Q4 2021 Guaranty Bancshares Inc Earnings Call
Q1 earnings call. My name is known a branch and I will be your operator for today's call.
This call is being recorded.
After the prepared remarks, we will have a Q&A session.
Our hosts for todays call will be tie absent chairman and Chief Executive officer of the company.
Kathy Payne senior Executive Vice President and Chief Financial Officer.
Schilling Jacobson executive Vice President and Chief Risk Officer.
To begin our call I will now turn it over to our CEO Tae oxygen.
Thank you Donna.
Good morning, everyone and welcome you again to our fourth quarter earnings call for guarantee Bancshares as we highlighted in our press release. This morning, the bank had a very good quarter in a really good 2021 for the full year achieving record results and.
Almost every financial metric that we monitor and track the asset quality the bank remains extremely strong.
We see a lot of positive things coming forward into 'twenty, two for our company and the opportunities for our company as.
As we take advantage of the footprint and the growth that we see and deposit things happened in the state of Texas going forward I want to turn it over to caffeine shalane and head into.
An overview of some of the results and then we'll open it up to Q&A Cathy.
Thank you Dan.
I'm going to give you a quick recap of the balance sheet I think we've got some quarterly highlights up on the screen for those of you that can see it in these obviously a very high level bullet points.
On the balance sheet income statement things, we're doing but I'll give you a little bit of color.
Added to that are our total assets were.
Three 9 billion at the end of the year, that's a very nice increase of $345 million or 12, 6%.
For 2021, this was really driven by a nice increase in deposits, which were about $384 million increase and I'll speak to a little bit to that little bit later.
A couple of items to note on the balance sheet, where we get it on the income statement, but our cash and cash equivalents, which is basically our fed bonds continued to remain elevated.
And they're even double what they were one year ago. So this is this is a really high level that creates some headwinds on our net interest margin. This is probably about a three times the historic level.
We've talked about in prior in prior quarters has continued to increase.
Mainly driven by that increase in deposits for.
For the quarter, though we did add to the bond portfolio and again, we've talked about this in prior quarters, we added about a net increase of.
The $85 million during the quarter to our bond portfolio and Thats about $150 million increase year to date.
And just to.
Just to do some consistently dollar cost averaging into the portfolio while rates have been historically low and we have been conservative in that regard and slow to pull the trigger.
To a large dollar amount with a larger dollar amount just because of low historic rates.
But this the amount in fed funds is probably putting a headwind on the NIM of 25 plus basis points.
Just depressing it just a little bit because of the excess liquidity.
But everybody wants to talk about loans, so we do highlight.
In the earnings release that you have our gross loan growth and then the detailed components of that but.
But then through Covid and the PPP stimulus program.
We have emphasized our core loan growth.
With X out PPP in warehouse lending.
For the year, we did have a little better than expected growth.
Our 2021 guidance.
Was for PPP for net loans net of PPP and warehouse lending was the high single digit growth.
And we ended the year at 10, 8% that represents.
About $176 million in loan growth.
I know Q4, we did show a decrease.
And actually.
And net net core loans of about $10 million, which was.
About half.
Half a percent decrease.
But we did have in Q4, some elevated pay downs again like we did in Q2.
Our loan fundings were pretty strong during the quarter pretty consistent with what they had been in prior quarters is just we did have additional pay downs.
In the quarter that they would.
Newer coming at some point in time, but it did come in Q4.
Our fourth quarter average loan balance, though you'll see in one of the tables, there was higher than in Q3.
So as our bond portfolio.
The reasons I mentioned that balance was higher in <unk>.
Q4 than Q3, so those aspects helped the margin, but again as I said the headwinds aspect of that was the cash component that.
That depressed it some because of its elevated balance.
As I said earlier the deposits showed a nice increase $384 million, that's almost 17% for the year growth of $108 million of that came in Q4, which is typically shows an increase in the fourth quarter.
Certainly a positive part of that deposit increase is that about 60% of that $384 million or.
Which is $235 million roughly came as an increase in non interest bearing DDA accounts.
