Guaranty Bancshares, Inc. (GNTY) CEO Ty Abston on Q4 2021 Results - Earnings Call Transcript

Jan. 18, 2022 2:07 PM ETGuaranty Bancshares, Inc. (GNTY)
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Guaranty Bancshares, Inc. (NASDAQ:GNTY) Q4 2021 Results Conference Call January 18, 2022 11:00 AM ET

Company Participants

Ty Abston - Chairman and CEO

Cappy Payne - Senior Executive Vice President and CFO

Shalene Jacobson - Executive Vice President and Chief Risk Officer

Conference Call Participants

Michael Rose - Raymond James

Brad Milsaps - Piper Sandler

Brady Gailey - KBW

Matt Olney - Stephens


Good morning, and welcome to the Guaranty Bancshares' Fourth Quarter 2021 Earnings Call. My name is Nona Branch, and I will be your operator for today's call. This call is being recorded. After the prepared remarks, we will have a Q&A session.

Our host for today's call will be Ty Abston, Chairman and Chief Executive Officer of the Company; Cappy Payne, Senior Executive Vice President and Chief Financial Officer; Shalene Jacobson, Executive Vice President and Chief Risk Officer.

To begin our call, I will now turn it over to our CEO, Ty Abston.

Ty Abston

Thank you, Nona. Good morning everyone. We welcome you again to our fourth quarter earnings call for Guaranty Bancshares. As we highlighted in our press release this morning, the bank had a very good quarter and a really good 2021 for the full year, achieving record results, and almost every financial metric that we monitor and track. The asset quality of the bank remains extremely strong. We see a lot of positive things coming forward in the '22 for our company, and opportunities for our company. As we take advantage of the footprint and the growth that we see, and the positive things happen in our state of Texas going forward.

I'll turn it over to Cappy and Shalene and have them do an overview of some of the results, and then we'll open up to Q&A. Cappy?

Cappy Payne

Thank you, Ty. I'm going to give you a quick recap of the balance sheet. I think we've got some quarterly highlights up on the screen for those of you that can see it. These obviously are very high level bullet points on the balance sheet and income statement, things we're doing, but I'll give you a little bit of color added to that.

Our total assets were 3.09 billion at the end of the year. That's a very nice increase of 345 million or 12.6% for 2021. This was really driven by a nice increase in deposits, with about 384 million increase and I'll speak to a little bit to that a little bit later. A couple of items to note on the balance sheet before we get in on the statement, but our cash and cash equivalents, which is basically our fed funds, continue to remain elevated, and they're even double what they were one year ago.

So this is really high level that creates some headwinds on our net interest margin. This is probably about a 3x the historic level, which we've talked about in prior quarters. It has continued to increase mainly driven by that increase in deposits. For the quarter, though, we did add to the bond portfolio, and again, we've talked about this in prior quarters. We added about a net increase of 85 million during the quarter to our bond portfolio. And that's about 150 million increase year-to-date.

Try and just to do some consistently dollar cost to averaging into the portfolio while rates have been historically low. And we've been conservative in that regard and slow to pull the trigger to a large dollar amount -- with a larger dollar amount, just because of low historic rates. But the amount in fed funds is probably putting the headwind on the NIM of 25 plus basis points, just pressing it, just a little bit because of that excess liquidity.

But everybody wants to talk about loan, so we do highlight in the earnings release that you have our gross loan growth and then the detailed components of that. But then through COVID and the PPP stimulus program, we have emphasized our core loan growth, which ex out PPP and warehouse lending. For the year, we did have a little better than expected growth. Our 2021 guidance was for net loans, net of PPP and warehouse lending was the high-single-digit growth, and we ended at 10.8% that represents about $176 million in loan growth.

I know on a Q4, we did show a decrease actually in net core loans of about 10 million, which was about a half a percent decrease. But we did have in Q4 some elevated pay downs, again, like we did in Q2. Our loan fundings were pretty strong during the quarter, pretty consistent with what they had been in prior quarters. It's just we did have additional pay downs in the quarter that we were coming at in time, but did in Q4.

