CVB Financial Management Discusses Q4 2013 Results - Earnings Call Transcript

Jan.23.14 | About: CVB Financial (CVBF)

CVB Financial (NASDAQ:CVBF)

Q4 2013 Earnings Call

January 23, 2014 10:30 am ET

Executives

Christina Carrabino

Christopher D. Myers - Chief Executive Officer, President, Director, Chief Executive Officer of Citizens Business Bank, President of Citizens Business Bank and Director of Citizens Business Bank

Richard C. Thomas - Chief Financial Officer, Executive Vice President, Chief Financial Officer of Citizens Business Bank and Executive Vice President of Citizens Business Bank

Analysts

Hugh M. Miller - Sidoti & Company, LLC

Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division

Timothy N. Coffey - FIG Partners, LLC, Research Division

David Gong - Keefe, Bruyette, & Woods, Inc., Research Division

Gary P. Tenner - D.A. Davidson & Co., Research Division

Operator

Good morning, ladies and gentlemen, and welcome to the Fourth Quarter and Year-End 2013 CVB Financial Corp. and its subsidiary, Citizens Business Bank, Earnings Conference Call. My name is Mike, and I am your operator for today. [Operator Instructions] As a reminder, today's conference call is being recorded.

I would now like to turn the presentation over to your host for today's call, Christina Carrabino. Ms. Carrabino, the floor is yours, ma'am.

Christina Carrabino

Thank you, Mike, and good morning, everyone. Thank you for joining us today to review our financial results for the fourth quarter and year-end 2013. Joining me this morning are Chris Myers, President and Chief Executive Officer; and Rich Thomas, Executive Vice President and Chief Financial Officer.

Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Our Investors tab.

Before we get started, let me remind you that today's conference call will include some forward-looking statements. These forward-looking statements relate to, among other things, current plans, expectations, events and industry trends that may affect the company's future operating results and financial position. Such statements involve risks and uncertainties, and future activities and results may differ materially from these expectations.

The speakers on this call claim the protection of the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the company's annual report on Form 10-K for the year ended December 31, 2002 (sic) [2013], and in particular, the information set forth in Item 1A, risk factors therein.

Now I will turn the call over to Chris Myers.

Christopher D. Myers

Thank you, Christina. Good morning, everyone, and thank you for joining us again this quarter. Yesterday, we reported earnings of $25.3 million for the fourth quarter of 2013 compared with $24.2 million for the third quarter of 2013 and $22.1 million for the fourth quarter of 2012. This quarter represents the most profitable quarter in company history.

Highlights for the quarter included over $100 million in organic loan growth and a $6.8 million recapture of loan loss provision, primarily due to improved credit metrics.

Earnings per share were $0.24 for the fourth quarter compared with $0.23 for the third quarter and $0.21 for the year-ago quarter. For the year ended December 31, 2013, we earned $95.6 million compared with $77.3 million for the year ended December 31, 2012. Earnings per share were $0.91 for 2013 compared with $0.74 for 2012. 2013 represents the most profitable year in CVB Financial history.

The fourth quarter represented our 147th consecutive quarter of profitability and 97th consecutive quarter of paying a cash dividend to our shareholders. Excluding the impact of the yield adjustment on covered loans, our tax exempt net interest margin was 3.49% for the fourth quarter compared with 3.48% for the third quarter, and down from 3.60% for the year-ago quarter.

At December 31, 2013, we had $3.55 billion in total loans, net of deferred fees and discount, compared with $3.44 billion at September 30, 2013. Overall, non-covered loans increased by $108.2 million and covered loans decreased by $3 million quarter-over-quarter.

During the fourth quarter, our commercial real estate loan portfolio increased by $75 million, and our dairy and livestock loan portfolio increased by $33 million. The dairy and livestock loan portfolio typically increases during the fourth quarter, as many dairies draw down on their line of credit to prepay feed expenses. We, therefore, regard the fourth quarter increase in dairy loans as temporary. Our recent growth in total loans can be attributed to a combination of a strength in new pipeline and reduced loan runoff.

