First Financial Bancorp. Q4 2021 Earnings Call Transcript

Quartr
Provided by Quartr
January 28, 2022

Key Takeaways

  • Positive Sentiment: Adjusted EPS came in at $0.58 with a 1.34% ROA and a 60.2% efficiency ratio, reflecting strong earnings and operational performance.
  • Positive Sentiment: Core loan balances grew by $149 million (6.3% annualized) excluding PPP, CRE loan sales, and the Summit acquisition, marking the strongest organic growth quarter of 2021.
  • Positive Sentiment: The bank recorded $7.7 million in provision recapture while classified assets fell 36.7%, highlighting improved credit trends and declining asset risk.
  • Positive Sentiment: The completed acquisition of Summit Funding Group expands the equipment finance platform and is expected to drive $400 million in annual originations, offering diversification and growth opportunities.
  • Negative Sentiment: Net interest margin fell 9 basis points to 3.23% amid lower PPP fees and continued pressure on asset yields from the low interest rate environment.
AI Generated. May Contain Errors.
Earnings Conference Call
First Financial Bancorp. Q4 2021
00:00 / 00:00

There are 9 speakers on the call.

Operator

Hello, and welcome to the First Financial Bancorp Fourth Quarter 2021 Earnings Conference Call. My name is Alex, and I'll be coordinating the call today. I'll now hand over to your host, Scott Crawley, Corporate Controller. Over to you, Scott.

Speaker 1

Thanks, Alex. Good morning, everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's 4th quarter and full year 2021 financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer Jamie Anderson, Chief Financial Officer and Bill Herrad, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankatfirst.com under the Investor Relations section. We'll make reference to the slides contained in the accompanying presentation during today's call.

Speaker 1

Additionally, Please refer to the forward looking statement disclosure contained in the Q4 2021 earnings release as well as our SEC filings for a full discussion of the company's risk factors. Information we provide today is accurate as of December 31, 2021, and we will not be updating any forward looking statements to reflect facts or circumstances after this call. I'll now turn it over to Archie Brown.

Speaker 2

Thank you, Scott. Good morning, everyone, and thank you for joining us on today's call. Yesterday afternoon, We announced our Q4 financial results, which reflect an outstanding finish to an exceptional year despite the challenging operating environment and interest rate backdrop. Our quarterly results were highlighted by strong earnings, significant core loan growth, solid fee income, Provision recapture and improved credit trends. We announced and successfully completed the acquisition of Summit Funding Group during the quarter And we're excited about our future together.

Speaker 2

The synergies gained by adding Summit's leading nationwide position in the equipment finance sector Our current product offerings will provide significant growth opportunities moving forward. Summit has developed a diversified and nimble lending platform and demonstrated the ability to produce high quality and consistent origination volumes. We're pleased to have Summit's exceptional asset management expertise and look forward to the growth potential created by combining our 2 companies. 4th quarter results remain strong across the board With adjusted earnings per share of $0.58 return on assets of 1.34 percent and an efficiency ratio of 60.2%. 4th quarter earnings were again highlighted by significant provision recapture of $7,700,000 as credit quality trends continue to improve And classified assets decreased by 36.7%.

Speaker 2

Fee revenue was also strong As record foreign exchange income from our Bannockburn unit more than offset some seasonal drop in mortgage income. Loan origination activity improved to record levels and was approximately 27% higher than the 3rd quarter with our commercial groups leading the way. Growth in the unfunded line and construction commitments are expected to provide tailwinds to loan growth over the coming year as they draw up. We also completed the sale of approximately $144,000,000 in commercial real estate loans, which both reduces our hotel concentration And our exposure to an industry that continues to be impacted by the pandemic particularly in Metropolitan Central Business Districts. Excluding the impact of PPP, the loan sale and the Summit acquisition, core loan growth was approximately $149,000,000 We're 6.3% annualized, which was the strongest quarter of the year.

Speaker 2

We're very pleased with this organic loan growth We have continued to see record payoffs within our commercial real estate and commercial finance portfolios. As those payoffs moderate And as Summit portfolio builds, we expect to see further strengthening in loan growth in 2022. We're pleased to have deposit balances grow modestly across all customer segments as our customers continue to maintain substantial liquidity levels. PPP forgiveness continue to wind down in the 4th quarter. Through quarter end almost all of round 1 and over 80% of round 2 loans have been forgiven.