Our fourth quarter average loan balance though, you'll see in one of the tables there was higher than in Q3, so was our bond portfolio just for the reasons I mentioned, net balance was higher in Q4 and Q3. So those aspects helped the margin. But again, as I said, the headwinds aspect of that was the cash component that depressed at some because of its elevated balance.

As I said earlier, the deposits showed a nice increase $384 million. That's almost 17% for the year growth. $108 million of that came in Q4, which is typically shows an increase in the fourth quarter. Certainly, a positive part of that deposit increase is that about 60% of that $384 million or which is $235 million roughly came as an increase in non-interest bearing DDA accounts.

At 12\31 last year at the end of the year, our checking accounts were 38% of our deposits, and the average dollar year for little over 36% of total deposits. So, we've grown the number of checking accounts really for the last three years and the 8% to 9% range. So, I think every one of our locations reflected an increase in deposits for the year.

So our staff is pretty focused on onboarding relationship accounts, which focuses on having a checking account to guarantee along with other deposits or other products. So that along with keeping our cost of funds manageable has been a positive trend toward our growth for 2021.

And looking at the shareholder equity component, it increased about 4.8 million for the quarter and 29.6 million year-to-date. Again, this is as discussed in the earnings release, that's a nice increase that helps maintain our common equity capital ratios even with that, over 12.5% growth that we've experienced in total assets for the year.

Again, this quarter, we did not buy back any stock. And again, we paid out a $0.20 dividend to shareholders that made a year-to-date cash dividend of $0.80, which was about 24% of our earnings per share for the year. And at the current price level, that's about a 2.2% cash yield on dividends.

And I'll remind you, we did do a 10% stock dividend in Q1 of 2021 on top of the $0.80 cash dividends. So, all those components with the growth and stock really provided a nice total return for our stock for 2021 as most financial stocks reflected.

The next set of bullet points is turned over to the income statement. As Todd mentioned, we were very pleased with our earnings for the year with good fourth quarter and we had a really good earnings for 2021. Our net earnings as detailed in the earnings release for the fourth quarter for 9.2 million, that's $0.76 per share -- per basic share, as compared to 9.3 million and linked quarter, which was $0.77 per share in Q3.

Year-to-date earnings were 39.8 million as $3.30 per share, that's compared to 2020 net earnings of 27.4 million or $2.25 per basic share. So that's a really nice increase, of course we again talk about the components of that and a lot of that been in the provision that we did in 2020. So our year-to-date, return on assets is 1.36% and then we identify the Q4 for you there on the screen ROA and ROE. But looking at the year, we really pleased with our return on assets of 1.36 for the year and a return on equity of 13.72% year-to-date for 2021.

Again, this quarter as we've shown in prior quarters, we do detailed out for you in table format, a core earnings in this earnings release. And you'll see that in the fourth quarter 2021 was one of the strongest, was the strongest quarter and our core earnings in the last five quarters matter of fact, and we defined core earnings as on our earnings -- our net earnings before provision for credit losses, before income tax and before the effects of the PPP loan activity, which obviously we've had quite a bit for the last two years.

So, our fourth quarter net core earnings were 10.1 million, that's $0.84 per basic share comparatively, and looking at that as compared to the link quarter that's up from $0.81 per share. We did not do a provision in the fourth quarter, nor did we do a release of provision like we have done in the previous two quarters during 2021 and because of that our ACL continue to grow a little bit or stay steady in the fourth, I guess just saying is 1.64% ex-PPP loan to compared to loans ex-PPP for the year.

Shalene will give a little more detail on the components of our ACL and what we've done, how we've changed it over the last year. So our net interest margin again was pretty steady for the quarter. In fourth quarter, it was 3.39% as compared to the linked quarter of 3.40%, so not much change there. When we look at the ex-PPP activity, which we again show that and tax reform in the release, our net interest margin was 3.35% compared to linked quarter 3.36%. Again, very steady was just to kind of show you the differences when we back out PPP loan activity.

