UMPQ (2021 - Q4)

Good morning and welcome to the Umpqua Holdings Corporation Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. At this time, I would like to introduce Ms. Jacque Bohlen, Investor Relations Director for Umpqua to begin the conference call. Ms. Bohlen please go ahead. Jacque B

Thank you, Rands. Good morning and good afternoon everyone. Thank you for joining us today on our fourth quarter 2021 earnings call. With me this morning are Cort O'Haver, the President and CEO of Umpqua Holdings Corporation; Tory Nixon, President of Umpqua Bank; Ron Farnsworth, our Chief Financial Officer; and Frank Namdar, our Chief Credit Officer. After our prepared remarks, we will take your questions. Yesterday afternoon we issued an earnings release discussing our fourth quarter 2021 results. We have also prepared a slide presentation which we will refer to during our remarks this morning. Both these materials can be found on our website at umpquabank.com in the Investor Relations section. During today's call, we will make forward-looking statements which are subject to risks and uncertainties and are intended to be covered by the Safe Harbor provision of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to slide two and three of our earnings conference call presentation as well as the disclosures contained within our SEC filings. I will now turn the call over to Cort.

Hi. Thank you, Jacque. I'll provide a brief recap of our performance and then pass to Ron to discuss financials, Frank will discuss credit, and then we'll take your questions. For the fourth quarter, we reported earnings available to shareholders of $88 million. This represents EPS of $0.41 per share compared to the $0.49 reported last quarter and the $0.68 reported in the fourth quarter of last year, with this linked quarter decline, due primarily to $15 million in merger-related expenses and last quarter's sizable provision recapture. The decline from the prior year period reflects a more sustainable level of mortgage banking income in the current quarter as volume and margins normalized from the 2020's historical high levels, as well as the previously mentioned merger-related expenses. Once again, the focal point of the quarter was organic loan growth, which contributed to increased net interest income from the prior quarter when PPP-related fees are removed. Non-PPP loan balances grew $930 million in the fourth quarter, representing a quarterly growth rate of 4.4% and an annualized growth rate of 18%. Notably, the quarter's organic generation significantly offset continued declines in PPP loan balances, enabling total portfolio expansion of 2.7% or 11% annualized during the fourth quarter. Expansion during the quarter -- for the year, it was balanced across categories and though pipelines are lower today than we spoke them -- when we spoke in October, given the fourth quarter's heightened production and seasonal trends, we expect continued loan growth through 2022 as a multi-year initiatives, which include successful ongoing talent acquisition and brand momentum in our markets, enabling us to take market share and drive value for our customers. With PPP remaining balances at only $380 million or 1.7% of the portfolio, the majority of our anticipated net organic growth in 2022 will result in net portfolio growth for the year and any favorable movement in line utilization, which we have not seen to-date would provide additional tailwind. Regarding capital, in November, we paid our shareholders a dividend of $0.21 per share consistent with historical payments. And as we previously discussed, we did not repurchase any given -- any shares given our pending combination with Columbia Banking System, which we announced on October 12th. While our usual NextGen slide has been replaced with the information and updates related to our pending combination, we continue to make strides as a standalone entity. I'm going to provide a quick update on a few notable items. As planned, we consolidated 15 stores early in the fourth quarter, bringing our total rationalizations under NextGen 2.0 to 34, moving us within our original 30 to 50 store consolidation goal. We consolidate in 99 stores under NextGen 1 and NextGen 2.0, which represents the rationalization of one-third of our footprint over the past four years. During that period, the number of non-CD accounts has grown by 2.7% as the number of demand accounts has grown by 4.1%. Since we launched our original NextGen plans in late 2017, our deposit balances are up $6.7 billion, or 34% and non-CD balances are up $7.7 billion or 45%, driving efficiency improvement in our core banking segment. Our human digital initiatives remain critical to our long-term strategy as our customers continued to engage with us through digital channels at an accelerated pace. Notable achievements here include a steady pace of increase in Zelle transactions, which were up 7% for the quarter and up 48% for the year. Additionally, we crossed a new milestone with go-to users as we pass the 100,000 mark in the quarter. One final comment before passing to Ron. I've been talking about the growth opportunities ahead for Umpqua for a number of quarters and our strong performance in the fourth quarter provides continued support for these remarks. The past few months' production is a tremendous accomplishment in its own right, but it is all the more noteworthy as it demonstrates the intentional and successful separation of our growth initiatives from our irrigation -- integration planning activities related to our pending combination with Columbia. As we have previously disclosed, the integration management office was established to lead our integration and the IMO leadership team includes senior executive leadership from both Umpqua and Colombia. The IMO enables Umpqua's bankers to have undisturbed focused on generating business and serving customers and I remain highly enthusiastic that the growth prospects within our markets and the momentum from our banking teams will drive continued growth in 2022 that enables us to deliver shareholder value over the long-term. And with that, Ron, take it away.

