Q4 2021 Allegiance Bancshares Inc Earnings Call
Good day, and thank you for standing by and welcome to the Q4 2021 allegiance Bancshares, Inc. Earnings Conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that this call is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your host today Courtney zero cheap.
Accounting officer.
May begin.
Thank you operator, and thank you to all who have joined our call today.
Morning's earnings call will be led by Steve Retzloff CEO of the company over to Lee President of the company and see Oh allegiance Bank, how Aggie executive Vice President and CFO .
An aching executive Vice President and Chief Risk Officer at the company and President of allegiance Bank, and Shannon Cutrell Executive Vice President and General Counsel.
Before we begin I need to remind everyone that some of the remarks made today constitute forward looking statements as defined in the private Securities Litigation Reform Act of 1995 at the minute. We intend all such statements to be covered by the safe Harbor provisions for forward looking statements contained in the act.
Also note that if we give guidance about future results that guidance is only a reflection of management's beliefs at the time. The statement is made and such beliefs are subject to change we disclaim any obligation to publicly update any forward looking statement, except as may be required by law.
Please see the last page of the text in this morning's earnings release, which is available on our website at allegiance Bank Dot com for additional information about the risk factors associated with forward looking statements.
We also have provided an investor presentation on our website, although it is not being used as a guide for today's comments. It is available for review at this time.
At the conclusion of our remarks, we will open the line and allow time for questions.
And now I'll turn the call over to our CEO Steve Retzloff.
Thank you Courtney and good morning, everyone, who is participating with us on today's call. We thank you for your time and interest.
The impressive themes from the third quarter of 2021 continued their march into the fourth quarter. Fortunately me to sound a little redundant, but in a good way as our net income of $21 6 million or $1 six per diluted share was the result of both strong core performance, but also the beneficial contribution from further PPP fee income recognition.
And a prudent but significant increase in investments due to continued liquidity expansion.
For the full year, we set new records all over the place record earnings of $4, one per share and new highs in key balance sheet components, and putting such as securities core loans deposits capital in total assets.
Our shareholders should dominantly celebrate the higher earnings, but we've also declared another increase in the dividends being paid.
Not only a bigger bank, we're getting better every day and 2021, we originated a record level of new loans, which as it was predominantly granular represented a courageous effort by all of our bankers in the field. We grew our core loans in the fourth quarter at an annualized rate of seven 5%.
Our asset quality statistics are even better than before highlighted by fewer that nonaccrual loans and zero owari at year end with the continued strong allowance for credit loss position. This resulted in a higher NPA coverage ratio.
Alright, uncertainties going into 2021, we just did not experienced very much in the way of net charge offs for the year, which I believe can be attributed not only to continued solid underwriting, but also a well conceived and executed pandemic assistance program great work by our special assets team and the Houston regional economy that is more resilient than people.
Sometimes realize.
It does not only it's not always easy to be succinct. When you want to fully describe something so that others, who are not seeing it firsthand can gain a full appreciation ray and Paul are about to provide the details which represent clearly impressive results and a strong balance sheet position I want to lean into our excitement for what is being accomplished in addition to the numbers.
As you know, we announced a merger of equals during the quarter with <unk>.
The announcement was the result of a year long work between our executive team members and our respective boards since announcement, our joint integration team has been formed conversations between function of apartments are becoming frequent and people are getting to know and in many cases getting reacquainted with one another while change is often referenced as a <unk>.
<unk> factor and it is real our two teams are rapidly adopting unified approach as they collaborate and take on the responsibility of putting these two organizations together I could not be more pleased by how a strong sense of one team one future is being formed this.
This is clearly clearly unexciting time at allegiance as we continue to embrace our quickly expanding role as the Premier community Bank headquartered in our region.
As such I am proud of our financial and volunteer commitment to local outreach as we continue to support our community.
No I think just two of many we recommitted to support the Houston Food Bank in 2022, which for those of you unfamiliar the Houston Food Bank is the largest food bank in the country and is able to deliver annually well over 150 million pounds of food to our region through 1800 distribution partners, which not only rescues.
Those with food in securities, but can also serve to supplement rising expenses for financially challenged families.
