Q1 2024 Cadence Bank Earnings Call
Unknown Executive: If you recall, we completed some strategic initiatives in 2023, including the sale of our insurance agency, the restructuring of our securities portfolio, the streamlining of our branch network, as well as other opportunities to improve our operating efficiency. These efforts, along with a continued focus on business development, can be seen throughout the results that we will be discussing this morning.
Teammates across our company bear fruit in the financial results. We reported this quarter. If you recall, we completed some strategic initiatives in 2023, including the sale of our insurance agency the restructuring of our securities portfolio. The streamlining of our branch network as well as other opportunities to improve our operating efficiency.
These efforts along with a continued focus on business development can be seen throughout the results that we will be discussing this morning.
Unknown Executive: We reported GAAP net income for the first quarter of $114.6 million, or $0.62 per common share, with adjusted net income from continuing operations for the first quarter of $114.4 million, also $0.62 per common share, representing considerable improvement over each of the last several quarters. From a balance sheet perspective, our active pipelines resulted in loan balances growing just over $385 million, or 4.8% annualized. We saw good growth in our non-real estate and owner-occupied C&I portfolios, as well as a nice pickup in residential mortgages.
We reported GAAP net income for the first quarter of $114 6 million or <unk> 62 per common share with adjusted net income from continuing operations for the first quarter of $114 4 million also 62 per common share representing considerable improvement over each of the last several quarters.
From a balance sheet perspective, our active pipelines resulted in loan balances growing just over $385 million or four 8% annualized we saw good growth in our non real estate and owner occupied C&I portfolios as well as a nice pickup in residential mortgages from a deposit perspective.
Unknown Executive: From a deposit perspective, we continue to strategically reduce both the brokered and certain thinly priced public fund balances, which collectively declined just over $1 billion in the linked quarter. Importantly, we were able to organically grow core customer deposits by approximately $400 million in the quarter, which offset much of this decline. Our community bank continues to perform very well in the face of continued strong competition for deposits, driving the majority of core deposit growth in the quarter.
We continued to strategically reduce both brokered and certain thinly priced public fund balances, which collectively declined just over $1 billion linked quarter. Importantly, we were able to organically grow core customer deposits by approximately $400 million in the quarter, which offset much of this decline our community bank.
Continues to perform very well in the face of continued strong competition for deposits driving the majority of the core deposit growth in the quarter.
Unknown Executive: As expected, we saw a significant improvement in our net interest margin, which was up 18 basis points compared to the fourth quarter, to 3.22%. The balance sheet dynamics that I mentioned and our fourth quarter securities portfolio restructuring contributed to this improvement. Valerie will discuss the moving parts more in just a moment. Our results for the quarter also reflected a considerable improvement in operating efficiency. Our adjusted expenses declined by over $6 million compared with the fourth quarter of 2023, which, along with our revenue growth, drove close to a 600 basis point reduction in our adjusted quarterly efficiency ratio to 60.1%.
As expected we saw a significant improvement in our net interest margin, which was up 18 basis points compared to the fourth quarter to three 2% the balance sheet dynamics that I mentioned and our fourth quarter securities portfolio restructuring contributed to this improvement.
Valerie we will discuss the moving parts more in just a moment.
Valerie: Our results for the quarter also reflected considerable improvement in operating efficiency, our adjusted expenses declined by over $6 million compared with the fourth quarter of 2023, which along with our revenue growth drove close to a 600 basis point reduction in our adjusted quarterly efficiency ratio to 61%.
Unknown Executive: We anticipate additional improvement as we move throughout the remainder of 2024. From a credit quality perspective, we recorded a provision for credit losses of $22 million, while net charge-offs totaled $19.5 million, or 24 basis points of average loans on an annualized basis, both of which were in line with our expectations and improved over our fourth quarter 2023 results. Finally, we repurchased just over 650,000 shares during the quarter at a weighted average price of $25.65. We were able to do that while continuing to grow our capital metrics, which is reflected in CET1 of 11.7% and total capital of 14.5% at March 31, 2024.
Valerie: Anticipate additional improvement as we move throughout the remainder of 2024.
Valerie: From a credit quality perspective, we recorded a provision for credit losses of $22 million, while net charge offs totaled $19 5 million or 24 basis points of average loans on an annualized basis, both of which were in line with our expectations and improved over our fourth quarter 2023 results.
Valerie: Finally, we repurchased just over 650000 shares during the quarter at a weighted average price of $25 65.
Valerie: We were able to do that while continuing to grow our capital metrics, which is reflected in CET. One of 11, 7% and total capital of 14, 5% at March 31, 2024, I'll now turn the call over to Valerie for her comments Valerie.
Valerie C. Toalson: I'll now turn the call over to Valerie for her comments. Valerie?
Thank you Dan.
Valerie C. Toalson: After a noisy year last year, both for the industry as well as our results, it is really nice to have a good, clean quarter to discuss this morning. When looking at our first quarter 2024 performance, the results of our focus on delivering improved operating performance are clear. We showed improvement in virtually all of our financial results and operating metrics, including a 55% improvement in our adjusted EPS from continuing operations, a 26% improvement in our adjusted pre-tax, pre-provision net revenue, and the nearly 600 basis point improvement in our efficiency ratio that Dan mentioned. There were no significant non-routine items in our results for the first quarter, so GAAP and adjusted net income available to common shareholders were just over $114 million, or $0.62 per diluted share.
Valerie: After a noisy year last year for the <unk>.
Valerie: <unk> as well as our results. It is really nice to have a clean quarter to discuss this morning.
Valerie: When you're looking at our first quarter 2020 for performance the results of our focus to deliver improved operating performance are clear.
We showed improvement in virtually all of our financial results and operating metrics, including a 55% improvement in our adjusted EPS from continuing operations of 26% improvement in our adjusted pretax pre provision net revenue and the nearly 600 basis point improvement in our efficiency ratio.
Valerie: But Dan mentioned.
Valerie: There were no significant non routine items in our results for the first quarter. So GAAP and adjusted net income available to common shareholders were just over $114 million or 62 cents per diluted share.
Valerie: Turning first to margin and net interest revenue beginning on slide 10, we reported net interest income of 354 million for the first quarter, an increase of 19 million or five 8% compared to the fourth quarter of 'twenty three.
Valerie C. Toalson: Turning first to margin and net interest revenue, beginning on slide 10, we reported net interest income of $354 million for the first quarter, an increase of $19 million or 5.8% compared to the fourth quarter of 2023. Our net interest margin was 3.22% for the first quarter, 18 basis points. The driving factor behind the net interest margin increase was the fourth quarter of 2023 securities portfolio restructuring, which resulted in a quarterly increase of 65 basis points, an improvement in our first quarter security portfolio yield to 3.13%.
Valerie: Our net interest margin was 322% for the first quarter up 18 basis points.
Valerie: The driving factor behind the net interest margin increase was the fourth quarter of 2023 securities portfolio restructuring, which resulted in a quarterly increase of 65 basis points.
Valerie: Improvement in our first quarter security portfolio yield to 313%.
Valerie C. Toalson: Our net interest margin also benefited from a continued slowing in the pace of deposit cost increases and deposit makeshift, and improvement in our earning assets. The total cost of deposits increased 13 basis points to 2.45% for the quarter, representing the slowest pace of deposit cost increases since the onset of this rate cycle. Non-interest-bearing deposit balances ended the quarter at 23.1% of total deposits, down just slightly from 24% at the end of the fourth quarter.
Valerie: Our net interest margin also benefited from a continued slowing in the pace of deposit cost increases in deposit mix shift and improvement in our earning asset mix at.
