Q4 2021 Southside Bancshares Inc Earnings Call
Thank you for standing by and welcome to the sales side Bancshares incorporated fourth quarter and year end 2021 earnings call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program is.
Being recorded and now I'd like to introduce your host for today's program Lindsey Bailes, Vice President Investor Relations. Please go ahead.
Thank you Jonathan good morning, everyone and welcome to Southside Bancshares' fourth quarter and year end 2021.
A transcript of today's call will be posted on Southside Dot com under Investor Relations during today's call and in other disclosures and presentations I will remind you that any forward looking statements are subject to risks and uncertainties.
Factors that could materially change our current forward looking assumptions are described in our earnings release and our form 10.
Joining me today are Lee Gibson, President and CEO and Julie Shamburger CFO .
Lee will share his comments on the quarter and then Julie will give an overview of our financial results I will now turn the call over to Lee.
Good morning, everyone and welcome to Southside Bancshares' fourth quarter and year end earnings call for 2021.
This morning, we reported exceptional results for the year and fourth quarter I wanted to start by recognizing and thanking the entire sales team for their extraordinary contributions in efforts during 2021 without which these results would not have been possible.
Highlights for the quarter included earnings per share of <unk> 88.
ROA TCE of 16, 8% annualized linked quarter deposit growth of 29, 1% annualized linked quarter loan growth net of PPP up three 8%.
An increase in the net interest margin to 323% and continued strong asset quality with nonperforming assets decreasing to one 6% of total assets.
<unk> for the full year included record net.
Record net income.
$113 4 million record earnings per share of $3 47.
And ROA TCE of 17%.
16% increase in deposits, a 5% increase in loans net of PPP.
An increase in the net interest margin of nine basis points and further improvement in our strong asset quality.
The fourth quarter results included a reversal.
Provision for credit losses of $3 4 million linked.
Linked quarter, our net interest margin increased seven basis points.
The average yield on securities increased eight basis points and the rate on our interest bearing liabilities decreased 13 basis points 11 basis points of which resulted from the decrease in sub debt expense. The average yield on loans decreased 12 basis points largely.
Due to the decrease in PPP loan accretion.
We were extremely pleased with our annualized linked quarter loan growth net of PPP, a three 8% given the previously discussed anticipated large payoffs that occurred during the fourth quarter.
As we begin 2022, our loan pipeline is extremely strong.
Especially encouraging is that the pipeline in each of our regions is very strong.
Given the excellent outlook for the high growth markets, we serve as well as the growth occurring in our other markets. We anticipate solid loan demand will continue well into 2022.
We are projecting 2022 loan growth net of PPP loans of 9%.
During the fourth quarter, we continued to experience an increase in our average non maturity deposits, which represent our lowest cost.
Interest bearing interest bearing liabilities over the past 24 months non maturity deposits have increased significantly which has allowed us to strategically transform.
Our funding base by significantly reducing dependence on higher cost and shorter duration Cds.
And swapped FHL b and other wholesale borrowings.
Currently our swap borrowings of $575 million down $30 million since December 31.
The economic conditions in our markets remained strong.
Bolstered by continued company relocations and existing company expansions combined with population growth, resulting from continued migration from other states.
W and Austin markets that we serve continue to be among the highest growth markets in the country.
I look forward to answering your questions. Following julie's remarks, and I will now turn the call over to Julie.
Thank you Lee and good morning, everyone and welcome to our call today, meaning between 'twenty, one with another strong quarter in record financial results for the year with annual net income of $113 4 million and diluted earnings per common share of $3 47.
45% increase from $2 47 for 2020.
We reported fourth quarter net income of $28 7 million linked quarter, a decrease of $619000 or two 1%.
Through a lower reversal of provision for credit losses, and a decrease in gain on sale of Aam's security, partially offset by a decrease in interest expense.
In the corner ended December 31st 2021 diluted earnings per common share were 88 days.
The decrease in two cents or two 2% linked quarter basis.
Linked quarter net and the decrease in PPP loans, and $36 5 million, our loan portfolio increased $34 million to $3 six 1 billion.
Our construction loans increased $25 8 million commercial lines, excluding the P. P. P forgiveness increased $11 7 million and we also experienced an increase in municipal loans at $15 8 million linked quarter basis.
We had increased payoffs in commercial real estate, including several large land between 24 and $30 million.
The weighted average rate of new loans funded during the fourth quarter was approximately three 4%.
As of December 31st our PPP loans included in the commercial loan category totaled $31 million down from $67 5 million at September 32021.
The average balance of PPP loans with approximately $53 6 million for the fourth quarter and $142 7 million for 2021.
Currently our remaining PPP loans or approximately $25 million.
Our asset quality remains strong nonperforming assets decrease throughout 2021 with a total decrease of $5 9 million or 33, 6% for 2021 or 16.
Percent of total assets compared to <unk>, 5% at December 31, 2020.
On a linked quarter basis, nonperforming assets decreased $815000 or six 6%.
Linked quarter, our allowance for loan loss decreased $2 7 million or seven 2% to $35 3 million at December 31 data recording a reversal of provision for credit losses on loans of $2 7 million in the fourth quarter of 2021.
The reversal of provision for the fourth quarter was primarily due to increased forecast for commercial real estate as well as the impact of loan payoffs on the allowance.
As of December 31st our allowance for loan losses as a percentage of total loans was nine 7% and nine 8% when excluding PPP loans.
Our allowance for off balance sheet credit exposures at December 31 decreased to $2 4 million when compared to $3 1 million at September 30th 2021 data reversal of provision of 706000 in the fourth quarter.
This combined with the reversal of provision for credit losses on loans. The total reversal of provision for credit losses was $3 4 million for the three months ended December 31 2021.
As of December 31st our loans with oil and gas industry exposure was $69 7 million or one 9% of total loans.
Our securities portfolio increased $9 5 million or 3% on a linked quarter basis.
We recognized $463000 in net security gains on the celebrated securities during the quarter a decrease from the net gains of one 4 million reported last quarter.
And we had a net unrealized gain in the securities portfolio of $111 7 million and the duration in the portfolio with $5 nine years up from five eight years linked quarter and $4 seven years at the end of 2020.
Our mix of loans and Securities at December 31 was 56% and 44% respectively remaining consistent on a linked quarter basis with the shift from 58% loans and 42% securities for the prior year end.
Our deposits increased $390 7 million or seven 3% compared to September 32021.
This increase consisted of an increase in public fund deposits of $126 6 million or 14, 7%.
The fund deposits normally increase in the fourth quarter each year.
Additionally, brokered deposits increased $181 3 million or 159, 8%.
In December in order to obtain lower cost spending we utilized $265 million in broker deposits for funding our cash flow hedge slots and reduced FHA advances.
During the first quarter of 2002, we plan to utilize brokered deposits in place at FHA advances on the remaining $310 million of cash flow hedge swaps. We expect this to reduce the overall funding costs on the swaps by approximately 10 basis points.
Our net interest margin increased seven basis points on a linked quarter basis to three 3% and the net interest spread increased nine basis points to three nine.
The redemption of our subordinated notes on September 30th impacted the average rate paid on our interest bearing liabilities by approximately 11 basis points for an impact of nine basis points on the NIM.
Approximately eight basis points of the net interest margin related to fees earned on PPP loans compared to 18 basis points last quarter.
For the three months ended December 31, net interest income increased $1 2 million or two 5% when compared to the linked quarter.
We recorded approximately one 4 million in net fees related to the PPP loans included in interest income this quarter compared to $3 1 million last quarter.
