Allegiance Bancshares, Inc. (ABTX) Q4 2020 Earnings Call Transcript

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Allegiance Bancshares, Inc. (ABTX)
Q4 2020 Earnings Call
Jan 28, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q4 2020 Allegiance Bancshares, Inc., Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Courtney Theriot. Please go ahead ma'am.

Courtney Theriot -- Executive Vice President , Chief Accounting Officer

Thank you, operator and thank you to all who have joined our call today. This morning's earnings call will be led by Steve Retzloff, CEO of the Company; Ray Vitulli, President of the Company and CEO of Allegiance Bank; Paul Egge, Executive Vice President and CFO; Okan Akin, Executive Vice President and Chief Risk Officer of the Company and President of Allegiance Bank; and Shanna Kuzdzal, Executive Vice President and General Counsel.

Before we begin, I need to remind everyone that some of the remarks made today may constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 as amended. We intend all such statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the act.

Also note that if we give guidance about future results, that guidance is only a reflection of management's beliefs, at the time the statement is made. Management's beliefs relating to predictions are subject to change, and we do not publicly update guidance. Please see the last page of the text in this morning's earnings release for additional information about the risk factors associated with forward-looking statements. If needed, a copy of the earnings release is available on our website at allegiancebank.com or by calling Heather Robert at 281-517-6422 and she will email you a copy.

We also have provided an investor presentation on our website. Although it is not being used as a guide for today's comments, it is available for review at this time. At the conclusion of our remarks, we will open the line and allow time for questions.

I now turn the call over to our CEO, Steve Retzloff.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Thank you, Courtney. Welcome everyone to our conference call and thank you for your attendance. As we report on our results for the fourth quarter and for the 2020 year, we are buoyed by the heroic effort put forth by our Bank team. I differentiate the actions of our staff this past year between that of mere duty and that of genuine dedication. Our purpose of opening doors to success and helping small to medium-sized businesses in our region and understanding the importance of our special role within our community is what drove our team through the late nights and weekends that it took for not only our vastly outside PPP response, but also as we remained in close contact with our customers throughout 2020.

In addition to strong operating results during a COVID-impacted 2020, we completed and initiated numerous projects including opening a new branch in the exciting East side of Downtown, Houston, while we announced the closure of a branch related to occur in January of this year.

We also furthered the implementation of a new loan origination system adopted CECL, enhanced our cyber security, expanded our electronic banking services including online account opening, improved numerous electronic workflows, implemented additional card controls, introduced factoring as an in-house product, incorporated letters-of-credit production into our international services group, executed share repurchases, began paying dividends, in this quarter, we'll increase that dividend by 20%. Most importantly, we continue to support the community through local organizations, such as the Houston Food Bank and many others, and we were recently awarded for the 11th year in a row, the distinction of being a Best Places to Work in the region.

All of this and more was accomplished with a large number of our staff working from home and-or dealing with family challenges resulting from the worldwide pandemic. To say that we are proud of our team and the culture in which we operate, is an understatement. During the fourth quarter, $140 million of PPP loans were processed through the forgiveness phase, while core loans increased approximately $40 million notwithstanding approximately $16 million of loan sales, which Ray will describe in his report. While core loans only slightly increased during 2020, our customers and consequently, the community and the bank benefited from the $700 million of first-round PPP loans that were booked.

Our team is well under way as we readied ourselves for the opening bell of PPP 2021 and we're transmitting loans to the SBA on day one of the new program. I am pleased with our asset quality position as we were able to reduce non-accrual loans in the fourth quarter resulting in an improved coverage ratio. We continue to work with customers with payment relief where possible, and consider that our reduction in the volume of this activity is an encouraging sign of optimism, broadly speaking.

The past two quarters reflected high watermarks for Allegiance in terms of earnings per share, which was driven by both the accelerated PPP fee recognition and our ability to on-board new lending relationships at an impressive pace. The Houston and Upper Gulf Coast region of Texas continues to be resilient in this cycle, and our bankers are prepared to take it from here. Next, Ray will describe our loan and deposit production results as well as an outlook on credit, followed by Paul who will cover our financial results. We will then open the call for questions. Ray?

Ramon Vitulli -- President of the Company and Chief Executive Officer

Thanks, Steve. As in the previous quarters of 2020, our bankers continue the outreach effort to our borrowing customers in the fourth quarter to get updates on financial condition, perspectives on how the pandemic is affecting their industries and to continue the relationship development of our new customers as a result of our outsized PPP effort. Each quarter, I look back on all the accomplishments and truly appreciate all of our bankers, who have found ways to get all the work done. Given all the challenges that came our way during the year, it is very nice to look back at 2020 and see solid performance by various measures, as will be described later by Paul, and some other key results that are reflective of how we have come to be Houston's largest community bank. From total loan originations of $1.8 billion, inclusive of $1.1 billion in core loans and $700 million in PPP to record levels of on-boarding of new treasury management customers to a smooth PPP forgiveness process. We continue to deliver to meet the expectations of the communities we serve.