Valerie: The total cost of deposits increased 13 basis points to 245% for the quarter.
Valerie: Representing the slowest pace in deposit cost increases since the onset of this rate cycle non.
Valerie: Noninterest bearing deposit balances ended the quarter at 23, 1% of total deposits down just slightly from 24% at the end of the fourth quarter.
Valerie C. Toalson: Our yield on net loans excluding accretion was 6.46% for the first quarter, up three basis points from the prior quarter's yield. Non-interest revenue, highlighted on slide 13, was $83.8 million on an adjusted basis, an increase of $10.7 million or 14.6% compared to the fourth quarter of 2023. This increase was driven primarily by two areas, service charge revenue and mortgage banking. Service charge revenue increased $7.2 million, primarily due to the fourth quarter rule to account for deposit service charge fee changes. Mortgage banking revenue also increased notably, both production and servicing revenue, as well as the MSR asset valuation.
Our yield on net loans, excluding accretion was 646% for the first quarter up three basis points from the prior quarter shield.
Valerie: Noninterest revenue highlighted on slide 13 was $83 8 million on an adjusted basis, an increase of $10 7 million or 14, 6% compared to the fourth quarter of 2023.
Valerie: This increase was driven primarily by two areas service charge revenue and mortgage banking service.
Valerie: Service charge revenue increased $7 2 million, primarily due to the fourth quarter accrual to account for deposit service charge fee changes.
Valerie: Mortgage banking revenue also increased notably both production and servicing revenue as well as the MSR asset valuation.
Valerie C. Toalson: Production and servicing revenue increased $2.5 million as we entered the spring selling season, and the MSR asset valuation was essentially flat for the quarter compared with a negative adjustment of $5.1 million for the fourth quarter of 2023. Our fee businesses continued to perform well in the first quarter, representing 19.1% of total revenue, and assets under management increased 8.5% to $23 billion. Turning to slides 14 and 15, total adjusted non-interest expense was $263.5 million for the quarter, reflecting a late-quarter decline of $6.3 million.
Valerie: Production and servicing revenue increased to $5 million of these as we entered into the spring selling season, and the MSR asset valuation was essentially flat for the quarter compared with a negative adjustment of $5 1 million for the fourth quarter of 'twenty three.
Valerie: Our fee businesses continued to perform well in the first quarter, representing 19, 1% of total revenue and assets under management increased eight 5% to $23 billion.
Valerie: Turning to slides 14, and 15 total adjusted noninterest expense was $263 5 million for the quarter, reflecting a linked quarter decline of $6 3 million.
Valerie C. Toalson: This decline, along with the quarter's revenue growth, contributed to a material improvement in our adjusted efficiency ratio to 60.1% for the first quarter, compared to 66% for the fourth quarter of 2023. As expected, salaries and employee benefits increased $8.6 million compared to the fourth quarter, with over half of the increase as a result of first quarter resets of FICA and 401k plan expenses. In addition, certain of our incentive compensation accruals were higher in the first quarter as a result of strong operating performance.
Valerie: This decline along with the quarter's revenue growth contributed to material improvement in our adjusted efficiency ratio to 61% for the first quarter compared to 66% for the fourth quarter of 'twenty three.
Valerie: As expected salaries and employee benefits increased $8 6 million compared to the fourth quarter with over half of the increase as a result of first quarter resets of FICA and 401K plan expenses.
Valerie: In addition, certain of our incentive compensation accruals were higher in the first quarter as a result of strong operating performance.
Valerie C. Toalson: Data processing expense declined $2.8 million late quarter, impacted by seasonality and card volumes, as well as other vendor expense and project time. Advertising and public relations expense declined $3.4 million from seasonally high fourth quarter costs, and legal expense also declined $2.5 million as the fourth quarter included some non-recurring accruals. Finally, other miscellaneous expense declined $4.2 million late quarter as a compilation of a number of factors, including a reduction in operational loss.
Valerie: Data processing expense declined $2 8 million linked quarter impacted by seasonality in card volumes as well as other vendor expense and project timing.
Valerie: Advertising and public relations expense declined $3 4 million from seasonally high fourth quarter costs and legal expense also declined $2 5 million as the fourth quarter included some nonrecurring accruals.
Finally, other miscellaneous expense declined $4 2 million linked quarter as a compilation of a number of factors, including a reduction in operational losses.
Valerie C. Toalson: This first quarter improvement in non-interest expenses, combined with revenue growth, resulted in pre-tax pre-provision net revenue of $174.2 million, a meaningful increase over the $137.9 million reported in the fourth quarter of 2023. Moving on to credit quality, on slides 8 and 9, we recorded a provision for the quarter of $22 million and net charge-offs of $19.5 million, or 24 basis points of loans and leases annualized, both of which represent improvement compared to our fourth quarter 23 results. However, the allowance for credit loss coverage remains flat at 1.44%.
Valerie: This first quarter first quarter improvement in noninterest expenses combined with the revenue growth resulted in pre tax pre provision net revenue of $174 2 million a meaningful increase over 100, the $137 9 million reported in the fourth quarter of 2023.
Valerie: Moving on to credit quality on slides eight and nine we recorded a provision for the quarter at $22 million and net charge offs of $19 5 million or 24 basis points of loans and leases annualize both of which represent improvement compared to our fourth quarter 'twenty three results.
Valerie: Our allowance for credit loss coverage remained flat at 144%.
Valerie C. Toalson: While our criticized and classified loan totals as a percent of total loans increased slightly compared to the fourth quarter of 2023, both have improved compared to the first quarter of 2023. Our non-performing loans and non-performing asset totals increased in line order to 73 basis points of loans and 51 basis points of assets, respectively. About 25% of our non-performing loans have government guarantees behind them. Factoring these out, the linked quarter increase in non-performing loans was only $14.5 million.
Valerie: While our criticized and classified loan totals as a percent of total loans increased slightly compared to the fourth quarter of 2023, both have improved compared to the first quarter of 2023.
Valerie: Our nonperforming loans and nonperforming asset totals increased linked quarter to 73 basis points of loans and 51 basis points of assets respectively.
Valerie: About 25% of our nonperforming loans have government guarantees behind them.
During these out the linked quarter increase in non performing loans was only $14 5 million.
Valerie C. Toalson: Overall, credit remains well-managed and in line with the guidance that we provided in our year-end earnings call. Our capital is shown on slide 16. As Dan mentioned, we opportunistically repurchased just over 650,000 shares during the first quarter under our share repurchase program. We were able to take advantage of a temporary market decline and repurchase these shares at a weighted average price of $25.65.
Valerie: Overall credit remains well managed and in line with the guidance that we provided in our year end earnings call.
Valerie: Our capital as shown on slide 16, as Dan mentioned, we Opportunistically repurchased just over 650000 shares during the first quarter under our share repurchase program, we were able to take advantage of a temporary market decline and repurchased these shares at a weighted average price of $25 65.
Operator: Importantly, our strong earnings drove further improvement in our regulatory capital metrics, even with our share repurchase activity, January's dividend increase, and first quarter's loan growth. Additionally, total shareholders' equity of $5.2 billion at the end of March is up $700 million, or 16%, compared to this time last year, once again indicative of our capital accretive efforts over the past year. Looking forward, we continue to be comfortable with the 2024 guidance ranges that we showed last quarter in all categories, although it does appear that net interest income will be impacted slightly more positively than anticipated, given what appears to be a higher-for-longer rate environment.
Valerie: Importantly, our strong earnings drove further improvement in our regulatory capital metrics, even with our share repurchase activity January dividend increase and first quarter's loan growth.
Valerie: Additionally, total shareholders' equity of $5 2 billion at the end of March is up $700 million or 16% compared to this time last year once again indicative of our capital accretive efforts over the past year.