We have also been deeply involved with the formation and funding of our banking program at Texas Southern University, one of the nation's largest historically black universities with the vision that <unk> will fill the educational needs for those students interested in pursuing a career in banking with that I'll turn it over to Ray for a more detailed review of our operational results followed by Paul who will cover our.
Our financial results.
Thanks, Steve.
Through the first three quarters of 2021, the story was record levels of loan originations with signs of loan growth building each quarter.
The fourth quarter was no different with $450 million in core loan originations, but with meaningful growth as core loans increased $75 million during the quarter or seven 5% annualized.
I know our lending team and everyone that supports the lending function, we're happy to see the fruits of their hard work in the form of core loan growth that was driven by higher levels of initial fundings on the originated loans and some welcome relief and the level of paid off loans, which was lower than the prior two quarters.
For the year, we originated $1 6 billion and core loans up 44% from the $1 1 billion in 2020.
In addition, we originated $380 million in round two of PPP loans.
Total loan originations for the year to 2 billion setting a record for the bank.
It's the team effort from our bankers that generates these type results and positions. The bank for continued success as we attract new customers and expand existing relationships.
And speaking of our team 2021 saw nine new lender additions with four hires from outside the bank and five promotions from our lender development program.
As we progressed with the M O. We feel good about continuing our track record of attracting top lending talent to join the pro forma company.
Moving now to our quarterly operating results, our staff and lending team, but the previously mentioned $450 million of new core loans that funded to a level of $327 million by December 31.
Compared to the third quarter with $454 million of Newport loans were generated which funded to a level of $293 million.
The weighted average interest rate on the new fourth quarter core loans was 4.48%.
Compared to the weighted average rate charged on new third quarter core loans of four 5% to 7%.
And for 54% in the second quarter of 2021.
Paid off core loans were $223 million in the fourth quarter compared to $290 million in the third quarter.
The core loan payoffs during the quarter had a weighted average rate of 497%.
Carried core loans experienced advances of $124 million at a weighted average rate of $4, seven 8% and paydowns of $160 million, which were at a weighted average rate of 493%.
All in the overall period end weighted average rate charged on our funded core loans decreased four basis points ending the quarter at 483% compared to 487% as of September 30.
With the core loan growth of $75 million for the quarter. We were pleased to report core funded loans of just over 4 billion setting another record for the bank.
Turning to asset quality nonperforming assets, including both nonaccrual loans and Owari ended the fourth quarter at 34 basis points of total assets.
<unk> from 44 basis points in the third quarter.
Nonaccrual loans decreased a net of $4 3 million during the quarter from $28 4 million to $24 1 million, primarily due to $5 6 million in payoffs.
620000 payments $1 1 million in charge offs and $3 $4 million in upgrades placed back on accrual.
Partially offset by $6 4 million in additions.
<unk> sits at zero at December 31, as the two residential properties at September 30 were sold during the fourth quarter.
And charge offs for the fourth quarter totaled 13 basis points annualized, but we're very pleased with the full year 2021 charge off level of five basis points, especially given the challenges and uncertainties of the pandemic.
In terms of our broader watch list our classified loans as a percentage of total loans increased slightly to 386% of total loans as of December 31.
Compared to 383% as of September 30.
Criticized loans decreased to 536% at December 31 from 537% at September 30.
And specific reserves for individually evaluated loans ended the quarter at 15, 5% of total reserves compared to 17, 5% at September 30.
We continue to keep a close eye on various loan categories that may have heightened risks due to the pandemic.
Including our hotel portfolio, where we feel it will take more time for financial performance to see a return to pre COVID-19 levels.
At December 31, our hotel portfolio totaled $115 million or $2, 81% of our funded loans.
With a weighted average LTV of 61, 1% on the $112 million Thats categorized as CRE.
A 30% stress test on the LTV, plus 6% and marketing expenses would result in a $4 $5 million shortfall on the portfolio.
In aggregate our asset quality at quarter end remained in a manageable position with zero owari lower levels of nonperforming loans and improved allowance coverage ratio and single digit charge offs for the year.
As good as ever in most asset quality metrics.