In terms of PPP, we are very pleased with our loan results and the impact of our efforts on the Houston region. Our approach to provide PPP loans to both the existing customers and new customers has further strengthened our market presence. We continue to execute on the forgiveness process from round one of PPP and welcome the recent announcements of the simple forgiveness application for loans up $150,000. Of all 6,000 plus round one PPP loans we originated, 83% or 150,000 or less in terms of number of loans. To date, we have received forgiveness applications for 2,785 loans totaling $368 million. Of those, 1,511 have been submitted to the SBA with 1,274 having been approved in funds received.

We are positioned again to be a leader in the delivery of the next round of PPP funds to our existing and new customers. Our application portal has been opened since January 11th, and to date, we have responded to more than 3,700 new PPP first or second draw increase with more than 1,500 completed applications having been received.

In addition to helping our customers through the PPP process, we also provided assistance to eligible borrowers with payment deferrals on outstanding loan balances of $1.15 billion or 30% of core loans. Of this amount, approximately $161 million of core loans remain on deferral at the end of the fourth quarter and $126 million as of January 25th.

I will now go over our quarterly results. Total core loans, which excludes PPP loans and mortgage warehouse lines ended the fourth quarter at $3.92 billion, an increase of $39.7 million during the quarter. During the fourth quarter, our staff and lending team booked $310 million of new core loans that funded to a level of $220 million by December 31, compared to the third quarter when $280 million of new loans were generated, which funded to a level of $182 million by September 30. Paid-off core loans were $195 million in the fourth quarter compared to $181 million in the third quarter and $171 million in the second quarter of 2020. The average size of the new organic core loans generated during the fourth quarter was 382,000 with an average funded balance of 270,000, which once again reflects our continued focus on building a diverse and granular loan portfolio.

The average size of all core-funded loans ended the quarter at 343,000. Regarding interest rates on loans, based on total loan amount, the weighted average interest rate charged on our new fourth quarter core loans was 4.64%, which is comparable to the third quarter 2020 weighted average rate of 4.63% and below the second quarter 2020 weighted average rate of 4.84%. The $195 million of paid-off core loans during the quarter had a weighted average rate of 5.25%. Carried core loans experienced advances of $65 million at a weighted average rate of 4.88% and paydowns of $63 million, which were at a weighted average rate of 5.02%. All end, the overall period end weighted average rate charge on our funded core loans decreased 8 basis points, ending the quarter at 5.08% compared to 5.16% as of September 30, 2020.

In terms of our overall loan portfolio, the loan type mix was little changed on a linked quarter basis. The slide deck posted on our website provides added color regarding our overall mix of loans. I would now like to provide some additional information on three loan categories that could have heightened risk due to energy prices and-or the COVID pandemic. Those being our oil and gas portfolio, our hotel portfolio, and our restaurant and bar portfolio. Despite being a Houston region bank, our overall exposure to oil and gas is largely indirect as we do not have any reserve based loans, but we have defined this category to be any borrower that operates and-or directly supports the upstream, midstream or downstream segments of the industry. At December 31, this category is approximately 1.7% of our funded loans or $75 million of which $28.4 million was commercial real estate and $46.2 million was C&I. Of the $28.4 million in CRE, the weighted average LTV for the portfolio was 52.3%, a 20% stress testing of the most recent appraised value plus 6% marketing expenses resulted in an overall collateral deficiency of approximately 142,000, increasing to 440,000 at a 30% stress test.

Regarding our hotel portfolio, at December 31, we had $127 million of hotel loans, of which $117.7 million was commercial real estate, $6.8 million was C&D and $2.5 million was in C&I. Of the $117.7 million in CRE, the weighted average LTV for the portfolio was 59%. A 20% stress testing of the most recent appraised value plus 6% in marketing resulted in an overall collateral deficiency of approximately 994,000, increasing to $30.1 million at a 30% stress test. And regarding our Restaurant and Bar portfolio, at December 31, we had $117 million of restaurant and bar loans, of which $83.4 million was commercial real estate, $2.9 million was C&D and $30.4 million was C&I.

For the $83 million in CRE, the weighted average LTV for the portfolio was 58.1%. A 20% stress testing of the most recent appraised value plus 6% marketing resulted in an overall collateral deficiency of approximately 613,000, increasing to $1.9 million to the 30% stress test. Asset quality at quarter end remained in a manageable position. Non-performing assets, including both non-accrual loans and ORE ended the fourth quarter down from 78 to 63 basis points of total assets, primarily due to the sale of $8.2 million of non-accrual loans during the quarter, which was part of $16 million in total loan sales during the quarter.

