Q4 2023 First Bancshares Inc Earnings Call
Okay.
Good day, and thank you for standing by.
Welcome to the review of fourth quarter 2023 financial results 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 session.
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Please be advised that today's conference call is being recorded I would now like to hand, the call over to hobby called CEO. Please go ahead.
Good morning, everyone and welcome several team members, who are with US today on the right. We've got three Lowery, our CFO George Wilson, our Chief Credit Officer, Jeffrey Parker, our Chief lending Officer I'll cover a few high level items for the quarter and here then turn it over to each of their respective team members for more color.
Back to the area.
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For the fourth quarter of 2023 operating earnings were lower than the third quarter, we expected some margin compression during the quarter and we experienced about 13 basis points of core margin compression, primarily due to a deposit campaign that we talked about.
Jeffrey Parker: In our previous earnings call associated with being a bit more aggressive towards the end of the year support our loan growth.
Jeffrey Parker: Deposit outflows.
Jeffrey Parker: Credit was solid again for the quarter, we had $80 million of net loan growth was six 3% of our annualized base.
Jeffrey Parker: Credit quality metrics remained strong we had six basis points charge off $2 billion reduction of the MTA.
Jeffrey Parker: Passes at a pretty low point 23 basis points.
Jeffrey Parker: But then you also talked about her prototypes and we did a bond restructured during the quarter in order to reposition a portion of the portfolio to improve our yield.
Jeffrey Parker: And three of our EPS.
Jeffrey Parker: For the full year.
Jeffrey Parker: For you to come forward it extremely well as you're aware we closed our acquisition occurred with southeast Bank on January one of last year at about 1 billion.
Jeffrey Parker: The overall organization during the year, our operating income increased 41, 6% by $6 million.
Jeffrey Parker: On ROI from Europe, $1, 42, and a return on tangible common equity of 17%.
Jeffrey Parker: We grew our tangible book value about 7% year on year to $19 35 to urea.
Jeffrey Parker: Our dividend, 21% 74 cents a share of market share for our shareholders.
Jeffrey Parker: All in all a good year, a good growth year, good year in terms of profitability.
Jeffrey Parker: And with that I'll turn it over to you our actual presentation, great. Thanks, Heartbeat and welcome everyone and I just like to say is it's probably reiterate as well that I think we did have a very solid quarter.
Jeffrey Parker: Despite the increased cost of our deposits that we knew were coming we had great long grass. The tappin mentioned six 3% annualized which was the same as the third quarter as consistent there and then also our deposits were basically flat when you back out the public funds. So this is the first quarter.
Jeffrey Parker: Yes in the past or that we basically maintained our deposit side and that obviously you gave each any deposit specials and we'll talk a little bit more about that but we did have a couple of obviously non operating items this quarter acquisition charges and as well as a loss on the securities from the restructure and we'll talk about that in a minute.
Jeffrey Parker: When you look at our reported earnings it was $11 million or <unk> 35 cents.
Jeffrey Parker: Which was down $13 3 million from <unk>.
Jeffrey Parker: Last quarter, but on an operating basis, if we back out the acquisition charges that were about 400000 net of tax and then the loss on the sale of Securities was $7 3 million net of tax earnings were $18 7 million or 59 cents per share.
Jeffrey Parker: This compared to 24 million or <unk> 76 per share.
Jeffrey Parker: Quarter ended September which was a decrease of about $5 $3 million.
Jeffrey Parker: And you know when you look at that 5.3 million dollar decrease.
Jeffrey Parker: Compared to last quarter. It can really be found out from basically interest experiencing obviously, increasing more than our interest income interest income did increase $3 million for the quarter, but our interest expense increased $6 1 million with how about a million and a.
Jeffrey Parker: Non deposit related interest expense, but excluding the securities loss. Our noninterest income was basically flat down $1 million, mostly related to interchange fee income, which was elevated last quarter with a one time fee income but is in line with the first and second quarters of the year.
Jeffrey Parker: Noninterest income look very comparable.
Jeffrey Parker: Expenses were up <unk> 40 from they were I'm, sorry, $44 million they were up $1 8 million from the previous quarter. If you back out all the expenses that we mentioned last quarter related to the grant money that was expense last quarter. So that $1 8 million as represented by a million dollars related to salary expense.
