Q4 2023 Equity Bancshares Inc Earnings Call
[music].
Yeah.
Good day and thank you for standing by welcome to the Q4 2023 equity Bancshares, Inc. Earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer.
To ask a question during the session you will need to press star one on your telephone.
Then here an automated message of buys in your hand as race to withdraw your question. Please press star one again please.
Please be advised that today's conference is being recorded.
Now I'd like to hand, the conference over to your Speaker today, Brian Cassidy Director of Investor Relations you may begin.
Brian Cassidy: Good morning.
Thank you for joining us today for equity Bancshares fourth quarter earnings call before we begin let me remind you that today's call is being recorded.
Brian Cassidy: Yeah.
Brian Cassidy: Thanks.
Brian Cassidy: Along with our earnings release and presentation materials. Today's presentation contains forward looking statements, which are subject to certain risks uncertainties and other factors that could cause actual results to differ.
Brian Cassidy: For materially from those discussed.
Brian Cassidy: Following the presentation, we will allow time for questions.
Brian Cassidy: Thank you all for joining us with that I'd.
Brian Cassidy: I'd like to turn the call over to chairman and CEO Brad Elliott.
Brad Elliott: Good morning, and thank you for joining equity Bancshares earnings call.
Brad Elliott: <unk>.
Brad Elliott: Through our fourth quarter results.
Brad Elliott: Beating consensus earnings.
Brad Elliott: Our repositioning of our bond portfolio.
Brad Elliott: And our announced merger with Rockwell Bancorp, the parent company of bank of <unk>.
Brad Elliott: Joining me today are Ric status.
Thanks.
Christoph: Christian Alberto our CFO Christoph <unk>, our chief Credit Officer.
Brian Cassidy: Let's look back at the fourth quarter.
Brian Cassidy: Entering the quarter, our balance sheet strength, including high levels of capital.
Brian Cassidy: Loan loss reserves and available liquidity position the bank to take advantage of the current environment to build for the future.
Brian Cassidy: We announced the merger with the bank of Clarksville, which combined like minded organizations, while expanding our footprint in Missouri.
Brian Cassidy: We are excited to report that we received approval from the Federal Reserve Bank. This week and it takes a closing in February.
Brian Cassidy: Different than with past transactions, we will not convert the core systems until may of this year due to scheduling conflicts with a different core electronic providers.
Brian Cassidy: Also during the quarter.
Brian Cassidy: Repossession $450 million and our investment portfolio significantly improving our earnings while not impacting tangible equity.
Brian Cassidy: Tangible book value of expanded during the quarter and year over year as you will see in our slide deck.
Brian Cassidy: Yeah.
Brian Cassidy: These transactions reflect our teams.
Brian Cassidy: Value creation.
Brian Cassidy: Our employee base is engaged and motivated to drive exceptional outcomes, which provides value to our customers employees and shareholders.
Brian Cassidy: I'm incredibly proud of all we accomplished this quarter and throughout 2023.
It was a year of challenges.
Brian Cassidy: Change and as we reflect at December 31 equity is better positioned for the future than ever before.
Brian Cassidy: I've never been more excited about what equity has positioned to accomplish that I am starting 2024.
Brian Cassidy: We have an excellent management team strong balance sheet.
And a guiding expectation to be the bank of choice for our communities.
Chris: I'll, let Chris talk you through our financial results.
Chris Smith: Thank you Brad.
Chris Smith: We reported a net loss of $28 $3 million or $1.84 per diluted share.
Chris Smith: Adjusting for the loss realized within the repositioning of our investment portfolio as well as one time merger expenses operating income was $11 9 million or <unk> 77 per share compared to <unk> 80 per share in the third quarter.
Chris Smith: Net interest income was down $1 $5 million linked quarter, our net interest margin declined from 351% to $3 49.
Chris Smith: We'll discuss margin dynamics in more detail later in this call noninterest income adjusted for the loss on repossessed repositioning of investment in Q4 was down $1 $5 million linked quarter decline is primarily attributable to derivative fair value change and special asset benefit related to a minute state Bank 500.