Valerie: Looking forward, we continue to be comfortable with the 2024 guidance ranges that we shared last quarter in all categories. Although it does appear that net interest income will be impacted slightly more positively than anticipated given what appears to be a higher for longer rate environment.
Operator: In closing, as Dan mentioned, our teammates have worked relentlessly on the planning and execution of the strategic efforts that have driven the improved results we've reported this quarter. It truly is exciting and rewarding to see these efforts pay dividends for our company and our shareholders. But of course, we are not stopping here, and we continue to work toward driving further improvement over the remainder of 2024 and beyond. Operator, we would like to open the call to questions, please. We will now begin the question.
Valerie: In closing as Dan mentioned, our teammates have worked relentlessly on the planning and the execution of the strategic efforts that have driven the improved results we reported this quarter.
Valerie: It truly is exciting and rewarding to see these efforts pay dividends for our company and our shareholders but of course, we are not stopping here and we continue to work towards driving further improvement over the remainder of 2024 and beyond.
Speaker Change: Operator, we would like to open the call to questions. Please.
We will now begin the question and answer session.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. If you have additional questions, you may rejoin the queue. At this time, we will pause momentarily to assemble our roster. Our first question today is from Jon Arfstrom with RBC Capital Markets. Please go ahead.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two please.
Speaker Change: Please limit yourself to one question and one follow up if you have additional questions you may rejoin the queue. At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question today is from John <unk> with RBC capital markets. Please go ahead.
Jon Glenn Arfstrom: Hey, thanks. Good morning. Morning, Jon. Hey, Valerie, question for you. Can you talk a little bit about the asset repricing and what kind of a lift you're expecting in Inasset yields in the next quarter or two?
John: Thanks, Good morning.
John: Hey, John.
John: The other question for you can you talk a little bit about.
John: B asset repricing, and what kind of lift you're expecting.
John: Can I ask with yields in the next quarter or two.
Valerie C. Toalson: Yeah, thanks, Jon. Yeah, we saw the biggest part of the lift obviously from the fourth quarter to the first quarter with the securities repositioning. That really is in place, and so what we're looking at going forward is simply the more natural price lift that is inherent within our balance sheet repricing. We've got that slide in our deck on page 12 that shows the repricing, and given just the loan repricings that we've got coming up, as well as some of the cash flow coming off the securities book and reinvesting that, we are expecting it to improve to the extent that it'll keep our margin fairly stable to, potentially, even increasing a little bit over the year.
John: Yes, Thanks, John Yes, we saw the biggest part of the lift is obviously in the fourth quarter to the first quarter with the securities repositioning that really is in place and so what we're looking at going forward is simply the more natural.
John: Price lift that is inherent within our balance sheet repricing, we've got that slide in our deck on page 12 that shows that repricing and given just the loan re pricings that we've got coming up.
John: As well as then some of the cash flow coming off the securities second reinvesting that.
John: We are expecting it to improve to the extent that it'll keep.
Keep our margin fairly stable to potentially even increasing a little bit over the year.
Jon Glenn Arfstrom: Okay, okay. Yeah, I was looking at that 833 weight at an average rate, and it doesn't seem like you'd get a lot of lift in the near term. Is that fair?
Speaker Change: Okay. Okay, Yeah, I was looking at that 833 weighted.
Speaker Change: The weighted average rate and it doesn't seem like you would get a lot of lift.
Speaker Change: The near term is that fair.
Valerie C. Toalson: Well, there is that, but then there is the portion that is amortizing. What that chart does not include is the amortizing portion of the portfolio and, of course, the unanticipated payoff. And so as we're able to reinvest those dollars, it does have a little bit more lift than what it would appear on the surface.
Speaker Change: Well there is that but then there is the portion.
Speaker Change: That is amortizing what that chart does not include it.
Speaker Change: Is the amortizing portion of the portfolio and so and of course unanticipated pay offs and so as we're able to reinvest those dollars. It does have a little bit more left and what that would appear on the surface.
Jon Glenn Arfstrom: Okay. Okay.
Speaker Change: Okay, Okay, and just one on the other side of the balance sheet.
Unknown Executive: And just one on the other side of the balance sheet. On slide four, you guys call out some of the core deposit growth of $400 million. You talk a little bit about the drivers there, and is that repeatable going forward? Thanks. Yeah, this is the fourth quarter, third quarter, or fourth quarter where we've had really good core customer growth in the community bank. We continue to see lots of competition out there in the world, as you know, but I'm really proud of our team. Chris, do you want to add on to that?
Speaker Change: Slide four you guys call out some of the core deposit growth of $400 million you talk a little bit about the drivers there and is that is that repeatable going forward. Thanks.
This is the fourth quarter third quarter or fourth quarter, where we've had really good core customer growth in the community Bank. We continue to see lots of competition out there in the world as you know, but I'm really proud of our team Chris you want to add on that.
Chris: There is a lot of competition out there, but we've got great bankers across a great footprint, active and vital markets. And so I think the opportunity to continue to grow there is real. Yeah, we're excited.
There is a lot of competition out there, but we've got great bankers across a great footprint with.
Speaker Change: Okay.
Chris: Active and vital markets and so I think the opportunity to continue to grow there is real for us.
Unknown Executive: Yeah, we're excited about what the team's doing every day. Yeah, the numbers have been good.
Chris: We're excited about what the team is doing every day.
Speaker Change: Yes numbers have been good okay. Thank you I appreciate it.
Jon Glenn Arfstrom: Okay. Thank you. I appreciate it.
Speaker Change: Thanks Chuck.
Manan Gosalia: The next question is from Manan Gosalia with Morgan Stanley. Please go ahead.
Speaker Change: The next question is from Manan <unk> with Morgan Stanley. Please go ahead.
Manan Gosalia: Hey, good morning, all. I wanted to touch on the NII, well, the revenue guide really, but the NII component of that guide, how should we think about that in an environment where we get no rate cuts this year? Is that a bigger benefit, or are you relatively neutral at this point to higher rates?
Manan: Hey, good morning, all.
Manan: I wanted to touch on the NII, while the revenue guide really but the NII component of that guide.
Manan: How should we think about that.
An environment, where we get no rate cuts this year.
Manan: Is that a bigger benefit or are you relatively neutral at this point too.
Speaker Change: Hi, rich.
Unknown Executive: Good to hear from you this morning. Great question. The guidance is using the forward curve. Right. And so when you look forward, if the forward curve is wrong, there's probably benefit. Valerie's got numbers. Yeah. Yeah.
Rich: Good to hear from you this morning.
Speaker Change: Great question the guidance is using the forward curve right and so when you look forward. If the forward curve is wrong Theres, probably benefit Valerie has got numbers, yes, yes, we use the forward curve as of March 30, <unk> and so that includes a couple of rate cuts. This year went early next year.
Valerie C. Toalson: Yeah, yeah, we're using the forward curve as of March 31st, and so that includes a couple rate cuts this year and early next year. If that ends up being flat and having no cuts this year, it's incrementally positive to our NII, just under 1%. So not hugely incremental, but definitely a positive slant.
Speaker Change: If that ends up being flat and having no cats. This year, it's incrementally positive to our NII.
Speaker Change: Just under 1%, so not not hugely incremental but definitely a positive slant to it.
Manan Gosalia: That's helpful. And then, do you have a jumping off point for NIM at the end of the quarter? You know, I would assume that it's higher than the average NIM for the quarter, given the repositioning and the redeployment of cash.
Speaker Change: That's helpful.
