Q4 2021 SB Financial Group Inc Earnings Call
And our commitment to traditional SBA seven lending across the entire footprint.
We believe our model, calling effort 10 lender production rewards will uncover projects that will fit nicely into our risk profile.
We intend to retain a number of these smaller government guaranteed loans to bolster our balance sheet. Our net interest income, yes boost loan sale gains for our larger originated SBA loans.
This represented the fourth consecutive year of internal referrals closed exceeding $70 million.
Without these interdependencies and great inter business line partnerships, we would not have been able to grow both sides of the balance sheet by over $600 billion or 47% in the past five years.
Operational excellence and client care remain our fourth key theme.
We continue to see a shift in our residential real estate production mix this quarter, our purchasing and construction lending accelerated.
Speaker 1: Carefully we were both worth cautious about failed or unfocative economic failure. Our Volummer represented 55% of 60% of 250%
Our volume represented 55% of our total activity.
Speaker 1: For the full year we originated 51% of our volume from construction and purchase activity and had another 20% from external refinance.
For the full year, we originated a 51% of our volume from construction and purchase activity and have another 25% from external refinances are.
Speaker 1: A great testament to the strong brand that we build across our footprint that represented 75% of our annual volume from Newcastle.
A great Testament to the strong brand that we've built across our footprint that represented 75% of.
Of our annual volume from new customers.
Expenses grew at single digit rates compared to both the linked and year ago quarters. When you can drive operating leverage lower.
Speaker 1: The Census grew at single digit rates compared to both the length and hero goal quarters, which did drive operating deliveries lower.
Speaker 1: These higher expenses are due to increased spending on technology and higher cost to both retain and recruit top talent in each of our markets.
These higher expenses are due to increased spending on technology and higher cost to both retain and recruit top talent in each of our markets.
Speaker 1: So revenue growth of 3.9% is just slightly below the 4% total expenditure of the year.
Total revenue growth of three 9% is just slightly below the 4% of total expense growth for the year.
Speaker 1: This establishment of a true contact center in the first quarter of this year, I'm sure we remain intimate with our client base.
The establishment of a true contact center in the first quarter of this year will ensure we remain instrument with our client base.
And finally asset quality.
Speaker 1: Clant liquidity and numerous government programs that have kept our non-performing levels low throughout the past two years. We did take back a large credit into Oreo in 2020 and we currently have an agreement in place to sell this $1.6 million dollar dollar property.
Client liquidity and numerous government programs that have kept our nonperforming levels load throughout the past two years, we did take back a large credit.
And the Oreo and 2020 and we currently have an agreement in place to.
To sell this $1 $6 million property.
Speaker 1: Our strong performance in the past two years has also enabled us to continue to build a healthy reserve low. Now up to 1.68% of total loan for a year over a year of increase.
Our strong performance of the past two years has also enabled us to continue to build a healthy reserve level now up to 168% of total loans for year over year increase.
Up 10% non.
Speaker 1: Non-derforming assets to total assets have now declined to 0.49%. And finally, we have certainly worked hard to build our reserve the past several years, and we've neither released nor expected released reserves any time-shem.
Nonperforming assets to total assets have now declined to 49% and finally.
We have certainly worked hard to build our reserve the past several years and we have neither released nor expect to release reserves anytime soon.
And now I'd like to ask Tony to provide a few more details totally on our quarterly and annual performance.
Speaker 1: And I would like that Tony to provide a few more details Tony are, or really an end of the form.
Speaker 1: Thanks Mark. Good morning again everyone. Again, for quarter we had gas net income of 3.3 million or 49 cents per share. And for the year 18.3 million or $2.56 per share.
Mark Good morning, again, everyone again for the quarter, we had GAAP net income of $3 3 million or <unk> 49 per share.
And for the year, $18 3 million or $2 56 per share.
Speaker 1: That full year result is up 60 cents or 31 percent. Highlights.
That full year result is up 60 or 31%.
Highlights for the quarter.
Speaker 2: Included total operating revenue down to $2.5 million, or 13.7% has PPP forgiveness revenue as down 390,000 and mortgage gain declined by $4 million. This was offset as Mark indicated by showing an mortgage servicing rights for a capture of 1.2 million.
Total operating revenue down $2 5 million or 13, 7% as the PPP forgiveness revenue was down 390000 in mortgage gains declined by $4 million.
This was offset as mark indicated by a swing in our mortgage servicing rights recapture of $1 2 million.
Speaker 2: Well, management and the policies were strong, up 14.5 and 13.6% respectively.
Wealth management and deposit fees were strong up 14, 5% 13, 6% respectively.
Speaker 2: And we continue to reduce interest expense costs, which were down 31% by 10% increase in interest during liability.
And we continued to reduce interest expense costs, which were down 31%. Despite a 10% increase in interest bearing liabilities.
Speaker 2: Now, as you would break down further our fourth-core income statement, start with Larnin.
Now, let's break down further our fourth quarter income statement start with margin.
Average loan yield for the quarter, a four 2% to 4% decreased by 18 basis points from the prior year were down 43 basis points from the linked quarter.