Jeffrey Parker: And that is our year end Nicole.
Jeffrey Parker: And also solid vacation.
Jeffrey Parker: As well, which is a one time item at the end of the year.
Jeffrey Parker: Given estimates basically last quarter about where expenses might fall and these are a little bit more than that I believe I said it could be up to 43 million. So this wasn't just a little over that for the fourth quarter.
Jeffrey Parker: And it's helped me mentioned in and if you recall from our call last quarter. We did expect our margin to compress for the fourth quarter, obviously due to a couple of things that run off in our public funds. It normally happens in the fall and especially in the fourth quarter, which usually leads to additional borrowings and then as well.
Jeffrey Parker: Well as our increased deposit costs related to the deposit gathering campaign and also as well as market competition, we still have.
Competition for deposits in our markets. Some some banks still running some higher priced CD specials that we're still face.
Jeffrey Parker: And that competition as well our specials ended at the end of the year and to remind you we had a 5.256 months CD.
Jeffrey Parker: And a 5% six months right guarantee on a money market account.
Jeffrey Parker: With and you have to have in noninterest bearing accounts with us as well to to have those specials, but we did bring in about 183 million of new money over the course of I guess four months or so when we ran the campaign and then obviously both of those items, we've talked about it led to the increased deposit costs for the quarter.
Jeffrey Parker: And as we talked about that last quarter, we would be on aggressive side with the campaigns are due to the loan growth, which we had both quarters I believe was.
Jeffrey Parker: $150 million to $60 million in loan growth for the two quarters combined.
Our core margin decreased 13 basis points down to 314.
Jeffrey Parker: Expect to see compression again in the first quarter and then you know looking at hopefully that stabilizing in the second quarter of the year we've got.
Jeffrey Parker: Still what is market competition on these specials were still repricing some deposits, but then obviously the six all these specials will be come in days throughout the next six months we had.
Jeffrey Parker: A lot of folks don't know specials in September and October and then again in December right. Before we ended so we could see all of that pricing through I guess really through the second quarter, but as those come in every price obviously, hoping to raise prices down because we're not running the same specials and be able to.
Jeffrey Parker: That's kind of what we're looking at as far as hopefully the stabilization will be in the second quarter due to that.
Jeffrey Parker: We did have a yield on our interest bearing assets did increase 15 basis points for the quarter, but our rate on interest bearing liabilities increased 42 basis points.
Jeffrey Parker: Our cost of deposits increased 33 basis points for the quarter to 100 to 154 basis points still.
Jeffrey Parker: Still a very respectable number due to a granular deposit portfolio and compare it to some of our peers. Our interest bearing deposit cost did increase 42 basis points to do anything and that drove our beta to 38%, which was up from 31% through last quarter.
Jeffrey Parker: As I mentioned the deposit run off obviously, a decline this quarter from our previous quarters to basically almost flat. It was down 17 million, but public funds was right at 15 million of that so just a couple of million dollars. So.
Jeffrey Parker: No that was very good number for us for the fourth quarter.
Jeffrey Parker: Our noninterest bearing deposit portfolio changed one basis points, we were 29 basis points to tell a lot total deposits down from 30 last last months.
Jeffrey Parker: Overall still very happy with where those numbers as well.
Jeffrey Parker: On a year to date basis, a couple of just highlight that they point out operating earnings for the year increased $28 4 million.
Jeffrey Parker: That was 40 right at 42% to $96 $7 million our allowance excluding the.
The acquisition of Heritage on one one increased six 3% for the entire year, which was 230.
Jeffrey Parker: $37 million.
Jeffrey Parker: Assets overall grew $1 5 billion up to $8 million and our cost of our deposits averaged 109 basis points for the year and then our net interest margin on a fully tax equivalent basis on a year over year basis actually increased 40 basis points.
Jeffrey Parker: Just a couple of notes on the on the bond sale, we didn't put our Nat cat in case, you didn't see that I'll go over them really quick or easy, but we did have a $9 $7 million loss on 123 million of bonds that we sold they had a weighted average book yield of 1.18%.
Jeffrey Parker: And an average life life of three years, so 92 million of that was reinvested.