Speaker 2

We expect the majority remaining Round 2 payoffs to come over the first half of twenty twenty two. Overall, our full year 2021 performance was exceptional as our participation in PPP helped offset the pressure from historically low interest rate environment, While provision recapture contributed to strong earnings and reflected dramatically improved credit trends, I was pleased to see Fee income again was very strong this year given our strategic focus on that area of our business and expenses remained well managed despite inflationary pressures. Lastly, our balance sheet and capital ratio has remained strong and we're very pleased to deliver superior returns to our shareholders through aggressive share repurchases and a strong dividend yield. With that, I'll now turn the call over to Jamie to discuss the details of our Q4 results and then after Jamie's discussion, I will wrap up with some additional forward looking commentary. Jamie?

Speaker 3

Thank you, Archie, and good morning, everyone. Slides 4, 5 and 6 provide a summary of our 4th quarter and full year 2021 financial results. We're very happy with our performance, which included strong earnings, Core loan growth, a significant decline in classified assets, provision recapture and elevated fee income. The highlights of our quarter included closing the acquisition of Summit Funding Group and 6% annualized core loan growth. In addition, fee income surpassed our expectations as Bannockburn had a record income quarter, wealth management remained strong We recorded higher syndication fees during the period.

Speaker 3

Non interest expenses were slightly higher than our expectation due to elevated incentive compensation, which was tied to our higher fee income and overall company performance. We were particularly pleased on the credit front As classified assets declined 37% during the period. Net charge offs were elevated due to our decision to sell $134,000,000 of in order to address various portfolio concentrations. The decline in classified assets Combined with a positive economic outlook resulted in $7,700,000 of provision recapture during the period. From a capital standpoint, Our ratios are strong and remain in excess of both internal and regulatory targets.

Speaker 3

Given the Summit acquisition, We paused our share repurchase program and expect to remain on the sidelines in the near term. However, our Board recently approved a new plan Which authorized 5,000,000 additional shares to be repurchased. Slide 7 reconciles our GAAP earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $54,100,000 or $0.58 These adjusted earnings account for $6,000,000 in tax credit investment write downs, dollars 3,500,000 In legal settlement, dollars 4,000,000 of Summit acquisition costs and $2,000,000 of other costs not expected to recur, Such as severance and branch consolidation expenses. As depicted on Slide 8, these adjusted earnings equate to return on average assets 1.34 percent, a return on average tangible common equity of 17.4% and an efficiency ratio of 60.2%.

Speaker 3

Turning to Slide 9 and 10, net interest margin declined 9 basis points from the linked quarter to 3.23%. This decline was primarily driven by a decline in PPP forgiveness fees and lower asset yields. The impact on the net interest margin from these changes was partially offset by an increase in other non PPP loan fees during the quarter. Asset yields declined modestly during the period due to continued pressure from the low interest rate environment and the growth of the investment securities portfolio. Over the course of 2021, we increased the size of the investment portfolio, which has negatively impacted the margin.

Speaker 3

Our cost of deposits of 10 basis points was flat when compared to the Q3. Our near term outlook on funding cost remains the same. We anticipate cost stability or a very slight decline as we have reached our pricing floor. Slide 11 illustrates our current loan mix and balance changes compared to the linked quarter. Loan balances decreased during the period Primarily due to declines in PPP and the ICRE portfolio.

Speaker 3

The decline in PPP was expected as those loans have been forgiven, While the decline in ICRE was impacted by $144,000,000 in loan sales during the quarter. Excluding the impact from these two events, As well as the acquisition of Summit, we were very encouraged by $149,000,000 of growth in the rest of the portfolio. Slide 13 shows our deposit mix as well as the progression of average deposits from the Q3. In total, average deposit Balances increased $218,000,000 during the quarter, driven primarily by increases in non interest bearing deposits and public funds. This was partially offset by a decrease in higher cost brokered CDs.