Speaker Change: Do you have the jumping off point for them at the end of the quarter I would assume that its higher than the average NIM for the quarter, given the repositioning and the redeployment of cash.
Valerie C. Toalson: I don't have that. We have just our, you know, NIM for the full quarter. I will say if you, you know, some of the average loans, actually, the loan balances came on a little bit more weighted toward the end of the quarter. And so some of the impact of the new loans and the higher yields that those are bringing was a little bit delayed. But overall, it was fairly balanced. The securities purchases that we had in the quarter were very early on, so we really pretty much got the whole impact of that securities yield in the first quarter. So maybe just,
Speaker Change: And I don't have that we have just R. R.
Speaker Change: Our NIM for the full quarter I will say if you.
Speaker Change: With some of the average loans actually the loan balances came on a little bit more weighted towards the end of the quarter and so some of the impact.
Speaker Change: The new loans and the higher yields that those are bringing was a little bit delayed but overall it was fairly balanced.
The securities purchases that we had in the quarter were very early on so we really pretty much got the whole impact of that securities yield in the first quarter.
Manan Gosalia: So maybe just slightly higher than the average is what you're saying?
Yes, so maybe just slightly higher than the average is what youre, saying I think that's fair Yep alright. Thank you.
Casey Haire: The next question is from Casey Haire with Jefferies. Please go ahead. Casey, good morning.
Speaker Change: The next question is from Casey Haire with Jefferies. Please go ahead.
Casey Haire: Yeah, thanks. Good morning, everyone.
Casey Haire: Good morning.
Casey Haire: Yes, thanks, and good morning, everyone.
Unknown Executive: I want to touch on the loan growth outlook. You know, a very, very nice result given what's going on in the industry. Just wondering how pipelines are shaping up after a decent quarter? And the line utilization, C&I line utilization, was up. Just wondering if that's sustainable or we should expect a reversal. Thanks.
Casey Haire: Wanted to touch on.
Casey Haire: The loan growth outlook.
Casey Haire: Very very nice result, given what's going on in the industry.
Casey Haire: Just wondering how are pipelines.
Casey Haire: Shaping up for a decent quarter and.
Casey Haire: The line utilization C&I line utilization was up just wondering if that's sustainable or we should expect a reversal.
Unknown Executive: Yeah, I think line utilization is just normal business moving around. You know, I'm really proud of what the team's doing out there. When we look at what's happening in the company, you know, we saw a pipeline that was filling and... February-March started the year lower and was getting bigger throughout the quarter. So we're excited about what the pipeline is showing.
Speaker Change: Yes, I think line utilization is just normal business moving around and I'm really proud of what the team is doing out there when we look at what's happening in the company.
Speaker Change: A pipeline that was filling.
February March started the year lower than was getting bigger.
Speaker Change: Throughout the quarter. So we're excited about what the pipeline showing really.
Unknown Executive: Yeah, sure. So that's true. And it's across Most segments, with the exception of SBA, that one's flat-ish. All of our general corporate segments, specifically, which is what I'll talk about, have really picked up in the last, you know, five months, call it that. We saw some of the pull-through occur, like Valerie said, at the end of the last quarter, and our pipelines are solid across various segments. A basic comparison is... Yeah, our volumes peaked, you know, probably back in mid-22, from an approval standpoint.
Speaker Change: Yes sure so.
Speaker Change: That's true and it's across.
Speaker Change: Most segments with the exception of SBA that one flat ish all of our general corporate segment, specifically, what I'll talk to.
Speaker Change: Have really picked up in the last.
Speaker Change: Five months call. It we saw some of the pull through occur like Valor is set at the end of the last quarter and our pipelines are solid across various segments on a basis of comparison is.
Speaker Change: Our volumes peaked.
Speaker Change: Back in mid 'twenty, two from an approval standpoint.
Unknown Executive: And then they troughed later last year, and we're 25% off of our trough and our approval volumes. So we're on a good upward trend there, and we're seeing pipelines fill from there. So, Casey, the growth is coming in the higher growth markets. Now we're seeing lots of activity in Texas, Florida, Georgia, as you would expect. Valerie, did you want to add anything?
Speaker Change: And then they trough later last year, we're 25% off of our trough and our approval volumes. So we're at a good upward trend there and we're seeing pipeline fill from there so.
Speaker Change: Good trajectory and as you would suspect Casey.
Speaker Change: <unk> is coming in higher growth markets, we're seeing lots of activity.
Speaker Change: Texas, Florida, Georgia.
Speaker Change: What you would expect or did you want to add I was just going to share that.
Valerie C. Toalson: Yeah, I was just going to share that line utilization picked up a little bit this quarter, but if you drill down to the detail, it's really all coming from our construction portfolio, which is typical for that. You know, that's the nature of that, it will fund up. So that's really what's driving that. The rest of the portfolio is fairly stable.
Speaker Change: That line utilization it didn't pick up a little bit this quarter, but if you drill it down to the detail. It's it's really all coming from our construction portfolio, which is typical for that that's the nature of that is it will fund up so thats really whats driving that the rest of the portfolio is fairly stable.
Casey Haire: Got it. Thanks for the color.
Speaker Change: Got it thanks for the color and then just lastly, switching to the capital.
Casey Haire: And then just lastly, switching to capital. You know, the buyback, you guys, you guys bottomed it, which is the good news. But you know, you didn't use a ton of the authorization, I guess. My takeaway, it feels like the share buyback is going to be pretty price sensitive and not necessarily going to utilize the authorization despite a very strong CT1 ratio. Is that fair? I think that's fair. I think you know we want to be price sensitive.
Speaker Change: The buyback.
Speaker Change: You guys you guys bottom ticked it which is the good news.
Speaker Change: But.
Speaker Change: Yeah.
Speaker Change: You didn't use a ton of the authorization I guess.
Speaker Change: It feels like the share buyback is going to be pretty price sensitive and not necessarily going to.
Speaker Change: Utilize.
Speaker Change: The authorization despite a very strong CET one ratio is that fair.
Unknown Executive: I think that's fair. I think, you know, we want to be price sensitive. We want to be opportunistic in what we're doing. That's what we did in the past with our buyback, and so we're prepared to take action, and we did.
Speaker Change: I think Thats fair I think we want to be price sensitive we want to be opportunistic in what we're doing that's what we've done in the past with our buyback and so we're prepared to take action and we did.
Speaker Change: Okay.
Speaker Change: Okay. Thank you thank.
Speaker Change: Thank you Casey.
Catherine Fitzhugh Summerson Mealor: The next question is from Catherine Mealor with KBW. Please go ahead.
Speaker Change: The next question is from Catherine Mealor with <unk>. Please go ahead.
Catherine Fitzhugh Summerson Mealor: Thanks, Good morning, Hey, good morning Catherine.
Catherine Fitzhugh Summerson Mealor: A couple of follow-up questions on the margin. First, Valerie, on loan yields, they were only up about three basis points this quarter. Is it fair to say that with just your outlook for fixed rate repricing that that should move higher on a kind of per quarter basis over the rest of the year? Was there anything in this quarter that limited that expansion?
Catherine Fitzhugh Summerson Mealor: A couple of follow up on the margin I'm first salary on loan yields they were only up about three basis points. This quarter is it fair to say that with just your outlook for fixed rate repricing that should.
Catherine Fitzhugh Summerson Mealor: That should move higher on a per per.
Catherine Fitzhugh Summerson Mealor: Per quarter basis over the rest of the year was there anything kind of this quarter that that limited that expansion.
Speaker Change: Yes, there was.