As of December 31, 2021, we had net deferred fees of approximately $935000 remaining to be recognized as a yield adjustment over the terms of the loans.
Additionally, we recorded $364000 in purchase loan accretion this quarter, an increase of 168000 from the prior quarter.
For the three months ended December 31, 2021, noninterest income excluding net gains on the sale of securities increased 160000, or one 4% for the linked quarter.
For the fourth quarter non interest expense was $31 3 million, excluding the loss on the redemption in the third quarter noninterest expense increased 689000 or two 2%.
Linked quarter basis.
For 2022, we expect quarterly noninterest expense to be approximately $32 5 million.
We are pleased to report our fully taxable equivalent efficiency ratio for the three and 12 months ended December 31 was 40, 761% and 49, 3% respectively.
Income tax expense decreased 165000, or three 3% compared to the three months ended September 32021.
Our effective tax rate decreased slightly to 14, 4% for the fourth quarter.
At this time, we are estimating an annual effective tax rate at 12% for 2022.
Thank you for joining US today. This concludes our comments and we will open the line for your questions.
Certainly once again, ladies and gentlemen, if you have a question at this time. Please press Star then one our first question comes from the line of Graham <expletive> with Piper Sandler Your question. Please.
Hey, good morning, everyone.
Good morning.
So I just wanted to start on the bond portfolio you guys have any plans to grow it from here.
Ill talk about the additional broker deposits, but it looks like it might have been some seasonal funds in there as well overall deposit growth was.
Pretty strong.
Just wondering if you guys are planning to grow it anymore.
No.
I think for the year, we're budgeting just ever so slight increase from the bond portfolio.
30, or $40 million somewhere in that range.
But no we're really not and those growth in brokered deposits.
Were due to us.
<unk> the funding of our swaps.
Funding from our home loan bank to the broker deposits. So that we can save approximately 10 basis points.
Right that sounded like a pretty good trade for you guys.
And then I guess.
One last thing on the bond portfolio.
I'm wondering if there's anything nonrecurring driving the improvement in the MBS yields this quarter.
I think the increase had to do with less amortization expense on the mortgage backed securities and.
And we did we did we continue to have some prepayments where theres yield maintenance on some of those mortgage securities.
And I would anticipate with rates being up a little bit long in.
We may see some further slowing of prepayments.
Prepayment speeds that could possibly move move the mortgage yield up a little bit.
Okay, that's kind of what I.
Got it.
And then just moving I guess more to asset sensitivity and looking at a higher rate environment. I was wondering if you guys could provide just a little color on how you all are positioned heading into this maybe like broadly.
Your NII shock scenarios or what percent of loans re price immediately.
And then even like what you guys might be expecting on the deposit paid upfront with all of that would be very helpful. Thank you.
Okay.
I think.
For the last really since the pandemic began.
Deposits.
All banks started growing we basically utilized that deposit growth in non maturity deposits too.
To become significantly less dependent on the Cds.
And to become significantly less dependent on <unk>.
Swap wholesale funding, which right now we just don't have a lot of.
So.
As as the short term interest rates increase we don't feel like we're going to have to raise our our funding costs anywhere near what those increases are in fact, the first increase on some of the non maturity deposits or may not be.
Any increase at all but b.
A very small percentage increase of the.
Going forward, even throughout the year, if it goes up the four.
Rate increases that they are anticipating this year on the loan side I think just a little less than 50% and Julie probably has the number.
Is in floating rate of that.
Robley.
60, or 70% re prices immediately but most of it.
Within six months to a year some of it's based off a three month LIBOR and.
Some of it one month, but a lot of it is overnight and immediate.
Okay I appreciate that.
Thanks, guys and congrats on a solid quarter.
Thank you.
Thank you. Our next question comes from the line of Michael Young from two Securities. Your question. Please.
Hey, good morning, just wanted to touch on the loan growth outlook, you mentioned I think 9% I assume thats kind of ex PPP. So just the core loan growth and was just curious what areas Youre seeing the most strength then if it is kind of the historical construction bucket and what the.
New yields are on loans that you might be putting on or are they a good bit higher at this point than kind of the back book of what's rolling off.
We are seeing a fair amount of construction loans.
And those are typically.
Not typically they are almost always floating.
And they are either tied to prime or they're tied to one month LIBOR. So for at this point.
So.
As rates move up those construction loans will move up.
What's really encouraging is were seeing a lot of full funders and it's primarily on the commercial real estate side.
We're seeing that and then.
Seen.
Some.
Some nice increases in municipal loans that we anticipate throughout the year.
Okay.
Does that kind of.
Answering your question Michael.
Yes, I guess I'm trying to get at basically are the new loans you are putting on are they sort of at higher rates and higher yields on what's running off and that it should be sort of accretive to loan yields or is it more in line or still kind of slightly dilutive.
I'm sorry.
Full funders that.
If we're fixing the full funders there.
At slightly higher yields.
And what's rolling off and on the floating rate.
<unk> at similar yields to what we have today, but.
They're going to.
In March I think everybody is anticipating it was 25 basis point increase.
Youll see that across the board reflected and so for LIBOR.
And prime is that occurs so.
Those floating rate loans.
Spreads on those let's say, we've got one at a price of $3 25.
The real spreads increased over what our cost of funds.
Pretty much I wouldn't say, the full 25 basis points, but it ought to.
It will be in the <unk> somewhere 2022 'twenty three basis points spread on inquiries.
Alright, Okay, and then on the capital side Lee just just sort of curious how you guys are going to have stronger loan growth. So.
Wanted to just get your updated thoughts on capital return just share buybacks, even still in the equation given where the stock is.
And then what the outlook is for M&A.
Okay.
In terms of.
Stock buybacks, we would.
We do not have one at this point in time currently in place.
It's something that we're looking at and.
Would anticipate.
Sometime during the first half of this year Youll, probably see something on that.
In terms of.
Let's say it was.
You mentioned capital.
A dividend M&A, we're actually having some more meaningful conversations with.
Some potential partners that.
Would be something we'd be interested in acquiring and.
I don't look for anything to happen.
Mediately, but I think I am.
I'm hopeful that some time, maybe during the first half or first three quarters of 2022.
May be possible that we are able to announce something.
But theres nothing sitting on the table exact today.
Good conversations.
Okay, great. Thanks for the color appreciate it.
Okay.
Thank you. Our next question comes from the line of Brady Gailey from <unk>. Your question. Please.
Yes. Thank you good morning, guys.
Hey, Brian how are you doing.
Great.
So when I look at your fee income.
Lot of it is driven by our service charges on deposits.
Can you just talk about I know the industry has seen some pressure on the NSF fees and overdrafts.
Just one.
One tell us how much NSF and overdraft.
In 2021, and then how you guys are thinking about that going forward.
Yeah.
Agility is grabbing the number for 2021, what I can tell you is that.
We're cognizant of that and our budget for <unk>.
For 2022 .
We basically have lowered it.
By 10% for the last nine months of the year is that correct yes.
And the only reason we're doing that is because if we.
Look to make the change today on something it would take.
Take a while for that to filter through and really some of our lower <unk>.
<unk>.
Overdraft income occurs in the first quarter because of tax refunds and things of that nature. So we are cognizant of that and I think Julie has that number for 2021.
The overdraft and return check charges together were about $9 2 million overdrafts.
Self was eight 4 million.
And that was some decline from 2020 as well not significant but some decline.
Mainly due to that.
The abundance of deposits.
Probably in all institutions right now.
And then.
Moving to the expense base.