Non-accrual loans decreased in net of $9 million during the quarter from $37.9 million to $28.9 million, primarily due to the $8.2 million in non-accrual loans sold during the quarter, $3.8 million in charge-offs, of which $2.1 million is associated with the loan sale, $1.4 million in payments and pay-offs and $321,000 that was moved to ORE. We added $4.1 million in new non-accrual loans during the quarter, the largest being a $1.7 million real estate loan that paid off in full earlier this month. The additional $2.4 million increase in non-accruals was from five relationships, two of which totaled $2.2 million and the remaining 194,000 was from three smaller relationships.

ORE increased to $9.2 million during the quarter compared to $8.9 million for the third quarter, primarily due to a single-family residence that was moved to ORE in the amount of $321,000 and subsequently sold in January of 2021. The $9.2 million in ORE consists of five properties with the largest of $4.4 million commercial real estate property. Second largest is a $3.7 million industrial real estate property and the third largest a $576,000 residential property. The remaining property is in Beaumont. These properties are being actively marketed, with the two largest properties in contract negotiations for potential sale. The level of net charge-offs was elevated during the quarter at $4.3 million for an annualized rate of 37 basis points, inclusive of $2.4 million related to the above -- to the aforementioned loan sale.

In terms of our broader watch list, out classified loans as a percentage of total loans increased to 3.61% of total loans as of December 31, compared to 2.40% as of September 30. Criticized loans increased to 5.95% at December 31 from a 5.16 at September 30. Specific reserves for individually evaluated loans ended the quarter at 12%, compared to 15.7% at September 30. On the deposit front, we saw an increase in total deposits in the four quarter by $71.1 million from the third quarter and up $920.3 million over the year ago quarter. The increased during the fourth quarter was primarily in CDs and other time deposits. The increase over the prior year was primarily in the non-interest bearing deposit category as a result of new accounts associated with PPP customers as well as higher balances in our carried accounts. Non-interest bearing deposits decreased $68 million during the fourth quarter and were up $452 million over the year-ago quarter. With that, our non-interest bearing deposits to total deposit ratio was 34.2% for December 31, 2020 compared to 36% for September 30, 2020 and 30.8% for the year-ago quarter.

With regards to the pandemic and COVID statistics for the Houston area, while not at all time peak levels, Harris County is experiencing elevated levels of both percent of positive tests and ICU beds occupied by COVID patients. We continue to monitor these trends and remain highly focused on health and safety. We are cautiously optimistic of the progress toward the economic recovery in the Houston region, aided by our ability to again deliver release to our customers with the next round of PPP, while providing banking solutions to meet the needs of our customers in 2021 and beyond.

I now turn it over to our CFO, Paul.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

Thanks, Ray. We are very pleased to report fourth quarter net income of $15.9 million or $0.77 per diluted share as compared to $16.2 million or $0.79 per diluted share in the third quarter and $14 million or $0.67 per diluted share posted in the fourth quarter of 2019. Pre-tax provision income for the fourth quarter reached a high watermark at $24.2 million, as compared to $21.2 million in the third quarter and $18.5 million for the year-ago quarter. I'll note that we had $1.9 million in OREO write downs in the third quarter. So after adjusting for this, pre-tax pre-provision income would have been about $23 million for the third quarter.

Net interest income was the key driver to our pre-tax, pre-provision earnings power in the fourth quarter, where we saw an increase of $3 million or 5.8% to $54.9 million from $51.9 million in the third quarter, primarily due to revenue recognized on PPP loans and lower interest expense in the quarter, more than offsetting slightly lower core loan income. Total net fee revenue related to PPP loans recognized into interest income during the fourth quarter was $6 million, is an increase from $3 million in the third quarter. Additionally, interest expense decreased by $757,000 during the fourth quarter compared to the third quarter.

The impact of acquisition accounting accretion continue to decrease in the fourth quarter. Accretion increased loan income by $281,000 and reduced CD expense by $61,000 for a total positive effect on net interest income of $342,000 versus a total positive impact of $598,000 in the third quarter and $1.9 million in the year ago quarter. Only $855,000 remain in loan mark and $220,000 in the CD mark. Yield on loans in the fourth quarter was 5.09% as compared to 4.89% for the third quarter and 5.65% for the year-ago quarter.

Adjusting for acquisition accretion yields on loans would have been 5.07% in the fourth quarter, 4.84% in the third quarter and 5.47% in the year-ago quarter. Our loan yield story reflects a combination of factors, including decreased purchase accounting accretion as previously discussed, decrease in core or non-PPP loan yields, which went from 5.25% in the third quarter to 5.11% in the fourth quarter, and perhaps most impactful was the overall impact of PPP loans.

