Q4 2019 Earnings Call

It resulted in 100.

And 67.8 million in Revenue a 1.94% Roa and 44 cents EPS. What a great way to end a decade but that opening line. I now like to turn the call over to Brian Davis to share some information with you about our new thanks Donna. The fourth quarter was another solid quarter for our net interest income and net worth margin on a tax-equivalent basis. We recorded net interest income of 141.1 million for key for 2019 compared to 144.2. 5:43 2019. The fourth quarter net interest margin was 4.24% compared to 4.32% for the third quarter.

Next I want to give you some color on the 8th basis point decline in March and 1st during 2019. The interest rate environment began to decline. This decline has increased the prepayment speeds on our investment Securities portfolio as a result during the fourth quarter, we experienced an increase in investment premium amortization, a 468000 or 1.5 this point decline in margin from Q3 second the third quarter of 2019. We had several interest income events primarily related to large payoffs off these events total 2.8 million of interest income and decrease the net interest margin by 8.4 basis points where the third quarter of 2019 during the fourth quarter interest rate of interest income was $549,000 and increased the den by 1.7 basis points the lower event interest income from Q3 to Q4 resulted in a 6.7 base wage.

Decline for the margin.

Third the accretion name Khan for the fair value adjustments recording and purchase accounting was 9.1 million during Q4 compared to eight point five million during Q3 for an increase of $660,000 this increase our name but two basis points.

Wrap it up in conclusion the 1.4 basis point decline for increased premium amortization for Investments plus the 6.7 basis-point declined for lower interest in Vietnam offset by the two basis point improvement from accretion totaled the margin decline of 6.1 basis points with that said net interest margin is only down two basis points on Apple Juice apples comparison.

Finally, I'd like to switch over from the quarter to the year and then interest margin for 2018 was 4.42% versus 4.29% for 2019 a line of 13 basis points during 2019. We experienced a decline in our event income of 3.9 million a decline in our accretion income of 5.6 dollars an increase in our investment premium average stations of two million. The total of these three items was 11.4 million or 9 basis points of the 13 basis point decline in net interest. Margin Donna return the call back over to you. Thank you Brian and Apples to Apples comparison on the DM is very helpful now, we will hear from Chris Bolton about our division home.

Thank you, Donna and good afternoon.

During the fourth quarter. We close out a strong production year at c c f g over this past year. I highlighted are healthy pipeline which resulted in record new loan originations of approximately 1.1 billion dollars from 2019 for the fourth quarter. We originated 384 million dollars in new loans while payoffs in the commercial real estate books load a bit resulting in overall in that loan growth of about $95 million dollars off our production office continues to be a significant contributor accounting for approximately 40% of production this quarter and just over 35% for the full year over time. We expect this region to account for approximately 35,000 the overall cre portfolio.

In addition, we saw increased draws from facilities and other prior commitments as a higher origination over the prior four quarters has started to show up in our net loan balances.

We continue to see good demand in our loan Pipeline and looking ahead that loan growth will continue to depend on these new Rich Nations plus increased draws on existing commitments currently standing in about 1 billion a future potential funding and it continued stabilized level of payoffs. Thank you Donna that concludes my remarks from ccfg. Thank you Chris. Now, we will go from land to see them. We will turn the call over to John Marshall to hear about short Premier. Thank you Donna and good afternoon. I always look forward to providing a quarterly update for sure from your Finance. The fourth quarter was good for marine and good for them to place our performance in proper perspective. Let's take a macro. Look at boat sales which Drive our business Business Wire reports according to the National Marine manufacturers Association a 2019 sales equaled the record results of 2018, which is where the highest performance in the past twelve years. The 2020 outlook for powerboats is sales up by 2Pac

and regional growth which is important to our business is

Forecast to grow between five and eight percent from New York to California to Florida. Probably a good time to be invested in the Marine Finance space across credit metrics are consumer and Commercial bolio's have exceeded my expectations in the fourth quarter. Let's take a look at first it asset quality and a closer. Look at the numbers here in 2019 non-performing retail loans approved to their birth position from your end 2018 dropping from a peek non-performing assets of 4 million down to one point seven million, which equals a drop from 98 basis points to 34 basis points off 30. Plus they retail delinquency improved from six million dollars to less than 900,000 again equal to 148.86 points dropping to 17 basis points from your end 18-19. We have no commercial delinquencies or default. Both asset quality metrics were favorable to expectations of here in and just as a harbinger of future portfolio performance wage

Origination FICO scores during full year 2018 or 770 that improved to 778 and full year 2019, but I'm satisfied that we're well-positioned to absorb economic pull back whenever it might strike in terms of profitability short Premier can contributions to Centennial bank's bottom line Eclipse two million dollars in December for the first time that you're if you don't belong to a combination of higher interest earning assets and are disciplined expense Foster. Our efficiency ratio is 21% in December twenty 2% in the quarter an average 26% for the full month. We saw continued pressure on them. And in the quarter due to funding loans in the third quarter when 5-year treasury drop below 1.4% separately. We also experience as expected a seasonal refresh of commercial inventories that reflect less risk, but also a lower margins read above the Libor index.