In terms of loan quality, nonperforming assets, defined as non-covered, nonaccrual loans plus OREO, decreased in the fourth quarter to $46 million compared with $56 million for the prior quarter. The allowance for loan and lease losses was $75.2 million or 2.22% of total non-covered loans at December 31, 2013, compared with $80.7 million or 2.46% of outstanding loans at September 30, 2013.

Net recoveries for the fourth quarter were $1.3 million compared with net charge-offs of $994,000 for the third quarter of 2013.

At December 31, 2013, we had loans delinquent 30 to 89 days of $3.3 million or 0.10% of total non-covered loans. The $3.3 million included $1.7 million of single-family residential mortgage pool loans. Classified loans for the fourth quarter were $245.6 million compared with $264.1 million for the prior quarter. This represents a 7% decrease in classified loans quarter-over-quarter. Our classified loans decreased due to improvements in our commercial real estate, commercial and industrial and dairy loan portfolios. We will have more detailed information on classified loans available in our year-end Form 10-K.

Moving on to covered loans. Covered loans represent loans in which we have loss-sharing protection from the FDIC as a result of our acquisition of San Joaquin Bank in October 2009. At December 31, 2013, we had $173.1 million in total covered loans with a carrying value of $160.3 million, compared with $177.9 million with a carrying value of $163.3 million at September 30, 2013. As of fourth quarter end, our remaining purchase discount was $12.8 million. As a reminder, our loss-sharing agreement with the FDIC expires this year in October.

Now I would like to discuss deposits. For the fourth quarter of 2013, our non-interest-bearing deposits increased to $2.56 billion compared with $2.54 billion for the prior quarter and $2.42 billion for the same quarter a year ago. This represents a $142 million or 5.9% increase year-over-year, completely organic. Non-interest-bearing deposits now represent 52.41% of our total deposits.

Our total cost of deposits and customer repurchase agreements for the fourth quarter was 12 basis points compared with 12 basis points for the prior quarter. At December 31, 2013, our total deposits and customer repurchase agreements were $5.53 billion compared with $5.25 billion for the same period a year ago and $5.46 billion at September 30, 2013. Our ongoing objective is to maintain a low-cost stable source of funding for our loans and securities.

Interest income. Interest income for the fourth quarter totaled $59.3 million compared with $58.1 million for the third quarter of 2013. The $59.3 million for the fourth quarter included $2.1 million of discount accretion from principal reductions and payoffs, as well as the improved credit loss experienced on covered loans. This compares to $2.9 million of discount accretion for the prior quarter. So if the discount accretion was eliminated, total interest income for the fourth quarter increased by $2.1 million or about 3.8% from the third quarter of 2013. Total investment income of $14.5 million increased $1.9 million or 15.3% from $12.6 million for the third quarter of 2013. Noninterest income was $5.9 million for the fourth quarter compared with $5 million for the third quarter of 2013.

Now expenses. We continue to closely monitor and manage our expenses. Noninterest expense for the fourth quarter was $29.3 million compared with $25.7 million for the third quarter. The quarter-over-quarter increase was due to $3.7 million in insurance reimbursements for previous year's legal costs recorded in the third quarter of 2013. Noninterest expense, excluding the $20.4 million FHLB debt termination expense recorded back in 2012, declined by $3.8 million in 2013. This decline was primarily due to an increase of $3.2 million in insurance reimbursements for legal costs.

Also contributing to this year-over-year decrease were reductions of $1.4 million in legal expenses, $1.3 million in OREO-related costs, $1 million in occupancy and equipment expenses and a $1 million decrease in the amortization of intangible assets. The aforementioned decreases in noninterest expenses were partially offset by a $2.5 million increase in salaries and employee benefits and a $500,000 provision for unfunded loan commitments in 2013.

