Q4 2021 SouthState Corp Earnings Call
Speaker 8: Okay, great. Well, I'll let somebody else jump on. Thanks for the call, guys.
Speaker 5: Thank you Stephen. We'll now move over to Michael Rose of Raymond James. Michael, please go ahead.
Speaker 9: Hey, good morning, guys. Thanks for taking my questions. Just want to talk about slide 13. I think it's really compelling, you know, the fact that the origination.
Speaker 9: volumes have been up so nicely year on year. Obviously, the paydowns have been an issue. Doug's obviously grown at a really high rate as well. When do you think the paydown slows? Is it as rates rise? You talked about M&A activity and selling businesses and things like that, but when can we expect to see a more robust pickup in net loan growth? Any commentary would be helpful, thanks.
Speaker 7: You know, for the back half of the year, we wound up at about 8.5% annualized loan growth. It was 10% in the third quarter, 7% this quarter. But yeah, to your point, it's kind of interesting.
Speaker 7: our loan production went up, but our net growth went down, and so we spent some time analyzing that. And sure enough, we looked at our big payoffs, and we had about $170 million more of large payoffs in the fourth quarter than we did in the third. And you go down the list, and it's
Speaker 2: Yes, it's family businesses, multigenerational operating companies that sold.
Speaker 7: We had a lot of real estate investors that are selling CRE at these record low
Speaker 7: cap rates to get the gain. So, I do think that interest rates play a big, big part of this and the extra liquidity in the system. So, you know, we've kind of thought that at this level...
Speaker 7: of loan production, we ought to be producing high single digits to 10% if we could slow the prepayments down. So I think as interest rates drift up, you're going to have less prepayments on residential.
Speaker 7: And as interest rates drift up, the cap rates are going to move up on CRE and those gains are going to be less, so there's probably going to be less churn in the CRE portfolio.
Speaker 7: You know, I feel I'm real pleased with the level of production.
Speaker 7: And if you get a little less liquidity in the system, a little higher interest rates, it could very easily move into high single digits to 10% loan growth where we're at.
Speaker 9: Okay, that's very helpful. Thanks, John . And then maybe just following up on slide 19, because I think this is also pretty compelling. I don't know if this is for Steve or Will, but if you can comment on some of the assumptions for that 1-year change, which was relatively unchanged from last quarter in terms of what that implies in terms of securities portfolio, deployment, deposit betas.
Speaker 9: you know, etc. And then, you know, what the impact, you know, could potentially be based on initial versus counting marks and the like from the addition of ACBI. Thanks.
In all three areas I will now turn the call over to John .
Thanks, Robert Good morning, everybody I Hope you and your families are doing well.
As we reflect on 2021, it was a challenging year in many ways, but I'm proud of the way our team prevailed and successfully completed the largest conversion in our history last summer.
Speaker 7: Yeah, Michael, it's Steve, and maybe Will can follow up with anything I missed, but, you know, all this is doing is taking our balance sheet as a point-in-time static balance sheet, so it's not growing it for securities or anything like that, and just shocking it for rates, 100 basis points across the curve.
And as soon as the conversion was complete our bankers turned on the growth.
We continue to see a lot of positive momentum in the south east as we accelerate out of this pandemic cycle.
Speaker 2: And so when you look at that number, what it does is it makes the net income of the bank go up about 15%. Now we all know it's not all going to be 100 basis points on one day, but this is directionally just tells you, you know, as you incrementally move 25 basis points and what have you, that's how that would play out per our model. You know, a couple things to note on that slide too is.
If we step back and look at loans and deposits. This past year in 2021, we originated roughly $10 billion in new loans.
To put that in perspective, we originated about $7 billion in 2019 before the pandemic.
And about $6 5 billion in 2020, so 2021 solve 40% to 50% higher lending volumes in the past two years.
Speaker 7: Our floating rate loans are around 31%.
Speaker 7: on a daily basis, and then, you know, we have about another 20% that are variable, and, you know, a lot of that reprices in the first year, and only 49% fixed. So that drives some of it, but, you know, I kind of go back to what really is the, you know, the asset sensitivity to our entire franchise. Obviously, we have a lot of cash sitting on the balance sheet today.
And we saw that trend accelerate in the fourth quarter as loan originations increased another 19% from third quarter levels to a new record of $3 $1 billion.
That level of loan production resulted in 7% annualized loan growth in the fourth quarter compared to 10% loan growth in the third quarter.
After the vaccines rolled out last spring, we guided to mid single digit loan growth in the back half of 2021, and we wound up at eight 5%, so a little better than our guidance.
Speaker 7: that we normally don't have. So 15% of assets, that's obviously a driver. Number two, our floating rate loan portfolio is probably well within tiers and pretty normal for our size.
The excess liquidity from the Fed's monetary policy continues to flow onto our balance sheet.
Speaker 7: But the piece that I think is probably the most important is just our deposit portfolio and the power of our franchise and in a race up environment, you know, we have a slide in here that details out our deposits.
Deposits were up 18% in the fourth quarter, even as we drove our deposit costs down to just six basis points.
And the excess liquidity in the system and continues to lead to elevated loan payoffs.
Speaker 7: Yeah, we have 59% of our deposits are in checking accounts versus 41% for our peers.
Many of our clients have wisely sold their operating businesses at high valuations.
Or sold commercial real estate to lock in the game from historically low cap rates.
Speaker 7: And so that's just a significant advantage or change. You know, we have 816,000 checking accounts and 1,000,002 total accounts.
Yeah.
A few weeks ago. The census Bureau, released the latest population migration trends for 2021, and the conclusions clear the south one the population battle during the pandemic.
Speaker 3: You know, in higher rates, that's when the beta stay lower than hopefully peers, and that's where you outperform. So all of that is built into this model, but hopefully that helps answer your question. Yeah, and Steven, as well, I'll just elaborate a little bit on that. You know, the modeling we use does incorporate our historical deposit betas.
The northeast the Midwest and the West all loss population and the South gained 786000 people.
Not surprising the south state footprint is in the fastest growing markets in the country.
Speaker 3: And as Steve just alluded to, you know, one thing that's a little bit different this time around is that we're entering this rising rate cycle with a much lower loan to deposit ratio. If you look back to the last, and I think we ended second or third quarter of 19 with the loan to deposit ratio in the low to mid 90s, 93, 94% or so.
Florida ranked number two for population growth behind Texas.
Followed by Georgia, North Carolina, and South Carolina.
Placing south state in four of the six fastest growing states in America.
That population growth is driving strong housing demand as well as demand for new construction and really all housing related products, including furniture appliances and building materials.