Jeffrey Parker: Yielding estimated 533% and then we paid off $30 million of our bank term funding program that had a rate of 482. So overall with that shifting of the balance sheet, we earn the earn back or take a $2. One years, that's expected a $4 7 million dollar increase in our net interest income.
Jeffrey Parker: And then about eight basis points related to margin improvement.
Jeffrey Parker: Couple of notes at just in general on the other our liquidity position remained strong loan deposit ratio is 80% you still have about $2 2 billion and our borrowing capacity and 40% of our securities are unpledged, which is about $680 million.
Jeffrey Parker: Over the next this year really 'twenty 'twenty four we have about $205 million in cash flows that will generate out of our bond portfolio.
Jeffrey Parker: And then our capital ratios.
Jeffrey Parker: We're and line <unk> seven point not leveraged at about $9 seven and total risk based 15% all in line basically with last quarter. Our return on average assets operating was 95 basis points and our efficiency ratio was 62 basis points.
Jeffrey Parker: All in all over all I think it was solid just deposit increased deposit costs.
Jeffrey Parker: Were up as expected and.
Jeffrey Parker: Moving forward.
Jeffrey Parker: Alright, Thanks, Robert I appreciate that.
Jeffrey Parker: Portola.
Robert Smith: Yes, Sir Thank you happy I think for the third time I'll mention about $82 million loan growth so very.
Jeffrey Parker: Very happy to see that data and help you both mentioned in line with third quarter. So about six 3% annualized really for the whole back half of the year. So I think we're encouraged with loan production really for the second half of the year.
Jeffrey Parker: December finished on a high note, which you never know what the end of the year, how things are going to pan out, but we had over $100 million in originations and also saw an uptick in our actual funded loans as compared to <unk>.
Bank for future construction at about 70% were funded in December.
Historically has been 50% to 60% so that gave us a boost at the end of the year.
Unfunded construction commitments, however remained steady and virtually unchanged since quarter three so we still have.
Jeffrey Parker: Underfunded commitments to run out through 2024, so we're encouraged by that as well small.
Jeffrey Parker: Small contraction of pipelines at the end of the year I think we did close a lot.
31, but anecdotally at the end of the year and into the first couple of weeks of January a lot of conversation about new credit so very encouraged about where we're starting 2024.
Jeffrey Parker: Regionally I just want to mentioned, Louisiana had a great quarter, we talked about on our last call. The integration of the new team there into New Orleans.
Robert Smith: They actually contributed about $38 million and net loan growth for the quarter just in that market. So very encouraging there Tampa and private bank as I, usually say had great quarters.
Jeffrey Parker: Well and then we also saw a pretty nice uptick in our cash value lending program and the heritage legacy market really for the first time had a nice increase in the outstandings in the fourth quarter. So.
As <unk> mentioned the average yields for the quarter continued to tick up we got to $8 26 for the quarter for the fourth quarter. We finished the third quarter at 767.
Robert Smith: We have a pretty rigid pricing.
Robert Smith: Model, nowadays with hurdle rates and anything above certain rates have to go to myself a hockey. So I think we've been diligent in our pricing the last quarter or actually the last couple of quarters.
Jeffrey Parker: And then regarding personnel a lot of exciting movement in the fourth quarter. We had a couple of hires one, particularly in our north Atlanta market that we're very excited about bringing a lot of experience in the commercial and construction market.
Robert Smith: That team and then we actually had.
Jeffrey Parker: Four offers out before the end of the year three of which have been on boarded as of the date of this call.
Robert Smith: So we're very excited there are most strategically new regional executive for the Tampa St Pete market.
Robert Smith: Donlin brings about 40 years of experience in that market with.
Donlin: With a high level of experience in commercial wealth management and private banking. So we're very excited about 2024 and Tampa.
Donlin: Lastly.
And George May.
Jeffrey Parker: Correspond on this we had migrated the rest of the <unk> team to our LLS platform.
Jeffrey Parker: And then with Georgia sale continued to add efficiency to our small business.
George May: Lending group during the quarter, so very encouraging quarter, and I think 2024, hopefully starting out as.
George May: Well so.
Speaker Change: I'll turn it back over to you Bobby Thank you JJ.
George May: George could you talk about first of all.