In the third quarter, we saw PPP loans effectively dilute overall loan yields, which went from 5.13% in the second quarter to 4.89%, as average PPP balances amounted to about 15% of our loan mix. This is a pretty significant mix shifts toward lower yielding PPP loans and without the benefit of any accelerated fee income recognition from forgiveness. This dynamic flipped in the fourth quarter, thanks to accelerated PPP net-fee income recognition in the yield, totaling approximately $3 million and thereby boosting loan yields to 5.09%.

So total yield on interest earning assets was 4.71% for the fourth quarter, up from the 4.58% we posted in the third quarter and down from 5.35% for the year-ago quarter, reflecting the aforementioned effects of PPP balances, net-fee income recognition, lower accretion income and a changing asset mix. Excluding PPP loans and related revenue, total yield on earning assets would have been 4.67% for the fourth quarter versus 4.85% in the third quarter.

Before I move on, I should note that as of year-end, we had approximately $14 million of net deferred fee income remaining relating to 2020's PPP loans, which we will recognize in the yield over the life of the remaining PPP loans, and on an accelerated basis when we experience SBA forgiveness. With respect to interest expense, our cost to interest bearing liabilities continued to decrease in the fourth quarter to 93 basis points from 105 basis points in the third quarter and 185 basis points for the year-ago quarter. The overall cost of funds for the fourth quarter was 62 basis points versus 69 basis points in the third quarter. We expect to see continued improvement in our funding cost going forward.

So, with the help of PPP net-fee income recognition and lower interest expense in Q4, offsetting a significant shift in the composition of our earning assets, we are really proud to post a taxable equivalent net interest margin of 4.14% for the quarter as compared to 3.95% in the third quarter and 4.11% in the year-ago quarter. Now if you were to exclude PPP loans and the related revenue, net interest margin would have been 4.02% for the fourth quarter.

Going forward, we continue to feel well positioned to maintain a relatively strong net interest margin, as we seek to further optimize our funding mix and maintain discipline on loan pricing.

Non-interest income ticked up slightly quarter-over-quarter increasing to $2 million for the fourth quarter from $1.9 million in the third quarter. On the expense side, total non-interest expense also remained relatively stable quarter-over-quarter, as fourth quarter expense was $32.7 million compared to $32.6 million in the third quarter. The difference is primarily due to increases in the salary and benefits line and the other expenses line, mostly offset by decreased other real estate expenses.

The efficiency ratio for the fourth quarter decreased to 57.53% compared to the 60.58% posted in the third quarter and the 62.2% for the prior year quarter. As mentioned in prior quarters, we had elected to take the relief that came with the Cares Act to defer the implementation of CECL until this quarter, at which point we adopted CECL retrospectively to January 1, 2020. Consequently, the reported allowance for the fourth quarter was calculated under the CECL standard. The provision for loan losses was $4.4 million for the fourth quarter compared to the loss to the provision we took in the third quarter of $1.3 million, bringing our total provisioning for the year to $27.4 million. Our allowance for loan losses ended the year at $53.2 million representing 118 basis points of total loans and 139 basis points on core or non-PPP loans.

So bottom line, our fourth quarter ROAA and RATC metrics for the quarter came to 1.05% and 12.32% respectively. Year-end, tangible book value per share was $25.59, which makes for an increase of approximately 13.1% since year-end of 2019, which is something we feel great about notwithstanding such turbulent 2020, which included CECL implementation and a year-over-year reserve build of over 80%, $0.40 of dividends and the repurchase of over 500,000 shares of stock during the year.

On the topic of share repurchases. I should note that in the fourth quarter we did restart share repurchases under our existing 1 million share repurchase authorization, buying back nearly 275,000 shares. While COVID still brings about significant economic uncertainties, Allegiance closes out 2020 bigger and better than ever at over $6 billion in assets, with capital, reserves and liquidity levels stronger than ever. We feel very well positioned as we navigate the current economic environment and we feel confident about our ability to maintain a strong capital position. To that end, the company declared a dividend of $0.12 per share of common stock, up 20% from the $0.10 per share dividend prior.

I will now turn the call back over to Steve.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Thank you, Paul. With that I will now turn the call over to the operator to open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Brad Milsaps with Piper Sandler. You may proceed with your question.

Brad Milsaps -- Piper Sandler -- Analyst

Hey, good morning guys.

Ramon Vitulli -- President of the Company and Chief Executive Officer

Hey, good morning, Brad. How you're doing, Brad?

Brad Milsaps -- Piper Sandler -- Analyst

Good. Hey, Ray, I was writing quickly during some of your commentary, and I think I may have missed a number of -- but I think our production of $310 million during the quarter, what did that fund up to in terms of outstandings and kind of -- it sounds like that was higher linked quarter and kind of based on that, how do you kind of feel about loan growth in 2021, kind of based on your finish to the year?

