Q4 2021 Ameris Bancorp Earnings Call

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Hello, everyone and welcome to today's Embarrass Bank fourth quarter earnings Conference call. My name is amarin and I'll be coordinating your call today, if you'd like to ask a question. During the presentation. You may need may do so by pressing star followed by the number one on your telephone keypad.

Speaker 1: Hello everyone and welcome to today's Emerald Spank Fourth Quarter Earnings Conference call. My name is Emma and I'll be coordinating your call today. If you'd like to ask a question during the presentation, you may need to do so by pressing star followed by the number one on your telephone keypad.

Speaker 1: If you wish to withdraw your question, please press star, follow button number two. When preparing to ask your question, please ensure that your line is muted locally, unmuted locally. I will now pass over to your host to begin. Nicole Stokes, Chief Financial Officer, please go ahead.

If you wish to withdraw your question. Please press star followed by the number two when preparing to ask your question. Please ensure that your line is muted locally on music locally I will now pass over to your host to begin Nicole Stokes Chief Financial Officer. Please go ahead.

Speaker 2: Great, thank you Emma. And thank you to all of you who have joined our call today. During the call, we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our website at amarrasbank.com. I'm joined today by Palmer Proctor, our CEO and John Edwards Archive Credit Officer. Palmer will begin with some opening general comments and then I will discuss the details of our financial results before we open up for Q&A.

Great. Thank you Emma and thank you to all who have joined our call today during the call we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our website at <unk> Dot Com I'm joined today by Palmer Proctor, our CEO and Jon Edwards, our Chief Credit Officer.

Palmer will begin with some opening general comments and then I'll discuss the details of our financial results before we open up for Q&A.

Speaker 2: But before we begin, I'll remind you that our comments may include forward-looking statements.

But before we begin I'll remind you that our comments may include forward looking statements. These statements are subject to risks and uncertainty the actual results could vary materially we list. Some of the factors that might cause results to differ in our press release and in our SEC filings, which are available on our website, we do not assume any obligation to update.

Speaker 2: These statements are subject to risks and uncertainties. The actual results could vary materially. We've lived some of the factors that might cause results to differ in our press release and in our SEC filing, which are available on our website. We do not assume any obligation to update any forward-looking statement as a result of new information, early developments, or otherwise, except it's required by law.

Any forward looking statement as a result of new information early developments or otherwise except as required by law.

Speaker 3: Also during the call, we will discuss certain non-dap financial measures in reference to the company's performance. You can see our reconciliation of these measures and GAAP financial measures in the appendix to our presentation. And with that, I'll turn to David Palmer for opening comments. Thank you, Nicole. And good morning, everyone. I appreciate you taking the time to join our call this morning. I'm really pleased with the financial results we reported yesterday and excited to share some of the highlights from the quarter as we had a tremendous year for 2022.

Also during the call we will discuss certain non-GAAP financial measures in reference to the company's performance you can see a reconciliation of these measures and GAAP financial measures in the appendix to our presentation and with that I'll turn it over to Palmer for opening comments. Thank you Nicole and good morning to everyone. I. Appreciate you taking the time to join our call. This morning.

Pleased with financial results, we reported yesterday and excited to share some of the highlights from the quarter as we had a tremendous year for 2022 for 2021, we earned a record $368 7 million or $5 29 per diluted share on an adjusted basis, which is up 22%.

Speaker 3: For 2021, we earned a record 368.7 million, our $5.29 cents per deluded share on an adjusted basis, which is up 22% over 2020 results.

Over 2020 results. This represents an ROA of 169 and a return on average tangible equity of 21, 9%. We had a fantastic fourth quarter as we earned $81 5 million or $1 17 per diluted share on an adjusted basis. This represents a 140 <unk>.

Speaker 3: This represents an RLA of 169 and a return on average tangible equity of 20.19%. We had a fantastic fourth quarter, as we earned $81.5 million or $1.17 per diluted share on an adjusted basis. And this represents a 140 return on average assets and a 16.88% return on tangible equity.

And on average assets and a 16, 8% return on tangible equity on the balance sheet side of things we were extremely pleased with our organic growth.

Speaker 3: On the ballot sheets out of things, we were extremely pleased with our organic growth.

Speaker 3: Exclusive of PPP runoff and our Balboa acquisition loans grew over 383 million for the fourth quarter or over 10% annualized and that brings our full year 2021 loan growth to 1.4 billion or 10.5% excluding the PPP runoff.

Exclusive of PPP runoff and our about Boa acquisition loans grew over 383 million for the fourth quarter or over 10% annualized and that brings our full year 2021 loan growth to $1 4 billion or 10, 5%, excluding the PPP runoff.

Speaker 3: The Valboa acquisition brought another 665 million of loans on our balance sheet.

<unk> acquisition brought another $665 million of loans on our balance sheet.

Speaker 3: We continue to anticipate 2022 loan growth in the upper single digits. We certainly have the liquidity to fund it as our deposits have continued to grow. Our total deposits now are approaching $20 billion with non-intersparing deposits accounting for over 39% of total deposits.

We continue to anticipate 2022 loan growth in the upper single digits. We certainly have the liquidity to fund it as our deposits have continued to grow our total deposits now are approaching $20 billion with noninterest bearing deposits accounting for over 39% of total deposits Nicole is going to provide more deep.

Speaker 3: The calls can provide more detail shortly, but know that we remain focused on ways to safely deploy our excess liquidity.

Shortly but know that we remain focused on ways to safely deploy our excess liquidity.

Speaker 3: As capital position, it remains strong. We've consistently said we're focused on tangible look value growth. And while we did have some dilution in the fourth quarter from the Valvola acquisition, we still grew tangible look value by over 10% in 2024.

As the capital position. It remains strong we've consistently said we're focused on tangible book value growth and while we did have some dilution in the fourth quarter from the Belo acquisition, we still grew tangible book value by over 10% in 2021 and.

Speaker 3: And with anticipated earnings, we forecast to be back at last quarter's changeable book value within the next quarter.

And with anticipated earnings we forecast to be back at last quarter's tangible book value within the next quarter.

As reported last quarter, we have a share repurchase program outstanding until the 31st of October this year, we repurchased $1 3 million during the fourth quarter, which leaves approximately $78 million left on that program and while we don't anticipate executing on this during the first quarter of 2022, we do like to have.

And the Optionality, if the right opportunity presents itself.

Speaker 3: As for the dividend, we still remain very comfortable for the dividend stance today.

As for the dividend, we still remain very comfortable with where the dividend stands today.

Moving on to credit Jon Edwards, our Chief Credit Officer is with US today, and certainly available to take any credit questions. After our prepared remarks, but overall, we were very pleased with our credit metrics. We had net recoveries of $556000. This quarter, which is the second consecutive quarter of net recoveries.

Speaker 3: Moving on to credit, John Edwards, our Chief Credit Officers with us today and is certainly available to take any credit questions after our prepared remarks. But overall, we are very pleased with our credit metrics. We had net recoveries of $556,000 this quarter, which is the second consecutive quarter of net recovery.

Speaker 3: NPAs were 43 basis points at year end, loans that remain on the furl at the end of the quarter were minimal, and those that remain are primarily mortgage related.

N P. As were 43 basis points at year end loans that remain on deferral at the end of the quarter were minimal and those that remain are primarily mortgage related.

Our allowance coverage ratio, excluding unfunded commitments was 1.06 at the end of the year.

Speaker 3: In the fourth quarter, we were proud to announce our purchase of the Balboa Capital Corporation, which is a Fintech provider of business lending solutions to small and mid-size businesses nationwide. We've already begun to integrate and leverage their technology into the rest of the bank. So when you combine their technology with our strong, tap Eastern markets, it only reinforces the overall potential for us for 2022.

In the fourth quarter, we were proud to announce our purchase of the Balboa Capital Corporation, which is a fintech provider business lending solutions to small and mid size businesses nationwide, we've already begun to integrate and leverage their technology into the rest of the bank. So when you combine their technology with our strong southeastern markets. It only reinforces.

As the overall potential for us for 2022.

Speaker 3: In terms of momentum, I wanted to share some of the core fundamentals driving our positive outlook for this year. You know, we have an asset-sensitive balance sheet with over 40% variable rate loans, and then there's actually another 10% on top of that, which is a short duration fixed rate loans that behave more like variable rate loans. So we're well positioned in terms of margin expansion and NII expansion.

And in terms of momentum I wanted to share some of the core fundamentals driving our positive outlook for this year.

Have an asset sensitive balance sheet with over 40% variable rate loans, and then theres actually another 10% on top of that which is a sort of short duration fixed rate loans that behave more like variable rate loans. So we're well positioned in terms of margin expansion in NII expansion.

Speaker 3: We have a strong loan pipeline and even after we had our best production quarter in the history of the company, it still remains robust.

We have a strong loan pipeline and even after we had our best production quarter in the history of the company it still remains robust.

Speaker 3: We continue to meet our growth expectations and a lot of that. We are very fortunate to be in some of the best markets within the southeast and more importantly have the experienced bankers to help us execute in those markets.

We continue to meet our growth expectations in a lot of that and we're very fortunate to be in some of the best markets within the southeast and more importantly have the experienced bankers to help us execute in those markets. We've also got $70 million of revenue anticipated for the growth and forecasted from Balboa, which will be very meaningful which allow.

Speaker 3: We've also got $70 million for revenue anticipated for the growth and forecasted from BALBOLA, which will be very meaningful, which allows us to target an RWA in the 130 to 140 range and a return on tangible common equity well above 15%. So you can find all that with a culture of expense control. That way we should be able to still maintain a sub 55% efficiency ratio.

US to target, an ROA and the 130 to $1 40 range and a return on tangible common equity well above 15%. So you combine all of that with a culture of expense control that way, we should be able to still maintain a sub 55% efficiency ratio.

Speaker 2: I'll stop there now, turn it over to Cole to discuss our financial results in your detail. Great, thank you, Palmer. For the fourth quarter, we're reporting that income of $81.9 million or $1.18 per diluted share. On an adjusted basis, we earned $81.5 million or $1.17 per diluted share. And that's when you exclude the servicing asset recovery, murder and conversion charges, and that gang on sale of aid premises.

