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OceanFirst Financial (OCFC) Q4 2021 Earnings Call Transcript

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OceanFirst Financial (NASDAQ: OCFC)
Q4 2021 Earnings Call
Jan 28, 2022, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning. Thank you for attending today's OceanFirst Financial Corp. earnings conference call. My name is Tania and I will be your moderator for today's call.

[Operator instructions] I would now like to pass the conference over to our host, Jill Hewitt, investor relations officer with OceanFirst. Please go ahead.

Jill Hewitt -- Investor Relations Officer

Thank you, Tania. Good morning and thank you all for joining us this morning. I'm Jill Hewitt, senior vice president and investor relations officer at OceanFirst Financial Corp. We begin this morning's call with our forward-looking statement disclosure.

Please remember that many of our remarks today contains forward-looking statements based on current expectations. Refer to our press release and other public filings, including the risk factors in our 10-K, where you will find factors that could cause actual results to differ materially from these forward-looking statements. Thank you. And now I will turn the call over to our host, chairman, and chief executive officer, Christopher Maher.

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Christopher Maher -- Chairman and Chief Executive Officer

Thank you, Jill. And good morning to all who have been able to join our fourth quarter 2021 earnings conference call today. This morning I'm joined by our president, Joe Lebel; and chief financial officer, Mike Fitzpatrick. As always, we appreciate your interest in our performance and are pleased to be able to discuss our operating results with you.

This morning will cover our financial and operating performance for the quarter and provide some color regarding the outlook for our business. Please note that our earnings release was accompanied by an investor presentation that is available on the company's website. You may refer to those slides during this call. After our discussion, we look forward to taking your questions.

In terms of financial results for the fourth quarter, GAAP diluted earnings per share were $0.37. Earnings reflect a healthy economy and material loan growth across all regions. Core earnings were stronger than GAAP earnings at $0.48 per share, as branch consolidation expenses and net losses on equity investments totaled approximately $7.3 million and $1.3 million, respectively, on a pre-tax basis. The consolidation expenses relate primarily to real estate exit costs associated with the nine branch consolidations conducted in December.

An additional two branches were sold in December, generating a non-core gain of $2 million, which partially offset branch consolidation charges for the quarter. Recall that the company previously announced an additional 10-branch consolidations, which will be completed at the close of business today. Regarding capital management, the board declared a quarterly cash dividend of $0.17 per common share at approximately $0.44 per depositary share of preferred stock. The common share dividend is the company's 100th consecutive quarterly cash dividend.

$0.17 common share dividend represents 35% of core earnings. Given the robust outlook for loan growth, which will be discussed later in the call, we elected to maintain the current dividend level. Over the past year, maintaining a conservative dividend payout ratio has allowed tangible common equity per share to increase to $15.93, an increase of 6.3% as compared to December 31, 2020. In addition, the company intends to retire $35 million of subordinated debt, carrying an interest rate of 4.14% on March 31, 2022.

Tangible stockholder's equity to tangible assets strengthened to 8.89% and total assets decreased $90 million during the fourth quarter, resulting in total assets of $11.7 billion. Our interest-earning assets increased during the quarter as we continued to see success with our commercial banking expansion strategy. The company's share repurchase activities continued during the fourth quarter, with approximately 251,000 shares repurchased. On a year-to-date basis, the company has repurchased 1.7 million shares at a weighted average price of $21.07.

There are 3.3 million shares available under the current repurchase program or 5.6% of the total shares outstanding. Turning to operations, loan originations of $989 million set a new quarterly record, delivering $441 million in net loan growth in Q4. As of December 31st, the committed loan pipeline also set a new record of $671 million, almost double the pipeline we went into last year. That should support strong momentum moving into 2022.

The deployment of cash drove a pickup in net interest income and another improvement in net interest margin, which ended the year to 2.99%. Considering that a substantial portion of bones were booked late in the fourth quarter, the year-end loan balances were $286 million higher than the average balance for the fourth quarter. As a result, the balance sheet is positioned to deliver additional margin expansion in the first quarter of 2022. Regarding credit trends, the company posted exceptional metrics for the year, including a 33% decrease in criticized assets, loan delinquencies, and net recoveries of $461,000 for 2021.