12, 31 last year at the end of the year, our checking accounts were 38% of our deposits and they averaged all year for a little over 36%.
Deposit so we've grown the number of checking accounts really for the last three years in the 8% to 9% range.
So I think every one of our locations reflected an increase in deposits for the year.
So our staff is pretty focused on onboarding relationship accounts.
Which focuses on.
So.
Having a checking account a guarantee along with other deposits and other products. So.
That along with keeping our cost of funds manageable has really been a has been a positive trend.
Toward our growth for 2021.
And looking at the shareholder equity component it increased about $4 8 million for the quarter.
And $29 6 million year to date and again this is discussed in the earnings release.
That's a nice increase that helps maintain our common equity capital ratios even with that.
Over 12, 5% growth.
We've experienced in total assets for the year.
Again this quarter, we did not buyback any stock and again, we paid out a <unk> dividend.
The shareholders that made a year to date cash dividend of 80 cents, which was about 24% of our earnings per share for the year and at the current price level, that's about a two 2% cash yield on dividends.
And I'll remind you we did do a 10% stock dividend in Q1 of 2021 on top of the 80 cash dividend. So.
All of those components with the growth in stock really provided a total return for our stock for 2021 as most financial stocks reflected.
The next set of bullet points, let's turn it over to the income statement as Todd mentioned, we're very pleased with our earnings for the year, we had good fourth quarter and we had a really good earnings for 2021.
Our net earnings is detailed in the earnings release for the fourth quarter were nine.
$9 2 million that 76%.
<unk> per share per basic share as compared to $9 3 million in linked quarter, which was <unk> 77 per share in Q3.
Year to date earnings.
With $39 8 million at $3 30 per share thats compared to 2020.
Net earnings of 27 $4 million.
Our $2 25 per basic share so that's <unk>.
Really nice increase of course, we again talk about.
The components of that and a lot of that being the provision that we did in 2000 2020.
So our year to date return on assets was 136% I know we identify the Q4 for you there on the screen ROA and ROE.
And then looking at the year, we're really pleased with our return on assets of 136 for the year and our return on equity of $13 seven 2% year to date for 2021.
Again this quarter as we've shown in prior quarters, we do.
Detail out detail out for you in table format, a core earnings in this earnings release and Youll see that in the fourth quarter 2021 was one of the strong it was the strongest quarter in our core earnings.
In the last five quarters, a matter of fact, and we define core earnings as our earnings.
Our net earnings before provision for credit losses, before income tax and before the effects of the PPP loan activity, which obviously, we've had quite a bit for the last two years.
So our fourth quarter net core earnings were $10 1 million Thats 84 cents per basic share comparatively.
And looking at that as a compared to the linked quarter and Thats up from 81 per share.
We did not do a provision in the fourth quarter, nor did we do a release of provisions like we have done in the previous two quarters.
During 2021.
And because of that our ACL continue to grow a little bit.
Stayed steady in the fourth quarter, I guess, I should say and is 164%.
Ex PPP loan compared to X compared to loans ex PPP for the year.
Julian I'll give a little more detail on the components of our ACL and and and.
What we've done how.
How we've changed that over the last year.
So our net interest margin again was pretty steady for the quarter.
And fourth quarter, it was $3 three 9% as compared to the linked quarter of $3 four O. So not much change there when we look at the ex PPP activity, which we again show that and tax reform in the release.
Our net interest margin was 335 compared to linked quarter 336, again, various steady, but just to kind of show you the differences when we back out.
That went back out the loan PPP loan activity.
Our total loan yield actually increased in fourth quarter by four basis points to 471%.
And then if you back out again, the PPP activity that was 466% during the fourth quarter and Thats down from the previous quarter up 473% had been in Q3.
Very reflective of what is done all year.
When we put out.
Our loan yield for the whole year SPP was 475%.
Hi.
Yes.
For the year and Thats compared to <unk>.
Before adjustments for 84%.
So it's really it really showed that about not about nine basis points difference throughout the year and when do you.
Back out the PPP activity and Thats really generated from the fee income that we're recording.
Due to that did those loans you've made in the PPP program.