Near-term we expect bottom.

To grow an average rates to rebound even with that backdrop or kyun improved 11 basis points over three q and 74 basis points over for q80. Am I return on assets was 2.5% in the month than 1.93 for the year finally retail loan origination the managed to Prevail over persistent prepayment rates and seasonal commercial inventory reductions delivery $14 in net growth for the month forty million net growth in the quarter seventy 1 million for the year and $127 a month since acquisition Bicentennial in July 2018, the introduction this month of prepayment penalties in the initial 12 months of all retail loans should favorably impact gross profitability by extending the duration and income-generating lives of these retail assets commercial lending commitments grew by 150% in 2019 as well the onboarding of several new phone number.

And their attendant distribution now.

Works in North America will also enhance loan growth and margins in 2020 and just separately and ancillary benefit of this commercial growth is the Gathering of deposits which increased from $490,000 at the beginning of the year to nearly 5.4 million to close out the year. So Donna on that optimistic note. Let me conclude my remarks on Marine to return the conversation back to you.

Thank you, John and congratulations on a great quarter and a great year now to hear more from a Centennial Bank level is Tracy French and even Tipton Tracy. Thank you. Donna wage again. Please report consistent strong performance for Centennial Bank in the fourth quarter 2019. Well, the fourth quarter Centennial Bank had a return on assets 2.1 1050 ratio of 39% and consistent Revenue in excess of seven hundred over $170 our North West Arkansas Conway, Alabama. Strong results were North Florida region ran the best results these numbers along with our best yet non-performing ones made the fourth quarter an outstanding one.

You have heard from Chris.

John on their strong performance for the quarter in this year Our Community Bank footprint and proud to report that the full-year are Alabama region in for of of our five Arkansas regions produce over a 2% return on assets with two of our regions in Arkansas or Cabot region in Northwest, Arkansas producing more income than their share of assets.

Florida Regions for five provided solid return bolstered by our North Florida region with nearly a two and a half percent return on assets while all others were all around the 2% more.

2019 certainly was a unique year for all of us in the banking industry. No one knew were interest rates were going competition diving to sub for interest rates on loans by continuing to pay 2% on accounts. We are optimistic. These institutions will return more rational ways of thinking and operating their Banks Johnny and I along with each other from the bank made several on-site calls with customers over the past quarter the consensus of all the businesses. They all had a good year and agreed that 2020 looked to be a healthy for a healthy.

we like the way our

Customers run their operations and we Financial companies must hold to sound underwriting and monitor that said I'll now turn it over to Stephen Tipton to give more detail on the loans and deposits Centennial Bank.

Thank you Tracy. I will get some color on production payoff and balance sheet changes for sure Community Bank Loan Production in the fourth quarter of 2019 was strong and 735 million dollars highlighted by nearly four hundred million dollars from Arkansas regions and sixty four million in production from short career Finance while the yields were off slightly in October a regions closed out the year strong and again have the message to hold their discipline on price.

That's Chris and John have mentioned ccfg inshore stock solid growth over the course of the year and in the fourth quarter, and we're excited about the opportunities in 2024 everyone payoff elevated in Q4 708 million, but as Brian mentioned provided income to the bottom line due to proper structure payoff activity in the Community Bank footprint was again else needed and related to development projects that stabilized and moved to the Department of Art.

on the

Other side we were pleased to see balance as Rebound in Q4 after the seasonal decline. We saw last quarter total deposits increased in Q4 by 231 million dollars split fairly evenly between the Arkansas and Florida Regions. I would like to highlight our South Florida region which had nearly a hundred and thirty million dollars in growth in in the fourth quarter alone and a half percent growth and balances for the full year 2019 their business development efforts along with the continued strengthening a strengthening economy. Give us optimism for 20 28. Congratulations to our South Florida group with that said, I'll turn it back over to you Donna. Thank you Tracy and Stephen great reports for the quarter and the year. I like that deposit growth. Well now without further Ado to wrap up. Our prepared remarks is our chairman John Nelson Donna. I hope are you pleased with the corner end of the year?

Actually, I've been concerned all year with.

