Cadence Bank - Q4 2022
January 31, 2023
Transcript
Operator (participant)
Good morning, welcome to the Cadence Bank fourth quarter 2022 webcast and conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw from the question queue, you may press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Will Fisackerly, Director of Finance. Please go ahead.
Speaker 13
The conference is now being recorded.
Operator (participant)
One moment, please.
Speaker 13
The conference is no longer being recorded.
Operator (participant)
Ladies and gentlemen, thank you for your patience. At this time, I would now like to introduce Will Fisackerly, Director of Finance. Will, please go ahead.
Will Fisackerly (EVP and Director of Corporate Finance)
Good morning. Thank you for joining the Cadence Bank fourth quarter 2022 earnings conference call. We have our executive management team here with us this morning, Dan, Paul, Chris, Valerie, and Hank. Our speakers will be referring to prepared slides during the discussion. You can find the slides by going to our investor relations page at ir.cadencebank.com, where you'll find them on the link to our webcast, or you can view them at the exhibit to the 8-K that we filed yesterday afternoon. These slides are also in the presentation section of our investor relations website. I would remind you that the presentation, along with our earnings release, contain our customary disclosures around forward-looking statements and any non-GAAP metrics that may be discussed. These disclosures regarding forward-looking statements contained in those documents apply to our presentation today. Now I'll turn to Dan Rollins for his opening comments.
Dan Rollins (Chairman and CEO)
2022 marked a year of tremendous change, progress, and success for our company, highlighted by the fourth quarter completion of our rebranding across our footprint and the related systems integration. The results of our business development efforts will be discussed this morning will validate the unity, optimism, and excitement shared by our teammates as we are now operating under one name and brand. As we look at our annual and fourth quarter 2022 financial results, the storylines and key highlights are very similar for both the quarter and the full year. I'd like to make a few comments about both of those. We reported adjusted net income for the fourth quarter of $142.9 million or $0.78 per common share, which resulted in annual adjusted net income of $542 million or $2.94 per common share.
Adjusted PPNR was $195.5 million or 1.62% of average assets for the fourth quarter. We continue to benefit from a strong pipeline, which is reflected in net loan growth of $1.1 billion or 14% annualized for the fourth quarter and $3.5 billion or 13% for the full year. Our fourth quarter results were again very diverse from a product and geographic standpoint. We had six of the seven regions within our company report net growth for the quarter. Our corporate banking team had another outstanding quarter. We also continue to see favorable results from many of our specialized industry verticals along with our mortgage team. Total deposits were flat for the fourth quarter and down $860 million or 2.2% for the year.
While we, like many of our peers, have seen a decline in average account balances and a shift towards interest-bearing products, our bankers remain focused on preserving and growing core deposit relationships. We continue to evaluate and tweak our product offerings and our posted rate structure in an effort to ensure our relationship managers have the tools necessary to compete in this highly competitive environment. The rate environment, combined with the balance sheet dynamics that we just discussed, resulted in continued improvement in our net interest margin. Our fourth quarter margin improved five basis points linked quarter, and our margin for the full year was 315, up almost 20 basis points compared to the prior year. Valerie will discuss the margin components in just a few more minutes. Credit quality continues to be a positive story. Let me start that again.
Our fourth quarter provision of $6 million was necessary to support continued loan growth. We reported net recoveries for both the fourth quarter and the full year. We have now reported net recoveries six out of the previous seven quarters. Our non-performing assets also declined 8% for the quarter and 38% for the full year, now stand at 24 basis points on total assets at year-end, which is very low by any standard. As of today, we simply aren't seeing any areas of significant weakness. We will continue to monitor credit quality very closely as we move into 2023. We continue to improve our operating efficiency. Our fourth quarter adjusted efficiency ratio of 58.7 marks our fifth consecutive quarter of improvement in this metric.
As we move into 2023, while there are some headwinds that Valerie will mention in a moment, continuing this improvement is a key strategic focus for our team. Finally, I'd like to briefly touch on capital. We repurchased 6.1 million shares of our 2022 share repurchase authorization during the first half of 2022. Recently, our board approved an authorization of 10 million shares for 2023. While we currently remain on pause with our repurchase activity, we are pleased to have this authorization in our toolkit and will continue to monitor both the economic environment as well as our capital position as we move forward this year. Valerie, I'll give it to you.