Guidance of $32 5 million.
Is that more kind of the run rate in the first quarter and youre going to see some growth beyond that or is that more kind of the average run rate for the full year.
It's probably closer to an average for the full year.
Based on budgeting.
Okay.
We've budgeted in some additional.
Loan officer hires.
Net.
Likely we're going to you'll see hopefully in the second and third quarter.
Possibly fourth quarters, so thats.
Okay, Brian a little lower in Q1.
Lower than Q1.
I think you were guessing somewhere closer to 32 million.
In the first quarter.
But on average we think.
New lease budgeting 32 and half of the year.
Per quarter.
Okay, and then Lee it sounds like.
Youre a little more active on M&A now that you have been the last couple of years.
Just remind us.
What geographies do you kind.
Kind of what's the sweet spot from a size point of view for a bank target for sale side.
Geography.
Basically we'd like to stay in at this point in time, we plan on staying along Interstate 35 to the east.
Might go 50, 60 miles west of Interstate 35, but probably not much past that.
And that encompasses about 85% of the population in the state and probably at least that percentage of the economy in the state. So.
In terms of size.
Deal size would be somewhere between 1 billion and $2 billion, we start getting too much above <unk>.
And we're touching on.
10 billion.
So we'd like to.
We do an acquisition, we'd like to stay under that.
Unless we were to look at it really really large acquisition that would take us.
At least $1 billion or two over $10 billion, but.
Sweet spot for us release, probably a billion two two.
$2 billion.
Alright, and then just.
On that topic.
The Durbin.
It sounds like.
You guys want to stay under 10 billion for a while here but.
If you do cross remind us what the durbin impact could be.
Our last estimate was around $8 million.
Yes, it probably does seem to be refresh, but that was I think last quarter said.
Then Julie about $8 million 8 million on today's balance sheet.
We're a $10 billion balance sheet.
Now with me today is balance sheet.
Okay.
Alright, great. Thank you guys.
Alright, Thank you Barry.
Thank you. Our next question comes from the line of Matt Olney from Stephens. Your question. Please.
Yes. Thank you want to ask about the loan growth guidance that you guys provided of 9% for the.
Full year ex PPP.
It implies a nice pick up versus what we've seen over the last few quarters any more color on that improvement and I think you mentioned paydowns were heavier in the back half of 2021. So are you assuming a more moderate level of pay downs in 2022.
We certainly are not expecting.
Pay downs like that in the first half of the year.
And then we had a lot of there was some uncertainty about tax laws and things of that nature that.
Probably drove a few of the pay offs.
That.
We have some sales that occurred.
In the fourth quarter.
But no we.
We're not anticipating.
The volume, but the main thing is our pipeline.
<unk> typically December and January are pretty slow months and.
It's been fast and furious.
We have not seen a start to the year like this in quite some time. So it's just.
Very encouraging and it's not just one or two regions. It's in all of our regions. So.
We just feel good the economies doing extremely well and.
Growth is occurring and it's.
It's real growth.
New jobs people moving in companies moving in it's just.
It's amazing what's going on so they are not.
We're not talking about we're talking about apartments that.
Down in Austin in the DFW area that.
We heard.
This week.
Theres bidding wars for apartments and Austin.
Kind of like do you see bidding wars for houses.
Yes.
It's it's housing related is key.
Company relocation related and a lot of warehouse related type stuff. So it's just really positive right now and we're beginning to okay.
To see a real.
Impact as a result of that on our on our pipeline.
That's helpful. Lee. Thank you for that and you also mentioned earlier.
Optimism around hiring additional new producers for the year.
Loan production from those producers you expect later on this year is that also embedded in that 9% or could that be potential.
Not even from the current guidance.
I think that could be potential upside from the current guidance.
<unk>.
We're visiting actively with.
Different lenders and.
Feel good about.
No.
Uh huh.
Especially the first three quarters that we're going to land a few in.
It always takes about a month for somebody to kind of get their feet on the ground and notify everybody that they've moved but we.
We expect.
Hoping to get some additional.
Sure.
Lift out of loan officers that we hire but with that we're not including that in our 9% because thats not something we have in place today.
Yes, okay.
Okay, great. Thank you guys.
Alright, thank you.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Lee Gibson for any further remarks.
Thank you for joining us today, we appreciate the opportunity to answer your questions and your interest in South side Bancshares in closing given the positive economic conditions in our markets are strong pipeline balance sheet capital position core earnings and asset quality.
Cited about the prospects for 2022 and look forward to reporting first quarter results to you during our next earnings call in April .
This concludes the call. Thank you.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
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Speaker 1: I have.
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Speaker 2: Thank you for standing by and welcome to the South Side Bank Shares Incorporated Fourth Quarter in year-end 2021 earnings call. At this time, all participants are in listen only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Lizzy Biles, Vice President, Investor Relations. Please go ahead.
Thank you for standing by and welcome to the South side Bancshares incorporated fourth quarter and year end 2021 earnings call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone Azarow.
Today's program is being recorded and now I'd like to introduce your host for today's program Lindsey Bailes, Vice President Investor Relations. Please go ahead.
Speaker 3: Thank you, Dawson. Good morning, everyone, and welcome to South Side Bank Shares Sports Quarter in year-end 2021 earnings call. A transcript of today's call will be posted on southside.com under Investor Relations.
Thank you Jonathan Good morning, everyone and welcome to Southside Bancshares' fourth quarter and year end 2021 earnings call.
A transcript of today's call will be posted on Southside dot com under Investor Relations.
Speaker 3: During today's call and in other disclosures and presentations, I will remind you that any fordlooking statements are subject to risk and uncertain.
During today's call and in other disclosures and presentations I will remind you that any forward looking statements are subject to risks and uncertainty factors.
Speaker 3: Factors that could materially change our current court-looking assumptions are described in our earnings relief in our quarantine case. Joining me today are Lee Gibson, President and CEO and Julie Schamburger, CFO . First, Lee will share his comments on the quarter and then Julie will give an overview of our financial results. I will now turn the call over to Lee.
Factors that could materially change our current forward looking assumptions are described in our earnings release and our Form 10-K .
Joining me today are Lee Gibson, President and CEO and Julie Shamburger CFO first Lee will share his comments on the quarter and then Julie will give an overview of our financial results I will now turn the call over to Lee.
Speaker 4: Good morning, everyone, and welcome to Southside Bank Shares Fourth Quarter and Year in Arning's Call for 2021. This morning we reported exceptional results for the year and fourth quarter. I want to start by recognizing and thanking the entire Southside team for their extraordinary contributions and efforts during 2021, without which these results would not have been passed.
Good morning, everyone and welcome to Southside Bancshares' fourth quarter and year end earnings call for 2021. This morning, we reported exceptional results for the year and fourth quarter I wanted to start by recognizing and thanking the entire southside team for their extraordinary.
Ordinary contributions and efforts during 2021 without which these results would not have been possible.
Speaker 4: Highlights for the quarter included earnings per share of 88 cents, an RLA TCE of 16.8%, annualized link quarter deposit growth of 29.1%, annualized link quarter loan growth net a PPP of 3.8%.
Highlights for the quarter included earnings per share of <unk> 88.
And ROA TCE of 16, 8%.
Elisa linked quarter deposit growth of 29, 1% annualized linked quarter loan growth net of PPP up three 8%.
Speaker 4: an increase in the net interest margin to 3.23% and continues strong asset quality with non-performing assets decreasing to 0.16% of total assets.
An increase in the net interest margin to 323% and continued strong asset quality with nonperforming assets decreasing to one 6% of total assets.