Brad Elliott: $40000 during Q3 that did not recur.
Chris Smith: Noninterest expenses adjusted for onetime M&A charges totaling $34 7 million.
Chris Smith: Modestly higher quarter over quarter, primarily due to incentive accruals and increased advertising costs.
Chris Smith: Our GAAP net income, including a included a provision for credit loss of 711000 to understand the attribution of the inputs you can reference our earnings deck, which shows the calculation. We continue to hold reserve for potential economic challenges. However to date, we have not seen any specific concerns in our operating markets.
Chris Smith: 731 coverage of ACL to loans is 131%.
Christophe: Stop here for a moment, let christophe talked through our asset quality for the quarter.
Christophe: Thanks, Chris.
Chris Smith: Asset quality metrics remain at historically low levels in the fourth quarter with total classified loans closing the quarter at $40 5 million or seven 1% of total bank regulatory capital.
Chris Smith: Non accrual loans as a percentage of total loans remains a level of 75 basis points.
Chris Smith: Net charges for the year were 13 basis points of average loans.
Chris Smith: Recognize charge offs have been reflective of specific circumstances.
Chris Smith: Individual credits and not related to the broader concern in the markets in which we operate.
Chris Smith: We have now completed a whole cycle annual reviews and renewals incorporating the latest operating results from our borrowers.
Chris Smith: These have affirmed the resilience of our portfolio and the current interest rate and economic environment.
Chris Smith: We have not seen any deterioration at this point in our commercial real estate book.
Chris Smith: We continue to monitor our portfolio for early signs of deterioration or risk rating migration. During this cycle has resulted in a historically low problem credit ratios.
Chris Smith: Testament to our disciplined underwriting practices at origination the strength of our local economies and proven more guest strategies.
Chris Smith: While our credit outlook for 2024 is positive we maintain a favorable position in terms of capital reserves and credit strength to confront any potential future economic challenges.
Chris Smith: Thanks, Christophe as previously mentioned, we saw a large portion of our bond portfolio during the quarter pulling forward cash flow of approximately $450 million.
Christophe: As at the end of the period, our sales have settled in funds have been redeployed in securities purchases funding of loans are being held in cash or use it as an alternative to more expensive funding sources for the balance sheet.
Christophe: The benefits of the transaction are expected to be fully realized in the first quarter of 2024.
It has increased during the quarter at an annualized rate of six 1% loan originations in the fourth quarter totaled $143 million with a weighted average coupon of 861% compared to $149 million and a weighted average coupon of 846% in the third quarter.
Christophe: We continue to successfully originate loans in the current interest rate environment contributing to expanding coupon yield on interest earning assets.
Christophe: During the fourth quarter, the coupon euro pound increased to 671% from $6 six 2%.
Total loan yield declined as purchase accounting loan fees and non accrual accounting contributed two basis points in quarter four versus 15 basis points in quarter. Three what are these levels to be consistent period over period NIM would have improved eight basis points.
Christophe: Cost of interest bearing deposits increased 19 basis points to five 8% in the quarter a decline from the 26 basis points of expansion in the third quarter, while the contribution of average noninterest bearing deposits to the average deposit mix declined to 22, 8% from 23.0%.
Christophe: Net interest income totaled $39 $5 million in the fourth quarter down $1 5 million from the third quarter, driven by declining average, earning assets and the excess cash liquidity and the bank has been maintaining was used to fund the decline in average deposit balances.
Christophe: We continue to have $140 million outstanding at the Federal Reserve Bank funding program. We are currently earning a positive spread on that borrowing though it does have the effect of reducing margin.
Christophe: We calculate that the excess liquidity had the effective reducing margin by seven basis points for the current quarter.
Christophe: Salaries and benefits increased 741000 in the quarter due to a decline in share based compensation compensation part mature as well as of year end incentive accruals marketing expenses remain elevated from advertising to continue to attract deposits.
Our outlook slide includes the forecast for the first quarter as well as our full year 2024.
