Q4 2020 SmartFinancial Inc Earnings Call
Okay.
[music].
Good morning, and welcome to the Smart financial fourth quarter, 'twenty and 'twenty earnings call.
All participants will be and Buffalo moving up so do you need assistance and placing all conference specialist by pressing the star can you called out here.
After todays presentation, there will be and opportunity to ask questions to ask a question and you May Press Star then one on your Touchtone phone.
Withdraw your question Please press star and.
And two.
Please note this event is being recorded.
I would now like to turn the conference over to Miller Welborn. Please go ahead.
Thanks Grant good morning, and thanks for joining us this morning for our Q4, 'twenty and 'twenty earnings call.
Always enjoyed business, where this group each quarter and talk about the progress of our bank and our company. Joining me. This morning on the call are Billy Carroll, our President and CEO, Ron Gorczynski, our CFO and Rhett Jordan RCC.
Before we get started I'd like to ask each of you to please refer to page two of our debt that we filed this morning for the normal and customary disclaimers and forward looking statements come yet.
Please take a minute to review these.
With 'twenty and 'twenty was certainly an interesting and fascinating year I can say, we learned a ton here at smart banking grew tremendously as a team a few things we learned during the year.
Rapid and quality communication with our team members clients and investors is paramount.
As a large community bank, we must make quality decisions faster and we did that.
Management collaboration is invaluable and has been excellent this past year.
And one of the last things as we've learned to better embrace and utilize the quality and technology that we've invested and over the last few years with that said, let me highlight a few accomplishments of Q4 'twenty before I hand, it over to bill and to dig into some of the details of the quarter.
We had record revenue of 31.48 million for the quarter.
And record operating profit of $9 2 million per quarter.
We grew our non interest income to 15% 15, 8% of total revenues for the quarter, which was certainly a record for our bank and we grew our tangible book value to $17.92, a share which is a 15% increase annualized.
And I talk a lot about how excited we are and where we are as a company, but I can't stress enough about how we feel this company is positioned we actually showed strong improvement in Q4 and virtually every operating metric, we track and went down and I will turn it over to Billy.
Thanks Noah.
And as Mel alluded to we wrap the year on a really good note closing with the best quarter, We've had a near and Dear during the last four.
And the company has taken some price stats from 'twenty and 'twenty and we're bullish on where we're headed.
And hit on a couple of areas and I'm trying to we want to dive into financials, and then I'll open and ready to jump in and credit in the portfolio.
First obviously, we've continued dealing with the pandemic and those challenges, but we've seen most of our markets continuing to perform very well I won't spend a lot of time on this but as noted on slide slide deck on page five we continue to keep the situation front of my team has done a really nice job of safely operating in this environment.
And had minimize those issues and we've gotten back on offense.
Let me touch on a few of the highlights is nowhere alluded to again total net revenue continues to climb exceeding $31 billion from period.
We had another quarter of really nice deposit growth that has resulted and is growing $758 million for the year and it's a 37% increase from 2019, we significantly shifted to a core deposit funded franchise clients continue to hold cash and we'd utilize the year to work on moving called <unk>.
<unk> chips that we picked up through the PPP process.
We did some consolidation during the quarter with the closing of the breach from our PSP acquisition and also closed a larger option and Chattanooga and no longer need and moving those associates and some space. We had near downtown office, Rob will speak to this more in a moment, but we have community, but as we communicated and anticipated current.
Modifications and dropped significantly and we are seeing no concern on the credit from switch, which is evidenced by our nonperforming assets holding extremely low and 0.31%.
Jumping into financials Youll see our quarterly highlights on page seven of the debt net income for the quarter was $9 million from a GAAP standpoint, and operating net income of $9 2 million at 61 cents per share for the operating quarter.
We reported a solid pretax pre provision income number at $11 7 billion, which equates to a 1.45% P. T. P. P. R O. What this earnings trajectory is and it really nice trend line and as shown on slide nine we.
We also had another record non interest income coming in and over four 9 million and Ron will touch on this more in a moment, but this is an area of focus for us and we're starting to see the results of another really good trend.
The balance sheet remained fairly side loans were down 21.8 million quarter over quarter with the majority of that being PPP loan forgiveness core loans were down slightly for the quarter and we and as we ended up with a handful of closings that had moved into Q1 and do remain confident we'll see the organic growth pick back up in 'twenty and 'twenty one.