Our total loan yield actually increased in fourth quarter by 4 basis points to 4.71%. And then if you back out again, the PPP activity that was 4.66% during the fourth quarter, and that's down from the previous quarter of 4.73% again in Q3. But that's very reflective of what is done all year. Again, we put out our loan yield for the whole year ex-PPP was 4.75% for the year, and that's compared to before adjustments 4.84%.

So it's really shows that about that mad basis points difference throughout the year when you knock out the PPP activity, and that's really generated from the fee income that we're recording due to those loans we've made in the PPP program. In our total cost of deposits continues to decrease, looking at Q4 our total cost of deposit was 18 basis points, that's compared to linked quarter of 21 basis points in Q3.

And then, our year-to-date cost of deposits were 22 basis points compared to 2020's year-to-date cost of deposits of 54 basis points. So again, certainly supports our net interest margin and probably pretty reflective of a larger percent of deposit and in noninterest bearing which certainly helps not only in our cost of deposits, but in our net interest margin component to.

Then looking at the noninterest income categories, our noninterest income did decrease 400,000, that's about 6% in the quarter, catches your attention, I realized a couple of thoughts there. All that decreased plus a little more actually came in a decrease in loans sold in the secondary market. You might notice in the comparative quarter, Q3 that was the highest quarterly volume we've had all year.

And then by the way, Q4 was the lowest quarter that we've had all year and traditionally it is a lower volume quarter, but not typically by 30% as those numbers would reflect. A couple of thoughts again, for the gain on sales 2022, I'm projecting a volume decrease of the 12% to 15%, not 25% to 30% as reflected in this quarter. We did lose a couple of originators that had some pretty good volume. We're looking to replace them pretty soon.

I think we will in 2022. So that will help offset that, but with the shift of rates increase in rates and the shift of refi versus new loans, the volume has flowed somewhat both in mortgage and in warehouse lending. But another factor on the mortgage side is, we have decided to keep some mortgages in house. We didn't do a whole lot of that in the last quarter or in 2021, but we did keep about 8 billion that traditionally would've been sold in the secondary market. And we've committed up to 20 million, 25 million in that program. I don't know that we'll get that high, but we have committed to do keep some of those in house as a way to deploy some of our liquidity.

But overall, just to give a little guidance I do project our 2022 noninterest income to be an increase in total around 5%. And looking at our noninterest expenses, they did decrease for the quarter about 300,000, but you'll note that we did have a non-recurring expense in Q3 and length quarter of about 400,000. So when you back that out expenses actually increased about a 100,000 and we talk about that in the earnings release, some of that's FDIC insurance, but we did talk about, and we did see some salary cost pressures in the quarter that we didn't really plan for.

But we think that some adjustments that we've already made and pretty confident that we'll continue to deal with that going forward as most companies are. And trying to keep staff appropriate staff properly staffed, going forward, I think there'll continue to be some cost pressures there in salary. And we also did disclose the release that we had some increases employee benefit costs, which specifically with the health insurance claims that were higher this year that than prior years.

So looking forward and looking at 2022 expenses last quarter, I think I told you that we were projecting in a $75 million range. I think I probably it's going to be in the 76, maybe $76 million to $77 million range going forward. We do have quite a few job openings posted that I think will get filled throughout the years.

Some of will be coming up in a little bit later, even with anticipated growth, but we have quite a few job positions posted of which a lot of them are production oriented. So if we add to some of the production staff, certainly we think we'll be able to continue to grow in the markets that we're in the regions that we're in. So that's kind of a high level over cap of the balance sheet and income statement.

So I'll turn it over to, to Shalene, and let her continue on.

Shalene Jacobson

Thank you, Cappy. On this slide, I'll cover quickly the COVID-19 response, any deferrals related to that and an update on the PPP program. Like the rest of the nation on current search here in Texas, too. Although most of our businesses and restaurants seem to have remained open. For the most part, all of our bank locations are open and employees are back in their branches, except if we need to have temporary lobby closures due to staffing shortages from positive COVID tests and to disinfect those affected locations.