Valerie Toalson (Senior EVP and CFO)
Thanks, Dan. Dan spoke to the key highlights that are applicable to both our quarterly and annual results that you'll see on slide four. Very consistent loan growth, continued margin expansion, stable credit quality, and steady progress in the adjusted metrics. Focusing on the fourth quarter of 2022, the results include quarterly improvement in our net interest revenue due to loan growth and increasing margin, and improvement in adjusted expenses due to year-end employee benefit adjustments. These were partially offset by seasonal declines in insurance revenue and change in mortgage servicing rights valuation and a modest provision for credit losses. Fourth quarter adjusted PPNR was $195.5 million, up from $5.7 million from the prior quarter.
Referencing slides five and six, we reported net interest income of $359 million for the fourth quarter, an increase of $4 million compared to the third quarter of 2022. Our net interest margin was 3.33% for the fourth quarter, up five basis points from the linked quarter. Not surprisingly, the pace of improvement in the margin slowed this quarter as our deposit costs accelerated in response to continued rate increases and strong deposit competition. Total cost of deposits increased to 76 basis points from 35 basis points in the third quarter. Despite this increase, we continue to have a favorable deposit beta, thanks to our large mix of community bank deposits. Our total deposit beta was 28% for the fourth quarter and 17% cycle to date.
This compares to the fourth quarter's loan beta, excluding accretion, of 49% and 39% cycle to date. Our yield on net loans, excluding accretion, was 5.41% for the fourth quarter, up 71 basis points from the prior quarter. Our balance sheet remains asset sensitive with approximately 48% of our loan portfolio, or $14.8 billion, repricing in the next 12 months, of which $12.6 billion of that reprices within the next three months. At a higher level, as laid out on slide 7, 72% of our loan book is floating or has variable rate terms with 28% fixed rate. Non-interest revenue, highlighted on slides eight and 17, was $114.9 million, which represents a decline of $9.6 million for the quarter.
The decline is driven primarily by a $7.1 million unfavorable swing in the MSR market valuation adjustment, as well as a $5.2 million decline in insurance commission revenue related to seasonality in the policy renewal cycle. While the insurance decline is in line with typical fourth quarter seasonal results on a year-over-year basis, total insurance commission revenue actually increased 6.3% from the fourth quarter of 2021. In addition to these two items, we saw a decline in deposit service charges primarily as a result of an increase in the earnings credit rate on corporate analysis accounts and an increase in BOLI income which is attributable to timing of death benefits. Moving on to expenses, which are highlighted on slides nine and 10.
Total adjusted non-interest expense was $279.3 million for the fourth quarter, a decline of $10.9 million compared to the third quarter. The decline was driven primarily by a decline in compensation expense, largely related to employee benefits year-end adjustments, including lower accruals on insurance costs and the annual assessment of other employee benefit obligations that have been impacted by higher discount rates. The decline in other miscellaneous expense included a number of small variances, including lower franchise taxes, legal, and other items.
You may recall that last quarter we guided toward a $290 million base level of adjusted non-interest expenses, which was in line with the fourth quarter results, factoring out the year-end adjustments made to employee benefits. Regarding non-routine adjusted items, merger and merger-related costs increased to $53 million this quarter as we completed the franchise rebranding and the core system conversion. A large component of these costs were in advertising and public relations, which reflects the rebranding of our franchise under the Cadence Bank name and new logo, including nearly 400 offices. We also incurred a $6.1 million pension settlement expense due to the elevated number of retirements in the fourth quarter and branch closing expense of $2.3 million associated with the 17 branches that were closed or consolidated in the fourth quarter.
