Earnings Call Transcript
WASHINGTON TRUST BANCORP INC (WASH)
Earnings Call Transcript - WASH Q3 2021
Operator, Operator
Good morning and welcome to the Washington Trust Bancorp, Inc’s Conference Call. My name is Gresh and I will be your operator today. Today's call is being recorded. And now I will turn the call over to Elizabeth B. Eckel, Senior Vice President, Chief Marketing and Corporate Communications Officer. Ms. Eckel, you may begin.
Elizabeth B. Eckel, Senior Vice President, Chief Marketing and Corporate Communications Officer
Thank you and good morning. Welcome to Washington Trust Bancorp, Inc.'s third quarter conference call. Hosting today's call are members of Washington Trust's executive team, Ned Handy, Chairman and Chief Executive Officer; Mark Gim, President and Chief Operating Officer; Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer; and Bill Wray, Senior Executive Vice President and Chief Risk Officer. This presentation may contain forward-looking statements and actual results could differ materially from what is discussed on today's call. Our complete safe harbor statement is contained in the earnings press release which was issued yesterday and in other documents we filed with the SEC. These materials and all public filings are available in our Investor Relations site at ir.washtrust.com. Washington Trust trades on NASDAQ under the symbol WASH. And now I'm pleased to introduce the host for today's call, Washington Trust Chairman and CEO, Ned Handy.
Ned Handy, Chairman and Chief Executive Officer
Thank you, Beth. Good morning and thank you for joining our third quarter call. We appreciate your continued interest in Washington Trust and hope all is well with you as we all continue to navigate the best and safest ways forward. I'll provide an overview of our third quarter highlights and then Ron Ohsberg will review our financial performance. After our prepared remarks, Mark Gim and Bill Wray will join us to answer any questions you may have about the quarter. I am pleased to report that Washington Trust posted strong third quarter results with net income of $18.8 million, or $1.07 per diluted share. We had a strong quarter. We hit record highs in net interest income, wealth management revenues, assets under management, and total in-market deposits in the quarter. We continue to believe that the Rhode Island market presents us with an opportunity to add physical presence in addition to digital advances, to leverage our brand and bring our distinctive level of care to more Rhode Islanders conveniently. I am proud of the team's continued efforts on growth combined with their high degree of care for our customers as they too work their way through this uncertain stage in the pandemic. We continue to feel optimistic about how we and our customers are managing the pandemic. And we acknowledge that the need for informed care, thoughtful decision-making, and an empathetic approach to finding the optimum work and life balance is still critical to see our way through these trying times. We strive to keep what is safest for everyone and what is best for our customers at the center of our thinking. The economies in which we operate are faring better and in the midst of the pandemic. The students are back in school, restaurants open, gyms open, and municipalities ready to embark on the equitable deployment of subsidies to make meaningful, long-term improvements in critical areas like housing, infrastructure, education, job training, and mental health assistance. The realities of labor shortages, logistics challenges, and the risk of ongoing inflation weigh on us all. So, we're helping where we can, adjusting where we must and are prepared to adapt to any necessary changes. We were recently named by Newsweek as the Best Small Bank in Rhode Island. We are humbly proud to serve our customers well. Whether we're serving our customers in person or in remote channels, our market reputation for outstanding service quality is very strong as exemplified by our high net promoter scores, which have exceeded national averages both before and during the pandemic. Whether it is to simply speed the delivery of a mortgage, or to make it even easier for small business customers to manage payments, or to ensure that our operating infrastructure is ever more reliable and secure, we recognize that the best solution is often digital. As always, the protection of our customers’ data and privacy is a paramount concern. In all of these areas, we partner with our core providers and with FinTech companies. We believe that active engagement with the FinTech ecosystem is important for understanding both new opportunities, as well as competitive challenges. Once again, this quarter, we were well-served by the diversity of our revenue sources and our commitment to strong credit practices, which have helped to minimize potential costs associated with the pandemic. Total loans declined 0.3% in the quarter. This was largely due to PPP loan forgiveness. New loan formation in commercial was strong at $100 million in the quarter, but was offset by commercial payoffs and pay-downs. Third quarter mortgage lending activity remained robust and pipelines are relatively strong. Recent increases in longer-term interest rates will likely result in a reduction of mortgage refinancing activity compared to the record levels of late 2020 and early 2021. However, in our market, supply and demand characteristics suggest that buyer purchase activity and housing values should remain. Our wealth management division’s assets under administration stood at a record $7.4 billion at September 30. Wealth management revenues were $10.5 million, up slightly for the third quarter and at a record level. We're very pleased with our wealth management division’s continued strong performance from both a customer and shareholder perspective. Growth through business development and market appreciation helped us enhance this recurring revenue stream, which provides a welcome diversity in the current low-interest-rate environment. I'll now turn the call over to Ron for a more detailed review of our financial performance.