Now I'd like to turn the call over to Rich Thomas, our CFO, to discuss our effective tax rate, investment portfolio and overall capital position. Rich?

Richard C. Thomas

Thanks, Chris. Good morning, everyone. Our effective tax rate was 34.4% for the third and fourth quarters. The overall tax rate for the full year 2013 was 33.7%.

Now to our investment portfolio. During the fourth quarter of 2013, we sold an average of approximately $99.3 million in overnight funds to the Federal Reserve and received a yield of approximately 25 basis points on collected balances. We also maintained $70 million in short-term CDs with other financial institutions, yielding approximately 70 basis points.

At December 31, 2013, investment securities totaled $2.67 billion, up $46.3 million from the third quarter of 2013. Investment securities represented approximately 40% of our total assets at quarter end. At December 31, 2013, we had an unrealized loss of $16.1 million in our investment portfolio compared to an unrealized gain of $7.3 million for the prior quarter.

Virtually all our mortgage-backed securities are issued by Freddie Mac or Fannie Mae, which have the implied guarantee of the U.S. government. We also have 3 private-label collateralized mortgage-backed securities totaling $560,000. We have been strategically reinvesting our cash flow runoff from our investment portfolio, carefully weighing current rates and overall interest rate risk.

During the fourth quarter, we purchased $160.6 million in mortgage-backed securities with an average yield of 2.19% and an average duration of approximately 4 years. We also purchased $4 million in municipal securities during the fourth quarter with an average tax equivalent yield of 3.86%. We elected to utilize short-term borrowings to facilitate a portion of these purchases. However, we regard these borrowings as temporary, as we intend to pay them back through cash flow from our investment portfolio and/or future deposit growth.

For the year 2013, we purchased $860.9 million of mortgage-backed securities with an average yield of 2.15% and $19.8 million of municipal securities with an average tax equivalent yield of 3.64%. Prepayment speeds in our investment portfolio have decreased. And based upon current interest rates, we anticipate receiving approximately $25 million to $30 million in monthly cash flow from this portfolio.

Now turning to our capital position. Our capital ratios are well above regulatory standards, and we believe they still remain above our peer group average. Our December 31, 2013 capital ratios will be released soon, concurrently with our year-end Form 10-K.

Shareholders' equity increased $8.9 million for the year 2013. The year-over-year increase was due to an increase of $95.6 million in net earnings, $6.4 million of various stock-based compensation items. This was offset by $52.6 million in unrealized loss on available-for-sale investment securities and $40.5 million in cash dividends.

Now I will turn the call back to Chris for some closing remarks.

Christopher D. Myers

Thanks, Rich. Now let's talk about the economic conditions. In terms of the dairy industry, milk prices increased, while feed costs continued to decrease. According to the California Department of Food and Agriculture, the CDFA, feed costs in California represented 65.4% of total milk production costs at the end of the third quarter of 2013, down from 66.8% of total milk production costs for the second quarter of 2013. Thanks to a reported bumper U.S. corn crop during 2013 and slowing exports, dairy farmers saw a significant drop in corn prices. This downward trend may help to lower the cost of other feed products as well. It remains difficult, however, to project the future cost of feed as it will continue to be dependent on many factors, one of which is weather.

Turning to the California economy. Although its overall recovery has not progressed at a rapid pace, California's economy continues to get stronger each month. According to the state's Employment Development Division, the California unemployment rate was 8.5% in November 2013 compared with 8.7% in October and 9.9% back in November 2012, over a year ago.

Through August 2013, California had recovered just shy of 830,000 of the nearly 1.37 million jobs lost during the recession. The real estate market, which is strengthening, is expected to continue to perform well over the next several quarters. Local economists forecast home price appreciation to remain in the double-digits into mid-2014. Not only are home prices rising, but California's housing inventory remains undersupplied. The longer development and permitting processes, along with the regulatory climate, have been keeping the new supply of housing comparatively muted. The tight supply keeps home prices high relative to other states and makes it more difficult for individuals to afford the cost of housing while still maintaining their overall quality of life.