Non-performing assets fell by 48% for the year to land at $19 million or just 16 basis points of total assets. Positive credit trends and stable economic conditions drove a $1.6 million negative provision for the quarter. Operating expenses were elevated this quarter due to the upgrade of the bank's core banking platform earlier this year. We expect expect this to be a tailwind in 2022 as we finalize our optimization efforts associated with the new platform, partly offset by our continued investment in digital products and services.

Additionally, our branch optimization efforts, which consisted of closing 19 full branches, one drive-thru, and the sale of two branches will provide a tailwind going into the first quarter. Finally, we've been working to reduce our tax burden with several strategies, including the organic expansion into markets with more favorable tax policies. Going forward, our estimated effective tax rate should be in the range of 23%. At this point, I'll turn the call over to Joe for a discussion regarding the progress this past quarter, including an update on the expansion of our commercial bank.

Joe Lebel -- President

Thanks, Chris. Loan originations of $989 million were the highest on record for the company, and commercial originations of $780 million also set a record. We saw solid growth from new geographic regions of Baltimore and Boston, with continued expansion in core markets of New Jersey, Philadelphia, and New York. Even after record originations, we enter Q1 with a committed pipeline of $671 million, another all-time high, and fully expect momentum to continue as we are adjusting our stride in our new markets.

Excluding PPP forgiveness of $30 million, record originations led to loan growth of $471 million, which included $378 million in organic commercial growth and a residential pool purchase of $82 million. The PPP loan portfolio totals just $23 million as of December 31st. As Chris noted, the bulk of the commercial growth occurred in December, so we'll see the benefit of the added interest income in Q1 and beyond. I expect we will continue to purchase a few smaller residential pools in Q1 and possibly Q2, largely to offset our existing portfolio runoff.

Our deposits decreased $41 million for the quarter due primarily to the loss of $101 million of deposits domiciled in the two branches sold in early December. As you know, our deposit business is somewhat seasonal, with the fourth quarter usually representing a low point for the year. Despite the sale of the branches, year-over-year deposit growth totaled $305 million. Continued growth at a time when we were not aggressively soliciting deposits, our cost of deposits declined continued to trend down, decreasing by two basis points to close the quarter at 20 basis points, down significantly from 45 basis points in fiscal year-end 2020.

We still expect the cost of deposits to trend lower as we have $338 million of time deposits, with an average cost of 86 basis points maturing in the first half of 2022. Our Treasury management and commercial banking teams are now actively sourcing new deposits to fund the '22 loan growth expected, the utilization of much of our excess cash in Q4. While deposits are always our first choice to fund loan growth, we have several alternatives to provide the funding for the additional growth. Our investment portfolio generates significant monthly cash flow.

We have substantial wholesale funding capacity, having paid off all of our home loan bank borrowings in Q4 of 2020. I expect the loan growth in 2022 will be funded by a combination of a mix shift from the portfolio and investments, the planned deposit growth from our Treasury services and commercial teams, and wholesale funding, if necessary. We've made strong progress this past quarter in utilizing our excess cash with our loan to deposit ratio ending the year at 88%, still below our target of 95% to 100%. Core NIM improved quarter over quarter by six basis points.

We see continued modest improvement moving forward. Rate increases will only improve NIM and earnings with our asset-sensitive balance sheet. With that, I'll turn it back to Chris.

Christopher Maher -- Chairman and Chief Executive Officer

At this point, we'd be pleased to take your questions.

Jill Hewitt -- Investor Relations Officer

Tania, can you explain how to ask a question, please, and get in the queue?

Questions & Answers:


Operator

[Operator instructions] Our first question comes from David Bishop of Seaport Investors. David, the line is yours.

David Bishop -- Seaport Investors -- Analyst

Yep. Thank you. Hey, good morning, Joe Lebel as well. Well, Chris, maybe -- I appreciate the slide where you sort of break out the expenses this quarter, technology expense versus other non-core.