Speaker 3

We continue to be mindful of deposit pricing And we'll make any necessary adjustments based on market conditions and our funding needs. Slide 14 highlights our non interest income for the quarter. As I mentioned previously, 4th quarter fee income remained elevated During the period, primarily due to a $1,200,000 increase in syndication fees. Non interest expense for the quarter is outlined on Slide 15. Non interest expenses increased $10,600,000 during the period It included multiple large transactions that we do not expect to recur.

Speaker 3

These include $6,100,000 of tax credit investment write downs, $4,100,000 of costs associated with the Summit acquisition, a $3,500,000 legal settlement And $1,900,000 of other costs such as branch consolidation and severance expenses. Overall, Core expenses were slightly higher than we expected and increased modestly when compared to the linked quarter. This was driven by elevated incentive compensation which was tied to higher fee income and the company's overall financial performance. Turning now to Slide 16. Our ACL model resulted in a total allowance which includes both funded And unfunded reserves of $145,000,000 $7,700,000 in total provision recapture during the period.

Speaker 3

The provision recapture was driven by a 37% decline in classified asset balances and improved economic forecast. Net charge offs as a percentage of loans increased to 32 basis points on an annualized basis as the company sold $134,000,000 of hotel loans during the period in an effort to address portfolio concentration. This sale added $9,200,000 to our quarterly net charge off For further description of the loan sales during the quarter, please see Slide 18. Our view on the ACL and provision expense remains unchanged. We believe we acted aggressively when building reserves in response to the pandemic and have been relatively conservative in releasing those reserves.

Speaker 3

In the beginning of 2022, We expect further provision recapture and reserve release, but at a more gradual pace than we saw in the back half of 'twenty one. Finally, as shown on Slides 20 21, capital ratios remain in excess of regulatory minimums and internal targets. All capital ratios remain strong despite declines during the period due to the acquisition of Summit. As I previously mentioned, We did not repurchase any shares in the Q4 and do not expect any additional share repurchases in the near term, while we rebuild our capital position following the Summit acquisition. Additionally, we do not anticipate any near term changes to the common dividend.

Speaker 3

However, we will continue to evaluate various capital actions as the year progresses. I'll now turn it back over to Archie for some comments on Summit And our outlook going forward. Archie?

Speaker 2

Thank you, Jamie. Before we end our prepared remarks, I want to comment On our forward looking guidance which can be found on Slide 22. Loan demand remains strong especially in our commercial And we expect loan balances to grow mid single digits over the near term excluding PPP and Summit. Securities balances are projected to come down slightly while deposit balances are expected to remain relatively stable over the near term with some modest seasonal outflows. The net interest margin will continue to be positively impacted by the remaining PPP forgiveness payoffs, Which we expect to conclude in the first half of the year.

Speaker 2

Without any further substantial liquidity inflows And excluding PPP, we expect the margin to be relatively stable over the next quarter. Our asset sensitive balance sheet positions us very well to Benefit from the expected rise in interest rates. Significant portion of our loan portfolio is indexed to short term rates And although there are many variables at play impacting magnitude and timing, we expect to benefit from rising rates especially early in the cycle when deposit rate pressures are muted. Regarding credit, we expect further improvement in quality trends and continue to expect additional provision recapture in the near term, So less than we had in the back half of twenty twenty one. We expect fee income to be between 38 $40,000,000 in the Q1 excluding the Summit acquisition as seasonal and rate headwinds put pressure on mortgage banking income And we'll see some decreases in overdraft income due to seasonality and updates to our program.

Speaker 2

Specific to expenses, We expect to be between $91,000,000 $93,000,000 excluding the Summit acquisition, but this could fluctuate with fee income. Regarding Summit, we expect the acquisition to have a minimal impact on 2022 earnings with a slightly negative impact near term from the intangible amortization. We expect the acquisition to provide $400,000,000 in annual originations, which should provide a strong lift to loan growth as we progress through the year. Lastly, our capital ratios remain strong and we will continue to elevate reevaluate capital deployment opportunities over the year. Overall, we continue to be pleased with the strength and performance of our company.