Dan spoke to the loan and deposit activity included on slides 11 and 12. Slide 13 provides credit quality highlights that further demonstrate the points Dan made earlier, with steady declines in non-performing assets throughout the year. Classified assets increased somewhat during the quarter but declined 15% as compared to the end of 2021. As mentioned earlier, the $6 million provision for the quarter supports continued growth in loans and unfunded commitments that we've experienced. The ACL coverage finished the year at 1.45% of loans. Capital, as shown on slide 14, continues to be stable across the board, with the quarter's earnings absorbing the growth in risk-weighted assets. We look forward into 2023, from a loan growth perspective, we anticipate a high single-digit growth rate, with investment security cash flows continuing to support loan growth.
We expect that approximately $3.3 billion in securities cash flows and maturities in 2023, including $1.5 billion of low-yielding treasuries maturing in the fourth quarter of this year. Deposits continue to be more difficult to predict with increasing rates and aggressive competition. However, we do anticipate our deposit costs will continue to increase and currently expect to reach our cumulative total deposit beta of 28%-30% toward the middle of this year. net interest margin will be in part dependent on our deposit levels and pricing, but we do anticipate margin to be higher in the fourth quarter of this year than in the 2022 fourth quarter. This expectation is due to the asset mix shift out of lower-yielding securities into higher-yielding loans, combined with the ongoing asset repricing in our variable loan book.
Slide seven in the slide deck provides a nice visual of the repricing timing of our portfolios. We also anticipate steady growth in our fee businesses, except for mortgage and analysis service charges, which we expect to continue to be negatively impacted by the higher rate environment. Regarding non-interest expenses, we currently anticipate a low single-digit growth rate on an annualized basis compared to the $290 million quarterly run rate guidance we previously provided for the fourth quarter of 2022. This factors in the anticipated benefits from our merger integration, but also the number of headwinds, including increased FDIC insurance assessments, higher pension expense, increased CPI levels in many vendor and technology agreements, and continued wage pressure. Importantly, we expect merger and merger-related expenses to be materially behind us. We are continuing to aim to reap efficiencies beyond our initial targets.
Our 2022 net charge-offs, which were actually a small net recovery for the year, were clearly very low. We do expect those to increase to a more normalized level in 2023. However, as Dan noted earlier, while cautious, we are just not seeing areas of significant weakness currently. We have a lot to be pleased with looking back at the results and accomplishments of 2022. I think we would all agree the excitement is in the opportunity that lies ahead. Operator, we would like to open the call to questions.
Operator (participant)
Of course. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Catherine Mealor with KBW. Please go ahead.
Catherine Mealor (Managing Director and Equity Research Analyst)
Thanks. Good morning.
Dan Rollins (Chairman and CEO)
Hey, good morning, Katherine. Appreciate everybody's patience with our technical problems this morning.
Catherine Mealor (Managing Director and Equity Research Analyst)
No, all good, all good. Valerie, you gave a lot of great guidance at the end of your comments, thank you for all of that. I wanted to start my questions with maybe on expenses. It seems like you're saying take the $290 from this quarter and then grow that at a low single-digit pace. Is that net of cost savings, or should we grow it at that pace and then allow the rest of the cost savings to offset it from there? Just wanna make sure I'm clear on that guide.
Valerie Toalson (Senior EVP and CFO)
Sure. That's a fully baked in number. realizing the savings that we've got baked in, as well as, the work that's continuing to be done and, you know, and the expense headwinds that we and I believe our peers are also experiencing as we look into 2023.
Catherine Mealor (Managing Director and Equity Research Analyst)
Okay. Then that $9 million that was, you know, from some of the employee and insurance, changes from this quarter, how do we think about that in the run rate for next year? That was kind of viewed as like a one-time event from this quarter, or is that partly in the run rate as we pull that forward to next year?
Dan Rollins (Chairman and CEO)
Yeah, that's a one-time event.
Valerie Toalson (Senior EVP and CFO)
Yeah. Yeah. The big chunk of that is really related to the annual assessment of employee benefit obligations and the fact that a higher discount rate because of interest rate changes allowed us to take a credit on that. That's not something that happens every quarter.