Individual incomes, overall consumer spending and exports of key commodities and products continue to be positive economic factors. Hotel occupancy and other tourism have also strengthened.

With 2013 now in the books, I would like to thank our employees for their continued hard work and commitment; our customers, for their loyalty; our shareholders, for their continued support; and our Board of Directors, for their ongoing guidance. As we move into 2014, we remain focused on quality loan growth, fee income expansion, stronger core deposits and overall operating efficiency. We also continue to actively focus on acquisition opportunities with respect to community banks in or adjacent to our geographic footprint.

Well, that concludes today's presentation. And now, Rich and I will be happy to take any questions that you might have.

Question-and-Answer Session

Operator

[Operator Instructions] The first question we have comes from Hugh Miller with Sidoti & Company.

Hugh M. Miller - Sidoti & Company, LLC

I guess first question was just with regard to kind of the loan yields, which we continue to see some pressure on in this particular quarter, quarter-over-quarter. Can you just comment about kind of the competitive landscape, and whether or not that's really pressuring things, and what we should be thinking going forward?

Christopher D. Myers

It's interesting. It's interesting because back in March and April, we felt that the environment from loan pricing was the most competitive we've seen. And that's really a product of the 10-year treasury being down as low as it was. Now that 10-year treasury has come back up. I think it's running at 285 [ph] or something like that, and so some of that pressure has moderated in terms of the real low, low pricing for really primarily what we're talking about here as fixed-rate commercial real estate lending. So we've seen some of that back off.

It's still a very competitive environment, particularly for the loans that we're chasing. We're chasing the higher-quality, typically, a little bit lower loan-to-value loans. We're not trying to stretch for the -- on the credit side given -- I'd rather win a deal with a little bit lower pricing that's better quality than stretch for a tougher loan to get more yield. So it's still a very competitive environment, but it's not like it was. And some of that is also reflected in our prepayment penalties. And one of the things -- that kind of bleeds into net interest margin as well.

If you look at prepayment penalty income for the fourth quarter, it was $273,000-ish for us. That compares to $856,000 for the third quarter, $1.1 million for the second quarter and $950,000 for the first quarter of 2013. So you can see that the competitive pressure for refinancing some of our existing commercial real estate loans has subsided some. The good news is, is that we're getting a little bit better pricing on our loans and our securities, right? We're buying securities at higher yields. But we've lost some of that prepayment income, which kind of caused our net interest margin to flatten quarter-over-quarter. But we're hoping that if we can continue to get good loan demand and keep these prices or get a little higher prices, higher yields on our loans, that, that NIM will start going back up.

Hugh M. Miller - Sidoti & Company, LLC

Okay, yes. And I guess some of that, too, you are benefiting to an extent from lower levels of nonperforming assets being a positive. But -- so some of it just also is a shift towards -- or would you that you are shifting your portfolio even more towards higher-quality loans? I know you guys are always very conservative on the underwriting side. But has there been, I guess, a mix shift where you're willing to take a lower yield just to have a higher-quality loan than you were several quarters ago?

Christopher D. Myers

No, I think we're pretty consistent. I don't think we're any different than we were before. I think we're just -- we've always tried to drive quality, and we're continuing in that. And I guess the point I'm trying to make more is that I don't think we're stepping off our quality drive because we're trying to grow loans. We're trying -- we're marketing very hard and trying to keep that quality focus.

Hugh M. Miller - Sidoti & Company, LLC

Okay. And then the follow-up question I had was with regards to what we're reading is the [indiscernible] reports for the San Francisco district and California area is kind of a divergence of some banks seeing a pickup in kind of interest in loan demand, while others are still seeing borrowers that are cautious on the environment go forward.

