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Edited Transcript of BDGE earnings conference call or presentation 30-Jan-20 3:00pm GMT

·31 min read

Q4 2019 Bridge Bancorp Inc Earnings Call BRIDGEHAMPTON Feb 3, 2020 (Thomson StreetEvents) -- Edited Transcript of Bridge Bancorp Inc earnings conference call or presentation Thursday, January 30, 2020 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * John Martin McCaffery Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer * Kevin M. O'Connor Bridge Bancorp, Inc. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Alexander Roberts Huxley Twerdahl Piper Sandler & Co., Research Division - MD & Senior Analyst * Collyn Bement Gilbert Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst * David Jason Bishop D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst * Erik Edward Zwick Boenning and Scattergood, Inc., Research Division - Director and Analyst of Northeast Banks * William Davis Curtiss Hovde Group, LLC, Research Division - Director ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, and welcome to the Bridge Bancorp Fourth Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note this event is being recorded. I would like to turn the conference over to Kevin O'Connor, President and CEO. Please go ahead. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [2] -------------------------------------------------------------------------------- Good morning, and thank you for joining us today. I will be discussing our quarterly and full year performance as well as sharing some insights about the bank's strategic initiatives. I'm joined on our call by our CFO, John McCaffery, and together we will take your questions regarding the results and general market conditions. I am pleased to report that net income hit a historical high this quarter of $14.2 million, with EPS of $0.71 per share. Our full year income was $51.7 million or $2.59 a share. These results reflect the impact of growth earning assets, aggressive management of funding costs and the continued evolution of the mix and geography of our loan portfolio. I'm especially proud of the fact that over the last 2 years, despite 2 changes in Fed direction, we've maintained a consistent NIM of 3.3%. We've done this by staying true to our strategy of nurturing and growing core deposits and taking a thoughtful approach to balance sheet management. Our continued commitment to our core markets and the addition of some key producers in our western markets allowed for strong loan growth in originations and fueled increases in most loan types. These new loans helped to offset some sizable paydowns we experienced as several of our long-term customers successfully exhibit their businesses. The net of the activity resulted in a 12% lift in the overall loan portfolio to $3.7 billion. In considering our deposit performance, given strategic decisions to deemphasize some higher rate deposit products and the impact of large deposit flows related to the aforementioned business sales, it's best to assess this on an average basis. Fourth quarter IPC deposits grew by $212 million or 7% versus Q4 2018 and the year-over-year growth was 12%, with DDA of $1.5 billion, representing 40% of total deposits. We've also been very aggressive in managing the cost of these deposits and over the past 2 quarters, the cost of interest-bearing deposits is down 33 basis points. This positive momentum in loans was partially offset by declines in other earning assets and resulted in average asset growth of 5% versus last year, and we ended 2019 with total assets of $4.9 billion. From a strategic perspective, we continue to stay on course and are focused on making smart investments in people and technology by hiring more bankers who partnered with branch teams, this strategy continued to bear fruit. This year, our western markets contributed a significant portion or 82% of annual net loan growth and we experienced an uptick in deposits in those markets of over 19%. In addition, the launch of new products expanded our offerings and is helping to drive market share in new segments as well as deeper relationships with existing customers. Earlier this year, we became one of the few banks in New York to offer banking services to companies with permits to grow process and extract industrial hemp in CBD. This should expand our traditional customer reach. We recently launched functionality that allowed businesses to print official cashier checks on site. This is considerable value from many of our existing customers and acts as a differentiator versus other competitors. And finally, with significant technical and credit development work in 2019, we are planning to launch a small business loan decisioning engine to significantly reduce the time line associated with small loan originations, freeing up internal resources and reducing customer friction. I'll now turn this over to John to discuss in greater detail specifics on the margin and other income and expenses. -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [3] -------------------------------------------------------------------------------- Thank you, Kevin. Thank you all for joining us this morning. And for those reading the transcript, I will do my best to be intelligible. Let me get to the margin right after that. The quarter-over-quarter NIM compressed by 14 basis points. I will walk you through the big moving parts of that decline. First and foremost, increased prepayment activity in the bond portfolio resulted in higher premium amortization, thus depressing yields. Secondarily, another phenomenon has to do with the timing of the changes in rates on our loans and deposits. During the third quarter, as we manage our deposit rates lower, some accounts will move more than the fed move and we effectively lowered some rates before the Fed move. Therefore, impact to our deposits was larger and quicker than our loans. Additionally, our floating rate loans do not go and