Catherine Mealor (Managing Director and Equity Research Analyst)
Great. Okay. Okay. Maybe my follow-up was just on the margin. It doesn't feel like you're saying that this is peak margin, but I found it interesting that your guide is fourth quarter to fourth quarter is gonna be higher. Does that imply that there may be some fluctuations between now and then, just depending on how deposit costs flow, but ultimately, by the time we get to the end of next year, we'll have a higher NIM? Is that a fair way to read that?
Valerie Toalson (Senior EVP and CFO)
I think you got it well. You know, as you said, it's the deposits are the variable key there. Assuming no surprises there, you know, we could have some modest improvement before things kind of stabilize or soften. We are anticipating a better margin as we look to the end of the year, really related to all the repricing and the mix out of the securities book into the loan book. You know, as we've talked about a number of times, the variable rate loans that continue to reprice as long as we're in a higher rate environment.
Dan Rollins (Chairman and CEO)
The way you said it, I think Kathryn is correct. I think, you know, I think we see an upward trajectory on our margin, but maybe not linear. We could bounce around here, but we're moving in an upward direction.
Catherine Mealor (Managing Director and Equity Research Analyst)
Great. Okay. Thank you so much.
Operator (participant)
The next question comes from Michael Rose with Raymond James. Please go ahead.
Michael Rose (Managing Director and Equity Research Analyst)
Hey, good morning, guys. Thanks for taking my questions. Just wanted to start on your commentary on the fee businesses. Obviously understand mortgage and service charge is under pressures given the ECR. Please kind of lay out, you know, expectations for some of the other businesses. Like I know insurance obviously benefiting from a, you know, a relatively high, hard pricing market. You know, I guess maybe I'm a little, you know, on the trust and wealth side, maybe that's a little bit harder to see, but it sounds like you're kind of guiding or at least the outlook is to see kind of year-over-year progression.
Can you just kind of walk through some thoughts there by business line and, you know, maybe how we should, you know, think about them? Thanks.
Dan Rollins (Chairman and CEO)
Yeah. I think you've covered some of that, Michael. Good to hear from you. you know, mortgage is clearly flying into headwinds. I would expect that 1Q is not gonna be a good quarter for mortgage. Hopefully, 2Q, 3Q, during normal home selling season will come back a little bit on that piece. You know, we're portfolioing more of those loans. The secondary market for ARMs is not working today. If that market comes back on, then we can fix that. That means we're not collecting that gain on sale for the loans that we're booking onto the balance sheet, the ARMs. Mortgage is clearly under pressure. I think you were spot on insurance. insurance looks to be, you know, in good shape today. I think we continue to win business.
Our insurance team is growing customer base. Our insurance team is growing their fee income, and that hard insurance market will help us. We expect to see good progress on the insurance side in 2023. The wealth management team is all similar to anybody else in wealth management, dependent upon asset value. Depending upon what asset values do this year will drive that revenue. We're hoping that the market will move up and that we'll see benefit there. Then you I think you hit the ECR on treasury management. You know, we do believe that we'll see some pressure because of a rising ECR on treasury management.
Other than that, though, I think our bank fees, we've already given back the pieces of the puzzle we needed to give back. We continue to see, you know, stability there. Our card servicing fees, we continue to see increasing volume on cards. We continue to see increasing average ticket or average transaction on cards. The card income continues to be moving up. Valerie, did I miss anything?
Valerie Toalson (Senior EVP and CFO)
I think you covered the big ones.
Michael Rose (Managing Director and Equity Research Analyst)
Yeah, it sounds like the big ones. Thanks for the color. Maybe just switching to capital and the repurchase. You know, it sounded like, if I got this right from the prepared comments that, you know, maybe buybacks wouldn't be a near-term thing. Maybe you'll let capital build a little bit here as kind of the, you know, the operational efficiencies from the merger continue to play out. Is that the way to think about it? That, you know, maybe nearer term purchases not, you know, in the forefront, but, you know, maybe think about it more usage in the back half?
Dan Rollins (Chairman and CEO)
Yeah, I think that's a fair way, Michael, to look. I think, you know, we wanna be prepared if the market backs up on us. We certainly have that in our toolkit, and we can take advantage of the market if it backs up. We're currently watching, you know, where we are. We're watching the economy. There's still unknowns in front of us and we wanna make sure that we're fully prepared.
