CVB Financial Corp
NASDAQ:CVBF
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
15.75
23.83
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
CVB Financial Corp
You don't have any saved screeners yet
Good morning, ladies and gentlemen. And welcome to the Fourth Quarter and Year-ended 2021, CVB Financial Corporation and its subsidiary, Citizens Business Bank Earnings Conference Call. My name is Michelle and I'm the Operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question and answer period. Please note this call is being recorded. I would now like to turn the presentation over to your host for today's call, Christina Carrabino. You may proceed.
Thank you, Michelle. And good morning, everyone. Thank you for joining us today to review our financial results for the 4th Quarter and year ended 2021. Joining me this morning are Dave Brager, Chief Executive Officer, and Allen Nicholson, 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 Investors tab.
The speakers on this call claim the protection of the Safe Harbor provisions, contained in the Private Securities Litigation Reform Act of 1995. For 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, 2020. And in particular, the information set forth in Item 1A, risk factors therein. For more complete version of the company's Safe Harbor disclosure, please see the company's earnings release issued in connection with this call. Now, I will turn the call over to Dave Brager. Dave.
Thank you, Christina. And good morning, everyone. The Bank delivered another solid quarter and full-year of strong earnings. The 2021 earnings represented the highest earnings in the company's history. And over the last two years since the onset of the COVID-19 pandemic, Citizens Business Bank has maintained its high level of performance and confirmed our position as a safe, sound, and secure financial institution. We were pleased to complete the acquisition of Suncrest Bank on January 7, 2022 and to welcome Suncrest Bank's associates, customers and shareholders to Citizens Business Bank. We are excited about the acquisition and the opportunities it provides for expansion into the Greater Sacramento market, as well as solidifying our significant position in the Central Valley.
We reported net earnings of $47.7 million for the fourth quarter of 2021, or $0.35 per share representing our 179th consecutive quarter of profitability. We previously declared an $0.18 per share dividend for the fourth quarter of 2021, which represented our 129th consecutive quarter of paying a cash dividend to our shareholders. Fourth quarter net earnings of $47.7 million or $0.35 per share compared with $49.8 million for the Third Quarter of 2021 or $0.37 cents per share and $50.1 million for the year-ago Quarter or $0.37 cents per share.
For the Fourth Quarter of 2021, our pre-tax pre-provision income was $66.8 million compared with $65.7 million for the prior Quarter and $70.5 million for the year-ago Quarter. Net earnings were $212.5 million for the year ended 2021, a $35.4 million increase compared to 2020. Diluted earnings per share were $1.56 for 2021, compared with $1.30 for 2020. 2021 pre-tax pre-provision income was $272 million compared with $273 million for 2020. In 2021, we had $25.5 million recapture provision for credit losses. While in 2020, we had a $23.5 million provision for credit losses. Now, let's discuss loans. Our 2021 loan production continued to be strong in the fourth quarter. From year-end 2020, to December 31, 2021, quarter loans, excluding PPP
loans, grew by $235.3 million or approximately 3%. Total loans at quarter end were $7.89 billion, a $38.2 billion increase from the end of the third quarter.
After excluding PPP loan forgiveness and the seasonal increase in dairy and livestock loans, fourth-quarter loan growth was $76 million or approximately 4% annualized. Loan growth in the fourth quarter was led by continued growth in commercial real estate loans which grew by $55 million compared with the end of the third quarter. And by $288.2 million or approximately 5% for all of 2021. C&I loans increased $43 million compared with the third quarter, but were essentially flat when compared to the end of 2020. Although line of credit utilization for C&I loans continues to be lower than our pre -pandemic experience, it increased modestly from the third quarter. The line utilization rate for C&I loan was 29% at the end of the fourth quarter compared with 27% for the third quarter, and 29% at the end of 2020. Dairy and livestock loans grew by approximately $110 million from the end of the 3rd quarter. The majority of the increase in dairy and livestock loans was seasonal and much of the growth occurred near the end of the 4th quarter as many of our dairy owners chose to defer their milk checks into the first quarter of the following year and or prepay their feed expenses. Dairy livestock loans grew by approximately $32 million from the end of 2020.
