Q4 2021 Independent Bank Group Inc Earnings Call
As a reminder, this conference is being recorded I would now like to turn the conference over to your host Mr. Paul Langdale Executive Vice President corporate development and strategy for independent Bank group.
Speaker 2: As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Paul Langdale, Executive Vice President, Corporate Development and Strategy for Independent Bank Group. Thank you.
You may begin.
Speaker 3: Good morning, everyone. I am Paul Langdale, Executive Vice President of Corporate Development and Strategy for Independent Bank Group, and I would like to welcome you to the Independent Bank Group fourth quarter 2021 earnings call. We appreciate you joining us. The related earnings press release and the slide presentation can be accessed on our website at ibtx.com.
Good morning, everyone I am Paul Langdale Executive Vice President of corporate development and strategy for independent Bank group and I would like to welcome you to the independent Bank Group fourth quarter 2021 earnings call. We appreciate you joining us the related earnings press release and slide presentation can be accessed on our website at <unk> Dot com.
Speaker 3: I would like to remind you that remarks made today may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and expected results to differ. We intend such statements to be covered by Safe Harbor provisions for forward-looking statements.
I'd like to remind you that remarks made today may include forward looking statements. Those statements are subject to risks and uncertainties that could cause actual and expected results to differ we intend such statements to be covered by safe Harbor provisions for forward looking statements. Please see page five of the text in the release or page two for the slide presentation for our Safe Harbor statement I'll comment.
Speaker 3: Please see page 5 of the text in the release or page 2 for the slide presentation for our Safe Harbor Statement. All comments made during today's call are subject to that statement. Please note that if we give guidance about future results, that guidance is a statement of management's beliefs at the time the statement is made and we assume no obligation to publicly update guidance.
It's made during today's call are subject to that statement. Please note that if we give guidance about future results that guidance is a statement of managements beliefs at the time. The statement is made and we assume no obligation to publicly update guidance.
Speaker 3: In this call, we will discuss a number of financial measures considered to be non-GAAP under the SEC's rules. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are included in our release. I'm joined this morning by David Brooks, our Chairman and CEO , Dan Brooks, our Vice Chairman, and Michelle Hickox, Executive Vice President and CFO . At the end of their remarks, David will open the call to questions. With that, I will turn it over to David.
In this call we will discuss a number of financial measures considered to be non-GAAP under the SEC's rules reconciliations of these financial measures to the most directly comparable GAAP financial measures are included in our release I'm joined this morning by David Brooks, Our chairman and CEO , Dan Brooks, Our Vice Chairman and Michelle Hickox Executive Vice President and CFO at the end of their <unk>.
<unk>, David will open the call to questions with that I will turn it over to David.
Thanks, Paul Good morning, everyone and thank you for joining us on today's call.
Speaker 4: Thanks, Paul. Good morning, everyone, and thank you for joining us on today's call.
Speaker 4: We were very pleased to report solid results for the fourth quarter, with adjusted earnings of $1.28 per share, healthy return metrics, and a strong annualized organic loan growth of 11.2 percent. Notably, this organic growth is driven by broad-based lending to our customers across Texas and Colorado, and is supported by the strong tailwinds that continue to benefit our four great markets.
We were very pleased to report solid results for the fourth quarter with adjusted earnings of $1 28 per share healthy return metrics and <unk>.
<unk> annualized organic loan growth of 11, 2%.
Notably this organic growth is driven by broad based lending to our customers across Texas and Colorado.
It's supported by the strong tailwind does that continue to benefit our four great markets.
Speaker 4: On the credit side, we were pleased to see a meaningful improvement in our non-performing assets, which declined from 44 basis points to 31 basis points during the quarter.
On the credit side, we were pleased to see a meaningful improvement in our nonperforming assets, which declined from 44 basis points to 31 basis points during the quarter.
Speaker 4: Our company's strong performance in the fourth quarter resulted in tangible book value per share increasing by $0.46 to $35.25. In addition, we repurchased a total of 201,326 shares of our common stock and increased our dividend for the fourth quarter to $0.36 per share.
Our company's strong performance in the fourth quarter resulted in tangible book value per share increasing by 46 cents to $35.25. In addition, we repurchased a total of 201326 shares of our common stock and increased our dividend for the fourth quarter to 36 cents per share.
These actions reiterate our steadfast commitment to deliver returns to our shareholders with.
Speaker 4: These actions reiterate our steadfast commitment to deliver returns to our shareholders.
Speaker 4: With that overview, I'll now turn the call over to Michelle for more detail on the operating results for the quarter.
With that overview I'll now turn the call over to Michele for more detail on the operating results for the quarter.
Thank you David Good morning, everyone I'll go to slide six shows selected financial data for the quarter.
Speaker 5: Thank you, David. Good morning, everyone. Note that Slide 6 shows selected financial data for the quarter.
Speaker 5: Full year 2021 GAAP net income was $224.8 million or $521 per diluted share, an increase of $23.5 million or $0.54 per share over the prior year on a diluted basis.
Full year 2021, GAAP net income was $224 8 million or 521 per diluted share an increase of $23 5 million or 54 cents per share over the prior year on a diluted basis.
Speaker 5: For the fourth quarter, adjusted net income totaled $55 million or $1.28 per share, an increase of $2.4 million or $0.06 per diluted share over the linked quarter.
For the fourth quarter adjusted net income totaled 55 million or $1 48 per share an increase of $2 4 million or six cents per diluted share over the linked quarter.
Net interest income trended upward to $132 7 million in the fourth quarter, which was an increase of 4 million over the linked quarter. This increase was driven by an increase of $1 7 million in acquired loan accretion income versus the linked quarter as well as a strategic reduction in our deposit funding cost.
Speaker 5: Net interest income trended upward to $132.7 million in the fourth quarter, which was an increase of $4 million over the linked quarter. This increase was driven by an increase of $1.7 million of acquired loan accretion income versus the linked quarter, as well as a strategic reduction in our deposit funding costs.
Speaker 5: During the quarter, we achieved our target of growing our securities book to $2 billion and booked loan growth at an 11.2% annualized rate. However, the impact of these increased earning asset balances were partially offset by lower incremental yields relative to older loans and securities maturing.
During the quarter, we achieved our target of growing our securities book 2 billion and that's the loan growth and an 11, 2% annualized rate.
However, the impact of these increased earning asset balances were partially offset by lower incremental yields relative to older loans and securities maturing.
Speaker 5: PPP fees remain stable at $4 million in Q4, with $2.6 million remaining to be recognized. We anticipate this $2.6 million to be mostly recognized in the first half of 2022.
P. J P fees remain stable at 4 million in Q4 with $2 6 million remaining to be recognized.
Anticipate this $2 6 million to be mostly recognized in the first half of 2022.
Speaker 5: The net interest margin excluding accretion was 2.87%.
The net interest margin, excluding accretion was 2.87%.
Speaker 5: down four basis points from the linked quarter. The decrease is primarily due to increased average liquidity during the quarter, which had a negative impact of seven basis points and was partially offset by the reduction in deposit costs.