Michael Rose (Managing Director and Equity Research Analyst)
Okay. Maybe just finally for me, just on the margin, you know, back to the margin color. I assume Valerie, you're talking about the core margin. I believe last quarter you kind of talked about accretion income for the year somewhere in the $22 million-$23 million range. It was obviously higher this quarter. Just wanted to clarify that and then get, you know, any sort of updated expectations for what you would expect for scheduled accretion for this year. Thanks.
Valerie Toalson (Senior EVP and CFO)
Yeah. No, no, that's exactly right. The, the core margin is really the direction that we were headed there. On the accretion, you're spot on the scheduled accretion numbers for next year, close to $23 million. That is a headwind for this year. You know, we had $47 million nearly for the year of 2022. It was a little bit higher this fourth quarter because of some pay downs and so forth. No change to the expected, scheduled accretion for 2023.
Michael Rose (Managing Director and Equity Research Analyst)
All right. Thanks for taking my questions.
Valerie Toalson (Senior EVP and CFO)
Yeah.
Operator (participant)
The next question comes from Manan Gosalia with Morgan Stanley. Please go ahead.
Manan Gosalia (Executive Director and Equity Research Analyst)
Hi, good morning.
Dan Rollins (Chairman and CEO)
Good morning.
Manan Gosalia (Executive Director and Equity Research Analyst)
I wanted to follow up on the comment on deposit betas. I think you noted 20%-30% cumulative deposit betas by the middle of this year. Do you expect that to be the peak, or, you know, just given your other comments on the elevated level of competition that you and others in the industry are seeing right now, should that deposit beta ramp up as we go towards the end of the year?
Valerie Toalson (Senior EVP and CFO)
Yeah. No, actually, what we're modeling is an increase from where we are today, which is a 17% cumulative to, you know, kind of our peak deposit beta mid-year of next year, which would be in that 28%-30% level on a total deposit basis.
Manan Gosalia (Executive Director and Equity Research Analyst)
Got it. As you think about the mix of funding, to the extent that loan growth exceeds the securities runoff, between the quarters in the year, could we assume that you would plug that with FHLB or, you know, are there other funding levers that you might want to pull such as, growing the CD book?
Dan Rollins (Chairman and CEO)
Yeah, I think that, you know, we've got lots of securities running off in 2023. Most of the loan growth in 2023 can be funded, if not all, with securities portfolio and the move up of the loan-to-deposit ratio. Moving our loan-to-deposit ratio north of 75 is a goal of ours. We would like to see our loan-to-deposit ratio higher in a more normal environment. I think from a funding standpoint, that's just a temporary spot. We're currently playing in all of the spaces that you just mentioned. I think we've got our team looking to grow deposits. Some of our customers are moving CDs around. Some people, because of rates, have taken CDs. I think the answer is all of the above is where we would be funding from.
Manan Gosalia (Executive Director and Equity Research Analyst)
Got it. Are those CDs more, shorter term dated or are you putting on a little bit of duration there?
Dan Rollins (Chairman and CEO)
Yeah. CDs is such a small piece of our book. You know, it's mostly short. We're not offering any specials for any long-term money.
Manan Gosalia (Executive Director and Equity Research Analyst)
Got it. Very helpful. Thank you.
Dan Rollins (Chairman and CEO)
Thank you.
Operator (participant)
The next question comes from Brandon King with Truist. Please go ahead.
Brandon King (VP and Equity Research Analyst)
Hey, good morning.
Dan Rollins (Chairman and CEO)
Good morning, Brandon.
Brandon King (VP and Equity Research Analyst)
Hey. I'm curious, with putting all the pieces of guidance together, are you still sticking with kind of that 54% efficiency ratio target for next year?
Dan Rollins (Chairman and CEO)
That's a great question. I think we've got a lot of headwinds on that. Valerie?