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Thank you, Ned. Good morning, everyone. And thank you for joining us on our call today. As Ned mentioned, net income was $18.8 million or $1.07 per diluted share for the third quarter as compared to $17.5 million and $1 per share for the second quarter. Net interest income amounted to $36.1 million up by $1.3 million or 4%. The net interest margin was 2.58%, up by three basis points. Net interest income continued to benefit from accelerated fee income recognition due to PPP forgiveness, which totaled $2 million and had a 13 basis point benefit to the margin. This compared to $1 million and 7 basis points in the second quarter. Additionally, there were no commercial loan prepayments in the third quarter compared to $717,000 of prepayment fees in the second quarter, which was five basis points. Excluding the impact of these items, the margin increased from 2.40% to 2.45%. Average earning assets increased by $69 million with increases of $42 million in average loans and $16 million in average investment securities. The yield on earning assets was 2.85% for the third quarter, unchanged from the previous quarter. On the funding side, average in-market deposits rose by $108 million, while wholesale funding sources decreased by $79 million, the rate of interest-bearing liabilities declined by three basis points to 0.35%. Non-interest income comprised 36% of total revenues in the third quarter and amounted to $20.5 million, down by $73,000 from the preceding quarter. Wealth management revenues were $10.5 million, up by $27,000. This included an increase in asset-based revenues, which were up by $233,000 or 2% offset by a decrease in transaction revenues of $206,000 due to a decline in seasonal tax reporting and preparation fees. The increase in asset-based revenues correlated with an increase in the average balance of assets under administration, which were up by $249 million or 3%. September 30 end-of-period assets totaled $7.4 billion, up by $2 million from June 30, reflecting net positive client asset inflows, which were partially offset by market depreciation of assets. Our mortgage banking revenues total $6.4 million in the third quarter, up by $379,000 or 6%. This included net realized gains on sales of loans of $5.88 million, which were down by $2.8 million or 33%. Mortgage loans sold totaled $174 million, down by $117 million or 40%, this was partially offset by an increase in sales yield. Mortgage banking revenues were helped by positive fair value changes on mortgage loans held for sale and forward loan commitments of $467,000. This compared to a negative fair value change of $2.5 million in the second quarter. Mortgage loan originations amounted to $396 million, down by $93 million or 19% from the preceding quarter and were down by $114 million or 22% from the third quarter of 2020. We are seeing a shift in market demand away from sale of loans. The percentage of originations to be sold in the secondary market declined from 50% to 48% on a linked quarter basis and from 70% in the first quarter. Our mortgage origination pipeline is still robust at September 30. The pipeline was $281 million, down by $17 million or 6% from the end of June. Loan-related derivative income was $728,000, down by $447,000 in the preceding quarter. Regarding non-interest expenses, these were down by $492,000 or 1% from the second quarter. In the second quarter, debt prepayment penalties of $895,000 were incurred to pay off higher-cost FHLB advances. Excluding the impact of these penalties, non-interest expense was up by $403,000 or 1% from the second quarter. Salaries and employee benefits expense increased by $80,000 or 0.4% in the third quarter. FDIC deposit insurance costs were up by $108,000 and the remaining increase reflected modest increases across a variety of expense categories. Income tax expense total $5.3 million for the third quarter, the effective tax rate was 22.1% compared to 21.8% in the preceding quarter. We currently expect our full year 2021 effective tax rate to be 22%. Now turning to the balance sheet; total loans were down by $13 million from June 30 and up by $4 million from a year ago. In the third quarter, commercial loans decreased by $90 million or 4%, which included a net reduction in PPP loans of $70 million. Excluding PPP loans, commercial loans decreased by $20 million or 1% from June 30, reflecting payoffs and pay downs, up $103 million as well as lower line utilization of $17 million. These decreases were partially offset by new loan originations in advances of $100 million. Residential loans increased by $82 million reflecting a higher proportion of loans originated for the portfolio. Market deposits were up by $310 million or 8% from June 30th and up by $602 million or 16% from a year ago. The quarterly increase included seasonal inflows from our municipal and higher depositors as well as organic growth. Compared to last year deposit inflows have