Down four basis points from the linked quarter. The decrease was primarily due to increased average liquidity during the quarter, which had a negative impact of seven basis points and was partially offset by the reduction in deposit cost.
Speaker 5: Total non-interest income was $15.1 million for the fourth quarter, a decrease of $1.8 million versus the linked quarter, which was primarily due to decreases in mortgage banking revenue due to seasonality impacts as well as the recent uptrend in mortgage rates, more broadly impacting the mortgage business.
Total noninterest income was $15 1 million for the fourth quarter, a decrease of $1 8 million versus the linked quarter, which was primarily due to decreases in mortgage banking revenue due to seasonality impacts as well as the recent uptrend in mortgage rates more broadly impacting the mortgage business.
Speaker 5: Non-interest expense totaled $79.9 million for the fourth quarter, a flat reduction of $664,000 versus the linked quarter, and an increase of $4.7 million when compared to the fourth quarter of 2020.
Noninterest expense totaled $79 9 million for the fourth quarter, a slight reduction of 664000 versus the linked quarter and an increase of $4 7 million when compared to the fourth quarter of 2020.
Speaker 5: The increase over the prior year is primarily due to $5.2 million of increased salaries and benefits expense, mostly driven by additional headcount, including executive and senior leadership positions that were added during 2021.
The increase over the prior year is primarily due to $5 2 million of increased salaries and benefits expense, mostly driven by additional head count, including executive and senior leadership positions that were added during 2021.
Speaker 5: This increase was partially offset by a reduction in mortgage commissions and incentives of $1.8 million due to lower volumes in the year-over-year period.
This increase was partially offset by a reduction in mortgage commissions and incentives.
$1 8 million due to lower volumes and a year over year period.
Speaker 5: Fourth quarter 2021 also includes $614,000 of non-interest expense related to COVID-19 vaccinations, incentives, and testing.
Fourth quarter of 2021 also include 614000 of noninterest expense related to COVID-19, vaccinations incentives and testing.
Slide 19 shows our deposit mix and cost.
Speaker 5: Deposits total $15.6 billion at quarter end, with total non-interest bearing deposits up by $153 million from linked quarter and $901.8 million from the fourth quarter of 2020.
Deposits totaled $15 6 billion at quarter end with total non interest bearing deposits at 153 million from linked quarter and $901 8 million from the fourth quarter of 2020.
Speaker 5: Interest bearing deposit costs decreased 8 basis points from 40 basis points in Q3 to 32 basis points in Q4.
Interest bearing deposit costs decreased eight basis points from 40 basis points in Q3 to 32 basis points in Q4.
Speaker 5: This was a result of our efforts to reduce rates on CDs and interest-bearing DDA accounts in anticipation of contemplated increases in the Fed funds rates during 2022.
This was a result of our efforts to reduce rates on Cds and interest bearing DDA accounts in anticipation of contemplated increases in the fed funds rates during 2022.
Capital ratios are presented on slide 21.
In the fourth quarter, the company's consolidated capital ratios remain strong with common equity tier one capital of 11, 12% and a total capital ratio of $13 67 per cent.
Speaker 5: In the fourth quarter, the company's consolidated capital ratios remained strong with common equity tier one capital of 11.12% and a total capital ratio of 13.67%.
Speaker 5: As David mentioned, we repurchased about 201,000 shares of our common stock during the quarter for an aggregate price of $14 million.
As David mentioned, we repurchased about 201000 shares of our common stock during the quarter for an aggregate price of $14 million.
That concludes my comments I will turn it over to Dan to discuss the loan portfolio.
Speaker 5: That concludes my comments. I will turn it over to Dan to discuss the loan portfolio.
Thanks Michelle.
Speaker 4: Overall, loans held for investment, excluding mortgage warehouse purchase loans, were $11.7 billion at quarter end compared to $11.5 billion in the linked quarter.
Overall loans held for investment excluding mortgage warehouse purchase loans were $11 7 billion at quarter end compared to $11 5 billion in the linked quarter.
Speaker 4: Excluding the impact of PPP loans, core loans held for investment increased by $318.2 million over the length of quarter.
Excluding the impact of PPP loans core loans held for investment increased by $318 2 million over the linked quarter.
Speaker 4: represents an 11.2% annualized rate of lung growth.
Which represents an 11, 3% annualized rate of loan growth.
Loan growth continues to be driven by broad based relationship lending to our customers across Texas and Colorado.
Speaker 4: phone growth continues to be driven by broad based relationship lending to our customers across Texas and Colorado.
Speaker 4: There are 112.1 million of PPP loans on balance sheet at quarter end.
There were $112 1 billion of PPP loans on balance sheet at quarter end down.
Speaker 4: down from $243.9 million in the linked quarter.
Down from $243 9 million in the linked quarter.
Speaker 4: Average mortgage warehouse purchase loans decreased slightly to $801.7 million for the quarter, which is reflective of lower industry volumes overall due to upward pressure on mortgages.
Average mortgage warehouse purchase loans decreased slightly to $801 7 million for the quarter, which is reflective of lower industry volumes overall due to upward pressure on mortgage rates.
Credit quality metrics strengthened during the quarter in line with our expectations.
Speaker 4: Credit quality metrics strengthened during the quarter in line with our expectations.
Speaker 4: Total non-performing assets decreased to $57.5 million, or 0.31% of total assets at quarter-end.
Total nonperforming assets decreased to $57 5 million or three 1% of total assets at quarter end.
Speaker 4: which was a reduction of 25.3 million during the course.
Which was a reduction of $25 3 million during the quarter.
Net charge offs totaled $3 1 million or 10 basis points annualized during the quarter.
Speaker 4: Net charge-offs total $3.0 million, or 10 basis points annualized during the quarter.
Speaker 4: and were related to a leasing portfolio acquired as part of a previous M&A transaction.
And were related to our leasing portfolio acquired as part of a previous M&A transaction.
Speaker 4: These credits had been fully reserved through Purchase Accounting Adjustments at the acquisition date and were subsequently transitioned to the allowance under CECL.
These credits had been fully reserved through purchase accounting adjustments at the acquisition date and were subsequently transitioned to the allowance under Cecil.
At December 30, <unk> 2021 .
Speaker 4: The allowance for credit losses on loans is $148.7 million, or 1.28% of loans held for investment excluded.
The allowance for credit losses on loans is $148 7 million or one point to 8% of loans held for investment excluding mortgage warehouse loans.
Speaker 4: These are all the comments I have related to the loan portfolio this morning. So with that, I'll turn it back over to David.
These are all the comments I have related to the loan portfolio. This morning, so with that I'll turn it back over to David.
Speaker 4: Thanks, Dan. Looking ahead, we remain confident in our ability to grow our core loan portfolio at the 7 to 8 percent level in 2022. We are also incrementally encouraged by our strategic position of the balance sheet ahead of any increases in overnight rates. To that end, we have made a concerted effort to optimize our funding cost and mix, while deliberately booking new business with a rate hike environment in mind.
Thanks, Dan.