Can you talk about what you guys are seeing with regards to demand outside of kind of the seasonal aspect of the dairy side of the business? What you're seeing from your business borrowers and whether or not you anticipate that you'll see kind of a tailwind to the loan demand in 2014?

Christopher D. Myers

Well, on the commercial real estate side, we've had a pretty good pipeline, and we've had a pretty good pipeline for a while the last couple of quarters. I mean, really, if you look at the last 2 quarters, our loans are up $200 million since June 30, 2013 through December 31, 2013, about $200 million. Most of that growth is commercial real estate. What's not seen in there is that we also have a significant increase in our lines of credit on the commercial side.

The problem is, is that we're not seeing a lot of borrowings on those lines of credit. And again, that may be some of our own fault because we focused on quality, quality, quality. And some of those quality borrowers are still very cautious and they're pretty liquid and they're not borrowing. They're not growing as rapidly as we'd like them to. But those -- but the relationships are there and the facilities are there. And when that, I guess, business confidence comes back, we feel like they will start drawing on some of those lines of credit. So I think we're doing the right things along the way.

The other thing is we've added several new teams. Our San Diego team is now on board. We've got them -- we're -- we've got them actually temporary facilities. We haven't officially opened the San Diego center yet. That's probably going to happen in the early part of spring. We're working on the leasing stuff and getting them in there and all that stuff. But that's exciting for us. We also hired a couple of people down at Orange County that's a good -- they're good add-ons for us.

And then we also hired a new head of agribusiness in the Central Valley, and so we're really excited about that opportunity to expand our agribusiness lending. And so we've made investments in a lot of de novo things. We have a new head of construction lending here that we just hired a month or 2 ago and a new head of Citizens Home Loan that we hired 3 or 4 months ago. So we're really putting a lot of effort into growing organically.

And one of the things that we think is that we can grow organically and we can grow through acquisitions. So we kind of got those 2 things going for us. We look at some of the competition out there and we don't see them growing organically for -- not the big banks, the smaller banks. And so they're doing a lot of M&A because that's the way they're going to need to grow. We feel like we don't have to do M&A to grow, but we want to do M&A.

Operator

The next question we have comes from Aaron Deer of Sandler O'Neill + Partners.

Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division

Chris, question on the reserve releases. You've had 3 quarters consecutive releases now, and given the improving credit trends and that your reserve is still above 2% of loans, is there any reason we shouldn't expect to see a continuation of that, maybe $5 million, $10 million in negative provisions here in 2014?

Christopher D. Myers

You know what, that's a great question, and I think that's a little bit of a double-edged sword question because we'd love to keep our reserves as strong as possible. But we have a methodology and a science that's really behind this in terms of how we calculate our reserves, and there's a whole bunch of factors that go into that.

So really, the thing that you're seeing at the end of each quarter is just a result of our formulas and our calculations, and then we come out and say, "Okay, this is what our reserves should be." And then we either unwind or don't unwind or whatever we do to make that number. So that's the product of what you're seeing, and that's why you've seen 3 quarters in a row that we have on loan reserves.

And then previously to that, you saw 8 quarters where we didn't take any reserve. So it's really a product of that formula, and the economy has something to do with that formula, and improving credit trends have something to do with that formula and all kinds of other stuff in there.

Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division

Right. So I guess that's just it, right? All of the inputs into that formula seem to be moving in the right direction. So it seems reasonable that continued negative provisions, at least here for a little while, would seem reasonable.

Christopher D. Myers

Yes, hard for me to answer that question. But I mean, we're 3 quarters of them in a row, so we've seen that trend. But it's hard to forecast going forward. We'll put in the formula and it will spit something out at the end of the third quarter, and we'll be off and running.

Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division

Okay. Then as my follow-up, quick question on the fees. The other noninterest income line has been bleeding a bit lower. Can you talk about what's in that? And is that going to continue in that direction or is that stabilized here?