Valerie Toalson (Senior EVP and CFO)
Yeah. What we're anticipating is gradual progress, just like what we saw in 2022, gradual progress on that efficiency ratio improvement, and expect to continue that. There are a few headwinds as Dan mentioned, some of the FDIC expenses, some of the other things that we talked about that, you know, it may be early 2024 before we get to that number. I think, you know, we'll be making gradual improvements and certainly working toward that number, pretty aggressively.
Dan Rollins (Chairman and CEO)
Does that help you?
Brandon King (VP and Equity Research Analyst)
Okay. Yep. Yep. Okay. Then on loan growth, high single digits seems to be a bit above peers. I'm just curious what gives you confidence in that number and kind of what you're seeing as far as demand with, you know, the community platform versus corporate.
Dan Rollins (Chairman and CEO)
Yeah. I'm not sure I'm hearing the whole question. You're talking about loan growth being above peers, and what was the second part of that?
Brandon King (VP and Equity Research Analyst)
Yes. Yes. Loan growth, kind of what gives you confidence in that high single digit growth figure for next year. If you could provide some commentary around community versus the corporate lending, kind of the demand outlook there.
Dan Rollins (Chairman and CEO)
Yeah. Okay. Opportunities within the corporate lending and confidence around the high single-digit loan growth, I think is what you're asking about. I think our footprint is going to give loan growth. You know, the footprint that we're sitting in is continuing to perform well. As I said, we're not seeing really any weakness to speak of today. Chris and Hank are both in the room here and can talk about all you want to talk about on loan growth. Which one of you guys wants to go?
Hank Holmes (SVP and CBO)
Chris, I'll let you go first, then I'll fill in.
Chris Bagley (President)
Yeah. Dan started it. The 400 branch footprint, commercial teams with deep relationships with diverse products and services. We're in resilient growth markets as well as what I would call more stable and lower risk markets as well. There's just a lot of leverage that we can pull. When we look at our pipelines, we're seeing still active, and we still see, looking at least out the next few months, we see like we've got good pipeline and activity. We're comfortable in some of those loan growth targets. Hank.
Hank Holmes (SVP and CBO)
I agree 100% with Chris. I would categorize it as not too hot but not too cold. you know, we're positive on 2023. We do have capacity in our corporate teams, which is a nice thing to have when you're headed into some needs or having to have some loan growth which we're going to do. A lot of it depends on the macro environment and what that gives us through the second half of the year. Right now I would tell you that I feel good and positive about the guidance we're given that Valerie mentioned earlier.
Brandon King (VP and Equity Research Analyst)
Thanks for taking my questions.
Dan Rollins (Chairman and CEO)
Thank you. Appreciate it, Brandon.
Operator (participant)
The next question comes from Brett Rabatin with Hovde Group. Please go ahead.
Dan Rollins (Chairman and CEO)
Brett.
Brett Rabatin (Head of Equity Research and Equity Research Analyst)
Hey, good morning. Thanks for taking the questions. Wanted to talk about credit for a second and you know, obviously spectacular numbers. Thinking about the reserve, it's basically been flat the past three quarters from a dollar perspective, and just wanted to hear some thoughts on provisioning going forward and just thinking about the black box of CECL as well as the classified assets are really low, but they did tweak up a little bit in the fourth quarter. Anything that was prevalent in that increase and anything that you guys are watching from a credit perspective? Thanks.
Dan Rollins (Chairman and CEO)
Yeah. As I said, I don't think we're seeing anything today that's got any alarm bells ringing on it. I think the move around in classified assets is just normal move in, move out, bounce, and I'll let the guys cover that further. When we look at CECL, you know, I think our model, you know, continues to work for us. I think what you saw this quarter was provisioning for growth. You know, we're not seeing weaknesses in the portfolio, so we're provisioning for growth. Do you guys wanna touch on...
Chris Bagley (President)
The back to the classified loans, normal cycle, normal loan grading. Our average loan, if you're a legacy BXS from a view, we've got a larger average loan size now, so you're gonna see some larger loans moving out. Nothing in there that was systematic or a trend that we would note. Normal loan grading, normal working with customers. I think from there, it's a model. It's what the model's gonna project for us via economic forecasts and what our own loan grading systems do. Hank, any other color?