PPP loans declined by $144 million compared with our third quarter and by $696 million from the end of 2020 due to the continued forgiveness of these loans. Non - non-PPP SBA loans declined by approximately $19 million compared with the third quarter and $15 million from the fourth quarter of 2020. We are optimistic that we can continue to grow high-quality loans in 2022 at a pace similar to our 2021 core loan growth. We also anticipate that the Suncrest Bank merger with an expanded geography and CVB's greater lending capabilities, can further enhance our growth. At quarter end, non-performing assets defined as non-accrual loans plus other real estate owned were $6.9 million compared with $8.4 million for the prior quarter and $17.7 million for the year-ago quarter.
At fourth quarter end, we had no OREO properties and the $6.9 million in non-performing loans represented nine basis points of total loans. During the fourth quarter, we acquired an OREO property which was sold during the fourth quarter at a gain of approximately $700,000.
During the fourth quarter, we had net loan charge-offs of $345,000 compared with net loan recoveries of $22,000 for the third quarter of 2021. We had net loan charge-offs of $3.2 million for the full year 2021 compared with $308,000 for the full year 2020. At December 31, 2021, we had loans delinquent 30 to 89 days of $2.5 million compared with $1.1 million at September 30th, 2021. Classified loans for the fourth quarter were $56.1 million compared with $49.8 million for the prior quarter, and were lower than year-end 2020 by approximately $23 million. Our $65 million allowance for credit losses is approximately 103% of our total classified and non-performing loans.
Now, I would like to discuss our deposits. At 2021/12/31, our total deposits and customer repurchase agreements were $13.62 billion compared with $13.6 billion at September 30, 2021, and $12.2 billion for the same period a year ago. At December 31, 2021, our non-interest bank deposits were $8.1 billion compared with $8.3 billion for the prior quarter and $7.46 billion for the year-ago quarter. During the fourth quarter, non-interest bearing deposits averaged $8.3 billion, a $335 million increase from the average balance in the third quarter. A key differentiator for our bank is the level of our non-interest bearing deposits. Non-interest bearing deposits were greater than 63% of our average deposits for the fourth quarter, and the $8.3 billion balance at year end, exceeded the bank's $7.8 billion loan portfolio.
We continue to see strong deposit growth for the fourth quarter, as average total deposits and customer repurchase agreements increased by $378 million, or an annualized rate of approximately 11%% from the third quarter of 2021 and $1.9 billion or approximately 16% higher on average than the year-ago quarter. The bank's funding is entirely core customer deposits and customer repos, which combined had a total cost of just three basis points in the fourth quarter. This three basis point cost of funds compared with four basis points in the prior quarter and nine basis points for the year ago quarter. I will now turn the call over to Allen Nicholson to discuss our investments allowance for credit losses and capital levels. Allen.
Thanks, David. Good morning, everyone. We deployed some of our excess liquidity during the fourth quarter into additional securities by purchasing more than $700 million in mortgage-backed securities. As a result, our total investment securities increased by $474 million from the end of the third quarter to $5.1 billion as of December 31, 2021. Investment securities available for sale or AFS securities, totaled $3.18 billion inclusive of a pretax net unrealized loss of $1.3 million. Investment securities held to maturity for HTM securities, totaled approximately $1.93 billion at December 31st. During the fourth quarter, we purchased $452 million in new AFS securities with an expected tax equivalent yield of 1.61% and $259 million in new HTM securities with an expected tax equivalent yield of 1.84%. The growth in our investments resulted in the investment portfolio increasing from 29% of earning assets in the third quarter, to 33% on average in the fourth quarter.