The additional expenses of going over ten billion dollars in the revenue producers like Durbin because this was our first full year of derbent. We had a half a year and last year that right. That's so that's about 7 plus million dollars, I would assume what is that number bring you got it's about a million a month. That was a little about six million dollars impact on us. Yeah that with the unstable interest rate and everyone thinks that that we were about to go into a recession that that was imminent. It was kind of a strange, you know, the FED missed it's so far in 2018 that I really had no confidence this time that they'd get it right? Actually. I thought there was a better possibility that California congressman Adam Schiff would be picked as trucks running mate. Then the FED gets the job done but the FED did a great job this time and it's given the economy what appears to be a stable and Thursday.

solid at work, and now with the signing of the first phase of the agreement with

Looks like we could have a Goodyear. Let me talk about the highlights both good and bad origination 1148000000. That's the good news is good news is they 5.37 that really resulted from a low from a low rate October loan special. However, we came back in December strong at 573. If you remember the third quarter, we only originated about seven hundred and ten million and we hoped it was a Slowdown. We weren't sure whether it was or whether it was obviously it was just a hiccup a time not to panic but to remain disciplined and hold the course as we have for Twenty-One years good news is we grew about a hundred million dollars alone for the quarter of the bad news was that the average was down for the quarter?

When you go to ask that quality, I don't know what to say Devin Hester's here. If you want to ask him some questions about it, but it's about as good as it can get non-performing loans 4.50. I'm performing assets loan for three and past due loans were .49 Kevin. When's the last time we had a past-due loan? I don't remember it. He said since we started anyway, that's that's pretty good stuff. Donna talks about the revenue and also Brian talks about reviewing. Those are good numbers. Good job on controlling expenses. They're flat. I don't know where they are. They're higher than they used to be but they're blacked. We had a 15 and a half percent per share return on tangible, dekhle.

for the

There was a 194. However in December it was a to 12. We lightened what we got in December , but this should see ratio for the quarter was 4114. However, I remember it was 38.3 return on tangible common equity for the quarter was 19.51 Nineteen forty-five would however December was 2146. It appears we got a little offer game. We made the corrections necessary. We're silently back on target again.

December was a surprisingly strong month and I'd take every month like December during the quarter. We repurchased 510500 shares for 9488000 month. What are the $68 or $18.58 per share. We're continuing to be active on the stock repurchase side, but we're also building additional capital.

The captain's being billed for one of three reasons maybe a downturn using a transaction or to reduce debt. We we have added about thirty million to our Reserve this year and we hope to talk about sixty million or five million a month over the next twelve months in 2020. I predicted home would be back in m&a business either later this year or next year. We open 3 a.m. Is during the quarter like Noma, Florida Hialeah, Florida and a new one in Russellville, Arkansas.

in the last two years

Despite pessimism has run at the highest level of my business career and Bank multiples hit a 20-year low home is earned almost six hundred million dollars wage maintain superb asset-quality performed Best in Class and all performance metrics. We repurchased 9849900 shares 488 million $920,000. We paid a solid dividend to our shareholders over the last two years, but $165 million four hundred ninety-six thousand maintaining average return on tangible common Equity of 21.9% and Roa of 2% best-in-class number.

I'd like to see a list of the companies that perform at that level. I think it'd be a short list and we may be the only one on it when emotions come back and they will I think our shareholders will be rewarded.

Thank twenty-twenty where TWP for a good year in 2020 and we fought the expenses of most of the Regulatory and nineteen. I don't see a lot of increases in expenses on the regulatory side and we are beat up for a pretty good twenty20 Donna Eileen Eileen said Ali I think we're I think we're ready for Q&A. That's all I have a good job by all for the for the quarter and thanks for your reports and we're ready for Q&A Mister chairman. This is John at your Premier package for moving into Q&A. It occurs to me after listening to your comments and Tracy's I should probably clarify my own regarding Roa the numbers I decided were correct 2.5% for the month of December 1009 3% for the year, but those were pre-tax core Roa numbers. I should have provided net Roa numbers at 1.5 $7 for December and 1.31 for the years.

for a true or apples

Apples comparison with the other references. Sorry about that.

I guess I leave we're ready. Okay, we will now begin the question-and-answer session. No problem. I ask you a question. You can press star and then one on your touchtone phone if you're using a speakerphone, we do ask that you pick up your handset before you press the keys to withdraw your question. You can press * then two.

Our first question today will come from Brady Kaley with KBW.

Good afternoon, guys. Hey, buddy, Johnny, you talked about the increase profitability at the month of December and increase what drove the step up in the RO and December relative to the rest of the quarter.

Just a pretty good solid month. December was just pretty exceptional month for us. We had some we haven't some of that income we we did wrong. I mean for the month itself, we had a little bit of other service charges and fees. We had the the item that we've talked about where we had some additional income tax Equity Investments. And then we had some reduces reductions in salaries and employee benefits during the month of December . We crudup the incentive accrual been making for the year. And as you can see our here today prophets were down from 2018 to 2019 and we had about a 1.5 million dollar reversal for for incentives to true it off your end. We we we made some Equity investment several years ago, and those Equity Investments have have done very well for this company and birth.