Well, thank you Cort and for those on the call, who want to follow along. I'll be referring to certain page numbers from our earnings presentation. Page 12 of the slide presentation contains our summary quarterly P&L. Our GAAP earnings per share for Q4 were $0.41. Excluding MSR input, CVA, and other fair value adjustments along with merger expense and ex the disposal costs, our adjusted earnings were $0.44 per share this quarter. For the moving parts as compared to Q3, net interest income decreased less than 1%, reflecting the $6 million decline in PPP fees, mostly offset by continued organic loan growth and a reduction in our cost of funds. We had a recapture prior provision for loan loss of less than $1 million, with improving economic forecasts offsetting the provision required for new loan growth, down $18 million from the prior period recapture. Non-interest income reflected the expected seasonal decline in mortgage banking revenue, ex the MSR, more than offset by lifting the MSR fair value with the increase in longer term interest rates and non-interest expense included merger expense recognized to-date for the Columbia combination. As for the balance sheet on slide 13, interest bearing cash decreased to $2.3 billion this quarter driven by the asset remix into loans, with the record non-PPP growth this quarter. We also added $150 million to the bond portfolio later in the quarter as longer term yields increased. The $2.5 billion in cash along with expected future forgiveness and payoff on the remaining $380 million of PPP loans will give us significant future optionality for funding ongoing loan growth. Our total available liquidity including off balance sheet sources ended the year at $15.3 billion, representing 50% of total assets and 58% of total deposits. Moving to page 16 of the presentation, our NIM decreased six basis points in total to 3.15% in Q4 and we present a waterfall on the margin change on the right of the page. The NIM, excluding the impact of PPP loans and discount accretion was flat, which is great to see the impact of continued non-PPP loan growth and deposits continued to reprice lower offsetting the impact of the low rate environment. Our cost of interest-bearing deposits was 11 basis points in Q4. The next two slides include information which investors may find helpful as the market is pricing in the potential for Fed funds rate increases in 2022. First, on slide 17, we have expanded the detail provided on repricing and maturity characteristics of our loan portfolio. The first table on the upper left breaks down the pricing drivers on loans, noting as of year-end 33% of the portfolio is fixed, 2% is in remaining PPP balances, 32% is in floating rate, and 33% are in adjustable rates over time. The lower left table shows the maturity schedule by category. And the upper right table shows the loan rate floor buckets for floating and adjustable rate loans, noting 39% of the combined total or at their floor, meaning 61% have no floor or are above it. For the $5.7 billion in floating and adjustable rate loans at their floor, the lower right table breaks down the balances by rate change band, along with the weighted average rate change required for these loans to move above their floor. Hopefully, investors and analysts will find this information useful in assessing the beneficial impact on net interest income of future potential rate hikes. Next, on page 18. On the left, we've included our projected net interest income sensitivity for future rate changes in both ramp and shock scenarios over two years. This is a simulation we run and back test quarterly and assumes a static balance sheet. Ideally, we'll continue to see an asset remix with cash skipping bonds and flowing down the loans, which will benefit our net interest income absent any rate change. But this is not included here. The deposit betas used in this simulation range from 43% to 45% on interest-bearing deposits. For sensitivity on our model results, every 10% change in the beta is plus or minus 1.3% on the plus 100 basis points shock results. The table on the right shows our deposit beta from the last rising rate cycle starting Q3 2015 and running through Q3 2019 to catch the lag effect. Our beta then was 42% on interest-bearing deposits. Okay, now to our segment disclosures, starting with the core banking segment on page 21 of the presentation. Net interest income was flat sequentially driven by the strong non-PPP loan growth and continued decline in cost of funds, offsetting most of the PPP fee decline. I'll talk about CECL and the provision of detail in a few minutes, but you'll see here we had an under $1 million recapture this quarter from