On the deposit front total deposits increased $381 million in the fourth quarter compared to the third quarter and were up $1 1 billion over the year ago quarter.
We continue to see solid growth in noninterest bearing deposits that contributed to the quarter to date increase primarily the result of new customer acquisitions as well as higher balances in our carried accounts.
With that our noninterest bearing deposits to total deposit ratio was 37, 1% for December 31.
Compared to 36, 8% for September 30, and.
And 34, 2% for the year ago quarter.
In closing the Houston region created 152000 jobs in 2021.
Which set a record for employment and employment growth for the region.
This strong growth is welcome as both population and job growth drives demand for many of the goods and services that are provided by our bank customers.
As the largest community bank that is focused on the eastern region, we were as well positioned as ever to deliver growth and market share gains as we carry the momentum from the fourth quarter into 2022.
I'll now turn it over to our CFO Paul.
Thanks, Brian we're really excited to report another outstanding quarter to cap off a record year of earnings net.
Net income for the fourth quarter of 2021 with $21 6 million or.
A $1 <unk> per diluted share as compared to $19 1 million or <unk> 93 per diluted share in the third quarter and $15 9 million.
<unk> 77 per diluted share in the fourth quarter of 2020.
Net income for the full year 2021, with $81 6 million.
Or $4 <unk> per diluted share as compared to $45 5 million or $2 22.
Sure for the full year 2020.
These record results were driven in part by PPP related revenue.
Provision for loan losses, and lower funding costs.
All partially offset by M&A.
Related expenses among other things.
Our pretax pre provision income for the fourth quarter was $23 8 million as compared to $25 9 million in the third quarter and $24 2 million in the year ago quarter.
Note that the fourth quarter included elevated expenses, which we'll discuss later in.
The most significant being $1 $4 million in M&A related expenses.
For the full year 2021, our pretax provision income with $97 $6 million compared to last year at $83 $3 million.
Net interest income once again with a key driver to our pretax pre provision earnings power during the quarter.
As we reported $58 1 million for the fourth quarter, which is just slightly down from the $58 2 million in the third quarter.
Despite a decrease of $1 $4 million in Pvp revenue.
<unk> recognized on PPP loans compared to the third quarter.
Net interest income was up $3 2 million.
$54 9 million for the fourth quarter of 2020.
This was primarily due to the Pvp revenue recognize and lower interest expenses during the fourth quarter of 2021.
Total net fee revenue related to PPP loans, recognizing the interest income during the fourth quarter with $5 $9 million.
Compared to $7 $4 million in the third quarter and $6 million for the fourth quarter of 2020.
Interest expense decreased by $200000 during the fourth quarter of 2021 compared to the third quarter and decreased $2 6 million compared to the fourth quarter of 2020.
Before moving on I should note that ads as of the year end 2021.
After recognizing $5 $9 million in TTP fee income into yield during the fourth quarter and a total of $26 6 million for all of 2021, we had approximately $4 $9 million of net deferred fees remaining related to PPP loans.
To recognize in the future.
Yellow loans with $5 three 2% in both the fourth quarter of 2021, and the third quarter as compared to five 9% for the year ago quarter.
Excluding PPP loans and related revenue yield on loans would have been $4, 95% for the fourth quarter, 5% for the third quarter and $5, one 1% in the year ago quarter.
Total yield on interest, earning assets was 386% for the fourth quarter down from four 3% in the third quarter and $4 seven 1% for the year ago quarter. These.
These trends are primarily reflective of changes in interest rates and a significant mix shift of our growing earning asset base towards the higher proportionate lower yielding securities and cash.
With respect to interest expense, our cost spend liabilities continued to track downwards in the fourth quarter to 56 basis points from 61 basis points in the third quarter and 93 basis points for the year ago quarter. This was driven principally by CD repricing.
The overall cost of funds for the fourth quarter was down to 36 basis points versus 44 basis points in the third quarter.
Once again this is thanks to repricing and a higher proportion of noninterest bearing balances.
We look forward to continued deposit optimization in 2022.