Speaker 2

2021 was another successful year for First Financial And reflects the outstanding efforts of our talented associates. As we move into 2022, we're optimistic about our prospects for growth And are well positioned for the rising rate environment. Our focus remains on executing our core strategies, delivering exceptional service to our business, Consumer and Wealth Management clients and capitalizing on the momentum achieved in 2021 to deliver superior returns to our shareholders. With that, we'll now open up the call for questions.

Operator

Thank you. We will now begin the Q and A session. Our first question for today comes from Scott Siefers from Piper Sandler. Scott, your line is now open.

Speaker 4

Thank you. Good morning, guys. Thank you for taking the question. Jamie, I wanted to start with you regarding the margin. So just to make sure I understand, you're saying stable with the 3 implied 3%, which is the basic and the loan fees.

Speaker 4

Is that the best way to think about it?

Speaker 3

Help me out there Scott, when you say the 3% in the loan fees, what do you?

Speaker 4

The 3% which is basically the basic margin plus loan piece, the way you take I got it.

Speaker 3

Yes. So obviously without any rate hikes, we are Our kind of base margin is right around 305 call it. And so without rate hikes, we would If we don't have any rate hikes, we would look at that to be relatively flat. Yes.

Speaker 4

Okay, perfect. And do you have sort of a rule

Speaker 3

of thumb Excluding PPP is what Scott, right?

Speaker 2

Yes. Yes, exactly. Yes. Okay.

Speaker 4

And then do

Speaker 2

you sort

Speaker 4

of a rule of thumb for how much each 25 basis point hike by the Fed would help either the margin in basis points NII in dollars and maybe just sort of thought on how you

Speaker 3

Yes. So I'll maybe give you 2 different answers here in terms of like how it performs As we get the rate hikes and the number of rate hikes. So in the first couple of rate hikes, Mainly because we don't see the deposit side moving quite as much. We get a little bit more benefit from the first couple of rate hikes. So in basis points, our margin per rate hike in the first two would go up around 8 basis points.

Speaker 3

So in that, call it $11,000,000 range of benefit to the Net interest income in those first two. And then after we get past the first two that comes down a little bit just as We'll probably start to see some deposit pressure at that point and that 8 basis points comes down in that 5 to 6 basis point range of benefit. So more like $7,000,000 to $8,000,000 to $8,000,000 to $7,500,000 in Increase in net interest income. And those numbers are annualized numbers, right, Scott, the dollar amount? Yes.

Speaker 3

And And then you can kind of go from there, but and then obviously when the Fed would stop On the tail end, the deposit side starts to catch up and we get it starts to come down just a little bit, but So on the first four, that's kind of how it would play out.

Speaker 4

Perfect. All right. That's terrific. So thank you very much. I appreciate it.

Operator

Thank you, Scott. Our next question comes from Daniel Tamayo from Raymond James. Daniel, your line is now open.

Speaker 5

Thank you. Good morning, everyone. Good morning, Alex. Maybe just a follow-up on Scott's question. Can you just provide what your assumptions are in terms of deposit beta for the asset sensitivity numbers you just provided?

Speaker 3

Yes. So like I said in the first couple of hikes, I mean we don't really see deposits moving that much at all. And so because in a normal scenario, deposits right now would be there would be a Bucket of them paying negative rate, but so they're obviously at the floor. So they need to push through that floor in that first couple of hikes. And then But once you get past that, I mean our overall kind of Daniel, overall weighted Beta would be in that 20% range.

Speaker 3

I mean obviously within category it's going to be skewed towards The money market accounts and public funds, which would have a much higher beta, but And then what are the savings is going to be on the lower side and whatnot. So when you kind of look at the deposits in total, You're looking around a 20% -ish beta.

Speaker 5

Okay, terrific. That's helpful. Thank you. And then switching gears here, if you could just provide your kind of what your thought process was on the loan sales and If there's any other loans or buckets of loans that you're considering selling? Thank you.