George May: We continue to see acceptable and moderately improving trends for most of the all of our credit quality metrics throughout the year and certainly in the fourth quarter, the leading indicator metrics for credit quality trend about since 30 day delinquencies.
George May: The year is an improvement to 23 basis points.
George May: The best quarter finish of the year.
George May: And marginally below our annual average of 38.4 basis points. So good trim buyer.
George May: Asset quality continued to show improvement throughout the year.
Using that end of quarter, one as a benchmark is that was the.
George May: First full quarter operating post merger with HSBC loans on non accrual approved from $17 3 million down to $10 seven at the end of quarter four less an improvement of 38% and non accrual loans for the three quarters.
George May: Full operating.
George May: HSBC margins over the same time peak NPA, yes, so as a percentage of total loans improved from 45.1 bps at the end of Q1.
George May: 239.3 bps.
George May: Quarter on quarter.
Quarter four.
George May: Net loan charge offs as Harvey mentioned, we're six bips.
George May: Total criticized and classified loans also very positively.
George May: Positively reflected by a reduction from Q1 at 143 million down to $107 million.
George May: We saw a decrease.
George May: Quarter over quarter.
George May: End of quarter four of $11 2 million over quarter three that included payoffs of point, Megan and criticized and classified are upon us.
George May: As a percentage of capital plus a scale.
George May: The loan ratio improved year over year from 15% at $12 three 9%.
George May: Again, a strong emphasis on our balance in our loan portfolio mix owner occupied CRE at 25%.
Owner occupied CRE at 21%.
George May: Four family at 19, C&I 15, toil those represent the major categories in <unk>.
What's and continued focus on that.
George May: In CRE.
We do continue to place a lot of emphasis on maintaining a balance there.
Jeffrey Parker: Exposure chart on page 18 of your debt illustrates into node professional office, 24% of CRE does represent both the owner occupied.
Non owner occupied categories and of course retail center retail stand alone hotel warehouse and industrial ramp up our thoughts the RV categories.
Jeffrey Parker: As depicted.
Jeffrey Parker: A closely watched asset class of course, our professional office credit quality has held up very well throughout the year sub standard office loans or four 2% of our total office portfolio.
Jeffrey Parker: Average loans of 733000 in non owner occupied office category.
Jeffrey Parker: Stick with smaller and minimally vertically.
Jeffrey Parker: Constructed building types under four fours.
Jeffrey Parker: Across both our legacy as well as our acquired markets has served us very well.
Jeffrey Parker: We've noted in the past that even in our non owner occupied loan portfolio.
Number of office property loans in that category have a fairly sizable borrower related entity.
Jeffrey Parker: Occupancy presents.
George May: So even in that category, there's a good mix of owner bested ownership.
Jeffrey Parker:
Jeffrey Parker: We've seen minimal lease renewal issues in office acceptable tenant quality.
Fee credit off issues.
Issues in our office fund.
Leo.
Leo: So insurance costs have had an impact for some borrowers that issue will be watched very closely for operating margin progression throughout the year and there is one item to really provide some focus on this year.
Jeffrey Parker: In dollar terms with only 14% of the office portfolio maturing through 2025, the majority of the office portfolio will likely be mature and in a more favorable rate environment in terms of borrower coverage capacity.
Leo: Not that big of a slice if you will at 14%.
Leo: And the next two years.
Leo: And in summary asset and credit quality really did reflect a strong resiliency for the year.
Leo: By applying the same principles of management through our credit approval and administrative process since 2004.
Leo: We look forward to supporting the bank in similar fashion.
George: Thanks, George that concludes our prepared comments I think were open up for questions now.
George: Thank you and as a reminder, if you would like to ask a question. Please press star one on your telephone.
George: And wait for your name to be announced before you proceed with your question one moment, while we compile the Q&A roster.
George: The first question that we have for today is coming from Katherine Miller of.
George: <unk> Your line is open.
George: Thanks, Good morning.
Morning, Kathryn.
George: Start with the margin and as.
George: As you mentioned there was a little bit more compression this quarter than expected.
George: Honestly the cost of interest bearing deposits was it really.
George: That much higher than where you were thinking DDR remember I think Adam I know last quarter.
George: <unk> would be somewhere between <unk> 15, we came in at <unk> 18. So.
George: It's a little bit above that.