Speaker 4: highlights for the full year included record net income of 113.4 million Record earnings per share of $3.47 An R O A T C E of 17%
<unk> for the full year included record net record net income.
$113 4 million record earnings per share of $3 47.
And ROA TCE of 17%.
Speaker 4: A 16% increase in deposits, a 5% increase in loans, net of PTP, an increase in the net interest margin of nine basis points, and further improvement in our strong asset quality.
16% increase in deposits, a 5% increase in loans net of PPP.
An increase in the net interest margin of nine basis points and further improvement in our strong asset quality.
Speaker 4: The fourth quarter results included a reversal of provision for credit losses of 3.4 million. Linked quarter are net interest margin increased seven basis points.
The fourth quarter results included a reversal.
Provision for credit losses of $3 4 million linked.
Linked quarter, our net interest margin increased seven basis points.
Speaker 4: The average yield on securities increased eight basis points, and the rate on our interest rate liabilities decreased 13 basis points, 11 basis points of which resulted from the decrease in subbed expense. The average yield on loans decreased 12 basis points largely due to the decrease in PPP loan accretion.
The average yield on securities increased eight basis points and the rate on our interest bearing liabilities decreased 13 basis points 11 basis points of which resulted from the decrease in sub debt expense. The average yield on loans decreased 12 basis points largely.
Due to the decrease in PPP loan accretion.
Speaker 4: We were extremely pleased with our annualized link quarter lung growth net a PPP of 3.8 percent, given the previously discussed anticipated large payoffs that occurred during the fourth quarter. As we begin 2022, our loan pipeline is extremely strong. What is especially encouraging is that the pipeline in each of our regions is very strong.
We were extremely pleased with our annualized linked quarter loan growth net of PPP, a three 8% given the previously discussed anticipated large payoffs that occurred during the fourth quarter.
As we begin 2022, our loan pipeline is extremely strong.
Especially encouraging is that the pipeline in each of our regions is very strong.
Speaker 4: Given the excellent outlook for the high growth markets we serve, as well as the growth occurring in our other markets, we anticipate solid loan demand will continue well into 2022. We are projecting 2022 loan growth, neta PPP loans of 9%.
Given the excellent outlook for the high growth markets, we serve as well as the growth occurring in our other markets. We anticipate solid loan demand will continue well into 2022.
We are projecting 2022 loan growth net of PPP loans.
Up 9%.
Speaker 4: During the fourth quarter, we continue to experience an increase in our average non-maternity Drink sausage
During the fourth quarter, we continued to experience an increase in our average non maturity deposits, which represent our lowest cost interest bearing interest bearing liabilities over the past 24 months non maturity deposits and increased significantly which has allowed us to strategically transform.
Speaker 4: intersparing liabilities. Over the past 24 months, non-matured deposits have increased significantly, which has allowed us to strategically transform the funding base by significantly reducing dependence on higher cost and shorter duration CDs and unsupped FHLB and other wholesale borrowers.
The funding base by significantly reducing dependence on higher cost and shorter duration Cds.
And swapped FHL Bay and other wholesale borrowings.
Speaker 4: Currently our swap borrowings are 575 million. Down 30 million is December 30, per.
Our swap borrowings are $575 million down 30 million since December 31.
Speaker 4: The economic conditions in our markets remain strong.
The economic conditions in our markets remained strong.
Speaker 4: Blulstered by continued company relocations and existing company expansions combined with population growth resulting from continued migration from other states.
Bolstered by continued company relocations and existing company expansions combined with population growth, resulting from continued migration from other states.
Speaker 4: The DFW and Austin markets that we serve continue to be among the highest growth markets in the country.
The DFW and Austin markets that we serve continue to be among the highest growth markets in the country.
Speaker 4: I look forward to answering your questions following Julie's remarks and I will now turn the call over to Julie.
I look forward to answering your questions. Following julie's remarks, and I will now turn the call over to Julie.
Speaker 5: Thank you Lee. Good morning everyone and welcome to our call today. We end 2021 with another strong quarter and record financial results for the year with annual net income of $113.4 million and diluted earnings per common share of $3.47. A 40.5% increase from $2.47 for 2020.
Thank you Leigh and good morning, everyone and welcome to our call today, we enter 2021 with another strong quarter in record financial results for the year with annual net income of $113 4 million and diluted earnings per common share of $3 47, and 45% increase from $2.
<unk> 47 for 2020.
Speaker 5: We reported for a coordinate income of 28.7 million, the linked quarter decrease of $619,000 per 2.1%. Due to a lower reversal of provision for credit losses in a decrease in gain on sale of AFS security, partially offset by decrease in interest expense.
We reported fourth quarter net income of $28 7 million linked quarter decrease of $619000 or two 1% due to a lower reversal of provision for credit losses, and a decrease in gain on sale of AFM security part.
Actually offset by a decrease in interest expense.
Speaker 5: For the quarter-ended December 30th, virus 2021, our diluted earnings per common share were 88 cents, a decrease of two cents, or 2.2% on a linked quarter basis.
In the corner ended December 31st 2021 diluted earnings per common share were 88 days.
The decrease in two cents or two 2% linked quarter basis.
Speaker 5: Link quarter net of the decreased in PPP loans of $36.5 million, our loan portfolio increased $34 million to $3.61 billion. Our construction loans increased $25.8 million, commercial loans, excluding the PPP forgiveness, increased $11.7 million, and we also experienced an increase in municipal loans at $15.8 million on a link to quarter basis.
Linked quarter net and the decrease in PPP loans, and $36 5 million, our loan portfolio increased $34 million to $3 six 1 billion.
Our construction loans increased $25 8 million commercial lines is screening the P. P. P for goodness increased $11 7 million and we also experienced an increase in municipal loans of $15 8 million linked quarter basis.
Speaker 5: We had increased payoffs in commercial real estate, including several large loans between $24 and $30 million. The weighted average rate of new loans funded during the fourth quarter was approximately 3.4 percent.
We had increased payoffs in commercial real estate, including several large land between 24 and $30 million.
The weighted average rate of new loans funded during the fourth quarter was approximately three 4%.
Speaker 5: As of December 31, our PPP loans included in the commercial loan category totaled $31 million down from $67.5 million at September 30, 2021.
As of December 31st our PPP loans included in the commercial loan category totaled $31 million down from $67 5 million at September 32021.
Speaker 5: The average balance of PPP loans was approximately $53.6 million for the fourth quarter and $142.7 million for 2021. Currently, our remaining PPP loans are approximately $25 million.
The average balance of PPP loans with approximately $53 6 million for the fourth quarter and $142 7 million for 2021.
Currently our remaining PPP loans or approximately $25 million.
Speaker 5: Our asset quality remains strong. Non-performing assets decreased throughout 2021 with a total decrease of $5.9 million or 33.6% for 2021 or 0.16% of total assets compared to 0.25% at December 31, 2020.
Our asset quality remains strong nonperforming assets decrease throughout 2021 with a total decrease of $5 9 million or 33, 6% for 2021 or 16% of total assets compared to <unk>, 5% at December 31.
2020.
Speaker 5: On a length quarter basis, non-performing assets decreased $815,000 or 6.6%.
On a linked quarter basis, nonperforming assets decreased $815000 or six 6%.
Speaker 5: Length quarter our allowance for loan loss decreased $2.7 million or 7.2 percent to $35.3 million at December 31st due to recording a reversal of provision for credit losses on loans of $2.7 million in the fourth quarter of 2021.