Speaker 2: Average loan yields for the quarter of 4.24% decreased by 18 basis flex for the prior year, and we're down 43 basis flex for the linked quarter.
Speaker 2: If we exclude the S-Hack with a PCP, these declines would be 38 and 21 basis points per second.
If we exclude the impact of the PPP These declines would be 38% and 21 basis points respectively.
We have just 112.
Speaker 2: We have just 112,000 and an amortized TPP's remaining at ear end.
<unk> PPP fees remaining at year end.
On the funding side, we and reduce the cost of our interest bearing liabilities for the prior year.
Speaker 2: The funding side began to reduce the cost of our interest fair and liability from the prior year.
Speaker 2: This rate on our interest rate is at least 40 basis points, which is down to the prior year by 24 basis points and down 4 basis points to turn to the link core.
This rate on our interest bearing liabilities was 40 basis points, which is down from the prior year by 24 basis points and down four basis points compared to the linked quarter.
Speaker 2: Again, when we exclude the impacts that TPPDs for both years are fourth quarter NIM with decline in additional 14 basis points from the published NIM to 2.75%.
Again, when we exclude the impact of PPP fees from both years, our fourth quarter NIM would decline an additional 14 basis points from the published NIM to 275%.
Speaker 2: And so the full year, our gap margin of 3.06% will be reduced as a result of TTP by 16 basis points to 2.90.
And for the full year, our GAAP margin of three 6% will be reduced as a result of PTT by 16 basis points to 290%.
Mortgage banking revenue of $3 8 million for the quarter was down $2 $3 million up 38% from the prior year.
Speaker 2: 4-age bank in revenue of 3.8 million for the quarter was down 2.3 million or 38% for the prior year. As we have discussed the length, 4-age came on sale yields that trended down each quarter since their peak in the 4-quarter of 2020.
As we have discussed at length mortgage gain on sale yields have trended down each quarter since their peak in the fourth quarter of 2020.
Speaker 2: The game on sale yields from where each stale of this quarter was 2.92% down from the 5% that we realized in the fourth quarter last.
The gain on sale yields for mortgage sales this quarter was $2, 92% down from a 5% realized in the fourth quarter last year.
In addition to the lower yields we sold $33 million less in volume.
Speaker 2: In addition to the lower heels, we sold 33 million left and volume.
Our servicing portfolio. However, does continue to grow and is now at $1 36 billion and provided revenue for the quarter of 850000.
Speaker 2: Our service seems portfolio, however, does continue to grow and is now at 1.36 billion and providing revenue for the quarter of 800.
Speaker 2: Fork and value of our working surface increase is according to a calculated fair value of 93 base.
Market value of our mortgage servicing rights increased this quarter due a calculated fair value of 93 basis points. This fair value was up 33 basis points for the prior year and up nine basis points from the linked quarter.
Speaker 2: The stair value was up 33 basis points for the prior year and up 9 basis points for the link court.
Speaker 2: And as expected, we recovered a portion of our servicing wrecked impairment of a quarter of 5801-1,000.
And as expected we recovered a portion of our servicing rights impairment in the quarter of 581000.
Speaker 2: For all of 2021, we had a positive swing in servicing right revenue of $7 million compared to $1 million.
For all of 2021, we had a positive swing in the servicing rights revenue $7 million compared to 2020.
Speaker 2: This recapture swing replaced 87% of the $8 million gain on sale declined.
This recapture swing replace 87% of the $8 million gain on sale declines.
The prior year.
As Mark outlined expense growth is reflective of our investments in technology and people and if we normalize for the non core items in both years expense growth for the quarter and full year was $4 83.
Percent respectively.
Now, let me turn to the balance sheet.
Speaker 2: Now if we turn to the vouchee, low enough standing at December 31, so the $823 million, which was 62% of total assets have come.
Loans outstanding at December 31 stood at $823 million, which was 62% of total assets of company.
Speaker 2: After the loan growth this year, we have re-allocated cash balances to supplement the investment portfolio, which is now up to 269 million or 74% growth rate.
After the loan growth. This year, we have reallocated cash balances to supplement the investment portfolio, which is now up to $269 million or 74% growth rate.
Speaker 2: We are however maintaining a conservative approach for our investment portfolio. We're mindful of good cash love and national credit rating.
We are however, maintaining a conservative approach to our investment portfolio. As we are mindful of good cash flow and excellent credit rating loan growth does accelerate we will have plenty of liquidity to fund that growth.
Speaker 2: When loan growth does accelerate, we will have plenty of liquidity to fund that growth.
Looking at our capital position, we finished the quarter at $145 million, which is up $2 million or one 4% from December 31 of the prior year and our equity to asset ratio stands at 10, 9%.
Speaker 2: Looking at our capital position, we finished the quarter of 145 million, which is up 2 million or 1.4% from the 7th of 31 of the prior year. And our equity asset ratio stands at 10.9%.
Speaker 2: We were purchased 48,000 shares in the quarter and for all of 2021 we were purchased a little over 500,000 shares and average price of approximately 18.
We repurchased 48000 shares in the quarter and for all of 2021, we repurchased a little over 500000 shares at an average price of approximately $18 50.