So as we look at our tax equivalent net interest margin lower Pvp net fee income recognition along with lower interest expense in the fourth quarter and a significant shift in the composition of our earning assets resulted in a margin of 357% for the quarter as compared to three 9% in the third quarter and $4 one 4% in a year ago.
Quarter excluding.
Excluding PPP loan balances and related revenue the net interest margin would have been $3 two 8% for the fourth quarter and 357% in the third quarter.
Notwithstanding structural decreases in our go forward NIM profile due to significant shifts in our average earning asset mix. We are really pleased to see core net interest income excluding pvp fee income growing nonetheless, thanks to the larger balance sheet.
Moving on to noninterest income it increased to $2 5 million for the fourth quarter from $2 1 million in the third quarter, primarily due to a mix of factors, including a 2200 $22000 recovery on an acquired loan that had been fully reserved for with an associated credit Mark.
We've been very pleased to see significant year over year increases in our interchange income at this line item increased to $3 million for.
For the full year 2021, compared to $2 $2 million in 2020.
Total non interest expense increased in the fourth quarter to $36 7 million compared to $34 3 million in the third quarter.
This was largely due to acquisition and merger related expenses other professional fees tied to strategic initiatives to improve operating leverage and a $626000 prepayment penalty on $50 million of Paydowns that we that we chose to do for our high cost of <unk> borrowings during the quarter.
Aside from these items, which we consider to be one off we are pleased to be holding the line on expenses.
Accordingly, our efficiency ratio for the fourth quarter increased to 66, 8% compared to $56 nine 1% from the third quarter.
Our efficiency ratio for the full year of 2021 50, 886% down.
Down from 65, 5% for the full year 2020.
Moving on to credit we recorded a recapture of provision for credit losses of $2 $6 million during the quarter.
This is primarily reflective of recent improvements in certain economic factors.
Our allowance for credit losses on loans ended the year at $47 $9 million, representing 114 basis points of total loans and 118 basis points on core or non PPP loans.
Bottom line, our fourth quarter <unk> in our OTC metrics came to 123% and 15, 5%, respectively, while our full year 2021 row.
<unk> metrics were $1 two 4% in 2014, 93% respectively.
<unk>, representing very strong results.
Year end tangible book value per share with $28 43.
<unk> for an increase of approximately 11% from our prior year end.
Notwithstanding dividends and some share repurchases that we did at the beginning of 2021.
And more recently the company declared an increase in our dividend rate to <unk> 14 per share quarterly.
Up from up 16, 7% from our prior quarterly dividend pace of <unk> 12 per share.
As we look back at 2021, we crossed over $7 billion asset Mark with profitability capital and liquidity levels at or near all time highs.
We look forward to the expanded opportunities for growth in 2022.
Particularly as it relates to our pending merger with <unk>.
I'll now turn the call back over to Steve.
Paul with that I'll now turn it over to the operator to open the line for questions.
And thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question question <unk>. Please standby, we compile the Q&A roster and our first question comes from Brad Milsap from Piper Sandler Your line is now open.
Hey, good morning.
Morning, Brad.
Glad to see a rebound in loan growth this quarter, just kind of curious.
You know kind of how you guys are thinking about two.
2022, as you come together with <unk> is kind of a high single digit rate something you feel pretty good about being able to achieve I know, there's a lot of moving parts of the merger, but just just kind of curious kind of how you're thinking about loan growth this year.
Hi, Brad.
Yes, I think thats, a good way to look at it.
Obviously, we got a.
<unk>, we're still working on what we have to work on it.
As our individual banks, but.
Going into the first quarter.
The pipeline as we've been taking a close look at pipeline it looks it looks healthy and kind of similar to what we had in the last two quarters of 'twenty, one that really generated these record origination.
Level, so feel good about.
Entering the having the momentum entering 'twenty two on the loan growth side.
In the spirit of controlling what we can control our production.
Really at all time highs and we're feeling we're feeling good and see some green shoots around the fact that the fourth quarter levels.
Pay downs.
Starting.
Tether up sell.
That's a big thing for us to look at as we look into 2022.
We looked at earlier in the year 'twenty, one we said we might pursue some larger relationships.