improving economic forecasts and four rows down as the change in fair value on loans carried at fair value at a loss of $2.7 million here in Q4 as long-term interest rates increased this quarter compared to fair value gains over the last two quarters. Non-interest income of $42.8 million increased 23% from Q3, related primarily to higher swap and syndication revenue as our commercial fee initiatives advance. And in the non-interest expense section, you'll see the merger expense recognized to-date on the combination, along with exit and disposal costs related to lease exits on recent store consolidations and a right-of-use lease asset impairment as we execute our return to work plan. The direct non-interest expense for the core banking segment increased this quarter, primarily related to higher loan production incentives given the record growth discussed earlier. The efficiency ratio on the core increases 64% reflective of the merger expense, noting this will be 57% ex the merger and exit disposal costs. Turning now to page 22 of the presentation, we show the mortgage banking segment five-quarter trends. To start, we had $871 million in total held-for-sale volume this quarter, down seasonally 12% as expected from Q3. The gain on sale margin was 2.71%, again down from Q3 as expected given a slowing mortgage market and decline in the log pipeline. These two items resulted in the $23.6 million of origination sell revenue noted towards the top left of the page. Our servicing revenue is stable and for the change in MSR fair value, the passage of time piece increased slightly while the change due to valuation inputs was a gain of $15.4 million due to the increase in long-term interest rates in the second half of the quarter. Non-interest expense totaled $26.6 million for the quarter. Again, this represents held-for-sale origination costs, servicing costs, along with administrative and allocated costs. The direct expense component of this was $18.2 million as noted on the right side of the page, representing 2.08% of production volume, up slightly in basis points from the last few quarters with the lower volume. Couple final items for turn over to Frank. On slide 25, we've included a new quarterly loan balance roll forward. The record quarterly non-PPP loan growth was driven by a record $2.3 billion in new originations offset by $1.4 billion in payoffs. Next, let me take your attention to slide 27 on CECL and our allowance for credit loss. As a reminder, our CECL process incorporates the life of loan reasonable and supportable period for the economic forecasts for all portfolios with the exception of C&I, which uses a 12-month reasonable and supportable period reverting gradually to the output mean thereafter. Hence, these forecasts incorporated economic recovery through 2022 and beyond as most economic forecasts revert to the mean, within a two to three-year period. We use the consensus economic forecast this quarter updated in November. Overall, the forecast showed improvement in several key areas as economy works through the latest variant. We included a $17 million overlay for various CRE portfolios to hedge against any potential near-term slowdown or negative turns with the pandemic. Net of this overlay, including providing for the strong loan growth, we recognized less than a $1 million recapture and prior provisions for loan loss. Net charge-offs for Q4 remain low at $7 million or 13 basis points of loans, much lower than the models from last year suggested and the majority of net charges this quarter related to the small ticket lease portfolio. The ACL at quarter end was 1.16%. Noting this ratio is 1.18%, excluding the government guaranteed PPP loans. As these are economic forecasts driving the reserve, it will simply take the passage of time to see if net charge-offs follow as modeled. But today, the models have simply overestimated the actual net charge-offs given a lag of at least six quarters. Our day one CECL level was right at 1% on the ACL, which is about $40 million lower on the ACL for non-PPP loans we are at currently. All else equal, this excess ACL will either be charged off in future periods if the models are eventually proven correct or be recaptured and/or used for providing for future loan growth if the economic forecast continue to improve. Time will tell. And lastly, I want to highlight capital on page 29. Knowing that all of our regulatory ratios remain in excess of well-capitalized levels, our Tier 1 common ratio is 11.6% and our total risk-based capital ratio is 14.3%. The bank level total risk based capital ratio was 12.9%. And with that, I will now turn the call over to Frank Namdar to discuss credit.