Speaker 3: And as Steve said, we're at 68% today, and that's not uncommon. So the question will be, you know, how different a beta is this time around, given all the liquidity on all of our competitor's balance sheets, you know, absent a big.
I'll give you a quick update on Atlantic capital are Doug is here to comment on the fourth quarter for Atlanta capital and they continue to deliver outstanding results with 22% annualized loan growth in the fourth quarter.
Speaker 3: removal of auto liquidity very rapidly, one would expect that betas would be lower across the industry in this environment in this this time around and we'll see
We've now received approvals from both the OCC and from the Atlantic capital to shareholders.
But we're like many acquirers were just waiting for federal reserve approval.
Speaker 7: And just to marry up one other thing, you know, I know we'll have 10K disclosures that will come out at some point, but, you know, this is a net income disclosure, not a net interest income disclosure. So, net interest income disclosure will be closer to 9%, but the net income disclosure is what we have here, which is probably the more pertinent one that you all care about.
We're hopeful for a close in the next couple of months, but that is entirely subject to the federal reserve timing.
Yeah.
As we move into 2022, we're excited about our momentum we've been intentionally patient about deploying our excess cash.
Cash now makes up 15% of our balance sheet.
Speaker 9: helpful because I think that's up quarter on quarter correct because I think
And with an improving economy and accelerating loan growth, we have a real opportunity to deploy that excess cash into a higher rate environment and drive our revenue higher in 2022.
Speaker 9: the NII sensitivity in the last quarter was closer to 6%, and now you're saying 9% for NII.
I'll turn it over to Wil. So he can give you additional color.
Speaker 3: Well, it's 9 with a shock. A ramp was around 6. So that may be what you're thinking, Michael. I don't think it's changed that dramatically. No, it hasn't.
Thanks, John I'll cover some highlights on margin noninterest income and noninterest expense as well as credit and the provision for credit losses.
Slide 12 shows net interest margin trends.
We had net interest income of $258 million in the quarter.
245 million, we reported excluding accretion was our best quarter ever for core net interest income and was up 6 million from the third quarter.
Loan yields ex PPP were flat with Q3 levels and incremental improvement in our cost of deposits to six basis points combined with $508 million growth in average loans helped drive the growth in core net interest income.
Although we deploy some cash into loans and securities are dry powder remains extensive as noted on slide 17.
Speaker 7: The environment we were in in the fourth quarter, just like us, there was a lot of loan production that was going on, and then also the yield curve was a little bit flatter in the fourth quarter before it steepened up in the first quarter. Those ingredients, along with just great loan production, caused the fourth quarter to be very strong and fixed income to be a little weaker, but ultimately up $5 million, so very happy about that. As we think about...
We ended the year with $6 4 billion and interest, earning cash and fed funds sold up $700 million from the third quarter and up $2 1 billion from a year ago.
Fourth quarter deposit growth was one 5 billion some of which we believe to be seasonal or temporary due to municipal tax collections or asset and business sales by clients.
We estimate the more temporary deposit balance growth to be approximately half of the quarter's growth.
Speaker 7: You know, overall fee income, you know, our guidance hasn't changed for that in several quarters. I think we've laid it out as a percentage of assets. And what we've said is on a standalone South state would be, you know, 80 to 90 basis points on a, on a standalone basis and with Atlantic capital, you know, combined would be more like 75 to 85 basis points, not as income to assets. And we don't really see that change in a whole lot over the next, you know, the course of the next 12, 24 months. So that's helpful.
Noninterest income improved approximately $5 million from the prior quarter with a record quarter for our correspondent division and improvement in service charge income somewhat offset by a decline in our mortgage revenue.
As noted on slide 14 mortgage had a strong quarter of production of almost $1 4 billion.
The tightening of margins in <unk>.
$156 million decline in the pipeline led to a decline in revenue.
Service charge income increased from Q3 due to the ending of waivers and fourth quarter seasonality.
Speaker 10: Thank you, Michael.
Speaker 5: Thank you, Michael. We'll now move over to our question from Jennifer Demba from Truist. Jennifer, please go ahead.
Operating N I E was up $2 7 million from Q3 due to a number of factors one of which was the loan growth incentive kickers being triggered in the back half of the year.
There is other expense categories were slightly higher as noted in the release.
Speaker 11: A question about your buyback appetite at this point over the next several months.
Turning to credit.
Quality metrics continue to be very strong as noted on slide 26.
We had another quarter of net loan recoveries before DDA charge offs with total net charge offs of two basis points.
Speaker 4: Hey, Jennifer, it's John . You know, the board authorized a buyback of 5% of the company about a year ago, and we're a little more than halfway through that million eight shares out of the three and a half million. So we bought back 2.6% of the company.
We recorded a $9 million negative provision for credit losses in the quarter.
Given the changing nature of forecasts for fiscal stimulus and the impacts of omicron, we waited Moody's S. Three scenario of 45% in the baseline scenario of 55% a slightly more conservative waiting then for Q3.
Speaker 2: You know, our thinking is we're continuing to generate excess capital.
Speaker 4: We do not believe that we're going to be growing. There's no need to grow the balance sheet because we've got so much liquidity today. So we think we'll continue to generate excess capital.
Ending reserves were one 7% of loans.
Or one 4%, including the reserve for unfunded commitments as noted on slide 31.
Speaker 4: And we think that as interest rates rise in the course of the next year or so, bank valuations will improve. So we think it's a good time to put our capital to use and buy back.
On the capital front, we repurchased approximately 632000 shares in the fourth quarter, bringing the 2021 full year total to 182 million shares or approximately two 6% of the company.
Speaker 7: So, we've been reasonably active the last two or three quarters, and if the valuations stay close to where they are today, we probably continue to stay active the next couple quarters.
Our 2021 capital return, including dividends was approximately $282 million as outlined on slide 22.
This represented a total payout ratio dividends and repurchases of approximately 52% of adjusted earnings and approximately 59% of reported earnings.
Speaker 11: And what is your outlook on the correspondent's banking area for the next year with higher rates?
Any capital levels remained strong with CET, one close to 12% and ending tangible book value per share was $44 62.
Speaker 7: You know, I think what we've said over the course of the several quarters is that, you know, be ranging between 2428 million this quarter we hit 30, which was a really good quarter for us. But I think the same guidance and kind of the same thing is what we've we've talked about. And I'll tell you why.
I'll now turn it over to Doug to give a few highlights on Atlantic Capital's quarter.
Thank you will and good morning, I am pleased to have this opportunity to share Atlantic Capital's fourth quarter results with you.