Ramon Vitulli -- President of the Company and Chief Executive Officer

Sure. Thanks, Brad. Yes, so the $310 million was the originations for the quarter that funded up to 220 and -- which was nice compared to the third quarter. What was really nice is that $310 million is our first quarter in excess of 300 since third quarter of '19. So that kind of momentum going into '21, we're really excited about that and and still the fourth quarter was a quarter where we continued customer outreach, all the other things that we need to do as bankers, but to get that kind of core origination was -- really nice to see the return to those levels that we've kind of expected in the past, which we've talked about before that 300 benchmark kind of 300.

Brad Milsaps -- Piper Sandler -- Analyst

Do you think -- obviously one quarter may not make a trend, but is that -- does that push you maybe higher than sort of mid single-type run rate in loans, growth rate loans in '21 or is it higher than that?

Ramon Vitulli -- President of the Company and Chief Executive Officer

No, I think that's -- I still think that's good. It definitely puts us in a position for that Brad and that what you're -- that mid to high single -- absolutely puts us in where we will get our fair share and and the stage is set for that, as Paul mentioned, we're in a three-point stance, I'm ready for that.

Steven F. Retzloff -- Chairman, Chief Executive Officer

This is Steve, Brad. The effort that we put forth last year on the PPP really took our eye off the ball on loan growth, I mean to the extent that we spent so much time and our team was just spending a tremendous amount of energy on taking care of our customers outreach and PPP. We're going to repurpose that energy and '21. And that while we have some PPP activity, we do believe that this team is ready to go in '21 for a pretty robust loan production year.

Brad Milsaps -- Piper Sandler -- Analyst

That's great color, Steve or Ray. What about hiring? Can you talk about that activity opinion in fourth quarter and maybe kind of what your plans are for 2021?

Ramon Vitulli -- President of the Company and Chief Executive Officer

Yes, sure. So for the whole year, we brought on nine new producers for the year and then plus two internal promotions from our analyst pool. So feel real good about that. That's coming off in 2019, which was -- we had 15, so a little bit down from 2019, but a really strong class of nine for the year and I would expect that to continue in 2021, something similar to what we did in 2020. We're talking to folks, a handful that we're talking to at this moment. So we feel good about it, Brad.

Brad Milsaps -- Piper Sandler -- Analyst

That's great. And then maybe just one more here, Paul. Obviously, it looks like you had some incentive kind of catch-up in the fourth quarter on the expense side is -- is the fourth quarter you think a pretty representation, a pretty good representation of run rate expenses in '21 or kind of based on some things you guys are doing. Do you think you can kind of back off that rate a little bit?

Paul P. Egge -- Executive Vice President and Chief Financial Officer

Yes, the fourth quarter did tech us some items that gives the overall level of expenses, but it does kind of present a little bit of a glide path as to what to expect in the quarters within 2021. It's actually a little on the high side, but it's that range of 32 or so million dollars is really consistent with expectations and I think our spend story is largely going to be a function of a little bit of how our core loan growth story manifests itself in 2021. So we're very well positioned to actualize on whatever growth that's out there and as we assess dynamics, ultimately that can have the resulting effect as to how forward we are on that side

Brad Milsaps -- Piper Sandler -- Analyst

Got it, thanks. And just a housekeeping question Pau, do you have the average balance of PPP loans in the quarter?

Paul P. Egge -- Executive Vice President and Chief Financial Officer

It was around --I'm going to speak in approximation, I believe it was around 450 to 500.

Ramon Vitulli -- President of the Company and Chief Executive Officer

Average balance on PPP. Actually that is...

Paul P. Egge -- Executive Vice President and Chief Financial Officer

More like 125, 135 range.

Brad Milsaps -- Piper Sandler -- Analyst

You ended the quarter at 570. So it's got to be north of there right.

Ramon Vitulli -- President of the Company and Chief Executive Officer

I'm talking individual..

Paul P. Egge -- Executive Vice President and Chief Financial Officer

I'll split the difference between where we were at the end of the third quarter. Yeah.

Steven F. Retzloff -- Chairman, Chief Executive Officer

It was a pretty steady state, steady flow of forgiveness during the quarter.

Brad Milsaps -- Piper Sandler -- Analyst

Okay.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

The majority of our forgiveness was in November that was our largest kind of push forgiveness it's followed by December.

Brad Milsaps -- Piper Sandler -- Analyst

Okay. Okay, great, thank you guys. I'll hop back in queue.

Operator

Thank you. Our next question comes from Brady Gailey with KBW. You may proceed with your question.

Brady Gailey -- KBW -- Analyst

Hi, thanks, good morning guys.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Good morning Brady.

Ramon Vitulli -- President of the Company and Chief Executive Officer

Good morning.

Brady Gailey -- KBW -- Analyst

You all had a decent amount of success with PPP round one, I know round two is just now kind of starting, but any idea what the opportunity could be on round 2 for you guys?

Steven F. Retzloff -- Chairman, Chief Executive Officer

I think I want to take this, Oaken is managing that very, very well. So..