Looking ahead, we remain confident in our ability to grow our core loan portfolio at the 7% to 8% level in 2022.
We were also incrementally encouraged by our strategic position or balance sheet ahead of any increases in overnight rates to that end, we have made a concerted effort to optimize our funding cost and mix.
While deliberately booking new business with a rate hike environment in mind.
Speaker 4: We're also continuing to make strategic investments in our platform in anticipation of future growth, and we remain focused on continuing to attract talented individuals to our company.
We're also continuing to make strategic investments in our platform in anticipation of future growth and we remain focused on continuing to attract talented individuals to our company.
Speaker 4: While we are encouraged by strategic discussions with potential partner banks, we will remain patient, disciplined, and deliberate in our approach to M&A.
While we are encouraged by strategic discussions with potential partner banks, we will remain patient disciplined and deliberate in our approach to M&A.
Speaker 4: Our priority remains to create long-term shareholder value by growing our high-quality franchise across our four strong markets and to deliver a consistent high performance to our shareholders, customers, and communities.
Our priority remains to create long term shareholder value by growing our high quality franchise across our four strong markets and to deliver consistent high performance to our shareholders customers and communities.
Speaker 4: Texas and Colorado remain two of the most attractive economies in the country, and our bankers continue their disciplined pursuit of winning new business and expanding existing relationships each day. I'm grateful to our entire team for the strong finish to 2021 and look forward to the great things we can accomplish as we continue to leverage our strong culture and grow our platform in 2022.
Texas, and Colorado remain two of the most attractive economies in the country and our bankers continue their disciplined pursuit of winning new business and expanding existing relationships. Each day I'm grateful to our entire team for the strong finish to 2021 and look forward to the great things, we can accomplish as we continue to.
Leverage our strong culture and grow our platform in 2022.
Speaker 4: Thank you for taking the time to join us today, and we will now open the line to questions.
Thank you for taking the time to join US today, and we will now open the line to questions operator.
Speaker 2: Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker 2: In the interest of time, we ask that you each keep to one question and one follow-up. Thank you.
In the interest of time, we ask that you eat to keep to one question and one follow up thank you.
Speaker 2: Our first question comes from the line of Brady Gailey with KBW. Please proceed with your question. Hey, thank you. Good morning, guys.
Our first question comes from the line of Brady Gailey with <unk>. Please proceed with your question.
Hey, Thank you good morning, guys.
Good morning Brady.
But I know last quarter, you know Michelle gave us the expense guidance of expecting expenses up about 3% year over year in 'twenty to 'twenty two.
Speaker 4: But I know last quarter, you know, Michelle gave us the expense guidance of, you know, expecting expenses up about 3% year-over-year in 2022. You know, so far throughout earnings season, we've heard a lot of banks talk about inflation and compensation going up because they need to retain people. How are you all thinking about expenses now? Has there been any change to that 3% growth estimate, Michelle?
Yes, so for throughout earnings season, we've heard a lot of banks talk about inflation in compensation going up because they need to retain people are how are you all thinking about expenses now has there been any change to that 3% growth estimate Michelle.
Speaker 5: Yeah, that's a good question, Brady. I think similar to our peers, we have seen, continue to have challenges on wages, just being able to identify and hire talent, especially talent with specific skill sets.
Yeah. That's a that's a good question Brady I think similar to our peers. We have you know.
<unk> continued to have challenges on wages, you know just being able to identify and hire talent, especially talent with specific skill sets.
Speaker 5: has been more expensive, and so we are going to update our expense guidance. I think previously it was 3% over 21. I'm going to update that to 5% over full year 21 expenses.
Has been more expensive and so we are going to update our expense guidance I think previously it was 3% over 'twenty. One I mean are they that two 5% over full year 'twenty one expenses and this is due to the wage pressures as well as you know our board has wanted to continue to make investments in our infrastructure.
Speaker 5: Just due to the wage pressures as well as our board has wanted to continue to make investments in our infrastructure. So we've identified some new areas that we're going to make some investments there as well.
Identified some new areas you know that we're going to make some investments there as well.
Speaker 4: OK. All right. That makes sense. And then as you guys had talked about, the bond book grew in the fourth quarter. How are you thinking about it? You guys still have have excess liquidity here. So how are you thinking about bond book growth into 2022?
Okay, Alright that makes sense and then as you guys had talked about the bond book grew in the fourth quarter. How are you thinking about you guys still have excess liquidity here. So how are you thinking about a bond book grows into 2022.
Speaker 5: I think we'll continue to invest in the bond portfolio as long as we continue to have that liquidity on our balance sheet. Our plan has called for us to put at least half a billion in this year. It could be more, really depending on how the liquidity holds.
I think we'll continue to invest in our bond portfolio as long as we continue to have that liquidity on our balance sheet and our plan is called for us to put at least half a billion and this year. It could be more you know it really depending on how the liquidity health.
Okay.
Speaker 4: Okay. All right. And then just one final one for me. The buybacks, you bought back about 0.5% of the company this quarter, you did the same last quarter, but the stock is now...
All right and then just one final one for me the buybacks here you were you bought back about a 0.5% of the company. This quarter you did the same last quarter there, but the stock is now.
Speaker 6: I think the back half of the year, you bought it at a little under 70 bucks a share. The stock's now higher than that. How are you all thinking about the buyback this year? Do you think you continue just to chip away at it every quarter? How are you thinking about the buyback?
You know trading I think.
The back half of the year you bought it at a little under 70 Bucks a share of stocks now hired Matt how are you all thinking about the buyback. This year do you think you continue just to chip away at it every quarter how are you thinking about the buyback.
Speaker 4: I think, Brady, our view on that hasn't changed at all. We will be opportunistic with the volatility in the markets. We've had the opportunity the last two quarters to repurchase, you know, for us material amounts of stock compared to what we purchased in the past.
I think our Brady our view on that hasn't changed at all we will be opportunistic with the volatility in the markets. We've had the opportunity last few quarters to repurchase our you know for us a material amounts of stock compared what we purchased in the past.
You know, but.
Speaker 7: But because our retained earnings and our capital continues to grow, our retained book value per share is growing. So as it grows, then obviously the price at which we
Because our retained earnings and our capital to use to grow our book value per shares growing so as it grows then obviously the price at which we.
Speaker 7: you know, would be willing to purchase our stock, continues to go up. We'll see how that, you know, plays out over time. I still believe that, you know, strong organic growth and some future M&A opportunity possibly.
You would be willing to purchase our stock.
Continues to go up.
Yeah that plays out over time, I still believe that a.
Strong organic growth, but some future M&A opportunity, possibly.
Speaker 7: is the best use of our capital for our shareholders. But in the meantime, we will be active buying the stock back when the market allows that and then also continue to look to raise our dividends in the days ahead.
He is the best use of our capital for our shareholders, but in the meantime, we will be active buying the stock back when the market allows that and then also continue to look to raise our dividends in the days ahead.
Okay got it thanks David.
Thanks, Greg.
Speaker 2: Thank you. Our next question comes from the line of Michael Rose with Raymond James. Please proceed with your question.