Christopher D. Myers

Well, the other noninterest income for the year 2013 was down a little bit. And one of the things that -- we didn't do a lot of swaps incomes. We didn't do any swap income in 2013, and that was really a function of the yield in terms of what we would get on a variable rate versus the yield that we get on a fixed rate. So I think the year before, we had about $1.2 million in swap fee income for 2012.

In 2013, we didn't have any fee income in that area, so we didn't really -- we didn't do any new swaps in 2013. We're still looking to do swaps. The other thing is, as our non-interest-bearing deposits increase, some of those customers, we're not seeing as much as we were before because they're keeping higher deposit balance in their non-interest-bearing accounts, so they don't want to get fee. So it's a little bit of a tradeoff there. We also had an increase in the FDIC loss-sharing asset which impacts that as well.

Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division

Okay, great. Chris, that's helpful. I appreciate you taking my questions.

Christopher D. Myers

I'm sorry, the decrease in FDIC.

Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division

Right. Yes, I got that.

Christopher D. Myers

Sorry, I was looking at it backwards. So yes, decrease, I meant.

Operator

The next question we have comes from Tim Coffey with FIG Partners.

Timothy N. Coffey - FIG Partners, LLC, Research Division

Chris, can you talk a little bit about how you feel about your efficiencies right now and opportunities, if any, to control expenses going forward?

Christopher D. Myers

Yes, our efficiency ratio has been kind of holding in that 45% to mid- to high-40 percentage. And I think that's a good place for us. Although I don't wake up every morning and say, "Oh, I want my efficiency ratio to be 45%," or something like that. Right now, I think we're operating in an efficient manner. We have consolidated a few offices. We consolidated 2 offices in 2013 because brick-and-mortar is not as necessary to banking as it was before. But we're spending more money in technology and product and so forth so people can do -- can bank online and can bank remotely. So there's a little bit of a tradeoff there.

On the other side on expenses, we are investing in some of these new teams, so that does cost us money. When we're building out San Diego, we're hiring people in Orange County. We're bringing a new person on in the agribusiness sector, and he's going to build out a team, so forth and so on. That is -- we're investing in people because we're in a growth mode. Right now, we feel like we've been able to grow loans for 2 consecutive quarters, $100 million in each quarter and we're excited about that. So we're reinvesting in our business and trying to get as much growth as reasonably possible. We don't want to overgrow and take too much risk, but at the same time, we're controlling our growth but investing in our business.

Operator

The next question we have comes from Julianna Balicka of KBW.

David Gong - Keefe, Bruyette, & Woods, Inc., Research Division

This is actually David Gong for Julianna. So I've been reading a lot of articles on -- about the dry season and lack of water for the dairy industry. I'm just wondering if that has affected the farmers in your market.

Christopher D. Myers

You know what, it's interesting. I was just talking to George Borba, Jr., one of our directors who's a dairyman, about that yesterday at our board meeting, and I said, "So George, do you feel like this is affecting us yet?" And then George's comment was, he goes, "We're watching it. No effect yet, but it's something that we're watching closely."

And you look at the rain and so forth in California and the apparent drought that we're facing, we don't know what's going to happen with that. But then you look at it across the country and it's snowing, it's raining and all this stuff. So it's going to be interesting to see how that plays out, but we really don't know the impact on that at this point.

David Gong - Keefe, Bruyette, & Woods, Inc., Research Division

Okay. And just as a follow-up question. So you said prepayment penalty is coming down significantly. So would you say, like for 2014, that the 270 [ph] level will be a good run rate for the year?

Christopher D. Myers

Yes, it's hard to project that. I think that the 270 [ph] is a more normalized level, I think, than what we were seeing before. It just depends -- I think you're going to see, it depends on what interest rates do. If interest rates -- if the 10-year treasury is -- goes to 3% and beyond, I think you'll see moderate pressure on prepayment penalties, but I think it will stay down. If the 10-year treasury goes back to 2.50% or below, I think you're going to see a lot more -- there'll be more prepayment pressure and that will drive more prepayment income.