Paul P. Egge -- Executive Vice President and Chief Financial Officer

Thank you. So yes, we still see added PPP early on open our portal in January 11th. We have, what we're seeing is that the vast majority of the applications we're receiving are from second draw customers currently running at a rate I would think somewhere between 35% to maybe 40% of what we've done last time is what we are geared up to do easily, it could be more. We have twice the applications that have been requested by our customers. That are actually in so, so of every two applications received from customers. We have received one complete back so far, and based on what we're seeing is that all continues to progress the same way, somewhere around 35% to 45% is what I would expect.

Steven F. Retzloff -- Chairman, Chief Executive Officer

So we did 700 last time, that would mean that we'd be in the 300, 250 to 300 kind of that ballpark.

Brady Gailey -- KBW -- Analyst

All right. And that I think if you look at your core NIM ex accretion in PPP, I think you guys mentioned that was a little above 4%. Yeah, I know in the past you pointed to some NIM compression. But do you think at the 4% level, you've reached stability or are we going to see that core NIM dip into the 3s?

Ramon Vitulli -- President of the Company and Chief Executive Officer

I think structurally there is there is a chance you're going to see that core NIM dip into the 3s because the number of cited is one where if you assume away both the balances and the revenue from PPP. I think what more likely is that when PPP runs its course. The the earning assets are likely going to be there just redeployed into something other than PPP and that has the potential to dilute overall earning asset yields. But the mix will be a function of what we're able to produce on core loan growth. And then separately, where we ultimately redeploy any excess liquidity, so it will be a different the NIM might be if this come to pass the NIM will be lower, but it'd be a function of more structural implications, as in a lower level of run rate. Core loans to assets. That

Makes sense?

Brady Gailey -- KBW -- Analyst

Yeah, yeah, that makes sense. And then finally from me just on buybacks and M&A if you look at your currency, your trading at about 135% of tangible book value. So it doesn't seem quite high enough to do bank M&A as a buyer, but may be too expensive on the buyback front too. So just thoughts on, it looks like you've repurchased about 1% of the company this quarter. Will that continue and then thoughts on bank M&A everybody is expecting 2021 to be a fairly active year. You guys think you'll be active as well in M&A.

Ramon Vitulli -- President of the Company and Chief Executive Officer

Sure. I'll first start on the repurchase discussion and then we'll hit on M&A, and Steve will add some thought there too. But from the standpoint of our stance on repurchasing, we don't think current share prices are necessarily too expensive to be an active share repurchase, and ultimately how that manifests itself will be a function of our -- of the 10b5 plan we put in place and we're not, but we do see share repurchases as a very viable tactic to manage our capital structure in our capital ratios and we value the flexibility that comes with that, as it relates to managing and shaping our return on tangible common equity profile, and we think that would have the potential to pay dividends down the road in from a valuation standpoint as well.

From an M&A standpoint. I wouldn't say that our current valuation necessarily boxes us out. But you're right, it could always be better. I think we have, we're in a better place now than we were three to six months ago, as it relates to our currency and ultimately we plan if the right opportunity presents itself to be at it.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Yeah, there is no doubt about that. There is two things, really the kind of drive the M&A mood I guess is, one is the currency and it's always better to be higher, and we're moving in that direction. So that's good, but the other one is the cloud of uncertainty with regard to COVID, a year ago, we were all kind of perplexed with that and so as that cloud starts to lift, I think this is going to be a year where those conversations will heat up and we may see some, some deals take place. So we're active and people know that and so we are -- we maintain conversations in our region.

Brady Gailey -- KBW -- Analyst

Great, thanks guys.

Operator

Thank you. Our next question comes from Matt Olney with Stephens Inc. You may proceed with your question.

Matthew Olney -- Stephens Inc. -- Analyst

Thanks, good morning. I wanted to circle back to the discussion on the core margin, and Paul, you mentioned the liquidity aspect is going to be challenging as some of these PPP loans are paid down, and that's definitely something we're hearing from other banks. But if we try to put liquidity aside and the PPP impact aside, I'm curious if you think that the improvements of lower and-or sparing deposit cost will be comparable to the pressure on the core loan yields. Thanks.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

Yeah, we still have room to go to improve our cost of funds and we look forward to really seeing that manifest itself, albeit a little bit more gradually quarter-over-quarter in 2021, than it was in 2020. But we still see that as a -- as a real driver and ultimate protector of our overall NIM profile as we go forward. We're very pleased to note that a lot of that loan growth we had in the fourth quarter are really that production we had in the fourth quarter, which was quite strong at over $300 million, with actually at pricing that was a basis point higher on core loan yields than it was in the prior quarter. So we're seeing stabilization as it relates to the yields on our core loans, but we are very mindful of the competitive environment that we're in and the fact that core loan yields could be subject to additional risk. That said, I'm pretty buoyed by the the last quarter's pricing, as it relates to our core loans, and I think that helps us to be able to protect our overall revenue prospects in 2021 and beyond.