I'll stop there now ill turn it over Nicole to discuss our financial results in more detail great. Thank you Palmer for the fourth quarter. We're reporting net income of $81 9 million or $1 18 per diluted share on an adjusted basis, we earned $81 5 million or $1 17 per diluted share and that's when you exclude the servicing asset.

Recovery merger and conversion charges and the gain on sale of bank premises. Our adjusted return on assets in the fourth quarter was $1 40, and our adjusted return on tangible common equity was 16 88 there.

Speaker 2: Our adjusted return on assets in the fourth quarter was 140 and our adjusted return on tangible common equity was 1688.

Speaker 2: So for the full year 2021, we're reporting that income of $376.9 million or $5.40 per diluted share, which is a record year for a mayor.

So for the full year 2021, we're reporting net income of $376 9 million or $5 40 per diluted share, which is a record year for amyris on an adjusted basis, we earned $368 7 million or $5.29 per diluted share, which is still a record on that.

Speaker 2: On an adjusted basis, we earned $368.7 million or $5.29 per diluted share, which is still a record. That's compared to $300.5 million in 4-33 last year. That brings our full-year ROA to $169 compared to $156 last year and our full-year ROTCE to $20.19 compared to $19.77 last year.

Compared to $300 5 million and $4 33 last year.

That brings our full year, our way to $1 69, compared to $1 56 last year and our full year, our TCE to 21 nine compared to $19 seven seven last year.

Speaker 2: For the full year 2021, we had a 10.8% increase in tangible book value to end at 26.26.

For the full year 2021, we had a 10, 8% increase in tangible book value to end at 26 26, our tangible common equity ratio was eight O five at the end of the year compared to 888 at the end of the third quarter due to the <unk> acquisition and a lot of this dilution is a timing issue we added those out.

Speaker 2: Our team's will common equity ratio was 805 at the end of the year compared to 888 at the end of the third quarter due to the FALBO acquisition. And a lot of this solution is a timing issue. You know, we added those assets right at the end of the quarter without the benefit of the Valboa earning.

It's right at the end of the quarter without the benefit of about the learning. In addition to the approximate $3 billion of excess liquidity on our balance sheet negatively impacted this ratio by 135 basis points. If you exclude that cash from total assets, our TCE ratio would've been around 939 at quarter end or at year end, which is well above our.

Speaker 2: In addition, the approximate $3 billion of excess liquidity on our balance sheet negatively impacted this ratio by 135 basis points. If you exclude that cash from total assets, our TCE ratio would have been around 9.39 at quarter end or a year end, which is well above our stated target of 9%. So we estimate that the TCE ratio will be back closer to 8.5% by the end of the first quarter, and well above 9% by the end of the year, if not sooner.

Stated a target of 9%. So we estimate that the TCE ratio will be got closer to eight 5% by the end of the first quarter and well above 9% by the end of the year, if not sooner we continue to be well capitalized and we feel comfortable with our capital and good dividend level.

Speaker 2: We continue to be well-capitalized and we feel comfortable with our capital and dividend levels.

Then moving on to net interest income and margin.

Speaker 2: Are not interest income for the quarter increased by $5.2 million, of which 3.4 within the core bank, 3.6 million was from Valboa, and then those two increases were offset by a $2 million decline in the mortgage.

Our net interest income for the quarter increased by $5 $2 million of which three four within the core bank $3 6 million was from Balboa and then those two increases were offset by a $2 million decline in the mortgage.

Speaker 2: Our net interest margin declined full basis points, which was consistent with our previous guidance from 322 in the third quarter to 318 this quarter.

Our net interest margin declined four basis points, which was consistent with our previous guidance from $3 22 in the third quarter to $3 18, this quarter, our yield on earning assets declined by five basis points and our total funding costs decreased by one basis point kind of the moving moving factors into the margin squeeze we had seven days.

Speaker 2: are yield on earning assets declined by five basis points and our total funding cost decreased by one basis point. Kind of the moving factors into the margin squeeze, we had seven basis points of compression due to that growth and excess liquidity. And that was offset by two basis points of additional PPP accretion. And then that one basis point of improvement in our total funding cost.

Points of compression due to that growth and excess liquidity and that was offset by two basis points of additional P. P. P accretion and then that one basis point of improvement in our total funding costs.

Speaker 2: So excluding that excess liquidity, our margin would have actually improved this quarter. On slide eight, you can see the approximate $3 billion of excess liquidity and how it account for 54 basis points of the negative margin compression from one year ago. And without that excess liquidity, our fourth quarter margin this year is exactly the same as it was last year.

So excluding that excess liquidity our margin would have actually improved this quarter on slide eight you can see the approximate $3 billion of excess liquidity and how it account for 54 basis points of negative margin compression from one year ago and without that excess liquidity, our fourth quarter margin. This year is exactly the same as it was last year.

Speaker 2: In addition, we had about $314 million of Balboa debt that was still sitting on the balance sheet at the end of the year. We've paid that off and was as accreted to the margin and we anticipate that Balboa will cause an impact in the margin going forward.

In addition, we had about $314 million above all of that that was still sitting on the balance sheet at the end of the year, we pay that off and that was it.

Accretive to the margin and we anticipate that they'll have a positive impact in the margin going forward.

Speaker 2: As we say, as we have about $3 billion of excess liquidity, we anticipate net loan growth this year in the high single digits, from that 79%, which is about 1.1 to 1.4 billion of growth. That leaves about 1.6 billion of excess cash to prepare for the sickle-gull deposit runoff, and to begin purchasing investments in the bond portfolio, it's rate begins to rise.

As we stated we have about $3 billion of excess liquidity, we anticipate net loan growth. This year in the high single digits and that 7% to 9%, which is about one one to $1 4 billion of growth that leaves about $1 6 billion of excess cash to prepare for the cyclical deposit run off and to begin purchasing investments in the bond portfolio.

Begin to rise.

Speaker 2: From an ALM modeling standpoint, we've positioned ourselves to be asset sensitive with NII increasing 6% to 7% in an F100 environment. Basically, every 25 basis points of rate movement increases our net interest income by about $9.5 to $10 million.

From an a L. M modeling standpoint, we've positioned ourselves to be asset sensitive with NII, increasing 6% to 7% and an F 100 environment basically every 25 basis points of rate movement increases our net interest income.

By about nine $5 million to $10 million.

During the fourth quarter, we recorded $2 8 million a provision expense that was $7 5 million on the newly acquired Bellabella loans offset by a $4 7 million release of reserves in the other divisions due to improvement in the modeled loss rate.

Speaker 2: During the fourth quarter, we recorded $2.8 million of provision expense. That was $7.5 million on the newly acquired Balboa loans offset by a $4.7 million release of reserves in the other divisions due to improvement in the model loss rate.

Speaker 2: Within the Balboa provision, approximately $7.3 million is the Cecil double count on the non-PCD loans, and approximately $200,000 was to cover growth and net charge offs.

Within the Balboa provision approximately seven 3 million as the seasonal double count on the non PCI loans and approximately 200000 was to cover growth and net charge offs.

Speaker 2: We also have approximately $9.1 million of allowance on the PCD loans for a total reserve of $16.7 million on those Balboa loans.

We also have approximately $9 1 million of allowance on the P. C D loans for a total reserve of $16 7 million on the barbell alone.

Speaker 2: As Palmer mentioned, we had net recoveries for the second consecutive quarter. Our ending allowance for loan losses was $167.6 million, including the unfunded commit reserve and allowance for other credit losses. It was $200.8 million at year end, compared with $188.2 at the end of last quarter.

And Palmer mentioned, we had net recoveries for the second consecutive quarter, our ending allowance for loan losses was $167 6 million, including the unfunded commitment reserve and allowance for credit losses. It was $200 8 million at year end compared with $188 two at the end of last quarter.

Noninterest income increased $5 2 million for the quarter.

Speaker 2: Non-interest income increased $5.2 million for the quarter. We recorded a $4.5 million servicing rights recovery compared to a $1.4 million impairment last quarter. So excluding that MSR activity, total non-interest income declined slightly. Similar to last quarter, retail mortgage originations as a percentage of our pre-provisioned pre-tax income continued to decline, now representing only 13%, down from 50% this time last year.

We recorded a four and a half million dollars servicing rights recovery compared to a $1 4 million impairment last quarter. So excluding that MSR activity total noninterest income declined slightly.

Over the last quarter retail mortgage originations as a percentage of our pre provision pre tax income continue to decline that representing only 13% down from 50% at this time last year.

Speaker 2: While production in the Retail Mortgage Group declined to $1.8 billion this quarter, the average gain on sale increased to $3.27 compared to $3.17 last quarter, which helped offset some of the production revenue decline. The open pipeline at the end of the year was $1.6 billion compared to $1.9 billion at the end of last quarter.

While production in the retail mortgage group declined to $1 8 billion. This quarter. The average gain on sale increased to $3 27, compared to $3 17 last quarter, which helped to offset some of the production revenue decline. The open pipeline at the end of the year with $1 6 billion compared to $1 9 billion at the end of last quarter.

Speaker 2: Total non-interest expense increased by 1.2 million from 137.2 million last quarter to 138.4 million this quarter.

Total noninterest expense increased by $1 2 million from $137 2 million last quarter to $138 4 million this quarter.

Speaker 2: However, excluding the loss on bank premises and the merger charges, non-intercept expense actually declined 1.4 million during the quarter. In addition, we had approximately 1.4 million of operating expenses from Valboa. So excluding those, our operating expenses would have declined 2.8 million for the quarter, which is exactly in line with the estimate we gave last quarter.

Excluding the loss on bank premises and the merger charges noninterest expense actually declined $1 4 million during the quarter. In addition, we had approximately $1 4 million of operating expenses from Balboa. So excluding those or operating expenses would have declined $2 8 million for the quarter, which is exactly in line with the estimate we gave.

Last quarter.