Speaker 6

Sure. Good morning. We took a look at we constantly monitor the market Just to really see what the activity is and Everything kind of set up right for the hotel sale and really the genesis was looking at the portfolio, what we've seen over the past 1.5 years, 2 years and really take an opportunity to pull the risk down and mainly as Archie Allude to in his opening comments mainly to the business traveler, city center type locations dependent upon Conventions and business travel and things like as well as some of our more challenged Hotels in our portfolio within our watch and watch bucket. And so it really included full service hotels, Some limited service hotels and focused on where we felt that the short and medium term risk Was the highest within our portfolio. And we'll continue to monitor the various loan sale markets With different portfolios, but we don't have anything right now in our sights.

Speaker 2

Daniel, this is Archie. I mean part of this is we As you know we're all monitoring hotels. We have a little bit larger book going into the pandemic. So we're monitoring hotels and Most of them are rebounding really nicely, but as Bill was saying, some of those in the central business districts are maybe they came due online during the Pandemic, they were just ramping up slower and with continued concerns about where the pandemic is going, we thought it was prudent to Some of those were more problematic in our mind.

Speaker 5

Terrific. I appreciate all the color. That's all I had. Thank you.

Speaker 3

Thanks, Daniel.

Operator

Thank you, Daniel. Our next question comes from Chris McGratty from KBW. Chris, your line is now open.

Speaker 2

Hey, good morning. Hey, Chris.

Speaker 7

Jamie, a question on the just the efficiency ratio. How do we think about the cadence of it from here maybe with Summit and then with or without rates?

Speaker 3

Yes, so I mean I guess without any rate hikes, I mean you would see that Efficiency ratio moving up a little bit into that maybe 60 to 62 range, But obviously the rate hikes, we're going to benefit significantly from the rate hikes. I guess if and when they come, but it looks like they're coming here in March. And You start to see the efficiency ratio move back down kind of in that more in that 57%, 58% range.

Speaker 2

Chris, this is Archie. I mean it's fair to say, Jamie, we really focus on managing expense growth. So if you think 2% to 3% expense growth typically and the fluctuation may occur in the commission area where we have higher fees From time to time, but that's what we focus on there and then of course the goal is to get operating leverage and drive revenue higher. So if you think like that about it, That's how we manage the expense side. So if we get the rate hikes, then it should be pretty beneficial.

Speaker 2

Right.

Speaker 7

Okay. And then in terms of Summit, I think your guide is without fees and expenses. Could you Just help us a bit on what might go through each of those lines and also that $400,000,000 that you talked about for originations, like How do we think about just balance sheeting that stuff? Yes, so

Speaker 3

I mean Chris, given the fact that this disclosed at the end of the year, so we got a lot of moving parts. We're still working through The valuation adjustments, the purchase accounting related to that, so we brought over from them around $115,000,000 ish in assets and that's split up between $42,000,000 in finance leases which you see will run through the loan and lease Line item and then there's around $75,000,000 of their leases that are operating leases That will run through other assets. And so obviously on those 2 buckets, on the operating leases, they get Rental income that will flow through non interest income and then the depreciation of the assets running through non interest expense. But So I mean one of the things that why we didn't put a lot of guidance and information in the slides about them. I mean we're kind Flipping their entire model of how they're operating in terms of the in the past they were a Originate and sell the vast majority of their production because of the size of the balance sheet And their capacity to fund it and hold those types of assets.

Speaker 3

So going forward, we're changing their model quite a bit And we're going to our plan is to hold the vast majority of those and The mix of that is still a little bit up in the air as we're just trying to optimize what we should keep and then what we should And the mix between financing and operating leases. So but I mean overall, like we mentioned in the slides, The overall impact to 2022, we still believe is relatively neutral. Now in the beginning, in terms of EPS. In the beginning, in the first maybe couple of quarters, especially in the Q1, We think it could be slightly negative just because we think about it, like I said we're flipping their model where we're going to retain So we need to ramp up the balance sheet. As we're doing that, we need to provide for the in terms of provision expense And then but we have all of the fixed costs upfront as well and also the intangibles amortization.

Speaker 3

So in the beginning, We think it's maybe a slight negative, maybe a $0.01 to a $0.05 negative in the beginning And then as we progress throughout the year, the balance sheet builds that flips towards the back half of the year And really for the whole year it's kind of a wash from an EPS standpoint.