We continue to maintain a significant amount of funds at the Federal Reserve. Our credit balance averaged more than $2 billion for the fourth quarter. As interest rates have begun to rise in 2022, we've been able to purchase new mortgage-backed securities at the beginning of this year that yield exceeding 2%. If security yields continue to rise, we expect an increase in our security purchases in 2022. At December 31/2021, our ending allowance for credit losses was $65 million or 0.82% of total loans. When excluding PPP loans, our allowance as a percentage of the remaining loans was 0.84%, which compares to 0.91% at the pre -pandemic period end of December 31, 2019. In addition to the allowance for credit losses, we had $19 million during the remaining fair value discounts from acquisitions at the end of the year. For the full year ended December 31, 2021, We recorded a recapture provision for credit losses of $25.5 million. This compares to the provisions for credit losses of $23.5 million, we recorded in the first half of 2020. This was due to the estimated impact on loan losses from the economic forecast of a significant downturn in the economy, resulting from the initial onset of the COVID-19 pandemic.
Based on the magnitude of government economic stimulus, and the wide availability of vaccines, our economic forecast in 2021, continued to reflect improvements in key macroeconomic variables, and therefore, lower projected loan losses. Which resulted in a decrease in allowance for credit losses to $65 million. The allowance did not change from the end of the third quarter as there is limited changes to both our forecast of macroeconomic variables and the underlying loan quality attributes. Our economic forecast continues to be a blend of multiple forecasts produced by [Indiscernible]. These U.S. economic forecasts include a baseline forecast, as well as upside and downside forecast.
We continue to have the largest waiting on the baseline forecast. With downside risks weighted heavier than more optimistic forecasts. Our weighted forecast assumes GDP will increase by 2.7% in 2022, 2% for 2023, and then grow by 3% in 2024. The unemployment rate is forecasted to be over 5% in 2022 and 2023, and then declining to 4.8% in 2024. Now, turning to our capital position. For the year, shareholder’s equity increased by $73.5 million to $2.08 billion at the end of 2021. The increase was primarily due to net earnings of $212.5 million, including $9 million decrease in other comprehensive income, from the tax affected impact of the decrease in market value of available for sale securities, and $98 million in cash dividends.
Our overall capital position continues to be very strong. Our regulatory capital ratios are well above regulatory requirements, be considered well capitalized, and above the majority of our peers. At December 31st, our common equity tier one capital ratio was 14.9% and our total risk-based capital ratio was 15.6%. During the third quarter of 2021, we repurchased $390,000 shares of our customer of our common stock under a 10b5-1 stock repurchase plan, which was terminated in late September due to the pending proxy solicitation associated with the acquisition of Suncrest Bank.
The acquisition of Suncrest closed on January 7th and resulted in the issuance of approximately 8.6 million shares of common stock and cash consideration of approximately $39.6 million. Our Board of Directors will evaluate a new authorization for the repurchase of the company's common stock as we have after previous bank acquisitions. I'll now turn the call back to Dave for further discussion of our fourth-quarter earnings.
Thank you, Allen (ph). Net interest income before recapture or provision for credit losses was $102.4 million for the fourth quarter, compared with $103.3 million for the third quarter and $105.9 million for the year-ago quarter. Although our total net interest income declined in the fourth quarter, as our net interest margin declined to 2.79%, core net interest income grew by more than $3 million. Our fourth-quarter reflected $4.2 million in lower interest and fee income from PPP loans, and lower discount accretion on acquired loans. The quarter-over-quarter increase in core net interest income was primarily driven by the $2.8 million increase in interest income from investment securities, which grew by $733 million on average for the fourth quarter. Fourth quarter earning assets increased by $340 million on average from the third quarter, as the increase in the investment portfolio was partially offset by a decrease in average loans of $82.7 million, and average funds on deposit at the Federal Reserve declined by $310 million.