We anticipate operating expenses from Balboa to increase overall noninterest expense by approximately $6 million a quarter. However, they are anticipated to operate at a sub 40% efficiency ratio. So these expenses are more than offset by their revenue generation and bellabella is overall accretive to our efficiency ratio.

Speaker 2: We anticipate operating expenses from Balboa to increase overall non-interest expense by approximately $6 million a quarter. However, they are anticipated to operate at a sub 40% efficiency ratio. So these expenses are more than offset by their revenue generation and Balboa is overall accretive to our efficiency ratio.

Speaker 2: We were pleased that our efficiency ratio and the overall progress remained. We came back in for the quarter under 55%. We came in at 54.85 compared to 56.56 last quarter. For the full year, we were right at 55%. We had died at 52 to 55. And with the tight margin we've seen and the decline in mortgage revenue, we were pleased that we came in within our project.

We were pleased that our efficiency ratio and the overall progress we made a we came back in for the quarter under 55%. We came in at 50 485 compared to <unk> 50, 656 last quarter for the full year, we were right at 55%, we had guided to 52% to 55 and with the tight margin we've seen in the declining mortgage revenue. We were pleased that we came.

Within our projections, we continue to prudently examine other noninterest expense and we anticipate minimal increases in the core bank and actual decreases in the retail mortgage segment variable costs as that production a decrease in expenses decrease back to normal levels.

Speaker 2: We continue to prudently examine other non-interest expense and we anticipate minimal increases in the core bank and actual decreases in the retail mortgage segment variable cost as that production is decreased and expenses decrease back to normal levels.

Speaker 2: Although there's always cyclical first quarter bumps such as payroll taxes, we do continue to believe an efficiency ratio in the low than the 50s or 755 is reasonable and achievable.

Although theres always cyclical first quarter books, such as payroll taxes, we do continue to believe an efficiency ratio in the low to mid fifties or sub 55 is reasonable and achievable.

On the balance sheet side, we ended the year with total assets of $23 9 billion compared to $22 5 billion last quarter and 20 24 billion last year. We were extremely pleased with our organic loan growth of $383 9 million or 10, 4% annualized for the fourth quarter as you can see on <unk>.

Speaker 2: On the balance sheet side, we ended the year with total assets of 23.9 billion compared to 22.5 billion last quarter and 20.20.4 billion last year. We were extremely pleased with our organic loan growth of 383.9 million or 10.4% annualized for the fourth quarter. As you can see on slide 16, we had 319 million of headwind against 701 million growth in CRA, CNI and residential.

Slide 16, we had $319 million of headwind against 701 million growth in CRE C&I and residential P.

Speaker 2: PPP loans declined $147 million and indirect loans declined $59 million. Excluding the PPP runoff, our net loan growth was $536.6 million or $14.8 annualized for the quarter.

P. P P loans declined $147 million and indirect loans declined $59 million, excluding the PPP run off our net loan growth was $536 6 million or $14 eight annualized for the quarter.

For the full year, our loan growth was $727 5 million or 5%, including the P. P. P run off but excluding that PPP run off our net loan growth was one 4 billion or 10, 5% for the year, we have approximately $134 million of PPP loans less than $265 million of indirect.

Speaker 2: For the full year, our loan growth was $727.5 million, or 5%, including the PPP runoff. But excluding that PPP runoff, our net loan growth was $1.4 billion, or 10.5% for the year. We have approximately $134 million of PPP loans left and $265 million of indirect loans remaining. We anticipate the headwinds from the runoff in both of these portfolios to subside sometime early in 2022.

Loans remaining we anticipate the headwinds from the run off in both of these portfolios to subside sometime early in 'twenty two.

Speaker 2: We already discussed the excess liquidity you can see in other earning assets due to the tremendous deposit growth we've had. Deposits grew $832 million this quarter with non-interest bearing growing $158 million and interest bearing growing $674. Included in this deposit growth this quarter was approximately $540 million of cyclical municipality money that we expect to run back out within the first few months of 2022.

We already discussed the excess liquidity you can see in other earning assets.

Due to the tremendous deposit growth we've had deposits grew $832 million this quarter with noninterest bearing growing $158 million in interest bearing growing 674.

Included in this deposit growth this quarter with approximately $540 million of cyclical municipality money that we expect to run back out within the first few months of 2022.

Speaker 2: So to wrap it up, we are really excited about this year. We're well-positioned on our balance sheet as rates start to rise. We're excited about the Valboa acquisition and the positive impact it has on our operating results, margin, net income, and efficiency ratio.

So to wrap it up we are really excited about this year, we're well positioned on our balance sheet and as rates start to rise. We're excited about the Balboa acquisition and the positive impact. It has on our operating results margin net income and efficiency ratio as always we're watching expenses and finding ways to pay for new technology through a real.

Speaker 2: As always, we're watching expenses and finding ways to pay for new technology through a reallocation of resources. We feel the excitement and momentum throughout our company as our bankers continue to work hard to provide top performance and shareholder value.

Location of resources, we feel the excitement and momentum throughout our company as our bankers continue to work hard to provide top performance and shareholder value and with that I'll wrap it up I appreciate everyone's time today and I'm going to turn the call back over to Emma for any questions from the group.

Speaker 2: And with that, I will wrap it up. I appreciate everyone's time today. I'm going to turn the call back over to Emma for any questions from the group.

Thank you just as a reminder, if you'd like to ask a question today. Please press star followed by the number one on your telephone keypad.

Speaker 1: Thank you. Just as a reminder, if you'd like to ask a question today, please press star followed by the number one on your telephone keypad.

Speaker 1: Our first question comes from Brady Gailey from KBW. Please go ahead, your line is now open.

Our first question comes from Brady Gailey from <unk>. Please go ahead. Your line is now open.

Thank you good morning, guys.

Right.

So mortgage really held in.

Speaker 4: So, so mortgage really held in quite nicely in the fourth quarter. I know volume was down a little bit, but gain on sale was up a little bit. Yeah, as we head into 2022, I think most people think mortgage will kind of continue to normalize lower. But how do you think about gain on sale and volume at Amiris this year?

Quite nicely in the fourth quarter, I know volume was down a little bit but a.

Gain on sale was a little bit.

As we head into 2022, I think most people think mortgage will kind of continue to sort of normalize lower.

How do you think about gain on sale and volume at our mirrors this year.

Speaker 3: Brady, I will tell you that we're still very encouraged about the contribution that mortgage will make. I do think what you're going to start seeing as mortgage normalizes throughout the industry is that seasonality that you would typically see in mortgage, especially in first quarter, is going to be there for all of us, so that will normalize.

Hey, Brady I will tell you that we're still very encouraged about the contribution that mortgage will make and I do think what you're going to start seeing us mortgage normalizes throughout the industry is that the seasonality that you would typically see in mortgage, especially in the first quarter is going to be there for all of us so that will normalize we.

Speaker 3: We feel very comfortable based on our pipeline of where we are in terms of the contribution going forward. But I think what you'll find is that first quarter will be adjusted as it historically has been in terms of seasonality, and then second and third quarter will be very strong.

We feel very comfortable based on our pipeline of where we are in terms of the contribution going forward, but I think what you'll find is that first quarter will be adjusted as it historically has been in terms of seasonality and then second third quarter will be very strong. The margin. We were pleased a lot of that has to do with timings appear outs and everything for the.

Fourth quarter and as we go into the first quarter I think we will still feel a little more pressure downward pressure on that gain on sale margin, but in terms of the volume itself, we remain encouraged and positive in and one of the things too that we're pleased to see that it will still be a meaningful contribution but a lot of the growth. We're also seeing is.

Speaker 3: And as we go into the first quarter, I think we'll still feel a little more pressure downward pressure on that gain on sale margin. But in terms of the volume itself, we remain encouraged and positive.

Speaker 3: And one of the things, too, that we're pleased to see is that it'll still be a meaningful contribution, but a lot of the growth...

Speaker 3: We're also seeing this reflected in a lot of the other areas of the company.

<unk> in a lot of the are other areas of the company.

Speaker 3: So that's kind of our take on mortgages, our outlook. Still very positive.

So that's kind of our take home mortgages, we our outlook still very positive.

Okay, Great that's helpful.

Speaker 4: And then, assuming deposits don't grow at all this year, and you guys do the upper end of your one graph guidance, but you're still going to have a decent amount of excess cash.

Yeah.

Assuming deposits don't grow at all this year.

As you know do the upper end of your of your loan growth guidance, but youre still going to have a decent amount of excess cash on the balance sheet. So how are you.

Speaker 4: on the balance sheet. So how do y'all, and you know, the bond book.

The bond book.

Speaker 4: really has been pretty stable, if not kind of down post-COVID. So how do you think about growing the bond book, especially as the long end of the curve, you know, hopefully continues to...

It really has been pretty stable.

Kind of down post COVID-19 .

How do you think about growing the boardwalk, especially those belonging to the curve.

Fly continues to head higher.

Speaker 2: Great, Brady, that's a great point. So as you said, we have about $3 billion of excess liquidity. And one thing that I wanted to make sure that, I know it was in my prepared remarks, but we had about $350 million of Balboa debt that because of the timing, there were some 30 day notices on that. So we weren't able to pay that off before year end, but it's already been paid off this year.

Great. That's a great point. So as you said, we had about $3 billion of excess liquidity and one thing that I wanted to make sure that I know it was in my prepared remarks, but we have about $350 million of that though is that that because of the timing. There were some 30 day notice is on that and we werent able to pay that off before year end, but it has already been paid off this year.

Year, So there's that piece and then again about half a billion dollars of public fund cyclicality that we think will run out in the first quarter. So that's the $1 billion right. There in those two items and then if you have a you know somewhere between one one and $1 4 billion of loan growth that leaves us about 700000 $700 million two 1 billion.

Speaker 2: So there's that piece, and then again, about half a billion dollars of public fund cyclicality that we think will run out in the first quarter. So that's a billion right there in those two items. And then if you have somewhere between 1.1 and 1.4 billion of loan growth, that leaves us about 700 million to a billion dollars.

To be able to put in the bond portfolio. If you look historically, we're down to 2.5% of earning assets.