Christophe: We do not include future rate changes, though our forecast still includes the effects of lagging repricing in both our loan and deposit portfolios.
Christophe: Our provision is forecasted to be approximately 12 basis points of average loans.
Christophe: Important to note. The forecast does not include the impact of the bank of Kirkstall merger previous disclosure at announcement date indicated income accretion of <unk> 36 for 2024 break.
Christophe: I am pleased with what we accomplished in 2023 and all of that we are positioned to accomplish moving forward as we continue to emphasize value creation in our markets.
Christophe: Partnering with the bank of Kirk, So and Theyre committed team of banking professionals provide added scale and market expansion, which will contribute to our growth goals in 2024 during the quarter, our non brokered deposit base increased by $13 3 million attributed to seasonal inflows and our municipality operating accounts we continue.
Speaker Change: To see pressure on pricing and have maintained our disciplined approach as we consider the impact of bank of Kirksville closing in the first quarter as we enter 2024 will be going to market with a new suite of checking accounts designed internally by Jonathan Roop, and Julie Huber, which we believe will enhance our value proposition.
Julie Huber: For customers. In addition to our new accounts, we are partnered with Mar Stone, Inc. To provide digital wealth services to our customer base further enhancing our value proposition with our consumers.
Julie Huber: We believe we have the team and the suite of products to remain the banker of choice in the markets we serve.
Julie Huber: On the asset side of the balance sheet, our loan production continued at a consistent pace as we originated the same dollar level of loans in Q4 as in Q3, but it improved yields and rose to the bank.
Julie Huber: As we look to 2024 pipelines are strong and we expect pull through to increase as rate pressures moderate as of the end of quarter or 75% probability pipeline stood at 450 million, while our 50% probability was $260 million, bringing our greater than 50% pipeline to over 700.
Julie Huber: Third.
Brian Cassidy: As indicated in our outlook slide we expect to drive mid to high single digit organic loan growth in 2024, we have the strategy discipline tools and people in place to realize this expectation I look forward to assisting the team and execution.
Brian Cassidy: Service revenue was down quarter over quarter, but we continue to see increasing contributions from previous investment in cards Treasury and wealth management and insurance.
Brian Cassidy: Our teams are focused on enhancing customer value in 2024, and beyond which we expect to drive expansion of the business lines moving forward it.
Brian Cassidy: Finally, I am pleased to announce the promotion of Justin Harris to regional CEO community SaaS. We will now he will now be leading both our Ozark and southeast Kansas markets, just that had been leading the Ozark markets for a couple of years and is ready for an expanded role I look forward to partnering with Justin as we look to continue to be.
Justin Harris: To build equity bank in these markets.
Justin Harris: Our company is well capitalized.
Justin Harris: Our asset quality metrics are the best they've ever been in our balance sheet structure is solid.
Justin Harris: And we have a granular deposit base, which is positioned to improve with the addition of the bank of <unk>.
Justin Harris: Our strategic directives for 2024 have been set and the team has hit the ground running.
Speaker Change: Rick in collaboration with Mark Parman, Brad Daniel Adjusting Harris have their teams poised to hit to hit.
Speaker Change: And our goals for 2024.
Justin Harris: We look forward to Onboarding, our new <unk> team members and continuing to redeploy assets.
Justin Harris: If the customer relationships that build franchise value.
Brad Elliott: We continue to see momentum on the M&A front and expect that to continue throughout the year equity will remain disciplined in our approach to assessing these opportunities emphasizing value, while controlling dilution and the earn back timeline.
Brad Elliott: As you can see from our presentation I believe we have the right team.
Brad Elliott: Right balance sheet, the right geography, and a proven track record to execute on strategy and we started 20 years ago.
Brad Elliott: We have the ability to grow organically and through M&A.
What an exciting time for our team members.
Brad Elliott: Thank you for your interest in <unk>.
Brad Elliott: Equity Bancshares, and we'll open it up for questions.
Brad Elliott: And thank you.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced towards Joel. Your question. Please press star one one.