Going forward we expect.

Even better returns particularly in the first and second quarter with with our Equity Investments. And also we're anticipating some pretty large recoveries in the the first six months of the year. So you'll see some of that it's going to carry forward into the in the next year. All right, that's that's helpful.

Basis there's about a two billion dollar increase in other service charges and fees down in the non-interest income. Was there anything of note that drove talk ticket went from I think about eight and a half million to about 10 and 1/2 million on a linked quarter basis.

Yeah, it's it all has come from c f g and it's up. You're right. It is a 1.9 million. And what I'd like to do is get Chris Paul, give a little bit of color on that one point nine million dollar increase cuz it all came from c f g. Yep. Sure Brian . This is Chris. Yeah, we had a couple of we had a couple of influence and Loans where we were able to collect some fee income. But I think as you know that happens from time to time and fairly regularly be a little more of it this quarter than we had in the in in some of the prior quarters. But again, you know, we always think about as it's hard to Thursday. It's going to come in but every year it comes in.

Yeah.

And I think you have one one instant there Chris. That was like one point four million just from one bar or correct? Yeah, that's correct. That's correct. Okay.

All right. Thank you.

It's just on last quarter Johnny. You were a little more upbeat on m&a saying the conversation could kind of picked up and I thought maybe seller's expectations had been reset a little lower and you know, we we've seen some activity this cord. We saw a couple of big, you know, he's kind of in and around your neck of like what what's the latest on on m&a for helping? Well, we're looking will probably announce some kind of transaction in the next 30 days here when we bid on and we would hope to be successful in the transaction. It's not a big transaction, but it is a transaction that that gives a little kick to EPs and we like the business and we like the transaction so I can't say anything else anymore about it. It's always tell you all everything is going

I don't know. I had it in my prepared remarks, but they made me think.

Get out. So anyway, we haven't closed the transaction but we anticipate closing the transaction and additional m&a on out there. We think we might get might be a good time to be in the market.

All right, great. Thanks for the color guys. Our next question comes from Steven Skelton with Piper Sandler.

Hey guys, how's it going? How are you doing? Well doing well. We got we got a new name. We got a new name. We're ready to go home. Oh, yeah. Yep. So maybe following up on Brady's question on m&a there. I'm curious if if you guys are looking at any nonbank m&a as well as old bank and then on the whole Bank side, if you could give an idea you mentioned what you're looking at now is not a big transaction. But you know kind of how you would wait your time towards, you know, maybe sub to billion-dollar Acquisitions or and then north of that if he could give us a deal. I just really think we had done a deal in a while as we've digested Stonegate over the over the period of time and and I I would suspect we would will be active this year, but I like will start smaller unless a great unless a really good Emily comes around. We haven't seen we haven't seen a really good employee. Yep.

it makes sense for is maybe we're not talking to the right people, but maybe if a good employee comes around we

Would be interested in that. I think it's time for us to get back in the business.

If we can find a trade, I mean we did pretty good. They're they're looks like the trades have been done recently had done in the 150 160 range and if those kind of hold with us selling it to 10 a.m. Or 2:20, I think we can I think we can make something work. He just hadn't been feasible in the past. When as I said before you got a weak sister out there that's trading at 1. Thursday. We're trying it two times tangible book and something had together. They either got to go down if we got to go up and I think it's a good time. I hear lots of people talking about Bank stocks now possible and I hadn't heard that in the past and I think that will be rewarded for for the stability of this Corporation and the price our stock will go up give us opportunity to get back in there behaved.

And and just as you continue to build Capital pretty rapidly you you know that the the share BuyBacks you've done in the last couple of years. How do you think about that moving forward especially with you know near and 11% here today?

Well, we're going we're going to we're going to set on that capped a little bit right now. Brian Davis talks to me every month about buying back stock and how diluted it is and he's even put a amount of money that came. He said it cost us two million dollars last year as an expense to the buy back stock and I got that makes sense what he put some number on the dollars that we spent so long we will continue to buy back stock. We also are continuing to build Capital. We're building capital for a rainy day or we're building capital for an acquisition or six months from now. We got a three hundred million dollar deficits do so. We're building. We're building continuing to build this Capital. It will put us in a good position. If I don't see a downturn at all, I don't we just we haven't seen anything that shows a downturn but it's a good time. We're seeing we're seeing competition in the marketplace loan money in, New Jersey.