Thank you, Ron. I will also be referring to certain page numbers from our earnings presentation for those who want to follow along. Slide 28 reflects our credit quality statistics. Our non-performing assets total assets ratio held steady at 0.17% and our classified loans to total loans ratio declined by 10 basis points 2.71%. Our annualized net charge-off percentage to average loans and leases was 13 basis points in the quarter, reflecting below average net charge-off activity in the FinPac portfolio. The FinPac portfolio's ratio came in at 1.75%, notably below its historical 3% to 3.5% range for the second consecutive quarter reflective of higher levels of customer liquidity, improving economies, and the favorable impact of strategic credit tightening implemented last year. Excluding FinPac annualized net charge-offs were just two basis points. Obviously, we're very pleased with our credit quality metrics, we remain confident in the quality of our loan book, and we look forward to continued high quality growth. Back to you, Cort.

Okay, thanks, Frank and Ron, for your comments. Rands, we will now take questions.

Thank you, sir. At this time, we would like to take any questions you might have for us today. We have our first question from the line of Jeff Rulis with D.A. Davidson. Please go ahead.

Thank you. Good morning. Cort, you mentioned the pipeline down a little bit, makes sense as you had a strong production quarter, just want to kind of get a sense for the 2022 outlook. And then on a related question, how do you view loan officer hires given the news of the pending merger? Do you kind of take that as hey, we're combining with another bank here and just the recruitment process that you would do if that changes any? But to narrow that down expectations for 2022 growth and then how you approach the hiring? Thanks.

Hey Jeff. Let me -- I'll have Tory answer in detail, let me just give you a kind of a historical global answer. We've been -- as we've talked about, I think you've asked me before, kind of, we have been a bank of choice by bankers over the last -- certainly since Tory has been here and all the attracting of C&I lenders. And then maybe prior to Tory when I created the Real Estate Group, we've been a great shop for people looking to get out of bigger banks, banks we compete with now today as we've gotten to be over $30 billion. I don't see that changing after our combination with Columbia. In fact, I think you probably heard Clint and I talked about, we seem to be an employer of choice, as opposed to people are going to flee from here, because my goodness, gracious, we're going through a merger. And I don't see that changing from historical -- from our historical perspective on the talent that we've been able to attract. We had a great Q4, and I'll let Tory talk about it more -- in more detail, and hats off to the lenders that did a fabulous job. And we're continuing to see that pipeline grow. But let me give it over to Tory to answer a little greater detail, but I just think the combined organization of being a $50 billion behemoth here in the Pacific Northwest that has not existed in the last 25, 30 years, it's just a great opportunity for us to attract talent, as opposed to be a place where people would flee and try to go down tier. So Tory?

Sure. Thanks Cort. Jeff, this is Tory. So, I'll start with the banker question. I think to Cort's point, we -- I believe -- I think we believe we have a very strong value proposition for bankers, and we have seen talent come into this company over the last several years, and that will not -- we will continue to do that. And we are aggressively searching for good quality bankers. We're hiring folks in Phoenix to -- for our Arizona team. We're hiring bankers throughout our footprint, California, Oregon, Washington, and continuing to have a lot of success. So, we will we will continue to do that. On the pipeline, as mentioned, it's down a little bit from where we were a quarter ago, but that's for obvious reasons. We had just an outstanding Q4 in all lines of business. And my expectation is that Q1 will certainly won't be what Q4 was, just because we had some business that we originally thought would be a Q1 production and ended up kind of getting pulled into Q4, but the pipeline is still healthy and still strong and continuing to grow. So, we've got a lot of great bankers out there talking to customers, talking to prospects, and building the pipeline. I feel very confident that 2022 will be a strong loan growth year for us, at least, mid to high single-digits, and excited to continue to see progress in the bank.