And our total cost of deposits continued to decrease looking at Q4, our total cost of deposits was 18 basis points.
Compared to linked quarter at 21 basis points in Q3, and then our year to date cost of deposits were 22 basis points.
<unk> two 2000 twenty's year to date cost of deposits of 54 basis points. So again.
It certainly supports our net interest margin and.
Probably pretty reflective of a larger percent of deposits being in noninterest bearing.
With certain which certainly helps not only in our cost of deposits, but in our.
Net interest margin component too.
Then looking at the noninterest income.
Categories are noninterest income did decrease 400000, that's about 6% in the quarter that catches your attention I realized couple of thoughts there.
All of that decrease plus a little more actually came in a decrease in loans sold in the secondary market.
Notice in the <unk>.
Comparative quarter Q3 that was the highest quarterly volume we've had all year and then by the way Q4 was the lowest quarter that we've had all year and traditionally is it is a lower volume quarter, but not typically by 30% as those numbers would reflect.
A couple of thoughts again.
For the gain on sale in 2022 project and a volume decrease of the 12% to 15% not 25% to 30% is reflective of this quarter.
Did we did lose a couple of originators that had some pretty good volume, we're looking to replace them pretty soon and I think we will and.
In 2022, so that will that will help offset that but with the shift of rates.
The increase in rates and the shift of refi versus new loans. The volume has slowed somewhat both in mortgage and in warehouse lending.
But another factor on the mortgage side is we we have decided to keep some mortgages in house.
We didn't we didn't do a whole lot of that in the last quarter in 2021, but we did keep about $8 million that traditionally would have been sold in the secondary market.
We've committed up to 2000 $25 million in that program I don't know that we'll get that high but.
We have committed to do keeps.
Keep some of those in house as a way to deploy some.
Some of our liquidity, but overall just to give a little guidance.
Duke project, our 2022 noninterest income to be an increase in total of around 5%.
Then looking at our noninterest expenses they did decrease for the quarter about 300000.
But you'll note that we did have a nonrecurring expense in Q3 and linked quarter of about 400000. So when you back that out our expenses actually increased about 100000, and we talk about that in the earnings release. Some of that is the FDIC insurance, but we did talk about and we did see some.
Salary.
Cost pressures in the quarter that we didn't.
It didn't really planned for but we think that that.
Some adjustments that we've already made and I'm pretty confident that we'll continue to deal with that going forward as most companies are and trying to keep staff are appropriate staff.
<unk> staffed going.
Going forward I think that will continue to be some cost pressures there.
And salary.
And we also did disclosed in the release that we had some increases employee benefit cost, which specifically with the <unk> health insurance claims that were higher.
This year than in prior years.
So in looking forward and looking at 2022 expenses last quarter I think I told you that we were projected at a $75 million range I think that probably is going to be in the 76, maybe $76 million to $77 million range going forward, we do have quite a few job openings posted.
But I think we will get filled throughout the year some of them will be coming up in a little bit later, even with anticipated growth, but we have quite a few jobs.
Positions posted.
Of which a lot of them are production oriented. So if we add if we add to some of the production staff certainly we think we will be able to continue to grow.
And the markets that we're in and the regions that we're in so.
So that's kind of a high level.
<unk> of the balance sheet and income statements I'll turn it over to Shalane and leather continue on.
Thank you Cathy and then Fred.
Quickly the COVID-19 response, and harmony deferrals related to that.
The PPP program.
Like the rest of the nation.
<unk>, Texas Tam.
Most of our businesses and restaurants have remained open.
For the most part all of our bank locations are open and employees are back in their branches, except if we have temporary lobby equations <unk> staffing shortages from positive to the past.
And typically five days effect.
This location.
We did rollout of remote work policy for conditions that are conducive to that type of arrangement, which has really been helpful. Latest variant because we've been able to quickly transition back office staff to work from home more.
More efficiently and hopefully reduce the likelihood of further spread.
<unk> safety.
<unk>.
Okay.
As I mentioned on the third quarter call all of the borrowers you received a COVID-19 related modification have returned to their contractual payment schedules.