Thank you. Our next question comes from the line of Michael Rose with Raymond James. Please proceed with your question.
Hey, good morning, everyone hope, you're doing well or Michael.
Speaker 7: Hey, good morning, everyone. I hope you're doing well. Hey, good morning, Michael. Good morning. Hey, I just wanted to touch on the loan growth outlook. So it sounds like...
Good morning, Hey, just wanted to touch on the loan growth outlook. So it sounds like.
Speaker 7: You know, the expectation is kind of in line with last quarter, you know, really healthy growth for next year. It looks like you guys had really good energy growth for the second quarter in a row. Can you just give us, you know, kind of what the puts and takes are of that outlook? And then maybe if you can just comment on the CNI team, you know, build up that you've talked about previously. Thanks.
You know that the expectation is kind of in line with last quarter, you know really healthy growth for next year. It looks like you guys had really good energy growth for the second quarter.
Quarter on Iraq can you just give US you know kind of what the puts and takes are of that outlook and then maybe if you can just comment on the.
C&I team Buildout that you've talked about previously thanks.
Yeah. Thanks, Mike We are we were pleased with where the loan growth was in the fourth quarter. We felt like you know that that's what we had where we'd expected it to be would be year.
Speaker 7: Yeah, thanks, Michael. We were pleased with where the loan growth was in the fourth quarter. We felt like that's what we had expected it to be for the year, a little over 6% was
Over 6% was.
Speaker 7: You know, I think where we had budgeted and in the range of what we had expected, but certainly felt like it would accelerate the second half of the year. We feel like that our guidance to 7, 7 to 8% for 22 is still a good number. You know, there could be upside to that, depending on.
I think where we had budgeted and in the range of what we had expected but.
Certainly felt like it would accelerate in the second half of the year, we feel like that our our guidance to seven 7% to 8%. A 422 is still a good number of you know there could be upside to that in the Golan.
And Oh, you know how the economy goes how quickly the fed raises rates in a lot of things you don't control, but but we feel like under you know.
Speaker 7: you know, how the economy goes, how quickly the Fed raises rates and a lot of things we don't control, but we feel like under
Speaker 7: Most scenarios, 78% is a good number for us. For 22, the C&I, middle market C&I build-out continues to go very well. We saw some good traction there. They had some nice relationships moved over and some good fundings in the fourth quarter. Continue to build out their team. We expect to continue to do that.
Most scenarios seven 8% is a good number for us for for 'twenty two.
The C&I middle market C&I build out continues to go very well we saw some good traction there.
They had some nice relationships moved over and and some good fundings in the fourth quarter.
To build out their team, we expect to continue to do that.
Speaker 7: aggressively as we build out across Texas in 2022. On the energy front, we have had a lot of success moving over and picking up some high quality relationships.
Aggressively as we build out across Texas in 'twenty two.
On the energy front, we have had.
A lot of success.
Moving over in and picking up some high quality.
Relationships.
You know what it's about.
Okay.
Speaker 7: current commitments around $500 million and current outstandings around $340, $350 billion. So it's still a relatively small piece of our overall loan portfolio, but very proud of the team we've got there. We did just hire another energy banker in Houston, and so we intend to continue to invest and look for opportunities in the energy space.
Current commitments around 500 million in current Outstandings around 340 $350 billion. So it's still a relatively small piece of our overall.
Loan portfolio, but are very proud of the team. We've got there we did just hire a another energy banker in Houston, and so we get to.
Can you to invest and look for opportunities in the energy space.
Speaker 7: But with current outstandings around two and a half to three percent of our total loan book, we think we have some room to grow as long as we see the high-quality opportunities with the right structures and right pricing. And I think we'll continue to do that. Dan, did you have any other thoughts on that?
But you know with current outstandings around 2.5% to 3% of our total loan book, We think we have some room to grow.
As long as you see the high quality opportunities with the right structures and right pricing.
We will continue to do that Dan did you have any other thoughts on energy.
Yeah.
Speaker 4: No, I think you covered it well, David. We did see some really nice opportunities during 2021 in the energy book specifically and would expect if we see those opportunities in 2022, we'll continue to grow it there.
No I think you covered it well David we see some really nice opportunities during 2021, and the energy book, specifically and would.
I would expect if we see those opportunities in 2022, we will continue to grow there.
But beyond that I think you covered it very nice opportunities we saw in the middle market.
Speaker 4: Beyond that, I think you covered the nice opportunities we saw in middle market.
Speaker 7: Great. Thanks for the color. And maybe just as a follow-up, you know, David or Michelle, if you guys can comment on, you know, the mortgage business. Obviously, we can all see the NBA's forecast and what that implies for next year. But if you could just comment on, you know, your portfolios, given the strength, relative strength of your markets, and then maybe what you might expect for the warehouse as we move through the year. Thanks.
Oh, great. Thanks for the color and maybe just as a follow up.
David or Michel if you guys can comment on you know the mortgage business. Obviously, we can all see the the mba's forecast.
And what that implies for next year, but if you could just comment on your portfolio just given the strength relative strength of your markets and then maybe what you might expect for the warehouse as we move through the year.
Speaker 5: I think for our plan for our retail mortgages, we expect that they will be down just a bit in 22 relative to 21, you know, of course.
I think for our players for our retail mortgages as we expect they are saying it will be down just a bit in 'twenty relative to 'twenty. One you know of course, it's hard to predict that business really depending on what rates do this year that could more heavily impact them, but they have done a good job is building out that team.
Speaker 5: It's hard to predict that business really depending on what rates do this year that could more heavily impact them But they have done a good job of building out that team You know and we do have great markets where we have more buy versus refinance here in our Texas markets for sure
And we didn't have great markets, where we have more buy versus refinance here in our Texas markets for sure.
Speaker 5: Again, they've done a really good job of building, upgrading their customer base.
And warehouse, we expect you know again, they've done a really good job in building upgrading their customer base.
Speaker 5: And those average balances should be down a bit. That's our expectation for 22 as well. But we still think probably 700 to 750 million is what our plan calls for right now.
And that was the average those average balances should be down and that's our expectation for 'twenty, two as well, but we still think probably $700 million to $750 million is what our claim cost for right now.
Speaker 8: Okay, thanks for taking my questions. Hey, thanks Mike.
Okay. Thanks for taking my questions.
Thanks, Mike.
Speaker 2: Thank you. Our next question comes from the line of Brad Milsaps with Piper Sandler. Please proceed with your question.
Thank you. Our next question comes from the line of Brad Millsaps with Piper Sandler. Please proceed with your question.
Hey, good morning.
Hey, good morning, Brad.
Speaker 9: David Michaud, I know you guys have been really focused on lowering your funding costs. I'm just kind of curious how much more room you think there is to go there. And then I noticed too there was a pretty decent difference between kind of period end deposits and the average. Is that more seasonal, you know, kind of public funds related or is there something specific there that you're running off the categories that might continue to help you out as well?
David Michelle I know you guys have been really focused on lowering your funding costs.