Hank Holmes (SVP and CBO)
I think you said it well, so.
Brett Rabatin (Head of Equity Research and Equity Research Analyst)
Okay. Dan, anything, you know, maybe not for your, for your bank, but just anything that you would point out as something that you kind of view as potentially problematic for the industry, whether it's office or some other segment of lending that you would say, "Hey, this is something that we're keeping a close eye on?
Dan Rollins (Chairman and CEO)
We're just not seeing it, Brett. You know, when we look at what's happening today, We're like everybody else. We're watching carefully. We're paying attention. We think we're making good credit decisions. The credit team is asking lots of questions. Across the footprint that we're serving, the economy's continued to move along. We're still seeing some stresses on, you know, labor in some places. You know, some places are still not able to find labor. People are moving up their labor costs, but we're still moving.
Brett Rabatin (Head of Equity Research and Equity Research Analyst)
Yep. The economy sure is resilient. Thanks for all the color, Dan.
Dan Rollins (Chairman and CEO)
Thanks. Appreciate your time.
Operator (participant)
The next question is from Matt Olney with Stephens. Please go ahead. Oh, pardon me.
Dan Rollins (Chairman and CEO)
Hey, Matt.
Operator (participant)
This is a follow-up from Catherine Mealor with KBW.
Catherine Mealor (Managing Director and Equity Research Analyst)
Oh, I didn't mean to jump in front of Matt. Sorry about that. My follow-up is just back to the efficiency ratio question that Brandon asked. Valerie, can you just clarify what n-number efficiency ratio you were referring to? Is that I think when you originally put out slides, when the deal came together, I think it was a 54% efficiency ratio. Is that a number that you think is achievable by 2024? Do you think it's higher than that just given some of the expense headwinds you talked about?
Dan Rollins (Chairman and CEO)
I think that's the number we're talking about, and we're still targeting getting there.
Catherine Mealor (Managing Director and Equity Research Analyst)
Great. Okay. Just maybe not until sometime in 2024.
Dan Rollins (Chairman and CEO)
Yeah, I think that the things that have happened in the last little bit has delayed that trip to get there a little bit, but we're going to get there.
Catherine Mealor (Managing Director and Equity Research Analyst)
Absolutely. Great. Okay, thanks. Just wanted to clarify that. Thanks.
Operator (participant)
The next question is actually from Matt Olney with Stephens. Please go ahead.
Matt Olney (Managing Director and Equity Research Analyst)
Hey, guys. How are you? Good morning.
Dan Rollins (Chairman and CEO)
Good morning, Matt. Katherine owes you for that.
Matt Olney (Managing Director and Equity Research Analyst)
No worries at all. I think most of my questions have been answered. Just wanna circle back on the insurance segment. I know insurance has been an important part of the strategy going back several years, even in the BancorpSouth days. I guess there is some speculation in the marketplace about some of your larger bank peers that may not be married to their insurance segment longer term. I'm curious about the strategy of cadence in the insurance segment. Just I'm curious how important this insurance segment is to the longer-term strategy of the bank.
Dan Rollins (Chairman and CEO)
Yeah, I think we're no different than anybody else. We're watching what's happening in the market, but we like insurance. We've always liked insurance. We've continued to grow insurance. In the last quarter, we added another insurance agency, that we were able to add into our team. You know, it's clearly a big part of what we're doing every day, but the market is always doing something different. You pay attention to what's happening in the market.
Matt Olney (Managing Director and Equity Research Analyst)
Got it. Okay. All my other questions have been addressed. Thanks, guys.
Dan Rollins (Chairman and CEO)
Hey, thanks, Matt. Appreciate it.
Operator (participant)
As a reminder, to ask a question, you may press star then one. The next question comes from Jon Arfstrom with RBC Capital Markets. Please go ahead.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Hey, good morning, everyone.
Dan Rollins (Chairman and CEO)
Hey, John.
Jon Arfstrom (Managing Director and Equity Research Analyst)
just a couple of follow-ups. may be obvious, but the high single digit growth rate, you're assuming period end. We use period end as a base. Is that right?