Adam Iknow: Was there anything else within kind of the maybe the balance sheet or the margin composition of your margin that really drove the.
Adam Iknow: Greater compression this quarter and then.
Adam Iknow: Curious how youre thinking about.
Adam Iknow: The margin is going to react over the course of the year. If we get rate cuts I think last quarter. You also had said.
Adam Iknow: Got the margin can get back to 360 by the end of the year.
Adam Iknow: A much bigger delta from where we are today. So just curious.
Adam Iknow: What do you think that potential upside could be as it works through the year. Thanks.
Adam Iknow: Yes.
Adam Iknow: Stuart I think we had kind of indicated.
Adam Iknow: That we could have the same amount of compression in the fourth quarter that we did in third quarter and I really think probably.
Adam Iknow: So a little higher than what it was was just more of the re pricing of our current book with that special.
Adam Iknow: Had a lot of you know.
Adam Iknow: The non new money that re price.
Adam Iknow: During the quarter really I think drive that more than we probably expected that would reprice.
Adam Iknow: On the.
On the on the margin compression.
Adam Iknow: On the comment for the margin for.
Adam Iknow:
Adam Iknow: I'm sorry, what was the second question.
Adam Iknow: Given the market backdrop.
Adam Iknow: Yes, yes, I'm sorry.
Adam Iknow: I'm sorry, what I had said last quarter, we had a long winded question for you David.
Adam Iknow: Al.
Adam Iknow: And over here right.
David: And I'm sorry anyways.
What we have said last quarter was our modeling Michelle Linn that for 'twenty four we could have an expansion of eight basis points or so.
David: And our current modeling in our IOM modeling that was prior to the bond restructuring that was prior to the bond restructuring, yes that was just what our current modeling with selling for 24, and we had kind of indicated that we felt like that would be in the latter part of the year with getting when we started it may be having some expansion.
David: Basic questions that would be later in the year, so hopefully thats kind of what we in that.
David: Okay.
David: With or without breakup.
David: That's without without rate cuts, that's just what we're modeling right now I believe our modeling has no change.
David: Built in right now.
David: Okay.
Still the eight that maybe.
David: Maybe we're coming from a lower base.
David: Yeah. Thank you.
David: And the bond, but then you add in the bond restructure so maybe your net.
David: The same right and so I did indicate I look back in our net interest margin at $3 52 last quarter is you are adding to that with 360, but are still looking at our modeling is showing about eight basis points.
David: Next year, how have December and yet, but they're in November it was still showing about eight so yes, obviously, it's off a lower base.
David: The 360 square that will be.
David: Got it okay.
Robert Smith: How do you think your balance sheet will react when we start to get rate cuts.
Well I think that we'll have more opportunity on the deposit share increase our rates then that hopefully on the loan side.
Robert Smith: Hopefully as pressure on the loan side without give our fixed rate fixed rate nature of our portfolio that we'll be able to reprice deposits quicker repricing loan rates down.
Robert Smith: Exactly.
Robert Smith: Bill.
Robert Smith: Sure.
Yes for sure.
Robert Smith: Ill enough momentum.
Robert Smith: Yes, it sounds if I kind of like it's been on the ESI we've been slower.
Robert Smith: As the rates went up to increase on the on the asset side, just because of the fixed nature of the portfolio. So I think that definitely slower and more opportunity on the deposit side.
Robert Smith: Okay great.
Robert Smith: Still enough momentum on the fixed rate side to offset it just kind of help the margin and when you open it up even with rate cuts.
Glenn: Thank you Glenn.
Glenn: So that one more time, so even with rate even with rate cuts. There is enough momentum in your back book to re price upwards, but still push the margin higher.
Glenn: Oh I think so yes, there will still be gaming those are coming out of yes for sure.
Glenn: Great Okay.
Glenn: And I think last quarter, you had said you had about $100 million of fixed rate loans repricing each quarter as that so where are you seeing for 'twenty four.
Glenn: We just we're looking at that sounds reasonable.
Glenn: We're pulling that right now for next week.
Glenn: Okay.
Adam Iknow: And about as we model that about where is your I mean, I know I can look at your entire loan book and if that around 6%, but.
Adam Iknow: Is there a way to think about where the current fixed rate loan book is and where that's repricing up too.