Valerie C. Toalson: Yeah, there were some higher loan fees in the fourth quarter that impacted that quarter-over-quarter variance by probably three basis points. So, you know, otherwise it would have been closer to a six basis point improvement. The other factor driving it was some of the timing of the loans that came on the books a little bit later in the quarter. So those were the two factors. We anticipate that some of the repricings, combined with the continued loan growth, will have a more positive impact on those loan yields as we look into the next quarter.
Speaker Change: There were some higher loan fees in the fourth quarter that impacted that quarter over quarter variance by probably three basis points. So.
Speaker Change: Otherwise it would've been closer to a six basis point improvement the other factor driving it with some of the timing of that loans that came on the books for a little bit later in the quarter.
Speaker Change: So those were the two factors, we do anticipate that some of the repricing is combined with the continued loan growth will have a more positive impact on those loan yields as Lee.
Speaker Change: Good luck into the next quarter.
Catherine Fitzhugh Summerson Mealor: That's great. And then how about the cost of deposits? Do you feel like you're nearing a peak for that? And maybe if you could talk about some of the kind of trends in both the non-interest-bearing balances and maybe the cost of deposits towards the end of the quarter, that may help us. Yeah, so
Speaker Change: That's great.
Speaker Change: How about on cost of deposits are you do you feel like you are nearing a peak for that.
Speaker Change: And maybe if you could talk about some of the kind of trends in the noninterest bearing balances and any cost of deposits towards the end of the quarter that may help us. Thanks, yeah. So.
Valerie C. Toalson: Yeah, so we, you know, this quarter was absolutely the slowest quarter that we have seen on that cost of deposit increase, and it was really driven by makeshift versus inherent cost increases, if you will. In fact, we're able to tweak some of those on the softer side that helps balance that out.
Speaker Change: This quarter was absolutely the slowest quarter that we have seen on that cost of deposit increase and it was really driven by mix shift versus inherent cost increases. If you will in fact, we're able to.
Speaker Change: To tweak some of those on the software side.
Speaker Change: That helps balance that out.
Catherine Fitzhugh Summerson Mealor: As we look forward, assuming, you know, where the rate and again, for all our assumptions, we're using the forward curve as of March 31st, that would assume really kind of a end of the second quarter and beginning of the third quarter peak in deposit costs, but again, expecting the stability of those to be much more manageable than obviously what any of us saw last year. We are continuing to see solid growth in our CD portfolio.
Speaker Change: As we look forward assuming.
We're the right and again for all of our assumptions were using the forward curve as of March 31 that would assume really kind of an end of the second quarter beginning of the third quarter peak in deposit costs, but again.
Speaker Change: <unk> the stability of those to be much more manageable than obviously, what any of us saw last year.
Speaker Change: We are continuing to see solid growth in our CD portfolio. One interesting fact is that we have not only the new Cds that come into that but the rollover impact and the rollover Cds are actually coming on at a slightly or the combined new had rollover Cds are coming onto the books.
Catherine Fitzhugh Summerson Mealor: One interesting fact is that we have not only the new CDs that come into that, but the rollover impact, and the rollover CDs are actually coming on at a slightly lower rate, or the combined new and rollover CDs are coming on to the books at about 10, 15 basis points lower than they were in the fourth quarter. So that's a positive for us on the margin as well.
Speaker Change: About 10 to 15 basis points lower than they were in the fourth quarter. So that's a positive for us on the margin as well.
Catherine Fitzhugh Summerson Mealor: Yes, that's perfect. Thank you.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Yes, that's perfect. Thank you.
Speaker Change: Thank you Catherine.
Michael Edward Rose: The next question is from Michael Rose with Raymond James. Please go ahead.
Speaker Change: The next question is from Michael Rose with Raymond James. Please go ahead.
Michael Edward Rose: Hey, good morning, everyone. Thanks for taking my questions. I just want to ask one on credit.
Michael Edward Rose: Hey, good morning, everyone. Thanks for taking my questions.
Michael Edward Rose: Just wanted to ask one on credit I know you guys have had some.
Michael Edward Rose: I know you guys have had some, you know, continued upward migration in criticize and classify. I'm not surprised everybody's seeing it. But, you know, I think you guys have been pretty conservative in kind of classifying those credits. So can we just get some color there and then maybe what drove the sequential increase? Thanks.
Michael Edward Rose: Upward migration in criticized and classified not surprise everybody is seeing it but I think you guys have been pretty conservative in kind of classifying those those credits. So can we just get some color there and then maybe what drove the sequential increase thanks.
Unknown Executive: Yeah, I'd start with jumping here, Chris. I would start with the criticized loans actually down year over year. So you know, the criticized loans have been basically flat for now, a year. But when you're looking within those criticized categories, we've got migration moving.
Speaker Change: Start with something here, Chris I would start with the criticized criticized actually down year over year. So.
Speaker Change: Criticized loans have been basically flat for now.
Speaker Change: A year.
Speaker Change: When youre looking within those criticized categories, we've got migration moving within there Chris.
Chris: I agree. So, you know, we had a four BIP increase for the quarter, but it has been flat. So those loans that we've identified over the cycle, over the last year, nine months, those are what have migrated into the non-performing group that we continue to work on. The team's doing a great job. Early identification, early action.
Speaker Change: I agree.
Speaker Change: For Bip increase for the quarter, but it has been flat so those loans that we've identified over the cycle over the last year nine months. Those are what had migrated into the nonperforming group that we continue to work teams doing a great job early identification early actions.
Unknown Executive: So we're, we've got traction there. If you look at the quarter, the increase in non-performing loans, interesting when you look through there, of the 20, 24 million in increase, 10 million of that was guaranteed SBA loans. So it was pretty granular. It was one large credit, but it was really a granular move and what I would call a little slowing from a non-performing migration. And so that collection cycle to get through those, we're working really hard to work on going forward.
<unk> got traction there if you look at the quarter.
Speaker Change: The increase in nonperforming interesting when you look through there.
Speaker Change: 2000, $24 million and increased $10 million of that was guaranteed SBA loans. So that's pretty granular. It was one large credit, but it was really a granular move.
Speaker Change: And what I would call feels a little slowing from a nonperforming migration.
Speaker Change: So that.
That collection cycle to get through those we're working really hard to work on going forward.
Michael Edward Rose: Very, very helpful. And maybe just as a follow-up question, just on expenses. You guys have, you know, after a choppy last year and timing with the MOE and everything, it seems like expenses are kind of well controlled. Is there any opportunity to kind of ramp up investment spend as we kind of move through the year, maybe given some of the, you know, pullback from some of your competitors, maybe be, you know, opportunistic, you know, things like that?
Speaker Change: Very very helpful. And then maybe just as a follow up question just on.
Speaker Change: On expenses you guys have.
Speaker Change: After a choppy.
Speaker Change: Last year in timing with the MLR and everything it seems like consensus expenses are well controlled.
Speaker Change: Are there any opportunities to kind of ramp up though investment spend as we kind of move through the year, just maybe given some of the.
The pullback from some of your competitors maybe be.
Speaker Change: Opportunistic things like that and then.
Michael Edward Rose: And then, you know, to the extent that you guys can talk about next year, would we expect a more normalized rate of expense growth, just given the impacts of inflation, higher for longer, kind of, etc.? Thanks.
Speaker Change: The extent that you guys can talk about next year.
Speaker Change: Would we expect a more.
Speaker Change: <unk> rate of expense growth, just given the impacts of inflation higher for longer kind of et cetera. Thanks.
Unknown Executive: Yeah, I think we're constantly looking for ways to cut costs, but we're also looking for ways to invest in ourselves. We need to continue to invest in our business, whether that's investing in our people, or investing in the technology that we're using. We've got a pretty robust process that we're working through today. I think we're seeing the benefits of the work that we've been doing, as you said, over the last several years. This was just a clean quarter, and so you get to see it all. Valerie? Yeah,
Speaker Change: Yes, I think we're constantly looking for ways to cut cost.