Jeff, one last comment. I knew you guys were going to ask this. So I think when Clint and I were out in late December and December, talking, we got asked this question quite a bit as -- and I know exactly why. And what we've been saying and I think as evidenced by our fourth quarter productions hold us accountable for the growth. I mean, if you want to see how we're retaining and attracting talent, hold us accountable for the growth in the balance sheet and growth in earnings. That's the way to look at it. We will lose people and we lose people and we retain the people that we want to retain. But ultimately, it's how we continue to grow with our customers. And that's where I think you should look for our true retention efforts, our efforts to retain quality talent should come in the form of growth the balance sheet.

Got it. Thank you. Switching gears a little bit. On the expense side, it sounds like maybe NextGen updates are going to maybe slide to the kind of the backburner a little bit, not that you back off, but disclosure of that. So, I just wanted to get a milepost checking in on perhaps, if we're in the expense run rate of 100 -- low $180 million range ex the merger exit costs, what's left to take on cost stakes for this initiative? And I think it had a tailwind of 23 even if you could detail that.

Hey Jeff this is Ron. I'd say no change to our prior guidance for 2022, looking at $690 million to $710 million of expense, that hasn't changed and those are still are internal targets. Now also that incorporates a decline in overall mortgage held-for-sale volumes, which can be a wildcard from time-to-time depending what happens with rates. But with that, I'd say that the tail, post the impact of the stores recently consolidated here in Q4 is going to be really more around smaller amounts in the aggregate around lease consolidations back office benefits from right-of-use lease impairments, et cetera, which are incorporated in that guidance for the overall year expense.

Okay. Okay. Fair enough. And then just one quick one, Ron, housekeeping. The PPP fees, I think you mentioned down $5.9 million, what were those in the fourth quarter specifically?

Yes, in Q4 it was $9.6 million, there's a little over $11 million left going forward. 99% of that is going to be around round two, only a couple hundred thousand left related to round one.

Okay, I'll step back. Thank you.

Yes. Thanks Jeff.

Thank you. Our next question is from the line of Matthew Clark with Piper Sadler. Please go ahead.

Hi, good morning.

Hey Matt.

Can you specifically quantify the loan pipeline coming out of the quarter just to give us a sense on a comparison -- for comparison reasons?

Sure. So, Matt its Tory. The last -- at the end of Q3, pipeline was about $4.4 billion in total and today, it's about $3.5 billion -- so $3.6 billion, somewhere in that range. And -- so that's the mark between last quarter and this quarter. Again, I feel that we had a lot of business that booked in Q4, we had a phenomenal Q4 in terms of loan growth. I feel very good about momentum and the prospects for us to build the pipeline and to have a very strong successful 2022 and loan growth.

Okay. And then sounds like there's a lot of opportunities to hire producers out west, given all the disruption that's taking place, but can you give us a sense for what percentage or however you want to measure it or quantify it? What percentage of your producers are locked up with the deal?

Its locked up, Matt. I mean--

With the acquisition. In terms of retaining producers, so they can't -- it would hurt them to leave, yes.

Percentage-wise, I don't know, if I got a percent off the top of my head, I'll tell you, we obviously with key employees, look at all types of retention opportunities, whether it's just cash or stock, or the way we pay out incentives, and yada, yada, yada. And we feel like I mentioned before, very, very good about our retention prospects with our current staff, the ability to continue to attract. I think we've shown in more tumultuous hiring years, there have been years in the last four or five since Tory's been here, I know you've been on the calls Matt, we've been able to attract a lot of talent on some of the banks, some of our larger competitors, because like Tory mentioned a few minutes ago, we have a great value proposition. So, I'm not being -- I'm not naive to your question. Clearly, there's disruption, potentially with a merger. But once again, we are at $50 billion, there aren't a lot of generalist commercial banks. In fact, there's none in the Pacific Northwest that will be able to do what we do. And between that, and then yes, we do have retention tools in our back pocket we will use we felt very, very good about our ability to retain and once again, hold me accountable for the growth, hold me accountable.