As you know we filed our earnings release and Investor presentation last night and those are available on our website.
Speaker 7: you know, back to all of this excess liquidity in the banking system and all of our clients, they all have this excess liquidity. Some have more than others. And they're going to do one or two things with it over the next 24 months, just like we are. They're either going to loan it or they're going to invest it. And so for us, we have the products to both sell them on the fixed income side if the yield curve gets steeper, or if the yield curve gets flatter, we'll probably do more interest rate swap.
I'd like to thank by Atlantic capital teammates for another great quarter and for a great year, Despite pandemic related uncertainties and the distractions of merger integration planning.
Main focus on helping our clients pursue opportunities and the challenges.
Our clients are performing well and continue to make investments for the future.
Those investments are driving our new business pipelines and resulting loan growth.
Speaker 7: There's a slide that we put out there on the page.
With strong growth in loans deposits and revenue Atlantic capital recorded another quarter of solid operating results as.
Speaker 7: 15, and it shows the last, I think, five quarters of fee income for the correspondent. And then we have 1,060 financial institution clients. And you can see it's reasonably steady, but for different reasons. Sometimes the ARC revenues, which is our interest rate swap business, does better in the environment, and sometimes our fixed income does a little bit better. And a lot of that really depends upon the yield curve and how that moves. So I hope that's helpful.
As we reported at Atlanta Capital earned 57 cents per diluted share for the fourth quarter of 2021 compared to 65 cents in the third quarter, excluding merger related expense earnings per share were 59 cents.
For the full year, we earned $2.45 per diluted share.
That figure excluding merger related expense was $2 60.
Pre provision net revenue for the quarter was $14 $3 million or $15 $1 billion, excluding merger expense.
Speaker 12: All right, Jennifer, thank you.
Speaker 5: Jennifer. We'll take our next question from Catherine Miller of KBW. Catherine, please go ahead.
Loans held for investment excluding Triple P loans grew 22% annualized from the third quarter and 14% for the full year.
Loan origination volume was strong across all of our banking teams in net loan growth was particularly strong in the commercial and industrial and commercial owner occupied real estate categories.
Speaker 13: One more follow-up on fees, on just service charges. I was surprised to see the increase this quarter. I'm assuming some of that's just kind of a higher seasonal fourth quarter like we typically see, but how do you think about the outlook for service charges and some changes we're seeing in overdraft fees in the industry?
Since Atlantic capital became a public company six years ago. These commercial loan categories have grown at a compound average growth rate of more than 13%.
Speaker 3: Why don't I take the quarter and then let John sort of take the outlook going forward. So you're right, Catherine, there's really two components accounted for that roughly 4 million dollar pickup.
Credit quality is excellent.
<unk> for the quarter were 11 basis points of loans for the full year net charge offs were six basis points.
Speaker 3: One of it is just seasonal card use, you know, Christmas shopping, et cetera, that occurred. And then the other bigger factor was we still had some waivers in place in the third quarter post-conversion. You know, we did the conversion in the second quarter, kept some waivers out there. Fourth quarter, those had all expired, so we had none of those in the fourth quarter. But the combination of those two items really led to the increased quarter over quarter.
Nonperforming assets as a percent of total assets was one 1% at quarter end and classified loans as a percent of total loans was one 5% compared to 3.25% at the end of 2020.
As you've seen we recorded a negative provision of $731000 for the quarter compared to $2 $4 billion last quarter.
Speaker 7: As far as going forward, clearly the market is moving very quickly, Katherine, as it relates to overdraft fees and practices, and I would just tell you that that's something we continually evaluate. We continue to make adjustments to, and we'll do that in the future.
The allowance for credit losses, including Triple P loans was 106 basis points at quarter end.
With sharp focus on corporate Treasury management business for Atlanta, based enterprises and for high volume payments and Fintech companies across the country Atlanta capital has built a strong core deposit franchise.
Speaker 13: Generally, as you look at the service charge number, you know, it's hard because we haven't really seen a full kind of normal year of service charges with South State and Center State combined, since the first time we saw that together was in the middle of COVID. So, do you think we're still, we're still not at a full kind of operating run rate that truly shows the benefit of the merger? Is that fair? Do you think there's a?
Since we became a public company six years ago average total deposits have grown more than 20% compounded annually and average demand deposits have grown at a 30% compound average growth rate.
Payments volumes service charges and average deposits in the payments and Fintech business grew more than 40% annualized during the quarter.
For the fourth quarter average noninterest bearing deposits increased 33% annualized on a linked quarter basis.
Speaker 13: of headwinds and maybe this quarter's run rates may be kind of a more appropriate base.
Grew 52% year over year.
Speaker 3: Catherine, I'd say my impression is that the fourth quarter did have some seasonality. I don't have that most fourth quarters, I guess.
Noninterest bearing demand deposits averaged more than 44% of average total deposits.
The average cost of all deposits was seven basis points.
Speaker 3: As long as consumer behavior is where it is, but that the fourth quarter is the first quarter where we didn't have any of the waivers. And so if you normalize for a little bit of seasonality, maybe the fourth quarters run rate is a pretty good look with with, you know, where we are legacy South that we don't have a good year of history.
As we look ahead to our pending merger with South state our new business pipelines are robust and we expect continued strong momentum in loan deposit and revenue growth.
I'll be available to answer your questions during the Q&A portion of our call. This morning now back to John .
Speaker 3: To show you yet obviously with the conversion according occurring in the second quarter and then the waivers that we did and then the fourth quarter, of course, having some some seasonality so.
Thanks, Doug.
All of the pieces are starting to come together the population growth in the southeast the growth in loans in both the Atlantic capital and South state.
And a lot of dry powder in the form of excess cash to invest into a rising rate environment.
Speaker 13: That makes sense, that makes sense. And then on loan yields, that's actually stayed in a little bit more stable than I was expecting. So any kind of color you can give on loan pricing and where you think that loan yield maybe bottoms before we kind of start to get the benefit of higher rates.
Operator. Please go ahead and open the line for questions.
Thank you if you would like to ask a question that'll be staff when they buy one when you kind of think he pads.
That would be staff when they buy cheap.
And please ensure that you are on mute.
To your question.
Speaker 7: Yeah, sure, sure, Catherine, um, you know, uh, this, this quarter, I think our loan yield for the portfolio execution, all of that was around 377.
We'll take our first question today from it.
Stephen Scouten.
Good morning, everyone. How are you doing.