reprice immediately. Some can take up to a month to retest prevailing rates, whether that be prime or LIBOR. Therefore, part of the story of the fourth quarter was the loans catching up to the deposits and adjusting to falling rates. Lastly, the third quarter usually has about 3 or 4 basis points of line of credit renewal fees that do not occur in the fourth quarter. At this point, our floating rate loans have adjusted to the new rate levels and we continue to manage our deposit cost lower by increasing DDA and enhancing the mix of interest-bearing deposits. You will notice that ITP deposits are down quarter-over-quarter as we declined to compete for high cost 1031 money replacing with lower rate broker deposits. Most of the loan growth came late in the quarter, so we will see the full effect of those loans in Q1. Going forward, we can keep our hands on all levers to support our net interest margin. These are impacted by loan swaps, drove our noninterest income higher. As referenced in the press release, the flat yield curve and the overall low level of rate make these transactions attractive to borrowers who want low long-term financing. In the fourth quarter, we swapped over $180 million in loans giving us only 13 basis points versus the fixed pricing. These factors are still in effect and we continue to close loan swaps in Q1. Expenses were up on a linked quarter basis, mostly due to cash accrual for incentive payments. Our strong fourth quarter income and loan growth pushed our expected incentive payouts higher. We have instituted several programs to control expenses going forward. We are in the final testing phases of our CECL process. At this time, we are guiding a coverage ratio of 87 to 97 basis points. This includes specific reserves, which add about 9 basis points to the ratio at this time. This is not significantly far from where our ratio has been historically. We still have an authorized stock buyback and are committed to using it to support our stock as we did last year during the second and third quarter. We are estimating a tax rate of 22.5% for 2020. Kevin will now make some closing remarks. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [4] -------------------------------------------------------------------------------- As John indicated, this quarter's margin contraction was related to several factors. However, we believe our ability to manage funding costs and deliver noninterest income in multiple ways coupled with a focused approach to aggressively manage expenses and capital will allow us to achieve our performance targets. The ability of our team was tested in 2019 and they delivered. And I'm confident in our continued ability to make the prudent decisions, including those related to capital management to achieve positive results for the company and you, our shareholders. I will now turn this over to the operator to take questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question comes from Will Curtiss from the Hovde Group. -------------------------------------------------------------------------------- William Davis Curtiss, Hovde Group, LLC, Research Division - Director [2] -------------------------------------------------------------------------------- Obviously, a strong quarter on the swap fees. So I'm just curious now as we look to the first quarter your expectations or how should we think about the first quarter? And then maybe more broadly, how we should think about fee income growth for this year? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [3] -------------------------------------------------------------------------------- Sure. So -- I mean we do have -- we closed several swap -- loan swaps in January already. We have some in the pipeline. So again, as long as this rate environment is here, we'll keep booking those fees. Q4 was pretty strong coming up to Q3, but again, I think it still follows the rate environment. And I think that the reason some of these borrowers want to go long-term as we have multifamily borrowers in New York City given the new rent regulations are wanting to lock in lower to longer since they feel they're not going to be able to raise rents as quickly as they have in the past. So I think those factors together are what is going to keep that going into the quarter. And again, for the year, we can keep this momentum going. Some of those swap fees are generated from actually refinances of existing loans. So as much we have loans that are out there that people want to come in and refinance rather than opt for renewals that can also be a benefit there. -------------------------------------------------------------------------------- William Davis Curtiss, Hovde Group, LLC, Research Division - Director [4] -------------------------------------------------------------------------------- Okay. And then I wanted to ask, I know you mentioned hires as part of the strategy for last year. And I'm just curious, do you have the number of producers that you all brought on board this past year? And then maybe how you're thinking about additional opportunities going forward? -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- I guess we had a net increase of 5 on the producer side and we're having conversations with a half dozen people who said, "I'm not saying we're going to bring that many people on." But this is the time of the year when bankers begin the dance between each other as to -- they're going to get their bonus and figure out where they want to earn it next year so. -------------------------------------------------------------------------------- William Davis Curtiss, Hovde Group, LLC, Research Division - Director [6] -------------------------------------------------------------------------------- Understood. Okay. And then just the last one from me. Do you have the accretion number for the fourth quarter by any chance? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [7] -------------------------------------------------------------------------------- The accretion number? -------------------------------------------------------------------------------- William Davis Curtiss, Hovde Group, LLC, Research Division - Director [8] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [9] -------------------------------------------------------------------------------- For the premium amortization of these rates of return. -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [10] -------------------------------------------------------------------------------- Premium amortization. -------------------------------------------------------------------------------- William Davis Curtiss, Hovde Group, LLC, Research Division - Director [11] -------------------------------------------------------------------------------- I think last quarter, it was 4 to 5 basis points, I believe. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [12] -------------------------------------------------------------------------------- The impact of purchase accounting. -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [13] -------------------------------------------------------------------------------- So purchase accounting. Purchase accounting is minimal. It's 1 to 2 basis points of that. There's only a couple million dollars left in the whole bank. Last quarter -- I think the second quarter was higher than usual but last quarter and this quarter is that -- tracking about the same. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- The next question comes from David Bishop from D.A. Davidson. -------------------------------------------------------------------------------- David Jason Bishop, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [15] -------------------------------------------------------------------------------- A question, obviously you noted the pressure on the margin in the fourth quarter. This sounds like there were some elevation there in the third quarter. Just curious, do you think most of the pressure on the asset yields has been sales? And it sounds like you had some room on the deposit side to bring costs down. Do you think you can stabilize it here? Or do you expect we'll see a little bit more pressure here before we see some stabilization in the second half of the year? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [16] -------------------------------------------------------------------------------- I think for the most part, the loan pressure is off as far as repricings go. And I do think we have room in deposit, I think we can offset those things. If you look second quarter to fourth quarter, the third quarter kind of being the surge deposit benefit. We kind of track across kind of on the same level. So we think that that's kind of where we can be going forward. -------------------------------------------------------------------------------- David Jason Bishop, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [17] -------------------------------------------------------------------------------- Is EME the delta between the second and the fourth, I'm sorry. -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [18] -------------------------------------------------------------------------------- Right. The second quarter and the fourth -- the second quarter was $330 million and the fourth quarter was $326 million. There's this also a little bit to go in those back and forth, but we think that range should be able to be sustained given the move in deposits and loans over that period of time, kind of, for us the rate cut cycle. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [19] -------------------------------------------------------------------------------- And I would think that we were early on moving rates in really early in the third quarter and continued in the fourth. And as I've reviewed many of the releases of our competitors that has occurred more in the fourth quarter. So I think you will see continued repricing down of liabilities. -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [20] -------------------------------------------------------------------------------- And we had some recent customers who kind of walked in and we told them we were cutting rates. They actually go over to some bank desks and get a better rate, then they kind of came back to know that rate's not there anymore either. So I think everyone is kind of getting on board with cutting rates on deposit again. -------------------------------------------------------------------------------- David Jason Bishop, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [21] -------------------------------------------------------------------------------- Got it. And then in terms of new loan yields coming on board. Just curious how that compares relative to the third quarter, in maybe be it 6 weeks or so how are the new market yields coming? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [22] -------------------------------------------------------------------------------- So the yields on new loans in the fourth quarter were about 4%. That was because we had a lot of multifamily loans come along in the fourth quarter. And there were -- then there were swaps. So that takes again, that 13, 15 basis points off the rate. But -- and I don't -- and no one's expecting rates to go up anytime soon. We feel having the floating rate assets, especially on some of this longer term fee or multifamily money is better for us. So -- but the focus this year in some of the new producers we brought on are going to be more focused on C&I. The C&I business during Q4 came on at 5.5%. And the commercial mortgages and sales growth was a little over 4%. So we're hoping by changing the mix up we're going to get better loan yields. -------------------------------------------------------------------------------- David Jason Bishop, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [23] -------------------------------------------------------------------------------- Got it. And then maybe just a commentary, obviously the fourth quarter, it sounded like some of the -- the multifamily growth was driven by some of the rent control and the desire to lock in lower rates for longer. As you look out into 2020 in the pipelines, any sort of comments in terms of your expectations for loan growth? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [24] -------------------------------------------------------------------------------- We're -- I guess our expectation for loan growth for the entire bank is slightly less than it was last year in 2019 point-to-point. And we are certainly targeting more of a mix of commercial loans and less multifamily for the year. But I think the -- again, as we sit with this yield curve environment and we are getting paid less for each of them -- each margin is specific for all, we're not looking to grow it as high as rates we have in the past but still pretty strong and pretty close to where we were. I think high single digits. -------------------------------------------------------------------------------- David Jason Bishop, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [25] -------------------------------------------------------------------------------- Got it. Then one final question. John, it wasn't clear, the tax rate outlook for this year? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [26] -------------------------------------------------------------------------------- We're saying 22.5%. -------------------------------------------------------------------------------- David Jason Bishop, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [27] -------------------------------------------------------------------------------- 22.5%? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [28] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- (Operator Instructions) The next question comes from Erik Zwick from Boenning and Scattergood. -------------------------------------------------------------------------------- Erik Edward Zwick, Boenning and Scattergood, Inc., Research Division - Director and Analyst of Northeast Banks [30] -------------------------------------------------------------------------------- Just looking at that change in deposit balances year-over-year while total balances were down, I guess, about 2%, demand deposits were up 9% and your IPC deposits now represent 80% of total deposits up from 76% a year ago. Can you just talk about what factors contributed to the success in remixing the deposit base and what your expectations for deposit growth in 2020 are now that loan deposit ratio is at 96%? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [31] -------------------------------------------------------------------------------- Right. So we have a few moving parts in the deposits year-over-year. Remember while we did have -- if you remember last year, in the first quarter, we kind of were talking about this large one deposit that we had from a customer that Kevin referenced, we sold the business. That -- he had kind of moved that money out and he sold this business, gave us the deposit and then he was investing in other things. So that was about $90 million in money market account and one account. The 1031 money that we also -- when rates started to go down, we were paying them just about 2% and they were still getting 2% from other people. So we decided to let that money go. That was another $90 million that would be in savings accounts. So there was some flowback of that. The DDA growth is -- that's just boots on the ground for us. So we haven't seen a broad-based exhibit of money marketing or savings accounts leave the bank based upon the rate cuts that we get in Q3. There's been more chunky deposits, so people just -- we have transactions, they need to fund. They were pulling the money out for that reason or they were the highest paying customers that we had, that we chose not to match rates they'll be getting in other places. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [32] -------------------------------------------------------------------------------- DDA generation really comes from the commercial bankers on the ground. I mean we've had a big increase in sort of line exposure. And that really flows from those customers that have joined us. They moved their deposits. We give them lines of credit. Sometimes they draw, sometimes they don't. But that's really the driver of deposit growth. -------------------------------------------------------------------------------- Erik Edward Zwick, Boenning and Scattergood, Inc., Research Division - Director and Analyst of Northeast Banks [33] -------------------------------------------------------------------------------- I appreciate the color there. And would you be -- would you expect to -- for deposit growth to match loan growth this year? Or are you comfortable letting the loan-to-deposit ratio drift up a little bit higher? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [34] -------------------------------------------------------------------------------- I'm comfortable letting it drift up a little bit higher. That's not how I'm forecasting it. I'm certainly expecting deposits to grow commensurate with loans. That's the challenge we put in front of everybody. And I think there's lots of positive momentum going into this year. -------------------------------------------------------------------------------- Erik Edward Zwick, Boenning and Scattergood, Inc., Research Division - Director and Analyst of Northeast Banks [35] -------------------------------------------------------------------------------- Great. And then you mentioned several programs on the expense side to kind of manage expenses in 2020. Curious just one from first quarter perspective, in terms of the run rate, is the fourth quarter of '19 level a good place to start? And then how should we think about just kind of growth and expenses throughout the year? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [36] -------------------------------------------------------------------------------- So I would say then with -- that the first quarter for 2020 should be slightly lower than 2019 Q4. We are -- we came in a little bit higher than 2% on the expenses to asset ratio. But we want to get that back down to 2% and even drive a little bit lower as the year goes on. We will be -- so we will be looking at our expense budget, prospectively to say, if we're not getting the income or the balance sheet growth, we're going to kind ratchet it back on the expenses. So we'll keep looking at it over the year. The growth and expenses that were related to some manual fraud work that we were doing for the year and then we put a new software system in place and they were run concurrently. So we should be able to have to cash on some of those people who were doing a manual fraud review to other things. We are looking at or we have begun to [retrition] manage our branch staffing model, make people a little more universal employees in the branches so they can do different tasks in the branches, especially when transactions are a little bit slower. We are putting in more -- I think the numerated product that Kevin talked about before should free up some people on the origination space and the loans to do other loans or we don't have to replace them. So there's a few things going on as far as expense control go. I think we're also looking at cutting back a little bit on sponsorships this year as we have a new marketing director in place and we're changing our marketing spend in different venues, focusing more on the western markets and by remixing some of our how each dollar that we spend there as well. -------------------------------------------------------------------------------- Erik Edward Zwick, Boenning and Scattergood, Inc., Research Division - Director and Analyst of Northeast Banks [37] -------------------------------------------------------------------------------- And just finally, given the strong commercial real estate and multifamily growth in the fourth quarter, do you have an estimate of where your CRE to total capital ended the year? I think you're around 350% at the end of the third quarter. Just curious, I would expect that ticked up a little bit? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [38] -------------------------------------------------------------------------------- 386% at the end of the year. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- The next question comes from Alex Twerdahl from Piper Sandler. -------------------------------------------------------------------------------- Alexander Roberts Huxley Twerdahl, Piper Sandler & Co., Research Division - MD & Senior Analyst [40] -------------------------------------------------------------------------------- Just going back to the swap fee income which is obviously a huge quarter for that in the fourth quarter. And now we've seen the momentum growing through the end of 2019. Is that -- is the fourth quarter is more kind of like a perfect storm of rates and appetite, et cetera, and is it like a really big quarter? Or do you think that we're going to be -- as that business has ramped up, you could kind of repeat that at least for the foreseeable future? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [41] -------------------------------------------------------------------------------- It is -- so again, all of those factors still are in place and people are still getting increase in across the 2 loans in January for the same reasons we did in Q4. January I think overall is kind of a slow month for people as they're doing their taxes and getting their financials together. So I think it's going to -- and fourth quarter typically is a more busy quarter for loan originations. So throughout the year if conditions stay in place, then we can do more as the year goes on. So whether it's the first quarter or the second quarter, you can see last year, it kind of ramp-up. But it is based upon the flows of the business itself. So we're still seeing them. We think we can come close to last year's number, but may be differences in timing as to when that happens. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [42] -------------------------------------------------------------------------------- It would be great if we could control customers' behavior. But at certain points in time we do get chunky growth in the second and fourth quarters. -------------------------------------------------------------------------------- Alexander Roberts Huxley Twerdahl, Piper Sandler & Co., Research Division - MD & Senior Analyst [43] -------------------------------------------------------------------------------- Okay. So lot of volatility in that line. The full year maybe it comes in that kind of $6 million to $7 million range if everything goes right? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [44] -------------------------------------------------------------------------------- Correct. -------------------------------------------------------------------------------- Alexander Roberts Huxley Twerdahl, Piper Sandler & Co., Research Division - MD & Senior Analyst [45] -------------------------------------------------------------------------------- Okay. And then just given the very strong loan growth and it seems like a lot of it happened kind of late in the quarter. Does that mean that maybe the sort of the pipeline needs to rebuild as you head into the first quarter? Or was the backlog still pretty good for the ability to actually close loans in the first quarter? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [46] -------------------------------------------------------------------------------- But there's -- first quarter is typically strongest because of people's behavior and what's going on, right? Our pipeline is showing $300 million of new money and almost $500 million in kind of including refinancings. So if you look at... -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [47] -------------------------------------------------------------------------------- I think it's down about $100 million from where we began in the fourth quarter, I would say. -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [48] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Alexander Roberts Huxley Twerdahl, Piper Sandler & Co., Research Division - MD & Senior Analyst [49] -------------------------------------------------------------------------------- Down about a $100 million? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [50] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Alexander Roberts Huxley Twerdahl, Piper Sandler & Co., Research Division - MD & Senior Analyst [51] -------------------------------------------------------------------------------- Okay. And then do you just have just handy the impact on the margin from the prepays in the fourth quarter? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [52] -------------------------------------------------------------------------------- Yes. We haven't -- I'm going to say it's not a lot. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [53] -------------------------------------------------------------------------------- Are you talking about the prepayment on the MBS portfolio? -------------------------------------------------------------------------------- Alexander Roberts Huxley Twerdahl, Piper Sandler & Co., Research Division - MD & Senior Analyst [54] -------------------------------------------------------------------------------- Yes, yes. I'm just trying to get a sense for kind of what the right -- kind of the real driver of the margin. It seems like most of it was driven by the mismatch and the timing of loan yields versus funding costs coming down third quarter to the fourth quarter. But there is anything else that might be coming in nonrecurring that we should be paying attention to? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [55] -------------------------------------------------------------------------------- Yes. So prepayments on loans -- of our loans was about $200,000 in the fourth quarter. The prepayments on the investment portfolio had about, versus the second quarter, probably a 5 basis point impact. And probably that depends on how you want to measure the increase in the premium amortization on the portfolio. -------------------------------------------------------------------------------- Alexander Roberts Huxley Twerdahl, Piper Sandler & Co., Research Division - MD & Senior Analyst [56] -------------------------------------------------------------------------------- Versus the third quarter event, right? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [57] -------------------------------------------------------------------------------- Versus the second quarter. -------------------------------------------------------------------------------- Alexander Roberts Huxley Twerdahl, Piper Sandler & Co., Research Division - MD & Senior Analyst [58] -------------------------------------------------------------------------------- Versus the second quarter? Okay. -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [59] -------------------------------------------------------------------------------- Versus the third because it ramped up in the third quarter as well and continued going up into the fourth quarter. So versus the third quarter it was probably 3 basis points. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- (Operator Instructions) The next question comes from Collyn Gilbert from KBW. -------------------------------------------------------------------------------- Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [61] -------------------------------------------------------------------------------- I just want to dig into the loan dynamic a little bit here and just make sure I'm understanding this right. So the multifamily loans that came on this quarter, I know you gave some of the origination yields. But what were the -- what was kind of the blended yield on the multifamily loans that came on this quarter? -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [62] -------------------------------------------------------------------------------- This quarter, 3.56%. -------------------------------------------------------------------------------- Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [63] -------------------------------------------------------------------------------- Okay. So I guess it seems as if the -- and I understand your -- the outlook for the year and mix shift benefit moving for the year. But if we just assume kind of the flow-through of what came on this quarter. I guess it seems like that loan yield can continue to compress. I don't want to say fairly meaningfully. But if you're looking at a portfolio yield of 4.50% or 4.45%, I guess, it was for the quarter and most of the stuff coming on. And then I'm just trying to reconcile that with -- I know you're talking about lower deposit outlook, but it just seems like you're really now maybe perhaps below even where the market is which I'll ask that question in a second. But just first on the loan yield side, I mean can you quantify maybe a little bit more as to where you think the compression in the loan yield could go as the year progresses? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [64] -------------------------------------------------------------------------------- So I guess one reason maybe I'll just jump ahead. Maybe the reason we look for a little bit below market is because if we're doing effectively floating rates multifamily loans and not 5- or 7- or 10-year fixed rate, we sort of [giving up] about 13 basis points there. So going forward, I mean maybe rates will go up. But again, it's going to be focused on mix of the loan portfolio away from CRE and multifamily to an extent, I mean again we still have multifamily loan in portfolio that are coming for refinancing against those swap fees. But I think it's -- to some extent, it's a seesaw between putting more multifamily over having more swap fees. If they're good loans you could do them, but again, how much we can compress the margin or how much we can compress the loan yields for the year, I mean is based upon doing more multifamily. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [65] -------------------------------------------------------------------------------- I mean if I look at the pipeline that's out there today, the weighted average rate on that is in the [470s], because of the mix of commercial that's part of it. So while the fourth quarter was a ponderance with multifamily which should be going through 2020 upgrade or mix of C&I which carries little bit higher rate. So... -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [66] -------------------------------------------------------------------------------- Based upon our projections so far, our loan yields kind of stay flat for the year. Based upon the mix that we had in our plan going forward. -------------------------------------------------------------------------------- Collyn Bement Gilbert, Keefe, Bruyette, & Woods, Inc., Research Division - MD and Analyst [67] -------------------------------------------------------------------------------- Okay. Got it. And then just -- then on the deposit side, just curious now where some of the CD rates or your higher rate products, what -- where those are? What the offering rates are on those? And if you're kind of below market on some of those higher rate products? -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [68] -------------------------------------------------------------------------------- So we don't really have -- I think we have a high rate CD out there, it's 2% for 2 years. But it's -- we don't really make -- at some of our market, we don't have a lot of customers that come in to our branch looking for rate products. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [69] -------------------------------------------------------------------------------- We actually -- that attempt at one point in time when rates were rising, those got in lots of money in with CDs in our branches and our customers and we just don't have that sort of consumer base and our customers are not trained, they don't come here looking for higher rates. So I guess we are -- we've always been below peer on the deposit side. I think the deposit franchise that we've built over the last 100 years are really, quite honestly, the last dozen years reflects our commercial bank and deposit franchise which is geared toward DDA, it's geared towards money market so you've excess liquidity for our customers. So we've been below peer. We were below peer when rates are going up, I think we'll be below peer as rates go down. A measure of success of our commercial banking officers and our relationship, it is much about the deposits they bring, it isn't about the loss. And so we continue to feel -- I mean I think the 40% DDA was when this company was $600 million in size and its 40% DDA and $5 billion in size. So we've kept tied to our mission. So that's the part that we're most proud of and that's the value of this franchise is its deposits and we'll continue to manage that aggressively. -------------------------------------------------------------------------------- John Martin McCaffery, Bridge Bancorp, Inc. - Executive VP, CFO & Treasurer [70] -------------------------------------------------------------------------------- As we went through and lowered deposit rates in the third and fourth quarter, we realized that upwards of 80% of our money market accounts were priced individually. We had to go in there and bring those rates down one account at a time, I guess, that's kind of how we do it with our customers. So I think when we say we have the right weight out there that's out there dangling just to bring people in the door, we don't get deposits that way. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [71] -------------------------------------------------------------------------------- I think the right weight might be 3 basis points. -------------------------------------------------------------------------------- Operator [72] -------------------------------------------------------------------------------- This concludes our question-and-answer session. I would like to turn the conference back over to Kevin O'Connor for any closing remarks. -------------------------------------------------------------------------------- Kevin M. O'Connor, Bridge Bancorp, Inc. - President, CEO & Director [73] -------------------------------------------------------------------------------- I guess and I want to thank everybody again. And if you indulge me from -- I want to take a moment to acknowledge the passing this week of a loyal customer and a great friend of mine of the bank, Roger Fox. He was one of our first customers a dozen years ago when we opened our branch in Deer Park. And as I look at the businesses we've grown in these new markets that we talk about, much of it connected in some ways to the network of people he has introduced us to. He was a big advocate of the bank. He walked around wearing our pin proudly. He'll be missed by all of us. And I just -- I want to take a moment. So I appreciate that. So again, thank you. We're excited about the prospects for 2020. I think that we've demonstrated to you our ability to sort of manage through different cycles, conversations about expenses and capital. So we'll adjust and make the right decisions as events occur. So again, thank you, and I look forward to talking to each individual. -------------------------------------------------------------------------------- Operator [74] -------------------------------------------------------------------------------- The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.