As the bank gets bigger we were doing that and we're seeing some activity in that area too. So that gives us some upside potential I think as well going into 'twenty two.
So it's positive.
Great and Paul just in that same vein I mean, you grew the securities portfolio.
Folio almost.
$600 million linked quarter.
Period end, you had a little over $700 million of cash what's your what's your appetite.
For additional bond purchases, you know kind of vis vis the opportunity to.
Put more of that to work in the loan portfolio.
Certainly well.
Our highest and best use of.
Our liquidity into loan growth so.
Fear not securities purchases.
Getting in the way of loan growth really what we're trying to do from the standpoint of managing our liquidity position is.
We feel pretty strongly that over 10% of our assets in cash is that.
At the right position for the bank.
So we were engaging in securities purchases pretty meaningfully in the fourth quarter, mostly in the back half of the fourth quarter when the rate backdrop got a little bit better.
So long and short we want.
To be investing in loans and securities are really just.
Where we go to the extent of loan growth.
Materializing in really in the securities portfolio, we kind of have to stay short anyways.
So it only accentuates the extent to which.
Loans are going to be the highest and best use for our liquidity and everything else, it's really just managing that position.
So it sounds like the significant increases are going to slow down.
The yield on the securities portfolio stepped down about 30 basis points would you anticipate.
Obviously, some further step down in the first quarter or is that is the period end catches up with the the average because of the period and just kind of curious the magnitude of step down in the yield there.
It's not it's not that large.
Hopefully, we're seeing inflection there.
Because we still have a lot of cash flow is coming off of our securities portfolio that we're likely going to be in a position to reinvest.
But yes.
It is there is a step down going on and ultimately.
Sure.
The largest driver of our revenue profile isn't going to be that securities book.
It's going to be what we can.
Yes that we can make on the loan side of it.
Got it and then just final couple for me Paul is writing quickly can you go over again the two.
I think there was maybe a recovery in fee income and then there was a debt prepayment fee and interest and operating expense that kind of one off items.
Certainly so we incurred a prepayment fee with the FHL be late in the quarter that totaled $626000 and that was related to the paydown of $50 million of higher cost <unk> advances weighted average rate of that.
In the neighborhood of.
2%.
And really it's.
Our balance sheet housekeeping going into the end of the year.
Positioning ourselves better from an NII profile and really a reflection of the excess liquidity position that we have.
With the goal of really taking that negative spread off of our balance sheet.
That was one the other totaled a little over $220000 in that.
Related to an acquired loan.
Which has long since been written down to zero, we got.
A.
Acquired written down I should note.
And.
It's been a while since that acquisition and ultimately.
We got a we got a recovery in it and it doesn't work its way through the provision and allowance for credit losses.
And that in that respect it kind of manifest itself in.
Noninterest income.
Got it and then.
You guys laid out maybe like $3 12, and 323 or something when you announced the merger for EPS in 'twenty, two and 'twenty three do you still there.
Or would you make any changes to that as you sit here today does it does that still too conservative.
Based on the growth you're seeing I got to admit I love the interest rate backdrop, and how thats kind of manner.
Came to be over the last three months.
Which I think is some wind at our backs.
Secondary to that we're really pleased with how the loan growth story it has progressed.
Partially a function of lower paydowns.
But we feel pretty bullish about the overall environment that we're sitting in and.
We still think those are appropriate, but we like our potential to do better as.
The wind kind of hit okay.
At our back with respect to certain macro trends.
Great. Thank you.
And thank you.
And our next question comes from David <unk> from Raymond James Your line is now open.
Good morning. This is Eric back there actually on behalf of David Feaster, Congrats on a solid quarter, but I just wanted to touch on expenses, you've done a great job managing costs did not continue to invest in the franchise with inflationary pressures out there and we have the benefit of the Mou to help offset some of those I'm just curious whether there was anything.
Maybe more onetime in nature in the quarter.
I think a good core run rate heading into 2022, and how do you think about expense growth.
Throughout 2020.
Certainly we are mindful of inflation pressures and things along those lines, but.
The goal for US is really to hold the line as best we can when.
When we kind of.
Think about where we were at in the fourth quarter, bringing it down.
To kind of a call.