Adam Iknow: So we're actually.
George May: George and I were talking about that this morning, I can get you that data more specifically, but.
George May: What it has been in the last couple of quarters. The renewals are in the <unk>.
George May: Mid five range because these are typically five years back before the rate cuts. So typically in that five five and a half and then those are all really going into the eight plus range right now unless on an exception basis.
George May: 300 basis points.
George May: So two to 300, yes, I think thats reasonable $2 50, probably is a good good number.
George May: Okay great.
George May: But I think what Kevin was saying earlier.
George May: We are slower backed out as rates come down we're still going to pick up maybe two points. So we will have more.
Kevin Smith: Runway there yeah.
Kevin Smith: Got it okay.
Kevin Smith: I know, we've got a lot of analysts I'll step out and I'll put back into that any more questions. After everyone get them. Thank you. So much. Thanks, Scott Thanks Scott.
Thank you one moment for our next question.
Kevin Smith: And our next question will be coming from Matt lowly.
Kevin Smith: Stephen. Please go ahead your line is open.
Matt lowly: Hey, great. Thanks, Good morning, everybody good morning, Matt.
So going back on the margin discussion.
Matt lowly: <unk> data you mentioned that there'd be some pressure on that margin in the first quarter can you help us kind of ring fence, what that compression could look like in <unk> and I think in <unk>. It was.
Matt: Usually a handoff of funding as the borrowings come down from the fourth quarter and the public funds come come come in a little bit higher any more color on this handoff on what the <unk> could look like.
Matt: I think.
Matt: That handoff from the public funds and then and then and the debt versus that were probably they really won't have much impact on our first quarter that normally starts.
In March, but really getting some of the income the influx of that so I don't see it having a big impact on the first quarter, but.
Matt: Kind of looking at that I think.
Matt: But we're kind of looking at anticipating maybe.
Matt: Have much compression that we had this quarter might be a little less than that but I just think with what we're facing with the what we're seeing so far in January as a tail on what three pricing really in this and this.
Matt: Market competition and people still are trying to get in even though our specials ended we still got people pricing I mean, you know we have a five and a half.
Matt: We have a bank are from five and a half right now for I don't know.
I want to say they still got some five 540 range. So I mean, we're still having some.
Robert Smith: That's a market competition so.
Robert Smith: I just don't see it I think Max.
Robert Smith: What we had this time, but hoping for a little less.
Robert Smith: Compression on the part of inflows from the public.
Robert Smith: Public money really take effect at the end of the first quarter.
Robert Smith: Yes.
Robert Smith: Okay, Alright, that's helpful and I guess I would've thought that restructure that you did and a few weeks ago that you announce I would've thought that that would have further support. The margin. Then you are saying, but I guess it goes back to the deposit competition is kind of just more than offset.
And that is that is that right well that we didn't sell we did that last week of the year. So we sold that asset.
Robert Smith: Charity by December 27, 28, and then reinvested that in January So I mean, we really just got all that done.
Robert Smith: The 10th or so of January on the on the.
Robert Smith: Great purchase side, so it really didn't have any impact this quarter.
Robert Smith: This month this fourth quarter, yes.
Robert Smith: And just to clarify that restructure that will see more impact in the first quarter.
Robert Smith: That is embedded in that margin commentary you. Just you just provided I assume for <unk> is that right, yeah, because thats really too.
Kevin Smith: Two basis points, a quarter anticipated from that eight for the year. So that's really that's like two basis points.
Kevin Smith: Okay understood and then as far as that deposit special that you mentioned I think you said you ended that I think that was at the ended the year. So no real impact in January is that is that right.
Robert Smith: That's right.
Robert Smith: And what was it still has some people are trying to come in and get it obviously with the competition I mentioned so.
Robert Smith: Some of that will start coming out.
Robert Smith: That will they be.
Robert Smith: During March area.
And so hopefully we'll get some.
Robert Smith: Some reduction.
Robert Smith: Sure.
Robert Smith: Okay.
Robert Smith: Okay. Thanks, guys I'll hop back in the queue. Thanks, Matt.
Thank you one moment for the next question.
Robert Smith: If you would like to ask a question. Please press star one on your telephone.
