much as they are and much they're anticipated to, that would naturally slow prepay speeds, right? So that would be on top of the mid-single-digit growth. But it's hard to predict, Erik, with any certainty.

Erik Zwick: No, I certainly understand that. And then I think the kind of the term that you used for the pipeline -- the loan pipeline today was solid. Curious if you could quantify that at all, maybe where the pipeline stood at the end of the year versus maybe the end of the third quarter?

Thomas Shara: The pipeline, hold on. The pipeline was higher at quarter end than it was in September. And don't forget, we pulled forward a lot of the growth into the fourth quarter. So the pipeline -- finishing the year was down slightly from 2020 year-end but we did pull forward a lot of growth in the fourth quarter.

Erik Zwick: Okay. So even with that stronger growth in the fourth quarter, still up quarter-over-quarter, though, so positioned well and that gives you some confidence to...

Thomas Shara: Positioned well. And then none of that includes 1st Constitution, obviously, at this point.

Erik Zwick: Right. That's a good point, too. Okay. And then I know there's been a lot of questions on the margin and I guess I've just got one more. It may not -- you may need to close, I guess, kind of get the final closing numbers on 1st Constitution but any estimate of what the scheduled purchase accounting accretion contribution might be in 2022?

Thomas Splaine: I did have that, Erik but I don't -- I can't put my hands on it right now. But some of the -- just so everyone is clear, the -- a lot of the purchase accounting estimates that we got were from all the modeling that we did and the due diligence that we did when we announced the deal back in July. As we all know, interest rates have moved and expectations are that they're going to move significantly going forward. So until we can get the final marks, I don't have anything I can really share with you at this point. But I'll see what I -- wait till I put my hands on for you for and get back to you, Erik.

Erik Zwick: Okay. I appreciate that. And then just last one for me. I know you mentioned that you didn't repurchase any shares in the fourth quarter due to the kind of current valuation. Wondering if you could just kind of refresh us in terms of how you think about that in terms of price to tangible book value multiple, internal rate of return, things of that nature?

Thomas Splaine: Sure. Yes, we look at it from the standpoint on share repurchases that -- from an earn-back perspective and it's impact on capital levels. So we're looking for an earn back in the neighborhood of three-year earn back to capital levels. Tends to be on the conservative side for a share repurchase plan compared to some other banks but we hold ourselves to dilution of capital to the same standards that we hold doing mergers and acquisitions. So we think we're fairly consistent and conservative in how we look at tangible book value dilution. And if there's a better place to be spending our capital, we can either do M&A or share repurchases depending on what's going on in the economic environment.

Erik Zwick: Appreciate all the color, guys. Thanks for taking my questions today.

Thomas Splaine: Thanks, Eric.

Operator: Thank you so much, Eric. And we now have a follow-up question from Manuel Navas. Please go ahead.

Manuel Navas: Hey, I just wanted to clarify some of the NIM discussion. So the 5 basis points is kind of a higher entry point NIM into the first quarter, into the combination with FCCY. It's not an expectation for the end of the quarter of 1Q '22, you're entering kind of combining the FCCY at 3.03% NIM, for example. Is that the right way to think about it?

Thomas Splaine: You're correct, Manuel. Yes, I'm sorry for the confusion on that. That's the way we're looking at it.

Manuel Navas: And then as we have the current environment, we'll drive where it end the quarter.

Thomas Splaine: Right, correct. We'll have the acquisition of 1st Constitution and the pickup from their net interest income as well as what happens in the economic environment as we head through Q1. So at the end of Q1, you'll get a consolidated company net interest income as well as what's going on, economic conditions and the environment.

Manuel Navas: Perfect. That's how I understood it as well. And then I just wanted to make sure on this, the securities purchases you've made so far are deploying your own liquidity, legacy Lakeland liquidity. FCCY has it's own liquidity and that will be -- you have a kind of advanced -- sometimes you can advance securities purchases ahead of closing. That isn't what's happened so far. So there is likely is going to be some more securities investment when you are combined company, correct?

Thomas Splaine: That is correct. And the reason that we didn't do that, Manuel, to your point, is that we were deploying enough capital into the marketplace at a really quick pace in Q4 and we didn't want to push too many things into Q4 at one time. We have time here. There was some feeling at the time that interest rates were going to rise. And since then, there has been a groundswell of increasing the taper to quicker as well as a lot more interest rate increases in 2022 than were anticipated back at the beginning of Q4. So we decided not to push too many chips into the middle of the table at one time and to play this out and see where rates go. So yes, there is liquidity on 1st Constitutions books that we need to deploy into loan growth as well as securities as we get into Q1.

Manuel Navas: Is there any rough guide to where the securities book is going to be as a percent of earning assets as a combined company? Or is that too soon to know at the moment?

Thomas Splaine: Right now, forecast for the end of 2022 is that the combined portfolio will be somewhere in the neighborhood of $2.3 billion or pretty consistent with where we're at right now, entering in once it's consolidated and we get through the end of the year.

Thomas Shara: It should run about 20% is what we're thinking.

Manuel Navas: That's very helpful. Thank you. I'm good with the questions. Thank you very much.

Thomas Shara: Thanks, Manuel.

Operator: Perfect. Thank you, Manuel, for your question. And at this point, we have no further questions. I would now like to hand back over to Tom Shara for final remarks.

Thomas Shara: So thanks for joining us to go over our fourth quarter results this morning. If you have any follow-up questions, feel free to reach out to Tom or I. At this point, that concludes our call for this morning. Thanks very much and stay safe, everybody. Thank you.

Operator: Thank you everybody for joining today's call. You may now disconnect your lines.