Speaker 7: And our going on yield for loans was in the 313 range, I think, for this quarter. And, you know, a lot of that, as you know, has to do with, you know, where you are out on the curve. You know, we had a fair amount of production and a fair amount of that we ended up swapping to floating rates just because, you know, we felt like, you know, maybe the Fed would probably start moving rates, the same reason our clients did. So, you know, the way I think about that is, you know, if we can get, you know,
Yeah.
Yeah right now, yes can you hear me.
Okay great.
So again can you hear on that versus maybe yeah, I cant again.
Hear me.
Yeah.
Yes.
Okay, sorry about that yes, we can I'm curious first I know you spoke to you'd been patient about excess cash and I think you net EBIT kind of laid out.
Targets in terms of liquidity deployment expectations last quarter, maybe the quarter previous as well I'm wondering if you could give us an update there just in terms of how you're thinking about the pace of deployment with where rates have moved to now and where they look to be going.
Speaker 7: You know, great to move up from a Fed funds LIBOR perspective, 31% of our portfolio. We should be bottoming out here in the next quarter or so. And then from there, we'll start increasing with the rest of the market.
Sure sure Steven it's Steve.
Yeah. So I think what we've guided to over the last several quarters is that our investment securities to assets would be somewhere between 16 and 18% by the end of the year and I think right now were around 17%.
Speaker 5: Catherine. We're now going to move over to Christopher Morignac of Dany Montgomery.
Hum.
As we think about the future because we've got all this excess powder on the balance sheet and where today, our loan to deposit ratio with and really without it used to be a high 68%. So as we think about the next 24 months you know our goal is to take this loan to deposit ratio from 68 closer to 80%.
Speaker 7: Thank you, ma'am. Good morning. I wanted to ask about the accretion income relative to total and I, you know, will the slide you gave was very helpful. Just as a reminder, does that relationship change much with a CBI coming in, or will it continue to decline this next two years.
Speaker 3: Yeah, let me tell you maybe in components. So, you know, the PPP deferred fee accretion, that's essentially gone. I mean, we've got a little bit less in balance sheet, but you know, that's
The next two years and if we can do that that will spend a fair amount of the excess liquidity, having said that theres still probably $3 billion that still dry after all of that and so as we integrate the Atlanta capital into the mix in our investment portfolio will probably have better guidance as we think about that next quarter once we get to close.
Speaker 3: That's, you know, you can take that out of your models if you haven't already, of course. And I'd say our normalized run rate for the regular required accretion as we are today, you know, we think of that in the sort of the five to six million range. This quarter is a little bit higher than that. And, you know, some of that's hard to predict, but that's.
But right now there's really no change in that guidance, but just from a big picture perspective, 68% loan to deposit ratio going towards the 80.
Speaker 3: sort of how I think about it, you know, we don't anticipate the
And in the middle of that.
Securities portfolio, together and look at reinvesting at opera.
Speaker 7: the accretion on the Atlantic Capital side, you know, dramatically changing our accretion. We don't think accretion will be a big part of the story post Atlantic Capital closing, so not a big number addition there in our modeling. And Chris, I just add that, you know, I think what we've said a couple of quarters ago that as we thought about 2022 was that our, you know, accretion income would be somewhere in that $5 to $6 million.
Domestic.
Okay. That's helpful and then.
Can you give any color as to where you think expenses are going to go here in 'twenty, two maybe pre Atlantic capital I know that kind of clouds. The overall numbers, but on a on a core basis can you talk about what do you think expense growth will be and kind of what the drivers of that would be in terms of maybe new hires maybe it's just inflation and kind of how we can think about that.
Speaker 7: after we got through PPP. So I think it's the same, you know, that we've said for the last several
Sure Stephen as well.
The fourth quarter, and I and legacy South it was up a bit from the third quarter and you know there are few items that we noted in there in the release.
Speaker 7: Great, Steve. Thanks for that. And Will, thank you as well. Just a quick follow up on Doug and Pat from Atlanta Capital. The change in cash and deposits that we saw at period end, was any of that seasonal for them? And is that something that would come back this first half of the year?
You know as I mentioned I think in our third quarter call. Our goal for 2022 is to try to hold the inflation and NIH to low single digits.
Speaker 4: Chris, this is Doug. Some of it is seasonal. We see that every fourth quarter.
And that's certainly our plan and our budget, we do recognize theres a inflationary environment that we're all subject to and Thats, what we have to compete in the market, but that would be our plan. So if you look at the Q4 run rate.
Speaker 4: but there's also some strong organic growth in the midst of all that. So I think perhaps it'll be modestly lower in the first quarter of this year, but not significantly so.
Up a bit from Q3.
Something in that general range, where they were in Q4, it's maybe a little bit higher as sort of how you see things shaping up in 2022.
Speaker 14: Yeah, so Chris, if you look at the average deposit growth, right, it was pretty flat. And part of that was us driving down some deposit costs in particular products that probably caused a decrease. If you carved that piece out, it was actually up for the quarter. And then the period end number, it just depends on the day of the week, especially with our payments business. You know, it was up significantly at 9.30 because it was a Thursday. And then that year end, it was down because of the day of the week was on a Friday. So you really got to look at averages when you look at that.
But again, we'll have to compete with market forces.
And react accordingly, but that's our that's our plan right now.
Okay, great well I'll, let somebody else jump on thanks for the color guys.
Yeah.
Thank you Steven we'll now move to Michael <unk> of Raymond James Michael. Please go ahead.
Hey, good morning, guys. Thanks for taking my questions.
Speaker 4: And Chris, you know, the mix has also continued to change more toward non-interest bearing DDA.
I just wanted to talk about slide 13, I think it's really compelling.
Fact that the origination.
Speaker 4: DDA was 44% on average in the fourth quarter, that was up from the third quarter.
Volumes have been up so nicely.
On year, obviously, the paydowns have been an issue dogs, obviously growing at a really high rate as well you know when do you think the paydowns slow as it is it as rates rise.
Speaker 4: And that category of deposits continues to grow at a very strong pace.
You talked about M&A activity in selling businesses and things like that but when can we expect to see a more robust pickup in net loan growth.
Speaker 5: you Christopher. Before we move on to our final question, as a reminder if you would still like to ask a question that will be star followed by one on your telephone keypad, star followed by two if you change your mind.
It would be helpful. Thanks.
Yeah, Michael it's Jon good morning.
Speaker 5: We'll now move over to Brady Preston of Stephen Dink. Brady, over to you.
You know for the for the back half of the year, we wound up at about eight 5% annualized loan growth was 10% in the third quarter, 7% this quarter, but yes to your point, it's kind of interesting our loan production went up but our net growth went down and so we spent some time analyzing that.
Speaker 14: I wanted to ask, just to follow up on the ARC revenues, I just wanted to clarify where that.