Valerie Toalson (Senior EVP and CFO)
Yeah. Those are period end guides.
Dan Rollins (Chairman and CEO)
Yeah.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Okay.
Dan Rollins (Chairman and CEO)
For loans. Yes.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Yep. Okay, good. Valerie, you talked about just some, using some securities, cash flow from securities to fund loan growth. How do you feel about earning asset growth and balance sheet growth for the year? Help us understand the mix change.
Valerie Toalson (Senior EVP and CFO)
Yeah. Again, it just all goes back to deposits. you know, what we saw the industry see this year, you know, you're not gonna grow much in earning assets if you deposits. If we're able to grow deposits, keep, you know, so forth, then that would allow for some earning asset growth. Otherwise, it, you know, that's just simply the variable.
Dan Rollins (Chairman and CEO)
Yeah. Nobody wants to go backwards. I think when we look at 2022, we're gonna see that the industry as a whole lost deposits. We lost some, too. Hopefully, that trend is turning. That's really the question here. If we can grow deposits, then you'll see earning assets grow.
Jon Arfstrom (Managing Director and Equity Research Analyst)
The earnings notes look kind of the opposite of what we wrote 18 months ago, right, on balance sheet movements. What would you say is like an average new interest-bearing rate that you're paying right now? Are you seeing that pressure ease at all, kind of the second derivative of deposit pricing pressure?
Dan Rollins (Chairman and CEO)
Ease is an easy answer. No, there's no ease on the competition on deposits at all.
Chris Bagley (President)
Yeah. The competition's fierce out there. Most people are competing off the yield curve you see in the short term. Competition is in the short-term CD space and the money market space. That's, I think, why you're seeing the rates move out of the non-interest-bearing accounts. I don't know if you have an average number to quote, but the CDs we're putting on, the specials we're running in the fours, and the specials on money markets, you know, there's some exception pricing there in the, you know, high threes.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Okay.
Chris Bagley (President)
On average for the quarter.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Yeah, go ahead, Valerie.
Valerie Toalson (Senior EVP and CFO)
On average for the quarter, the new interest bearing came on at about 2.57%.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Okay. Then, any difference between on the pressures between the community bank footprint and, you know, that 76% you flag in the other parts of the business? Or is it just intense everywhere?
Chris Bagley (President)
Not from my perspective.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Yeah. Okay.
Chris Bagley (President)
It's intense everywhere, not from my perspective. In some ways, the community bank gets that local competition may be more fierce than the metropolitan competition. It just depends.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Okay. I'll wrap it up. I could go on forever on slide seven, but I like it. It's good. I guess, Dan, an easy one for you, maybe a softball, but rebranding feedback, is there anything that hasn't gone well or have you generally been satisfied with it?
Dan Rollins (Chairman and CEO)
Yeah. 5,000 and some odd signs changed in a short period of time. Lots of activity went on to that. We've been really pleased with the way that was executed. I think that, you know, we could have had a whole lot of issues, but we spent some time getting ready for that. The full 18 months were, you know, slower in getting everything done. The benefit of waiting, the benefit of putting it all together at one time, the benefit of getting it all behind us in the fourth quarter, we're really excited about where we are.
Jon Arfstrom (Managing Director and Equity Research Analyst)
Okay. All right. Thanks. Thanks for the time.
Dan Rollins (Chairman and CEO)
Thank you, John. Appreciate it very much.
Operator (participant)
This concludes our question and answer session. I would like to turn the conference back over to Dan Rollins for any closing remarks.
Dan Rollins (Chairman and CEO)
Thanks again, everyone, for your questions and your participation today. As I mentioned a minute ago, 2022 marked a year of tremendous change, progress, and success for our company. In closing, I just want to take one more opportunity to brag on our team. It took an incredible amount of effort and focus for everyone in our company to achieve what we accomplished in 2022. As we continue into 2023, we are committed to continuing to grow our business, improve our operating performance, and enhance the value created for our teammates, shareholders, and communities that we serve. Thanks again, everybody, for your time today. We look forward to speaking to you again soon.
Operator (participant)
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.