Just kind of curious how much more room, you think there is to go there and then I noticed too there was up a pretty decent difference between kind of period in deposits and the average is that more seasonal you know kind of public fund related or was there something specific there that that that you're running off some category that that might continue to help you out as well.
Yeah, and as it relates to our funding costs you know we made some.
Speaker 5: Yeah, as it relates to our funding costs, you know, we make some...
Speaker 5: changes fairly early in the quarter to reduce costs on CDs and interest-bearing BDA, really trying to align better with peers, and just given the liquidity we had, we felt like we had room to do that. There is still some opportunity, I think, in the first quarter as CDs reprice, and we have some contractual agreements that will reprice as well, so it should be a bit lower in the first quarter, but we probably won't see the full benefit of that until the end of Q1 perhaps. That's it for me. Thank you.
Change is fairly early in the quarter, they reduced cost on Cds and interest bearing DDA and really trying to align better with Peter and just given the liquidity. We had we felt like we had room to do that and there is still some opportunity I think in the first quarter I think he's right price and we have some contractual agreement.
That will reprice as well so it should be a bit lower in the first part of it.
We won't see the full benefit of that until the end of Q1 Brad.
Speaker 5: There was just a lot of volatility the last week of the year with some of our specialty treasury deposits where we had a bunch of outflows and we actually sent some one-way deposits off. I think it was about $400 million right at the end of the year, so that's why you see the year-end balances be a bit lower than the average balances. Those have really sort of come back to where they were before that, I would say fairly flat for the first quarter.
We did have it was just a lot of volatility in the last week of the he ever said that our specialty treasury deposits, where we had a bunch of outflows, we actually sent some one way deposit talk I think there's about 400 million right at the end of a year and so that's why you see the year in Dallas is lower than the average balances that we can't really sore and I come back to where they work.
Before that I would say a fairly flat for the first quarter.
Okay, Great and then just kind of sticking with the margin discussion.
Speaker 9: Okay, great. And then just kind of sticking with the margin discussion, Michelle, can you kind of discuss, I know there's a lot of moving parts, but, you know, in your mind, you know, if we do start to see short-term rates lift, you know, what does that, you know, for each one, what does that mean for IPTX's margin and, you know, if you want to do it in dollars or basic points? And then finally, can you remind us how much accretion you guys have left to recognize from some of your previous deals? Thanks.
Michelle can you kind of discuss that I know, there's a lot of moving parts, but you know in your mind you know if if we do start to see short term rates with you know what what is that for each one of them what does that mean for IDT excess margin.
Want to do it in dollars or basis points.
And then finally can you remind us how much accretion you guys have left to recognize them from some of your previous deals. Thanks.
Speaker 5: Yeah, I think we have about $24 million left of accretion, which is primarily from the guarantee deal, Brad. Our current outlook and plan doesn't call for any rate increases. We did our budget assuming a flat rate environment, which I think we all probably expect that that is not what is going to happen.
Yeah, I think we have about 24 million left in accretion, which is primarily from the guaranty deal. Brad you know our current outlook and plan doesn't call for any ratings in rate increases that's not we believe that there are but it you know assuming a flat rate environment, which I think we all probably expect that that's not that is not one.
It's going to happen.
Speaker 10: It will benefit us. We're more asset sensitive than we ever have been. But it's really hard to predict. It's hard to predict, you know, how long will deposits lag, you know, hopefully longer than they have in the past just due to the amount of liquidity. You know, also, what will the impact be on our mortgage group as rates go up? Because I think you'll get some offsets there. I mean, I think it will be beneficial. I just hesitate to estimate what that would be at this point.
They'll benefit us a little more asset sensitive than we ever have and but it's really hard to predict it's hard for an act you know how how long well deposit flag you know hopefully longer than they have in the past just due to the amount of liquidity.
Also what will the impact be on our mortgage group as rates go up because I think you'll get some offsets there I mean, I think it will be beneficial I just hesitate to estimate what that would be at this point.
Okay, great. Thank you guys.
Thanks, Brett.
Speaker 2: Thank you. Our next question comes from the line of Matt Olney with Stephen Zink. Please proceed with your question.
Thank you. Our next question comes from the line of Matt Olney with Stephens Inc. Please proceed with your question.
Speaker 11: Hey, thanks. Good morning guys. Just wanted to follow up on a few of Brad's questions there. I think you said... Good morning. Remaining discounts 24 million dollars. Michelle, any more color on what we should expect to see in a more normalized quarter?
Hey, Thanks. Good morning, guys just wanted to follow up on a few of Brad's questions. There I think you said there were many good morning remaining discounts to 'twenty four.
Million dollars, Michelle any more color on what we should expect to see at a more normalized quarter over the next few quarters.
Speaker 5: Yeah, we did have some accelerated accretion in Q4, if you noticed it went up from Q3. I think our expectation is that that run rate is going to be closer to $3.5 million a quarter for 2022. It's a better way to look at it.
Yeah, we did have some accelerated accretion in Q4, he noticed that it went up from Q3 I think our expectation is that that run rate would be closer to three and a half a million a quarter and for 'twenty. Two is a better way to look at it.
Okay perfect.
And then as far as the discussion around sensitivity to higher rates I get there's lots of moving pieces here, but.
Speaker 11: And then as far as the discussion around sensitivity to higher rates, I get there's lots of moving pieces here, but any commentary you can give us around the loans that are going to be repricing higher with the Fed? And how should we think about the loan floors and how much incremental repricing benefit you'll get with each incremental Fed increase?
Any any commentary you can give us around the the loans that are going to be repricing are higher with with the fed and how should we think about.
The loan floors, and how much incremental repricing benefit you'll get with each incremental a fed increase.
Yeah.
Speaker 5: We don't have...we have very few loans that are below floor. So we should...any, you know, on our variable rate loans, we should get an immediate impact on most of those. But that's only about, you know, 15% of our loan portfolio reprices immediately even though I think we're about half and half fixed and variable right now, but, you know, some of those reprice monthly, some quarterly, and so you have to consider that.
And we don't have we have very few of them that are below the floor. So we should if any you know on our variable rate loans, they should get an immediate impact on most of those.
But that's only about 15% of our loan portfolio of process re prices immediately even though I think we're about half and half fixed and variable right now, but you know some of that was bright reprice nice place on a quarterly and so you have to consider that.
Speaker 5: You know, right now I think it's going to depend on liquidity in the market. The long-term rates have really not changed, and so I think the question is still out on how that will impact our fixed-rate loans, and so, you know, we don't really have that built into our plan that we're going to get a significant benefit from that at this point.
You know right now I think it's going to depend on liquidity in the market. The long term rates have really not changed and so I think that question is still out on how that will impact our fixed rate loans and so yeah. We don't really have that built into our plan that we're going to get a significant benefit from that at this point.
Okay, and just lastly for me I guess for David round.
Speaker 11: Okay. And just lastly for me, I guess for David around loan growth, any incremental thoughts on commercial real estate paydowns? I know it's been a pretty aggressive pace over the last year or so, but I guess some of your peer banks have expectations that paydowns are going to remain elevated in the first part of the year, but hopefully moderate the back half of the year into 2023. I'm curious kind of what your thoughts are around the pace of the paydown.