During the fourth quarter of 2021, PPP loans had an average balance of $244 million compared with $502 million for the 3rd quarter of 2021. Our earning asset yield decreased by 10 basis points compared to the prior quarter. Excuse me. To decline in our earning asset yield was the result of a six basis point decline in our core loan yields, lower PPP fee income and lower discount accretion. Our balance sheet is very well positioned for rising interest rates with significant liquidity as demonstrated by approximately 47% of our earning assets at year-end in either cash or investment securities. Our tax equivalent net interest margin was 2.79% for the Fourth Quarter of 2021 compared with 2.89% for the Third Quarter, and 3.33% for the Fourth Quarter of 2020. When the impact of PPP loans, discount accretion on acquired loans, and non-accrual interest paid is excluded, our adjusted tax equivalent net interest margin was 2.65% for the fourth quarter, down from 2.68% for the prior Quarter, and 3.11% for the year ago quarter.
Our net interest margin continues to be negatively impacted by our excess liquidity. During the fourth quarter, we had approximately $2 billion on average on deposit at the Federal Reserve, earning 15 basis points. Our net interest margin in the fourth quarter would have been approximately 42 basis points higher without the $2 billion On average on deposit at the Federal Reserve. Loan yields were 4.29% for the fourth quarter of 2021, compared with 4.43% for the third quarter of 2021 and 4.56% for the year-ago quarter. Total interest and fee income from PPP loans was $4.2 million in the fourth quarter compared with $7.9 million in the third quarter. Excluding the impact of PPP loans, interest income related to purchase discount accretion and non-accrual interest paid, loan yields were 4.08% in the fourth quarter of 2021, 4.14% for the third quarter of 2021, and 4.38% for the fourth quarter of 2020. Prepayment penalty income decreased by $35,000 quarter-over-quarter, while decreasing by $852,000 compared with the year ago quarter.
New loan production continues to reflect yields from 3.5% to 3.75% on average. Our cost of deposits and customer re-post, as well as our total cost of funds for the fourth quarter was three basis points. Interest bearing deposits and customer repos, increased on average by $43 million from the third quarter, but interest expense declined. As the cost of interest bearing deposits and customer repurchase agreements decreased from nine basis points in the third quarter, to eight basis points in the fourth quarter. Our cost of funds declined by one basis point from the prior quarter, and six basis points compared with the fourth quarter of 2020. During the last cycle of rising short-term rates from 2014 through the end of 2018, where the Fed increased rates by 225 basis points, our cost of funds increased by only 8 basis points. We believe that our low cost of funds will remain relatively stable if short-term rates rise in 2022.
Although the impact of the deposits acquired from the Suncrest Bank acquisition, may have a small impact on our funding costs for the first quarter of 2022. Moving on to non-interest income. Non-interest income was $12.4 million for the fourth quarter of 2021, compared with $10.5 million for the prior quarter and $12.9 million for the year-ago quarter. The fourth quarter included a $700,000 gain on sale of an OREO property, as mentioned earlier, and $890,000 from the collection of a previously acquired loans that had been charged off prior to our acquisition of San Joaquin Bank. Deposit service charges were flat compared with the third quarter, but were higher than the fourth quarter of 2020 by 12% or $479,000. We did not have any fees from interest rate swaps during the fourth quarter.
In comparison, swap fees were $167,000 in the third quarter and $876,000 in the fourth quarter of 2020. Generally speaking, our volume of interest rate swaps was impacted by the shape of the yield curve. With a relatively five yield curve more conducive to a higher volume of swaps. Our customer investment services fee income increased by approximately $430 000, or more than 16% compared with the prior quarter. While being $436,000, or approximately 16% higher when compared with the year-ago quarter. Our trust business anticipates losing a significant relationship in 2022 due to the relocation of our customers out of state. The impact will be primarily to assets under management. However, the revenue impact will represent less than 4% of the trust and investment services revenue.
Overall, we are optimistic that addition of Suncrest customers and the extension of our geographic footprint, will allow us to grow fee income through a wider array of products and services not previously offered by Suncrest, including wealth management, investment management, foreign exchange, and more sophisticated treasury management products. Now expenses. We have continued to manage our expenses in a disciplined manner as reflected by the consistent level of Non-interest expense over the past year. Non-interest expense for the fourth quarter was $48 million compared with $48.1 million for the third quarter of 2021 and $48.3 million for the year-ago quarter.