Speaker 2: to be able to put in the bond portfolio. If you look historically, we're down to 2 1?2% of earning assets, and we'd like that bond portfolio to be kind of closer to that 7 1?2% of total assets. You go back to 2019, we were at over 9% of earning assets. So if we added a billion to a billion one in our bond portfolio, we would be back to where we were in 2019.

Like that bond portfolio to be kind of closer to that seven 5% of total asset you get out to 2019, we were at over 9% of earning assets. So if we added 1 billion. Two 1 billion won in our bond portfolio, we would that be back to where we were in 2019.

Alright, that's helpful and then finally for me.

Speaker 4: All right, that's helpful. And then finally for me, there's a lot of talk industry-wide as far as what's going to happen to NSF fees and overdraft. Any thoughts on kind of how Amiris fits into that? And then can you just share with us, you know, what was the level of NSF and overdraft when you look at last year?

A lot of talk industry wide as far as what's going to happen.

NSF fees and overdraft.

Any thoughts on kind of how <unk> fits into that and then can you.

Just share with US you know what what was the level of NSF and overdraft when you look at last year.

Sure. So when you look at our end service charge income in our on our income statement about 36% of that is and if that NSF fees. So it was about $16 million in 2021, which was already down you know its been coming down gradually over the over the last couple of years, we've budgeted at 25% decline in that so about a $4 million <expletive> .

Speaker 2: Sure, so when you look at our service charge income on our income statement, about 36% of that is NSF fees. So it was about $16 million in 2021, which was already down, you know, it's been coming down gradually over the last couple of years. We've budgeted a 25% decline in that, so about a $4 million decline is already in our internal budget. About 90% of those fees are consumer. We do have a plan that we're in the process of developing, and we do think that there will be an impact to that. As I said, we've already budgeted a 25% decline in our budget.

Klein is already in our internal budget.

About 90% of those fees are consumer we do have a plan that we're in the process of developing and we do think that there will be an impact to that as I said, we've already budgeted 25% decline in our budget.

Speaker 5: Nicole, that's $60 million. Is that just NSF or is that NSF and Overdraft? That's both, NSF and Overdraft. Okay, great.

Okay, Nicole that's $60 million is that just near that suffers that NSF and overdraft.

That's both NSF and overdraft fees.

Okay, Great Alright, Thank you guys.

Thanks Brady.

Thank you. Our next question today comes from Jennifer Denver interest. Please go ahead. Your line is my wife N.

Speaker 1: Thank you. Our next question today comes from Jennifer Demba from Truist. Please go ahead, your line is now open.

Good morning.

Could you guys talk about the increase in problem loans, this quarter and give us some detail behind that.

Speaker 6: Could you guys talk about the increase in problem loans this quarter and give us some detail behind that?

Speaker 3: Yeah, Jennifer, we put a slide on that in the deck. It's slide 18. There were really three categories of loan increases. One was the purchase credit deteriorated loans that we bought from Valboa Capital that came on in.

Yes, Jeff.

We put a slide on that or.

In the deck slide 18.

There were really.

Three categories.

Loan increases one was.

The purchased credit deteriorated loans that we bought from <unk> capital that came on in.

$9 $6 million versus about $25 million worth of mortgage loans that you know.

Speaker 3: $9.6 million, they received about $25 million worth of mortgage loans that, you know, had been under a CARES Act.

I had been under the cares Act.

Speaker 3: provision previously, and we're working through the MOD programs, but we were kind of in that middle. So, they were over 90 days, and those came in to the NPA number, and then there was about $3 million worth of premium finance loans, but those are very short-term, kind of transient.

Provision previously and we're working through the Mod programs, but we were kind of in that middle. So there were over 90 days and those came in to the NPA number and then there was about $3 million worth of.

Premium finance loans, but those are those are very short term kind of transitory.

Speaker 3: You know, we'll get the unearned premium sometime quickly, and so those will move on off. And that was offset by, you know, collections and recoveries of over $7 million, Oreo, Repo, and just general collections. So all in all, it's about $31 million worth of increase for the quarter, a third of which was really part of the Balboa Acquisition.

We'll get the unearned premium sometimes quickly and so those will move on off then that was offset by <unk>.

Collections and recoveries of over $7 million and Oreo repo and just general collection. So so all in all it's about $31 million worth of increase for the for the quarter.

The third of which was real.

Part of the <unk> acquisition.

Okay.

Speaker 6: And Palmer, could you talk about your acquisition interest going forward at this point?

Palmer could you talk about your acquisition interests going forward at this point.

What interest I missed the first part of the question.

Speaker 6: Could you talk about your acquisition interests going forward?

Could you talk about your acquisition interest going forward.

Yeah, you know right now obviously, we remain focused on fully integrating the <unk> and the beauty of that transaction is already up and running and we're levering the technology right now even through part of the core bank and we'll continue to focus on that but I would tell you is that acquisition as efficient as it was it doesn't preclude us from looking at other opportunities down the road.

Speaker 3: Yeah, you know, right now, obviously, we remain focused on fully integrating the valve boa and the beauty of that transaction is it's already up and running and we're revering the technology right now, even through part of the core bank. And we'll continue to focus on that. But I will tell you that acquisition is efficient, as it was, it doesn't preclude us from looking at other opportunities down the road.

But when you look at the first and foremost as I've always said, we're focused on organic growth and that's evident in the numbers, we've generated and produced and I couldn't be more excited in terms of the pipelines that we're seeing and where we're seeing that growth not only geographically, but also the lines of business. So that is our first and foremost.

Speaker 3: But when you look at the, first and foremost, as I've always said, we're focused on organic growth.

Speaker 3: And that's evident in the numbers we've generated and produced. And I couldn't be more excited in terms of the pipelines that we're seeing and where we're seeing that growth, not only geographically, but also the lines of business. So that is our first foremost. That's where our attention remains. But we will remain opportunistic in terms of looking at other opportunities.

That's where our attention remains but.

But we will remain opportunistic in terms of looking at other opportunities out there and the Balboa transaction wouldn't preclude us from doing so if we chose to to look at something.

Speaker 3: out there and the Balboa transaction wouldn't preclude us from doing so if we chose to look at something.

And what kind of deals interest you at this point.

Well I'll tell you if we could find more deals like this balboa deal it would be great. So I think there's both bank and non bank opportunities out there.

Speaker 3: Well, I'll tell you, if we could find more deals like this Balboa deal, it would be great. So I think there's both banking and non-bank opportunities out there. So we're pretty open to looking at both types of activities. It just depends on what makes the most sense.

So we're pretty open to.

Looking at the both types of activities.

It just depends on what makes most sense for us yes sure.

Thank you Jennifer.

Thank you. Our next question today comes from Casey Whitman from Piper Sandler. Please go ahead Casey Your line is now open.

Speaker 1: Thank you. Our next question today comes from Casey Whitman from Piper Sandler. Please go ahead Casey, your line is now open.

Hey, Thanks, good morning.

Good morning Casey.

Speaker 7: Palmer, I think you mentioned in your prepare remarks, 70 million in revenues from Valboa that you're assuming, just wondering, does that include the fee income piece or is that just the NII piece?

Palmer I think you mentioned in your prepared remarks 70 million in revenues from Balboa that you're assuming up to just wondering does that include the fee income piece or is that just the NII piece.

That includes both.

Speaker 7: It includes the fee and compete. Okay, thank you. And, okay, and wondering, can you put some numbers around where you, where we could see the margin shake out in the first quarter? I know there's just a lot of moving parts with the Balboa yields, a full quarter of that, and then the debt pay down, and presumably less cash. But, you know, we could maybe see a big jump, right, in the margin in the first quarter. So maybe help us just put some numbers around.

It includes the fee income piece, okay. Thank you for it and.

And wondering can you put some numbers around where you where we could see the margins shake out in the first quarter I know theres, just a lot of moving parts with the the Balboa yields a full quarter of that and then the debt pay down and presumably less cash, but we could maybe see a big jump right in the margin in the first quarter. So maybe help us just put some numbers.

Around that.

Sure.

Speaker 2: Sure. So we are guiding towards kind of mid-single digit, that three to five percent. And so while we'll see the impact of Balboa, which is an upward movement, we are anticipating some of the PPP coming out. So I don't know if you're, you know, when you think about core margin, absolutely an increase. But when I talk about reported margin, we've got the Balboa impact of a positive. We've got the PPP coming down. And then we've also got, we had a little bit of a bump in the bond portfolio this quarter because of an early...

So we are we are guiding towards kind of mid single digit that 3% to 5% and so while we'll see the impact of Balboa, which is an upward movement. We are anticipating some of the P. P. P coming out so am I I don't know if you're you know when you think about core margin absolutely an increase but when I talk about reported margin.

We've got the Balboa impact of a positive we've got the PPP.

And gown and then we've also got we had at that a little bit of a bump in the bond portfolio this quarter because of a.

Of an early.

Speaker 2: Thank you. My word went missing there. Based on those moving parts, we're saying mid-single digits, and then on top of that is where I would add the excess liquidity benefit. Every $100 million that we can put to use is about two basis points on the margin. If we can see some of these excess liquidity either exit the bank from those municipal deposits from paying off the Balboa debt.

Sure maturity. Thank you, but my word with missing there so based on the kind of those moving parts, we're saying kind of mid single digits and then on top of that is where I would add the excess liquidity benefit. So you know every $100 million that we can put to use is about two basis points on the margin. So yes.

We can see some of these X X X X liquidity either exit the bank.

Municipal deposits from paying off the Balboa debt.

Speaker 2: So we can see it increase a little bit more, but just keeping liquidity flat, we would be kind of in an up, you know, five basis point maybe now.

So we can see it increase a little bit more but just keeping liquidity flat, we would be kind of in an up five basis point maybe net.

Mhm.

Okay and minus how much you have left in PPP fees recognized.

Speaker 7: Okay, and minus how much you have left in PPP, these to recognize.

Speaker 8: Yep, so PPP fees that we have left is 5.8.

Yep. So P. P T fees that we have left.

Five eight.