Bone growth any incremental thoughts on commercial real estate pay downs I know, it's been a pretty aggressive pace of last year.
So, but I guess some of your peer banks have expectations that are paid.
Pay downs are going to remain elevated in the first part of the year, but hopefully moderate the back half of the year and enter into 23, I'm curious kind of what your thoughts are around the pace of the pay downs yes.
Speaker 7: Yeah, we've been a little surprised, Brad, by the volatility. It seems like in one quarter, they're elevated. The next quarter, they're not. But.
We've been a little surprised.
<unk> by the volatility it seems like a one quarter. They are elevated the next quarter they're not.
But.
Speaker 7: From the highest level, I think, our expectation is that we will continue to see accelerated payoffs in the first half of the year. The reason, as much as anything, one of our concerns, especially on the commercial real estate side, is that as the market gears up for this rate increase cycle that most everyone is expecting.
From a highest level I think our expectation is that we will continue to see you accelerated pay offs in the first half of the year are the reason as much as anything is one of our concerns, especially on the commercial real estate side is.
As the market gears up for Oh for this rate increase cycle that.
Every most everyone's expecting.
The thought is that maybe the cap rates on some of these assets has been at historic lows for the last couple of years and Agnes and have resulted in a lot of these asset sales and asset repositioning some things that we've seen our customers doing.
Speaker 7: The thought is that maybe the cap rates on some of these assets have been at historic lows for the last couple of years and have resulted in a lot of these asset sales and asset repositioning and things that we've seen our customers doing.
Speaker 7: that might accelerate even if people think that, hey, this is my last chance to really sell this asset at a very low cap rate. So, you know, I think that's consistent with the way we're thinking about it, that the payoffs will continue to be a lot of headwind, at least for the first half of the year. Then I really would expect that to moderate once rates start going up because, again, I think
That that might accelerate even.
If people think that Hey, this is my last chance to really sell this asset at a at a very low cap rate. So you know I think that's consistent with the way we're thinking about it the payoffs will continue to be a lot of headwind at least for the first half of the year than I really would expect that to moderate once rates start going up because of.
Again I think.
Cap rates will go up people will be settled into whatever they're going to hold here for this next cycle.
And so there always be some obviously turnover and pay downs, but yeah argue is the same similar.
Speaker 7: pretty accelerated first half of the year and slowing down late into the year and into 23.
Pretty accelerate first half of the year and slow it down late into the year and into 'twenty three.
Thank you guys.
Oh, thanks, so much Matt.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Brett Robinson with Hefty Group. Please proceed with your question.
Speaker 2: Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of Brett Robinson with HVD Group. Please proceed with your question.
Hey, good morning, David Michelle.
Hey, good morning, Brett.
Speaker 8: Hey, good morning, Brett. Hi, Brett. I wanted to ask, you know, your deposits through the pandemic are up about a third, like many, and your DDA is up almost a billion dollars in the past year. I'm curious, what's the thought on the stickiness of deposits, you know, as we go forward as rates increase, and how are you thinking about kind of managing excess liquidity as it relates to maybe...
One wanted to ask you know you know.
Pass it through the pandemic are up about a third like like many and your your DDA is up almost $1 billion in the past year I'm curious a what's.
What's the thought on the stickiness of deposits you know as we go forward as rates increase and where are you thinking about kind of managing.
Excess liquidity as it relates to maybe.
Speaker 8: Some concern that some deposits might draw down.
Some concern that some deposits might might draw down.
I'll I'll start us out Brad and then Michelle can give some more details Brett but.
Speaker 7: I'll start us out, Brad, and then Michelle can give some more details, Brett, but my
Hi.
Our view is that.
Speaker 7: Our view is that, you know, for starters, these are our customers' deposits, so there's not a lot of, you know,
For starters. These are our customers deposits. So there's not a lot of them.
Speaker 7: high yield money that's come in during this time. It's really our customers, their deposits.
The high yield money that's come in you know during this time right.
Really our customers their deposits are there will certainly be some pressure to raise rates as rates go up over time, but I think early on our expectation is that a.
Speaker 7: there will certainly be some pressure to raise rates as rates go up over time. But I think early on, our expectation is that
Speaker 7: given the amount of liquidity that that we and other banks have, there will be an ability to keep the deposit prices down without losing a whole
Given the amount of liquidity that we and other banks have there will be an ability to keep the deposit prices down without losing a whole lot of deposits.
Speaker 7: then as rates continue to go up, that gets a little more interesting, a little trickier. But our view is that a lot of that DDA growth has been our C&I customers and C&I deposits. And so we feel good about that. I feel good about, as you pointed out, the growth in DDA, the trend as a percentage. You know, our deposits are getting better quality. But Michelle, you could comment on deposit runoff
And as rates continue to go up that gives you a little more interesting little trickier, but.
Our view is that a lot of that DDA growth has been our C&I customers C&I deposits and so we feel good about that I feel good about as you pointed out the growth in DDA the trend as a percentage of our deposits are getting better quality.
But Michelle you could comment.
On a.
Deposit run off.
How much we might expect it to use those deposits to blow out.
Speaker 7: how much we might expect those deposits to flow out.
Yeah, I think at this point, Brett I don't really have an expectation for a big outflow of deposits at least in 'twenty. Two I think this is gonna be a longer term phenomenon.
Speaker 5: Yeah, I think at this point, Brad, I don't really have an expectation for a big outflow of deposits, at least in 22. I think this is going to be a longer term phenomenon.
Speaker 5: Obviously, as David said, we're going to have to manage as rates go up and as our competitors change rates on deposit accounts.
Obviously as David said, we're gonna have to manage as rates go up and as our competitors do not change rates on deposit accounts manage it that way.
Speaker 5: manage it that way, but right now, we don't really have a concern about liquidity. We have plenty to sort of manage that out. We have made a lot of investment in our retail team and in our middle market treasury management team, as David said, to improve our deposit base, so I think we're in a much better place than we were in the last upgrade cycle as far as building customers and retaining deposits.
Right now we don't really have a concern about liquidity, we have plenty to sort of manage that out.
And we have made a lot of investment in our retail team and in our middle market Treasury management team.
As David said to improve our deposit base. So I think we're in a I think we're in a much better place than we were when in the last upgrade cycle as far as building customers and retaining deposits.
Okay. That's good color.
Speaker 12: Okay. That's great, Keller. And then the other question I wanted to ask was, you know, David, thinking about M&A, you know, last year we kind of started the year early and you were pretty optimistic on, you know, doing a deal or two. And then I think as the year progressed, you know, maybe price expectations may have edged your enthusiasm a little bit. You know, as we start 22, I was curious just kind of what your optimism might be around M&A and if you think that's...
And then the other question I want to ask was you know David thinking about M&A you know last year, we kind of started the year early and you were pretty optimistic on doing a deal or two and then I think as the year progressed.
Maybe maybe price expectations may or may have added.