And as our sales teams are working hard and pipelines are looking really solid and.
Also please note the slide that we add and on page eight we wanted to communicate some of the work we've done this year and have planned on the technology from under the leadership of our New Chief Information Officer. Daniel here for this work is a priority for our company.
And that's some other comments as to what I expect as we move into 'twenty and 'twenty, one, but again steady results from S and BK. This quarter, let me turn it over to Ron for financials, and then on over the last four portfolio and credit and then I'll close with those additional comments Ron well. Thanks.
Thanks, Kelly and good morning, everyone, we had a big jumpstart to 'twenty and 'twenty with much organic growth the completion of our progressive bank acquisition and participation and the PPP program.
But going into the second half of the year, the COVID-19 pandemic and impacted our loan growth, but our deposits continue to experience significant growth our assets continue to remain stable as our excess deposit growth was used to reduce our brokered funding reliance and also paying off our PPP Lf funding facility, we will touch base more and these items and a few small.
Slides.
Moving on to slide 11.
Let's focus on the top Green line, we continues to stay and our profitability with our operating pretax pre provision returns remaining quite consistent over the last several quarters.
Our operating more way metrics have been a little more volatile primarily to our loan loss reserve builds except that and the current quarter, where we did not require any additional provision.
Moving on to the lower portion of the slide our operating return on average tangible common equity was at 13 point and 7% and all time high for us.
Turning to turning to slide 12, as Miller had indicated we have continued our consistent trends of value creation and our tangible book value growth, we have grown tangible book value by 50% on a linked quarter annualized basis and year over year, we had increases of 6.5% and that includes the effects of our Q1.
Acquisition.
On the lower portion of the graph our operating efficiency ratio represented by the Green line was below 61% still hovering at that 60% level.
Turning on to slide 13, net interest income.
Our tax equivalent net interest margin for the quarter was 3.57% and increase of 18 basis points when compared to the prior quarter.
As we mentioned on the last earnings call, we expected to see some margin relief with us paying off the P. P. P. L. A funding in October.
Our net interest income increased 463000 and for the quarter, having benefits from both interest earning assets and interest bearing liabilities.
For our interest earning assets, our contractual loan yields declined by eight basis points and we had 193000 less of loan discount accretion, which was completely offset by increases and other loan fees of 403000, primarily from loan prepayment penalties and an increase of 345000 and PPP loans to occur.
<unk>, which totaled $2 2 million from the current quarter.
For our interest bearing liabilities, specifically interest bearing deposits, we had a decrease and funding costs of nine basis points to 0.50% and our overall cost of total deposits ended the quarter at 0.38%.
Moving forward into 'twenty and 'twenty, one we will have over 50 per cent of our time deposits maturing and repricing during the first quarter. So we should have further opportunities to reduce deposit costs thinking maybe another 46 basis points.
Like other banks, we are sitting on and excess amount of liquidity. Our initial projections at the beginning of the pandemic was to have these to have the excess liquidity evaporated over several corners and today, we are thinking that this excess liquidity will be here for a while.
As mentioned previously we utilized a portion of our excess liquidity to pay off the P to P. L. A funding, but we still continue to have excess amounts of liquidity due to our continued deposit growth.
We are moving forward cautiously through this period of time and are hopeful that some of our excess liquidity can be utilized in both new loan fundings and the neck and the next round and the PPP loans as well as Elsa doll and we're evaluating current L M strategies.
Looking forward, we are forecasting and first quarter margin and the mid $3 50 range, which includes a heavier amount of P. P. People goodness, we are estimating to have loan accretion of 10 basis points or approximately 577000 and estimated PPP loans be accretion of 48 basis points approximately $2 8 million.
And then.
Moving on to slide 14, operating non interest income.
This continues to be a great slide for us look at those stair steps as we have discussed on previous earning calls over the past year. Our internal focus was to increase our overall noninterest income we are now starting to reap the rewards well does having all time highs well day noninterest income increasing almost 37% on a linked quarter.
And annualized basis, and increasing over 83% year over year. Our team continues to do an outstanding job and this area.
Our service charge income increased 140000, and as this quarter cemented what our normalized global activity should be going forward.