Speaker 2: Over $18.3 million in earnings this past year, we have returned nearly $12.5 million to our shareholders via the buyback and cash dividends.
Of our $18 3 million and earnings this past year, we have returned nearly $12 5 million to our shareholders via the buyback and cash dividend.
Asset quality was again, a great story as net charge offs for the quarter were just 7000 for the full year, we had net recoveries of 181000.
Speaker 2: As a quality, with the again a great story, isn't that charge up to the quarter, we're just 7,000. And for the full year, we had net recoveries of 181 pounds.
Speaker 2: This compares to the floor year number for 2020 of 681,000 and net charge offs for nearly 900,000 positive increase for our reserve.
This compares to the full year number for 2020 of 681000 net charge offs were nearly 900000 positive increase to our reserve.
I will now turn the call back over to Mark.
Yeah.
Speaker 1: Thank you, Johnny. I want to conclude with acknowledging the two dividend announcements. We've made this month and including the 5% stock dividend granted to the owners of record January 21st and our normal quarterly case dividend of 11 and 1.5 cents per share granted to owners of record February 11st.
Thank you Jeremy I wanted to conclude with acknowledging the two dividend announcements, we made this month and including a 5% stock dividend granted to owners of record January 21, our normal quarterly cash dividend of <unk> 11, and one half cents per share granted to owners of record February 11th.
We have been pleased with the market's reaction to both of these announcements as we continue to reward our shareholders by returning capital and.
Speaker 3: We have been pleased with the market direction to both of these announcements as we continue to reward our shareholders by returning capital and approved management. we start in the end.
<unk> manner.
Yes.
Okay.
Now, Sir I'll turn it back to you for questions or comments.
Thank you and when we're ready for our first question.
Ladies and gentlemen at this time, we'll begin the question and answer session. Once again in order to join the question can you May Press Star and then one to withdraw your question you May Press Star two.
Speaker 4: If you are using a speaker phone, we do ask you please pick up your handset prior to asking your question to ensure the best sound quality.
If you are using a speaker phone, we do ask that you. Please pickup your handset prior to asking your question to ensure that the best sound quality. Once again that is star and then one to join the question queue.
Speaker 4: Once again, that is Spar and then one to join the question.
Speaker 4: And our first question today comes from Evan Lyle from Janie Montgomery Scott. Please go ahead with your question.
And our first question today comes from Evan Lisle from Janney Montgomery Scott. Please go ahead with your question.
Hey, guys. Good morning, among the seven mile onto Brian Martin.
Speaker 5: Hey guys, good morning. I'm on this 7 mile on for Brian Martin.
Yep.
Speaker 5: Yeah, so just to begin with you guys get some nice color on mortgage and you know your PCG mortgage product Just any update on the outlook on that and just the mortgage production and also again of sale margins are 22 would be very helpful
Oh, yes, so just to begin with you guys gave some nice color on mortgage and.
Your PSEG.
Mortgage product.
Any update on the outlook on that and just the mortgage production and also the gain on sale margins through 'twenty two it would be very helpful.
Speaker 1: Yeah, first of all, I mean, I went to the PCG product that we knew this year with a flat yield curve, we were going to have to certainly come up with some innovation that we're able to build a balance sheet marginally with some mild duration risk. Those are very high income hindered plants as are meant to 70 plus million in volume.
Yes first of all with regard to the TCG product. We noted this year with a flat yield curve and we're going to have to certainly.
Come up with some innovation that will enable us to build the balance sheet marginally with us.
Some mild duration risk.
Those are very high income high net worth.
And so as we mentioned 70 plus million dollars and volume were.
Speaker 1: We're working hard as our PCG bankers are reaching out to those clients with progressively more touches.
We're working hard as our PSEG bankers are reaching out to those clients start with progression with more touches.
Speaker 1: We generally like it. We're going to continue it here in 2022, albeit at a bit higher rate, obviously, as rates tick up a bit. But we certainly like the product.
We generally like it or.
We're going to continue on here in 2022, albeit at a bit higher rate obviously is.
Rates tick up a bit.
We certainly like the product. We've certainly have competed quite well in our urban markets like Columbus, and Indianapolis at marginally in northwest, Ohio, and Toledo, but we certainly found our niche.
Speaker 1: We've certainly competed quite well in our urban markets like Columbus and Indianapolis, and marginally in Northwest Ohio and Toledo. But we certainly found a niche. We like what we have, and we certainly have identified a plethora of opportunities to identify three, four, five more services in those households, and now we have a staff of five individuals, private bankers who are working to identify more touches with those clients. So prospects for that continue to be good. We like it, and it plays well into...
We like what we have and we certainly have identified a plethora of opportunities to identify 345 more services in those households, and now we have a staff of five individuals private bankers who are working to.
Identify more touches with those clients so prospects for that continue to be good we like it and it plays well into R.
Speaker 1: our client base and our risk profile and the model of clients that we seek to help. Antonio on the margin piece, sure.
Our client base and our risk profile and the model of clients that we seek to help and Tony on the margin piece sure.
We came in about two 9% this quarter on the gain on sale yield.