Great, thank you. And then maybe Ron, on the core NIM outlook, I think the expectation coming into the quarter was fairly stable, which it was. What are your thoughts on the kind of asset yield outlook? And any update on the weighted average rate on new loans this quarter?

Yes, good question. So, I'd say just in terms of overall asset yields looking into Q1, really it's going to be a function of continued loan growth and that cash waterfall and remixing them into loans, skipping bonds. I'd say on the bond side, with the sell off and longer term rates, prepayment speed, assumptions are slowing down. So, there could be some lift in terms of lower amortization. Looking forward, just as those things extend slightly, you'd expect that to occur with higher rates. And aside from that on the loan yield side, our yield on loans, ex-PPP was up four, five bps in the month of December compared to Q4, so that bodes well looking into Q1 as well.

Okay. Thank you.

You bet.

Thank you. The next one, we have the line of Brandon King with Truist Securities. Your line is open.

Hey, I first wanted to touch on the merger call savings of $135 million, it seems that you remain confident in achieving that or even above that amount. But I was wondering what kind of inflationary pressures could affect that number? And if that has gone into any of the potential execution of achieving those costs savings?

Good morning Brandon and good question. So, overall, the $135 million remains our target. We internally we're targeting a number higher than that. But I say this, on inflation, we -- it's not new this month, this quarter, it's -- we've been dealing with inflation for the last year, year and a half on the back end of the pandemic. So, when I look ahead into the future and I think about estimates and accretion and the model, math, et cetera, one of the benefits of having that higher internal target that we're working towards would be to help offset if we do see continued outsized inflation, we're in over the balance of the year.

Okay. And then I also wanted to touch on deposit growth. I know deposits declined to anticipate outflows. And the first part of the question, could you please quantify if you can amount of deposits that were related to the Umpqua investment? And then I wanted to get a sense of where you see deposits going from here in 1Q, there'll be a seasonal inflow based off of seasonal outflow of 4Q. And then, overall, the impact of the Fed, particularly hiking rates and what that could do to the trend in deposits?

Kind of a loaded question, but let me take it in parts Brandon. The first component of there would be it was a little under $200 million, just in terms of the UI balances. I'll also point out that any given quarter, there might be timing just in terms of month end or quarter end ACH timing, and then there was probably about $150 million that fell into January that in prior years might have been 12/31. So, that's just more a function of the calendar when you're looking at a point-to-point number. When we look into 2022, obviously, still very confident about deposit growth, our expectations internally are loan growth will exceed deposit growth in 2022. I aim to build wildcard for all banks, not just Umpqua is going to be what occurs as the Fed raises rates, do overall DDA mixes drop and move back into interest-bearing or do balances flow out? I'd say the benefit we have on that front compared to past potential rising rate cycles is just the larger presence -- larger balance of core commercial deposits in our book based on what the team has done over the last four or five years. So, there's other fluctuations during the year just in terms of tax time in Q2 or maybe public fund inflows in Q4. But traditionally, over a long time horizon, we've been more of a seasonal bell curve there as well, with stronger growth in Q3 -- Q2, Q3, little less in Q1 and Q4, mostly offset by those tax timing nuances.

Okay. Thank you.

Hey, Brandon, this is Tory, let me just add one thing on the kind of the banker front. If you think about, we talk a lot about loans, but we have a lot of bankers that are in all different lines of business, whether it's retail, whether it's the middle market, community banking or real estate group, mean their goals and their incentives are equally distributed between lending and deposit growth and fee income growth. I mean those things are -- all of them are very important and it's a very balanced scorecard and it's how they're compensated. And all those things are important to us. So, obviously, so we continue to monitor and push and are successful in growth in all three areas, not just on the lending side.