We currently have no <unk>.
Any comments coming related to final program.
Pvp update but forgive me if this has been going very well during this year actually ended up <unk>. One program. We only have about $1 3 million remaining on our books and most of those are now in our P&I schedules.
Be repaid from borrowers who are they.
Most of them still have the opportunity to be forgiven.
They happen to go delinquent.
FCA to repay that began team.
So the GBP 10 program we started.
Mariana and had about 49 3 million remaining on our books now.
<unk>.
Under both programs, we have about one 2 million net of current feedstock.
<unk> recognized currently think about publicly.
As far as if I guess, if it keeps going like it's scaling recognize that a significant portion of that $1 2 million in 2022.
Next.
The overall loan portfolio credit quality.
And as Kathy mentioned and I, just mentioned our borrowers so far weather, the Covid storm pretty well and the Texas economy is strong.
We can expect to have good loan growth in 2012. However.
Hi.
Things down and we think rising rates and 8% headwind.
The new production side, we're estimating high single digit growth for now and 2022.
The Austin area in our Central Texas region.
Late 2021 and it really is our fastest growing region. We've recently opened locations there one in Georgetown, which is a suburb north of Boston.
<unk> 2021 at the moment and then when Enlink way, which is just west of Boston and Thats actually officially ethylene today. So we've got a great team there and look forward to strong growth in that region as well as growth in our other regions.
As Kathy mentioned ex PPP and warehouse, our acquired loan portfolio was down slightly less than 1% in the fourth quarter, but it was up about 10, 8% during 2021.
The slight decrease in Q4 was really driven by land payoffs out outpacing production like Kathy said.
Including our warehouse loans growth was down about 2% in the fourth quarter.
The decline in our warehouse line balances is partly the resultant lower volume markets refinancing.
Prior bank is primarily due to several of our larger warehouse customers moving from a delegated channel rather than a non delegated channel.
Which can certainly be more profitable to them, but we actually don't offer delegated products due to the higher risk by banks.
More conservative with particular lines of business.
So we're fully back filling with some new customers.
Warehouse lines will likely remain balanced it's much similar to Q4.
In the coming year.
And on a positive note as Kathy mentioned, we think our loan yield has held up well during the past couple of years as rates went down our average loan yield ex PPP is $4 six 6% for Q4 and with 75% for the year.
And finally with respect to <unk> yields there as we've mentioned on private prior call. Thank you have a large amount of our portfolio with rate floors, which we're monitoring closely to understand how that will impact.
And when rates begin to rise again.
We currently have about 727 million or 38 seven.
7% of our total loan portfolio.
Their interest rates lawyer, right now and that average rate of first mindset that slide 429%.
So if rates increased 75 basis points during 2022, which seems to be a popular increased expectation.
26, 3% at those loans that are currently at that rate plan will reprice at a higher rate.
With respect to non performing assets, our credit quality really despite the continuing challenges with our credit quality remains very good although we're remaining cautious with our allowance from service because.
Many of the economic stimulus program to come to an end and we really want to closely.
More further monetize and possible effects of both programs can EQM.
So our nonperforming assets as a percentage of total assets was <unk>, 9% at the end of the fourth quarter 'twenty, one and our net charge offs were also down in Q.
188 platform.
What percent.
<unk>.
And finally to the allowance for credit losses, as Kathy mentioned, we had no reserve reverse progression during more credit shneur reverse provision during the fourth quarter, and we had a $1 7 million reverse provision for the year.
We had expected and hoped at the beginning of 2021 that we'd be able to fully online.
Key factors that we built into our model during 2020, which amounted to about 55 basis points across that portfolio.
However, because thats the delta.
Barry into first Amit.
<unk> followed that.
We chose to slow that down.
About $14 five basis points related to the specific factors still in our portfolio.
Calculation of sites and we've chosen to be very cautious with lending. The key factors just because like I said, we want to impact.
We want to understand how these varian to impacting the economy as well as understand help borrowers might be affected by the economic stimulus programs coming to an end.
So hopefully.