Speaker 2

And then Chris this Archie, the $400,000,000 that we're talking about that's really that's Summit standalone. That's them doing what they've been doing, but with a bigger balance sheet and the ability to do more. We think there's upside. We're not baking in certainly as we bring new product set to our existing commercial clients

Speaker 5

We know

Speaker 2

we're using leasing products somewhere, but now we think we can have a better shot It's getting more of those 2. So we think there's quite a bit of upside in the $400,000,000

Speaker 7

Okay. That's helpful. Very helpful. But just getting back to the related expenses, so I can back into the revenues, what's kind of a range for a full quarter or full year of expenses

Speaker 3

So they have about $4,000,000 ish in What we would call kind of like SG and A expenses a quarter at this point and then We look at their overall like Q1 and like I said the problem Chris is this is going to move dramatically Throughout the year based on what we retain and what we don't retain and the types of leases. But in the Q1, We're looking at an overall expense base which includes the depreciation of those assets somewhere in that $9,000,000 to $11,000,000 range

Speaker 7

Okay. That's helpful. Perfect. And then last one on the buyback. I mean, understand the capital rebuild.

Speaker 7

Is this like a are we sidelined for maybe 6 months on the buyback or how should we think about the new authorization in terms of beginning to pick away at?

Speaker 3

Yes, I would say you're close there. It's really minimum a quarter, But probably more like a couple of quarters where we would be out. Got

Speaker 7

it. Thanks, Jimmy. Yes.

Operator

Thank you, Chris. If you're joining us online today, you can click the flag icon. Our next question comes from Jon Arfstrom from RBC Capital. John, your line is now open.

Speaker 8

Hey, thank you. Good morning, guys.

Speaker 2

Hey, John.

Speaker 8

Just one quick follow-up on Summit. I understand what you're saying, you've got some integration going on, but you're No real changes to the origination machine that they have and 12 months from now we could see another $400,000,000 or $500,000,000 of leases On the balance sheet, is that fair?

Speaker 2

Hey, John, this is Archie. Absolutely no changes to what they do in terms of the people and The clients in the process no changes at all. I think Jamie is mainly focusing on the fact that we'll probably hold more because we got the balance sheet to hold and they didn't. And of the $400,000,000 I mean is it probably 80 plus, we hope we can hold 80% of that or more. And again, we think the 400 is sort of the minimum expectation for what we think they can do this year.

Speaker 8

Okay. Any limits in your mind in terms of How large you let this get on your balance sheet?

Speaker 2

Well, I mean Yes, I guess there are some point you could say so, but the next 2, 3, 4 years I think we feel very comfortable that if they're doing 400 and 10%, 12% increase on that year over year over year, we'd be very comfortable with that.

Speaker 7

Yes, okay.

Speaker 8

Archie, you talked about some moderation in payoffs helping your loan growth, at least expecting to in 2022. Can you talk a little bit about that and what you're seeing? Yes,

Speaker 2

we just saw certainly in our commercial real estate group, we saw significant Record payoff levels. We saw also that in our finance company and even a little bit in our C and I business. And I do think there was some sort of rush Especially in Q4, because that was the highest quarter for payoffs. To get deals done, to get things sold, We think some clients were thinking about potential tax policy in 2022. So we just think there was A big rush to get some things done at year end and we still think in the current environment there's some payoff pressure, but We think it's going to abate some from the record levels in the Q1.

Speaker 2

That's probably the primary thing I think we see there. We did also part of the pressure there was when a CRE loan pays off and We had great production in this area but a lot of it was in the construction side. So we don't get the immediate benefit That hitting the balance sheet, but it should fund up here over the course of the year or so and that will give us a little bit of tailwind as

Speaker 7

well. Okay.

Speaker 8

Bill, a question for you, just a follow-up on the hotel portfolio or the hotel sale, but how much interest is there in the marketplace In loans like that, and I know you touched on maybe looking at a couple of other areas, but how active is that market?

Speaker 6

We found that it was very active and the way that we constructed this was a pool Based on our review that was the best strategy and really hit the market We've been testing it all year long last year and the market was very robust in Q4 Up from Q3. So it is very robust.

Speaker 8

Okay. Then I guess one more on fees. I know it's difficult to predict and you're giving us Some of the near term outlook on fees, but how do you want us to think about Bannockburn and mortgage in terms of maybe longer term view on those?