Robert Smith: The next question that we have is coming from Christopher.
Robert Smith: Meronek.
Christopher William Marinac: Of Janney Montgomery Scott Your line is open.
Hey, Thanks, Good morning, Happy I'm sure. This has not been your first deposits special over your career, so I'm kind of curious what.
Market Intel it kind of gives you and what you may be able to do with that as the rest of the year goes on either on the deposit side or even <unk>.
Christopher William Marinac: Earning assets too.
Christopher William Marinac: No it's not.
Christopher William Marinac: So we were to stop the deposit outflow in effect that deposit base.
The ability to get pricing.
Christopher William Marinac: Alright, the down and dirty for margins.
Christopher William Marinac: So the margin.
Christopher William Marinac: The one rig program.
Christopher William Marinac: Understood.
Christopher William Marinac: So we've got a full quarter of your outlook here.
Christopher William Marinac: But.
Christopher William Marinac: And be able to reprice that down as those mature.
Christopher William Marinac: Got you thanks for that and then on the new hires you mentioned in the Atlanta and Tampa are these replacing anybody or is this kind of net new additions just to enhance your growth profile.
Christopher William Marinac: So in Tampa that was replacing.
George May: Former market exact who came over with beach, but then left after the first year of integration.
George May: Most of the others are well, it's a mixture we've got some.
George May: So overall, we still got personnel.
George May: So we need to fill but.
George May: Do you want to look at it from a budget standpoint, they are probably replacements, but.
We are strategically hired in markets, where we see the need of our talents.
George May: Presenting itself from fallout from other banks.
George May: And I guess Atlanta, specifically, you had always wanted to push what you inherited with heritage southeast.
George May: Central and northern parts of the city, so it's probably got.
George May: That long term.
George May: Yes, most of the lenders have stayed I think we've talked about last quarter. We were at 90% no. One left in the fourth quarter and our retention rates are up and everybody's intact. This was really we had one or two spots, but a great opportunity.
Robert Smith: <unk> hired this gentlemen, with a construction background, which as you may know is a lot of our.
Robert Smith: Look up there in the south Atlanta market. So.
Robert Smith: Yes, we're always looking also in the Atlanta market I will say.
Robert Smith: We're trying to acquire a recruit private banker for that market, because we really don't have a specialty private bank.
They're in Atlanta, which is which is something we need.
Kevin Smith: Got it and then last question just more kind of big picture on credit as you look across your footprint, particularly in the Gulf coast areas or any kind of areas.
Kevin Smith: Softer than there would have been six nine months ago, just kind of curious on how the temperatures are.
Kevin Smith: Across the footprint.
I don't know that we would single out or pointed out any particular area.
Kevin Smith: Sure.
Kevin Smith: Across the firm.
Kevin Smith: The coastal markets.
Kevin Smith: Obviously.
Kevin Smith: Residential rents might have seen a little bit of a slowdown.
Kevin Smith: And the one to four family category, particularly in some of our tourism related markets.
Kevin Smith: So a little bit there.
Kevin Smith: But generally.
Kevin Smith: We've seen.
Speaker Change: As JJ can speak to.
Speaker Change: Pipe pipeline contribution from.
Speaker Change: Every area of the body.
Speaker Change: Across our footprint.
Speaker Change: Great. Thank you for taking my questions today.
Speaker Change: Okay.
Speaker Change: Thank you one moment.
Speaker Change: And we do have a follow up question.
Speaker Change: From Matt Olney of Stephens. Your line is open.
Matt Olney: Hey, guys. This is Matt can you hear me.
Matt Olney: Yes.
Matt Olney: Okay. Thanks for taking the follow up.
Matt Olney: Just wanted to revisit just on the deposit pricing competition.
Matt Olney: I guess, we're just hearing hearing mixed things from from the banks this quarter as far as competition easing in submarkets, but remaining pretty intense in other markets.
Matt Olney: Anything for us to appreciate from our side as far as.
Matt Olney: When you look at your various states and markets.
Matt Olney: Where there is more intense competition in all of these coming from the multistate regional banks or are these from the smaller private community banks.
Adam Iknow: I'll, let some others answer as well, but I know a couple here at local and has far we're dealing with a couple of days, but they are smaller private banks are.
Adam Iknow: <unk>.