On the crime begins to slow down and when we understand what borrowers taking out the economic stimulus will be able to further online now.
Our fourth quarter allowance for credit losses, as a percentage of total loans was 159%.
Ex PPP was one 6% so we still have a pretty pretty strong reserve in place.
That is the end of our prepared remarks, so I will now turn it back over to Luna for Q&A.
Thank you Celine.
If you now that it's time for our Q&A. If you have a question you can hit the raise your hand button.
At the bottom of your screen, if you're participating by telephone you mentioned star nine that will raise your hand and star six will mute your line.
Our first call today.
Yes, Michael Rose and he's with Raymond James.
Michael you should be able to meet your line yes.
Yes got it can you hear me yes.
Yes, Sir Michael Great. How are you guys.
Good.
Good so I just wanted to circle back to some commentary around the loan growth. Obviously this quarter was a little softer it seems like paydowns are to blame for the year, though over 10% it looks like youre guiding to high single digits. This year is that more a function of just maybe you had some accelerated growth from some of your.
Higher as this year is there greater paydowns as expected are you being cautious just given the strength of the market. Because you mentioned pipelines are still pretty solid.
Can you just give us a little bit more color as to how you get to that high single digit rate.
Yeah.
Hi, Michael This is Todd I'll take that so it's a combination really of all three I mean, our.
<unk> has always had a very short duration. So we had a pretty robust paydowns.
Throughout the year.
And then where we are.
We're sourcing new relationships and opportunities, it's obviously bumpy through the year as far as different.
Times of the year. It took me a we're able to look different.
Different fundings that we have in the pipeline so.
We're still we're still very pleased with kind of where we landed for the year.
And loan net loan growth, we're looking at 'twenty, two and probably modeling out in the high single digits again part of it is just being a little cautious to like we know where we are.
With some of the unknowns out there, but again, we still see a lot of strength in all of our markets and all of our regions in Texas.
<unk> said the majority of our growth.
Now the biggest percentage of our growth is coming from Central Texas region, Austin MSA Bryan College station, but we're also seeing.
So really strong growth in opportunities in Houston Dallas So.
Still a lot going on in our save a lot of positive things happening.
But we designed the portfolio.
He has to have a short duration so.
To get the net growth we want to have it we're constantly playing catch up like a lot of a lot of banks are trying to book new production to offset the pay downs are in the portfolio.
Alright.
Okay. That's helpful. And then maybe just circling back to the excess liquidity and the growth in the Securities book This quarter.
I know you guys arent that rate sensitive.
At this point, but you do have still a fair amount of excess liquidity. It looks like you built the securities book.
Pretty nicely this quarter can you just give us the expectations for.
Further securities redeployment as rates rise and then.
How should we think about the pace of that just given the assumption of the forward curve. Thanks.
So Michael Kathy said, we continue to buy additional securities each quarter and.
You can look at a 5% to 10% increase probably each quarter.
As a good benchmark and that's again net growth.
In addition to covering whatever bonds, we have that are paying down.
We're still doing that and being cautious with how we step into the market and so we're going to maintain excess liquidity. The other piece is as rates rise we may start to see in some of these excess deposits start moving out.
The plan is to be very disciplined on the cost of fund side of the balance sheet too. So we're kind of keeping some dry powder for that as well.
Okay, and then maybe just finally for me it does seem like the expenses for you and everybody else are going to be.
Little bit higher.
Unexpected.
But fee income growth still good I mean is the expectation that ex PPP that you guys can still drive.
Or is it a operating leverage this year is that a good way to think about it.
Please go ahead Sir.
Yes, Michael I mean, that's our that's our plan very specifically.
We know we're getting out of the PPP volume, but where we're going to continue to put the producers on the ground that can grow in the markets, we're in and Theres a cost theres a cost to that.
And as I said earlier, we've got quite a few job postings open and that includes backhaul as well as personal bankers as well as production staff.
Yes.
Great I appreciate you taking all my questions. Thanks, Michael Thanks, Michael.
Okay.
Right.
Donna back to you.
Our next call is from Brad Milsap with Piper Sandler.