allowed us to improve our funding mix by paying down higher costs wholesale advances. Wholesale broker CDs were up by $23 million in the third quarter while FHLB advances were down by $186 million. Total shareholders' equity amounted to $555 million at September 30, up by $7.5 million from the end of Q2. We remain well-capitalized. The total risk-based capital ratio was 13.83% at September 30, and the tangible equity to tangible assets ratio was 8.19%. Our third quarter dividend of $0.52 per share was paid on October 8th. Regarding asset quality, non-performing assets increased by $495,000 in the third quarter. Non-accrual loans were 0.26% of total loans and loans past due by 30 days or more were 0.22%. The allowance for credit losses on loans totaled $41.7 million or 0.97% of total loans and provided NPL coverage of 380%. Excluding PPP loans, the allowance coverage was 99 basis points. Net charge-offs were $168,000 in the third quarter compared to $258,000 in the second quarter. And for both the third quarter and the second quarter of 2021, there was no provision for credit losses. The provision and related ACL reflect our current estimate of forecasted economic conditions and continued stable asset quality metrics. Finally, I'd like to provide an update on our COVID-19 lending impact. As of September 30, we had loan deferments on five pre loans, totaling $38 million or 1% of total loans outstanding excluding PPP loans. This was down from 22 loans, totaling $93 million or 2% as of June 30th. As of September 30th, we are reporting 630 PPP loans with a carrying value of $77 million. In the third quarter, $73 million was forgiven by the SBA with $2 million of net deferred fees accelerated into income as a result. Net unamortized fees on PPP loans amounted to $2.6 million as of the end of September. And at this time, I will turn the call back to Ned.
Ned Handy, Chairman and Chief Executive Officer
Thank you, Ron. This was another strong quarter for Washington Trust and we feel well-positioned heading into the final quarter of the year. By now Ron, Mark, Bill, and I are happy to take any questions you might have.
Operator, Operator
We will now begin the question-and-answer session. Our first question today will come from Mark Fitzgibbon with Piper Sandler. Please go ahead.
Mark Fitzgibbon, Analyst
Good morning.
Ned Handy, Chairman and Chief Executive Officer
Hey Mark.
Mark Fitzgibbon, Analyst
First question I had for you, I heard Ned your comments about the mortgage business, perhaps normalizing. Do you feel like in a more traditional environment this is maybe a $25 million or $27 million revenue kind of business? Or when things normalize, do revenues fall more precipitously than that do you think?
Ned Handy, Chairman and Chief Executive Officer
I'm going to turn that to Mark for comments. Mark, he is closest to it, but I think – I think we'll probably bottom out at somewhere higher than our pre-pandemic levels just based on the volume that we've been generating of late.
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Yeah. So Mark, this is Ron. We had $15 million in mortgage revenue in 2019. If you annualize what we just did in the third quarter that works out to about $25.5 million, that feels like it's probably still higher than where it's going to end up. So with – it's going to be somewhere, I think between that $15 million and the $25 million that we're currently at. Is that $20 million? I think it's hard to say. And Mark Gim, I don't know if you have any color you want to add to that.
Mark Gim, President and Chief Operating Officer
I do. And thanks for those preceding comments, Ned and Ron. Mark, I think if we look back to where we entered the pandemic in 2020, we had a mortgage pipeline somewhere just below the $200 million range. And from a mixed standpoint, I think certainly the run-up in longer-term interest rates will have an impact first on the conventional saleable refinance business. And so depending on whether or not inflation expectations continue to be high, if the pipeline were to decline in relative terms, it would probably be more on the saleable side than on the portfolio side. However, as Ned said in his comments, we think the housing markets in Connecticut, Massachusetts, and Rhode Island remain pretty robust. The mortgage pipeline for retention of portfolio mortgages for reasons of size, for example, jumbo, should still continue to be strong. So, it’s very broad guidance that Ron gave, but somewhere between pre-pandemic levels and an annualized level of sales gains would be likely with interest rates and the housing market where we see them now. Is that helpful?
Mark Fitzgibbon, Analyst
It is very helpful. Thank you. And also, I guess I was curious as you think about the margin, you guys performed a little better maybe than you thought you were going to last quarter. How are you thinking about the outlook for the margin today? Do you still have some ability to drive those funding costs lower?