Brad Elliott: Again, please standby will be compile the Q&A roster and one moment Bob first question.
Brad Elliott: And our first question comes from Terry Mcevoy from Stephens, Inc. Your line is now open.
Terry Mcevoy: Hi, good morning, Thanks for taking the questions.
Terry Mcevoy: Chris If I heard you correctly the margin outlook assumes no changes in interest rates I guess my question is if the forward curve is accurate can we get a rate cut let's call. It the middle part of this year, how do you think the balanced position for freight rate cuts.
Terry Mcevoy: Yes.
Terry Mcevoy: Yeah. So great question, Terry we look at the balance sheet.
Terry Mcevoy: Near as near to neutral as it can be at the moment.
Terry Mcevoy: Real challenge in terms of attempting to forecast that out and I think the industry's challenge is how does competition react on deposit rates as the market begins to come down for.
Terry Mcevoy: For short term rate. So we have the capacity we have the positioning on.
Terry Mcevoy: On our balance sheet to be able to cut quickly, but in a situation where competition is being irrational. It can become challenging so it's hard to pinpoint exactly how we're going to react in a downward rate environment, but when you look at it on a contractual readjustment basis, we have the capacity to maintain a neutral balance sheet today.
Terry Mcevoy: Just just sticking with the margin and I apologize if I missed it what was the accretion in the fourth quarter of 11 basis points in Q3, but I couldnt find in Q4.
Terry Mcevoy: Yeah.
Terry Mcevoy: The purchase accounting accretion.
Terry Mcevoy: Correct, yes, sorry about that.
Terry Mcevoy: Yes.
Terry Mcevoy: Purchase accounting.
Terry Mcevoy: Yes.
Terry Mcevoy: One basis point in quarter four.
Terry Mcevoy: Perfect and then maybe lastly could you just update us on the size of the aviation loan portfolio and share any comments you might have on how the challenges at Boeing may impact some of your Wichita based suppliers that you have relationships with.
Terry Mcevoy: Hey, this is Chris Doyle. Thanks for the question. It's a very fair question given the recent developments I can tell you that our direct exposure to experience being that Boeing has is minimal we have made a conscious decision about three years ago to reduce our exposure in eurosport, given you've got everything Thats transpire.
Chris Doyle: With the Max eight and just Covid as of today, we only have about $15 million in direct exposure to aerospace of which only $6 million is.
Has some exposure to spirit and Boeing and as local credit.
The borrowers that making that are making up the $6 million.
Chris Doyle: Diversified revenue stream, so only a portion of their revenue comes from spirit and.
Chris Doyle: To add more flavor to it half of this exposure is GAAP government guarantees so.
Chris Doyle: So we feel pretty good about the risk of exposure, we have to do some sector. At this time that would have been different Terry.
Terry Mcevoy: Few years ago, we probably would have had $75 million of exposure of two years ago.
Terry Mcevoy: Thanks again for taking my questions.
Terry Mcevoy: And thank you.
Terry Mcevoy: And one moment our next question.
Terry Mcevoy: Okay.
Terry Mcevoy: And our next question comes from Jeff <unk>.
Terry Mcevoy: From D. A Davidson your line is now open.
Jeffrey Allen Rulis: Thanks, Good morning, just a couple of questions on the outlook slide.
Jeffrey Allen Rulis: What are the.
Get the get the rate sorry, the margin.
Down Pat So if I hear you right kind of $3 49 reported I think you mentioned.
Jeffrey Allen Rulis: Sure.
Speaker Change: <unk> way would've would've been.
Chris Smith: Maybe maybe 357 is that right as you talk about.
The impact of some one timers in there.
Speaker Change: If it was normalized compared to last quarter, Jeff It would've been $3 57, I think I'd look at last quarter is a little bit high so somewhere between so call. It 354 on a normalized basis is what I look at it.
Speaker Change: 254, okay.
Speaker Change: The expectation to hop into the $3 70 380 range.
Speaker Change: In the first quarter.
Speaker Change: What is that.