Speaker 14: Was that all kind of like what you would consider operating, or were there any kind of mark-to-market gains within that, just because the $7 million quarter-over-quarter increase is relatively large?
And sure enough, we looked at our big pay offs, and we had about $170 million more of large payoffs in the fourth quarter than we did in the third and you go down the list and it's it's.
Speaker 7: No, no, it was all organic, no mark-to-market in that. I mean, if you remember, I don't know if I've described it on this call or another, but in 2020 when the yield curve was flat, that business did 80 million in revenue for the year 2020. So this quarter at 17 million is a really good quarter, but not a record quarter by any means, but it's better than they've been over the last couple of quarters. Got it.
Yes, it's family businesses multi generational operating companies that sold.
We had a lot of real estate investors that are selling CRE at these record low.
Cap rates to get the game. So I do think that interest rates play a big big part of this and the extra liquidity in the system. So you know we've kind of thought that at this level of loan production, we ought to be producing high single digits to 10% if we could slow the prepayments down so I think.
Speaker 14: Um and then just maybe one more on fees just uh the mortgage production it looks like it looks like y'all are continuing to balance sheet um you know a relatively larger mix of the mortgage production than you historically have um so I guess I wanted
As interest rates drift up youre going to have less prepayments on residential and as interest rates dripped up the cap rates are going to move up on CRE and those gains are going to be less so there's probably going to be less churn and CRE portfolios.
Speaker 14: one, why, and then two, if the gain on sale margins.
Speaker 14: are going to track, you know, this level going forward. Do you envision maintaining that mix of portfolio versus secondary, just given that the margins are starting to get a little slimmer?
I see.
I'm real pleased with the level of production.
And if you get a little less liquidity in the system, a little higher interest rates. It could it could very easily move into high single digits to 10% loan growth where we're at.
Speaker 7: Yeah, I think you're referencing page 14 and hopefully this disclosure that we'll put together over the last couple of quarters has been helpful and it's helpful for me as we look at it.
Okay. That's very helpful. Thanks, John and then maybe just following up on slide 19, because I think this is also a pretty compelling.
Speaker 7: Um, yeah, the mortgage production just back to it. It's very robust. I mean, it was almost a billion for this quarter. Last quarter was a billion three. And then fourth quarter last year, which was an excellent quarter of a billion four. So really
I don't think this is for Steve or well, but if you can comment on some of the assumptions.
For that one year change, which was relatively unchanged.
From last quarter in terms of what that implies in terms of securities portfolio deployment deposit betas.
Speaker 7: Year to year, the production 2020, which is a record year for us was five and a half billion. This year, we did 5.4. So, you know, congratulations to that team. They've just been really working hard and doing doing. Well, you know, the things that strike me on this page are a couple of things. 1.
Et cetera, and then you know.
What the impact could potentially be based on initial purchase accounting marks.
Like from the addition of a CPI.
Yeah, Michael It's Steven maybe will can follow up with anything I missed but you know all of this is doing is taking our balance sheet as a point in time static balance sheet does not growing it for securities or anything like that and just shocking it for rate 100 basis points across the curve.
Speaker 7: is if you look at the trend on the gain on sale margins a year ago, they were 4.56%. Now they're 2.83. Well, 2.83 is just much more of a normalized gain on sale margin. So there's nothing to be alarmed about that. It's just more normal. But that's down 170 basis points, which is obviously taking away some of the fee incomes.
When you look at that number what it what it does is it makes the you know the net income of the bank up about 15% that we all know so it'll be 100 basis points on one day, but this is directionally. Just tells you you know as you.
Speaker 7: And that's why I think what you see in the top right column there is we're moving more of that production, which was a year ago, 72 percent as secondary, now down to 53 percent.
Speaker 7: Secondary and and so I would assume
Incrementally moved 25 basis points, what have you that's how that would play out.
Speaker 7: That as we kind of move forward here into higher rates, and we're getting more opportunities to do arms on balance sheet. We'll have more of an opportunity to continue to kind of that mix. So I would say that, you know, 55, you know, 55% secondary 45%.
Per our model.
A couple of things to note on that slide two is our floating rate loans are around 31% on a on a daily basis and then you know we have about.
Another 20% that are variable and a lot of that re prices in the first year at only 49% fixed so that that drives some of it but you know I kind of go back to what really is the the.
Speaker 7: you know, portfolio would probably be a good, um, mix. And, you know, some of the things that are driving the, the, uh, again, to the portfolio, or it's just.
The asset sensitivity to our entire franchise, obviously, we had a lot of cash sitting on the balance sheet today.
We normally don't have so 15% of assets. That's obviously a driver number two our floating rate loan portfolio is probably well within peers, it's pretty normal for our size, but the piece that I think is probably the most important is just our deposit portfolio and the power of our franchise and.
Speaker 7: Anyway, that's a lot of commentary, but I've just described it. It's a really strong production year for that portfolio we saw in the in the 4th quarter.
Speaker 7: Consumer real estate went up around 6%. If you pulled out Helox, it'd been more like 9%.
And Ah raped up environment.
We have a slide in here the detailed out our deposit but yeah. We have 59% of our deposits are in checking accounts versus 41% for our peers and so that's just a significant advantage or change you know, we have 816000 checking accounts and a million to total.
Speaker 7: So I kind of see that as sort of a good run rate going forward.
Speaker 14: Got it. That's very helpful. Thank you for that. And then just on the origination yields, the 313.
Speaker 14: You know, that was down five bits, I think, quarter over quarter, you know, similar to the core loan yield without any accretion. And so I guess just as we think about new origination yields going forward, you know, I know that we've all got our own different kind of Fed rate hike assumptions. But do you expect, you know, maybe further compression on new origination yields in the first and second quarter of the year, you know, depending on what the Fed does? Or just can you help us think about that?
And higher rate that's when.
The betas stay stay lower than hopefully peers, and that's where you outperformed so all of that is built into the model, but hopefully that helps answer your question Steve.
Stephen it's well I'll just elaborate a little bit on that you know the modeling we use does.
Incorporate our historical deposit betas.
And as Steve just alluded to.
Speaker 7: The way I would say it is our average loan size this quarter was up a little bit, and so typically as you get a higher new loan origination, those spreads tighten up a little bit just because of the nature of that. I guess it probably depends upon our mix. At the end of the day, we have a loan pricing model.
One thing that's a little bit different this time around is that we're entering this.
Rising rate cycle with a much lower loan to deposit ratio. If you look back to the last one I think we ended up.
Second and third quarter of 19 with a loan to deposit ratio in the low to mid Ninety's 90, 394% or so.