Non-interest expense totaled 1.19% of average assets for the 4th quarter of 2021 compared with 1 point to 2% for the 3rd quarter of 2021, and 1.37% for the 4th quarter of 2020. Our efficiency ratio was 41.8% for the fourth quarter of 2021 compared with 42.27% for the prior quarter and 40.64% for the fourth quarter of 2020. In regard to the Suncrest merger, we incurred $153,000 in acquisition-related expenses in the fourth quarter and $809,000 in the third quarter. We expect to see higher acquisition expense in the first and second quarters of 2022. The systems integration of Suncrest Bank will occur in mid-February and we will consolidate two banking centers in the second quarter. By the end of the second quarter, we expect to have completed the integration and consolidations and the third quarter of 2022, will reflect the full benefit of our expense savings. According to various economic reports, the California economy is strengthening, as many sectors have recovered or are in the process of recovery to their pre pandemic levels.
However, labor shortages, supply chain disruptions continue to negatively impact the businesses and the industries we serve. These issues are also beginning to impact our staffing and labor costs, as well. As we start 2022, we anticipate that these inflationary pressures will be a greater challenge to our expense management. However, we continue to be disciplined and will increase our efforts to maintain our efficient operations through increased automation and digital investments. For 2022, we plan on investing in numerous projects with total spend estimated at close to $3 million. These investments will enhance the productivity and efficiency of our sales efforts, our risk management processes, and our overall operational scale. As we look forward to 2022, our outstanding asset quality, strong capital levels, low cost funding, and substantial liquidity give us a strong position to grow core loans and take advantage of the anticipated increases in interest rates. Furthermore, the integration and consolidation of Suncrest Bank in the first half of 2022 will enhance our growth opportunities and our ability to generate positive operating leverage in the second half of this year. In closing, we're proud of our accomplishments in 2021 as we have continued to successfully navigate through the COVID-19 pandemic and believe we are well-positioned for future growth in 2022. I want to thank our associates for their continued hard work and dedication. Our customers for their business and ongoing loyalty, and our shareholders for their continued support and trust. We look forward to a successful 2022. Please stay healthy and safe. That concludes today's presentation. Now, Allan and I will be happy to take any questions that you might have.
As a reminder to ask a question, [Operator Instructions]. If your question has been answered, you would like to remove yourself in the queue [Operator Instructions]. Our first question comes from Matthew Clark, with Piper Sandler. Your line is open.
Hi. Good morning, guys.
Good morning.
Wanted to start on the rate sensitivity outlook. I know you guys disclosed the 21% benefit for up 200 over two years. But what's your expectation for up 100 over the first year? It sounds like deposit Betas will be pretty negligible. But what are your thoughts on the asset side of things? I think in the deck you show $800 million of cash coming off the securities portfolio this year, but thinking more about the loan portfolio and any force you have that you have that -- you might need to work through?
We do disclose in the Q and the K the impact on a ramp basis. Yeah, that's been pretty consistent for the institution. Obviously, the shape of the yield curve has a big impact on what the impact might be. Our loan book might have roughly 20% that's variable. You mentioned all liquidity we have that we can deploy as rates move up, and historically our base has been very limited, but end of the day, we have a rate rise and at the steep curve is going to be very beneficial. If rates rise and it's a flat curve, it will be muted somewhat. Still beneficial, but muted.
Yeah, Matthew, as far as the floors are concerned on the variable rate loans at Allen mentioned, we do have floors in most of our loans, but many of the floors are around the rate that they are at now. I mean, that's a competitive situation. Obviously, it's great to have a higher floor, say of 4% or 4.5% floor. But if somebody can go across the street and get a 3.25% or 3.5% rate, you have to -- you have to balance that based on the relationship. So there is some probably movement before we see some of that benefit, but I don't think it's pretty -- I don't think it's very significant.