Okay. I guess, following up on that, what is the ratio you internally expect when you grow, for instance, C&I loans, and what will be the ratio of deposits coming with those C&I loans? Just to get a sense.

This is Tory. I think that's kind of impossible to answer because it depends on the type of customer, the industry that they're in, what they're borrowing for, and just how flush they are with cash. So, I think if you look at the different businesses, our community banking business has about a 1:1 ratio of loan outstandings and deposit balances. Our middle market business has a little more on the lending side than it does on the deposit side. Our real estate business for sure is going to be more lending than it is deposits. Our retail bank is predominantly a deposit base for the company, so really just kind of depends. But -- so I can't really answer probably any more detail than that. At this point, we could go in and dig out some information maybe, but that'd be my off the cuff comments.

Okay. Thanks for all the answers.

Thank you.

Thank you. Our next question is from the line of Mr. Jared Shaw with Wells Fargo. Please go ahead.

Hey, good morning, everyone. Maybe, I think you'd mentioned that the growth outlook doesn't assume any type of normalization of the utilization -- line of utilization rate. What happens if you do see a utilization normalization there? How much of an impact could that be to balances?

Jared, hi, this is Tory again. So, if we -- if I look at the utilization rate, going back a couple years, in kind of Q4 2019, in our C&I businesses about 35%. And today, at the end of Q4 its about 26%. That's about a -- if we got to that -- back to the 35% level, kind of, an historical level, it's about $270 million, $260 million in outstandings, more outstanding for the company.

Okay, that's great. Thanks. And then on the mortgage banking side, what -- the gain on sale margin, obviously, declined through the quarter. Where was that sort of at the end of the year? And what's sort of the expectation as we go into first quarter and potentially higher rates on the gain on sale margin?

Hey, Jared, this is Ron, I also point out that the real impact in Q4 was the drop in the log pipeline. At a loan level, it's still firing off right around 3%. So, depending on market dynamics that could fluctuate during the year, but my assumption would be roughly 3% to 3.25% at the out size edge in the trajectory that of the year would be, again, higher in Q2, Q3 lower and Q4, Q1, just given the fact that we've had a fair value of the effect of that log pipeline change.

Okay. All right. That's good. Thanks. And then finally for me, just as we as we look at the integration timeline and you have your integration office, what are some goalposts we should be looking for as analysts and investors, whether that's events and timelines or metrics to sort of indicate a successful integration?

First of all, hey, Jared, Cort. The guidance we've given when we made the announcement, we still feel comfortable with that guidance of closing the deal, I think in the second quarter -- late second quarter. I mean, guidelines -- the guide posts, I mean, obviously, the shareholder vote for both companies is the middle of next week. That would be one and then ultimately, regulatory approval, like I -- my opening comment, we're still more than comfortable with the timeline we've given. We've got great relationships with our regulators, things are going great and we anticipate getting the deal closed by mid second quarter. And if anything changes, we'd tell you.

I guess I'm thinking -- thanks for that, I guess something maybe even after closing in terms of integrating the franchises, whether it's growth targets or retention targets or things like that?

Yes, I think after we close, we would -- whether we have a MDR or some type of roadshow or at the first earnings call, we'd provide that guidance. Clearly, other milepost would be core conversion and things of that sort that are normal in mergers, but that is a great question. We are working on that. So, we will be providing some of that clarity after we close the deal.

Okay, great. Thanks a lot.

Yes.

Thank you. There are no further questions at this time. Ms. Bohlen, please continue.

Thank you. Again, this is Jacque Bohlen and we would like to thank you for your interest in Umpqua Holdings Corporation and participation on our fourth quarter 2021 earnings call. Please feel free to contact me if you'd like clarification on any of the items discussed today or provided in our presentation materials. This will conclude our call. Good bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.