Respect your seven and ten years and these are Big. These are competitors that

Historically have not acted that way. I don't know if they're just building their balance sheet to sell it. That's what it looks like. Just kind of packing it up, but we're not getting into that that hurts us but it hurts them long-term and hurts us to you know, you can't you can't fix margin. Once you once you once you commit seven ten fifteen years on the loan, you got it. It's with you for a long time and you got to pay the piper when you sell it or or or or in our T's over a period of time if it's disappointing to see some of these people that know better choice and money at these low rates. I know that's where you went. But that's just something I want to talk. Yep. Yep. Definitely and then maybe just last thing for me curious if you guys are looking at the hiring of any new teams to kind of Drive loan growth. It feels like that's an even more prevalent phenomenon right now for a lot of your competitors. Everybody's looking at acquiring Talent from from the large Regional Banks and using that for growth some curious if Thursday.

An Endeavor you guys are pursuing at all or are you going to kind of stick with your team and and leverage in Via? M&a longer-term?

well, John , he's been a

A proponent that we stay in our lane and so we you know, you see this be consistent about where we look at him and a we'd probably be consistent about where we we look at teams as well. You know, we get there are some geographies outside of our footprint geography that we like that. We you know, we could do something like that and make sense. But you know, that's not been our life to this point. Nothing we can do it, but it it's not something that we push able to get this point. Okay. Great.

Try she's got something they get the right people. I mean, we did that in Pensacola, and you can see were North Florida at the top region in the company, and you've got John who just that was really a team and see what we did there and press and his group the same thing. So it was always in five opportunities the afternoon. I forget that John and his team and Chris and his team. I mean they were a team and we did that's what really well for great. Thanks guys. Well congrats on a great quarter. I hope December duck hunting win as well as December went for the bank. I've got the other day. He didn't get any would just let you know. He didn't get any, but I want you to know that I have only been about five days and I normally go home would have been all you know, I've never missed but they've had me hooked up this year and they keep looking me up to Stevens. Anyway. Well done guys.

Thanks.

Question comes from Matt only with Stephens. Hey guys, good afternoon going back to the internet discussion with Johnny. You mentioned m o s or a possibility. Can you talk more about your Emily priorities and historically I think the banks been a discount buyer of banks that are more dense crack. I'm curious if this is still your view.

Say that one more time the Moa you said you're interested in Emily's and then your comment about Banks. What well, I guess historically going back to several years. You purchased a number of banks that had some more Harry but it didn't scratch right? So I'm curious kind of what you had better view of that is

Well, we're not afraid of scratching their bikes at all.

It depends right? I'm I'm pretty selfish from I expect that I'm going to take my stock in home bancshares and put it in the hands of somebody else. I think if we do an Emily will be the will be the surviving Corporation coming out of that. I'm not unless we were to find somebody that does a better job than we do that runs a better company that we do we'd be open to looking at their management style and see if it makes sense. But the ones that we looked at through this period of time home has to be the Survivor because they don't run out run the performance that this company runs so

I have no intention.

And I don't think it's our board has any intention of taking this company and putting it in the hands of somebody who doesn't run at the level we run or doesn't it's not interested in learning how long to that lab. So if they don't run what we run and in the in they don't run what we run will be the Survivor in the deal because I always got to be a Survivor right Somebody's gotta by somebody else. So we're open that. I don't know that I'm open to an m o e at this point in time where we're not the Survivor.

I don't know if I'm making any sense to you but to find somebody that runs at the level is through friends. That is difficult. Yeah, I know understood. Sounds like you've got something closer on the smaller Bank m&a side. Does that prevent you from looking at other deals at this point?

No.

No, no, no. No. No, I think we'll do some smaller transactions and kind of get our feet wet over a period of time and kind of getting back in the mode. We've been out for a couple of years. Like, you know, the world thought we were just acquired acquiring acquiring but if you watch are we did acquire a lot of failed Banks, but this company died. Yes, what they do a good job and take their life and my dad just installed. It was a big one that was three billion dollars and we want to be sure we got that properly died yesterday. So he comment from anybody else on the m&a side effects open. I mean we have not been open in the past. We're open.

I guess we've always been open. It's just that they didn't make any.

friends and maybe non-premium deals now with a with a bike that

It makes a little money, you know, it has to do with the management to me, and that's not to be selfish and greedy that we got to run everything. I don't mind turn it over. There's a better off greater than us and walk in and we'll work we'll work for them. But there's not many of those out there agreed agreed congrats on the corner from me. Thank you man. Thanks off. Our next question comes from John Armstrong with RBC Capital markets.

Thanks. Good afternoon. Everyone couple things to clean up here. I guess just in terms of the numbers. I made a comment about some recoveries, but you also made a comment about adding five million a month the reserves and I'm just I'm kind of curious what that means for the provision. You obviously had a very good good. I'm sorry. It's just kind of a sinking fund that we've developed here. We're we're just putting about five thousand a month into a mental sinking fund billing additional Capital cash. I see. Okay, that's not that's not a little more clarification starting in July found that part of the cash dividend that we were getting from the bank and put it in a different Bucket over here that has accumulated to $60. I mean $30 for 2 a.m.