Overall interchange fees increased slightly for the quarter, but was lower when compared to the prior quarter due to a vendor credit of 130000 reported and that prior quarter.
For our mortgage banking team another tremendous quarter, we were expecting Q4 to be a little bit softer, but the reverse happened with all time high production our mortgage banking revenue reached over one 3 million and increase of over 30% from the prior quarter. We will continue to see good things from our mortgage team as our pipeline remains strong growth.
And into 'twenty 'twenty one.
Our entire SMB K T and we will continue its efforts and increasing and diversifying our noninterest income revenue.
Continuing on slide 15, we wanted to take the opportunity we wanted to take the opportunity to introduce you to our family of revenue generators, we have smart bank mortgage services small bank investment services, which is our wealth management platform and the numerous and the newest member of the lineup drains agency our full serve.
This independent insurance agency that also provides title services. We also have small bank itself, which is represented by our central logo.
Our 'twenty 'twenty, one focus will be increased revenues increased efficiency and digital innovation to enhance the client experience.
Turn to slide 16, and you'll find our operating mine interest expenses.
We continue our focus on expense control during the quarter. Our noninterest expenses had increased slightly some of the primary increases were our salary and employee benefit expense increases were primarily related to a catch up unemployed zone of accruals, we did share reduction or FDIC insurance when compared to the prior quarter due to Q3.
Having a higher amount of accrual and another item to note is the increase and our amortization of intangibles, we recorded a cumulative adjustment per the amortization of the client list and trademark relating to the range agency from the from the Progressive acquisition. As this was a catch up entry all forward quarterly run rate for all and tangible should be around 400 or 40.
And per quarter.
As you can see on the slide. We're continues we are continuing to focus on expense control as the ramp over the last few quarters have slowed considerably.
Looking forward our forecast from the first quarters had the noninterest expenses remaining near $19 million with salary and benefit expense around $11.5 million range.
Also before we finish the slot and let's just say some taxes our income taxes for the current quarter reported and effective tax rate of 21.7%, which was slightly lower than expected due to a tax benefit recorded that was associated with the program. The state of Tennessee manager per community investment loans.
We are forecasting the effective tax rate of 23 points and five per cent for the first quarter of 'twenty 'twenty one.
Our next slide 17 gives detail and our deposits are.
Our composition of deposits have been traditionally a third a third a third but a year and 'twenty and 'twenty. Our time deposits have shifted downward to represent 20% of the portfolio and demand deposits now represent almost half the portfolio now to the Philippines, We had another big deposit quarter. Our total deposits continued to accelerate during the <unk>.
Fourth quarter with an increase of over $153 million and ended the quarter at $2 8 billion up 37 per cent for the year.
Our noninterest bearing deposits ended the quarter and $686 million up over 88% per year and our time deposits continued to decrease down 120 129 million for the year.
As we mentioned last quarter. The Big story here is that at year and our broker deposits to total deposits was just over 2% a decrease of over $180 million from year end 2019.
There were several components assisting our significant deposit growth year over year, which included the PFG acquisition and our clients participation and the PPP program, but the largest driver overall was the increased liquidity by our clients both current as well as new relationships with.
With that said I'm handing over to slides you Rhett Jordan, our chief credit officer to go it alone and credit related info rent.
Thank you Ron beginning on slide 18, our loan portfolio composition continued to trend near third quarter results with outstanding balances slightly down and the overall portfolio mix being practically identical and segmentation while growth and balances was slightly negative as noted loan demand has been consistently improving across our entire footprint as our markets continue.
To be open and Covid related restrictions are minimal across the banks geography overall, our loan portfolio has continued to demonstrate steady operating results through the quarter. A result of our client base continuing to operate their business are successfully and challenging times and generate the needed cash flow to support their indebtedness, all and all a solid quarter with continued stable performance.
And the loan book.
As shown on slide 19, while loans did decline slightly our overall credit quality metrics continued to perform very well through fourth quarter. Our NPA ratio saw a slight increase 2.31% from a low of 0.19% and the prior quarter. This was due to two transactions. The first was and approximately 3 million dollar underperforming out of market retail.
Property credit that we inherited through our previous acquisition and elected to downgrade and positioned to exit. The second was we consolidated two of our branch locations and our upper Cumberland region, and thus moved the closed property value into our Ori asset portfolio and the combination of those two transactions led to the inquiries and our NPA ratio and we didn't.