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Yeah. There's not much left there, Mark. I would say we'll probably see some pressure on asset yields. So yeah, we did do a little better in the third quarter than we guided. But I would say, the guidance we gave before is consistent with the guidance we're giving now. I would say we trend closer to 2.40 in the fourth quarter.
Mark Fitzgibbon, Analyst
Okay. And then last question, I guess I was curious about; it looks like you've got about $1.6 billion in loans in Massachusetts and no branches there. Is that a missed opportunity to maybe sell other products and services to those loan customers, and is that in the cards for you all to open some branches in Massachusetts? Thank you.
Ned Handy, Chairman and Chief Executive Officer
Yes. Mark, do you want to comment on that?
Mark Gim, President and Chief Operating Officer
Yes, I would. Mark, we continue to try to figure out the best way to improve deposit gathering in markets where we have less of a physical presence like Connecticut or no physical presence in Massachusetts. We have been successful on a preliminary basis in introducing some programs where if we are able to get deposits from customers, for example, who are jumbo mortgage customers in Massachusetts and service them primarily digitally, we've been successful in gathering some of those amounts of deposits to keep and build on. I think in the remote markets where we don't have a current branch presence, it's more likely that we would try to broaden our digital offerings to those customers than to open branches de novo. It's primarily because it's a hard market to get into de novo, and you'd have to either open several at one time or perhaps look for opportunities through M&A and branch divestiture. So I'd say at the current time, our plans are more, and if there are physical opening presence opportunities, they're probably going to be more profitable faster in Rhode Island than they would be in Massachusetts and Connecticut. We may look to a combination of digital and/or M&A to broaden that. Our client service - our customer service center is our outreach part of the digital offering program and has been, we think successful in servicing some of those remote customers.
Mark Fitzgibbon, Analyst
Thank you.
Ned Handy, Chairman and Chief Executive Officer
Thanks Mark.
Operator, Operator
Our next question will come from Damon DelMonte with KBW. Please go ahead.
Damon DelMonte, Analyst
Hey, good morning guys. Hope everybody's doing well today.
Ned Handy, Chairman and Chief Executive Officer
Good morning, Damon.
Damon DelMonte, Analyst
First question regarding loan growth and kind of the outlook; Ned, can you just give us a little bit of insight as to how you think the paydown activity's going to play out here in the back half of the year? I mean, originations have been strong; you've just been offset by the elevated paydowns. Do you think that's slowing at all and you can start to show some net growth in the coming quarters?
Ned Handy, Chairman and Chief Executive Officer
I would say certainly slowing in Q4 versus Q3 is our expectation. Q3, we had a pretty big payoff quarter. The story continues to be somewhat the same. We're lending to high-quality borrowers who are able to take advantage of long-term financing opportunities or sales at continuing low cap rates. I think while rates stay low, our type of customer will keep taking advantage of cycling money in and out of deals. We try to put prepayment penalties or success fees in place, but that's a pretty early thing to be negotiated away by competition in the market. So that's a little bit difficult. I think certainly as rates – if rates take up a little bit, that may put some pressure on cap rates and might make it less enticing. In terms of scheduled payoffs, we think the number's a little lower in Q4. I'm happy with credit formation. I'd like to see more. We continue to look at the possibilities of adding lenders and growing organically that way. We think there's opportunity with some of the noise in Connecticut and Massachusetts; we think there may be some opportunities to add lenders. For the time being, we don't see it as an opportune time to change our risk tolerances. We think we're playing in the right place and we're on the pavement constantly fighting it out on the street corner to win, hopefully more than our fair share of deals. And I've said it before, Damon, and I'll say it again, I'd rather be paid off early in real estate than late. I like the quality of the deals we're getting involved in and I think we'll keep on that path.
Damon DelMonte, Analyst
Got it. Okay. That's good color. Thank you. And then on the C&I side, in line utilization; where does that stand in the third quarter and how does that compare to the second quarter?
Ned Handy, Chairman and Chief Executive Officer
Yes. We have a pretty small universe of corporate lines. They're down by $17 million in the quarter, down a little bit on a percentage basis. But that's not going to have a major impact on the numbers either way. I expect that utilization will come back to sort of normal levels. Most of that, I believe was in one large line that paid down at quarter end. So it’s really – there are so few lines it’s hard to think of that as being a major mover.
Damon DelMonte, Analyst
Got it. Okay. And then just I guess my last question on expenses Ron, anything unique that we should consider going forward, or do you think this mid $32 million range is a reasonable run rate going forward?