Speaker Change: Underpinnings of that increased.
Speaker Change: So that's all tied into the bond repositioning efforts in the fourth quarter. So we saw a small period of benefit on the bond repositioning it in December.
Speaker Change: Realize a full period of benefit from that into the first quarter, which is what's driving up that name.
Speaker Change: And is that all repositioning or is there some core traction gaining on.
Speaker Change: Margin at that point.
Speaker Change: So it's the majority of the.
Speaker Change: The repositioning there is some traction being gained generally in terms of growth of our loan portfolio. You saw throughout Q4, we referenced in the call 6% linked quarter growth, where we're bullish on our capacity to continue to grow the loan portfolio. So there is some additive benefit.
Speaker Change: Two we're putting on those higher yielding assets and then the majority of that uptick is driven by the repositioning of the bonds.
Speaker Change: Got it.
Speaker Change: It kind of extend decline got your comments on that.
Speaker Change: Neutral balance sheet will depend on.
Speaker Change: Positive.
Speaker Change: As of deposits is maybe cuts get later did but pretty flat for the year.
Speaker Change: So what would the Kirkland.
Speaker Change: Vacuum sort of impact if at all on that.
Speaker Change: Margin.
Speaker Change: 36, 36% accretive to overall earnings I'll get you the margin impact as we talk Jeff I got to get it pulled up.
Speaker Change: Great.
B.
Speaker Change: Just a kind of a similar question on the average earning asset growth looks like.
Speaker Change: Legacy.
Speaker Change: Pretty flat.
Speaker Change: Is it safe to say that earning asset we could just tack on Kirk Bill and.
Speaker Change: Kind of that's the expectation for the full year.
Speaker Change: Yes, I think thats, the right way to think about it the average earning assets being flat is essentially some repositioning so using cash that we currently have on our books to.
Speaker Change: Fund the loans, so not adding incrementally more average earning assets as we build the loan to loan portfolio.
Speaker Change: When you attack Clarksville on top of it Jeff.
Okay.
Speaker Change: Just one quick one on credit.
Speaker Change: I just wanted to talk about that that increase in non accruals I think it was at <unk>.
<unk> credit, but if you could walk us through the addition, there.
Speaker Change: Yeah. So most of that increase that you see is is related to one larger credit there was another smaller credit that makes up the difference but.
Speaker Change: It was a.
Speaker Change: It's a primary residence large large credits that large loan on a primary residents that we have a first mortgage that we feel very good about from a loan to value standpoint. So.
We're hoping to get out of it.
Speaker Change: Soon.
Speaker Change: Is that a borrower that has other lending relationships with the bankers with the singular residents.
Speaker Change: This is the only this is the only one we have.
Speaker Change: Okay.
Speaker Change: Okay.
Brad Elliott: Okay, and maybe Brad just real quick on that.
Brad Elliott: As you may be close kirksville.
Brad Elliott: Next month.
Brad Elliott: Kind of leaning into that.
Brad Elliott: Maybe M&A additional deals don't transpire.
Brad Elliott: Checking in on your appetite for the buyback if we go some time without any.
Brad Elliott: Any transactions that look.
Brad Elliott: Attractive.
Brad Elliott: Yes, what I would tell you Jeff is even with the M&A front we're back in.
Brad Elliott: Looking at the buyback.
Brad Elliott: Each day so.
Brad Elliott: We're.
Brad Elliott: We've got enough capital to close the transaction, we did hold the capital back.
Brad Elliott: And the last quarter to make sure that we could.
Brad Elliott: Have excess capital.
Brad Elliott: The transactions that we accomplish that so we're now looking at buyback this quarter.
Brad Elliott: As if an M&A deal came to fruition.
Brad Elliott: We'd have a quarter or two before.
Brad Elliott: It would close and so we're building cash pretty fast in earnings or are strong so.
Brad Elliott: We're back looking at buyback on a daily basis.
Brad Elliott: Okay. Thank you.