Just curious what sort of drove the uptick in that technology spend this quarter and where do you see that sort of settling into 2022?

Christopher Maher -- Chairman and Chief Executive Officer

So the core conversion that we conducted this year was the replacement of a core that we had in place since the early 1980s. So while it was a very old technology, it had been heavily customized for our environment and was actually reasonably efficient given its age. Given the sizable move from one platform to another, there were a lot of ancillary things that had to be done prior to year end. So these are things like making sure your controls are validated and the kind of one-time efforts to make sure that you have the same confidence in your year-end environment that you would have had in the other core system.

And then there's some ripples as you work through that. There are compliance functions that were a little harder, so we use some consulting and things like that during Q4. We don't break our guidance for the IT line itself, but we do -- we have issued guidance for the first quarter, saying that we believe total expenses should come in somewhere between $54 million and $57 million. I'm sorry, $54 million and $55 million.

Sorry about that.

David Bishop -- Seaport Investors -- Analyst

Got it. Thanks. And then in the past in terms of the NIM outlook, potentially settling back to that 3.23, 3.25 range with the expectations of several separate moves here, any updated terms of longer term expectations for where the NIM could settle out here?

Christopher Maher -- Chairman and Chief Executive Officer

So I think we're still on target to continue to go back more toward our historical norm. I mentioned the end of quarter loan balances versus the average balances. That should be good for several basis points into Q1. And then we're going to continue this mix shift.

So we have a very strong cash flows coming off the -- both bond book and the loan book that we can redeploy into new loans. And then the last thing is if you think about rates, our assumption going into 2022 when we were budgeting is that we expected somewhere in the range of two rate actions by the Fed. And it's anybody's guess but certainly the -- most of the talk this year seems to be more than that, maybe three or four, and some folks even thinking about five. So that could be a substantial tailwind as well.

I'm very happy that we came into the environment with a lot of floating rate and adjustable loans. We had that -- we kept that discipline throughout the last 18 months, and I think we're going to get the benefit from it as we go into 2022. So I think in the past, Dave, we've talked about in the current interest rate environment, working our way back up into the 3.20s. That would still be our expectation absent rate movements.

I think if you see substantial rate movements or policy action, it's possible we could get back to our longer term average closer to 3.40 or 3.50, but I think that would take a longer period of time. It might take four or five quarters.

David Bishop -- Seaport Investors -- Analyst

Got it. And then one final question, just in terms of the security cash flow. How much cash flows this generates sort of on a monthly basis? Thanks.

Christopher Maher -- Chairman and Chief Executive Officer

It's -- for the year, David, $275 million off that, but it's pretty even throughout the year.

David Bishop -- Seaport Investors -- Analyst

Great. Thank you.

Christopher Maher -- Chairman and Chief Executive Officer

Thanks, David.

Operator

Thank you. Thank you, Mr. Bishop. The next question is from the line of Russell Gunther with D.A.

Davidson. Your line is open.

Russell Gunther -- D.A. Davidson -- Analyst

Hey, good morning, guys. I wanted to start on the -- good morning, Chris. I wanted to start on the loan growth conversation and if you guys could share kind of where footings are within the Boston and Baltimore areas and your sense for continuing to climb toward that ultimate billion dollar target that you have.

Jill Hewitt -- Investor Relations Officer

So, Russell, how are you? I think we're -- one, we're pretty bullish about how we did in the fourth quarter with Boston and Baltimore. I think all the regions contributed to the loan growth, which is actually something really good to see because we have some regions that are more mature. And of course, you guys know the success that we've had in Philly and Boston, but or I'm sorry, Philly and New York. But Boston and Baltimore collectively are north of nine figures in 90 days, so we're pretty bullish about the -- and by that, I mean, in portfolio growth, originations are higher.

So I think we're really looking forward to a strong 2022.

Christopher Maher -- Chairman and Chief Executive Officer

So maybe you might also think a bit about the earnings drag on...