Not expect either of these to carry loss risk and the bank.
Net charge offs for the quarter were 0.08 per cent and continued a strong annualized performance up slightly quarter over quarter, but only the result of charging off a loan accounts that had been previously split specific reserved in our allowance.
The over 30 day past due ratio saw a slight increase to 0.40% of total loans, but was the result of the previously mentioned downgraded acquired loans overall, our asset quality continued to demonstrate solid metrics.
Impacted slightly by a couple of isolated events. Our outlook is very positive and we expect our historically improving trend to pick back up in future periods.
Looking at Slide 20, our fourth quarter saw the continued downward progression of our modified loan portfolio totals as you may recall at our peak and second quarter, approximately 25 per cent of our loan portfolio or roughly $615 million and outstanding balances had received and we're in some stage of a modified payment structure due to the Covid event.
At year, and we have reduced that number down to approximately 17 million imbalances, 4.7% of the portfolio is still modified due to COVID-19. All remaining modified loans are expected to restart the regular payment structures by the end of February 2021, and we do not anticipate additional modifications going forward based on feedback from our clients Hospital.
<unk> continued to represent the largest industry segment at 0.4 per cent of the total loan portfolio still modified.
Furthermore, hospitality represented approximately 60% of all modified loan balances at year and.
Our restaurant portfolio and now under 0.1% modified and clients are continuing to express confidence and their outlook. We expect this trend to continue as long as COVID-19 restrictions or not further impacted and we expect all loans to be on normal payment plans by the end of the quarter.
As for our PPP loans, we began working on our forgiveness process during fourth quarter and began to see a steady increase and applications for forgiveness for the quarter by quarter and we have processed approximately 100 applications and had formally receive forgiveness on roughly $11 million or 4% of the outstanding P. P. P portfolio.
As seen on slide 21, we ended the quarter with about 289 million and.
And balances remaining and expect the debt to continue with a reasonable pace of forgiveness applications into Corp fourth quarter 2021.
While we still anticipate a consistent flow of forgiveness apps from the initial P. P. P round with the recent legislation and the unrolling of round. Two we are prepared to actively take new applications from qualified applicants and have already begun to see activity on that front.
Our team has adjusted to both handle incoming forgiveness applications as well as new P. P. P applications and a more streamlined digital platform that we expect to assist us and processing applications more efficiently and with reduced cost than we saw in round, one and we are anticipating a reasonable volume of new applications for this new P. P P round and our team.
Have begun the process, reaching out to clients and prospects to gauge interest and assist those who seek funding underground too we believed it from being a great opportunity for the bank to assist our clients and further expand our prospect opportunities and taking advantage of this new source of economic support.
Now I'll turn it back over to Ron to walk into our allowance methodology Ron.
Thanks, Rob for all the detail let's.
Let's move forward to slide 22, our loan loss reserve.
As read and indicated our credit quality is strong for the current quarter, we did not record a provision and felt our allowance was adequate and was at adequate levels. During the quarter. We did adjust our qualitative factors and our model and added a new factor taking into account the number of Covid cases within our footprint.
Since year end, our overall allowance had increased almost 80% or $8 1 million with most of the increases being directly associated with the economic qualitative factors caused by the pandemic.
At year, and our allowance to originate loans once PPP loans was at point, 96% and our total reserves to total loans less PPP loans was at 1.57% going forward, we will adjust our loans as needed to accommodate the current economic and credit conditions move.
Moving on to Slide 23, and this gives us information our current capital position our.
Our capital position continues to remain strong during the fourth quarter, we announced that we would resume our stock repurchase program.
Since the start of the year, we utilized capital from the PFG acquisition executed a loan loss reserve build and repurchased over $4 3 million or 265000 shares and more common stock.
And with all of that activity, our CET, one and total risk based capital ratios are identical to where we started 'twenty and 'twenty.
Our tangible common equity to tangible asset ratio are trending back to the 9% level, even with our excess liquidity and almost 201 mine and PPP loans on the books and our current levels. We feel very strongly that we are positioned to weather any economic issues that may arise and are able to execute on any opportunities that may present themselves with that said.
And I'll turn it back over to Billy.
Ron and thanks for it and appreciate the color there and and as I think everyone can see just a really solid quarter and a number of really nice trends going for our company and I'll I'll.