Brad Elliott: And thank you and if you would like to ask another question that is star one one again, if you would like to ask another question that is star one one and one moment. Our next question and our next question comes from Andrew Liesch from Piper Sandler. Your line is now open.
Brad Elliott: Hey, good morning, guys.
Brad Elliott: Sticking with the outlook slide here on average deposit.
Andrew Brian Liesch: Pretty flat throughout the year heard you mentioned, you've got the new checking account suite coming up but you have some brokerage there I guess what are the ins and outs on on deposit growth and obviously the loan growth is pretty optimistic so.
Andrew Brian Liesch: We assume that youre going to squeeze cash flows from the securities book to fund that without much deposit growth.
Andrew Brian Liesch: Yes, so first off just.
Andrew Brian Liesch: Im looking at it flat I mean, we've got as we talked about we had some inflows as we normally view on the seasonality of the public funds.
Andrew Brian Liesch: Business, so that moved it up so we're going to kind of backfill that throughout the year. That's why you don't see a large growth in that in addition to that with as we add in the bank of Clarksville, We've just taken a more conservative approach as far as making sure that we continue to be very disciplined on what our cost of funds.
Andrew Brian Liesch: Our.
Chris Smith: And so I think that's why we're viewing this is as a little bit less growth. We're also going to try to look and see to make sure we try to push our <unk>.
Chris Smith: Mix.
Chris Smith: Which is what the new products are geared towards so.
Chris Smith: <unk> to maybe give up on a little bit of that time deposit to replace that hopefully with with more noninterest bearing and transactional accounts.
Chris Smith: But because you want it the other question I'm.
Chris Smith: I'm sorry, you had another question on there yes.
Chris Smith: Funding the loan growth then is it really just going to be Remixing. If you have that.
Chris Smith: Like why are the cash flows off the securities book.
Yes.
So we do have some continuing cash flow is coming off of our securities book.
Chris Smith: We're continuing to look at from a capital perspective, having excess capital and potentially pursuing more opportunities and continue.
Chris Smith: Continuing to sell at the market creates opportunity for us to be opportunistic in repositioning the bond portfolio directly as we did in the fourth quarter.
Chris Smith: Sure.
Chris Smith: As you look at the end of the fourth quarter, Andrew we are sitting on a meaningful level of cash at that point, we've continued to have meaningful cash levels kind of throughout the year.
Chris Smith: So part of that repositioning or loan funding is coming right out of that cash.
Chris Smith: And then when we get back get the bank of Clarksville.
Chris Smith: With that transaction, we are bringing on more cash and some relatively short term investment. So there is cash flow coming off of that one quickly to sell without meaningful deposit balance growth. We have we believe the capacity to continue to fund the loans at the level that were depicted here.
Got it.
Chris Smith: Alright that you've covered all my other questions I'll step back thanks.
Andrew: Thanks, Andrew.
Andrew: And thank you.
Andrew: And one moment our next question.
Andrew: And our next question comes from Damon Delmonte.
Damon Delmonte: From <unk>. Your line is now open.
Damon Delmonte: Hey, good morning, guys suburban is doing well today.
Damon Delmonte: Just a couple quick ones here one on the deposit.
Damon Delmonte: Remixing that's been occurring.
Damon Delmonte: I think non interest bearing deposits are now down to around 22% of total deposits do you feel you've kind of reached a floor there.
And it's with respect to hold from there or do you feel like Theres still some rotation or migration out of that category.
Damon Delmonte: Well I wish I could give you an exact answer on that I mean, I think I think we're seeing.
Damon Delmonte: Were not seen accounts.
Damon Delmonte: Decreasing.
Damon Delmonte: So what we're really seeing is we're seeing balance balances decrease within those accounts. So.
Damon Delmonte: We do think that those accounts are getting fairly low in the consumer area, but since we're so granular.
Damon Delmonte: Sure.
Damon Delmonte: It's something that we're obviously continuing to keep an eye on but it requires us to start growing accounts.
Damon Delmonte: And so that's kind of what we're looking at so I don't think I think it does feel like that number is slowing.
Damon Delmonte: And.