Your enthusiasm a little but you know as we start 22 was curious just kind of what's your optimism might be around M&A and if you think that's a.
A potential likelihood for this year.
Thank you.
Speaker 12: Maybe M&A is tougher. What's your thoughts are on optimism around deals?
Maybe M&A is tougher or whats your whats your thoughts are on optimism around around deals.
Speaker 7: Well, Brett, as my brother says, I'm a glass half full rising guy. So, you know, I'm I'm always encouraged, you know, about opportunity in the future. But.
Well, Brett It's my brother says I'm, a glass half full rising guy So I'm you know I'm.
I'm always encouraged you know about opportunity in the future, but that said given my track record. The last couple of years prognosticating about M&A volumes I'm going to give up that job and just stick to what we do really well, which is growing more organic a bank in the best markets in the country.
Speaker 7: That said, given my track record the last couple of years.
Speaker 7: growing an organic bank in the best markets in the country. And that's what we control. I really don't have a good sense, Brad, at the highest level.
And that's what we control I really don't have a good sense, Brad at the highest level I would just.
Speaker 7: continue to believe there will be consolidation in Texas and high-quality markets with high-quality banks.
We continue to believe there will be consolidation in Texas in high quality markets with high quality banks, we continue to invest in those relationships.
Speaker 7: We continue to invest in those relationships with those banks, but what motivates a group to decide to seek a partner, those things vary obviously across the board and timing. I do think that the,
With those banks, but.
What motivates you agree to decide to seek a partner.
Those things vary obviously across the board in timing I do think that the that.
You know our expectation going into this pandemic was that would cost a lot of disruption maybe a credit cycle that would.
Speaker 7: You know, our expectation going into this pandemic was that would cause a lot of disruption, maybe a credit cycle, that that would, you know, force, not force, but cause a lot of banks to think about, you know, where they were and what their future was, you know, going to be the next three to five years, and that they might think it was a good time to, you know, to find a partner.
Force force, but caused a lot of banks.
About you know where they were and what their future was going to be the next three to five years and that they might think it was a good time to you to find a partner.
Given the amount of assistance that came into the markets given the fact that there was really no credit cycle in our view.
Speaker 7: given the amount of assistance that came into the markets, given the fact that there was really no credit cycle in our view.
Hum.
Speaker 7: banks are doing extremely well. All of our peers are doing well. All the high-quality downstream banks that we would have an interest in are doing extremely well. And there's just nothing kind of pushing, if you will, motivating. And a lot of people point to the bigger macro things, which I think are all relevant and pertinent around technology and regulatory investments and things like that. But
Banks are doing extremely well all of our peers are doing well all the high quality downstream.
Banks that we would have an interest in are doing extremely well and they're just not the kind of pushing if you will a motivating and a lot of people point to the bigger macro things, which I think you know we're all relevant important around technologies.
You know regulatory investments and things like that but.
Speaker 7: That's a longer-term focus thing, and that's not anything that I think presses banks that are in this $2-10 billion range that are banks the size that we would be looking at. All that said, I just don't have a feel for it. I do know that
You know that's a longer term focus thing and that's not anything that I think presses.
Hum.
Banks that are in this.
Two to 10 billion range that you are banks the size that we would be looking at so all that said I just don't have a feel for it I do know that you know what we're focused on is as I mentioned organic growth hiring great teams of bankers, both customer facing and also.
Speaker 7: What we're focused on is, as I mentioned, organic growth, hiring great teams of bankers, both customer-facing and also hiring, really looking across our company and the infrastructure of our company and seeing where we need talent and where we can add talent. That's a part of what Michelle talked about with the.
Hiring really looking across our company in the infrastructure of our company and seeing where we'd be talent, where we can add talent. That's a part of what Michel talked about with the.
Speaker 7: With the expense guidance going up a little bit for 22, we really looked late in the fourth quarter at what was going on with talent war, if you will, in Texas and Colorado.
With the expense guidance going up a little bit for <unk>.
22, we'd really we really looked late in the fourth quarter and what was going on with <unk>.
With a talent war, if you will and in our Texas and Colorado.
And.
And not only hired new people, but but you're paying and retaining great talent that we've got.
Speaker 7: All that is very expensive. And then also looking to say, hey, where do we need to add more talent or where do we need to continue to invest? Michelle mentioned our board is very focused as well on making sure that we have an outstanding $20 billion platform from an infrastructure.
All that it was very expensive and then also looking to say, hey, where do we need to add more talent or where do we need to continue to invest and Michel mentioned, our board is very focused as well on making sure that we have an outstanding $20 billion platform Brahma and infrastructure.
And and technology standpoint, so that weekend in the future.
Speaker 7: technology standpoint, so that we can, you know, in the future.
Speaker 7: grow the company, continue to grow the company organically and hopefully someday with some M&A, but I'm not, I just don't have it set.
Grow the company continue to grow the company organically.
Organically yet.
Hopefully some day with some M&A, but.
Not.
I just don't have a sense bread at all whether it's a late 'twenty two or is it you know it will you know.
Speaker 7: bread at all, whether it's a late 22, or is it, you know, will, you know, something happen, will it be 23? You know, I continue to believe from a highest level that yes, there will be high quality M&A, but when?
Something happened it would be 23.
For you to believe from a highest level, but yes, there will be high quality M&A, but when in.
Speaker 7: timing and structure and all that. I just don't know. I do know we will continue to be very disciplined.
Timing and structure and all that I do know, we will continue to be very disciplined around making sure. We wait for the right deal at the right time with the right people and the right structure and.
Speaker 7: around making sure we wait for the right deal at the right time with the right people and the right structure.
That takes.
Speaker 7: 12 months or 18 months or 24 months, it will be what it will be. The other thing that we, you know.
12 months or 18 months or 24 months it will be what it will be.
The other thing that we you know.
Ties back to what I've seen a moment ago is we have to keep running our company well we have to keep growing we have to keep.
Speaker 7: We have to keep running our company. Well, we have to keep growing. We have to keep growing our profitability and
Growing our profitability and.
Speaker 7: By doing so, hopefully that allows us to continue to trade well in terms of our stock, which then again continues to give us the opportunity to be a good partner for someone in the future.
By doing so hopefully that allows us to continue to trade well in terms of our stock, which then again continues to give us the opportunity to be a good partner for someone in the future.
Okay, that's great color I appreciate it David.
Thanks, Brett.
Thank you. Our next question is a follow up from the line of Matt Olney with Stephens Inc. Please proceed with your question.
Speaker 2: Thank you. Our next question is a follow-up from the line of Matt Olney with Stephen Zink. Please proceed with your question.
Speaker 11: Yeah, thanks for taking the follow-up, Dave. I just want to ask about loan pricing. I think on the October call, you mentioned that the pricing for new and renewed loans had deteriorated a little bit in the back half of the year versus the first half of the year of 21. Any update on what you're seeing in more recent weeks and months around loan pricing?
Yeah. Thanks for taking the follow up David I, just wanted to ask about loan pricing I think on the October call you mentioned that the pricing for new and renewed loans had deteriorated a little bit in the back half of the year versus the first half of the year of 'twenty, one any update on what you're seeing in more recent weeks or months around around loan pricing.