And a few more comments just and then we'll open it up for some questions, but as we move now into what we hope are the later innings of this pandemic, we feel very good about where we are from a loan book came from when he.
Current recipe to to go through the year, we have and what share clients perform gives us great confidence and our loan portfolio. Our markets are all performing very well given the environment.
As I mentioned before are small or MSA marvell is well positioned for these current challenges with few exceptions, our markets are operating near normal levels.
We've jumped and the P. P P. Ron to El our team began working last week and collecting applications and yesterday started submitting those to the SBA debt.
And the P. P. P. P. P will provide much needed relief for a number of businesses. We currently have approximately 700 loans and our pipeline totaled about $90 million. We expect those numbers to rise, but believe the numbers will be lower than in round. One is many of our businesses and clients won't be needing the funding or won't qualify given the.
Parameters to the second round loan pipelines are solid and I do think we will see organic loan growth coming in and the in the next few months still targeting low to mid single digit annualized some obvious headwinds there with line utilization being softer and battling some payoffs of CRE and some CRE credits from move into some longer term per.
Imminent financing, but but I'm still extremely optimistic as our sales team is doing a nice job with their deal flow.
I believe we're sending and a really nice position given the environment the energy and our company is as good as it's ever been and our team is focused on taking advantage of those opportunities that we will see come out and the cycle. We built a $3 billion bank platform with strong loan book, we do need to continue work on and expense controls and scaling our balance sheet.
And business lines without significant additional expenses, but I'll really really liked the direction and which were heading our non interest income sector is beginning to scale nicely and diversify nicely and will continue to be a big focus for us and as Ron spoke and we continue to build capital through our earnings strength and.
Exciting time to be part of this company and we're positioned well to be opportunistic moving forward. So let me stop there and we'll open it up for questions.
We will now begin the question answer session.
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Yeah.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Graham Dick with Piper Sandler. Please go ahead.
Hey, guys good morning.
Good morning, Brian.
So you all mentioned that you had a fair amount of Cds that are going to throw off a re price here at the beginning of the year.
Just wanted to get an idea for where those are coming on and our new Cds are coming on and what price they're coming on at.
Right now and.
And then how much lower specifically you think that could lead interest bearing deposit costs.
And over 'twenty and 'twenty one.
Yeah.
And that.
We're looking at around 95 million over the first quarter and.
Where we're seeing based on previous quarters, what we're kind of at the at the 50 550 55 basis point area.
Ladies or debt.
And the ones that are maturing are at one one points, we 1%. So as I said I think we probably can go 46 basis points lowering our deposit cost.
We're still looking at our inception bucket on pricing so yeah, I'm still saying, we could probably get 46 basis points. At this point of time again, where we're getting pretty low so I'm not saying we're at the bottom Butler, we're hovering close to the bottom there.
And that's that's great very helpful. And then I guess just staying on the NIM you think it would be possible for you guys to use some more of your excess liquidity debt.
Repay even more borrowings.
And if so what kind of benefit do you think that could have on the margin going forward.
Yeah at this point of time are we paid off all we can and let roll off a lot of the other brokered deposits that we have or our structured out for different term limits. So at this point, we really don't have any opportunity left deferred to pay off some of the wholesale funding.
Okay.
Awesome and then just one quick housekeeping thing.
How much do you guys have remaining and the buyback.
It's about $5 7 million maybe.
And if you get close to running that thing down at some point. This year do you think you could increase the authorization further.
And we certainly have that option, if we desire to but it just.
We'll continue to evaluate and best use of capital, Yeah, and and Grant me I think you're right. I think you I think Ron said and the local forks and we've got we still have some some powder left on that and as Mel said I think for US right now it's just that as we come out of this come out of this past year, just evaluating the right utilization of that.
Capital.
Going forward, obviously by Baxter are still later and and can be options for us.
And we'll continue to evaluate that.
Okay Awesome, that's all from me congrats and good quarter guys.
Thanks Graham.
Our next question will come from Kevin Fitzsimmons with D. A Davidson. Please go ahead.
Hey, good morning, everyone.
Hello, Kevin and Kevin.
And.
Ron I was hoping you could.