Speaker 2

Yes, on Bannockburn, John, we see continued growth. They had an incredible year, if you think about it, but we still think there's a couple more $1,000,000 in revenue On top of that, they can do this year. On the mortgage side, certainly the rate increases have had some impact. Also the margins are starting to come down and the Fed actions around the balance sheet can have an impact on that as well. So I think we would tell you that we're probably Low mid-20s in terms of origination fees down from 2021 and What happens here that could be slightly worse, but we'd say it's in that range anyway.

Speaker 7

Okay.

Speaker 8

All right. Thanks for that. Well, they're still pretty good.

Speaker 2

I mean, lives are still pretty good. They've come down a little bit seasonally, but we still think they're good. It's more It may talk a little bit of refi volume later in the year and certainly margins coming in, it's just kind of the double side of that Impacting the fees.

Speaker 8

Yes. It's an interesting market, right, because the purchase volume is still there, but Obviously, we understand on gains and refi. So, yes, okay. Thanks, guys.

Operator

Thank you, John. Our next question is a follow-up question from Scott Cephas of Piper Sandler. Scott, your line is now open.

Speaker 4

Hey guys, thank you. I wanted to follow-up on fees just a little. I mean a lot of people making changes to their overdraft policies, which you Alluded to here, I was hoping you could maybe put a finer point on what specific changes you guys are making and sort of any specific Revenue impact anticipation you have there?

Speaker 2

Yes, Scott, this Archie. So just to maybe give some context, if you go back and look at 'nineteen And then look at where we're projecting to be this year, we're probably down 30% from 'nineteen levels already, we're projecting out 'twenty two And up through 'twenty one compared to 'nineteen. And if you look at 'twenty two, Scott, probably 3 or 4 things we did And kind of kicked them off the New Year. We actually lowered our overdraft a little bit, few bucks. We increased the cushion Before you go into an overdraft, that's where you get in terms of getting charged.

Speaker 2

We eliminated some fees. We put more caps on fee, Just in a lot of areas tightening it down and if I said that's 8% to 10% decline, probably an overdraft revenue. Now we could get some upside offset to that with growing accounts, which we hope to do. But if you said it's in that high single digit range in terms of impact on overdrafting income, that's probably what we talked about for 'twenty two. I was a little bit, I won't say surprised, I guess the amount of change, significant change we've seen in some of the larger banks here right out of the gate.

Speaker 2

We'll continue to monitor if we think our program remains competitive and could make further changes down the road, but This is what we had in place to start the New Year.

Speaker 4

Got it. Okay, perfect. And then just wanted to follow-up on Expenses, just to make sure I'm on the same page with what you guys are thinking. So Jamie, we've got the $91,000,000 to $93,000,000 in costs anticipated ex Summit. And it sounds like at least in the near term, we should expect, however, expenses To be closer to $100,000,000 to maybe a little higher than that with the full run rate of Summit in there on a Kind of on a core basis, but is the way the Nuance would change that as you go more toward Portfolioing them that some expenses would decrease over time, is that the right way to think about it?

Speaker 3

Well, Scott, so the first part is correct. It will be somewhere in that 100 to low 100, 100, 102 ish or whatever. And then going forward though it's going to depend on the So the operating leases are going to hit down there and so it's going to depend on mix at that point. So if we are doing more of a Higher percentage in financing leases, then obviously those hit up in margin and the depreciation expense would come down. But so yes, it's just going to depend on mix.

Speaker 4

Got it. Got it. That will be sort of, I guess, stay tuned for what happens over a period of time then?

Speaker 3

Correct.

Speaker 4

Okay, good. Thank you.

Speaker 2

Yes.

Operator

Thank you, Scott. We have no further questions. So I'll hand back to Archie Brown for any closing remarks.

Speaker 2

Thank you, Alex. I want to thank everybody for joining us today and reviewing with us our year. We're very pleased with 2021. Look forward to a great 'twenty two and We're looking forward to talk to you next quarter. Have a great day.

Speaker 2

Bye now.

Operator

Thank you for joining today's call. You may now disconnect.

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