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BancorpSouth Bank (NYSE:BXS)
Q4 2019 Earnings Call
Jan 23, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, welcome to BancorpSouth Q4 2019 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Will Fisackerly, please -- Executive Vice President and Director of Corporate Finance. Please go ahead.

Will Fisackerly -- Executive Vice President and Director of Corporate Finance

Good morning and thank you for being with us. I will begin by introducing the members of the senior management team participating today. We have Chairman and Chief Executive Officer, Dan Rollins; President and Chief Operating Officer, Chris Bagley; and Senior Executive Vice President and Chief Financial Officer, John Copeland.

Before the discussion begins, I'll remind you of certain forward-looking statements that may be made regarding the company's future results or future financial performance. Actual results could differ materially from those indicated in these forward-looking statements due to a variety of factors and/or risks. Information concerning certain of these factors can be found in BancorpSouth's 2018 annual report on Form 10-K. Also during the call, certain non-GAAP financial measures may be discussed regarding the company's performance. If so, you can find the reconciliation of these measures in the company's fourth quarter 2019 earnings release.

Our speakers will be referring to prepared slides during the discussion. You can find the slides by going to bancorpsouth.com and clicking on our Investor Relations page 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.

And now I'll turn to Dan Rollins for his comments on our financial results.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thank you, Will. Good morning everyone. Thank you for joining us today to discuss BancorpSouth's fourth quarter and full year 2019 financial performance. I will begin by making a few brief comments regarding the highlights for both the year and the fourth quarter. John will be happy to discuss our financial results, Chris will provide a little detail on our business development activities. And after we conclude our prepared comments, our executive management team will be happy to answer questions.

Let's turn to the slide presentation, were slide 2 contains the standard legal reminders that Will has already discussed with you. Slide 3 covers the highlights for the year. First and foremost, we are excited to reach the $20 billion mark in total assets for the first time in our company history. Actually ending the year with just over $21 billion in total assets. This accomplishment really speaks volumes for the success of all current and former teammates and continuing to grow our company in a judicious manner, both organically and through mergers and acquisitions.

We reported record annual earnings for 2019, both on a GAAP basis and operating basis. Our reporting -- our reported net income for the year was $234.3 million, or $2.30 per diluted share while our net operating income excluding mortgage service right adjustment was $254 million, excuse me $255.4 million, or $2.51 per diluted share. This represents an increase of operating income of 12.6% on a per share basis compared to 2018.

While we've battled recent headwinds resulting primarily from a shift in the earning asset mix on our net interest margin, our net interest margin excluding accretable yield, increased by 8 basis points year-over-year to 3.72%. On a year-over-year perspective, we were able to outpace deposit cost increases with upward repricing opportunities in the loan and securities portfolio. Given the current rate environment, this trend is obviously reverse course in the back half of 2019 and John will be providing a little more detail on this in just a few minutes.

I would like to commend our relationship managers for the success we had in 2019 with respect to organic deposit growth. We eclipsed $1 billion in organic deposit growth, which is just over 7% for the year. This is a tremendous accomplishment for our team as we continue to believe that our core deposit base is the greatest strength of our company.

Our credit quality remains strong, as evidenced by our provision for credit losses of $1.5 million for the year, net charge-offs totaled $2.5 million for full year 2019, which represents only 2 basis points of average loans. These metrics continue to speak about the quality of our underwriting and monitoring that our credit team provides. Chris will provide a little more information in just a few seconds.

We continue to improve our cost structure. Our operating efficiency ratio, excluding MSR declined by approximately 170 basis points compared to 2018 to 64.9%. We continue to benefit from the added efficiency achieved through our growth efforts, while also challenging expenses across all facets of our business, contract renewals, vendor relationships, facilities and suppliers, just to name a few. I expect our team to follow the same path in 2020, challenge each and every dollar we spend to ensure we are adding value to our customers and our shareholders as we continue to improve on efficiency.

Moving on to capital deployment and management, during 2019 we completed the four bank transactions listed on the slide. These transactions added $1 billion in loans and $1.3 billion in deposits to our balance sheet. All four of these transactions have been converted to our operating systems, with the most recent two having been converted over in the middle of the fourth quarter. As we move into 2020, we hope to continue to realize improved efficiencies associated with these transactions.