Linked quarter, our allowance for loan loss decreased $2 7 million or seven 2% to $35 3 million at December 31.
Data recording a reversal of provision for credit losses on loans of $2 7 million in the fourth quarter of 2021.
Speaker 5: The reversal of provision for the fourth quarter was primarily due to an improved forecast for commercial real estate, as well as the impact of loan payoffs on the allowance.
The reversal of provision for the fourth quarter was primarily due to increased forecast for commercial real estate as well as the impact of loan payoffs on the allowance.
Speaker 5: As of December 31st, our allowance for loan losses as a percentage of total loans was 0.97% and 0.98% when excluding PPP loans.
As of December 31st our allowance for loan losses as a percentage of total loans was nine 7%.
Nine 8% when excluding PPP loans.
Speaker 5: Our allowance for off-balance sheet credit exposures at December 31st decreased to $2.4 million when compared to $3.1 million at September 30th, 2021 due to a reversal of provision of $706,000 in the fourth quarter.
Our allowance for off balance sheet credit exposures at December 31 decreased to $2 4 million when compared to $3 1 million at September 32021 data or reversal of provision of 706000 in the fourth quarter desk.
Speaker 5: This combined with the reversal of provision for credit losses on loans, the total reversal of provision for credit losses was $3.4 million for the three months ended December 31, 2021.
This combined with the reversal of provision for credit losses on loans. The total reversal of provision for credit losses was $3 4 million for the three months ended December 31 2021.
Speaker 5: As of December 31st, our loans with oil and gas industry exposure was $69.7 million, or 1.9% of total loans.
As of December 31st our loans with oil and gas industry exposure was $69 7 million or one 9% of total loans.
Speaker 5: Our securities portfolio increased $9.5 million or 0.3% on a linked quarter basis. We recognize $463,000 in net security gains on the sale of AFS securities during the quarter, a decrease from the net gains of $1.4 million reported last quarter.
Our securities portfolio increased $9 5 million or 3% on a linked quarter basis, we recognized $463000 in net security gains on <unk> securities during the quarter a decrease from the net gains of $1 4 million reported last quarter.
Speaker 5: At year end, we had a net unrealized gain in the securities portfolio of $111.7 million, and the duration of the portfolio was 5.9 years, up from 5.8 years length quarter and 4.7 years at the end of 2020.
At year end, we had a net unrealized gain in the securities portfolio of $111 7 million and the duration in the portfolio with $5 nine years up from five eight years linked quarter and $4 seven years at the end of 2020.
Speaker 5: Our mix of loans and securities at December 31st was 56 percent and 44 percent, respectively, remaining consistent on a linked order basis with a shift from 58 percent loans and 42 percent securities for the prior year end.
Our mix of loans and Securities at December 31 was 56% and 44% respectively remaining consistent on a linked quarter basis with the shift from 58% loans and 42% securities for the prior year end.
Speaker 5: Our deposits increased $390.7 million, or 7.3%, compared to September 30, 2021. This increase consisted of an increase in public fund deposits of $126.6 million, or 14.7%. Public fund deposits normally increase in the fourth quarter each year.
Our deposits increased $390 7 million or seven 3% compared to September 32021.
This increase consisted of an increase in public fund deposits of $126 6 million or 14, 7%.
Public fund deposits normally increase in the fourth quarter each year Adil.
Speaker 5: Additionally, broker deposits increased $181.3 million or 159.8%.
Additionally, brokered deposits increased $181 3 million or 159, 8%.
Speaker 5: In December , in order to obtain lower cost funding, we utilized $265 million in broker deposits for funding our cash flow hedge swaps and reduced FHLB advances.
In December in order to obtain lower cost funding, we utilized $265 million in broker deposits for funding, our cash flow hedge slots and reduced FHA advances.
Speaker 5: During the first quarter of 22, we plan to utilize broker deposits in place at FHLB Advances on the remaining $310 million of cash flow hedge SWOTs. We expect this to reduce the overall funding cost on the SWOTs by approximately 10 basis points.
During the first quarter of 'twenty, two we plan to utilize broker deposits in place of <unk> advances on the remaining $310 million of cash flow hedge swaps. We expect this to reduce the overall funding cost on the swaps by approximately 10 basis points.
Speaker 5: Our net interest margin increased seven basis points on a linked quarter basis to 3.23%, and the net interest spread increased nine basis points to 3.09. The reduction of our subordinated notes on September 30th impacted the average rate paid on our interest bearing liabilities by approximately 11 basis points for an impact of nine basis points on the NIM.
Our net interest margin increased seven basis points on a linked quarter basis to three 3% and the net interest spread increased nine basis points to three nine <unk>.
The redemption of our subordinated notes on September 30th impacted the average rate paid on our interest bearing liabilities by approximately 11 basis points foreign impact of nine basis points on the NIM.
Speaker 5: approximately eight basis points of the net interest margin related to fees earned on PPP loans compared to 18 basis points last quarter.
Approximately eight basis points of the net interest margin related to fees earned on PPP loans compared to 18 basis points last quarter.
Speaker 5: For the three months into December 31st, net interest income increased $1.2 million, or 2.5%, when compared to the linked quarter. We recorded approximately $1.4 million in net fees related to the PPP loans included in interest income this quarter, compared to $3.1 million last quarter.
For the three months ended December 31, net interest income increased $1 2 million or two 5% when compared to the linked quarter.
We recorded approximately one 4 million in net fees related to the PPP loans included in interest income this quarter compared to $3 1 million last quarter.
Speaker 5: As of December 31, 2021, we had net deferred fees of approximately $935,000 remaining to be recognized as a yield adjustment over the terms of the loans.
As of December 31, 2021, we had net deferred fees of approximately $935000 remaining to be recognized as a yield adjustment over the terms of the loans.
Speaker 5: Additionally, we recorded $364,000 in purchased loan accretion this quarter, an increase of $168,000 from the prior quarter.
Additionally, we recorded $364000 in purchase loan accretion this quarter, an increase of 168000 from the prior quarter.
Speaker 5: For the three months into December 31, 2021, non-interest income, excluding net gains on the sale of AFS security, increased 160,000 or 1.4% for the length quarter.
For the three months ended December 31, 2021, noninterest income excluding net gains on the sale of <unk> Securities increased 160000, or one 4% for the linked quarter.
Speaker 5: For the fourth quarter, non-interest expense was $31.3 million. Excluding the loss on the redemption in the third quarter, non-interest expense increased $689,000 or 2.2% on a linked quarter basis.
For the fourth quarter noninterest expense was $31 3 million, excluding the loss on the redemption in the third quarter noninterest expense increased 689000, or two 2% on a linked quarter basis.
Speaker 5: For 2022, we expect quarterly non-interest expense to be approximately $32.5 million.
For 2022, we expect quarterly noninterest expense to be approximately $32 5 million.
Speaker 5: We are pleased to report our fully taxable equivalent efficiency ratio for the 3 and 12 months ended December 31st with 47.61% and 49.03% respectively.
We are pleased to report our fully taxable equivalent efficiency ratio for the three and 12 months ended December 31 was 40, 761% and 49, 3% respectively.
Speaker 5: Income tax expense decreased $165,000 or 3.3% compared to the three months ended September 30, 2021. Our effective tax rate decreased slightly to 14.4% for the fourth quarter.
Income tax expense decreased 165000, or three 3% compared to the three months ended September 32021.
Our effective tax rate decreased slightly to 14, 4% for the fourth quarter.
Speaker 5: At this time, we are estimating an annual effective tax rate of 12% for 2022.