And as Steve said, we're at 68% today and Thats not uncommon. So then the question will be.
Speaker 7: that price is to the curve. And so as the curve moves up, we still want to continue to get our spreads. And there's always a dance in there, particularly when rates rise for the first quarter or two. But long-term, that model works. And over time, you do get the spread.
You know how how different betas this time around given all the liquidity on all of our competitors balance sheets.
So absent a big removal of other liquidity in it.
Speaker 7: The question is, with all the liquidity sitting in the system, will you get it this year with this time, which is a great question. I don't think any of us know the answer. I do know that when security yields go to 2.5% and you can do it risk-free, it makes it a whole lot easier on the loan to be more disciplined on that.
Very rapidly one would've expected betas would be lower across the industry and this and this this time around and we'll see.
Yeah, just to marry up one other thing.
10-K disclosures that would come out at some point, but.
This is a net income disclosure not a.
Net interest income disclosure, so net interest income disclosure will be closer to 9%, but the netting and disclosures as what we have here, which is probably the more permanent one that you all care about.
Speaker 14: And then just on the loan growth, particularly within C&I, so y'all had a good year here. I think it was up like 13%, you know, when you excluded any PPP related.
Yeah.
Helpful. Because I think that's up quarter on quarter, correct, because I think.
Speaker 14: loans, but this quarter was a little bit light relative to H8 and what some of your peers were putting up. And so I wanted to ask, is there anything specific that drove that beyond the business sales that you noted, John , and if you could help us think about, you know, the size of those paydowns within CNI, it would be helpful.
The NII sensitivity in the last quarter was closer to 6% and now you're saying nine for NII.
Well now it's nine with the with the shock of ramp was around six so that may be.
Maybe what you're thinking Michael.
I don't think it's changed that dramatically.
No it hasn't.
Speaker 2: Sure. Brody, if you recall in the third quarter, we had a seasonal surge in C&I loans that was attributed to some hurricane cleanup business that we do, and we mentioned that that would, that would,
Okay understood maybe maybe just one final one for me so Steve maybe if you can go into the the the increase in correspondent banking. This quarter is a little bit more than we were expecting can you just talk about the puts and takes as we can.
Think about 2022 .
Speaker 2: uh, you know, starting to tail off seasonally in the fourth quarter of the first quarter. So that was a little bit of a headwind, but we're still happy year over year. C. N. I. Has grown 13%.
Yes.
Sure sure Yeah. It was a really great quarter from the correspondent team and you know kind of the driver of that this quarter was our interest rate swap business. I think this quarter was up about $7 million quarter to quarter actually a fixed income business was down couple of million dollars and you know it really comes back to if you think about the.
Speaker 2: And a lot of that's attributable to the middle market bankers that Greg LaPointe has recruited and brought into the company. But I do think that this particular quarter, at a 6% growth, it was probably that seasonality of the hurricane business, as well as just more of these operating companies selling and paying off at a higher rate than they did in the third quarter.
For the environment, we were in in the fourth quarter. It was just.
Just like US there was a lot of loan production that was going on and then also the yield curve was a little bit flatter in the in the fourth quarter before it's deep enough in the first quarter. So those ingredients along with just great loan production you know kind of caused the fourth quarter to be very strong in fixed income to be a little a little weaker, but ultimately up $5 million. So.
Speaker 14: Got it. Thank you for that. And if I could just sneak in just a couple more quick ones. On slide 25, y'all have given really good detail around the checking accounts. And I wanted to ask, do you know if that two-thirds or one-third mix of commercial versus retail checking is similar to what it was last cycle on a pro forma basis?
Happy about that as we think about.
You know overall fee income.
Our guidance hasn't changed for that vote and several quarters I think we've laid it out as a percentage of assets and then what we've said is on a standalone south state would be 80 to 90 basis points on a standalone basis and with Atlantic capital.
Speaker 3: Yeah, buddy, this is Steve. I don't think we've checked that that that number. It's a good question, but I don't think we've looked at it, you know, pre Emily. Yeah, I don't think so. I would ignorantly say it's close to that Brody, but you know, we haven't we haven't put that together. So good question.
Combined would be more like 75 to 85 basis points noninterest income to assets and we don't really see that changing a whole lot over the next the course of the next 12 to 24 months. So hope that's helpful.
Speaker 14: Okay. Okay. And then just one on the securities book, you know, do you happen to know what the duration, the effective duration of the AFS portfolio is? And then for the total portfolio, do you know what percent of the book is floating rate?
Very helpful. Thanks for taking all my questions.
Thank you Michael.
Thank you Michael we'll now move to a question from Jennifer Dunbar I'm curious Jennifer. Please go ahead.
Speaker 7: Yeah, I think our effective duration for the entire book is around 4.7 years. You know, I think the floating piece is about six, 6% of the book. So, you know, really most of those are fixed securities. When we and that's part of my comments, when we bring on the book for ACBI, they have a little bit of a longer portfolio. We'll examine all that when we put the fair value marks, depending on which day we close and put all that together.
Good morning.
Yeah.
Good morning, good morning.
One question about your buyback appetite.
This point over there.
Next several months.
Okay.
How are you thinking about that.
Hi, Jennifer it's John .
Speaker 3: And, Brody, that was for the full portfolio. The answer Steve gave. We don't have it broken out by AFS and HTM. My guess would be the AFS would be better.
Our board authorized a buyback of 5% of the company about a year ago, and we're a little more than halfway through that 1 million eight shares at a three and a half million. So we bought back two 6% of the company.
Speaker 15: Just, you know, give them what you put in the HCM typically, but don't have it precisely in front of them.
Our thinking is we're continuing to generate excess capital.
Speaker 16: Got it. Thank you very much for taking my questions, everyone. I really appreciate it. Thank you.
We do not.
Believe that we're gonna be growing theres no need to grow the balance sheet, because we've got so much liquidity today. So we think we'll continue to generate excess capital and.
And we think that as interest rates rise in the course of the next year or so bank valuations will improve so we think it's a good time to.
Speaker 7: All right. Thanks, Melissa. And thank you all for joining us this morning. We appreciate your continued coverage of South State and Atlanta Capital. And as always, if you have any questions, don't hesitate to reach out to Will or Steve as you're working on your models and I hope you have a great day.
To put our capital to use in buybacks.
So we've been reasonably active in the last two or three quarters.
And if the valuation stay close to where they are today, we'd probably continue to stay active.
Speaker 5: concludes today's call. Thank you all for joining and have a great rest of your day.
A couple of quarters.
Right.