Damon Delmonte: And so also if that's the case.
Damon Delmonte: I mean, I think we might still have a quarter of a little bit more of kind of.
Damon Delmonte: Where it continues to shrink on an average basis, but we're getting to that to that final point here. So.
Damon Delmonte: And what I would tell you is yes.
Damon Delmonte: Move down a tick, but it moved down a tick only because.
Damon Delmonte: Were in round things right. So it didn't move down from.
Damon Delmonte: 23% to 22, it moved down from just below 23 to somewhere into the 'twenty twos and so it's not like it fell 10 percentage point even quarter to quarter.
Damon Delmonte: Right right got it okay.
Damon Delmonte: And then on the.
Damon Delmonte: The guidance slide I think score.
Damon Delmonte: For noninterest income, you're guiding to $8 million to $9 million for next quarter.
Damon Delmonte: I think this quarter was kind of in the low $7 million range can you just kind of help us figure like walk us through from where you were here in the fourth quarter, and how you get to an $8 million to $9 million level.
Damon Delmonte: Yes. So we were we were somewhat light this quarter compared to what we'd look at it as a run rate some of that driven by derivative fair valuation. So when you look quarter over quarter, we benefited from derivative fair value change in Q3, we were hurt by in Q4.
Damon Delmonte: Expect the same level of kind of comparative shifts.
Damon Delmonte: And then as we look into next year.
We are continuing to see opportunities from some of our legacy acquired assets that are bringing in opportunity to realize some benefit from.
Damon Delmonte: Working out some special assets similar to what we've had in previous quarters with the upticks in kind of a repurchase obligations and other things we've talked about.
Damon Delmonte: Seeing some of that come back through again, and then we expect to benefit from in the first quarter and have some additional benefit throughout the year, which is whats being reflected in that figure.
Damon Delmonte: Got it okay. That's helpful. Thank you.
Damon Delmonte: And then lastly, just on the loan growth.
Damon Delmonte: Okay.
Damon Delmonte: The high single digit outlook could you just kind of give us a little bit more color as to what areas of the portfolio you feel more comfortable about is it on the C&I side, where where businesses are investing in capital expenditure projects or is it more on the development side with CRE folks.
So we're definitely seeing C&I positive movement on C&I.
Damon Delmonte: Owner occupied CRE as well both of those look pretty strong we've had a really good start to the year.
Damon Delmonte: That gives us confidence in being able to hit those numbers and Additionally, I think we'll see serves small we have a really small portfolio. When you look at things like our private banking in.
Chris Smith: Our exposure to <unk> and things like that I think youll see small incremental growth in that as well so it's a <unk>.
Brad Elliott: Development will definitely have looking forward will definitely have some of our construction deals we will be funding up this year that are that we're looking at so we have that confidence in there. So we're not we're being really thoughtful on the new deals that we do in that space, but.
Brad Elliott: We're seeing a lot of stuff coming back to us so things that we held firm on from both a credit perspective, and a pricing perspective, we're getting to see another look at those deals is as maybe other banks that are either falling by the wayside or.
Chris Smith: There is some concern.
Chris Smith: The.
Chris Smith: By the borrower.
Chris Smith: At that bank and get the deal done so.
Chris Smith: It's not I wouldn't just say its just one area and if not all of them, but it's really kind of those.
Chris Smith: Owner occupied CRE and C&I for sure with with added.
Chris Smith: A little bit on the consumer side.
Chris Smith: Got it Okay. That's helpful. That's all that I had thank you.
Chris Smith: Ann.
Chris Smith: Hey, Jeff just to circle back really quickly on that one open question on accretion to NIM from the way we had it modeled is seven five to 10 basis points of NIM accretion for this year.
Jeffrey Allen Rulis: Okay. Thank you.
Ann: And I am showing no further questions.
Ann: This.
Ann: Today's conference call. Thank you for participating you may all disconnect.
Ann: Yes.
Ann: Okay.
[music] okay.
Ann: Great.
Ann: Okay.
Ann: [music].