Walk through that I, just I was writing furiously when you were giving the margin outlook and I just want to make sure I've got it straight. So you said we were at $3 57, this quarter reported and you're saying and a mid $3 50 range and first quarter, which is inclusive of.
P P P forgiveness and purchase accounting accretion, which I believe you said.
Accretion about 10 bps.
Which is I guess compared to 13 bps.
This quarter and then.
P. P. P. At 48, Bips I think you said and that's compared to 36.
Baker I once this quarter is that correct. It is correct and done.
We're targeting we're targeting pretty much the margin to be Barry Yeah wanted two basis point range, and where we want and this quarter.
Okay and is that.
And what what's the assumption in terms of debt is the remaining piece.
P. P P forgiveness, which is the bulk of it right because you're really just started projected to take place all in first quarter or is it real or is it more realistically to take place over the next few quarters.
At this point, Kevin you know, we've we tried to give guidance on as ppb forgiveness, and the bouncing ball keeps going and different direction right.
Right now.
Giving guide and said, it's we're looking at 50% to be forgiven and Q1, which was about 154 million and then Q2, 40%, which.
Which is about $115 million and the remainder will just trickle in and so the majority as you said the first few quarters. We are hopeful that we will get most of the forgiveness out of the way and get the rest of the fees out of the way. So so we should be out of the well and this round of PPP forgiveness.
And Adam Keys for the most part by Q3 Q4 of 'twenty 'twenty one.
Okay. So about 48 bps is really kind of a steady state accretion.
As well as the accelerated accretion upon forgiveness of that 50%, yes is that a way to look at it yes.
Yes, Sir yes.
Okay, that's great and.
I guess, Billy I know you you continue to sound pretty upbeat on organic loan growth and that that could solve a lot of.
Issues. Unfortunately, it just seems like we're dealing with very liquid customers, we're dealing with P. P. P stepping in again.
And so.
So.
I guess, what what's giving you that confidence we're going to see that organic growth to really begin to.
Fall fall to the Bottomline and terms of the numbers.
Yeah, and that's good question, Kevin and a lot of it is just conversations that debt I'm, having with our chief lending officer, and a regional president and when we sit and and we look at pipelines on a weekly basis, and and and as we track those and look at the deal flow that we've got coming in yes, it's up.
It feels pretty good to be honest. It is now no theres no doubt theres, some headwinds army with with with pay downs.
Line utilization you know that.
That that's a rig that's a real thing witness this increased liquidity and the system. So line utilization is off a little bit.
But when I look at when I, just look at our pipelines and we.
We've got a lot of folks out working hard too.
To pick up some new deals and move deals.
And I still feel pretty good about it yet we're still balancing.
Yeah. It's it is a balancing act.
And you're balancing between rate you're balancing a not to not to give on credit and.
And it is it is child and you know when you've got a lot of you've got a lot of other and get a lot of other competitors out there are all trying to get growth as well, we're going to stick there, we're going to hold tight on credit and and do what we can to hold margin, but but I'm still optimistic that we can pick up some growth in the coming quarters.
Okay and one last one from me on the subject of buybacks you mentioned about P. C E trending back up toward the 9% level is that.
That and important level for you guys to get it back up above there before you would get a little more active or proactive in terms of thinking of utilizing that.
I don't think we have any certain goal I mean, that's just the.
And internal number that we look at regularly and it fit the higher it is a better and is but we know it's not a determining factor of us doing anything in particular, yeah. I don't think I don't think we're looking at to really push that back up before we continue to look at some of those other opportunities and earning.
Earnings from continues to improve and and we should be able to continue to accrete, some capital and that way so.
But the 9% numbers and good target for US I don't think there's a magic and magic formula there that debt that prevents us from doing other things fall, while Paul not at that number.
And I guess, you know that's one way to utilize your capital and other ways, how proceed or organic growth and M&A and.
It's been.
We haven't talked much about M&A recently, you understandably, but the industry is starting to focus on it more.
And <unk>.
As you guys get a little more of a current C D.
Or are there conversations going on on that front.
Absolutely I mean, we.
We've noted every quarter that we talk about it.
We have made we slowed down some of the conversation, but we never stopped the conversations because we wanted to be ready and have some relationships and queued up when the time is right. So we feel we feel as optimistic as we ever have that those opportunities will only increase and the euro.
And you're right you would probably see more and more conversations get started out there.