Okay and then Allen, how do you feel about the near-term core NIM outlook, if you exclude PPP and purchase accounting with Suncrest coming online? Should we anticipate another lag down here in terms of loans to earning assets, just given ex more excess liquidity and mix shift? And where do you think we find a bottom in the NIM ex-rates?
Well, I think there's going to be a lot of moving parts for 2022, Matthew. If you look at Suncrest, their loan yields are higher than our loan yields on average. Their cost of deposits is also a little bit higher, so we'll be re-engineering that a little bit. We do have a ton of liquidity and the asset mix obviously could be a big part of what changes in terms of the direction of our interest margin. If we are deploying a lot more of that into securities at attractive yields in the first second half of the year, that can certainly mitigate some of the decrease in loan yields. Loan yields could continue in the very near-term, maybe continue to tick down as we don't see anything on the short-end on move, but certainly, we could also get benefit of that. So many, many moving parts, we'll see what the Fed does and how the bond market performs thereafter.
Okay. And then just on expenses. Can you remind us or update us where the contribution kind of stands in terms of the expense run rate coming from Suncrest? We have it from a couple of -- from last quarter, but any update there on the contribution from Suncrest ex-merger charges and then just your underlying expense growth outlook given the wage pressure that we're seeing.
I'll start and then Allan can jump in. So as far as Suncrest on the expense run rate, we're executing to our stated 40% expense saves, and probably will do a little bit better there. We also will be consolidating the two offices in the second quarter, which will create a little more save there. As far as the overall expense rate, nothing's changed. I mean, we're still running and estimating that we're going to have low, low single-digit expense growth, and through the remainder of the year. Hopefully, we'll be able to execute on that. There are some headwinds with respect to labor and those issues, and we're experiencing that a little bit. The talent that's out there making sure that you keep your best people. So those are also headwinds. But I think we're going to be very consistent. We're investing in efficiencies in the organization both from the technology side. As I mentioned in my comments, and some of that should be able to offset some of the pressure we're having. So that's the plan.
Yeah. And then the only thing I would add is as Dave mentioned earlier, once we get through all the noise with Suncrest in the first half of the year, we certainly feel pretty confident in that positive operating leverage. By the third quarter, we'll be achieving that. If rates move significantly, it could be the magnitude getting better.
Okay. Thank you.
Our next question comes from David Feaster with Raymond James. Your line is open.
Good morning, everybody.
Morning, David.
I just wanted to start on loan growth. Loan growth was tremendous in the quarter and obviously, [Indiscernible] is seasonally stronger, but even excluding that, it was really good. Just curious what you're seeing in the market. Was this more of a function of improving production or a slowdown in pay-offs and pay-downs? And then just any color as we head into '22 on how the pipeline is looking. It sounds like new loan yields have held steady. Just kind of any commentary you could give there would be helpful.
Yes. Sure. We -- so I've mentioned I think on every quarterly call our loan production and, the pipelines have been strong and that remains. We actually produced over 15% higher on the loan production side in 2021 than we did in 2020. And as I mentioned in the past, 2020 was a record year for the bank. So obviously 2021 was a record year for the bank that contributed to, I would say to the new teams that we've hired, and the people that have come off or plus our, we remained open. I mean, we were open for business the entire time, and our bankers were all talking to people. And so we had a very good best-ever 2021 loan production. I don't think anything has changed for the previous quarters.
Our pipelines remain robust and strong. I think we're still kind of in that mid-single-digit growth rate. I mean, for the quality of loan that we go after, if we grow more than that, sometimes I would be a little more concerned from the asset quality perspective. But I'm very cautiously optimistic about continuing that subject to all the macroeconomic things going on. But I do think that we have a good pipeline going into 2022 and our goal was to do more than we did last year. And to your second regarding prepayment you did see there were some slowdown in the prepayment penalty area and that is reflective of the slowdown in loans being paid off, either refinanced or sold. So I think we're in pretty good shape.