Core rates.
We really really there were a couple of things in the fourth quarter that supported that being higher.
We had accruals on top.
<unk> of what we've already noted which is $626000.
Youll be prepayment penalties.
The $1 4 million of acquisition related expenses, we did have some higher professional fees as well as a bonus and profit sharing accruals given the performance of the year. So there was a little bit of catch up there. So I'd kind of say the core rate was probably more like $34 million.
But.
Just as in 2000.
'twenty one are kind of goal was to be keeping our <unk>.
Spence rate kind of in that 33 $34 million.
That trend as we kind of look forward into 2022, Standalone pre merger cutting out any merger related expenses is really stepped up to.
30% to $35 million to split the difference there and you kind of get a run rate.
Naturally we have a little bit of seasonality in the first quarter because of payroll taxes and things along those lines.
That's.
Has been our trend.
Okay, great. Thank you.
Just wanted to touch base on the MLP obviously, there's.
Only so much you can talk about but maybe just talk about the integration team and some of the preparations you guys are.
Taking to ensure a seamless integration and transition.
And then also just touch on.
Closing expectations, we've heard a few banks talk about.
Things getting moved back with that with that approval process. So if you could just kind of give some color on all of that that'd be great.
Yeah Eric.
Our integration teams are working really well.
It's an evolutionary process as we put these teams together, but we've staffed the team. So we've got leadership, we've got project managers functional heads working in all the various areas.
Obviously, there is a conversion team planning for that but there's so many other areas all the way down to loan approval processes and so forth. So.
We've got these teams staffed with members from both sides and we're meeting gosh, we have.
So we still have our day jobs as well so.
It's a lot of work, but it's very exciting I think the teams have come together great.
As far as the timing the timing is out of our hands.
A certain extent, we filed our applications and so where we're at.
I guess, the mercy of good old a regulatory approval.
And processes of that nature, So really don't want to comment too much on that I don't really know that.
Answer too so the timing question, but the sooner the better as far as we're all concerned and.
We would look forward to a very successful.
Integration with <unk>.
That in mind.
Controlling what we can control, we still think first stop closing as possible, but ultimately Steve put it best there's factors that are going to be outside of our control.
Right got it.
And then just wanted to touch on their record originations, which is great to see this quarter I'm just curious about what drove the increase is it the improved economic backdrop accelerated demand customer acquisition for TPP hiring or just kind of core households from your bankers can you just kind of provide a little bit more color on what drove that.
Yeah.
I like your husk.
Hustle word so a lot of hustle out there. So it was very close very close to a record by the way it was.
Third quarter was $4 50 for the fourth quarter was $4 50, so we'd like to call it very close to a record but.
Now it came.
It became really.
All from all areas that you mentioned customer acquisition.
Definitely some hustle as Steve mentioned, we have.
Because at the beginning of the year kind of.
<unk> announced an initiative to look.
Look at larger loan relationships and.
That's kind of there's fruits from that as we finish the year in that.
Average loan sizes kicked up a little bit which is nice to see still very granular as far as the.
$7 billion bank, but everything you've everything you described is what happened just kind of the blocking and tackling of what we do and the hard work from our lending team.
Okay, great. Thanks, and then one last question I just wanted to touch on asset sensitivity, obviously deal increase in your rate sensitivity, but just curious how you think about pro forma sensitivity you may have.
The margin benefited from.
The first rate hike or two.
Definitely what we we feel very good about merging our respective.
Interest rate risk profile <unk> is decidedly more asset sensitive than we are.
Focused on staying pretty neutral.
But we feel great about the prospects and that's how it models, but we feel great about the prospects of.
Net interest income potentially expanding in the context of the first rate hike in particular, because we expect deposit betas since the entire industry not very round up to be low.
And at the same time, we're going to have a heck of a lot of.
Continued fierce competition on loan rates as well, so, but we feel like when it all shakes out we're going to be.
Better position there than what our models with respect to our relative net interest income profile.
I'd say about all of our loan portfolio was 30% of it is variable rate and of that variable rate.
Portion two thirds of it is is.
Is at or above it for so we're kind of feel good about getting that as well as.