Okay. Thanks, Scott.
Thanks, Kevin.
Our next question will come from credit Stricklin with Janney Montgomery Scott. Please go ahead.
Hey, good morning, guys and then.
And then.
And I ask him and noninterest income side.
And what do you guys see out and mortgage do you expect any decline there over the next couple of quarters and if so do you think there's further room for growth and the other categories like insurance to kind of offset that.
Yeah, I'll I'll start Ron you can jump in.
And thank mortgage debt.
And Ron kind of given some guidance and we think mortgages were still fairly bullish on that week a lot of hours have been have been purchases. When you look at when you look at our mortgage volume. Obviously, we've had had some refis and these are these last these last few quarters.
But the golf ball and we felt from pretty optimistic we looked at to grow in the markets, where we've got population inflows.
I think we can we can we can hold it may be it may be off maybe slightly.
And maybe slightly down.
But I don't see us picking up a lot of growth and that sector I do feel like we can pick up the growth coming out of wealth and insurance stronger going into 'twenty and 'twenty, one day, but Roger will eat call over there now and you're exactly right and you know and the insurance will pick up Q1, Q2, and the contingency income comes in from the insurance.
But as far as mortgage banking, so that's and since that's our line leader.
And we're pretty strong at this point going into Q1.
Q2, Q3, I know, we've just got to wait and see but right now I think.
All indications that we will we should be able to maintain and slightly tweak up at the level, where we're at today and I don't think we're as much rate driven on the mortgage side is a lot of people think I mean, you look at the state of Tennessee, and the Florida Panhandle high growth areas.
Great Tech states with population growth and so I think debt will.
Won't fall off as much as a lot of other banks, but a tremendous opportunity on the wealth and and on the insurance side and as Bill had indicated over last three quarters or the amount of repurchasing the upstream and the amount of purchases is increasing and the amount of refis are are getting lower so a good trend.
Going forward, what we're seeing.
No that's great color. Thanks, guys, and then speaking of our Florida Panhandle, and Tennessee, any particular areas of your footprint.
And it's kind of a standout in terms of potential for growth for the year anywhere you are particularly focused on.
And you know.
It's really it's pretty well balanced and I think we've always really focused on on on a real balanced approach and all of their geographies.
We're continuing to look for opportunities to add.
And sales talent and and all of those items.
And so yeah, I would I would probably respond by just saying balance through all of our markets right now.
Got it that's great. Thanks, guys congrats on a great quarter.
And thank you.
The next question will come from Stuart Lotz with <unk> W. Please go ahead.
Hey, guys happy new year.
Good morning.
Ron if we could let's go back to your expense guidance for a second and I. Appreciate all the color you provided on some of your initiatives for this year would you be able to quantify kind of the associated costs of those initiatives or is that already baked into your $19 million our run rate guidance for first quarter, yeah, everything's baked into a nine.
<unk> million dollars.
Going forward, our past, we're only giving quarterly guidance, but where our mission is try to keep to that 19 million flat going forward. We may have some ups and downs, but that is and all our initiatives and and while we intend doing for 'twenty and 'twenty. One is baked into that number. So it's all inclusive at this point other than if we have any strategic.
And if things go on and that'll be over and above but at this point, we're looking to net the $19 million.
Okay.
Awesome.
And <unk>.
And then maybe one more for you on the reserve.
You know it's flattened.
Flat this quarter and I guess, where.
Kind of surprised to see no provision.
But you know inclusive of your acquired discount and your kind of and the 150 range and how are you thinking about that reserve level as we got into 'twenty and 'twenty. One if you know, but if what contact doesn't really materialize and.
Bob.
And kind of keep kicking the can down the road.
And any guidance for for provisioning.
Uh huh.
And I don't know if were giving guidance my arent, Mike our thought process is that you know we're going to maintain.
Well, we're at as best you know.
The last part of the quarter. We spent a lot of cases, we again, we switched quantitative factors to the amount of Covid cases had really spiked up in and specifically, Tennessee and Alabama. So we included that so we I mean, my gut says we will probably.
Don't know, if we're going to grow into provision, but if things improve quite drastically much quicker than expected, we could see a release, but again, it's too early to tell where the reserve is going so we're just going to kind of keep this level going forward. So I really I have not much more to say I don't.