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Yes, I think that's fine for Q4 Damon. I mean, we're just starting our budgeting process for 2022. So, I'm not really ready to talk about that yet. You guys are all aware that we're seem to be entering an inflationary period. So, we'll kind of have to think about how that might affect our run rate going forward. So, not quite at that point yet to talk about that.
Damon DelMonte, Analyst
Okay. Fair enough. That's all that I had. Thanks a lot.
Ned Handy, Chairman and Chief Executive Officer
Thanks Damon.
Operator, Operator
Our next question comes from Erik Zwick with Boenning & Scattergood. Please go ahead.
Erik Zwick, Analyst
Good morning, guys.
Ned Handy, Chairman and Chief Executive Officer
Good morning Eric.
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Hi, Eric.
Mark Gim, President and Chief Operating Officer
Good morning, Eric.
Erik Zwick, Analyst
Just to follow up on that last question, I realize you are still in the planning process for 2022 with expenses and I guess the planning process for the whole organization, but as we think about the new branch in Cumberland, that's going to come online next year, what is the expected timing in terms of the quarter that you expect to open that, and any estimates on that, the annual cost for that branch?
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Yes, Mark, I don't know if you can talk about the timing, Erik. The typical cost of a branch for us on a full-year basis is about $650,000.
Mark Gim, President and Chief Operating Officer
Right. From a timing perspective, Eric, we're thinking late second quarter, perhaps the end of the second quarter of 2022.
Erik Zwick, Analyst
Great. Thank you. And then transitioning back to the discussion on loans, thinking about it, maybe a different way, Ned in your comments, opening comments, you mentioned that the pipeline is relatively strong today. I wonder if any of you are able to provide any detail in terms of the construction of that in terms of type of as well as what the average yield is in the pipeline and how that might compare to the existing loan portfolio yield.
Ned Handy, Chairman and Chief Executive Officer
Yes, I would say the pipeline is not at its high point, it's in the mid-150s. There's a good portion of that that's in construction loans, like nearly half of it. It's tilted towards three at this point in time. I think just based on loans coming on in the quarter versus loans being paid off, the loans coming on were a little favorable from a yield perspective. I feel good about that from a margin standpoint. We did have a fair amount of closing in September itself. So, the pipeline got a little emptied out. I expect that it will build back up. It's kind of hovered in the $175 million to $200 million range. I expect that we'll get back there. One thing that, I think, we're experiencing a little bit is construction loans are funding a little slower just based on logistics issues. I think they'll take a little bit longer to reach full funding. Other than that, I feel pretty good about where we are.
Erik Zwick, Analyst
That's a good color. Thank you.
Ned Handy, Chairman and Chief Executive Officer
Yes.
Erik Zwick, Analyst
Thinking about credit you mentioned at the beginning of the call that you feel the level of the reserve is appropriate today, given the risk in the portfolio and the economic outlook. As we think about provisioning going forward, would you expect it now to match net charge-offs and growth? Are there other factors to consider at this point?
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Yes, Eric, it's Ron. We expect credit to remain stable in the absence of a COVID relapse or some other unforeseen economic shock. That said, provision should generally track to loan growth and the economic outlook. So, at least for the short-term foreseeable future, it seems to be kind of stable.
Erik Zwick, Analyst
Okay. Thanks. And one last quick one if I can squeeze it in. I noticed in the press release, and you mentioned it several times already, with regard to mortgage loans and what’s been sold, your gain on sale margin was up in Q3, and I think a lot of your competitors are seeing a compression there on the margin. So just curious where your advantage might lie, whether it's in the mix that you are selling, or maybe a technological and speed advantage. Just curious if you have got any thoughts on that front.
Mark Gim, President and Chief Operating Officer
Yes Eric, this is Mark. I'll start with that from kind of an operational perspective. And then Ron can go into some of the details. We do think that one of the things that we do very well is speed in process. Time is a huge advantage for everybody in a mortgage transaction, the seller, the buyer, the bank, and any referral sources. We have made, we think good use of additional digital technology to try to speed the turn time from application to close. It's kind of an unsexy thing, but every day that you can shave off the delivery time helps to preserve margin a little bit. Having said that, I think that we do believe that compared to the high margins of late 2020 margins are returning to a more normal level, perhaps higher than when we ended the pandemic, but it's hard to defend against market trends with internal process improvements alone. But we do think that it is an advantage and an edge for us in execution. Ron, I don’t know if you have anything to add on components of margin in Q3.