Steven F. Retzloff -- Chairman, Chief Executive Officer

That in our sense right now is there. We have a growing pipeline as well. So a good momentum. We have -- we obviously had good new loan production in the fourth quarter and we feel good about our pipeline as it sits. Will that -- will that hold, we don't ever know that, but we certainly feel really good about our entry into '21 with regard to that. And so that that growth in the loan portfolio is going to mitigate off a lot of that NIM compression pressure.

Matthew Olney -- Stephens Inc. -- Analyst

Okay, thank you for that. And then going back to the share repurchase discussion, you may have mentioned this I just missed it. What's the average price of the 270,000 shares? I think you mentioned that you repurchased in the fourth quarter.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

I believe it was around 33 and change, we'll have that in our 10-K. Yes.

Matthew Olney -- Stephens Inc. -- Analyst

Okay.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

What was that?

Ramon Vitulli -- President of the Company and Chief Executive Officer

Slightly over 33. Yeah.

Matthew Olney -- Stephens Inc. -- Analyst

And then you mentioned the M&A, I was wondering if you could be more specific and just talk about the M&A priorities for the bank at this point. What you are looking for, is it simply additional scale within the Greater Houston market or is it something besides that, thanks.

Steven F. Retzloff -- Chairman, Chief Executive Officer

We'll all hit -- first and foremost on scale in the power scale, we see that kind of loud and clear, as it relates to the current interest rate environment and potential pressures on the revenue profile that's spread away in the banks. The scale and being able to get cost savings is obviously in operating leverage is ultimately high on our minds, but separately to the extent we're able to broaden our our diversity of income profile to get more non-interest income. We see that as being potentially powerful as it relates to really building a more diversified and strong revenue profile.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

Each one of the potential candidates to that are unique and we will evaluate each one on their own merits, but primarily, I guess the one thing that would probably guide us in this year is to -- is going to stay in the region, and I would call as the Houston to Beaumont Gulf Coast Southeast Texas region is where we'll be expending our energy.

Matthew Olney -- Stephens Inc. -- Analyst

Okay. Okay, that's helpful and then just lastly, in the prepared remarks, there was the mention of the loans -- of loan sale and it was non-accrual loans, I missed some of the details behind that. Can you just kind of go over the highlights of that and is that something you would consider again in 2021. Thanks.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

Ray you want to cover that in detail?

Ramon Vitulli -- President of the Company and Chief Executive Officer

Yeah, sure. So Matt. So the total -- the total is about $16 million, of which a portion of that was non-accrual. So it was a handful of loans really all previously identified as loans that were watchlist type credits or even more deteriorated than that. So it's a tool that we had -- that we've felt to be proactive was appropriate and then we've, it was prudent -- it was the right thing to do for those loans. Whether we do it in the future or not, it's just really on a case-by-case basis depending on where we stand with those -- with these problem credits.

Matthew Olney -- Stephens Inc. -- Analyst

And Ray, just any, any color on the pricing of those loans versus where you had them on the books more recently?

Ramon Vitulli -- President of the Company and Chief Executive Officer

It was actually pretty well over our debt book value.

Matthew Olney -- Stephens Inc. -- Analyst

Yeah. Right.

Ramon Vitulli -- President of the Company and Chief Executive Officer

We had identified reserve on those -- on number of those loans that we basically just recognize that loss through the reserve, we'd already had on the books. So we basically picked up a price that was equivalent to what the net book value was.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

I think about 10% or so.

Matthew Olney -- Stephens Inc. -- Analyst

Okay, perfect. Thank you guys for taking my questions.

Paul P. Egge -- Executive Vice President and Chief Financial Officer

You bet.

Operator

Thank you. [Operator instructions] Our next question comes from David Feaster with Raymond James. You may proceed with your question.

David Feaster -- - Raymond James -- Analyst

Hey, good morning everybody.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Good morning, David.

Ramon Vitulli -- President of the Company and Chief Executive Officer

Hey Dave.

David Feaster -- - Raymond James -- Analyst

I just wanted to start. Just curious on the kind of the pulse of your clients. How much of this growth is great to see accelerating originations? How much of it is existing clients, may be expanding versus new client acquisition from the new lenders or the PPP program? And just I guess their thoughts on additional investment in growth as we head into 2021, obviously Texas is the economy strong there, but just curious the pulse of the client?