That's great. And then maybe could you just give us some details on the competitive dynamics from your standpoint across your footprint. We hear a lot about asset sales and deleveraging, but just curious, it sounds like again, pricing is stabilized. You seeing any changes in structure or just some irrationality from the competitive standpoint and that might be causing you concern?
Yeah. That's always something that we talk about. We're a disciplined lender, so we get challenged when somebody's willing to do things without guarantees or interest-only for extended period of time or types of properties that we would normally loan a lower loan-to-value, they're loaning a higher loan-to-value. I think it's not as much on the credit underwriting and that aspect of it. It's still a price-sensitive world. And just to give you some real color, we just lost a deal to a bank smaller than us at 3.1% fixed for 10-years interest-only, 60% loan-to-value, non-recourse on a retail property. We wanted to do the loan at 50% and at a rate that was higher than 3.1. But we want P & I payments and we wanted to guarantee. So there are still irrational behaviors going on out there. But we are going to remain disciplined and not chase that.
And then just -- that's helpful. And then just touching on capital priorities, glad to see you guys repurchasing stock, being active. Just kind of -- How do you think about your capital priorities, obviously organic growth, probably numero Uno. But you guys are continuing to invest in the franchise. Just how do you think about dividend growth, continued repurchases? And just how are M&A conversations? I know we just closed Suncrest. But just curious how the pulse of the M&A market from your standpoint?
Yeah. There's still a lot of conversations going on, and we did close on crafts and we're going to be integrating next month systems. So we're open for business there if it's the right opportunity. We definitely are having conversations. I think the biggest thing on the M&A front is the seller and the realistic nature of what their expectations are with the rise and everybody's stock price recently. So we have our guidelines, we're going to remain true of those guidelines and how we evaluate acquisition opportunities. But there are a lot of conversations still going on. There's nothing imminent, but there are opportunities that we're being presented as far as the rest, we discuss our capital management strategies all the time. We had our board meeting yesterday, obviously. And those conversations, as Allan mentioned in his comments, are things that we are evaluating all the time. So I don't know if you want to add anything to that.
David, you can see with some of our acquisitions that -- because there's limited cash, we only put in about €40 million here with Suncrest, that it's hard to deploy capital through M&A. And so certainly the board is certainly a ware -- well aware that our capital levels are above peers. So we have to look at alternatives there. I think the dividend payout ratio as has been consistently said, we're targeting plus or minus 50% so I think I don't foresee that changing so -- but yeah, we do have that rich man's problem right now.
Yeah. Too bad. That's great [Indiscernible]. Thanks everybody, great quarter.
Thank you.
Our next question comes from Gary Tenner with D.A. Davidson. Your line is open.
Thanks. Good morning. I just wanted to revisit the loan growth commentary as it relates to 2022. That mid-single-digit looks a lot like with the back half of 2021 looks like ex PPP. I'm just wondering, does that assume any additional increase C&I utilization rates? Or would that become a potential positive lever above mid-single-digit rate, as you look out over the year?
That does not include the C&I utilization and the opportunities. If people do start utilizing their excess liquidity and then ultimately their lines. So that's ex any line utilization increase.
Thank you. And then with regards to the Suncrest book. Is there any part of their loan portfolio that would be in a run-off or reducing framework posted deal for some period of time?
Yeah, I don't know if there's any specific part of their portfolio, but obviously individual deals as we look at them and touch them. We did due diligence on, I think close to 80% of the dollars and over 75% of the loans, so we feel confident about what's there. But there could be some structural changes as we touched on the first time that might impact that. So there is some headwind there as far as what could happen. It really just depends on our ability to sell why we're doing what we're doing to those deals and try and convince them that we're protecting them as well as us and that's part of the strategy that we've done every acquisition. So there could be some offset to their additional loan growth that we anticipate.
Thank you.
Our next question comes from Kelly Motta with KBW. Your line is open.
Hi, thank you so much for the question most of mine have been asked and answered already. I think maybe going just to deposits and obviously you have a really good core funded franchise just wondering, as we look to 2022 after the great influx of liquidity, do you have a sense of how much is potentially transitory and may run-off, as well as, I will just start there, thanks.