Speaker 2: We came in about 2.9% this quarter on the gain on sale yield. We've seen that come down between 30 to 50 basis points a quarter.
<unk> seen that kind of come down between 30 to 50 basis points a quarter.
Speaker 2: I would suspect we're going to see a continued decline of probably that same number until we get to the midpoint of 22 and maybe we'll kind of normalize it about...
I would suspect that we're going to see a continued decline in probably the same number until we get to the midpoint of 22, and maybe we'll kind of.
Normalized at about.
Speaker 2: that 2% level going forward. We certainly, as we look on our outlook, we certainly believe that we're certainly built in marking that some color here for a similar level of origination. We do...
That 2% level going forward.
We certainly as we look on our outlook. We certainly believe that we're certainly built and mark can add some color here for a similar level of origination.
We do acknowledge that refinanced volume its going to be under some pressure in in 'twenty two.
Speaker 2: Acknowledge that refinance volume is going to be under some pressure in 22. So again, our $600 million number is one that we feel comfortable with, but I would suspect we'll probably come off that as we continue to look at capacity.
So again, our $600 million number is one that we feel comfortable with but I would suspect we will probably come off that as we continue to look at capacity.
Speaker 1: Yeah, and just following up on Tony's comment there, you know, we've proclaimed many times we love that 650 million number, you know, we touched on the 700 million in value number, we're looking for, you know, nearly 600 million, maybe just a little less in 2022 here, but we continue to identify more producers and a newer market, which is Indianapolis.
Yes.
Just following up on the tonnage commentary.
Our claims many times, we love that $650 million number.
You touched on the $700 million in volume number we're looking for.
Nearly 600 million, maybe just a little less in 2022 here, but we continue to identify more producers in a newer market, which has ended Indianapolis.
Speaker 1: I'd also identify some additional players in that Columbus market to help keep that value number strong. We certainly like the business line and the few million that we get off of that servicing portfolio certainly bodes well for increasing that revenue, operating revenue number.
I'd also identify some additional players in the Columbus market to help keep that volume number is strong.
We like certainly liked the business line and the.
A few million dollars that we get off of that servicing portfolio children bodes well for increasing.
Revenue operating revenue number.
Also very helpful and just for clarification that gain on sale margin. You said was that high twos in mid 'twenty two.
Speaker 5: Awesome. Very helpful. And just for clarification, that gain on sale margin, you said, was that high twos in mid-22? Or I think just, what were you thinking about that gain on sale margin?
I think Jim.
What are you thinking about that gain on sale margins.
Speaker 2: Yeah, I think it'll come down probably 30 basis points per quarter and we'll probably settle somewhere in the two to two and a quarter range as we get to the midpoint of 2022.
Yes, I think it will come down probably 30 basis points per quarter, and we will probably settle somewhere in the two to two and a quarter range as we get to the mid <unk>.
42.
Speaker 5: Okay, awesome. Yeah. And then you mentioned, you know, higher rates, obviously, and kind of turning the margin, looks like this quarter you had a continued reduction in funding costs. So, you know, are you close to your floors there? And then can you just give us some thoughts on one queue pre-rate hike and then maybe, you know, 22 with one to two rate hikes in the future? Just any color on that would be helpful.
Okay awesome.
And then you mentioned higher rates, obviously and commentary on the margin. It looks like this quarter you had a continued reduction in funding costs.
Are you close to your core is there and then can you just give us.
Some thoughts on the <unk> pre rate hike and then maybe.
Two was one or two rate hikes in the future just any color on that would be helpful.
Speaker 1: Just a high-level comment, Tony can clean this all up, but certainly we have an insatiable desire for nearly zero interest rate transactional monies, which we'll take really all the time, which has really been nice in one of our newer markets in Edmonton that, as we've discussed before, another regional bank pulled out, left a $40 million off of it.
Just a high level comment Tony I can claim this all out but certainly we have an insatiable desire for nearly zero interest rate transactional monies, which will take really all the time, which is really been nice in one of our newer markets in that agenda as we've discussed before.
Another regional bank pulled out up to $40 million office, there to be serviced by electronics.
Speaker 1: to be serviced by electronics, we think that electronics are a complement to our community banking model, and that serves us quite well. So, we haven't figured out what to do with all the liquidity because we're trying to loan it out. Tony's trying to invest it. With that said, I think we probably have bottomed with regard to our interest expense, and we can only hope that the...
We think that the electronics are a complement to our.
Community banking model and Thats served us quite well so we.
We haven't figured out what to do with all the liquidity because we kind of blown it out Tony is trying to invest it but that said I think we probably have bottomed with regard to our our interest expense and we can only hope that the.
Speaker 1: The positive operator, the positive gap that we have will pay some dividends as rates begin to move a bit for us in 2020.
The positive operating positive gap that we have will pay some dividends as rates begin to move a bit for us in 2022.
Speaker 2: Yeah, I would concur, I think, Evan, we're at the bottom for the most part on funding costs. We've reduced four basis points in the prior quarter.
Yes, I would concur I think given where we are.
We were at the bottom for the most part.
On the funding costs, we've reduced four basis points from the prior quarter.