Finally, we were active in our share repurchase program, repurchasing approximately 2.5 million of the 3 million share authorization for 2019 at a weighted average price of $28.20. As we enter the New Year, our Board authorized another 8 million shares for 2020, the increase in authorization is primarily the result of our fourth quarter capital raise, which I'll discuss in just a second.

Slide 4 provides a view of our summary financial results over the past five years, both on a GAAP basis and operating basis. I certainly don't need to spend a lot of time on the details here, however I do want to emphasize the continued positive trends and success detailed on this slide. Most importantly, we have grown operating EPS, excluding MSR at a compound rate of 15% over the past four years.

Moving on to Slide 5, we will briefly review the fourth quarter highlights, which are very consistent with the annual highlights, accordingly I can again be very brief here. We reported GAAP net income for the fourth quarter of $65.8 million, or $0.63 per diluted share. We had a positive MSR valuation in the quarter of $3.2 million, while merger-related expenses totaled $5.8 million for the quarter. Accordingly, our net operating income excluding MSR was $67.8 million, or $0.65 per diluted share. On a per share basis this represents an increase of over 14% compared to the fourth quarter of 2018.

While loans were essentially flat in the quarter on an organic basis, we had another outstanding quarter with respect to organic deposit growth generating $385 million, or 9.5% annualized growth during the quarter. This deposit growth combined with the additional liquidity associated with the capital raise is the results -- resulted in a shift in earning asset mix that put downward pressure on the net interest margin. John will discuss the dynamics of the margin in just a few minutes.

Credit quality continues to remain a strength for us. We had net recoveries of $2.2 million for the quarter, which supported the lack of any reported provision during the quarter, virtually all of our credit quality metrics, including non-performing and classified asset balances were stable.

The last three bullets relate to capital manage -- management. Of the 2019 share repurchase total that I mentioned earlier, just under 300,000 shares were repurchased during the fourth quarter. We also went to the market during the fourth quarter with the simultaneous offering of $300 million in subordinated debt and $172.5 million in Perpetual Preferred Stock. We viewed the historically low rates respective to these capital instruments as an opportunity to bolster and diversify our capital mix. As a reminder, our bank has historically operated with 100% common equity and this will improve our capital stock. We anticipate this additional capital will be used to either support further growth efforts or support additional share repurchases or a little of both.

Finally, the last bullet point on this slide relates to the closing of our merger with Texas First State Bank, which closed effective January 1 of this year, 2020. We are excited to formally welcome Rodney Kroll and all of our new Texas First teammates. This transaction adds approximately $390 million in total assets to our company as we enter the Waco, Texas market and further enhance our market share in other surrounding communities.

I'm now going to turn the call over to John and allow him to discuss little more financial results in detail.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Thanks, Dan. I will jump right into the numbers. If you'll turn to Slide 6, you'll see our summary income statement and reviewing that statement, net income was $65.8 million, or $0.63 per diluted share for the fourth quarter. As Dan mentioned earlier, we had two non-operating items in our fourth quarter results. We had a positive pre-tax MSR valuation adjustment of $3.2 million and merger-related expense of just under $6 million. Accordingly, we reported net operating income excluding MSR of $67.8 million for the quarter, or $0.65 per diluted share compared to $69.7 million or $0.69 per diluted share for the third quarter of 2019 and $56.4 million, or $0.57 per diluted share for the fourth quarter of 2018.

Our net interest income increased 2.5% compared to the third quarter of '19 and 11.7% compared to the fourth quarter of 2018. The transaction closing, the merger closings in both the second and third quarters of 2019 did obviously impact those comparisons. As Dan mentioned earlier, we've seen some recent pressure on our margin, largely attributable to the shift in earning asset mix. Our reported net interest margin for the fourth quarter was 3.76%, while our net interest margin excluding accretable year -- yield, our core margin was 3.61%, comparable metrics for the third quarter of '19 were 3.88% and 3.76% respectively. We reported a net interest margin of 3.8% for the fourth quarter of 2018, while our core margin was 3.71%. As we look at the quarter-over-quarter change in our core margin, the shift in earning asset mix is largely responsible for the margin decline. As Dan mentioned earlier, we had a great quarter from a deposit growth perspective and we also completed a public offering of subordinated debt and preferred stock. The deposit growth success and the capital raise, collectively contributed approximately $850 million in additional liquidity during the quarter that had to be put to work.