We did roll out a remote work policy for positions that are conducive to that type of arrange, which has really helpful during this latest variant because we've been able to quickly transition back off of staff to work from home more efficiently, and hopefully reduce the likelihood of spread and improved safety of employees.

As we mentioned on the third quarter call, all of the borrowers who receive the COVID-related modification have returned to their contractual payment schedules, and we currently have no borrowers on any kind COVID-related program.

For a PPP update, the forgiveness has been doing very well during year actually, and the PPP 1 program, we only have about 1.3 million remaining on our books, and most of those are now on a P&I schedule, so they'll either be repaid from borrowers or they -- most of them still have the opportunity to be forgiven, or if they happen to go delinquent we'll ask the SBA to repay those under the guarantee.

For the PPP 2 program, we started with a 128 million and have about 49.3 million remaining on our books now. And under both programs, we have about 1.2 million of net deferred fees that remain to be recognized. So we think we'll probably as long as the forgiveness keeps going, like it's going, recognize a significant portion of that 1.2 million during 2022.

Next, I'll cover the overall loan portfolio and credit quality. As Cappy mentioned, and I just mentioned our borrowers of far, whether the COVID storm pretty well and the Texas economy is strong. We do expect to have good loan growth in 2022. However, the variant has somewhat slowed things down and we think rising rates may present a headwind to new production. So we're estimating high-single-digit growth for now for 2022.

The Austin area in our Central Texas region had a great 2021, and it really is our fastest growing region. We've recently opened two new locations there, one in Georgetown, which is a suburb north of Austin in Q3 2021 we opened that. And then one in Lake Way, which is the suburb west of Austin, and that's actually officially opening today. So we've got a great team there and look forward to strong growth in that region, as well as the growth in our other regions, too.

As Cappy mentioned, ex-PPP and warehouse, our core loan portfolio was down slightly less than 1% in the fourth quarter, but was up about 10.8% during 2021. The slight decrease in Q4 was really driven by loan payoff outpacing production, like Cappy said. Including our warehouse loans growth was down about 2% in the fourth quarter. The decline in our warehouse line balances is partly the result of lower volume of mortgage refinancing.

But for our bank is primarily due to several of our larger warehouse customers moving from a delegated channel rather than a non-delegated channel which can certainly be more profitable to them. But we actually don't offer delegated products due to the higher risk for our bank. So we're more conservative with this particular line of business.

So we're slow backfilling with the new customers, but the warehouse alliance will likely read main balances more similar to Q4 during the upcoming year. And on a positive note, as Cappy mentioned, we think our loan yield has held up well during the past couple of years, as rates went down. Our average loan yield ex PPP is 4.66% for Q4 and with 4.75% of the year.

And finally, with respect to growth and yield -- as mentioned on private prior calls, we do have a large amount of our portfolio with rate floors, which we're monitoring closely to understand how this will impact earnings when rates begin to rise again.

We currently have about 727 million or 38.7% of our total loan portfolio at their interest rate lower right now, and the average rate of those loans that are lower 4.29%. So if rates increased 75 basis points during 2022, which seems to be a popular increase expectation than 26.3% of those loans that are currently at their rate floor will be priced at a higher rate.

With respect to nonperforming assets, or credit quality, really, despite the continuing challenges with COVID, our credit quality remains very good. Although, we're remaining cautious with our allowance reserves because many of the economic stimulus programs have come to an end, and we really want to closely and more further monitor the possible effects of these programs coming to an end.

So, our non-performing asset as a percent of total assets was 0.09% at the end of the fourth quarter '21. And our net charge offs were also low in Q4, it only 188,000 or 0.04% of our total loans. And finally, on to the allowance for credit losses, and as Cappy mentioned, we had no reserve provision during the -- no provision or reverse provision during the fourth quarter, and we had a 1.7 million reverse provision for the year.