Kind of.
Speaker 2: call it 35 to 45 basis points a quarter as kind of the average. I would suspect that's going to be the range we're in here in the first half of the year. Obviously, we've
Call it 35% to 45 basis points.
<unk> as kind of the average I would suspect that's going to be the range. We're in here in the first half of the year obviously.
Speaker 6: We are asset sensitive, so movements up in range are good for us. The first couple may be not that significant for us because we have a number of floors on our lending portfolio at the 4 and 375 range. So as we get in that third increase is when we really start to see significant movement up on the interest income side. And then just one follow-up comment, as you all know, when...
We are asset sensitive so movements up and rates are good for us.
<unk>.
The first couple maybe not as significant for us because we have a number of floors on our lending portfolio.
For a $3 75 range. So as we get into the third increase is when we really start to see significant movement up on the interest income side.
One follow up comment as you all know.
<unk>.
Speaker 6: rates were thinning and margins were thinning, we made it up with a larger balance sheet. It's a bit ironic now that if organic growth becomes difficult, we're certainly looking for a bit of expansion in the margin to help make up for some of that required growth. And when we see a quarter of a point increase on the...
Rates were sending it margins were attending we've ended up with a larger balance sheet.
A bit ironic now that.
Organic growth comes difficult, we're certainly looking for a bit of expansion in our margin to help make up for some of that required growth in when we see.
Quarter point increase on the.
Speaker 6: on the short end of the curve that's like 10 to 15 million dollars of balance sheet growth. So we certainly like, as we've purported for many quarters, we certainly like our diversity and our income revenue stream diversity with 42 percent on its income. So we intend to do well in all markets regardless of the state of New York.
On the short end of the curve.
Like $10 million to $15 million of balance sheet growth. So we certainly like as we've reported for many quarters, we certainly like our diversity.
Our income revenue stream diversity with 42% noninterest income so.
We intend to do all of that all in all in all markets, regardless of the shape of the yogurt.
Yeah.
Also so just thinking about 'twenty two how many rate hikes are you guys modeling for the year.
Speaker 5: Awesome. And so just thinking about 22, how many rate hikes are you guys modeling for the year?
Speaker 2: We modeled two, which I think probably, as all indications are, it will be on the low end. I would suspect that we had them modeled later in the year, and I think we now think that the first one will be here in March.
Yeah.
We model too.
I think probably has us all indications are it will be on the low end I would suspect we had been modeled later in the year and I think we.
We are now take the first one will be here in March and I.
Speaker 2: You know, I think three to four is probably a regional estimate for everybody as we sit here today, but we'll see. And again, and that's kind of, you know.
I think three to four is probably a reasonable estimate for everybody as we sit here today, but we will see and again as I said.
Speaker 2: Prime base credits, you know, we got to call it a hundred.
Friday's credits, we got to call it a $140 million roughly of our portfolio is prime based but less than half of that.
Speaker 2: Forty million roughly of our portfolio is prime base, but less than half of that.
Speaker 2: I'm sorry, more than half of that is got a 375 and a bulb's floor on it. So again, it's going to be a little bit of a, you move through on how the FHLB and Treasury rates move and we're working through that.
I'm, sorry, more than half of that it's got a $3 75 and above floor on it so again.
It's going to be a little bit of it.
Move through on how the FHFA treasury rates move.
And we're working through that as we speak.
Speaker 5: Awesome. Thank you. Very helpful. And then kind of turning to loan growth, you know, you guys mentioned you guys have a little bit of pressure, XPPP. Just what's your pipeline look like and just your outlook for loan growth?
Awesome. Thank you very helpful. And then kind of turning to loan growth. You guys mentioned, you guys have a little bit of pressure ex PPP.
Just what's your pipeline look like and just your outlook for loan growth.
Yes, first I'll comment on our Chief lending Officer, Steve Walsh will clean it up here, but.
Speaker 6: Yeah, first couple comments and our Chief Lending Officer Steve Waltz will clean it up here. But we've pretty much, you know, always been of the fabric of it that we'll never get enough yield to compensate for an undue amount of risk. And so we don't intend to relax our standards.
We pretty much.
<unk> always been over the fabric that we will never get enough yield to compensate for an undue amount of risk and so we don't intend to relax our standards. So it makes the variable.
Speaker 6: So it makes the variable of whether it's working harder to find more bankable deals out there. Contents to be a challenge, but we're not going to jeopardize asset quality for some balance sheet growth. And I know Steve, we've had some good success about the actual pipeline beginning to grow a bit in most of our markets.
Our lenders working harder to find more bankable deals out there continues to be a challenge, but we're not going to jeopardize asset quality for some balance sheet growth and I know, Steve We've had some good success about the actual pipeline is beginning to grow a bit in <unk>.
Most of our markets.
Speaker 5: Yeah, actually in March 34, I think, pipeline is a building and activity we had anticipated, frankly, seeing more of the fourth quarter is accelerating now here as we look into the first quarter. We're optimistic as well as the pipeline experience we're seeing is broadly occurring across our footprint as opposed to constrained to certain markets, which we think is both well in the months ahead. Additionally, we have...