And what is your outlook on the correspondent banking.
So the next year with higher rates.
Yes, Steve.
Steve.
You know I think what we've said over the course of several quarters is that you know will be ranging between 24 $28 million. This quarter. We had 30, which was a really good quarter for us, but I think the same guidance as kind of the same theme as what we've talked about and I'll tell you why.
Speaker 17: The.
Back to all of this excess liquidity in the banking system at all of our clients.
Clients. They all have this excess liquidity some have more than others and they're gonna do one or two things with it over the next 24 months just like we are what they're they've got alone it or they're going to invest it and so for US we have the products to both sell them on the fixed income side, if the yield curve gets steeper or if the yield curve gets.
Flatter will probably be more interest rate swap business Theres, a slide that we put out there.
On the page.
15, and it shows the last I think five quarters of fee income.
For the correspondent and then we have 1060 financial institution clients and you can see it it's reasonably steady but for different reasons, sometimes the arc revenues, which is our interest rate swap business does better and in the environment and sometimes our fixed income does a little bit better in a lot of that really depends upon.
The yield curve and how that moves so I hope that's helpful.
Thanks, so much.
Alright, thank you.
Thank you Jennifer and we'll take our next question from Catherine Mealor of K.
<unk> Catherine Please go ahead.
Yeah.
Thanks, Good morning.
Yeah.
Good morning.
Oh, one more follow up on fees service charges.
With the price to see the increase this quarter I'm, assuming some of that's just kind of a higher seasonal fourth quarter like we typically see but how do you think about the outlook for service charges and changes we're seeing.
Overdraft fees in the industry.
Well why don't I take the quarter and then let John take the outlook going forward. So youre right catheter, there's two really two components.
Or for that roughly forming a pickup.
One of it is just seasonal card use Christmas shopping, etc that occurred and then the other bigger factor was we still had some waivers in.
Place in the third quarter post conversion.
We did the conversion in the second quarter kept some waivers out there fourth quarter those would all expired. So we had none of those in the fourth quarter, but the combination of those two items really led to the increase quarter over quarter.
And as far as going forward clearly the market is moving very quickly Kathryn as it relates to overdraft fees and practices and I would just tell you that that's something we continually evaluate and we continue to make adjustments to and we'll do that in the future.
Generally as you look at the service charge number.
It's hard because we haven't really seen a full kind of a normal year of service charges with south data centers they combine.
Thank you the first time, we saw that together with Covid.
Do you think we're still.
Still not at a full kind of operating run rate.
Truly shows the benefit of the merger is that fair or do you think there is still good.
Headwinds that maybe this quarters run rates, maybe you kind of a more appropriate.
Yes.
Yeah.
Kathryn I'd say my impression is that the fourth quarter did have some seasonal I don't have that most fourth quarters or I guess.
As long as consumer behavior is where it is but the fourth quarter as the first quarter. When we didn't have any of the waivers and so if you normalized for a little bit of seasonality, maybe the fourth quarter's run rate is.
Pretty good luck with with you you know.
Where we are our legacy South state, we don't have a good year of history to show yet obviously with the conversion of cord cutting in the second quarter and then the waivers that we did and in the fourth quarter of course, having some some seasonality so.
Yeah that makes sense that makes sense and then I worked on loan yields.
That's actually stayed in a little bit more stable than I was expecting so any kind of color you can give on loan pricing.
Where do you think that loan yield maybe bought them before we kind of get start to get the benefit of higher rates.
Okay.
Yeah sure check out the.
This this quarter I think our loan yield for the portfolio ex accretion all of that was around $3 77, and already going on yield for loans was in the $3 13 range I think for this quarter.
A lot of that as you know has to do with.
Where you are out on the curve, we had a fair amount of production or a fair amount of that we ended up swapping to floating ratios because.
Felt like maybe the fed will probably start moving rates the same legal our client so the.
The way I think about that as you know if we can get.
Our rates to move up from a from a fed funds LIBOR perspective, 31% of our portfolio, we should be bottoming out here in the next quarter or so and then from there will start increasing with the rest of the market.
Okay.
Great very helpful. Thank you.
Thank you Catherine we are now going to move over to Christopher <unk> of Janney Montgomery.
Christopher.
Thank you ma'am good morning, I wanted to ask you about the accretion income relative to total NII will have in the slide you gave was very helpful. And just as a reminder, does that relationship change much with a CPI coming in or will it continue to decline. This next two years.
Yeah.
Yeah, let me take them maybe in components.
The PPP.
Deferred fee accretion, that's essentially gone I mean, we've got a little bit less on balance sheet.
That's it.
You can take that gray models, if you hadn't already of course, and I'd say, our normalized run rate for the regular acquired accretion as you are today, you know, we think of that as sort of a five to six range. This quarter is a little bit higher than that and some of that is hard to predict but that's sort of how I think about it.
We don't anticipate the the.
The accretion on the Atlanta capital side.
Dramatically changing our accretion that we don't think accretion would be a big part of the story post Atlantic capital closing so.
Not a big number addition, there in our in our modeling.
Chris I would just add that you know I think what we've said a couple of quarters ago, then as we thought about 2020.
Two was that our accretion income would be somewhere in that $5 million to $6 million range and after we got through the P. P. P. So I think it's the same.
We've said for the last several quarters.
Great Steve Thanks for that and well. Thank you as well just a quick follow up on Doug and Pat from Atlantic capital the change in cash and deposits that we saw a period added with any of that seasonal for them and if that is something that would come back this stuff first half of the year.
Chris This is Doug some of it is seasonal we see that every every fourth quarter.
But there's also some strong organic growth in the midst of all that so I think.
Perhaps it would be modestly lower.
In the first quarter of this year, but not significantly so pet would you yes. So Chris if you look at the average deposit growth was pretty flat and part of that was that's driving down some deposit costs particular products that probably caused a decrease if you carve that piece out it was actually up for the quarter and then the period that number it just depends on the day of the week, especially with our payments business.
It's not significantly at 930 because of the Thursday.
And then at year end it was down because of the day. The week goes on a Friday. So you really look at averages and when you look at that.
Yeah.
Got it thanks folks I appreciate that that's helpful.
Yeah.
And Chris you know the mix has also continued to change more towards non interest bearing DDA.
DDA was non interest bearing DDA was 44%.
On average in the fourth quarter that was up from the third quarter.
And those those those deposits that category of deposits continues to grow at a very strong pace.
Yeah, Good point, Doug Thank you again.
Thank you Christopher before we move on to our final question. As a reminder, if you would still like to ask a question that'll be staff when they buy one on your telephone keypad thoughtfully by Keith you change your mind.