We had expected and hoped at the beginning of 2021, that we'd be able to fully unwind that COVID specific key factors that we built into our model during 2020, which amounted to about 55 basis points across our portfolio. However, because of the Delta variants at first, and then the Omicron variants have followed that we chose to slow that down. And we have about 14.5 basis points COVID related, COVID specific key factors still in our portfolio, our calculation, I'm sorry.

We've chosen to be very cautious people in wanting those key factors just because like I said, we want to impact. We want to understand how these variants are impacting the economy as well as understand how borrowers might be affected by the economic stimulus programs coming to an end.

So, hopefully, as Omicron begins to slowdown and we understand what borrowers are doing with our economic stimulus, we'll be able to further unwind that. Our fourth quarter allowance for credit losses as a percentage of total loans was 1.59% and ex-PPP was 1.64%, so we still have a pretty strong reserve in place.

That is the end of our prepared remarks. So I will now turn it back over to Nona for Q&A.

Question-and-Answer Session


Thank you, Shalene. [Operator Instructions] Our first call today is Michael Rose, and he's with Raymond James. Michael, you should be able to unmute your line.

Michael Rose

So I just want to circle back to some commentary around the loan growth. Obviously this quarter was a little softer, seems like pay downs or to blame still for the year over 10% looks like you're guiding five single-digits this year. Is that more function of just maybe you had some accelerated growth from some of your hires this year? Is the greater pay downs expected? Are you being cautious just given the strength to the market because you mentioned pipelines are still pretty solid? Can you give us a little bit more color as to how you get to that high single digit rate? Thanks.

Ty Abston

Michael, this is Ty. I'll take that. So it's a combination really of all three. I mean, we, our portfolio has always had a very short duration. So, we have pretty robust pay downs throughout the year. And then as we're sourcing new relationships and opportunities, it's obviously bumpy through the year as far as different times of the year at the company that we're able to book different fundings that we have in the pipeline.

So, we're still very pleased with kind of where we landed for the year, in loan, net loan growth. We're looking at 22, and probably modeling out in the high single digits. Again, far that just be a little cautious to like we know where we are with some of the unknowns out there. But again, we still see a lot of strength in all of our markets and over regions in Texas.

And like Shalene says majority of our growth, right now the biggest percentage of our growth is coming from Central Texas region, Austin, MSA Bryan college station but we're also seeing some really strong growth and opportunities in Houston Dallas.

So still a lot going on in our state, a lot of positive things happening, but we designed the portfolio where it continues to have short duration. So to get the net growth we want to have, we're constantly playing catch up like a lot of banks are trying to build new productions offset the pay downs are in the portfolio.

Michael Rose

Okay. That's helpful. And then maybe just circling back to the excess liquidity and the growth in the securities put this quarter, I know you guys aren't VAT rate sensitive at this point, but you do have a still fair amount of excess liquidity, looks like you'd built the securities book. You have pretty nicely this quarter. Can you just give us the expectations for further securities redeployment as rates rise? And then, how should we think about the pace of that just given the assumption of the forward curve? Thanks.

Ty Abston

So, Michael like Cappy said, we continue to buy digital securities each quarter and I think you can look at a 5% to 10% increase probably each quarter as a good benchmark. And that's again net growth covered, in addition to covering whatever cause we had that are paying down. We're still doing that and being cautious with how we step into the market, and so we're going to maintain excess liquidity and other pieces as rates rise. We may sort of see some of these excess deposits moving out. The plan is to be registered on the cost of funds side of balance sheet too, so we're kind of keeping some dry powder for that as well.

Michael Rose

Okay. And then maybe just finally for me you know, it does seem like the expenses for you and everybody else are going to be little bit higher than expected, but the income was so good. I mean is the expectation that ex-PPP that you guys could still drive, positive operating leverage this year, is that a good way to think about it?

Cappy Payne

Yes, Michael, I mean that's our plans very specifically. I mean, we know we're getting out of the PPP volume, but we're going to continue to put producers on the ground that can grow in the markets we're in and there's a cost of that. As I said earlier, we've got quite a few job postings open and that includes back off as well as personal bankers as well as productions staff.