In addition, we were active in December purchasing shares in advance of the Texas, I'm sorry, purchasing securities in advance of the Texas First merger closing. This earning asset mix shift was responsible for approximately 8 basis points of the margin compression. We also had some pressure on earning asset yields. And looking more specifically at those components, loan yields excluding accretion were down 7 basis points from 5.02% for the third quarter to 4.95% for the fourth quarter, this 7 basis point decline was largely the result of the impact of the September and October rate cuts on our variable rate portfolio. Securities yields were down nominally as well. And finally we saw 3 basis point decline in our total cost of deposits, which did help to offset some of the pressure on asset yields.

Before we move onto non-interest revenue expense, I'd like to briefly mention credit quality that Dan alluded to. We did have no recorded provision for the quarter compared to the provision of $0.5 million for the third quarter and a provision of $1 million for the fourth quarter of 2018, but our credit quality metrics, including non-performing and classified assets did remain fairly stable during the quarter. We also reported net recoveries of $2.2 million for the quarter, which certainly helped.

If you'll turn to Slide 7, you'll see a detail of our non-interest revenue streams. Total non-interest revenue was $74.7 million for the quarter, compared to $75.4 million for the third quarter of 2019 and $59 million for the fourth quarter of 2018. The MSR valuation adjustment as usual is obviously a primary contributor to the volatility in these totals. Outside of the MSR adjustment, considering the seasonal factors mortgage had a nice quarter, both [Phonetic] in production and servicing revenue of $6.9 million. Chris can discuss our mortgage business more in a moment, but we continue to benefit from -- some refinancing activity associated with the low rate environment. The quarter-over-quarter decline in insurance commissions is driven typically by seasonal factors associated with the renewal cycle in our book of business. All other items shown on this slide were within our range of expectations given the merger activity during the quarter and other seasonal factors.

Slide 8 represents a detail of non-interest expense. Total non-interest expense for the fourth quarter was $162.4 million compared with $159.6 million for the third quarter of 2019 and $152.3 million for the fourth quarter of 2018. Total operating expense, which excludes merger-related expense and all other one-time items was $156.6 million for the quarter compared to $155.6 million for the third quarter of 2019 and $147.9 million for the fourth quarter of 2018. The merger closings that occurred on April 1 and September 1 certainly impact the comparability of these figures.

As we look at the quarter-over-quarter trends, the decline in salary and employee benefits compared to the third quarter is a result of a year-end -- year-end true-up to several of our accruals including our medical accrual and incentive programs. These items provided a benefit of approximately $4 million in the fourth quarter. As our core expense base remains in a relatively tight range, we are pleased to see continued improvement in our annual operating efficiency ratio, excluding MSR, which improved to less than 65% in 2019 versus 66.6% in 2018.

That concludes my review of the financials. Chris will now provide some color.

Chris A. Bagley -- President and Chief Operating Officer

Thank you, John. Slide 9 reflects our funding mix as of December 31, compared to both the third quarter of 2019 and the fourth quarter of 2018. Total deposits and repos grew almost $370 million for the quarter, or 8.8% on an annualized basis. Over the course of 2019 deposits and repos increased $2.4 billion, $1.3 billion of which is associated with the four transactions closed during this time. Organic funding growth has totaled $1.1 billion, or 7.6% [Phonetic].

We're very pleased with our deposit growth efforts, both for the quarter and for the year. As we look at pricing, our total cost of deposits declined 0.68% for the fourth quarter from 0.71% for the third quarter of 2019. As we mentioned in our third quarter call, we were nearing the inflection point on the repricing of time deposits, which allowed us to ultimately improve our total cost of deposits in the fourth quarter. Roughly half of the fourth quarter deposit growth came in the non-interest bearing demand products, which contributed to improvement in deposit mix as well.

As we look at geographical performance relating to deposits, we had several divisions across our footprint standout this quarter. The Houston, Texas; Texas Hill Country, Tennessee Metro, West Tennessee, Missouri and our Northeast Arkansas divisions all reported strong deposit growth for the quarter.