As well as how we reprice.
Okay.
Great. Thank you that's it for me congrats again on a solid quarter.
Okay.
And thank you.
And again is do you have a question that is star one if you.
You'd like to ask a question that is star one and our next question comes from will Jones K B W.
Your line is now open.
Hey, Good morning, guys. This is Wilson in for Brady how are you guys. This morning.
Hi, good how are you doing.
Hey, guys. So I just wanted to I know you.
You talked to talked about loan growth thus far.
I know you guys saw a really nice continuing growth in <unk>.
<unk> got in the high single digits longer term into this upcoming year.
Maybe not necessarily the volume of.
Growth Youre expecting but how would you expect the cadence of loan growth this upcoming year.
There'll be a lot of ebbs.
Ebbs and flows with the CTX close.
Just a little bit of color on that would be helpful. Thanks.
Yeah.
Well I mean.
We continue to we continue to work at it I mean, I think as we combine.
And we have to look at it on a combined basis whenever that happens, but up until that point.
I guess maybe.
One way to think about it is I think maybe last year, we were talking about we would see growth in the back half of the year, maybe that's it.
What does that look like in 2022, I think that where we want to carry the fourthquarter momentum into the first quarter into the second quarter until we close so.
I think it would be mostly steady as far as the cadence of that.
Again, we've got customer acquisition going on we have some PPP, but we also have new new customers that never had a BBB loans that are just new customers that have come since we made our last PPP originations so good momentum as far as.
On a stand alone and I think we just have to see what happens when we get when we get together.
Great.
That makes sense very helpful. And then just looking to the deposit side.
You guys have had such a great year with deposit growth driven a ton of excess liquidity.
Any sense on the horizon.
We may eventually see a slow and this really nice deposit growth.
Are you guys thinking about.
The growth in your deposit base this upcoming year.
We're thinking about quality not quantity.
And we think the fee.
Kind of macro dynamics that are ultimately driven.
<unk> of our balance sheet growth.
While we are happy to take it now.
Now I think it's.
Power's us to be very disciplined and assertive around optimizing our funding mix.
So in a.
It's a rare opportunity for us.
And I think the industry will be focused on the same thing.
How they can effectively optimize.
The surplus of funding.
So that's our focus.
We will take it will take will take the growth, but at the same time.
It's going to be a huge focus on optimization.
Gotcha got you understood. Thanks, guys.
Alright. Thanks.
And thank you.
And our next question comes from Matt Olney.
Nuance from Stephens. Your line is now open.
Hi, Thanks, Good morning, everybody good morning, Matt Olney.
So a few follow ups here the F. H L. B prepayment fee that you mentioned, where do I find that is that in the other expenses or is that in the.
Interest expense.
It'll be another expenses non interest expense.
Got it.
And then I guess one of the hallmarks of the bank last few years has been bringing on new producers onto the platform.
Love to hear the updated thoughts and plans for bringing on new producers this year, especially in light of them strategic merger, that's still that's still pending.
Yeah, Matt So that will continue to invest in and quality talent on the lending side.
It comes from.
There is some M&A disruption, where we are where we do talk to that.
Those lenders that are affected and in.
And the good ones, we're talking to.
And I think kind of like the.
When we went public in that 15, when that kind of brought us to a new level as far as hiring talent and people wanting to come to the bank.
I think the announcement of the MLP has been similar to that so we've had good conversations with folks and we will.
We'll make those investments when it's appropriate and I think you'd probably see something like you saw in 2021 at least up until the MLR, but where we where we do some strategic hires and also do some homegrown.
Some of our homegrown lenders as well mhm.
Mhm Okay.
Okay got it we still have a capacity with some of our existing staff to to continue to grow and build their book as well, so theres quite a bit of that available to us.
Want to take advantage of that as well.
Okay understood guys. Thanks for your help.
Alright, Thanks, Matt.
Thank you.
And I am showing no further questions I would now like to turn the call back over to Steve Retzloff for closing remarks.
Just once again I really thank everybody for your time and interest in allegiance. We look forward to speaking to you again.
In the future and again, thanks very much for joining us. This morning appreciate it.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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