Hey, good morning, good morning, Brad.
Correct.
Thanks for taking my question I, just wanted to follow up on some of <unk> comments around the variable rate loan portfolio.
No. It's correct. So if you have did you have about $1 billion $2 50 of total variable rate loans that will leave about.
$501 million or so that would reprice immediately is that is that the correct way to think about it.
Yes. It is.
Okay, and then just curious.
Kind of where some of your new <unk>.
Fixed rate production is coming on the balance sheet. These days I think maybe last quarter, you mentioned and that kind of four to four and a quarter range, but just kind of curious kind of what youre seeing out there versus what's being paid down versus what you're putting on.
That's why we're still seeing it Brad is in the low fours.
<unk> seen some in the high threes to but we averaged even through the fourth quarter, new loan production being in the low 4% range.
Yeah.
Okay, Great and then.
Just on the bond portfolio.
Yeah.
I'll be curious kind of where youre seeing new yields coming on the books I think Cathy.
Missing me before that you guys use kind of a level yield method.
The available for sale yields jumped from like $1 48 up to 175 linked quarter.
I wanted to get a better sense of kind of where we are that's the kind of settled.
Given some of the volatility in those numbers.
We do use the level yield method, Nebraska.
As you mentioned, which keeps it keeps it pretty steady from the fluctuations of the amortization.
But where.
We're looking at.
And new bonds today in today's market.
It should be headed up and what we're seeing the tenure is increasing but we have been buying bonds in the five year average life five six year average life around 2%.
So I think that as a 10 year starts increase in or if it does which I anticipate it will that should improve from there.
Okay, Okay great.
You can kind of think about your cash.
Plus kind of what you have left over in PPP.
Maybe you can reduce that by a little more than half over the next 12 months. If you. If you continue to buy bonds at 5% to 10% a quarter is that is that the way to think about it.
Yes.
Go ahead Bryan.
Brian that's a good way to look at this is Todd that's a good way to look at it in kind of a kind of an artificial target between loan growth between.
Quarterly bond purchases and just.
At some point anticipated deposit side either to level off <unk> start some of that may be slow it out.
Would be a good target at least in the back of my mind to try to kind of cut that in half through the year.
As I said, that's about three times the rate that we've had or the level we've had.
Historically, so you haven't cut it in half would be.
I think that would that would.
That would be very predictive I mean, the biggest the biggest challenge that that in itself. It is.
It's kind of baked in is that we're also continuing to develop core deposit relationships as Shelley mentioned, because we see that as a real driver to franchise value. So I mean, we're not out of the deposit business were very aggressively growing core deposit relationships.
So we're in there we have modeled out for 'twenty two to do the same thing.
But that being said, we're certainly not chasing excess deposits due to our excess liquidity we have.
Yes.
Okay and just final question I, just want to make sure that it's very helpful. Thank you just say Lee just so I understand the commentary around the floors.
You said, 26% of the loans have floors would need rates up 75.
To move does that imply that the other 75% would need a higher move in rates.
Or would those floors be lower than the average.
Well, it's really more of a combination they would need either higher rates or they don't repriced in 2020, <unk> III price data later than 2022 for the most part.
Okay. So those are variable in the sense that they don't maybe reprice immediately but might reprice over a one or three year period, something like that exactly.
Okay. Okay very helpful. Thank you guys. Thanks, Brad.
Our next call will be from Brady Gailey with <unk>.
Hey, Thanks, Good morning, guys, Hey, Brian .
So auto guarantee in 2020 and early 2021.
Made an investment in some new loan producers I was just wondering kind of how that looks in 2022 or do you think you will continue to make notable investments in new lenders or do you think youre kind of happy with what you have and youll be able to hit this kind of high single digit growth with what you have today.
Yeah.
Hey, Brady this time so.
There won't be a targeted net increase and producers that being said, we're constantly onboarding new producers in all regions.
And so.
We will be and are currently actually onboarding, new wheat producers throughout our footprint, but that will not necessarily create net increase for us.
And producers.
Okay, and then I noticed the affair.