Yes, actually Margaret in Florida.
Volumes are building activity, we had anticipated frankly seeing more of in the fourth quarter is accelerating now here as we look into the first quarter.
We're optimistic as well as the pipeline experience, we're seeing is broadly broadly occurring across our footprint as opposed to constrained too.
Certain markets, which are fixed bodes well.
The months ahead.
Additionally, we have.
Speaker 7: Some opportunity on the line utilization side to see some growth with existing client base there. So we're optimistic about that. Agri-line balances being an example. Farmers were obviously had a great year and paid down balances, but with input cost rising, we're seeing activity on our ag portfolio side in those line balances.
Some opportunity on the.
Line utilization side.
And growth with existing client base there.
So we're optimistic about that.
Your line balance is being an example, farmers, where obviously had a great year.
And paying down balances, but with input costs rising we're seeing activity on our AG portfolio side and those loan balances.
So again, some update with your existing client base as well.
Speaker 5: Thank you, yeah, very helpful. And so, you know, with that I'll work, are you, you know, you still have access to clearly on the balance sheet? And so just on deposits, I guess.
Thank you very helpful and so.
With that outlook are you you still have excess liquidity on the balance sheet.
And so just on deposits I guess.
Speaker 5: are you know how are you thinking about these levels in 22 um are you you know modeling deposit growth or just how you think about deposit
How are you thinking about these levels in 'twenty two.
Are you.
Modeling deposit growth or just how you're thinking about deposits.
We have we have modeled deposit growth obviously.
Speaker 2: We have a model of deposit growth, obviously, you know, slower than we've anticipated, more than we've seen and realized in 20 and 21. We do feel that, you know, our relationship model continues to be one that, you know, we're just not going to be a lender. We want to have a full relationship, and that's going to be a part of how we look at things. You know, and again, the client seems to have plenty of liquidity, and they seem to be...
Slower than we'd anticipate wouldn't do we seen and realized in 2020 , one we do feel that.
Our relationship model continues to be one that we're just not going to be a lender we want to have a full relationship and that's that's going to be a part of how we look at things.
And again the <unk>.
Client seems to have plenty of liquidity and they seem to need.
Satisfied with staying where they are and do some things until things turn and when that turn happens as well.
Speaker 2: satisfied with saying where they are and do some things until things turn. When that turn happens is when I think the pressure is going to come on to figure out what's the next step on the positive liquidity. But we feel very good where we are today in terms of capital liquidity. You're fund any of our group.
The pressure is going to come.
Come on to figure out what's the next step on deposits for liquidity, but we feel very good where we are today in terms of capital and liquidity to fund any of our growth expectation.
Speaker 6: And also, I have just one additional follow-up comment. We all know that a lot of the TPP money went to.
And also I was just one additional follow up comments, though we all know is a lot of the PPP money went to.
Speaker 6: Some are native, but many that maybe didn't. We still have a lot of those monies on deposit. We think we're gonna keep, as we've concluded before, we think we're gonna keep the vast majority of that money, but that said, hopefully as the economy continues to length along here that many of us will find the utilization of those monies are gonna be more effective for them with a bit of leverage, which we're standing in the often way to do.
Some of the negative but many of them may be didn't we still have a lot of those monies on deposit we think we're going to keep.
Concluded before we think we're going to keep the vast majority of that money, but that said.
Hopefully as the economy continues to limp along here.
Many of them all find the utilization of those monies are going to be more effective for them with a bit of leverage which we're standing in the offing waiting to do so.
So I think some of them will go away, but I think generally we're thinking the people will again discovered the power of leveraging using other people's money to make some money in and hopefully drive the balance sheet growth that we budgeted for 2022.
Speaker 5: Okay, nice. That's helpful. And then kind of moving to expenses, you guys touch a couple times on your investment in technology. Just, you know, just some color on that investment, particularly, and then just expenses overall for 22. I think that would be helpful.
Okay. Thanks Thats helpful.
And then kind of moving to expenses you guys touched a couple of times on your investment in technology.
Just some color on that investment, particularly and then just on expenses overall for 'twenty two.
I think that would be helpful.
Speaker 6: A couple comments and I'm doing a little more detail here, but obviously everyone, and I know everyone has heard this story before, but the experience is driven by retaining a talent and finding talent is probably...
Yeah, a couple of comments and Tony can give more detail here, but obviously, everyone and I know everyone has heard this story before but expenses driven by retaining talent and finding talent.
It's probably.
Speaker 6: Second area of the technology spends we've had, but we know that both are required, which is certainly.
Secondary to the technology spends we've had but we know that both are required which is certainly.
Speaker 6: You know, while we need to continue to build the balance sheet as well as that operating revenue, but we continue to see pressure from all perspectives, but hopefully in a strange way as the yield curve is steep in the bit, just was only being better for us as we experienced those but I think we've generally...
While we need to continue to build the balance sheet as well as that operating revenue.
We continue to see pressure from all perspectives, but hopefully in a strange way as the yield curve steepens a bit.
It's probably better for us as we experience some spending but I think we've generally.