Joe Lebel -- President

That's actually a good point. We talked about this a bit this morning, Russell. The -- we've got the portfolio to the size now where the profitability of the existing portfolio totally offsets the run rate on an annualized basis, so there's -- we've already achieved break even or slight profitability with the new regions in Boston and Baltimore, collectively.

Russell Gunther -- D.A. Davidson -- Analyst

That's great color, guys. Thank you both. And then just one follow-up in terms of the expense conversation. So the 54, 55 guide for the first quarter, can you just help me think about what that will reflect in terms of -- Chris, you mentioned tailwinds from optimization efforts with the new core eventually cost saves from the branch closures.

Is that all embedded within the 54 or 55? And do we trend a little higher from there based on any franchise investment or hires? Just a general glide path discussion would be helpful.

Christopher Maher -- Chairman and Chief Executive Officer

The vast majority of that is embedded, of course. We do have the 10 branches that we operate are for January, so that will be a little bit of a tailwind into Q2. I guess the way to think about this is we're all facing across the sector inflationary pressures. We were not surprised about that.

We've been working toward this for the last six months to make sure we got ahead of the curve on the branch consolidations. It's very hard to predict the next three quarters, which is why we're not giving so much guidance. But there's no known reason today that those quarters would be materially different from the $54 million or $55 million. So I think you can see relatively flattish, but it's hard to say.

We have to watch, obviously, compensation. Expenses are a line item we're all watching carefully. But at this point, first quarter, $54 million to $55 million and that no -- nothing on the horizon that we see that would materially change that for the remainder of the year.

Russell Gunther -- D.A. Davidson -- Analyst

OK. Great. That's very helpful, and that's it for me. Thank you both.

Christopher Maher -- Chairman and Chief Executive Officer

Thanks, Russell.

Operator

Thank you, Mr. Gunther. The next question is from Christopher Marinac with Janney Montgomery Scott. Your line is open.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Thanks. Good morning. Chris and Joe, can you tell us about the goalposts on the technology kind of initiatives this year? You educated us back at Analyst Day about some of the things and those were repeated in the deck last night. But are the goalposts changing for kind of what you want to get out of the technology spend and kind of where you see your products going?

Christopher Maher -- Chairman and Chief Executive Officer

Yeah, very much. I think that the the horizon for us now in the spend that we're focusing on is back-office efficiency as opposed to front-office capabilities. So we feel very good about the customer experience that we're delivering, but we know that we can take this new environment and tune it. The other thing is we chose a core that's a very common core processing system that is used by thousands of banks across the U.S.

The advantage of that is there are a lot of third-party opportunities to come in and automate processes. It's a significant milestone. We launched our first internally developed bot in January. It's doing a process for us and we've got a development team in place that will be doing more of that throughout the year.

So I think what we're looking at is how do we create operating leverage in the back office in a material way now that we have an infrastructure that will accept kind of more modern technologies and we can build our own routines into it? And let me be clear, we're not going to build stuff that's readily available on the open market. But we have an architecture now where we can source things on the open market, we can adapt them for our environment, and where necessary, we can build our own software to take small tasks that are repetitive and low value and automate them and take the human element out. I think the only way the industry is going to stay ahead of the expense curve is by reducing the amount of labor input it takes to operate a bank. And for us, this horizon is all back office for 2022.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

So Chris, to that point, and thanks for all that background, do -- we can see the expense ratios, but does like the per transaction costs become a figure that becomes more prominent as you follow up on the financials?

Christopher Maher -- Chairman and Chief Executive Officer

Absolutely. And I think you're looking at total operating expense as a percent of assets for the bank as well because as Joe adds, think about the loan growth we had in the fourth quarter, that was -- there was virtually no marginal operating expense to add that. So as we continue to grow, we want to keep a line on the back-office expenses and that should help us grow into a lower expense ratio as a percent of assets.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Great. Thanks again.

Christopher Maher -- Chairman and Chief Executive Officer

All right. Thanks, Chris.

Operator

Thank you, Mr. Marinac. [Operator instructions] The next question is from the line of Eric -- Matthew Breese with Stephens Inc. Your line is open.