Moving to Slide 10, you will see our loan portfolio as of December 31 compared to the third quarter of 2019 and the fourth quarter of 2018. Loans were essentially flat on organic basis, driven primarily by some larger payoffs in the quarter and to some extent, competitive pricing and structuring headwinds. For the year, we added just under $1 billion in acquired loans to our balance sheet. And our teammates have done a good job of holding these loans balances during the turmoil of conversion integration. The mix of our loan portfolio is very consistent for each of the period shown here, while our pipeline of opportunities remained good, the recent redirection of Fed rate action has led to some very competitive pricing and structuring in the markets and has presented a headwind for organic loan growth while you try to protect margin. We are working hard to protect these loan balances, as well as margin, while the rate environment stabilizes.

Despite the overall organic loan growth pressures, we continue to have success in our lending efforts from a geographical perspective. We had several divisions produce significant meaningful loan growth. Our Dallas, Texas, Missouri, South Arkansas divisions all had great quarters from a loan growth perspective.

Slide 11 contains some credit quality highlights, which continue to be a strength for our company. As John mentioned earlier, we had no recorded provision for the quarter compared with the provision of $500,000 for the third quarter of 2019 and a provision of $1 million for the quarter of 2018 -- for the fourth quarter of 2018. We had net recoveries of $2.2 million for the quarter. Non-performing assets represented 0.84% of net loans and leases at December 31 compared to 0.82% at September 30, 2018 [Phonetic] and 0.81% at December 31, 2019. Other than the previously discussed anticipated lumpiness associated with acquired loans with our merger activity, we've been fortunate to maintain good credit quality metrics. To sum up the year, we believe our due diligence processes have performed well through our M&A activity. And combined with our legacy efforts have generated stable and acceptable credit quality metrics. We will continue to focus our attention on asset quality, as we believe this is a core strength of the company.

Moving on to mortgage and insurance, the tables on Slide 12 provide a five quarter look at our results for each product offering. Our mortgage banking operation produced origination volume for the quarter totaling $505 million, home purchase money volume was $322 million or 64% of our total volume for the quarter. This is consistent with our third quarter mix, which was 66% purchase money. Industry consensus projects downward pressure on total production driven by a decrease in refinance production due to the current rate environment. We feel positive about our diverse geography and our participation in growth purchase money markets like Houston, Dallas, and Nashville.

Deliveries in the quarter were $419 million compared to $374 million in the third quarter of 2019 and $251 million in the fourth quarter of 2018. Production and servicing revenue, which excludes the MSR adjustment, totaled $6.9 million for the quarter compared to $11.2 million for the third quarter of 2019 and $4.8 million for the fourth quarter of 2018. Our margin was 1.03% for the quarter, representing a decline from 2.38% for the third quarter of 2019. The margin decline is attributable to seasonal aspects and an $80 million increase in mortgage pipeline quarter-over-quarter. This is common each year as the pipeline declines leading into the winter months, which are slower from a home purchase standpoint as evidenced by the 0.88% margin for the fourth quarter of 2018. The $290 million pipeline in December 31 was comprised of approximately 50% refi, 50% purchase money. Finally, as Dan mentioned earlier, the MSR valuation adjustment during the quarter was a positive $3.2 million.

Moving on to insurance, total commission revenue for the quarter was $27.6 million compared to $31.5 million for the third quarter of 2019 and $28 million for the fourth quarter of 2018. As we mentioned, each quarter we typically benchmark to the same quarter in the prior year given the seasonality in the renewal cycles. Our total insurance commission revenue was relatively flat to the fourth quarter of 2018. This was a direct result of year-end true-up and contingent commission estimates. Notably, our core P&C commissions and life and health commissions increased by 3.3% collectively. This is in line with our growth rates and comments on pricing for the last several quarters.

Finally, I'd like to briefly mention wealth management. We reported wealth management revenue of $6.6 million for the quarter. For the year, wealth management revenue totaled $24.8 million, which represents an increase of 8% compared to 2018. During the fourth quarter, we completed the system conversion for the Summit Bank Wealth Management book of business, which was acquired effective September 1 with the Summit merger closing. We are pleased to have this conversion behind us, excited about the value of these new teammates will add as we continue to build our wealth management teams.

Now I'll turn it back over to Dan for his concluding remarks.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thank you, Chris. We are very pleased with our financial results for 2019. We've continued to improve virtually all of our performance metrics quarter after quarter and year after year. As I mentioned, we surpassed $21 [Phonetic] billion in total assets during the latter part of 2019 and achieved record earnings for the year. We improved most of our profitability metrics compared to 2018, while maintaining strong credit quality.