Our next call is from Brad Milsaps with Piper Sandler.

Brad Milsaps

Hey, good morning. Thanks for taking my question. I just wanted to follow up on Shalene comments around the variable rate loan portfolio. Some of my notes correct. So if you have -- did you have about 1.25 billion of total variable rate loans that would leave about 500 million or so that would re-price immediately. Is that the correct way to think about it?

Shalene Jacobson

Yes, it is.

Brad Milsaps

Okay. And then just curious, kind of where some of your new fixed rate production is coming on the balance sheet these days. I think maybe last quarter you mentioned in that 4 to 4.25 range. But just kind of curious kind of what you're seeing out there versus what's being paid down versus what you're putting on?

Ty Abston

That's where we're still seeing it Brad. It's in the low fours and we've seen some in the high threes too, but we averaged even through the fourth quarter, new loan production being in the low 4% range.

Brad Milsaps

Okay, great. And then just on the bond portfolio I'd be curious kind of where you're seeing a new yields coming on the books. I think, Cappy, you've mentioned before that you guys use kind of a level yield methods. I mean, the available for sale yield jump from like 148 up to 175 linked quarter, just kind of want to get a better sense of kind of where that could kind of settle in kind of give some of the volatility in those numbers?

Ty Abston

We do use the level yield method, Brad, as you mentioned, which keeps it pretty steady from the fluctuations of amortization, but we're looking at buying new bonds in today's market course. It's kind of -- it should be headed up in what we're seeing the 10 year increase, but we've been buying bonds in the five year average life, five, six year average life around 2%. So, I mean I think that as 10 year starts increasing or if it does, which I anticipate it will, that should improve from there.

Brad Milsaps

Okay, great. And so that, as I think kind of think about your cash plus kind of what you have left over in PPP. Maybe you can reduce that by a little more than half over the next 12 months if you continue to buy bonds 5% or 10% a quarter, is that the way to think about it?

Cappy Payne

Go ahead, Ty.

Ty Abston

Brad, that's a good way to look at. This is Ty. That's a look at it kind of a unofficial target between loan growth, between quarterly bond purchases and just at some point anticipated the deposit side either to level off and or start some of that maybe flowing out. It would be a good target at least in the back of my mind to try to kind of cut that in half to the year.

Cappy Payne

As I said, that's about 3x the rate that we've had or the level we've had in historically. So yes, to cut it in half would be I think that would be very productive.

Ty Abston

I mean, the biggest challenge of that its kind of baked in is that we're also continuing to develop core deposit relationships as Shalene mentioned, because we see that as a real driver to franchise value. So, I mean, we're not out of the deposit business. We're very aggressively growing core deposit relationships. So, we're -- and then we have model out for ‘22 to the same thing, but that being said, we're certainly not chasing excess deposits due to our access liquidity we have.

Brad Milsaps

And just final question, I just want to make sure that it’s very helpful. Shalene, this is to understand the commentary around the floor. You said 26% of the loan of floors would need rates up 75 to move. Does that imply that the other 75% would need higher moving rates? Or would those floors be lower than the average?

Shalene Jacobson

Well, it's really more of a combination of -- they would need either higher rates or they don't reprise in 2022, their next repriced data later than 2022 for the most part.

Brad Milsaps

So, those are variable in the sense that they don't maybe reprise immediately, but might reprise over a one or three year period, something like that?

Shalene Jacobson



Our next call will from Brady Gailey with KBW.

Brady Gailey

So, I know Guaranty in 2020 and early 2021 made an investment in some new loan producers. I was just wondering, kind of how that looks in 2022? You think you'll continue to make a notable investment in new lenders? Or do you think you're kind of happy with what you have and you'll be able to hit this kind of high single digit growth with what you have today?

Ty Abston

Hey, Brad. This is Ty. So, there won't be a targeted net increase in producers that being said, we're constantly onboarding new producers and all regions. And so, we'll be -- and are currently actually onboarding new REIT producers throughout our footprint. But that will not necessarily create net increase for us in producers.