Matthew Breese -- Stephens Inc. -- Analyst

Good morning.

Christopher Maher -- Chairman and Chief Executive Officer

Good morning, Eric.

Matthew Breese -- Stephens Inc. -- Analyst

No, this is Matt Breese, Chris.

Christopher Maher -- Chairman and Chief Executive Officer

I'm sorry. Glad to hear you. Sorry about that.

Matthew Breese -- Stephens Inc. -- Analyst

I did want to go back to the NIM just to kind of level set because there's just a few moving parts, right? So you have to carry through from higher loan balances and then you have to sub that redemption as we exit March. And so maybe just thinking as we get into rate hikes, is it fair to say that the kind of a launch point for the NIM is kind of in that 3.04, 3.05 range and then we can assume securities in the loans and then rate hikes from there?

Christopher Maher -- Chairman and Chief Executive Officer

Yeah, that's fair. I mean, it could be as high as 3.10, but somewhere between 3.05 and 3.10 is probably the launch point for the -- for then rate movements to come in on top of that.

Matthew Breese -- Stephens Inc. -- Analyst

Got it. OK. And then, Joe, maybe one for you just thinking about the pipeline, obviously, it was a very strong quarter on loan growth this quarter. How do you feel about the $250 million net growth per quarter? And obviously, plus or minus a little bit, but that type of guidance for '22, do you feel any better or worse or how would you kind of recalibrate there?

Joe Lebel -- President

No, I'm pretty confident about that, Matt. I think we could -- there's a definitely an opportunity to do better than that. And I think that dovetails into the comments that we've made the last couple of quarters about some of these resi pools. We're not buying resi pools to build a loan growth.

We're basically purchasing those just to offset some of our own runoff. Some of the some of the activity in the resi space tends to tail off. If there's something worthwhile, we'll buy just to offset our residential amortization. If it's not, we won't do it.

But I think from the commercial bank perspective, I think we're really, really pretty confident we're going to hit the 250, if not do a bit better.

Christopher Maher -- Chairman and Chief Executive Officer

Some of that, Matt, too maybe just an outcome of whatever payoffs there are. In the fourth quarter, we had payoffs of about $483 million, payoffs and other pay downs and prepayments. So we're able to grow a significant amount with that level of payoffs. That was a pretty robust quarter.

If that number changes up or down a little bit, we'd have great opportunity. We certainly have the productive capacity and we think that's going to be a big tailwind in the year.

Matthew Breese -- Stephens Inc. -- Analyst

Got it. OK. I was curious on the tax strategy. I assume this is kind of part and parcel with the exposures now in Philly, D.C., Baltimore, and Boston.

But are there any other kind of geographic exposures you're supposed to bank to? And maybe any other strategy we should be aware of underneath the hood?

Christopher Maher -- Chairman and Chief Executive Officer

Well, I think there's a couple of things going on there, Matt. The first is, obviously, there are very different statutory tax rates in the areas we currently operate in, and that's all the focus today. So our lending is happening in the markets we've been talking about. But you have in those markets, New Jersey, for example, has an 8% -- I'm sorry, 11% statutory tax rate, which is very high among the highest in the northeast and the highest in the country.

So we employ a couple of strategies. One is attribution, so you can look at the portfolio and where it is and your tax liability reflects where that collateral is or where those loans are. So it's helpful to have more and more collateral outside New Jersey. And then, obviously, we use as many banks to reach an investment corp.

structures that are allowable under the code, and we have the ability to move our loan portfolio among those structures to optimize the tax on it. So by doing all of that, the net you get to is about a 23%. So for a New Jersey domiciled bank, we think that's a decent number.

Matthew Breese -- Stephens Inc. -- Analyst

Great. I'll leave it there. Thank you for taking my questions.

Christopher Maher -- Chairman and Chief Executive Officer

Thanks, Matt.

Operator

Thank you, Mr. Breese. The next question is from Eric Zwik with Boenning & Scattergood. Your line is open.

Eric Zwik -- Boenning and Scattergood -- Analyst

Hello.