As we look forward into 2020, consistent with industry expectations, we anticipate this year to be a challenging year from an earnings growth standpoint, particularly given recent trends in loan demand and margin pressure. Our message to our team is to simply control the things that we can control, our front line teammates will continue to focus on protecting our customer base and winning new business on both sides of the balance sheet, while not compromising on structure or credit quality. Our business development and tech teams will continue our efforts to enhance the customer experience through technology improvements and improved product offerings. We will also keep challenging every dollar we spend in an effort to continue improving our operating efficiency.

Finally, we must work to efficiently manage and deploy our capital in a manner that maximizes value for our shareholders. Here's to a successful and prosperous 2020.

With that operator, we'd be happy to answer any questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Catherine Mealor from KBW, go ahead.

Catherine Mealor -- KBW -- Analyst

Thanks, good morning.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Good morning. Catherine.

Catherine Mealor -- KBW -- Analyst

Just want to start with the balance sheet and margin dynamics. Can you talk a little bit about how quickly you think you'll be able to deploy the excess liquidity that we felt built up this quarter? And how we should think about how that will translate into loan growth this year? Thanks.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, so -- John is ready to jump in here too. So a couple of things were happening in the fourth quarter. We closed on the Texas First transaction on the 1st and we were looking to kind of get ahead of the portfolio that they will be bringing across. So some of that will be used in sucking up the portfolio that's not coming across on their. They are very liquid and so cash will come in to take some of that.

Your specific question on loan growth, we continue to be focused on loan growth. I like the fact that we're showing good growth in Texas, where parts footprints are slower growth or no growth spots today. And so we saw some contractions and the outstandings in a couple of states, but we saw really good growth across the state of Texas. Specifically, I think Chris mentioned the pay down structure. We got another pay down today on a non-recourse low rate CRE credit and so you saw CRE credits drop for us. I don't think we're willing to play in those low rate non-recourse games. And so we're seeing some headwinds on those payoffs. However, the production side, especially in Texas continues to do very well. John, you want to take some of that?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Just on the Texas First and that wasn't a very big portfolio. We did pre-fund that restructuring of that portfolio. So we in general here, we'll be selling those securities and paying not -- paying down some borrowings.

Catherine Mealor -- KBW -- Analyst

Got it. Okay and so, I mean do you -- as we think about growth range for next year, I mean is it -- is -- do you feel that net basis kind of low-single digit is a good place to start as we're thinking about next year just given these dynamics?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I expect this to grow. So how we get there, we grew the balance sheet this year on the deposit side, but the loans weren't there. So again, I think I'm really proud of the team and the core low cost deposits that we're attracting. We want to continue to do that, we got to deploy that into higher earning assets and if we can continue to do that across the state of Texas and the higher growth footprint, I think we're -- we've been on the ground in the Florida Panhandle for only a couple of months now, that area has promise for us. We think the team down there can help us can help us grow. So I think we've got that opportunity in front of us.

Catherine Mealor -- KBW -- Analyst

Okay. So then on the margin side, outside of the impact from excess liquidity, how are you thinking about the outlook for the margin this year assuming no further rate cuts?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Well, we are obviously less -- less optimistic than we were in the second quarter of this year. No doubt there is going to be continued pressure on the margin. We've had -- we've had 10 or 11 quarters, straight quarters of an increasing earning asset yields. And we've had 13 or 14 consecutive quarters of higher interest-bearing liability rates, but we've also had a number of quarters of improving net interest margins. We've reached an inflection point on that in the fourth quarter were earning asset to yields have fall -- did fall and also deposit rates did fall. Now deposit rates there is a big tail on deposits, that's a lagging -- lagging thing. So I guess the wild card would be can we maintain higher than expected loan repricing. We were repricing loans at 5.5 in the second quarter, we're going to reprice those loans that -- by a couple of billion in loans over the next 12 months and current repricings are somewhere between 450 and 490. So that's going to put pressure on the margin, maybe the wildcard is what can we do relative to deposit -- reprice in deposits that is as I said, somewhat lagging. So the prime rate cuts in the third quarter and fourth quarter, that cost is about 5.5 basis points in the margin for the fourth quarter. And then we already mentioned that the, sorry for the train.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Train is coming through John's office, right here.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

The asset mix would cost us 8 basis points. So that's about 14 bps of the 15 bps decline.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

So I guess I would want to jump in there, just a second. Margin is certainly important to us and we're working hard to manage deposit cost the best we can. The mix of the loans that we're bringing on you saw C&I credits grow this quarter, you saw CRE credits go down, C&I credits come on as a skinnier rate. So there is a mix here coming onto, I would want to focus on NII. We continue to look for opportunities to grow our bottom line income and we think we have that capacity.