Okay.

Alright.

Thank you for taking my questions.

Sure. Thank you.

Speaker 1: Thank you. Our next question today comes from David Feastow from Raymond James. Please go ahead. David, your line is now open.

Thank you. Our next question today comes from David Feaster from Raymond James. Please go ahead, David Your line is now open.

Hey, good morning, everybody.

Him with.

Speaker 9: It's nice to see the increase in production in the quarter. North of a billion dollars broke out of that kind of $900 million run rate that we were at. It's kind of curious. What do you think drove the increase in the quarter? Is it an increase in demand? Is it the new hires hitting strides? Or just more increased willingness to compete on pricing? And then just maybe help us think about how the pipeline is looking ahead in the two years. Maybe how the competition is trying to...

It was nice to see the increase in production in the quarter North of $1 billion broke out of that kind of 900 million run rate that we're at just kind of curious what do you think drove the increase in the quarter is it is it an increase in demand as the new hires hitting stride.

More increased willingness to compete on pricing and then just maybe help us think about how the pipeline's looking ahead into the year and maybe how the competition quite a change.

Yes sure.

Speaker 3: Yeah, sure. We were very pleased with the growth. Now, we did benefit from a lot of, on the CRE side, a lot of those loans migrating from a construction phase into a permanent phase for us.

We were very pleased with the growth we did benefit from a lot of on the CRE side, a lot of those loans migrating from a construction phase into a permanent phase for us.

Speaker 3: And then we also saw a nice increase in our CNI activity.

And then we also saw a nice increase in our C&I activity and when you I guess, that's probably one of the encouraging things that I've seen is where our focus has been is where we're seeing a lot of that growth. We will also always have meaningful contributions coming from mortgage from premium finance some of the other areas and now Balboa, but when you look at.

Speaker 3: And when you, I guess that's probably one of those encouraging things, and I've seen it as where our focus has been, as well as we're seeing a lot of that growth. We've also always had meaningful contributions coming from mortgage and from premium finance to some of the other areas, and now, Balboa.

Speaker 3: but when you look at the core bank, the pipelines are made strong and turns of the outlook going forward, the pipelines are full, the businesses there.

The core bank the pipelines remain strong in terms of the outlook going forward. The pipelines are full the businesses there.

Speaker 3: But the discipline on our side is also there because what we have to be mindful of is there's a lot of competition Driving rates continue driving down which is evident in the margin that everybody's seen the pressure there

But the discipline on our side is also there because what we have to be mindful of is there's a lot of competition driving rates continue driving down which is evident in the margin that everybody is seeing the pressure there. So while we're certainly want to have good relationships that we're going after we're not going to be stupid about it in terms of.

Speaker 3: So while we're certainly, want to have good relationships that we're going after, we're not going to be stupid about it in terms of setting ourselves up for a margin compression longer term. So there are several deals that we've had that have fallen out of a pipeline strictly because of pricing.

Setting ourselves up for.

The margin compression longer term. So there are several deals that we've had that had fallen out of the pipeline is strictly because of pricing. So while I'm pleased with our current pipeline extremely pleased as I said, we had a record production and pipeline in the fourth quarter and that is spilling over in the first quarter, but theres going to be some fallout in there just do.

Speaker 3: So while I'm pleased with our current pipeline, extremely pleased, and as I said, we had a record production in pipeline in the fourth quarter and that is spilling over in the first quarter, but there's gonna be some fallout in there just due to pricing, to your point, in terms of competition. So that's anybody's guess at this point of how low people are willing to go, but I can tell you we have an internal threshold and we're pretty disciplined about that.

To pricing to your point in terms of competition. So it's anybody's guess at this point of how low people are willing to go but I can tell you we have an internal threshold and we're pretty disciplined about that so there will be deals that we will pass on but in terms of our outlook and our optimism the businesses out there and.

Speaker 3: So there will be deals that we will pass on, but in terms of our outlook and our optimism, the business is out there, and we are certainly gonna get our fair share of it. And more importantly, just kind of line the business. Focus.

We are certainly going to get our fair share of it and more importantly can you just talk about the business focused on.

Speaker 9: Just calling up on the pricing discussion, you know, it looks like new loan yields were down in the quarter, kind of to your point. Just curious, where are you seeing more pressure? Do you think it looks like it's mostly on a variable rate side? Where are you seeing the most pressure? Do you think it's kind of dropped? Or have you, we've seen a stabilization in new loan yields just kind of given the increase of the premium?

Just following up on the pricing discussion you know it looks like new loan yields were down in.

In the quarter kind of kudos to your point as well.

Seeing more pressure do you think.

And it looks like it's mostly on the on the variable rate side.

What where are you seeing the most pressure do you think you are the trough.

<unk> seen a stabilization in new loan yields just kind of given the increase of the premier.

I do I think I think people have realized now that the pricing is we I think we've kind of hit a bottom I don't see it going down anymore, but that being said, it's still extremely competitive out there and then what happens is beyond rate structure and you don't want to start compromising too much on structure. So it's a balancing act.

Speaker 3: I do. I think people have realized now that the pricing is, I think we've kind of hit a bottom. I don't see it going down anymore, but that being said, it's still extremely competitive out there. And then what happens is the on rate is structure. And you don't want to start compromising too much on structure.

Speaker 3: So it's a malice act, but I do feel like to your point that we have hit the trough and we should start seeing some moderation there in terms of the competition and pricing. I don't anticipate it going lower. I would only see it actually improving from this point going forward, especially as it contains the CNI.

But I do feel like to your point that we have hit the trough and we should start seeing some moderation there in terms of the competition and pricing I don't anticipate it going lower I would only see it actually improving from this point going forward, especially as it pertains to the C&I efforts.

Okay. That's helpful. And then maybe following up a bit on that payoffs and pay downs.

Speaker 9: Okay, that's helpful. And then maybe falling up a bit on that, you know, payoffs and paydowns are obviously still ahead wins. I'm just curious what you're seeing on the paydown front. It kind of sounds like you might be passing on more deals just for competitive reasons or aggressive structure or pricing. I'm just curious, you know, any trends are seen on the payoffs and paydown front. And then just any thoughts on the recruiting side in your appetite and pulse of the due higher lender higher market. Okay.

All of headwinds just.

Curious what youre seeing on the Paydown front it cut it sounds like you might be passing on more deals just for competitive reasons or aggressive structure or pricing.

Curious you know.

Any trends youre seeing on the payoffs and Paydown front, and then just any any thoughts on the recruiting side and your appetite and COO.

Also to do higher lender higher market.

Yes.

I think what we're seeing on the pay downs with our existing C&I customers are utilization rates are actually up.

Speaker 3: I think what we're seeing on the paydowns with our existing C&I customers, our utilization rates are actually up.

Speaker 3: on C&I. The CRE is where we are seeing some pay downs and a lot of that has to do more with the investor property where people are getting premium prices for the properties and you can't fault them for moving the property or selling the property.

On C&I. The CRE is where we are seeing some pay downs and a lot of it has to do more with the investor property, where people are getting premium prices for the properties and you can't fault them for moving the property yourself on the property. So I think there'll still be downward pressure there.

Speaker 3: So I think there'll still be downward pressure there or a headwind to contend with. But we feel very comfortable with our ability to still maintain our current production levels. And that all comes back to the bankers to your point. We hired 17 bankers this year. And what we were able to do to Nicole's point earlier about reallocating resources.

Or a headwind to contend with.

But we feel very comfortable of our ability to still maintain our current production levels and that all comes back to the bankers to your point, we hired 17 bankers this year.

And what we were able to do to Nicole's point earlier about.

Reallocating resources, we hired 17 folks, but actually moved out 21 folks.

Speaker 3: We hired 17 folks, but actually moved out 21 folks.

Speaker 3: And that's all just a function of attrition. And so, net, when you look at from an expense standpoint, we're actually down four people, but on that side, but we're actually up in production. So the folks that we have are more productive.

And that's all just a function of attrition and so net when you look at from an expense standpoint, we're actually down for people, but on that side, but we're actually up in production. So the folks that we have are more productive and we've been very consequential about that and I think that will continue to serve us well when you look at.

Speaker 3: and we've been very consequential about that. I think that will continue to serve us well when you look at our expense and over.

Our expense and overhead so we feel very good about the markets. We're in we saw a lot of good growth this past quarter fourth quarter coming from Atlanta.

Speaker 3: So we feel very good about the markets we're in. We saw a lot of good growth this past quarter, fourth quarter coming from Atlanta and Florida and also the Carolinas. And I think that will continue.

Florida and also the Carolinas and I think that will that will continue.

That's helpful. Thanks, everybody.

Hmm.

Thank you. Our next question today comes from Christopher <unk> from Janney Montgomery Scott. Please go ahead Christopher Your line is now open.

Speaker 1: Thank you. Our next question today comes from Christopher Maronac from Janie Montgomery Scott. Please go ahead Christopher. Your line is now open.

Speaker 5: Thanks, good morning. Palmer and Nicole, could you just elaborate on a little bit of the tools that that will give you kind of inside the company to kind of process and prove and kind of how that's going to play out in the future quarters?

Thanks, Good morning, Palmer, Nicole could you just elaborate on a little bit of the tools that all but what gives you kind of inside the company to kind of process improve and kind of how that's going to play out in the future quarters.

Speaker 3: I'll talk about the technology side of it, and Nicole can get into some of the other benefits. But one of the things that really attracted us to Balboa was the technology. I mean, it is a fintech. And the thing that's nice too is it gets us in front from a point of sale concept in front of a lot of opportunities that banks are losing out on. And so while they've also got the benefit financing, the point of sale is absolutely critical.

Yeah, I'll talk a little about the technology side of it and then Nicole can get into some of the other benefits but.

One of the things that really attracted us to Balboa was the technology I mean, it is a fintech and.

The thing that's nice to as it gets us in front from a point of sale concept in front of a lot of opportunities that banks are losing out on.

And so while they also got the vendor financing at the point of sale is absolutely critical and so that's that's a new venue for us, but the technology in and of itself we call. It they've got a portal $3 60, which is a very efficient platform, which gives a turnaround times immediately you know you're getting a response within a day or within an hour.