Operator

Eric, your line is open. The next question is from Michael Perito with KBW. Your line is open.

Michael Perito -- KBW -- Analyst

Hey, good morning, guys.

Christopher Maher -- Chairman and Chief Executive Officer

Good morning, Michael.

Michael Perito -- KBW -- Analyst

Just a couple. All my questions have been asked and answered, just a couple things. Number one on the non-interest income side. Just curious if you could maybe try a little bit more color about where some of the growth opportunities are there for 2022 and particularly a comment maybe around the swap income, which I would imagine the back half of the year obviously was pretty strong, with rates moving higher.

I would think maybe there's some tailwind there. Just would love to start there if you have any comments.

Christopher Maher -- Chairman and Chief Executive Officer

I think I mean, if you think about the swap side, that's where the big opportunity is, and we have opposing forces here. You would think that borrowers would be highly, highly motivated to get into a fixed rate instrument right now, but the cost to get into that instrument is different than it was six months ago. So there's kind of two opposing forces there, but we would hope that you'd see more swap income throughout the course of the year, especially as these loan volumes continue. And then we're fighting what every other bank is fighting around depository fees and overdraft, and that's more of a long-term trend.

That's yeah, we're just going to have to watch and we're in the process of working through with our folks what our fee strategy will be in the back half of the year for those deposit accounts.

Michael Perito -- KBW -- Analyst

Helpful, thank you. And then [Inaudible] if I missed this, but did you guys give any update in terms of when do you expect the Partners Bankcorp deal to close in the first half of the year? And secondly, just curious how that process is trending in terms of kind of the team buying down there and what the pipeline to look like down there and if you guys still feel pretty, pretty bullish about the ability to kind of bolster your presence and have it be additive to your organic growth pro forma?

Christopher Maher -- Chairman and Chief Executive Officer

Sure, so. Well, look, we feel great about the opportunity. Their performance is continuing as we expected, and I think they'll be releasing earnings shortly. So everything is in line from a business standpoint of what we expected.

We've had great conversations with their people and worked through the onboarding to the extent we can. There are restrictions on what you can do, so -- but we're prepared on that. Process is moving normally, nothing unexpected. We have a -- on the SEC and shareholder side, the Partners folks have a vote scheduled for March 9th.

So that's a kind of an ordinary course schedule. We have submitted our applications to our regulators. And as you can appreciate, this is an environment where it's a little bit difficult to get the transparency you'd like around timelines, so we're -- we understand they have an obligation to review applications in maybe a new way. So as you've seen with a lot of the deals in the last few months, we're responding to requests if we get them and giving them the time to do what they need to do.

So we have no reason to believe that the -- that we'll have an extended approval time. I would continue to hope that maybe sometime in the second quarter, we're going to close it.

Michael Perito -- KBW -- Analyst

Great. Thanks, Chris. Appreciate you guys taking my questions.

Christopher Maher -- Chairman and Chief Executive Officer

Thanks, Mike.

Operator

Thank you, Mr. Perito. The next question is from the line of Eric Zwik with Boenning & Scattergood. Your line is open.

Eric Zwik -- Boenning and Scattergood -- Analyst

Good morning. Can you guys hear me now?

Christopher Maher -- Chairman and Chief Executive Officer

Well, we can, Eric. Sorry about that. And then I called Matt Eric, so sorry to both of you.

Eric Zwik -- Boenning and Scattergood -- Analyst

A couple of false starts. No problem. I'm not sure what was going on there, but glad you guys can hear me. Just a couple for me at this point.

One curious just thinking about the outlook for the strong loan growth and thinking about the rest of the earning assets and I guess in particular, the investment securities portfolio, it stands at about 15% of -- around 15% or so of total assets today. How would you expect that to trend? That would keep pace with that the loan portfolio? Are you OK with that shrinking? Would you ever assume from a yield perspective, you'd probably prefer to deploy capital there, but curious about your thoughts there?