The tax rate was a little lower than normal at about 17%. This quarter I think normally are 18%, 19% how should we think about the forward effective tax rate.
Brady, it's going to be in the 18 18, 5% range I think we did have a true up on deferred tax this quarter that adjusted at a little bit.
But we're targeting 18% 18, 5%.
For 2028.
Alright, and then finally for me just an update.
M&A always seeing some activity.
In Texas on the bank M&A side.
Are you guys still looking at targets and do you expect to be active in M&A. This year.
Brady, we do that being said like we've said before.
We're looking for opportunities that are accretive to what we're modeling out.
That we can generate and plan to generate internally and so.
We get obviously, we had calls quite a bit but nothing specific at this point and there is there is an opportunity that makes sense to bolt on to what we're already planning to produce and we will certainly take advantage of that.
But we don't have anything specific that we're targeting at this point other than just having conversations looking for the right opportunity.
Okay got it. Thank you guys hey, Thanks Brady.
Sure.
Our next call will be.
From Matt Olney with Stephens.
Hey, guys. Thanks for taking my question.
Wanted some clarification around some of the commentary you provided around.
The non interest income.
Kathy I think you mentioned a few items around.
Gain on sale, which for 'twenty two versus 21 can you just kind of reiterate what that was and then for the overall fees for the year.
I wrote down 5% increase whats the baseline that you're using on that 5% increase.
I think we did about $23 million during the year.
Four.
$24 million during the year for 2021, so that's the baseline so I'm talking about a 5% increase from their overall and thats with a.
A decrease in gain on sale of loans of about.
12% to 15%.
Okay.
Got it okay.
And then clarifying the outlook for the loan growth high single digit does that include or exclude the mortgage warehouse.
Exclude that excludes.
Uh huh.
And then on the mortgage warehouse I guess I'm less familiar with the delegated versus non delegated loan channels.
Any more details you can give us on that to help me appreciate kind of what the what the change was in during the quarter.
Yes, Matt this task so that so the delegated versus non delegated those are two different channels in the mortgage warehouse space and we stayed in the <unk> and the non delegated channel, which are good I mean.
So.
Greater Digest version of this is I mean, those loans are preapproved by the investor on the backend.
So it's.
It's a it's a channel that just has.
Less risk from our standpoint.
We're not we're not at this point.
It is to scale that operation up.
To actually add delegated, which does that opportunity, but also as a risk profile that we're not ready to scale up too. So we're going to stay kind of in that non delegated channel and.
So.
It depends on what the market's doing as markets as underwriting changes different places that.
Non delegated class, we're able to actually obtain delegated channels.
Mortgage mortgage warehouse lines that we're not doing and then we try to backfill that and onboard new relationships to cover it.
Okay.
That's helpful. Thank you for that.
And then on the loan yields. Thank you mentioned, excluding PPP core loan yields were down around seven basis points. Thank you disclosed the new renew loan yields already.
For the Paydowns in the fourth quarter I'm curious if those paydowns came with higher loan yields I'm just trying to appreciate kind of why the loan yields were down seven basis points.
Well.
Matt the loan I have the dollar amount of loan payoffs I don't have the yield that goes with it.
I don't know exactly what what they what that would be but I can tell you that.
<unk> income moves around the margin officer or the loan yields quite a bit Pete the fee income from the PPP, which which has really tapered off.
Quite a bit as we get down below $50 million in total outstandings in we've got about $1 million.
One left to book, but I think for the most part of that fee income that will get booked in 2022 as we approach zero in PPP loans in sometime during the year, but.
I say all that to say, it's all we're showing the ex PPP loan volume just to kind of take out that noise.
But the answer to your question I don't know specifically, if those payoffs were from higher yielding loans.
I can I can find that out and get back with you.
That's helpful. Kathy would you say that the mortgage warehouse loans that were also paid down this quarter I would think those would be lower yielding loans versus the rest of the book is that a is that a fair assumption you think yes. It is.
<unk>.
Okay.
Okay. That's all for me thanks, guys.
Thanks, Matt Thank you Matt.
As there are no further questions.
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Okay.