For the 19th for six months.

That's where he's talking about the five million and that money would be used to pay down some debt if we don't spend if it's not restricted cash, it's just we're put it in a different bucket. So we have a better use for we plan on paying down the sub debt. Yeah. We have a break a million dollars a subject is doing $27 a month. So I mean they call if you remember they call it capital. I don't know how they do that. We call it debt. So we'd like to would like to make a dent in that package that comes reffed. We're just building the capital and if it was a a daily it came up would use it for that or if there was it went down turn which I don't see we use it during that cycle so long it's just reserved on top of Reserve I guess but it's not like they got it and then and then the recoveries, I guess potentially the message is more the same with me just a just these are some recoveries we've been after for a while. We really expect them in February and Kevin said I wouldn't say that correct.

We've been expecting them for several.

But and just for clarification and Johnnies our recoveries from banks that we Acquired and so they weren't charged off through the a triple L. And so when we get those results, they will show up as other income versus a recovery on a trip well because the a triple L was never brought over on those on those acquired transactions and then on the margin Brian your favorite topic the margin Outlook, but it looks like you guys had a nice step down and deposit pricing and it sounds like you're feeling better about loan yields. God feels like a stable to maybe potentially better call Marjan environment. Am I thinking about that the right way?

I mean from a core. Margin, you're probably pretty close. I mean, you know, we will have I'll let Steve and kind of give a little more color onto but you know, we will have some faith in Decline that we had five point six million of accretion decline in 2019. We worked on our budget for 2020. We've got another five million decline on top of that month. I mean, we have a total of 73 million of available accretion that's sitting on the books that's going to create in probably over the next 3 and 1/2 years. We had approximately little over nine million dollars in decreasing this quarter. It's probably projecting about 8 and 1/2 and that probably from a Christian standpoint probably dings the margin about two basis points investment premium amortization expect to stabilize while they were up in Q4 $467 thousand, you know, Mister Allison talked about December being a great month.

What other things that was good about December ?

Was that the amortization on the premiums was lower in December ? It was the lowest since we've had since July . So I'm anticipating that that will not continue to increase I might let Steven Tolbert what color on the the production and what and what he's he's seeing over there. Hey John , I think you're right the Stables the way we're trying to look at things today from a corporate standpoint. We actually bought the coordinate of December was was up slightly. So, you know deposit cost I think will continue to try to pressure down December ended a little lower than what the quarterly average was and Thursday you said on the loan side, I think potentially heels.

Will stabilize here so I think in a flat rate environment, we think we can can hold it where it's at. We're constantly going to try to improve on that but I think it's a fair way to look at it off December is any indication we make may be able to increase it a little bit. We're not we're not saying we're going to increase it, but it's a good indication that we may be able to at least hold our own on the margins side. So I thought it would be it'd be all all efforts to to do that. I don't see any reason why we can't particularly unless the FED starts again. If they start moving again, you know, you just got to regroup it. They'll leave things alone right now and leave rates where they are. I think I think it's going to be a good run.

Okay. All right. Thanks.

to help everyone

our next question comes from Michael rose with Raymond James.

Hey guys, good afternoon. Just hey, just wanted to Circle back on, you know, some of the larger transactions that we've seen in and around your Market particularly one that just happened here recently that had a big footprint in Florida. You know, we had another bank today talk about some some elevated costs that they're putting towards capturing some some market share from from the disruption. Do you guys have any plans to to look at, you know additional lender hires or commit Capital to advertising or things like that? And should we think about that is about a potential addition to the expense run rate as we move into the the you know the year. Thanks. We don't we don't offer any marketing programs.

It would create a significant difference. There might be some natural Fallout from a from a legal standpoint, you know from some of these transactions that occur in the one you mentioned or you know, some of them another area that presents an opportunity.

Okay, so like no.

Okay, and then maybe just looking at the loan the loan generation as we move forward, you know, I think if I exclude Christmas group this quarter, you know, I look pretty flattered stand up the pay Downs looks like there's going to be some as we move into the first quarter. Can you just talk about the the general environment for for loan growth? I mean is it so competitive that the risk-adjusted returns just don't make sense and you guys are fine, you know kind of growing a on a on a gross basis kind of in a low to mid-single-digit basis. Is that the way we should should think about it or is the environment, you know actual moving, you know the Outlook guys. How should we you know think about as we move forward thanks. Michael is Kevin, you know second quarter fourth quarter were both strong $20 could you know could be strong also given, you know, the economic Outlook that we're we're kind of thinking is out there. There are deals out there. The question is whether it's at the yield and The Leverage that wage

willing to do

I'm optimistic based on you know, two out of last three quarters that that we're going to get our share of them that they're there but it is a crazy time. I mean you've you've got that we're hearing from a re Nanna leverage standpoint at this point in the cycle doesn't doesn't make sense in a lot of cases. So, you know, we got to pick and choose and we're going to we're going to protect margins protected asset quality and if drove comes with it, then it does.