At this time, we are estimating an annual effective tax rate at 12% for 2022.
Speaker 5: Thank you for joining us today. This concludes our comments and we will open the line for your questions.
Thank you for joining US today. This concludes our comments and we will open the line for your questions.
Speaker 2: Certainly. Once again, ladies and gentlemen, if you have a question at this time, please press star, then one. Our first question comes from a line of Graham <expletive> from Piper Sandler. Your question, please.
Certainly once again, ladies and gentlemen, if you have a question at this time. Please press Star then one our first question comes from the line of Graham <expletive> from Piper Sandler Your question. Please.
Hey, good morning, everyone.
Good morning.
Speaker 6: I just wanted to start on the bond portfolio. Do you guys have any plans to grow it from here? I know you all talked about the addition of those broker deposits, but it looks like there might have been some seasonal funds in there as well. Overall deposit growth is pretty strong. Just wondering if you guys are planning to grow it any more from here.
Yes.
So just wanted to start on the bond portfolio you guys have any plans to grow it from here.
<unk> talked about the addition of those broker deposits, but it looks like there might have been some seasonal declines in there as well overall deposit growth was.
It's pretty strong.
Just wondering if you guys have a plan.
And to grow it anymore.
Speaker 4: No, I think for the year we're budgeting just an ever so slight increase in the bond portfolio, 30 or 40 million dollars, somewhere in that range. But no, we're really not. And you know, those growth and broker deposits were due to us changing the funding of our swap funding from a home loan bank to the broker deposits so that we could save approximately 10 base.
No.
Thanks for the year, we're budgeting just ever so slight increase from the bond portfolio.
30, or $40 million somewhere in that range.
But no we're really not and those growth in broker deposits.
Due to changing.
Changing the funding of our swaps.
Funding from home loan bank to the brokered deposit so that we could save approximately 10 basis points.
Speaker 6: Right, that sounded like a pretty good trade for you guys. And then I guess one last thing on the bond portfolio is just wondering if there's anything non-recurring driving the improvement in the MBS yields this quarter.
Right that sounded like a pretty good trade for you guys.
And then I guess, one last thing on the bond portfolios just wondering if there's anything nonrecurring driving the improvement in the MBS yields this quarter.
Speaker 4: I think the the increase had to do with less amortization expense on the mortgage-backed securities and we did we did you know we continue to have some some pre-payments where there's yield maintenance on some of those mortgage securities.
I think the increase had to do with less amortization expense on our mortgage backed securities and.
And we did we did we continue to have some prepayments where theres yield maintenance on some of those mortgage securities.
Speaker 4: And I would anticipate, with rates being up a little bit on the long end, that we may see some further slowing of prepayment speeds that could possibly move the mortgage yield up a little bit.
And I would anticipate with rates being up a little bit long in.
We may see some further slowing of prepayments.
Prepayment speeds.
That could possibly move move the mortgage yield up a little bit.
Speaker 6: That's kind of what I thought. And then, just moving, I guess, more to acid sensitivity and looking at a higher rate environment, I was wondering if you guys could provide just a little color on how you all are positioned heading into this, maybe like broadly.
Okay, that's kind of what I.
Thoughts.
And then just moving I guess more to asset sensitivity and looking at a higher rate environment. So wondering if you guys could provide just a little color on how you all are positioned heading into this maybe like broadly.
Speaker 6: your NII shock scenarios or what percent of loans repriced immediately and then even like what you guys might be expecting on the deposit payday front would all, all that would be very helpful.
Your NII shock scenarios or what percent of loans re price immediately.
And then even like what you guys might be expecting on the deposit paid upfront with all of that would be very helpful. Thank you.
Speaker 4: You know, I think, you know, over the last really since the pandemic began and deposits in all banks started growing, we basically utilized
Okay.
I think overall.
Over the last really since the pandemic began.
Deposits.
And all bank started growing we basically utilize that deposit growth in non maturity deposits too.
Speaker 4: that the posit growth and non-matured deposits to
Speaker 4: to become significantly less dependent on the CDs and to become significantly less dependent on unswapped wholesale funding, which right now we just don't have a lot of.
To become significantly less dependent on the Cds.
And to become significantly less dependent on swap.
Swapped wholesale funding, which right now we just don't have a lot of.
So.
Speaker 4: As the short-term interest rates increase, we don't feel like we're going to have to raise our funding costs anywhere near what those increases are. In fact, the first increase on some of the non-maturity deposits, there may not be.
No.
As the short term interest rates increase we don't feel like we're going to have to raise our our funding costs anywhere near what those increases are in fact first increase on some of the non maturity deposits or may not be.
Speaker 4: Any increase at all but you know be a very small percentage increase of the
Any increase at all but b.
A very small percentage increase of the.
Speaker 4: going forward even throughout the year if it goes up the four rate increases that they're anticipating this year. On the loan side, I think just a little less than 50 percent, and Julie probably has the number, is in floating rate of that probably
Going forward, even throughout the year, if it goes up the four.
Rate increases that they are anticipating this year on the loan side I think just a little less than 50% in jewelry probably has the number.
Is in floating rate of that.
Robley.
Speaker 4: 60-70% reprises immediately, but most of it reprises within six months to a year. Some of it's based off of three months, live-or, and some of it's one month, but a lot of it is overnight immediate.
<unk> 60, or 70% re prices immediately but most of it.
Mrs within six months to a year some of it is based off a three month LIBOR and.
Some of it's one month, but a lot of it is overnight and immediate.
Speaker 2: Okay, I appreciate that. Thanks, guys, and congrats on a pretty solid quarter. Thank you. Thank you. Our next question comes from the line. Michael Young from Tourist Security. Is your question, please?
Okay I appreciate that.
Thanks, guys and congrats on a solid quarter.
Thank you.
Thank you. Our next question comes from the line of Michael Young from two Securities. Your question. Please.
Speaker 7: Hey, good morning. I just wanted to touch on the loan growth outlook. You mentioned, I think, 9%. I assume that's, you know, kind of XPPP, so just the core loan growth. And I was just curious, you know, what areas you're seeing the most strength in, if it's kind of the historical construction bucket and what the new yields are on loans that you might be putting on. Are they a good bit higher at this point than kind of the back book of what's rolling off?
Hey, good morning, just wanted to touch on the loan growth outlook, you mentioned I think 9% I assume thats kind of ex PPP. So just the core loan growth and was just curious what areas youre seeing the most strength than if it's kind of the historical construction bucket and what the.
New yields are on loans that you might be putting on are they a good bit higher at this point than kind of the back book of what's rolling off.
Speaker 4: Uh, we are seeing, you know, a fair amount of construction loans, uh, and, you know, those are typically, uh, not typically, they're almost always floating, um, and they're either tied to prime or they're tied to, you know, one month LIBOR or SOFR at this point, um, so they, you know, as, as rates move up, those, uh, construction loans move up,
We are seeing a fair amount of construction loans.
And those are typically.
Not typically they are almost always floating.
And they are either tied to prime or they're tied.
One month LIBOR so for at this point.
So.
As rates move up those construction loans to move up.
Speaker 4: But what's really encouraging is we're seeing a lot of full funders and it's primarily on the commercial real estate side. They were seeing that and then we're seeing you know some some some nice increases in municipal loans that went to state throughout the year. Is that kind of
What's really encouraging is were seeing a lot of false vendors and thats, primarily on the commercial real estate side.
We're seeing that and then.
Seen some some some nice increases in municipal loans that we anticipate throughout the year.
Hi.