Speaker Change: But we're also looking for ways to invest in ourselves we need to continue to invest in our business, whether that's investing in our people whether that's investing in the technology that we're using we've got up we've got a pretty robust process that we're working through that.
Speaker Change: I think we're seeing the benefits of the work that we've been doing as you said over the last multiple years.
Speaker Change: Or just a clean quarter until you get to see it all power yes.
Valerie C. Toalson: Yeah, I would just add that inherent within our guidance for expenses in 24 is a reinvestment or a continued investment, I would say, in our technology and our people. From an opportunistic hiring perspective, that really is market by market and business by business. And if there are key opportunities where we believe that we've got a niche that we can further strengthen or fill in that perhaps we're not in before, absolutely, we're going to take a look at those opportunities.
Speaker Change: I'd just add that inherent within our guidance for expenses in 'twenty four is.
Speaker Change: Reinvestment or a continued investment I would say in our technology and our people.
Speaker Change: From an opportunistic hiring and that really is market by market and business by business and if there are key opportunities, where we believe that we've got a niche that we can.
Speaker Change: Further strengthen or fill in that perhaps were not in before absolutely we're going to take a look at those opportunities.
Michael Edward Rose: Yeah, we've also got... All right. Great. Thanks. Yep. Thanks, guys.
Speaker Change: Yes.
Speaker Change: Okay that sounds good.
Speaker Change: Thanks, guys.
Brandon Thomas King: The next question is from Brandon King with Truist. Please go ahead.
Speaker Change: The next question is from Brandon King with Truest. Please go ahead.
Brandon Thomas King: So with the updated forward curve, could you give us your updated thoughts on where you see nine-inch spring deposits trending from here and kind of where you see that mixed shift? standing at by the end of the year?
Brandon Thomas King: Hey, good morning.
Brandon Thomas King: Good morning random.
So with updated forward curve could you give us your updated thoughts on where you see non interest bearing deposits trending from here and kind of where do you see that mix shift.
Brandon Thomas King: The outstanding debt, but end of the year.
Valerie C. Toalson: Yeah, our modeling hasn't changed much; we may be a little more aggressive than others. Go ahead, Valerie. Sure. We actually have...
Brandon Thomas King: Our modeling has it changed much we might be a little more aggressive than others. Go ahead, Valerie sure. We actually have that mix going to about 20% noninterest bearing deposits to total deposits by the end of the year with just a gradual decline between here and there.
Valerie C. Toalson: Sure, we actually have that mix going to about 20% non-interest-bearing deposits, total deposits by the end of the year with just a gradual decline between here and there.
Valerie: Okay, and just are you seeing some more stabilization.
Brandon Thomas King: Okay, and are you seeing some more stabilization in some of your commercial depositors' accounts?
Valerie: Some of your commercial depositors.
Valerie C. Toalson: Yeah, I think the biggest volatility that we've seen has really just been in public funds. And so, you know, the corporate accounts, that volatility was really this time last year. For the most part, there's some seasonality with bonus payments and some of the things like that that you'll see in corporate customers from time to time, but overall, good solid performance there.
Valerie: Yes, I think the biggest volatility that we've seen has really just been in public funds and so the corporate accounts that volatility was really this time last year.
Valerie: For the most part there is some seasonality with bonus payments and some of the things like that that you will see in corporate customers from time to time, but that overall good solid performance. There I think the deposits as a whole I don't know that were seeing a whole lot of disruption. That's just normal customer business. The fact that rates are up 500 basis points in the last year, there are still customers that.
Unknown Executive: I think deposits as a whole, I don't know that we're seeing a whole lot of disruption. It's just normal customer business. The fact that rates are up 500 basis points in the last year is still waking up customers. They're realizing, you know, I don't want to miss some of that.
Valerie: Waking up realizing.
Valerie: I don't want to I don't want to Miss some of that and so youre seeing customers continue to make decisions I've said for a while that I think.
Unknown Executive: And so you're seeing customers continue to make decisions. I've said for a while that the first time we get close to a rate drop, I think that wakes people up. And so I think you can see people react to that first rate drop by taking advantage of the rates that are there. But then they kind of get left behind. So I think we've still got the same normal behavior that we've been expecting in deposits. The capacity and capabilities that we're building out, I think we've still got great opportunities to continue to grow core deposits.
Valerie: The first time, we get close to a rate drop I think that wakes people up and so I think you can see people react to that first weight rate drop by taking advantage of the rates that are there. They don't want to get left behind so I think we've still got the same normal behavior that we've been expecting.
Valerie: In deposits and the ability to hit our 300 plus.
Valerie: Branches across our footprint along with the digital.
Valerie: Capacity and capabilities that we're building out I think we've still got great opportunities to continue to grow core deposits.
Brandon Thomas King: Okay. And then lastly, what's the outlook for mortgages here? Are you looking to maybe sell some more loans in the secondary market or just keep some and then kind of what you do.
Valerie: Okay.
And then lastly was the outlook for mortgage here are you looking to maybe sell some more loans in the secondary market or portfolio, some and kind of what you're seeing within your customer base.
Valerie C. Toalson: Yeah, the inverted yield curve continues to create havoc on the secondary market in the mortgage book. Go ahead, Valerie.
Valerie: Inverted yield curve continues to create havoc on the secondary market and the mortgage book go ahead, Valerie yes, so that I think the biggest challenge in the mortgage area is one the rates. Although I think consumers are starting to digest that that's what it's going to take to get a mortgage.
Valerie C. Toalson: Yeah, so, you know, I think the biggest challenge in the mortgage area is, one, the rates, although I think consumers are starting to understand that that's what it's going to take to get a mortgage, but the lack of inventory as people are holding on to their lower interest rates and, you know, there's just not a lot of inventory that's causing a lot of movement there. We are starting to see the spring pickup that we typically see and anticipate that to continue, and, you know, other than that, our volumes are fairly consistent with where they were last year, but we do see some opportunities as we go forward. We're not doing much at all on the refi side, and we are selling more than we are holding, but there is a nice mix there for both. And what's coming in the portfolio?
Valerie: But that the lack of inventory as people are holding onto their lower interest rates and there's just not a lot of inventory, that's causing a lot of movement. There we are starting to see the spring pickup that.
Valerie: We typically see and anticipate that to continue and other than that our volumes are fairly consistent with where they were last year.
Valerie: But we do see some.
Valerie: Opportunities as we go forward, we're not doing much at all on the refi side.
Valerie: And we are selling more than where our portfolio ing, but there is a nice mix there for both and what's coming on the portfolio as the arm.
Valerie C. Toalson: Coming in on the portfolio is the Arm product. It is, yes. I'll just add to that the lack of inventories given, we've got a construction to perm product that I think plays well into that, so we're getting some nice pick-up.
Speaker Change: So let me just add to that the lack of inventories given we've got a construction to perm product that I think plays well into that so we're getting some nice pickups there.
Brandon Thomas King: Okay, thanks for taking my questions. All right, thank you, Brandon.
Speaker Change: Okay.
Speaker Change: Taking my questions.
Stephen Kendall Scouten: The next question is from Stephen Scouten with Piper Sandler. Please go ahead.
Speaker Change: Thank you Brenda.
Speaker Change: The next question is from Stephen Scouten with Piper Sandler. Please go ahead.
Stephen Kendall Scouten: Good morning. I just wanted to confirm that you were saying 20% on non-insuring, which does seem extremely conservative. So presumably, if that's in your guide, if that, say, shook out at 20, 21, 22, or, you know, if there was upside there, there would also be upside to your overall NII guide, your revenue guide? Yeah.