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Yes. Yes, Mark. The only other thing I would add to that is it becomes a little bit of a supply and demand thing. As volumes are ramping up high, you tend to see the yields go up because there's less capacity to process the loans and the pricing pressure – the pricing opportunity gets better. We kind of dipped down a little bit in Q2, and we rebounded a bit in Q3. I would say we're probably still at a fairly high historical yield. So, we'll see how long we're able to maintain that.
Erik Zwick, Analyst
That's helpful. Thanks for taking my questions today.
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Sure.
Mark Gim, President and Chief Operating Officer
Thanks, Eric.
Ned Handy, Chairman and Chief Executive Officer
Thanks, Eric.
Operator, Operator
Our next question comes from Laurie Hunsicker with Compass Point, please go ahead.
Laurie Hunsicker, Analyst
Yes, hi thanks. Good morning.
Ned Handy, Chairman and Chief Executive Officer
Hi, Laurie.
Laurie Hunsicker, Analyst
One thing, Ron, if we could circle back to your comments on the fourth quarter margin guide of around 2.40%, stripping out PPP, and obviously there were no prepay fees. So we are at 2.44%, essentially for the third quarter. So, four basis points of contraction. Can you just help us think a little bit more about that? And I guess, looking into 2022 what potentially you can do to mitigate it, especially given that your cost of funds is so low and there's nothing left in terms of borrowing prepays, at least I think that that was what was in my notes. Just help think about that. And then just one last piece of that. Can you share with us what is remaining in terms of PPP fees that are unamortized? Thanks.
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Yes, so I'll answer that second part first; it's $2.6 million of unamortized PPP.
Laurie Hunsicker, Analyst
Great.
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
As far as just margin itself, I mean, we're going to continue to see some asset yield pressure on our resi book and on our mortgage securities. As those pay down, the legacy yields are higher, and they are being replaced by lower yielding assets. So that's really the main story there. I think we've done a nice job of bringing down our funding costs through both deposit growth and just kind of repricing our wholesale funding book down. Not a lot of opportunity left there with that. That's kind of where we are. I wouldn't expect to see lots of big moves within the margin, but I would say the overall trend over the next few quarters would probably be lower than where we are right now.
Laurie Hunsicker, Analyst
Okay. That's helpful. And then obviously your credit is looking pretty stable, just wondered if you could help us think – it looks like on the hotel side, your hotel loan balances have gone up from, what's been previously $150 million to $160 million; you are now $199 million. Are you adding to your hotel book? And then just any color you can give us on the $38 million in deferrals, how of that is hotel? Thanks.
Ned Handy, Chairman and Chief Executive Officer
So, we did make one new hotel loan in Newport on a very favorable loan to value property that had just been renovated and with a customer we know. But I will tell you Laurie that we're not out canvassing for new hotel loans otherwise. So that was a rare opportunity. Bill, I don't know if you've got specifics on that, or Ron on the five remaining deferrals in terms of whether they are hotels in there.
Bill Wray, Senior Executive Vice President and Chief Risk Officer
Yes, there's one hotel, one healthcare, one retail. Basically, three relationships.
Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer
Hotel is just under $10 million.
Laurie Hunsicker, Analyst
Okay, great. Thanks. And then, do you have an average LTV on your hotel book? Or if not, I can follow up with you offline.
Ned Handy, Chairman and Chief Executive Officer
Bill I don't have if you…
Bill Wray, Senior Executive Vice President and Chief Risk Officer
Yes, we'll have to do that offline to give you what the latest numbers are. The numbers we looked at last time across the portfolio if I remember right, were in the mid-50s. We tend to underwrite these very carefully, but we should do an offline follow-up.
Laurie Hunsicker, Analyst
Okay, great. And then just one last question, I appreciate the 22% tax rate guide for fourth quarter. How should we be thinking about the tax rate in 2022?
Ned Handy, Chairman and Chief Executive Officer
Yes, it's going to be approximately what we're seeing this year I’d like, say 22%.
Laurie Hunsicker, Analyst
Great, thanks. I’ll leave it there.
Ned Handy, Chairman and Chief Executive Officer
Sure. Thanks, Laurie.
Operator, Operator
Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Ned Handy for any closing remarks.
Ned Handy, Chairman and Chief Executive Officer
Thank you all for joining us this morning. We do appreciate your continued interest and hope all is well with you and continues that way. We will talk to you all soon. And Laurie, we will come back to you.
Mark Gim, President and Chief Operating Officer
Have a great day, everybody.
Operator, Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.