Speaker 6: His pause a bit on additional innovative expenditures on the IT side because we're digesting what we've currently done in the past 18 months. Can I make some? Yeah, I think that's that evidently fair. I think we...
Hit pause a bit on additional innovative expenditures on the it side because we're digesting what we've currently done in the past 18 months comments, yes, I think Thats I think Thats eminently fair I think.
Speaker 2: We've taken on that pretty big bite here, given where we are and where we expect to be in the future. You know, we've added a low origination system, you know.
We've taken on Thats pretty big bite here.
Given where we are and where we expect to be in the future. We've added loan origination system.
Customer relationship management system, we've done some things to help us on the cyber security front, which is front of mind with everybody.
Speaker 2: customer relationship management system. We've done some things to help us on the side of security front, which is front of mind with everybody. You know, we've improved backups, we've improved performance, all in the intention that we can be kind of, as best we can, we're never going to be able to compete with the big guys on technologies or clients, but we don't want clients to shy away from us from that perspective. So we do think those have been important.
We've improved backups with approved kind of performance all of the attention that we can be.
Kind of as best we can we're never going to be able to compete with the big guys on technology for clients, but we don't want clients to shy away from us from that perspective, So we do think.
Those have been important.
Speaker 2: I do think expense growth in 22 will come down from what it was in 21. I certainly don't anticipate the same level of percentage growth that we had in 21. And like all things with us, more of these volume tends to drive a bit of our expense variability because we've become much more variable on the more exciting on the expense side. We've done a lot more variable compensation not only for front end but also for our team.
Spencer I do think.
Growth in 'twenty two.
We'll come down from where it was in 'twenty. One I certainly don't anticipate the same level of percentage growth that we had in 'twenty, one and like all things with us mortgage volume tends to drive up.
A bit of our expense variability because we become much more variable on the mortgage side on the expense side, we've done a lot more variable compensation not only for the front end, but also for our 14th and I think that will bode well for us as we see volumes up in that.
Speaker 2: I think that will both well for us as we see volume.
Speaker 6: And Tom, I think it's fair to say that we've certainly been focused on tactic or execution in the digital space, but we keep our eye on horizon for more strategic implementation of how we intend to be innovative with our clients. So it's a real balance between the technical or the tactical piece and the strategic piece, and we think we've got a good mix.
And Tony I think it's fair to say that we've certainly been focused on tactical execution in the digital space, but we keep our eye on the horizon for more strategic implementation.
How we intend to be innovating with our clients. So it's a real balance between the technical for the tactical patient that strategic piece.
And we think we've got a good mix.
Very helpful. Thank you for all that color.
Speaker 5: Very helpful. Thank you for all that color. Next kind of moving to just capital management. You guys mentioned you bomb action shares. So, you know, how are you thinking about that and maybe M&A? Have you noticed any meaningful dialogue or pick up in conversations? Just color on the capital profile. We'll be fine. Very nice.
Let's kind of move into just capital management you guys mentioned you bought back some shares.
How are you thinking about that and maybe M&A have you noticed.
Any meaningful dialogue or a pick up in conversations.
Just color on the capital program.
Nice.
Speaker 6: There are a couple of comments on the second part of it, and Tony will do the couple of piece, but we continue to look for opportunistic kind of...
Yeah, a couple of comments on the second part evident Antonio.
Capital piece, but we continue to look for opportunistic kind of.
Targets out there if you will.
Speaker 6: hardest out there, if you will. Again, we know that organic growth has been intended to be hard to come by. We know with our 115, 20% 10 book number puts a bit of constraint on us for competitive reasons. So we want to make sure that we're approved with our capital and our growth. We've been very disciplined on what it is we can and we'll pay.
Again, we know that organic growth is going to continue to be hard to come by we know with our 115%, 20% tangible book number puts us up quite a bit of constraint on us for competitive reasons.
So we want to make sure that we're prudent with our capital and our growth we've been very disciplined on what it is we can and will pay.
Speaker 6: We think there are more opportunities out there and we intend to build one of our five key strategic initiatives, which again is a bit more scale, but we want to do it approvedly and we want to make it certainly accrued on all fronts, whether that's a tangible book or the EPSI.
We think there are more opportunities out there and we intend to do.
<unk> one of our five key strategic initiatives, which again is a bit more scale, but we wanted to do it prudently and we want to make it certainly accretive on.
All fronts, whether that's tangible book or the.
EPS side, but.
Speaker 6: But there are opportunities out there and we continue to seek those out and we'll do so on the coming year.
But there are opportunities out there and we continue to seek those out and we will do so on the coming years.
Speaker 2: Tell me on a cap, please. Yeah, I think capital, you know, as we looked at what we've done, and if you look at the window over, you know, a longer time.
Kathryn Please yes, I think capital.
As we look at what we've done and if you look at the.
The window over a longer timeframe.
Speaker 2: You know, we've certainly bolstered our capital level significantly. Not only through organic growth, but we've done the market place several times.
We've certainly bolstered our capital levels significantly not only through organic growth, what we've done to the marketplace several times.
Speaker 2: You know, you could probably look at our voucher today and say we have an extra cap all which you know, I don't I don't know that
You could probably look at our balance sheet today, and say, we had excess capital which.