That kind of.
To answer your questions Michael.
Speaker 7: Yeah, I guess I'm trying to get at basically are the new loans you're putting on, are they sort of at higher rates and higher yields than what's running off and that it should be sort of accretive to loan yields or is it more in line or still kind of slightly diluted?
Yes, I guess I'm trying to get at basically are the new loans you are putting on are they sort of at higher rates and higher yields on what's running off and that it should be sort of accretive Dylan yields or is it more in line or still kind of slightly dilutive.
Speaker 4: I'd say the full funders, if we're fixing the full funders, they're at slightly higher yields than what's rolling off. And on the floating rate, they're probably at similar yields to what we have today. But they're going to, in March, I think everybody's anticipating at least a 25 basis point increase.
I'm sorry.
Full thunders that.
Therefore fixing the whole thunders there.
They're slightly higher yields than what's rolling off and on the floating rate. They are probably at similar yields to what we have today, but.
They're going to.
In March I think everybody is anticipating at least 25 basis point increase.
Speaker 4: and you know you'll see that across the board reflected in SOFR LIBOR and PRIME as that occurs.
Youll see that across the board reflected and so for LIBOR.
And prime is that occurs so.
Speaker 4: Those flooding rate loans, you know, the spreads on those, you know, let's say we've got one at prime at 325, the real spread's going to increase over what our cost of funds is pretty much, I wouldn't say the full 25 basis points, but it ought to, it'll be in the 20s somewhere, 20, 22, 23 basis points, that spread will increase.
Those floating rate loans.
Spreads on those let's say, we've got one at prime is 325%.
The real spreads increased over what our cost of funds.
Pretty much I wouldn't say the full 25 basis points for that order.
It'll be in the <unk> somewhere 2022 'twenty three basis points spread on crews.
Speaker 7: Okay, and then on the capital side, we just sort of curious, you guys are gonna have stronger loan growth, so you know, wanted to just get your updated thoughts on capital return, just share buybacks, even fill in the equation given where the stock is, and then what the outlook is for M&A.
Right, Okay, and then on the capital side Lee just just sort of curious how you guys are going to have stronger loan growth. So.
Wanted to just get your updated thoughts on capital return just share buybacks, even still in the equation given where the stock is.
And then what the outlook is for M&A.
Speaker 4: Okay. In terms of, you know, stock buybacks, we do not have one at this point in time currently in place, but that's something that we're looking at and would anticipate that, you know,
Okay.
In terms of.
Stock buybacks.
We do not have one at this point in time currently in place.
That's something that we're looking at and would anticipate.
<unk>.
Speaker 4: Sometime during the first half of this year, you'll you'll probably see something on that in terms of, let's say it was you mentioned capital. I mean, there is a.
<unk>.
Sometime during the first half of this year Youll, probably see something on that.
In terms of.
Let's say it was you.
You mentioned capital.
A.
A dividend.
Speaker 4: M&A, we're actually having some more meaningful conversations with some potential partners that would be something we'd be interested in acquiring. And.
M&A.
We're actually having more meaningful conversations with.
Some potential partners that.
Would be something we'd be interested in acquiring.
Speaker 4: you know, I don't look for anything to happen immediately, but I think, you know, I'm hopeful that sometime, maybe during the first half or first three quarters of 2022, it may be possible that, you know, we're able to announce something. But there's nothing sitting on the table exactly, you know, today, but just good conversations.
I don't look for anything to happen immediately.
Immediately but I think.
Im hopeful that some time, maybe during the first half or first three quarters of 2022.
It may be possible that.
We're able to.
Now something.
But theres nothing sitting on the table exact work today.
Good conversations.
Okay, great. Thanks for the color I appreciate it.
Okay.
Speaker 2: Thank you. Our next question comes in the line of Brady Gailey from KBW. Your question, please. Yeah, thank you. Good morning, guys.
Thank you. Our next question comes from the line of Brady Gailey from <unk>. Your question. Please.
Yes. Thank you good morning, guys.
Hey, Brian how are you Dan.
Great.
Speaker 8: So when I look at your fee income, a lot of it is driven by service charges on deposits. Can you just talk about – I know the industry is seeing some pressure on NSF fees and overdrafts, but maybe just, you know, one, tell us how much NSF and overdraft was in 2021, and then, you know, how you guys are thinking about that going forward.
So when I look at your fee income.
A lot of it is driven by a service charges on deposits.
Can you just talk about <unk>.
Curious to add some pressure on the NSF fees and overdrafts.
One tell us how much NSF and overdraft.
In 2021, and then how you guys are thinking about that going forward.
Speaker 4: I do always grab in the number for 2021. What I can tell you is that, you know, we're cognizant of that and our budget for...
Agility is grabbing the number for 2021, what I can tell you is that.
We're cognizant of that and our budget for.
Speaker 4: 2022. We basically have have lowered it by 10% for the last nine months of the year. Is that correct? Yeah. And the only reason we're doing that is because if we, you know, look to make a change today on something it would it
For 2022.
We basically have lowered it.
By 10% for the last nine months of the year is that correct yes.
And the only reason we're doing that is because of weak.
Look to make the change today on something it would.
Speaker 5: take a while for that to filter through. And really, some of our lower months of overdraft income occurs in the first quarter because of tax refunds and things of that nature. So we are cognizant of that. And I think Julie has that number for 2021. Brady, the overdraft and return check charges together were about 9.2 million. The overdraft just by itself was 8.4 million.
To take a while for that to filter through.
Really some of our lower months of.
Overdraft income occurs in the first quarter because of tax refunds and things of that nature. So we are cognizant of that and I think Julie has that number for 2021 and.
Brady that overdraft and return check charges together were about $9 2 million overdrafts, just by itself was $8 4 million.
Speaker 5: And that was sent to climb from 2020 as well, not significant, but sent to climb.
And that was some decline from 2020 as well not significant but some decline.
Speaker 5: Mainly due to the abundance of deposits probably in all institutions right now.
Thank you.
Abundance of deposits.
Probably in all institutions right now.
Speaker 8: And then moving to the expense base, you have the guidance from 32 and a half million. There was that more kind of the run rate in the first quarter, and you're gonna see some growth beyond that. Was that more kind of the average run rate for the whole year?
And then.
Moving to the expense base the guidance of $32 5 million.
Is that more kind of the run rate in the first quarter and youre going to see some growth beyond that.
That more kind of the average run rate for the full year.
Speaker 5: It's probably closer to an average for the full year based on budgeting.
It's probably closer to an average for the full year.
Based on budgeting.
Speaker 4: And we've collected it in some additional loan offs or hires.
Okay.
We've budgeted in some additional.
The loan officer hires.
Speaker 8: that likely we're going to, you know, you'll see hopefully in the second and third quarter, possibly fourth quarter. So that's, you know, I think, I think. You're lowering Q1. Yeah, I think you were guessing somewhere closer to 32, but on average, we think it's, you know, really budgeting 32 and a half for the year or quarter. Okay. And then.
That.
Likely we're going to you'll see hopefully in the second and third quarter.
Possibly fourth quarters, so thats.
I think we run a little lower in Q1.
Move lower in Q1.
I think you were guessing somewhere closer to 32 million warrants yes.
Yes in the first quarter.
But on average we think.
Elyse budgeting 32 and half of the year.
Per quarter.
Okay, and then Lee it sounds like.
Speaker 8: a little more active on M&A, now that we have been the last couple of years. So just remind us, what geographies do you like and kind of what's the sweet spot from a size point of view for a bank target first outside?