Catherine Mealor -- KBW -- Analyst

Great. Okay, that's all very helpful, thank you.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thanks Catherine.

Operator

Our next question is from Jennifer Demba from SunTrust, go ahead.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Hey, Jenni.

Jennifer Demba -- SunTrust -- Analyst

Good morning. Two questions. First, wondering what the CECL day one impact will be on the BancorpSouth loan loss reserve? And then my second question is Dan, you've been around M&A block, you know as many times it's probably almost anybody in the industry and I'm just wondering what your opinion is on these larger MOEs and if they could ever make sense for BancorpSouth? Thanks.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

All right, so on the CECL side, John may want to jump in here again too. I know CECL is walking around in our building, I haven't met him yet, but I'm pretty sure he's here. On day one impact, our team is working hard on that. I don't think we have really anything to add more than what we had put out back in -- in the Q last time, which was kind of a range of what we expect the numbers to be. John you want --?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

$30 million to $50 million.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

$30 million to $50 million on the numbers?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Right.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

And so I don't know whether we're smart in the middle of that or a little bit outside of that range one way or the other, but the team is working hard, I suspect we will have that all done here in the next week or so, and you will see more about that in the K, when the K gets filed.

On the M&A front, there is a lot of activity and a lot of talk out there still going on from bigger to smaller, several transactions within our footprint just in the last week. You know there is still lots of talk out there. Your specific question was on the larger transactions. I think some of those can do well. I think it's going to be purely driven off of execution. And so if you have a better opportunity to execute you probably have a better opportunity to make something like that work. There is -- there is opportunity for all of them, but there's also increased risk on the size. So we continue to talk and look at lots of things that are out there. We're not afraid to talk to anybody. We think there is lots of opportunity within our footprint for us on the M&A front.

Jennifer Demba -- SunTrust -- Analyst

Thanks a lot Dan.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thanks Jenni.

Operator

Our next question is from Kevin Fitzsimmons, D.A. Davidson. Go ahead.

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Good morning, everyone.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Kevin, good to hear from you.

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Good to hear from you, Dan. Just on the subject of what Jenni just brought up about some of these large mergers, does that present market disruption opportunity for you that you've seen yet in terms of going out and hiring and that of course if it's done to a large degree, would entail some near-term expenses, but then longer term, some production, some revenues coming in. How -- how much do you think you're going to get to participate in that?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, there is certainly -- certainly disruption. Everybody wants to talk about Atlanta and we're not in Atlanta. So I can't -- I can't speak to the disruptions over there, but there has been multiple transactions in other parts of our footprint, from Tennessee to Arkansas to Texas and all of those areas will lead to disruption. We have seen some movement among producers or among relationship managers. We continue to add relationship managers across our footprint. I think our net relationship manager gain for 2019 was 51 across our footprint, with right at half of those in the Texas footprint. We believe that we will be able to take advantage of that even more as we look into 2020. So that's certainly part of our game plan.

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Okay, great. And just a quick follow-up on buybacks, is that going to strictly be governed by where the stock price is or do you have a certain idea -- we want to get through this much within the -- at a time?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I don't think we have a number that says we have to buy X shares back. We do have a 10b5-1 plan that is executing and is driven off of -- off of price. That's what drove some of the movement in 4Q and I suspect that will drive movement here as we get deeper into the year and we watch what's going on. Maybe we change our gears a little bit, but right now I think we like the plan that we've been operating under. And I suspect we will be in the market buying shares back throughout the year would be my thinking right now.

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Okay, great. Thank you.

Operator

Our next question is from Jon Arfstrom from RBC Capital Markets. Go ahead.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Hey, good morning guys.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Hey, good Jon. How are you?

Jon Arfstrom -- RBC Capital Markets -- Analyst

I'm good, I'm good. CECL was driving the train, by the way, do you have --?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Is that where he is? I have been looking to meet CECL.