And the futures kind of tough at this point, although you have anything to add no I think I think that's right I think it's more just kind of Ah and evaluate as we go.
And we've got some we think we'll probably have some capacity to grow into that.
Additional build that we did in 2020.
But we'll watch it and add add accordingly, and I don't think it's.
You use current kicked the can down the road I don't think it's that I think it's more of a continual evaluation, yes, yes.
Monthly quarterly weekly.
Yeah.
Awesome.
Sorry, just one more on that reserve.
Thank you you are not scheduled to adopt Cecil until 'twenty and 'twenty three or 'twenty.
'twenty 'twenty two.
Just curious are you guys, Ron or you're still running kind of a parallel analysis with that and.
Would you look at maybe adopting earlier if it could enable some reserve release.
Or is that or do you still and just kind of thinking about that.
And that's that's two years down the road.
No I'm well two years down the road.
Which is true, but we're starting to do a lot of the data scrub and we intend to run parallel next year at some point in time. So it now if there's a and intriguing reason why we should adopt journal and will probably go down that road, but at this point. We are we are expecting to get.
And probably dual guidance by the third and fourth quarter of next year and just follow the adoption standard.
January of 2000, and twenty-three again subject to if there is an intriguing reason why we should.
Really get this thing going quicker, we will but that's kind of the schedule we laid out at this point and time.
Okay.
Thanks for all the color and.
Thanks for taking my questions guys.
Thank you <unk>.
Our next question will come from Brett Robinson with a degree visco.
Hey, good morning, guys and.
And I joined a little bit late and you might have covered this a little bit, but I heard Billy be pretty optimistic about the growth for the growth outlook and I was just curious to hear how the competition was related to rate competition, and particular interesting things ease up or if it's still pretty intense and just maybe some thoughts around the competitive.
Landscape relative to loan origination.
And in it and it is right now it is competitive.
And you're in good markets, you've got you've got we've got some good banks and the zones and and everybody's out chasing chasing growth and so for us.
It is a rate competition and is is pretty fierce.
And we've done a pretty good jobs and been able to balance that but we're not sacrifice and as the credit piece.
And then that earlier too.
Thank you are seeing maybe a little more aggressiveness on.
And in some areas and so yeah I think that's the only thing that kind of causes me debt to hedge that a little bit, but I still feel really good as I alluded to on the.
One of my first comments, when you look at our pipelines and and and and.
I do feel I do feel we've got some really nice deal flow. The real Delta is going to be you know payoffs you know you're in an environment, where you can see and that youre continuing to see these cap rates move and vote for selling assets that we hadn't anticipated and selling and so it is a it is a little bit of a moving target.
And with some uncertainty, but but are like the the aggressiveness that our sales team is out calling right now and feel really good about where the pipeline is so we'll just continue to watch it but if there is no doubt competition is tough.
Okay.
That's helpful. And then just wanted to go back to fee income and and mortgage banking and then.
You know kind of all the all the whole fee income bucket, there and just thinking about 'twenty, one versus 'twenty, one and make sure I understood you're still thinking about.
Growth and and fee income and 21 and it sounds like you're pretty optimistic on on mortgage are you basically saying that mortgage really doesn't come off that much and Tony one and given the changes you've made in the past 12 months or can you maybe give me a little color on your expectations for that and all and the next few quarters.
Well I guess getting into Q2 Q3, we it's really unknown. We specifically just gave guidance on Q1, we can kind of get got we got that one figured out.
And overall other than mortgage all of the other silos.
Noninterest income as we explained we were putting a lot of hard work and we do have some internal initiatives and opportunities that we're gonna take exercise on so we feel we feel very optimistic that we will hit all hit our guidance and.
This section.
Okay.
And that's that's helpful. Thanks.
Thanks, Brad I appreciate and thank you Brett.
Again, if you have the question and I'll start and then one other.
And one quick question.
Okay.
There being no further questions at this time and this will conclude our question and answer session.
I would like to turn the conference back over and and Miller Welborn and for any closing remarks.
Thanks Grant as we jump into 'twenty 'twenty, one as you heard us talk about today, everybody knows their goals and objectives and we're all looking forward to 'twenty 'twenty, one with tremendous optimism and we appreciate your interest and our company and your best met and our company and have a great week. Thanks.
The conference has now concluded thank you for attending today's presentation.
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