Do we have a customer and the customer and one of our competitors? 857-305-6415 text 415-385-6415 a bank. So we're not going to do that. You know, we'll just pass and what time will be reduced like you don't think over the next five or six years you could loan money higher than that, right? So we when that happens we just passed, you know, we're not going to we're not going to get sick when I go in the stupid Award right? No doubt. Maybe just one more for me. You know, Chris Rock seen some slowdown in some some of the larger Metro markets across the US in terms of new construction formation. He just talked about the outlook for where your group and your footprint whether it be the the metronome.

New York City or out in the west coast and how we should think about kind of the the natural rate of growth is uh, you know, some of those metres of slowed. Thanks. Sure. No worries. So we did a billion little over a billion dollars this year in volume. I don't see any reason why that wouldn't probably continue that's up from where we were averaging probably 750 prior. I would I would hope that we'll do something pretty similar to that of the uh this year and and what we generally notice is if you increase your production by a couple hundred million dollars over a couple of years with

And about eighteen months or so, you're not grow starts to come in at about 50% of that. So if I do two hundred million more for two years, I'd expect in eighteen months out of my net growth would be a hundred million dollars that type of a relationship usually exists. So even even with day off, you know, we're seeing a little bit, you know, you talk about a Slowdown in the in the Metro Market. That's that's that's a little true. I think there's caution in the Metro markets because I think there's a lot of things happening right condo. Um sales has prices have fallen a little bit and if you were lending 70% on that you'd have a real concern about that which is why I generally never lent on that level our views always been odd assume the price is going to come down a little bit. And so I don't know that that change is necessarily our our point of view on that but it certainly gives some people some pause and off and so we do see a little bit of that so that generally actually helps our business a little bit because when other people have a little bit of reason to pause that gives our product a little bit more competitiveness, I think which which actually laughing

Some of our increase in uh in in lending over this over this past year, but look, we're we're cautious about New York. I think the environment in New York is is such that the city council and off and the government here is going to continue to press for higher taxes and uh and changes around affordability Etc that make it more expensive to develop here and I would expect wage will ultimately result in less development. I don't know that that means that will do less. Um, because again, I got a product may just get a little bit more competitive but we like we like New York. We like San Francisco as well as some of the other metros, but we continue to be pretty optimistic about what we're seeing and I think over time our product gets more competitive.

Okay, one quick follow-up where they kind of the new production yields in your in your portfolio Chris and maybe where's that stands versus last quarter, maybe a year ago. Thanks. Yeah, I think quarter-over-quarter. It's been reasonably flat, you know, we're still you know, generally for over Libor, you know, sometimes that's three seventy-five. Sometimes that's four seventy-five, you know, five years ago. We were six over Libor but Libor was effectively zero and so, you know with Library 175, we always kind of knew that his light went above zero, you know, you're you're Marjorie compress a little bit. I'd say year-over-year you're in a quarter point two fifty points. So let's so call it fifty. But but again, it's also vary depending on the type of loan in the mix and and and things like that. So I still think we get our price on on on our good core deals and then uh, we've seen a little bit more wage.

A little bit more competition. Our pricing is generally limited not necessarily by what's going

On the banks side, but as non-bank lenders bring down their Equity return requirements that puts that puts it more of a ceiling on our price because they're typically lending more money at at at home sense of Rights. But at some point the uh, the mass starts to work that we get a little bit of a cap on how much we can charge based on the non-bank lenders bringing their price in a little bit. But again at the same time off and on Bank lenders do that. We also lend to those non-bank lenders and so that creates opportunities for us as well. But I would say, you know twenty-five to fifty points in kind of over the last couple of years.

Great. Hey Chris, it's great color. I appreciate all the time guys. Thanks.

Our next question comes from Brian Martin with Janney Montgomery.

Hey, good afternoon, Brian . I wondered if I don't know who wants to take it but maybe just a little bit of color Johnny. You talked about the expenses kind of being flat but maybe a little bit higher than you thought or maybe I misjudged and misunderstood that but just kind of given with the true up to Brian talked about in the fourth quarter. Just kind of the the current expense run rate is we look into twenty-twenty. If you can just give a little color and how he's going about things. Yeah, I was I was really weren't even fact that. Yeah. I mean, you know Brian I mentioned that we probably had a one point five million dollars in trip in the salary employee benefits, but you know, there's a couple of other categories other professional fees and other expenses that have moved also a little bit of noise and I may not get to them as much as the minutiae on it. But you know, the other professional fees has this third-party $631,000 a month.