Jon Arfstrom -- RBC Capital Markets -- Analyst

That's where he is. Yeah, he shows up every quarter.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

He is here.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Couple of follow up questions. Chris, you talked about the $1 billion in acquired loans and that you've held a lot of the balances. You just trying to deconstruct the loan growth a bit. Can you talk a little bit about what kind of run off, you saw from the $1 billion in acquired loans?

Chris A. Bagley -- President and Chief Operating Officer

Yeah, I wouldn't say we had -- obviously every time we do a due diligence and we identified some loans that we perhaps don't fit our balance sheet we work on those, but other than that I think we've done a good job of holding those. So you would probably see those in our PCI credits, that's direct place where you see those numbers. Just from run off in general, we're just saying you know Fed change the direction, prime dropped three times. We're seeing some really aggressive, I'd call it maybe try to race to the bottom of interest rate on loans. We're seeing some three handles. We're seeing lot of non-recourse structuring that's put some downward pressure on both our pipeline. Our pipeline remains good, but when we were comparing those opportunities and we're competing against a low three or a non-recourse loan, we'll let that one pass and that also impacts your pay downs when you have some loans that exist on the balance sheet that are seeking out those same kind of opportunities are able to do so.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

That's in CRE portfolio.

Chris A. Bagley -- President and Chief Operating Officer

It is most primarily in the CRE portfolio. And so those are just going to go. Those are going to ebb and flow with those rates. So what we're trying or diligently to do is protect asset quality and protect margin in our balance sheet. But in all those things, don't always think up with retransaction. So that's the downward pressure you've seen on some of the CRE paydowns. Does that help?

Jon Arfstrom -- RBC Capital Markets -- Analyst

Yeah, that definitely helps. And then just buzzing through a couple of fee lines, wealth management it looks like you had decent growth, and it sounds like maybe you're still optimistic on that, and you've made some recent changes. Can you talk a little bit about expectations there?

Chris A. Bagley -- President and Chief Operating Officer

I think it's some of that is market driven -- facing the market -- increases drive some of that. But overall, we've had a good production, good new business opportunities on the trust and wealth management side. Summit Bank added some assets under management to that books, that's what you're seeing in those comments. So curious --.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Added some relationship managers across multiple markets I think he is up 3 or 4 people this year to.

Chris A. Bagley -- President and Chief Operating Officer

In fact, we've had a couple in Texas. So we're excited about getting into -- again just like on the loan side, higher growth markets from the wealth management side. So I would see some upward pressure on that from the opportunity, but you have to weigh that against what the market does too.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, we're actively recruiting relationship managers and revenue producers across all product lines. And wealth management has been able to attract some too.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. And then on insurance, focused on the year-over-year, can you talk a little bit about premium trends versus winning new business or adding new business just help us understand the two of those, the puts and takes?

Chris A. Bagley -- President and Chief Operating Officer

Yeah a lot of it starts with maintaining your business. So we have a great renewal rate for our -- for our book of business. It's good. So we have a good stable -- great book of business, good producers, good relationships with our customers. There has been some firming of the price. Our guys would tell us that across the P&C sets so you've seen that a little bit in the upward pressure on the revenue, I think. And from a new business it's same story, Dan just mentioned, we've hired new producers in the insurance world to -- across the footprint. So that will help us hopefully put upward pressure on the revenue side. It's a little longer lead time for those folks because they joined with the -- in the industry it's common to have a non-solicitation. So you're investing in producers with a little more lead time in terms of their ability to start producing meaningful numbers.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. Okay and then just one follow-up Dan for you on M&A pricing. You talked about the challenging 2020 loan demand and margins and we all get that, but you think that would lead to softening prices in M&A and I'm just curious what you're seeing in terms of pricing? Thanks.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

I see pricing all over the board. That's really been interesting, you see some transactions with no or low premium. And you've seen other transactions at what I would consider to be very high premiums and some of them we share our head a little bit out, but I think we're all over the board. So I think it's back to expectations and what can institution do for the buyer. So again, I think we're going to see opportunities in our footprint and I think that we will be able to be successful on many of those.

Jon Arfstrom -- RBC Capital Markets -- Analyst

Okay. I'm feeling a little nervous about anything pending, so we're waiting. Thanks a lot. Appreciate it.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Appreciate it.

Operator

Our next question is from Matt Olney from Stephens. Go ahead.