Speaker 3: And so that's that's a new venue for us, but the technology in and of itself, we call it, they've got a portal 360.

Speaker 3: which is a very efficient platform which gives turnaround times immediately you know you're getting a response within a day or within an hour

<unk> and our interest was trying to take that technology, Chris and leverage it throughout our core banking platform. So when you think about all the small business lending, we do through our retail network and through the small business lending activities of the bank. What we're able to do is take that technology and lever. It up so we had already rolled this.

Speaker 3: Our interest was trying to take that technology, Chris, and leverage it throughout our core banking platform. So when you think about all the small business lending, we do through our retail network and through the small business lending activities of the bank, what we're able to do is take that technology and leverage it up. So we...

Speaker 3: rolled this out and the majority of the commercial group.

And the majority of the commercial group and then we'll be rolling it out in retail over the next month, so it's that fluid and the nice thing about this portal as you go into key and the information all the application processing everything is done and it's automated and you're able to give a quick return and turn times and the beauty of this business.

Speaker 3: and then we'll be rolling it out and retell it over the next month. So it's that fluid and the nice thing about this portal is you go in, you key in the information, all the application processing, everything is done and it's automated and you're able to give quick return and turn time.

Speaker 3: And in the beauty of this business, a lot of people will ask the question is, you know, how are you able to maintain such great yield? It's all about convenience. And it's all about that.

A lot of people ask the question is how are you able to maintain such great yield is all about convenience.

And it's all about that point of sale and so we view this as a real opportunity for us if we had to go out and invest and build this type of platform throughout our operation It could take us years of millions of dollars. So that's really an added benefit of the company and then Furthermore in terms of what we can get back to Bob.

Speaker 3: So we view this as a real opportunity for us if we had to go out and invest and build this type of platform throughout our operation. It could take us years and millions of dollars. So that's really an added benefit of the company. And then furthermore, in terms of what we can get back to Balboa, they have never had access to obviously the capital liquidity that we provide, but in addition to that, they're very excited about helping us to level up our SBA lending activity.

Sure.

I have never had access to obviously the capital liquidity that we provide but in addition to that they are very excited about helping us lever up our SBA lending activities.

Speaker 3: And so that should, we should see meaningful cross-pollination between both sides of the shop there.

And so that should we should see meaningful validation cross pollination between both sides of the shop there.

It's called anything else you want to add on sure.

Speaker 2: Sure, I was just going to re-emphasize what I said about their, you know, an impact to our financials, that they're accretive on everything. So, you know, we're looking at $70 million of revenue, you know, five and a half to six million a quarter. So even if you go on the high end of that, $24 million of expense, you know, they're running at a sub 40 efficiency ratio. So that's accretive.

I was just going to reemphasize, what I said about there some impact to our financials that they are accretive on on everything so they were looking at $70 million to $70 million of revenue.

Five $5 million to $6 million a quarter. So even if you go on the high end of that $24 million of expense.

They're running at a sub 40 efficiency ratio. So that's accretive on the margin side, they're expected to have 25 to 30 basis points of impact on the margin. There's some of that is gonna be offset by the <unk> going away of the P. P. P revenue, which is why my margin guidance.

Speaker 2: On the margin side, they're expected to have 25 to 30 basis points of impact on the margin. And some of that's going to be offset by the going away of the PPP revenue, which is why my margin guidance was.

You know what it was until that we will have you know it's accretive there. So there you're just tremendous opportunity and I think having a 10% growth in this line is absolutely reasonable and achievable and we hope to beat that.

Speaker 2: what it was. So that we will have, you know, it's a creed of there. So very, just tremendous opportunity. And I think having a 10% growth in this line is absolutely reasonable and achievable. And we hope to beat that.

Great. That's really helpful. Thanks for that and you have a natural efficiency already happening at the company. So.

Speaker 10: Great, that's really helpful. Thanks for that. And you have a natural efficiency already happening at the company. So as you get better internally with the technology, we'll see those results as they occur, right? So there's no kind of definitive number there, but it's just in general should be pretty.

You kind of get better entirely with the technology, we'll just we'll see those results as they occur right. So there's no kind of definitive number there, but just in general should improve.

Speaker 2: That's right. So they are running at a sub 40. And so even when you layer that on, you know, to us, it's a creed of us for sure. And then as we start, you know, just growing that bulk, it'll just generate even more.

That's right because they are they are running at a sub 40, and so even when you layer that on to US it's accretive accretive to us for sure and then as we start you know just growing that book it'll just it'll just generate even more.

Speaker 10: got it. And then just a quick follow up, you know, the last several years, the mortgage business has been a regional business in many states and the bank has kind of quietly followed that, particularly in Georgia and in Florida. Does the technology at Balboa or just your ongoing calling effort organically allow you to push deeper into these other markets? Again, it's not an M&A question, Palmer, as much as it is, just executing further with the tools you have.

Got it and then just a quick follow up the last several years the mortgage business has been a regional business in many states in the bank is kind of quietly fall of that particularly in Georgia, and Florida does the technology at Balboa or just your ongoing calling effort organically allow you to push deeper into these other markets.

Again, it's not an M&A question Palmer as much as it is kind of just executing further with the tools you have.

Speaker 3: Yeah, I think, you know, in a perfect world, we would have the same technology that Alvola has you to last rather than a entire company and all our lines of business.

Yeah, I think you know.

Perfect World, We would have the same technology that <unk> has utilized throughout our entire company and all our lines of business reality is something different now we've made tremendous strides in mortgage in terms of utilizing robotics and efficiencies there, but theres a lot more that we can do and you have to do today to compete with the online lenders. So we continue to push.

Speaker 3: Reality is something different now. We've made tremendous strides in mortgage in terms of utilizing robotics and efficiencies there But there's a lot more that we can do and you have to do today to compete with the online Lenders so we continue to push hard there the majority of the advantage of being a regional bank is that you know a lot of the benefit We get it's from our builder and realtor business

Hard there the majority of the advantage of being a regional bank is that you know a lot of the benefit we get is from our builder of realtor business.

Speaker 3: that's something that online providers will never have. So we don't ever want to lose sight of that because that's our bread and butter. But at the same time, I think there's some incremental volume that we can capture through online efforts and coming up with a more user-friendly kind of portal there. So that will be a separate initiative.

It's something to online providers will never have so we don't ever want to lose sight of that because that's our bread and butter, but at the same time I think there is some incremental volume that we can we can capture through online efforts and coming up with a more user friendly portal there so that will be separate.

<unk>.

Speaker 3: because as much as I'd love to be able to put the 360 portal from Bavoa right in the mortgage immediately, it can't happen, but what it does help us realize, as a

Because as much as I'd love to be able to put the 360 portal from that blow up.

Right in the mortgage immediately it can't happen, but what it does help us realize.

Bank is that when you look at how efficient that operation is it gives you an appreciation for the opportunity you've got so many other high volume areas of the company. So we think of that premium finance our mortgage it really motivates us to start doing the same type of initiatives there to to help lever of both those lines of business does that.

Speaker 3: is that when you look at how efficient that operation is, it gives you an appreciation for the opportunity you've gotten so many other high-volume areas of the company.

Speaker 3: So we think of that premium finance or mortgage. It really motivates us to start doing the same type of initiatives there to help divert both those lands business.

To answer your question.

Yeah. It does thanks very much I appreciate the background here.

Speaker 10: No, it does. Thanks very much. I appreciate the background here.

You bet.

Thanks.

Thank you. Our next question today comes from Kevin Fitzsimmons from D. A Davidson. Please go ahead, Kevin Your line is now open.

Speaker 1: Thank you. Our next question today comes from Kevin Fitzsimmons, from DA Davidson. Please go ahead, Kevin. Your line is now open.

Hey, good morning, I appreciate you fitting me in at.

Speaker 11: Hey, good morning. Appreciate you fitting me in at the end of the call here. Most of my questions have been asked, but just wanted to clarify on the margin, the margin outlook, Nicole, the three to five basis points is that that's expansion, right? Not compression.

At the end of the call here.

Most of my questions have been asked but.

Just wanted to clarify on the mortgage the margin outlook Nicole the three to five basis points is that that's expansion right not compression.

Speaker 2: That's right, that's expansion. And then that did not include any impact from the use of that access to liquidity. So if we, like I said, if the municipal deposits run out as expected, and then if we have any, so again, any other deposits run off than any.

That's right that's expansion and then and that did not include any impact from the use of that excess liquidity. So if we like I said, if there's if the.

Municipal deposits run out as expected and then if we have any again any other deposit run off than any any use of that excess liquidity is not built into my so when I said, you know five basis points kind of that mid single digit that is expansion excluding abuse of liquidity that should be worst case.

Speaker 2: any use of that excess liquidity is not built into my. So when I said, you know, five basis points, kind of that mid single digit, that is expansion, excluding the use of liquidity. So that should be worst case is a five percent expansion.

There's a 5% expansion.

And that's for the first quarter were talking right that's not a that's right.

Speaker 11: And that's for the first quarter we're talking, right? That's not a... That's right. Yeah, yeah. Okay. All right, just going to the check. And can you, I was trying to keep up with you, but couldn't, can you, would you mind repeating some of that interest rate sensitivity stats that you gave earlier on the call?

Okay, Alright, just wanted to check and can you I was trying to keep up with you, but couldnt can you would you mind repeating some of that.

Interest rate sensitivity.

Stats that you gave earlier on the call.

Speaker 2: Sure, sorry, I do talk fast. I apologize for that. So, we're about six and a half percent packet sensitive. So, for every 25 basis point in rate hike, we're about nine and a half to 10 million dollars of additional NII.

Sure sorry, I do talk fast I apologize for that.

It's where ever you were about six 5% asset sensitive. So for every 25 basis point in rate heart rate hike were about nine and a half the $10 million of additional NII and then we've got about 40% of our loan book is variable, but we have another $1 5 billion or another 10%.