Youre a little more active on M&A now that you have been the last couple of years, So just remind us.
What geographies do you.
Kind of what's the sweet spot from a size point of view.
Target for sale side.
Speaker 4: Geography, you know, basically we'd like to stay in the disappointing time we plan on.
Geography.
Basically we'd like to stay in at this point in time, we plan on staying along Interstate 35 to the east where we might go 50, 60 miles west of Interstate 35.
Speaker 4: staying along Interstate 35 to the east, we might go, you know, 50, 60.
Speaker 4: west of Interstate 35, but probably not much past that.
Not not much past that.
Speaker 4: Um, and that encompasses about, you know, 85% of the population of the state and probably at least that percentage of the economy in the state. So, uh, in terms of size, uh, you know, ideal size would be somewhere.
And that encompasses about 85% of the population in the state and probably at least that percentage of the economy in the state. So.
In terms of size.
Deal size would be somewhere between 1 billion and $2 billion, we start getting too much about <unk>.
Speaker 4: between a billion and two billion, we start getting too much about.
Speaker 4: $2 billion, and we're touching on $10 billion. And so we'd like to, if we do an acquisition, we'd like to stay under that unless we were to look at a really, really large acquisition that would take us.
And we're touching on.
10 billion.
So we'd like to.
We do an acquisition, we'd like to stay under that.
Unless we were to look at it really really large acquisition that would take us.
Speaker 4: at least a billion or two over ten billion, but sweet spot for us release probably a billion to two billion.
At least 1 billion or two over $10 billion, but.
Sweet spot for us really is probably a $2 billion.
Speaker 8: Okay, and then just on that topic, the Derbin and I, and I, and I found right.
Alright, and then just on that topic.
Durbin.
Speaker 8: You guys can expand the tender in for a while here. But if you do cross, remind us what the German impact could be.
It sounds like.
Guys want to stay under 10 billion for a while here but.
If you do cross remind us what the durbin impact could be.
Our last estimate was around $8 million.
Yes.
Speaker 9: It probably does seem to be refreshed, but that was I think last quarter. So then enjoy that. Is that a million on today's balance sheet or a 10 billion dollar balance sheet? yeah. o
Yes, it probably does seem to be refresh, but that was I think last quarter.
And Julia about $8 million is that 8 million on today's balance sheet for a $10 billion balance sheet.
Now with me today is balance sheet.
Okay.
Alright, great. Thank you guys.
Alright, Thank you Barry.
Speaker 2: Thank you. Our next question comes to the line, a man only from Stephen, see your question please.
Thank you. Our next question comes from the line of Matt Olney from Stephens. Your question. Please.
Speaker 10: Yeah, thank you. Want to ask about the long growth guidance that you guys provided of nine per-
Yes. Thank you want to ask about the loan growth guidance that you guys provided.
1%.
For the full year ex PPP.
Speaker 10: It implies a nice pickup versus what we've seen in the last few quarters. Any more color on that improved...
It implies a nice pick up versus what we've seen over the last few quarters any more color on that improvement and I think you mentioned paydowns were heavier in the back half of 2021. So are you assuming a more moderate level of paydowns in 2022.
Speaker 4: We certainly were not expecting paydowns like that in the first half of the year. Then we had a lot of, there were some uncertainty about tax laws and things of that nature that.
We certainly are not expecting paid.
Pay downs like that in the first half of the year.
Then we had a lot of there was some uncertainty about tax laws and things of that nature of that.
Speaker 4: probably drove a few of the payoffs that, you know, be of some fails that occurred in the fourth quarter. But no, we're not anticipating, you know, the volume. But the main thing is our pipeline typically December and January are pretty slow months.
Probably drove a few of the payoffs.
That.
Some sales that occurred.
In the fourth quarter.
Yes.
But no.
We're not anticipating.
The volume, but the main thing is the.
Our pipeline typically December and January are pretty slow months.
Speaker 4: and uh you know it's been fast and furious and um you know we have not seen a start to the year like this in quite some time so uh it's uh just you know very encouraging and it and it's not just you know one or two regions it's in all of our regions so uh we know we just feel good the economy's doing extremely well and um you know growth is occurring and and it's um
It's been fast and furious.
We have not seen a start to the year like this in quite some time so.
It's just.
Very encouraging and it's not just one or two regions. It's in all of our regions. So.
We just feel good the economies doing extremely well in.
Growth is occurring and it's.
Speaker 4: You know, it's real growth. It's new jobs, people moving in, companies moving in, it's just, you know.
It's real growth.
New jobs people moving in companies moving and it's just.
Speaker 4: It's amazing what's going on. So we're not talking about apartments that down in Austin and the DFW area that we heard this week that there's bidding wars for apartments in Austin. Kind of like you see bidding wars for houses.
It's amazing what's going on so they are not.
We're not talking about we're talking about apartments that.
Down in Austin in the DFW area that.
We heard.
This week.
Theres bidding wars for apartments and Austin.
Kind of like do you see bidding wars for houses.
Speaker 10: So it's housing related, it's company relocation related, and a lot of warehouse related type stuff. So it's just really positive right now, and we're beginning to see a real impact as a result of that on our pipeline. That's helpful, we thank you for that. And you also mentioned earlier optimists.
Yes.
It's it's housing related.
Company relocation related and a lot of warehouse related type stuff. So it's just really positive right now and we're beginning to.
To see a real.
Impact as a result of that on our on our pipeline.
That's helpful. Lee. Thank you for that and you also mentioned earlier.
Optimism around hiring additional new producers for the year.
Loan production from those producers you expect later on this year is that also embedded in that 9% or could that be potential.
Speaker 11: equal potential.
Even from the current guidance.
Speaker 4: I think that could be a potential upside from the current guidance.
I think that could be potential upside from the current guidance.
Speaker 4: you know, we're, you know, we're visiting actively with, with different lenders and, you know, feel good that
We're we're visiting actively with.
With different lenders and.
Feel good.
Over the.
Speaker 4: you know, especially the first three quarters that we're going to, you know, land a few. And it always takes about a month for somebody to kind of get their feet on the ground and notify everybody that they've moved. But, you know, we expect, you know, we're hoping to get some additional
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Especially the first three quarters that we're going to land a few in.
It always takes about a month for somebody to kind of get their feet on the ground and notify everybody that they've moved but we.
We expect.
Hoping to get some additional.
Speaker 4: you know, lift out of loan officers that we hire, but with that we're not including that in our 9% because that's, you know, not something we have in place today. Yeah.
Lift out of loan officers that we hire but with that we're not including that in our 9% because thats not something we have in place today.
Yes, okay.
Okay, great. Thank you guys.
Alright, thank you.
Speaker 2: Thank you. This does include the question and answer session of today's program. I'd like to hand the program back to Leaked, Gibson, for any further remarks.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Lee Gibson for any further remarks.
Speaker 4: Thank you for joining us today. We appreciate the opportunity to answer your questions and your interest in Southside bank shares in closing given the positive economic conditions in our markets, our strong pipeline, balance sheet, capital position, core earnings and asset quality. We're excited about the prospects for 2022 and look forward to reporting first quarter results to you during our next earnings call in April . This concludes.
Thank you for joining us today, we appreciate the opportunity to answer your questions and your interest in the SaaS side Bancshares in closing given the positive economic conditions in our markets are strong pipeline balance sheet capital position core earnings and asset quality, we're excited about the prospects for <unk>.
2022, and look forward to reporting first quarter results to you during our next earnings call in April .
This concludes the call. Thank you.
Speaker 2: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.