Stephen Kendall Scouten: Stephen Good morning, Yeah. Thanks, Good morning, I just wanted to confirm you were saying, 20% on non interest bearing which does seem extremely conservative.
Stephen Kendall Scouten: So presumably if that's in your guide is that shook out in 2021 'twenty two or if there is upside there there would also be upside to your overall.
God revenue guidance.
Unknown Executive: Yeah, that's exactly right. That is factored into our modeling and our guide.
Speaker Change: Yes, that's exactly right that is that is factored into our modeling and our guide.
Stephen Kendall Scouten: Perfect. I appreciate the clarification. And just from a competitive perspective, you know, what are you seeing in terms of loan demand, and how other competitors are playing new loan yields? Do you feel like that competitive environment is changing in any material way, especially as, you know, 20 and 21 vintages of loans, presumably are repricing from what I would assume was the lowest rate on your loan on your book moving forward? Just kind of wondering how that's playing out.
Speaker Change: Okay perfect appreciate the clarification and just from a.
Speaker Change: <unk> perspective.
Speaker Change: Are you seeing in terms of loan demand like.
Speaker Change: And how other competitors are playing new loan yields do you feel like that competitive environment is changing in any material way, especially as you know 2021 vintages of loans, presumably a repricing from from what I would assume was the lowest rate on your loan on your book moving forward just kind of wondering how that's playing out.
Unknown Executive: I think there's always competition in the loan book, and again, depending upon the market, depending upon who the competition's coming from. You know, we play across the rural south, we play in major metropolitan markets, and we see different competitors in those markets, and they all behave a little bit differently. We're certainly seeing some competition on the community bank side on smaller business loans where banks are willing to take some of those loans at rates that we've not played in. I think on the corporate side, it's been much more stable, Billy.
Speaker Change: I think there's always competition in the loan book and again, depending upon the market depending upon who the competition is coming from.
We play across the rural South we play in major Metropolitan markets, and we see different competitors in those markets and they all behave a little bit differently, we're certainly seeing some.
Speaker Change: Competition on the community bank side on the smaller business credits, where banks are willing to take some of those credits at rates that we've not played in on the other hand, I think on the corporate side, it's been much more stable Billy.
Billy: Yeah, that's a fair statement. The corporate banking pricing environment has been stable. For the highest quality and the highest, I'd say, house account, full wallet, larger corporate deals, those have started to get more competitive, primarily in price, but structures have held solid. Our non-bank competitors are continuing to take the higher-risk deals. The banks have stayed disciplined in that market and, for the most part, stayed away from those high-leveraged sponsor-backed buyout deals.
Speaker Change: Yes.
Speaker Change: Fair statement.
Speaker Change: Corporate banking pricing environment has been stable.
Speaker Change: For the highest quality and the highest I'd say house account full wallet larger corporate deals those have started to get.
Speaker Change: More competitive primarily in price but.
Speaker Change: Structures have held and solid.
Speaker Change: Non non bank competitors are continuing to take the higher risk deals the banks have stayed.
Speaker Change: Disciplined in that market.
Speaker Change: For the most part stayed away from those.
Speaker Change: How leveraged.
Stephen Kendall Scouten: Got it. Very helpful. Thanks for the time, Smyrne. I appreciate it.
Speaker Change: Sponsor backed buyout deals.
Speaker Change: Got it very helpful. Thanks for the time I appreciate it thank you.
Matthew Covington Olney: Hey, I appreciate it, thank you. The next question is from Matt Olney with Stevens. Please go ahead.
Speaker Change: The next question is from Matt Olney with Stephens. Please go ahead.
Matthew Covington Olney: Good morning, Thanks, Good morning, Hey, Thanks, good morning, everybody.
Matthew Covington Olney: Thanks, good morning everybody. Going back to the non-interest-bearing deposit discussion and the guidance of 20% by year end, is there anything that's structural that would make Cadence more vulnerable to continue NIBH?
Matt Olney: Yes.
Matthew Covington Olney: <unk> gone back to the non interest bearing deposit discussion on the guidance of 20% by year end is there anything structural that would make cadence more vulnerable to continue an IV headwinds.
Unknown Executive: No. No, not at all.
Matthew Covington Olney: No not at all maybe a conservative.
Unknown Executive: Maybe a conservative treasury. I just think we want to be realistic about what's happening. We're continuing to see customers migrate, and I think we want to be realistic. Exactly right. There's absolutely nothing structurally different about our deposit base. In fact, we are so community-driven that you might even say that it's a better structure.
Matthew Covington Olney: Treasury.
Matthew Covington Olney: I just think we want to be realistic about whats happening, we're continuing to see customers migrate and I think we want to be realistic.
Matthew Covington Olney: Exactly right there is absolutely nothing structurally different about our deposit base. In fact, we are so community.
Matthew Covington Olney: Driven that you might even say that.
Unknown Executive: I like where we sit today with our deposit base and our branch network, the community bank that we're driving, and the digital capabilities that we have today. I think we're in really good shape.
Matthew Covington Olney: It's a better structure.
Matthew Covington Olney: I like where we sit today with our deposit base in our branch network that community bank that were driving.
Matthew Covington Olney: The digital capabilities that we have today.
Speaker Change: I think we're in really good shape.
Matthew Covington Olney: Okay. Appreciate that. And then, I guess, on the overnight earning assets, remind me what you consider your excess liquidity position. I think the average position for the overnight was a little over $3 billion, but the ended period was a little bit below that. How do you guys view that longer term?
Speaker Change: Okay I appreciate that.
Speaker Change: Then I guess on the overnight.
Speaker Change: Overnight, earning assets.
Speaker Change: Remind me what you consider your excess liquidity position I think the average position for overnight was over $3 billion, but ended period was a little bit below that how do you guys kind of view that longer term.
Valerie C. Toalson: Yeah, longer term, you know, we'd like to have it half of that, at least. The reason we're holding that in excess is we've got the bank term funding at 5 or 4.67%, and we're investing that at 540. So we're just getting a little bit of an incremental spread on that for the time being.
Speaker Change: Yes longer term.
Speaker Change: We'd like to have it half of that.
Speaker Change: At least the <unk>.
Speaker Change: Reason, we're holding that in excess as we've got the bank term funding at five or four.
67% and we're investing that at $5 40, So we're just getting a little bit of incremental spread on that for the time being.
Valerie C. Toalson: That runs through next January-ish.
Speaker Change: That runs through next January is exactly.
Matthew Covington Olney: Okay, so Valerie, do you expect these current levels to remain elevated through the end of the year and early next year?
Speaker Change: Okay. So Valerie you expect these current levels to remain elevated.
Speaker Change: Through through the end of the year into early next year as long as rates hold where they are after the benefit of holding that decline.
Valerie C. Toalson: As long as rates hold where they are, if the benefit of holding that declines to a certain point, then we'll pay it down.
To a certain point then then we'll pay it that we could use that in the loan book, Yes, absolutely.
Matthew Covington Olney: Perfect. Okay. Thanks, everybody.
Speaker Change: Perfect. Okay. Thanks, everybody.
Operator: Again, if you have a question, please press star then 1. The next question is from Gary Tenner with D.A. Davidson. Please go ahead.
Speaker Change: Thanks, Matt.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: The next question is from Gary Tenner with D. A Davidson. Please go ahead.
Gary Tenner: Hey, this is Ahmad Hassan on for Gary Tenner. Ah, okay. Good morning. So, I know you touched a little bit on the credit side, NPAs ticked a little bit, but... You said it was mostly because of that one SBA loan, but are there any sectors that you're seeing?