Speaker 2: And then we've got about 40% of our loan book is variable, but we have another 1.5 billion or another 10% roughly that is technically per call report, they're a fixed rate loan, but because of their short duration, they behave like a variable rate loan. And so when you add that in, we're running about a 50% variable on our loan book.

Roughly that is technically per call report they they they were fixed rate loan, but because of their short duration. They behave like a variable rate loan and so when you add that in about a 50% variable on our on our loan book.

I think that was the hydro.

Speaker 11: I think that was a high grade. Was there something? Yes. Yeah, yeah. That's great. And one last thing, just on the elbow, can you?

Yep Yep Yep.

That's great.

And one last thing just on Balboa can you.

Speaker 11: Give us a sense for what, when we look at that loan balance that they brought over, how would you describe the geographic, how that spread geographically, and how do you expect that to?

Give us a sense for what when we look at that loan balance that they brought over.

How would you describe the geographic.

How that spread geographically and how do you expect that to.

Speaker 11: change over time. In other words, they're based out of California. It's nationwide, I understand that, but do you think it'll morph more weighted toward your banking footprint, or not necessarily over time? Thanks.

Change over time in other words, they're based out of California, It's nationwide I understand that but do you think it will more.

More weighted toward your banking footprint or not necessarily over time. Thanks.

<unk>.

Speaker 3: I think you have to buy for tickets. What we'll have as I touched on is we'll level the technology threat core bank. There's going to be obviously more production coming out of our retail network and our small business lending network from the legacy bank.

I think you have to bifurcate, what we'll have as I touched on is we live with the technology threat core bank, there's going to be obviously more production coming out of our retail network and our small business lending network from the from the legacy Bank.

Speaker 3: And so you will see incremental growth there coming out of the markets, but you know, they've got about 17% of their business.

And so you will see incremental growth there coming out of the markets, but you know they've got about 17% of their business.

Speaker 3: coming out of California and then that's equal with Texas and then Georgia, Florida. So it's a nice mix. It's not a concentration in one geographic area. But I think if we can start levering up through the bank, you will see proportionately more of that business coming out of the southeast if we're successful in levering up the traditional line of business.

Coming out of California, and that's equal with Texas, and Georgia, Florida. So it's a nice mix, it's not a concentration in one geographic area, but I think if we can start levering up through the bank you will see proportionately more of that business coming out of the southeast if we're successful and levering up the traditional line of business.

Speaker 3: through that portal, but at the same time they will continue to grow their book and all the markets they're already operating in, and that's primarily driven from a lot of their vendor relationships that they've had for over 20 plus years.

Through that portal, but at the same time, they will continue to grow their book and all the <unk>.

Markets, they're already operating in and that's primarily driven from a lot of their vendor relationships that they've had for over 20 plus years. So I wouldn't expect to see a huge geographic shifts in terms of their focus or concentration of what they already have.

Speaker 3: So I wouldn't expect to see a huge geographic shift in terms of their focus or concentration of what they already have.

Speaker 11: So Palmer, there's, you know, what is called Balbo, and I assume going forward, you'll still update us on what the balances and the growth are at Balboa, but there's going to be...

So Palmer, there's there's you know what is called Balbo and I assume going forward, you'll still update us on what the balances and the growth of our Balboa, but theres going to be.

Speaker 3: banking growth you're within your own bank within your own footprint that's coming through that technology that's not necessarily going to be slotted as Balboa correct correct incremental volume

Banking gross your within your own bank within your own footprint, that's coming through that technology, that's not necessarily going to be slotted as bell boat correct correct, that's incremental volume.

Okay, great. Thanks very much.

Thank you.

Speaker 1: Thank you. Our final question today comes from Brody Preston from Stephen Dink. Please go ahead Brody. Your line is now open.

Thank you. Our final question today comes from Brady Preston from Stephens, Inc. Please go ahead Friday. Your line is now open.

Hey, good morning, everyone.

Speaker 12: Hey, good morning, everyone. Good morning.

Good morning.

Yeah, I've got a handful of questions I'll try to try to get through here Nicole.

Speaker 3: Yeah, I'm going to hand full of questions. I'll try to get through here Nicole. Did I, I thought I heard you earlier, it was either pair off or pay out in the mortgage, this quarter that helped, helped some of the gain on sale. I know a couple quarters ago you had like some kind of, you know, larger kind of pair off fees. Were there any of that? Was that what drove that this quarter? Or maybe I was misunderstood?

I thought I heard you earlier, it was either pair off or pay out in the mortgage this quarter that helped.

Some of the gain on sale was.

I know a couple of quarters ago, you had like some kind of a larger kind of pair off fees were there any of that was was that what drove that this quarter or maybe I was misunderstanding.

Speaker 2: If I think that was in one of Palmer's comments, questions where we did see the gain on sale go up a little bit. And some of that is that he was comparing it as it can be a timing issue a little bit. And so we're guiding towards that gain on sale in the future kind of in that 275 to 325 range. But we don't expect it to go up.

Maybe I think that was in one of Palmer's comments questions, where we did see the gain on sale go up a little bit and some of that is it he was comparing it to if it can be a timing issue a little bit and so we're guiding towards that gain on sale in the future kind of in that $2 75 to $3 25 range.

So we don't expect it to increase like it did this quarter.

Speaker 13: So there weren't any of those pair off fees that you saw in the second quarter of this quarter.

So there weren't any of those pair rcs that you saw in the second quarter this quarter.

Nothing material.

Speaker 13: And then I wanted to go back to the Balboa. It looked like just given how long it was on the balance sheet of the quarter, it looked like the yields came in well north of the 9.9% that you had in the deal deck. Were there any additional loan fees that kind of helped juice that yield a little bit this quarter?

Okay, Okay, Great and then I wanted to go back to about Boa.

It looks like just given the how long it was on the portfolio on the on the balance sheet. This quarter. It looks like the yields you know came in well north of the nine 9% that you had in the deal deck were there any additional loan fees that kind of helped you know juice that yields a little bit this quarter.

No. It's actually so those loans are yielding closer in that 11% to 12% and then we have a purchase accounting adjustment of a premium on those loans and so because we only we're still finalizing all of that purchase accounting so that when we set the nine 5% to 10% that's after that purchase accounting.

Speaker 2: No, it's actually, so those loans are yielding closer in that 11 to 12%. And then we have a purchase accounting adjustment of a premium on those loans. And so because we only were still finalizing all of that purchase accounting, so in our debt where we set the nine and a half to 10%, that's after that purchase accounting amortization. And so because we only had them on the books 20 days and we're still finalizing those day ones, we didn't have an adjustment.

Monetization and so because we only had them on the books 20 days and we're still finalizing those day. One we didn't have an adjustment that youll see that come back that expected nine 5% 10%.

Speaker 5: that you'll see that come back, that expected 9.5 to 10%. This next quarter. squared.

Next quarter.

Got it and so.

Speaker 13: I guess, so should I interpret that as there would be a credible yield, no coal that will flow through NII as well?

I guess should.

Should I interpret that as there'll be accretable yield Nicole that will flow through NII as well.

Speaker 2: Yep, if the offer is, it's a premium, so it'll be amortized for bringing that yield there.

Yeah, it's the opposite it's a premium so it'll be amortized bringing that yield.

We haven't talked about in a while.

Speaker 13: Okay, so that was just, you know, you hadn't finalized it yet, so that's why the interesting impact was a little bit higher than it otherwise would have been.

Okay. So that was just you know you haven't finalized it yet so that's why the interest income impact was a little bit higher than it otherwise would've been.

That's right.

Speaker 13: I guess I wanted to go back also to the 70 million from Balboa. You said it was both NII and Fee's and it looked like you sold a little bit of the loans this quarter because there were some Fee's that went through Fee income. But they're running, I guess, with the, you know, near 700 million, you know.

I guess I wanted to circle back also to the $70 million for about Boy you said it was both NII and fees and it looked at and it looks like you sold a little bit of the loans this quarter because there were some some fees.

Through fee income, but there they're running I guess with the near 700 million you know.

Speaker 13: 9 to 10% kind of loan yield, they're running at about 70 million or so in NII right now. Already, and I know you have growth plans for that. And so I guess what's driving...

Nine.

9% to 10% kind of loan yield they're running at like about you know $70 million or so in NII right now already and I know you have growth plans for that and so I guess, what's driving you know it to be $70 million as opposed to something north of that for Bob I'll Anna for Blah Blah revenues.

Speaker 13: you know it to be 70 million as opposed to something north of that uh... for valbo and for valbo revenues

Yeah, so well.

Speaker 2: Yep, and so, well, you know, A, we're being conservative and so we don't want to over-promise and under-deliver and then the other pieces of included in that is in historically they sold some loans and we expect that to slow and put those on our balance sheet. And so again, those are projections and we didn't over-bake the projections for growth in that number.

Hey, we are being conservative and so we don't want to over promise and under deliver.

And then the other pieces are included in that is in historic there historically they sold some loans and we expect that to slow and put those on our balance sheet until again. Those are those are projections, then we didnt over bake the projections for growth in that number.

Speaker 13: Got it. Okay. And the A-triple on the Belbo, it looks like just all in with the 16.7. You called out it's running about 240 to 240. Some are in between there. Is that where you'll expect to run that going forward?

Got it okay and the a triple on the Bell boy It looks like just all in the 16 seven you called out it's running about $2 40 to $2 45 somewhere in between there is that is that we all expect around that going forward.

Speaker 2: No, again, what's bringing some of that up is that nine and a half million of the PCB lines that we brought the specific reserves over on those. So once those problems are worked out, that'll come back down to a more normalized kind of a not one and a half.

No and again was bringing some of that up is that $9 5 million of debt.

The P C D loans that we brought the B C.

Typically reserves over on those so once those problem loans are worked out that'll come back down to a more normalized kind of in that one one and a half.

Got it okay. Thank you for that and I guess, maybe moving away from I'll always specifically, if I kind of strip out the impacted by BOE M. P. P. P. It looks like core loan yields were down like 12 to 14 bps or so.