Now moving to the key Brady Preston with Stephens, Inc.
Hey, good morning, everyone.
Hey, Brian .
I wanted to ask just on just to follow up on the arc revenues I, just wanted to clarify where that.
Does that all kind of like what you would consider operating or are there any kind of mark to market gains within that just because the $7 million quarter over quarter increase was relatively large.
No no. It was all organic no mark to market in that I mean, if you remember.
As I've described on this call or another but.
In 2020, when the yield curve is flat that business did $80 million in revenue for the year of 2020. So this this quarter at $17 million is a really good quarter, but not a record quarter by any means but it's better than they've been over the last couple of quarters.
Got it that's helpful. Thank you.
And then just maybe one more on fees just.
The mortgage production it looks like it looks like you all are continuing to balance sheet.
And you know.
A relatively larger mix of the mortgage production than you historically have.
I guess I wanted to ask one why and then two if the gain on sale margins are going to track. This level going forward do you envision maintaining that mix of portfolio versus secondary just given that the margins are starting to get a little slimmer.
Yeah Brady this is.
Steve If you I think you're referencing page 14, and hopefully this disclosure that we'll put together over the last couple of quarters is that helpful. And it's helpful. For me as we look at it.
The mortgage production just back to its very robust I mean, it was almost $1 billion for this quarter last quarter was a $1 three and then fourth quarter of last year, which was an excellent quarter with $1 four so really.
Year to year production twice, what it was a record year for US was $5 5 billion. This year with a $5 four so congratulations.
Congratulations to that team they've just been really working hard and do it well you know the things that strikes me on this page are a couple of things one.
Is if you look at the trend on the gain on sale margins a year ago. They were 456% now there are 2.83 with $2. Eight three is just much more of a normalized gain on sale margins. So there's nothing to be alarm about that I was just more normal, but that's down 170 basis points, which is obviously taking away some of the fee income.
And that's why I think what you see in the top right column there as we're moving more of that production, which was a year ago, 72% as a secondary now down to 53% secondary and and so I would assume.
That as we kind of move forward here into higher rates and we're getting more opportunities to do arms on balance sheet will have more of an opportunity to continue to kind of that mix. So I'm, just saying that 50 550.
55% secondary 45%.
Portfolio would probably be a good mix.
Mix.
One of the things that are driving that.
Again to the portfolio.
There's just a lot of new construction.
A single family home owners who've come in there and do a custom built house because there's just not a lot of inventory. So we're doing a lot of that and where we are.
We're doing a construction loan and then are putting an arm on it on the backend.
There's a lot of commentary, but I've just described it it's a really strong production year more of that core portfolio. We saw in the in the fourth quarter consumer real estate went up around 6%. If you pulled out HELOC, there's been more like 9%. So I kind of see that as sort of a good run rate going forward.
Got it that's very helpful. Thank you for that and then just on the origination yields of 313.
It was down five seven quarter over quarter and similar to the core loan yield without without any accretion and so I guess, just as we think about new origination yields going forward.
We've all got our own different kind of a fed rate hike assumptions, but do you expect you know maybe further compression on new origination yields in the first and second quarters of the year you know depending.
Depending on what the fed does you just can you help us think about think about that.
Yes.
It's really the way I would say as you know our average loan size. This quarter was up a little bit and so typically as you get a higher yield.
New loan origination those spreads tighten up a little bit just because of the nature of that so I guess, it probably depends upon our mix.
At the end of the day, we have a loan pricing model.
As to the curve and so as the curve moves up we still while they continue to get our spreads and Theres always a dance in there, particularly when rates rise for the first quarter or two but long term that model works and overtime you do get the spreads.
Question is with all the liquidity sitting in the system, where you get it this year with this time, which is a great question and I don't think any of US nothing answer, but I do know that when security yields good at two 5% and you can do it with free it makes it a whole lot easier or alone.
To be more disciplined on that.
Got it okay.
And then just on the.
The loan growth rate, particularly within C&I. So you all had a good year here I think it was up like 13%.
You know when you exclude PPP related loans, but this quarter was a little bit light relative to H eight and what some of your peers are putting up and so I wanted to ask was there was there anything specific that drove that beyond the business sales.
But you noted Jon and if you can help us think about the.
The size of those paydowns within C&I it would be helpful.
Sure.
If you recall in the third quarter.
We had a seasonal surge in C&I loans that was attributed to some hurricane cleanup business that we do and we mentioned that that would that would.
You know starting to tail off seasonally in the fourth quarter and the first quarter. So that was a little bit of a headwind, but we're still happy year over year C&I has grown 13% and a lot of that is attributable to the middle market bankers that Gregg Lapointe is recruited and brought into the company.
But I do think that this particular quarter at a 6% growth there was probably that seasonality the hurricane business as well as just more of these operating companies selling and paying off at a higher rate than they did in the third quarter.
Got it thank you for that and if I could just sneak in just a couple more quick ones on on slide 25.
You all have given me a good detail around the checking accounts and I wanted to ask do you know if that two thirds, one third mix of commercial versus retail checking and similar to what it was last cycle on a pro forma basis.
Yeah Brady this is Steve, but I don't think we've checked that that that number. It's a good question, but I don't think we've looked at it pre M O M.
Yeah, I don't think so I would say.
They normally say, it's close to that royalty, but we don't we haven't we haven't put that together so good question.
Okay. Okay, and then just one on the Securities book.
Do you happen to know.
No what the duration of the effective duration of the F. S.
<unk> portfolio is and then for the total portfolio do you know what percent of the book is floating rate.
Yeah.
Yeah, I think our effective duration for the entire book is around $4 seven years.
You know I think the floating piece is about six 6% of the book So really most of those are fixed securities when we.
Part of my comments when we bring on the book for ACB of high they are a little bit of a longer portfolio will examine all of that when we put the fair value marks depending on what they would close in.
Put all that together at that point and really that was for the full portfolio of answer Steve David We don't have it broken out by U S and H T M.
My guess would be the U S. It would be a little bit shorter.
Just being good way, but when you put an HCM typically but don't have it precisely in front of us.
Got it thank you Dan and thanks for taking my questions everyone I really appreciate it.
Thank you.
Thank you Brady that was our final question.
Your management team.
Alright, Thanks, Melissa and thank you all for joining US. This morning. We appreciate your continued coverage of South state and Atlanta capital and.
And as always if you have any questions don't hesitate to reach out to will or Steve as you're working on your models and I Hope you have a great day.
This concludes today's cool. Thank you all for joining and have a great rest of your day.
Yeah.
Yeah.
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