Speaker 7: Sure, Matt, we continue to see pricing being very competitive for the same reasons we talked about in the fourth quarter, which is that the market is not as competitive as it was in the first quarter.
Sure, Matt we we continue to see pricing being very competitive for the same reasons, we talked about in the fourth quarter, which.
Speaker 7: which is that all the liquidity and institutions are just looking to book high-quality assets. And so, I'm seeing a lot of pressure on pricing continuing. The structure, I think, generally, you know, remains strong, and I'll let Dan comment on that, but I think the pricing.
Which is that all the liquidity in an institution or just looking to book high quality assets and so you're seeing a lot of pressure on pricing continuing.
The structure I think generally remained strong and I'll, let Dan comment on that but I think the pricing.
It was continued I would say in the fourth quarter at similar kind of pricing what we saw in the third quarter. So it didn't it didn't get worse in the fourth quarter.
Speaker 7: It was continued, I would say, in the fourth quarter at similar kind of pricing, what we saw in the third quarter. So it didn't get worse in the fourth quarter, but it certainly remained super competitive, and we expect that to hold. Michelle alluded to this earlier, Matt, what I think.
But it certainly you were being super competitive and we expect that the whole Michelle.
Michel alluded to this earlier, Matt what I think is.
Speaker 7: It's hard to know on some of these three-year and five-year fixed rate deals.
It's hard to know you know on some of these three year and five year fixed rate deals.
Speaker 7: as interest rates go up later this year, likely, you know, how quickly does that?
U S.
Rates go up later this year likely you know how quickly does that get.
Speaker 7: get reflected or would it be reflected in the CRE pricing market? Again, just don't have a feel for that, we certainly
Get reflected or would it be reflected in the in the CRE pricing market again, just don't have a feel for that we certainly.
Been booking a lot more floating rate U S percentage of our of our loans, you're anticipating an upgrade cycle as I mentioned in my prepared remarks earlier, but.
Speaker 7: We've been booking a lot more floating rates as a percentage of our loans here, anticipating an uprate cycle, as I mentioned in my prepared remarks earlier. But that said, you know, we've built in...
That said you know we built in.
Speaker 7: you know, pretty conservative pricing into our model.
Pretty conservative pricing into our models.
And we still feel good about our spreads and margins and I know Dan in terms of structure.
Speaker 7: still feel good about, you know, our spreads and margins. And I don't know, Dan, in terms of structure, any concerns or anything you're seeing in the market?
Any concerns or anything you're seeing in the market.
Speaker 4: I think the only structural pressure that we're seeing, Matt, is coming from non-banks.
I think the only structural pressure that we're seeing now is coming from Nonbanks.
Speaker 4: It's always out there. The fact that the banks have the liquidity they have today, I think, is primarily a pricing issue, as David said.
It's always out there.
The fact that the banks have the liquidity to have today I think is primarily a pricing issue as David mentioned, it's just competitive.
Speaker 4: competitive, but it's been competitive. All of 21 was competitive, so we certainly expect that that would continue.
But it's been competitive all of 'twenty, one was competitive so we certainly expect that that would continue in 'twenty, two but I think overall the banks have behaved well as it relates to structure and is primarily the nonbanks that are in that space.
Speaker 4: But I think overall, the banks have behaved well as it relates to structures, and it's primarily the non-banks who are...
Okay. That's that's helpful and maybe just lastly, a big picture question.
Speaker 11: Okay, that's helpful. And maybe just lastly, a big picture question.
Speaker 11: We haven't talked much about efficiency ratios for a little while, but if we go back a few years ago, the bank had efficiency ratio below that 50 percent level and now we're a little bit above. So, help us appreciate just what we need to see to get that core efficiency ratio back below 50 percent level. Is it a matter of just seeing higher rates or do you also think it's going to have to be driven partially by M&A?
We haven't talked much about efficiency ratios for for a little while but if we if we go back a few years ago that the bank had a fishy ratio.
Below that 50% level and now a little bit above so help us appreciate just what we need to see to get that core efficiency ratio back below 50% level. It is it a matter of just seeing higher rates or do you also I think it's gonna have to be driven partially by by M&A. Thanks.
Yeah, I think I don't expect that that efficiency ratio will go back below 50% in 'twenty two that just due to all the things that we've talked about this morning.
Speaker 5: Yeah, I think, I don't expect that that efficiency ratio will go back below 50% in 22, Matt, just due to all the things that we've talked about this morning. I would expect by 23 it will trend back below 50%. It's primarily going to be driven by revenue growth, really. I don't expect at this point we're going to really reduce our costs going forward. Hopefully, they don't continue to increase at the level they will in 22, but just as a growing company, I expect they'll continue to increase.
And I would expect that 'twenty three it will trend back below 50%, it's primarily going to be driven by revenue growth. Clearly you know I don't expect at this point, we're going to work and I really rent. These are costs going forward hopefully they don't continue to increase at that level thing will end 'twenty two that just isn't growing company I expect they'll continue to increase.
Speaker 10: But, you know, especially with rate increases, we should drive higher revenue in 23 that will help us push that efficiency ratio back down.
That you know, especially with rate increases, we should drive higher revenue and 23 that will help us push that efficiency ratio back down.
Yes.
Okay. Thanks, that's all from me.
Hey, Thanks, Matt.
Good day.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Brooks for any final comments.
Speaker 2: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Brooks for any final comments.
Speaker 7: Thank you. I appreciate everyone being on today. I did want to comment one more time, what an amazing job our team did.
Thank you I appreciate everyone being on today.
I did want to comment one more time.
What an amazing job our team did in 2021 and really for the last two years, we had no.
Speaker 7: 2021. And really, for the last two years, we had no, you know, no understanding really, you know, early in 2020, what was coming for the next two years. And our team has just done a fantastic job of leaning in and taking care of our customers and taking care of our communities. And it's just been, I've been, you know, proudest of everything that we've accomplished the last two years has been.
No understanding really.
Early in 2020, what was coming for the next two years and our team has just done a fantastic job of leaning in and taking care of our customers and taking care of our communities.
This has been not been you know proudest of everything that we've accomplished last two years, there's been a proud of our team and the work they've done and our ability to continue to attract such a talented people who you know resonate with what we're trying to do in the company, we're trying to build and the impact we're trying to add.
Speaker 7: proud of our team and the work they've done, and in our ability to continue to attract such talented people who resonate with what we're trying to do and the company we're trying to build and the impact we're trying to have in communities. So we're committed to that, and we continue to build our team in a way that, you know, points to a long-term goal.
In communities and so we're committed to that and we continue to build our team in a way that you do.
Two a long long term future.
Speaker 7: Just appreciate each of them and appreciate each of you who listen and who invest in our company. And we will continue to work hard on your behalf as well. Have a great day.
Just appreciate each of them and appreciate each of you.
Listen in he.
Investing in our company and we.
We will continue to work hard on your behalf as well.
Great day.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Speaker 2: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.