Yeah. That's a good question. I love the word transitory. We've been talking about that word for quite some time. So Allen and I for the last two years since this pandemic began have been talking about this topic and we talked about it almost every day, and every time we talked about it, our deposits go up and the balances continue to increase. So I think the money, subject to a couple of things, is going to be here for a little while. And we've invested in our investment portfolio pretty significantly over the past 18 months, and we continue to maintain a large amount of money overnight at the FED (ph).
So we're hopeful that some of that starts to get utilized. I think unfortunately, it's going to be utilized for costs associated with our customers, businesses, both on the labor’s front and the materials front. But I do believe that the money is going to be here for a little while. I think the one thing that could influence out a little bit more is the rising rates and we're a little more disciplined on increasing our deposit rates as rates go up and as evidenced by our past, but I do think that there could be some money that moves out to higher yielding opportunities if we maintain the discipline on our pricing. So I danced around your question, but I think for the most part, we're going to see that excess liquidity as for a little while longer.
Yeah, that's really helpful. Thanks a bunch. And then with the security purchases, you've obviously been putting some money to work there. What’s a good rate of assumption to assume those continuing [Indiscernible] obviously have a lot of cash on balance sheets? Thanks.
As I mentioned earlier, we've seen yields over 2% so far this year. Certainly markets moved in as much as 20 basis points over the course of just one month. But they are pretty consistent. We can get over two and your what I would call your claims that will mortgage back securities. So it's a little more attractive obviously than it was in 2021,
Well that's above our overall. I mean
Yeah, the portfolio itself was yielding a little bit over 50 basis points. In the fourth quarter. So yes, it should have uplifted to meet overall yields as we go throughout 2022.
Got it. Thank you so much.
[Operator Instructions] Our next question comes from Tim Coffey with Janney. Your line is open.
Great, thanks. Morning, guys.
Good morning.
Dave, what do you think it takes to get your commercial clients to start using more than lines of credit?
I think they have to get through their deposit balances first and they're sitting on a lot of excess liquidity. I mean, they're experiencing the same thing we are as a bank and we have -- I have mentioned this number before, but just our 150 top deposit customers in the bank. So the relationships of the top 150 depositors, those balances have increased by over $1.5 billion since the beginning of the pandemic. So those guys are not necessarily borrowers. And then as you go down to the next tier of customers that we have, their balances have increased as well. So I think they have to utilize some of that excess liquidity where they feel like they need to borrow, and I think part of the challenge could be as rates are rising, what they're doing with that excess liquidity, and then ultimately, if they start to borrow again and feel confident, I do believe overall that the customers are starting to use some of that, but I just don't know how quickly that's going to occur.
Have you seen an increase in some of the volatility within the deposit accounts this last quarter?
Not really. I mean, our deposit basis, very, very stable and it's obviously a very fantastic deposit base with 63% of our deposits non-interest bearing, but there hasn't been a lot of volatility. We do have a couple of larger clients that there is some fluctuation, but for the most part that's normal. So it's not outside of what's normally occurred in past years.
Okay. Got it thanks. And then Allen, I apologize if I missed this. But what do you think the tax rate is going to do once Sun crest is inside the company or now that is a sub company, I should say?
I don't know that we were really preceding any significant change to our tax rate. It's on a relative basis, it's a small acquisition and there -- they have some [Indiscernible], they have a couple of tax credit deals, but it's not going to have a big impact.
Okay, great. Thank you. Those are my questions.
Thanks, Tim.
[Operator Instructions] At this time, there are no more questions, so I'd like to turn the call back to Mr. Brager.
Thank you. I want to thank everybody for joining us this quarter. We appreciate your interest and we look forward to speaking with you in April for our first quarter 2022 earnings call. Please let Allan or I know if you have any questions. Have a great day and thanks for listening. Bye bye.
This concludes the program. You may now disconnect. Everyone, have a great day.