Adam Iknow: Not really trading.
Adam Iknow: So.
Adam Iknow: We're facing some of that and then.
Adam Iknow: But I think across the footprint.
Adam Iknow: Competition early in Peanuts, I mean, it's a mix.
Matt Olney: Matt it's both the local smaller banks, but then also some of the larger.
Matt Olney: So the larger regional banks so.
Matt Olney: Just seems to be real competitive in most really most all of our markets out there.
And you're obviously in some rural markets, but also some more metro markets from that perspective, how would you characterize the <unk>.
Matt Olney: Competition relative to where it was maybe a few months ago.
George May: I'll tell you that the rural markets have probably picked up where it was a few months ago I think when it started out very lagged a bit but now they are kind of catching up to the metro markets.
George May: It's kind of a format.
George May: Sure understood.
George May: Okay, and then on the expense side.
George May: Operating expenses I think data you mentioned they were a little heavier this quarter than you expected.
George May: I think you mentioned it but I just didn't write it down and what was the color of the heavier expense this quarter and then the outlook for 'twenty for any change from what you said last quarter I think it was $170 million to $171 million for 24.
George May: So the.
George May: The real difference was about $1 8 million quarter over quarter on the expenses a million of that was related to salaries and benefits of about 500000 was related to.
George May: Solid vacation.
George May: Folks don't use it they can sell it back and then about 500000 was just year end accrual on our Nonexempt staff.
George May: For the last five days of the.
George May: So a year.
George May: Those few things were $1 million and then our.
George May: Professional services.
George May: It was also up as well.
And that was really driven by some of our 10 day expenses.
George May: And we had mentioned before about in the middle of that doing our GAAP analysis and so.
George May: Some of that in the fourth quarter as well those are the two main on two main things.
George May: I think on for 24, I'm still working through all of that in China, China exactly for 'twenty four but.
George May: I think it's probably going to be kind of looking at where we've been the last two quarters and that run rate probably more closer to the $44 million a quarter.
George May: You know when you look at where we were this quarter or the $44 four and back out the acquisition charges.
George May: I think.
George May: Even though we had that extra million there I think just $44 million a quarter is probably.
George May: It will be next year.
George May: Okay, and I assume that the quarterly average comment or is that more just yeah. Okay. Yeah.
George May: Okay. That's helpful and then on the fee side fees looked a little bit light sequentially.
George May: In the fourth quarter anything you see in there that was unusual and just any thoughts on kind of where that we should start off the year on 2024.
Matt Olney: Well it was it was like down compared to last quarter, I think about $1 million, but.
George May: That was on the interchange fee income, but if you look at last quarter that was elevated and so when you. When you look at fourth quarter noninterest income and compare it to first and second it's all really is in line. So we really had kind of been right around that $12 million a quarter.
George May: And then on the noninterest income section.
George May: Got it okay.
George May: Alright, that's all from me thanks, guys.
Matt Olney: Thanks, Matt.
Matt Olney: Okay.
Matt Olney: Thank you one moment please.
Matt Olney: And we have another follow up question coming from Katherine Miller of K B W. Your line is open.
Matt Olney: Matt hit Miami Ben's question.
Katherine Miller: It's been asked but one other one.
Katherine Miller: Just on just your M&A outlook.
Katherine Miller: I feel like it's been really slow.
Katherine Miller: The industry.
Katherine Miller: We typically are in active acquirers, such as what are your thoughts on potential deals over the next year or so.
Katherine Miller: I think things were kind of a focus internally in the first half of the year in the back half of your.
I think we would be more open to thinking about potential things for next year or so.
Katherine Miller: I think things are still slow or not a lot of conversations going on out there.
Katherine Miller: Great. Thanks for the update appreciate it.
Katherine Miller: Thank you that concludes our Q&A session I would like to go ahead and turn the call back over to hobby.
hobby: <unk> CEO for closing remarks. Please go ahead. Thanks.
hobby: Thanks, everyone. We appreciate your participation. This morning, and that's all we have for this quarter and we look forward again to two.
hobby: Talk to you all next quarter.
hobby: Yes.
hobby: Thank you for participating in today's conference call you may all disconnect.
hobby: Okay.
hobby: [music].
hobby: Okay.