So it's really -- I think it's a product of that. Because the prepayment penalties are coming from our commercial real estate loans that we either have to refinance and we keep the loan and charge them a prepayment penalty or we lose the loan and they pay it off and pay us a prepayment penalty. So the less pressure on that, the more normalized it becomes.

Operator

[Operator Instructions] The next question we have comes from Gary Tenner of D.A. Davidson.

Gary P. Tenner - D.A. Davidson & Co., Research Division

I just had a follow-up question on the expense side, on the personnel line, in particular. Last quarter, I believe that the spike in personnel cost was related to some true-up on the bonus incentive side. This quarter, personnel remained over $18 million. Should we think of fourth quarter as more of a loaded number for the new hires and teams you've brought on? Or was there some additional true-up in the fourth quarter?

Christopher D. Myers

No, the fourth quarter was pretty normalized for the most part, although some of those teams were hired midway through the fourth quarter, so we don't have the full impact of them being in there. And there are times when you are hiring people, though, you are paying them a sign-on bonus or something like that, which tends to be a little bit lumpy along the way.

But if you look at our last 4 quarters of salary and benefits, the highest being the third quarter at $18.4 million, we were $18.2 million in the fourth quarter, $17.1 million in the second quarter and $17.3 million in the first quarter. So no question, we're reinvesting in our business. We also typically do our merit increases, our -- for our employees in the first part of the year. And that will affect -- that does -- if we do raises, if you will, for our people, that will affect us in the second and third quarter by a few percent.

Operator

[Operator Instructions] The next question we have comes from Hugh Miller of Sidoti & Company.

Hugh M. Miller - Sidoti & Company, LLC

I just had a follow-up question just on the acquisition landscape that you guys had kind of alluded to earlier. Previously, you guys, I think, talked about kind of seeing a window of opportunity while some of your peers were sidelined integrating some larger deals. And obviously, in the past, there has been a little bit of a pricing disconnect between buyers' and sellers' expectations. Can you just talk about where things stand right now and whether or not you're seeing more or less deal flow coming your way for things you could be looking at?

Christopher D. Myers

We're actively having a lot of discussions, and I think we're hoping those discussions will lead to a deal in -- to announcing a deal in 2014. The climate out there is active. There's no question along. There's a lot of discussions going on. What we saw before was -- were banks that we felt like were more need to sell in terms of they weren't going to make it or they were just going to sluggishly go along.

And now we're seeing more banks that are considering more want to sell or would consider merging. And that's why I think you've seen some of these deals, these merger of equal deals go along because I think they're looking at, hey, if we put ourselves together, we can get some good efficiencies out of this and it's good for the investors. So we're looking at everything we can and -- but we are focused on quality and something -- and we're looking at deals that are in or adjacent to our geographic markets.

Hugh M. Miller - Sidoti & Company, LLC

Okay. And would you say that the lack of kind of moving forward with things, is that a function more on kind of pricing? Or is it more on finding the right opportunity for a franchise?

Christopher D. Myers

I think it's more the right opportunity than pricing. I think we're -- considering where our -- we're trading at a pretty good multiple right now, so we have good currency. So I think that's -- even though that's going to -- the high tide is going to raise all boats, I think that's going to help us as the tide has risen our boat a little bit more than some of the other people. I don't know if that's a good analogy or not, Hugh.

Operator

[Operator Instructions] At this time, there are no more questions. So I would now like to turn the conference back over to Mr. Myers for any closing remarks. Sir?

Christopher D. Myers

Great. Thank you very much. I want to thank you, all, very much for joining us on our call today. We certainly appreciate your interest and look forward to speaking with you again on our first quarter 2014 earnings conference call in April. In the meantime, please feel free to contact me or Rich Thomas, and have a great day. 2014, here we go.

Operator

And we thank you, sir, and to the rest of management, for your time. The conference call has now concluded. We thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you and take care, everyone.

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