Brady Gailey

And then, the effective tax rate was a little lower than normal, about 17% this quarter, I think normally 18% to 19%. But how should we think about the forward effective tax rates?

Ty Abston

Brady, it's going to be in the 18.5% range. I think we did have a up on deferred tax this quarter that a little bit. but we're targeting 18.5% for 2020.

Brady Gailey

And then finally, for me, just an update on M&A, we've seen some activity recently on the bank M&A side. Are you guys still looking at target? Do you expect to be active in M&A this year?

Ty Abston

Brady, we do. That being said, like we said before, we're looking for opportunities that are created to what we're modeling out that we can generate and plan to generate internally. And so if it's we get -- obviously, we get calls quite a bit, but nothing specific at this point. And there's an opportunity that makes sense to bolt onto what we're already planning to produce. And we'll certainly take advantage of that, but we don't have anything specific that we're targeting at this point other than just having conversations looking for the right opportunity.


Our next call will be from Matt Olney with Stephens.

Matt Olney

Wanted some clarification around some of the comments here you provided around the non-interest income. Cappy, I think you mentioned a few items around down some mortgage for ’22 versus ‘21, can you just kind of reiterate what that was and then for the overall themes for the year? I have wrote down 5% increase. What's the baseline that you're using on that 5% increase?

Ty Abston

I think we did about 23 million during the year or 24 million during the year for 2021. So that's the baseline. So I'm talking about a 5% increase from their overall. And that's with a decrease in gain on sale of loans of about 12% to 15%.

Matt Olney

And then, clarifying the outlook for the loan growth high-single-digit, did that include or exclude the mortgage warehouse?

Ty Abston


Cappy Payne

That excludes.

Matt Olney

And then on the mortgage warehouse, I guess I'm less familiar with the delegated versus non-delegated loan channels anymore, because you can give us on that to help me appreciate kind of what the change was and during the quarter?

Ty Abston

Matt, this is Ty. So, the delegated versus non-delegated, those are two different channels in the mortgage warehouse space. And we stayed in the non-delegated channel, which gets, I mean, it's a Reader's Digest version of this, I mean, those loans are pre-approved by the investor on the backend. So, it's a channel that just has left rip from our standpoint. We're not at this point, ready to scale that operation up to actually add delegated, which does add opportunity, but also adds a risk profile that we're not ready to seal up to.

So, we're going to stay kind of in a non-delegated channel. And so as depending on what the markets doing as markets, is underwriting changes, different places that non-delegated, clients are able to actually obtain delegated channels, mortgage route plans that we're not doing, and then we try to backfill that and onboard new relationships to cover.

Matt Olney

And then the loan yield, I think you mentioned excluding PPP core loan yields were down around 7 basis points. As you disclosed a new renew loan yields already. For the pay down to the fourth quarter, I'm curious, if those pay downs came with higher loan yields. I'm just trying to appreciate kind of why the loan yields were down 7 basis points?

Cappy Payne

Matt, I have the dollar amount of loan payoff. I don't have the yield that goes with it. I don't know exactly, what that would be. But I can tell you the fee income moves around the margin observe or the loan yield quite a bit of peace to fee income from the PPP, which has really tapered off quite a bit as we get down below 50 million in total outstanding, and we've got about a 1 million left to book that I think for the most part of that fee income.

They will get booked in 2022 as we approach zero and PPP loans and sometime during the year. But I'd say all that to say as well, we're showing the ex-PPP loan volume just to kind of take out that noise. And answer your question, I don't know specifically, if those payoffs are from our yielding loans. I can find that out and get back with you.

Matt Olney

Would you say that the mortgage warehouse loans that were also paid down this quarter? I would think those would be lower yielding loans versus the rest of the book. Is that a good a fair assumption, you think?

Cappy Payne

Yes, it is assumption


There are no further questions. I would like to remind everyone, the recording of this call will be available by 1 p.m. today on our Investor Relations web page at

Thank you for attending. This concludes our call.

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