Gary Tenner: Very good to hear from you.
Speaker Change: Hey, this is a model on for Gary Tenner.
Speaker Change: Good morning.
Speaker Change: So I know you touched on credit side, NPA has ticked up a little bit but.
You said it was mostly because of that one SBA loan.
Speaker Change: Are there any sectors that youre seeing.
Unknown Executive: No, not really. We're not seeing any trends, any themes, any geographies, any types. It's really just... Normalization of Credit Issues. Billy, Chris, jump in here.
Speaker Change: Dennis.
Dennis: No not not really we're not seeing any.
Dennis: Trends any themes any geographies any types.
Dennis: Really just.
Dennis: Normalization of credit issues really Chris jump in here.
Chris: You see it on slide 9. It's not a CRE story, so the CRE's held up really well. It's been more of a CNI story, and the SBA loan we referenced wasn't just any SBA loan. There are a lot of SBA loans, so we have seen some migration in the SBA book. If you look through, I think $60 million of that is non-performing. Valerie mentioned our government-guaranteed loan. The collection cycle and the application process to get paid on those are just lengthy. That's what it is. And through this cycle, you saw some increased non-performing assets there. And part of our numbers are working through those small, granular moves in the SBA.
Chris: It really jump and you see it on slide nine its not a CRA story. So the CRA has held up really well then more of a C&I story.
Speaker Change: SBA loan we referenced wasn't one SV alone. It's a lot of SP SBA loans. So we have seen some migration in the SBA, but if you look David I think $60 million of that nonperforming I already mentioned our.
Speaker Change: Government guaranteed loan at a collection cycle in the application process to get paid on those.
Speaker Change: It gets his lengthy that's what it is in US through this cycle you saw some increased nonperforming there and part of our numbers are working through those small granular moves in the SBA book.
Unknown Executive: Yeah, like we've said in, you know, the recent handful of quarters, the only sector we've seen any consistency in where there's a little bit to point to would be restaurants. And I would say that continues. And then across the sector, we're hearing this, it's the kind of senior assisted living seeing some signs of stress continuing, but you know, we're starting to come out of that, it feels like. But those would be the only two sectors I would call out, but all manageable and all having been identified now for several quarters.
Speaker Change: Yes, like we've said in recent.
Speaker Change: Handful of quarters, the only sector, we've seen any consistency in where there's a little bit to point to would be restaurant.
Speaker Change: And I would say that continues and then across the sector. We are here in this.
Speaker Change: Senior assisted living seeing some signs of stress continuing but.
Speaker Change: And to come out of that it feels like but it's yes, those would be the only two sectors I would call out, but all manageable and all having been identified now for several quarters.
Speaker Change: Okay.
Unknown Executive: All right, great. That's good to hear. And maybe just one more question, I know you touched on loan growth, even geographically, but within those high-growth markets you talked about, Georgia, Texas, what sectors are you guys most excited about? Yeah, we're single.
Speaker Change: Alright, great. That's good to hear and maybe just one more on I know you touched on loan growth even geographically but.
Speaker Change: In those high growth markets, you talked about Georgia, Texas.
What sectors are you guys more.
Unknown Executive: Yeah, we're seeing growth in the C&I book, so it's the corporate bankers, it's Florida, our Tampa team's doing a great job, our Atlanta team's doing a good job, our Nashville team's doing a great job, Houston, Dallas, Austin, Fort Worth, you know, we've got great bankers in those high growth markets and we're winning business, it's not any individual segment, we're just seeing good opportunities there.
Speaker Change: Excited about that.
Speaker Change: We're seeing growth in the C&I book, So it's the corporate the corporate bankers, it's Florida.
Our Tampa team is doing a great job our Atlanta team is doing a good job our Nashville team's done a great job Houston, Dallas, Austin and Fort worth.
Speaker Change: We've got great bankers in those high growth markets and we're winning business. It's not any individual segment. We're just seeing good good opportunities there.
Unknown Executive: Great Thank you for taking my questions.
Speaker Change: Great. Thank you for taking my questions.
Matthew Covington Olney: I appreciate it very much. Thank you.
Matthew Covington Olney: The next question is a follow-up from Matt Olney with Stevens. Please go ahead.
Speaker Change: Appreciate it very much thank you.
The next question is a follow up from Matt Olney with Stephens. Please go ahead.
Matthew Covington Olney: Hey guys, I don't think anybody asked about fees this quarter. Any color on the fees? I know it was noisy last quarter, but it looks like a clean run rate to me, but any color on the fees in the first quarter and the outlook here?
Matthew Covington Olney: Hey, guys I don't think anybody asked about.
Matthew Covington Olney: Fees this quarter any color on the fees and there was no with the last quarter. It looks like a clean run rate to me, but any any color on that the fees in the first quarter and the outlook here.
Unknown Executive: Yeah, no, we're really pleased with our feed performance, and your structure of that, or your characterization of that as being kind of routine is absolutely spot on. There was nothing that was abnormal that showed up in those numbers. The resurgence of service charges compared to the prior quarter was because of the accrual that we made in the fourth quarter. You know, Mortgage had a nice quarter, seeing some impact both in production and the servicing as well as the MSR evaluation.
Yes, we're really pleased with our performance.
Matthew Covington Olney: And you are.
Matthew Covington Olney: Structure of that are your characterization of that as being kind of routine is absolutely spot on there was nothing that was abnormal that showed up in those numbers. The resurgence of service charges from compared to the prior quarter was because of that accrual that we made in the fourth quarter.
Mortgage had a nice quarter.
Matthew Covington Olney: Some impact both in the production and the servicing as well as the MSR.
Matthew Covington Olney: Evaluation will wealth management's doing let's say wealth management Trust.
Unknown Executive: The Wealth Management Trust, really all just very consistent. We saw an increase in our assets under management. Part of that's new business, part of that's market-driven. So overall, we feel very good about our fee businesses. We're just under 20% of total revenue and expect that to continue to be strong for us.
Matthew Covington Olney: Really all just very consistent we saw an increase in our assets under management part of that.
Matthew Covington Olney: Part of that's market driven so overall, we feel very good about our fee businesses were just under 20% of total revenue and.
Matthew Covington Olney: I expect that to continue to be strong for us.
James D. Rollins: Thank you. Thanks, Matt. This concludes our question and answer session. I would like to turn the conference back over to Dan Rollins for any closing remarks.
Speaker Change: Thank you thanks, Matt.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Dan Rollins for any closing remarks.
James D. Rollins: Thanks again for joining us this morning. Seeing the fruits of our team's work and our financial results is very rewarding. While much more work is still needed, our efforts are visible in virtually all of our performance metrics. We reported significant improvements across the board on EPS, ROA, ROE, efficiency, net interest margin, just naming a few, while maintaining stable credit quality and growing loans and core customer deposits. If you have our commitment, we will continue our efforts to further enhance our results as we move forward. Thanks again for joining us today. We look forward to visiting with you all again as we travel on the road. Thanks. The conference has now concluded.
James D. Rollins: Thanks again for joining us this morning, seeing the fruits of our team's work and our financial results is very rewarding while much more work is still needed. Our efforts are visible in virtually all of our performance metrics, we reported significant improvements across the board on EPS ROA ROE efficiency net interest margin just naming a few while.
James D. Rollins: Stable credit quality and growing loans and core customer deposits.
James D. Rollins: You have our commitment that we will continue our efforts to further enhance our results as we move forward. Thanks again for joining US today, we look forward to visiting with you all again as we set out on the road. Thanks.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Operator: BF-WATCH TV 2021
Speaker Change: Okay.