Christopher Maher -- Chairman and Chief Executive Officer

I think our first option would be to decrease the percentage of securities and increase the percentage of loans and get a mix shift and improvement in NIM and earnings that way. And I think an important note about that is our deposit -- the quality of our deposit funding, which is high quality core deposits. We continue to have a loan to deposit ratio well under 90% and we have no federal loan bank borrowings at this time. So it's a very strong funding profile.

And I think that allows us the opportunity to have a slightly lower percentage of securities than some peers. So the first thing we'll do is kind of redirect cash flows from the securities book into the loan book, but we're not averse to growing the balance sheet. And we're -- our teams are doing a great job. If we've got another string of strong quarters, we'll be taking a fresh look at -- at what point do you just allow that to turn into a balance sheet growth?

Eric Zwik -- Boenning and Scattergood -- Analyst

Thanks, Chris, I appreciate the color there. And then maybe a question for Mike. Can you remind us what the deposit betas are you use in your assumptions for the interest rate sensitivity modeling that that shows up in the in the [Inaudible] case?

Mike Fitzpatrick -- Chief Financial Officer

Yeah, we update the betas every year. We've probably got about 12 or more years, 12 to 15 year history now of studying this, but we -- so the beta is I think about generally about 10% the life. The average life is probably five, six, seven for money market savings, interest -- something around there, five to seven years. So it's -- and you can see that from where we were a couple of years ago in relation to our peers before the rate reductions.

Our cost of deposits was very, very low in relation to our peer group.

Christopher Maher -- Chairman and Chief Executive Officer

In the last rising cycle, our beta was about half that of our peer group, which I think is important. And if we think about our deposit base today versus what it was when we went into the last rising cycle, we have an even lower proportion of certificates and high rate instruments. So I think we're feeling pretty good about how that funding will work out. And we have we have options having -- we've got the dry powder in terms of FHLB advances, so we don't have to raise our deposit prices too quickly.

So I think we've got the ability to manage this a bunch of different ways.

Eric Zwik -- Boenning and Scattergood -- Analyst

Got it. That's helpful. And just last one for me, and Chris, I know in your prepared remarks, you mentioned the amount of shares that you repurchased in 2021. Sorry, if I missed it.

Did you address kind of your appetite for continuing to repurchase shares in '22 at this point?

Christopher Maher -- Chairman and Chief Executive Officer

Yeah, I didn't address that specifically, so let me be clear. We have a strong appetite to repurchase our shares. The challenge is just with the securities rules. Our ability to get our hands on enough shares in any given window has been a bit of a challenge, especially the windows are tighter with the pending acquisition like Partners.

But we're ready and we have an interest and we can do block trades, so we can do larger trades if they become available to us in certain time windows. So I think you should expect us to do -- to run on the pace we were running last year and faster if we can find an opportunity to do that.

Eric Zwik -- Boenning and Scattergood -- Analyst

Great. Thanks for taking my questions today.

Christopher Maher -- Chairman and Chief Executive Officer

Sure.

Operator

Thank you, Mr. Zwik. [Operator instructions] There are no additional questions waiting at this time. I will now turn the conference over to Chris Maher for any closing remarks.

Christopher Maher -- Chairman and Chief Executive Officer

All right. Thank you very much. With that, I'd like to thank everyone for their participation in the call this morning. Obviously, we're very pleased with the momentum of our commercial business, our expanding net interest margin, our asset sensitivity position, especially in light of the Fed moves that may come later in the year, and the trend toward decreasing expenses throughout the year.

So we look forward to speaking with you following our quarter end results in April. Thank you.

Operator

[Operator signoff]

Duration: 35 minutes

Call participants:

Jill Hewitt -- Investor Relations Officer

Christopher Maher -- Chairman and Chief Executive Officer

Joe Lebel -- President

David Bishop -- Seaport Investors -- Analyst

Russell Gunther -- D.A. Davidson -- Analyst

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Matthew Breese -- Stephens Inc. -- Analyst

Eric Zwik -- Boenning and Scattergood -- Analyst

Michael Perito -- KBW -- Analyst

Mike Fitzpatrick -- Chief Financial Officer

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