talked about uh, there was some

Recruiting expenses trying to get some additional people in here that we can hopefully don't have most this also came out of New York and it was $272,000. So that's not necessary need like going to be reoccurring there was some other special projects that weren't quite as expensive as the 631 thousand but there was a 1:45 and a 214,000. I'm not going to give you the name, you know, there was some timing and other expenses and we were up 1.3 million there and we had some timing on some donation expense for 300,000. We had a couple other items that tell the 243,000 that were timing. So a little bit of that is going the other way. So I don't know if I really answered your question. I'm just trying to give you a little color on some of the changes that we had within our within our incomes statement in a statement. Okay. So I mean this with all the noise levels not a bad level to think about as we had in the next Thursday.

is some puts and takes but if anything is

Shouldn't be growing much from the current level where it's at as we at least start out for 1 Q. If you look at last quarter, we had 67.7 million, but we also had a two point three thousand dollar a refund on our FDIC assessments too. So that that's what prompted to be down. And so seventy 1 million. That's probably not a bad run rate. I'm not looking not interest expense October November and December . This is $2,423.23. That's when I said it was basically flat it was planned across there were nineteen fifty expense. Yep. Yep. Okay, perfect. That's helpful. And then just Johnny, I think you mentioned something about the equity investments in the benefit. I guess that's is that maybe for Brian does that appear in that other line? And I guess just this level is somewhat sustainable for the next couple of quarters as you as you capture that benefit if you're looking for the line item, it's it's in the dividends line item and non-interest wage.

and

We got an extraordinary large amount of dividend from one of our Equity Investments not all of them just one of them and we we estimated that it was up about eight hundred sixty-one thousand. Do I think that that is sustainable every quarter know I think that we might have that or maybe a little better next quarter may I mean they there's the possibility that they may be able to reciprocate that and q1 but I'm not heard that they can reciprocate that after a few one and I got a normal run right on that might be four or five hundred thousand and instead we had one point three million for the court. It looks like it looks like the first quarter that they've had pretty pretty nice. And so we're anticipating a big payday the first floor it's a little choppy. It had been fairly consistent for quite some time and I teased the guys who love God.

The income but you know the public companies like okay, there's something I get to explain every quarter, right? Okay, that's helpful.

Just the last minor things Johnny, I guess just as it relates to m&a just if you remind us, I mean the lowest the smallest type of type of deal that you would look at today versus talking about families and maybe the larger deals if you had a range of you know, how low you would go given the impact that would have to to home. I guess. Do you have a size range in the top on the bottom end of of m&a? I really don't have a I really don't have a a size range. I wouldn't mind doing a

I wouldn't do it twenty but probably would do a 15 and probably would prefer warmer warming ourselves back up with something in the one that two million dollar one or two billion dollar Reigns to get get warm back up. Got you. Okay, and the last one was just maybe for Steven just on the morrow just the you talked about maybe seeing you know, the core margin stabilize or improve a little bit. I mean, I guess the Outlook to see it go up a little bit, you know, what could lead you to see the margin actually the corner and actually expand a little bit as you think about going into 2020.

A couple of things and I think Brian mentioned, you know is just as interest rates stabilized, you know, some of the Investment Portfolio impact minimizes. Hopefully, I think it's it's just our ability to you know to right-size and lower deposit cost further from here relative to loan yields kind of hanging in with or adamant think in December 3rd, December . I had our our portfolio yield kind of accidental accretion income and the 5 and 1/2 range. So if we think about where we're right off of you collectively riding loan deals between the Community Bank footprint and and Chris's group, you know for north of there. I think that we could potentially see Improvement wage.

Got you. Okay. Thanks guys. I appreciate it man. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to mr. Allison for any closing remarks. Thanks Allie. And thanks everyone for being with us today and not supporting our company. It was interested into interesting years and the companies continued to perform. We were down about ten million this year over last year. We hit 5 PST Mbps number but actual income was down about 10 and 1/2. It's about five out of New York about three out of out of Legacy at about is Brian put two for the cost of buying back the stock. So kind of gives you a perspective last year your four last I guess it is now eighteen ccfg had something else in the fourth quarter of the say didn't have this year. It took them down a little bit and actually Legacy hung in pretty good if they hadn't if we hadn't had a full year of Durban. I'm not sure like I said,

would have been up so in spite of all the craziness that's going on this year in the

Medical Williams and interest rates and all the different psychologies that are people trying to spread it is this company has remained as solid as anybody in the country and will continue to do that in the future. So appreciate your support. Hopefully, we'll see some good Wind Blows in the first quarter or the first six months. That'll really give us a kicked off to the year and hopefully get our transaction that I mentioned to you close sometime in February or March and let that start before eating it income. So thank you for your support and we'll talk to you in 90 days.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.