Speaker 13: Got it. Okay. Thank you for that. And I guess maybe moving away from elbow specifically, if I kind of strip out the impact of elbow and ppp, it looks like core long yields were down like 12 to 14 bits or so.

Speaker 13: I know you said it's been competitive, but I guess with a big chunk of the production, the total dollar production being CRE is, is it tighter spreads in CRE that's driving that? Just as it looks like a lot of banks are returning the growth mode and so should we expect, is that what's driving that? And should we expect tighter spreads to kind of persist a little bit?

I know you said, it's been competitive, but I guess with a big chunk of the the production. The total dollar production being CRE is there or is it tighter spreads in CRE. That's driving that you know just as it looks like a lot of banks are returning to growth mode and so you know should we expect is that what's driving that and should we expect tighter spreads to kind of press.

Just a little bit.

Speaker 3: Yeah, I would expect there to be continued pressure there for the near term.

Yeah, I would expect there to be continued pressure there for the near term.

Yeah, that's that's really what's exciting about bringing on the Balboa.

Speaker 2: Yeah, that's really what's exciting about turning on the Balboa. And again, this was, you know, Balboa was a way to use, you know, $800 million or $650 million of excess liquidity as well and put it to work at even a 10%.

And again this was you know Balboa as a way to use.

$800 million or $650 million.

Excess liquidity as well and put it to work at even at 10%.

Speaker 13: Well, help. Got it. Got it. Okay. And I'm mortgage Nicole. Just could you help me understand why the HFS portfolio didn't grow given the production you had and the implied kind of sales volume? I guess did you balance sheet any of that? And I guess if you are, you know, what percent of production are you balanced?

We'll help got it got it okay and mortgage Nicole just could you help me understand why the Hff's portfolio didn't grow given the production you had in and the implied kind of sales volume I guess it did your balance sheet any of that and I guess if you are.

What percent of production or your balance sheet.

Speaker 2: So we have not changed any of that strategy at all. What it really comes down to is that the production, as it slowed, it really slowed the last four to six weeks of the quarter. And so you think about the health or sale piece being a bucket that empties out the bottom and you refill the top. And so the last six weeks of the quarter is really when we sell that production start to slow. And a lot of that has to do with the holidays. And then that sounds superficial, but a lot of it does, people just don't do.

No.

We have not changed any of that strategy at all but it really comes down to is that the production as it flowed it really slowed the last four to six weeks of the quarter and so you think about the held for sale piece being a bucket that you know empties out the bottom and we felt the top and so the last six weeks of the quarter is really when we saw that production start to slow.

And a lot of that has to do with the holidays any of that sound superficial, but a lot of it is people just don't know.

Speaker 2: during that time and so we've already seen it kind of come back up a little bit in January closer to where we were in in November .

During that time and so we've already seen it you know kind of come back up a little bit in January closer to where we were in a in in November .

Speaker 13: got it. Okay, and I think you mentioned this in the in the deck or maybe it was released somewhere which you expected mortgage expenses to go down I think in the first quarter. I guess you know just given that production was down this quarter why didn't we see more of a decline in mortgage expenses this quarter in a whole.

Got it Okay, and then I think you mentioned this in the in the deck or maybe it was the release somewhere but your expected mortgage expenses to go down I think in the first quarter. I guess you know just given that production was down this quarter why didnt, we see more of a decline in mortgage expenses this quarter Nicole.

Yeah, and that's exactly what I just said the the fact that the production slowed the last four to six weeks Theres always a lag.

Speaker 2: Yep, and that's exactly for what I just said. The fact that the production flows the last four to six weeks. There's always a lag and says that the production had gone down in October . Then we would have seen those expenses start being cut November , December , but because the production flowed in those last six weeks of the quarter, four to six weeks of the quarter. So that's why we're saying that there's that lag. And so it's already starting to come out in January .

Instead this that production had gone down in October than we would have seen those expenses start being cut November December but because of production slowed in the last six weeks of the quarter four to six weeks of the quarter. So that's why we're saying that it'll it there's that lag in total it's already starting to come out in January .

Got it. Thank you and if you could help me tease apart the expense trajectory going forward, maybe setting mortgage and Balboa side.

Speaker 13: got it. Thank you. And if you could help me tease apart the expense trajectory going forward, maybe setting mortgage and Valboa aside. You know, a number of banks have talked about inflation every pressure is this year and you all have been pretty successful in hiring and I'm assuming that'll continue going forward. And so when you think about the core bank kind of setting aside Valboa and mortgage, you know, what are your expense growth expectations there, Nicole?

You know a number of banks have talked about inflationary pressures. This year and you all have been pretty successful in hiring and I'm, assuming that will continue going forward and so when you think about the core bank kind of setting aside Balboa and mortgage you know what.

Of your expense growth expectations there Nicole.

Speaker 2: Yep, so our expenses there are a very minimal increase. You know, like Palmer mentioned, for example, this last year we were able to hire 17 new bankers, but we had 21 exits.

Yeah. So our expenses there are very minimal increase them you know like Palmer mentioned for example, just last year, we were able to hire 17, new bankers, but we had 21 exit and so we were actually down a couple of hundred thousand dollars of expense in the core bank because of that that attrition in that.

Speaker 2: And so, you know, we were actually down a couple hundred thousand dollars of expense in the core bank because of that that attrition and that rehiring. And so we continue to find ways to kind of pay for that along the way. So minimal increases, I will say that I think wage inflation is real. And so we are obviously battling that, but we're trying to find other ways, you know, through lease expense or through, you know, other areas to kind of compensate and to pay for those other increases.

Rehiring.

And so we continue to find ways to kind of pay for that along the way. So minimal increase it I will say that I think wage inflation is real and so we are obviously battling that but we're trying to find other ways through lease expense or are there other areas to kind of compensate and to pay for those other increases.

Got it. Thank you for that thanks for that color and on the on the municipal on the municipal balances Nicole.

Speaker 13: Got it. Thank you for that. Thank you for that color. And on the municipal balances, Nicole, I think those peaked out about 750 in the first quarter of 2020, the down, you know, about 24% from there to today. I guess what's driving that? And what should our growth expectations be for that business line going forward?

I think those peaked out at about 750 in the first quarter of 2020, they're down.

24% from there.

So today, I guess, what's driving that and what should our growth expectations be for that business line going forward.

Municipal loans or municipal bonds.

Speaker 2: municipal loan sorry sorry should have been more specific. Okay sorry when you said municipal that was looking at the bond portfolio and then I wasn't following. No I meant I meant the loan portfolio sorry about that. Okay got it sorry that was my my looking at the wrong thing so no some of that has just been you know the economy and and COVID-19 and just some of that coming down but you know when we look at our 2022 growth rate we don't see a lot of that bill growing that's not where we're putting a lot of the growth.

Municipal loan sorry, sorry, I should've been more specific ones. Okay. Sorry, when you said municipals I was looking at the bond portfolio and then I wasn't following.

I met the loan portfolio, sorry about that okay got it sorry that was my my in looking at the wrong thing to the wrong thing. So no. There's some of that has just been the economy and COVID-19 and just some of that coming down but.

When we look at our 2022 growth rate, we don't see a lot of that book growing that's not where we're putting a lot of the growth.

Speaker 13: got it. Okay, and if I could sneak just a couple super fish ones in left the 40% variable rate does all of that reprice within 12 months?

Got it okay, and if I could sneak just a couple of superficial ones and left the 40% variable rate because all of that reprice within 12 months.

Yes.

Okay, and then I think we have that right.

Speaker 13: And then we have that record. Okay. Yeah, yeah, the extra 10%. I just wanted to confirm the variable rate that wasn't anything going on there. And then the, I know it's a small percent of your asset base, but just within your securities portfolio, what's the duration of it and what's the percentage that's floating rate?

Okay, Yeah, yeah, the extra 10% I just wanted to confirm that.

The variable rate there wasn't anything going on there.

And then the you know I know, it's a small percent of your asset base, but just within your within your securities portfolio.

You know, what's the duration of it and what's the percent of what's what's the percentage that's floating rate.

Speaker 5: Sure, we've got about 8% of the variable rate in the bond book, and it's about a three-year duration. Awesome. Thank you very much for taking. Thank you.

Sure we've got about 8% that's variable rate and the bond book and its about a three year duration.

Awesome. Thank you very much and you have got all my questions.

Oh, Yeah go ahead Mary.

Speaker 2: I just would say that other 10% that I said the fixed rate loans that the hay variable, they are also within a 12 month. They're actually closer to less than 10 months.

I wouldn't say that other 10% that I said behaved the fixed rate loans that behaved variable and you're also within a 12 months actually closer to less than 10 months.

Got it. Thank you very much for all the color on the time this morning I appreciate it.

Speaker 13: Thank you very much for all the color and the time this morning. I appreciate it. Thanks, Cody.

Thanks Jody.

Yes.

Speaker 1: Thank you. This concludes today's Q&A session. I'll pass the call back to Palmer Proctor, CEO , to be for any closing remarks.

Thank you. This concludes today's Q&A session I'll now pass the call back to Palmer Proctor CEO for any closing remarks.

Great. Thank you Emma and I'd like to thank everybody again for listening to our fourth quarter and full year 2021 earnings results and I'd also like to give a special shout out and thanks to all my <unk> teammates, whose hard work and dedication made this year. So extraordinary for a marathon all of our stakeholders and as we look forward into 2022, I think we're extremely well.

Speaker 3: Great, thank you Emma. And I'd like to thank everybody again for listening to our fourth quarter in full year 2021 earnings results. And I'd also like to give a special shout out and thanks to all my Maris teammates, whose hard work and dedication made this year so extraordinary for Maris and all of our stakeholders. And as we look forward into 2022, I think we're extremely well positioned to capitalize on our opportunities. And I continue to thank you for your support. Thank you.

Positioned to capitalize on our opportunities and continue to thank you for your support.

That concludes our call.

This concludes our marriage banks fourth quarter earnings conference call.

Speaker 1: This concludes Emery's Bank's fourth quarter earnings conference call. Please enjoy the rest of your day. You may now disconnect your line.

Enjoy the rest of your day you may now disconnect your lines.

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