Steven F. Retzloff -- Chairman, Chief Executive Officer

Hey, David. Yes. So we do keep track of -- keep track of that exact what you're asking, new and new customers and existing customers. So when you look at the $310 million, the $310 million was actually 60-40 of existing to 60 to 40 of new, but the qualifier I would say though there is that we have a bunch of new customers that are going to, that are going to fall into the existing category right now because of -- because they might have been here from PPP. So while I say a 60-40 existing, we really need to do another look at it, to really see what are new maybe new new, which is another category probably. But I guess the answer is that we're definitely getting traction and building relationships with customers acquired through PPP and of our 6,000 PPP loans that we made more than half were to new customers. So those new customers returning in the new business on the treasury side, we're on-boarding. Basically every quarter of 2020 was twice of the on boarding of treasury that we did in 2019. And then we're seeing new loan requests from those customers as well. So we feel really good about it and of converting those to permanent customers. And yeah, the mood is I mean when you originate $310 million, I think that's a pretty indicative of the mood that there are, there is some, some growth and expansion happening.

I mean it definitely market share. There's nothing market share gains in there too, but there is some growth and expansion.

David Feaster -- - Raymond James -- Analyst

Okay, that's helpful and encouraging too. And then is great to see the C&I growth in the quarter. I mean we've been talking about that for a while. Just curious, the composition of your pipeline and maybe whether you think C&I can potentially be a larger contributor going forward.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Certainly there is definite upside on the C&I David the the challenge there is utilization. We will -- we definitely book quality lines of credit to customers. The question is utilization and when they -- when we most customers get back to seeing revenue growth and we'll see, we'll see more utilization, which will result and larger funding, but there is an opportunity for us and we have experienced C&I lenders in our in our producer team.

David Feaster -- - Raymond James -- Analyst

And then just last one from me, just any thoughts on the competitive landscape? It seems like almost as fast as originations are growing payouts and pay-downs are accelerating to just -- just curious how much of this is just strategic you're passing on because of unattractive terms or rate or clients is using cash to pay down debt or even asset sales. Just any comments on the competitive landscape and pay out and pay down activity? Thanks.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Yeah, so the -- you mentioned the cash to pay down debt, that is a component that we hadn't seen before where customers are just liquid and just -- if not a function of rate or sale of property just reducing de-levering on the -- on their own balance sheet. So we're still seeing some of that. Where we are passing on some on some pricing terms, but as Paul mentioned, this $310 million that we originated in the fourth quarter came on at $464 million, the $280 million that we did in the third quarter came on at $463 million.

So really like that trend there of picking up a basis point on the, on the 300 that happened in the third quarter. So that kind of positive signs in kind of a reflection of the competitiveness.

David Feaster -- - Raymond James -- Analyst

That's great. Thanks everybody.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Thank you, David.

Operator

Thank you. And our next question comes from John Rodis with Janney. You may proceed with your question.

John Rodis -- Janney Montgomery Scott -- Analyst

Good morning, guys.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Good morning John.

John Rodis -- Janney Montgomery Scott -- Analyst

Just one question for me on fee income, the rebate line item ticked up a little bit in the quarter, but still well below 2019 levels. How should we think about that going forward in the current environment.?

Paul P. Egge -- Executive Vice President and Chief Financial Officer

I'd see that tick up as a relative outlier. It is a function of larger than normal cash balances being held in our correspondent bank that hopefully will not necessarily be the case as much going forward. Predominantly from the standpoint of deploying that liquidity into core loans or to a lesser extent securities both the cash in our core funding.

John Rodis -- Janney Montgomery Scott -- Analyst

Yeah. I guess,Paul along those lines. As far as the securities portfolio goes, like you said you grew that what, about $100 million during the quarter. So you -- should we expect that to continue to move somewhat higher. I guess it's a trade-off with loans in deposits to I realize, but how should we think about that?

Paul P. Egge -- Executive Vice President and Chief Financial Officer

Ideally, no really what you saw there is a investment in short variable rate 0% risk weight cash alternative types of securities. So it's really a function of excess liquidity and ultimately deciding to deploy it somewhere where we're not taking significant amounts of credit or interest rate risk, but doing better from a risk weighted capital standpoint -- risk weighted asset standpoint and otherwise on and the cash.

John Rodis -- Janney Montgomery Scott -- Analyst

Okay, thanks guys.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Thank you.

Operator

And I'm not showing any further questions at this time, I would now like to turn the call back over to Steve Retzloff for any further remarks.

Steven F. Retzloff -- Chairman, Chief Executive Officer

Thank you, operator. Once again, guys we appreciate your time and interest in Allegiance Bank and look forward to speaking to you again in the future. So thank you all very much.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Courtney Theriot -- Executive Vice President , Chief Accounting Officer

Steven F. Retzloff -- Chairman, Chief Executive Officer

Ramon Vitulli -- President of the Company and Chief Executive Officer

Paul P. Egge -- Executive Vice President and Chief Financial Officer

Brad Milsaps -- Piper Sandler -- Analyst

Brady Gailey -- KBW -- Analyst

Matthew Olney -- Stephens Inc. -- Analyst

David Feaster -- - Raymond James -- Analyst

John Rodis -- Janney Montgomery Scott -- Analyst

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