I don't know that.
Speaker 2: You can have too much. You can have too much, I think that's great, but the Board of Youth business has driven to her in significantly for us.
Estimates you can have too much I think that's great, but but the mortgage business has driven earnings significantly for us, which we've been able to without dipping into those capital reserves that we have been able to get that back out to our shareholders in a significant way and we expect to continue to do that we think that's a prudent use of our capital, but as Mark said we.
Speaker 2: which we've been able to, without giving into those capital reserves that we have, we've been able to get that back out to our shareholders in a significant way. And we expect to continue to do that. We think that's a prudent use of our capital. But as Mark said, we would like to utilize some of that generated external capital.
Would like to utilize some of that generated external capital to expand our company and we think we're operators that are effective enough that we can make two plus two equal three five.
Speaker 2: to expand our company and we think we're operators that are effective enough that we can make 2 plus 2 equals 3 and R equals 5.
<unk> sorry.
Okay.
Thank you yes.
Speaker 8: Thank you. Yeah, that's very helpful. And then I guess just one last thing for me, just circling back on the NEM, we mentioned, I asked how many are A2, they're modeling to two, but just how, what did 25 basic points rate, what does that look like? And just benefit to the NEM. And then I said, I, I, I, I, I, I, I, I, I, I, I, I, I, I,
Very helpful. And then I guess, just one last thing for me just circling back on the NIM.
We mentioned.
How many rates we were modeling so too but just.
What is it 25 basis point rate, what does that look like and just.
The benefits of the net.
Sure.
Speaker 2: You know, prime base, it's probably on the annualized basis, you know, less than 200,000 to us, because again, of the number of floors that we have, and you know, that kind of doubles on itself as each time goes, you know, call it 400,000 for 50 and then 800,000 for 475, those floors, you know, kind of go away, and then we start to see that impact. The question is how much of that can we retain without having to?
Prime base.
It's probably on an annualized basis.
Less than 200000 to us because again of the of the.
Number of floors that we have.
And that kind of doubles on itself is each time goes you know I'll call. It 400000 for $50 and 800000 and 475 as those floors kind of go away and we start to see that impact. The question is how much of that can we retain without having to go to a <unk>.
Speaker 2: go to an increase on the funding sites. We think we're in pretty good shape as we sit here today.
The increase on the funding side, we think we're in pretty good shape as we sit here today.
Speaker 2: But I don't think we've been naive enough.
But I don't think we'd be naive enough.
Speaker 2: to not acknowledge that they're still lending clients.
So not all acknowledge that there are still lending clients that still believe.
Speaker 2: I still believe rates are going down and they're asking for a rate of adjustments every day all the time.
Rates are going now and they are asking for rate adjustments every day, all the time and we're doing our best to manage our way through that and I still think that's going to be a bit of a headwind in 'twenty two before really rate increases are everywhere it needs in the market and that's it.
Speaker 2: and we're doing our best to manage our way through that. And I still think that's gonna be a bit of a headwind in 22 before really rate increase.
Speaker 1: are everywhere in these markets. And I think also, Tony, marginal improvement was incremental improvements of wider margins to a decline margin to say, well, that would pass it in.
Also attending Tony.
Marginal improvement, whereas with incremental improvements of wider margins too.
Decline margins they will have a positive impact on US, yes, I think we can.
Speaker 6: Yeah, I think we could get with higher margin balances on their variable base.
Higher margin balances on our vertical base, yes.
Speaker 5: Boss and that's it for me. Congratulations on nice finished to 22.
Awesome.
For me congratulations on nice finished at 22.
Thanks, Kevin Thanks have a good day.
Speaker 4: Once again, if you would like to ask a question, please press star and one to adore yourself from the question queue you may press star and two.
Once again, if he would like to ask a question. Please press star and one to enjoy yourself from the question queue. You May press Star two.
But again that has started and then wanted to join the question queue.
And while we're waiting for additional questions I'd like to remind you that today's call will be accessible on our website at IR <unk>.
Speaker 9: I'm all reading for additional questions. I'd like to remind you that today's call will be a accessible on our website at iRxatYourStayBank.com.
State Bank Dot com.
Speaker 4: And ladies and gentlemen, at this time, I am showing no additional questions. I'd like to turn the floor back over to the management team for any closing remarks.
And ladies and gentlemen at this time I am showing no additional questions I'd like to turn the floor back over to the management team for any closing remarks.
Speaker 6: Thank you, sir. I want to get thanked, thank you, everyone, for joining us this morning. We look forward to speaking with you on April 20th, our virtual annual meeting and our first quarter 2022 webcast, April 22nd. Hope you all have a great day and a great weekend and we'll talk soon. Take care. Thanks.
Thank you Sir I once again, thanks, everyone for joining us. This morning, we look forward to speaking with you on April 20th our virtual annual meeting and our first quarter 2022 webcast on April 22nd Hope you all have a great day and great weekend, and we'll talk soon take care. Thanks.
Speaker 4: Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for attending. You may now disconnect your line.
Ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending you may now disconnect your lines.