Matt Olney -- Stephens -- Analyst

Great, thanks, good morning guys, how are you?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Good.

Matt Olney -- Stephens -- Analyst

I want go back to the balance sheet remix. I think you guys mentioned that you are pre-funding, the balance sheet in the fourth quarter and you'll be selling some securities in the first quarter from the Texas First deal, can you quantify that? Did you pre-fund the entire amount or just a portion of it?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, so we've done the same thing with multiple of the acquisitions over the last year. So as we're looking at their investment portfolio coming into ours we are looking to see if there is assets that we want to retain and assets that we want to divest. Many times there are assets we want to divest, they were $390 million bank with $150 million in loans and my guess is, we did not pre-fund all of the -- remaining part there, but we were working on trying to make sure that the portfolio look similar to ours.

Matt Olney -- Stephens -- Analyst

Okay, got it. And on the expense side, it looks like your deposit insurance was still lower in the fourth quarter, is that the run rate or do you still have some insurance credits that offset that? Just trying to get a better idea for the run rate into '20.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

I don't know that we have an answer for that. John?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

I think, I think we have a fairly, it's fairly small true-up in our accrue, I think we over accrued a little bit.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, not significant.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

It wasn't something that really caught my eye as being significant though Matt.

Matt Olney -- Stephens -- Analyst

Okay, that's fine. And then on the -- just more of a -- as a modeling question, on the preferred dividend if I'm -- if I'm doing this right, it looks like the core of the amount will be about $2.5 million per quarter, but the first quarter could have a higher accrual around $3.5 million, am I do my numbers right there as far as the preferred dividend expense in 2020?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Well, I don't think so. I think that the dividend payment is -- is on a quarter from when it was issued. So I think it's little less than $2.5 million per quarter throughout the year. The first payment date is February 20, which is 90 days coming out from when we went out.

Matt Olney -- Stephens -- Analyst

Okay. I was in an understanding that the first quarter would have a higher accrual since it was -- I thought it was closed sometime in the fourth quarter, but I can go --?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

It was, but we're not paying on a quarterly basis. We're paying in mid quarter.

Matt Olney -- Stephens -- Analyst

Got it.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Dividends are accounted for declaration basis, right.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

That's right.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

You don't accrue them, they are subject to Board action.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, in yesterday's press release that went out, I think the dividend is in there. So that dividend is record date February 5 I think and payment date, February 20. So it's not a calendar quarter payment.

Matt Olney -- Stephens -- Analyst

Okay, got it. I'll -- I'll check that out. That's all from me. Thank you.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Okay, thanks.

Operator

[Operator Instructions] Our next question is from John Rodis from Janney. Go ahead.

John Rodis -- Janney -- Analyst

Good morning, guys.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Hey, how are you, John?

John Rodis -- Janney -- Analyst

Good, Dan. How are you doing?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Great.

John Rodis -- Janney -- Analyst

Just back to the securities portfolio real quick, so I understand the pre-funding and stuff, but, so it's 4 -- it was $4.5 billion at the end of the quarter. Would you expect it to grow much from here or is it sort of stable going forward?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I don't know that it grows unless our deposit mix grows significantly. I think what you see is, as you know we're bringing deposits in, we grew deposits pretty healthy way last quarter and you saw that money flow into the bond portfolio. And at the same time you saw us put some borrowings on to make sure that we were prepared for Texas First coming on board. Those borrowings should pull back a little bit this quarter and then if we grow deposits, which I would expect that we will grow deposits in the first quarter, we historically have, then that will impact the level of securities also.

John Rodis -- Janney -- Analyst

Okay. Okay that makes sense. All my other questions were asked and answered, so thank you.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

I appreciate it, John.

Operator

Okay. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Dan Rollins, Chairman and CEO. Go ahead.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thank you much. Thank you everybody for joining us today. If you need additional information or have further questions, please don't hesitate to contact us. Otherwise, we look forward to speaking with you again soon. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Will Fisackerly -- Executive Vice President and Director of Corporate Finance

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Chris A. Bagley -- President and Chief Operating Officer

Catherine Mealor -- KBW -- Analyst

Jennifer Demba -- SunTrust -- Analyst

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Jon Arfstrom -- RBC Capital Markets -- Analyst

Matt Olney -- Stephens -- Analyst

John Rodis -- Janney -- Analyst

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