Premier Financial Corp (OHIO) (PFC) 2013 Q4 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Good morning and welcome to the First Defiance Financial Corporation fourth-quarter and full-year earnings conference call. (Operator Instructions) I would now like to turn the conference over to Terra Via. Please go ahead.

  • Terra Via - Director, Marketing

  • Good morning, everyone, and thank you for joining us for today's 2013 fourth-quarter and year-end conference call. This call is also being webcast and the audio replay will be available at the First Defiance website at fdef.com.

  • Providing commentary this morning will be Don Hileman, President and CEO of First Defiance, and Kevin Thompson, Executive Vice President and Chief Financial Officer. Following the prepared comments on the Company's strategy and performance, they will be available to take your questions.

  • Before we begin I would like to remind you that during the conference call today, including during the question-and-answer period, you may hear forward-looking statements related to the future financial results and business operations for First Defiance Financial Corp. Actual results may differ materially from current management forecasts and projections as a result of factors over which the Company has no control. Information on these risk factors and additional information on forward-looking statements are included in the news release and in the Company's reports on file with the Securities and Exchange Commission.

  • Now I will turn the call over to Mr. Hileman for his comments.

  • Don Hileman - President & CEO

  • Good morning and welcome to the First Defiance Financial Corporation fourth-quarter and full-year 2013 conference call. Last night we issued our 2013 earnings release and now we would like to discuss that release and give you a look forward into 2014. At the conclusion of our remarks we will answer any questions you might have.

  • Joining me on the call this morning to give more detail on the financial performance for the fourth quarter and the full year is our CFO, Kevin Thompson. Also joining us this morning to answer questions is Jim Rohrs, President and CEO of First Federal Bank.

  • As First Defiance's new President and CEO I'm proud to say I am following a wonderful leader, good friend, and mentor, Bill Small, who has led this organization for the past 14 years. Bill officially retired as of December 31; however, we will continue to benefit from his guidance as Chairman of the Board and he will be (technical difficulty) in helping First Defiance maintain continuity with our current strategic plan.

  • We have been transitioning the management team for the past several months and I believe we now have a team in place to continue to execute on our strategic plan and to move the performance of the organization to be consistently a high-performing organization.

  • Fourth-quarter 2013 net income on a GAAP basis was $5.1 million, or $0.50 per diluted common share, compared to $5.2 million and $0.52 per diluted common share in the fourth quarter of 2012. For the year ended December 31, 2013, First Defiance earned $22.2 million, or $2.19 per diluted common share, compared to $18.7 million, or $1.81 per diluted common share for 2012. The $22.2 million is another record high for net income at First Defiance, surpassing 2012 by 19%.

  • These results include the impact of our assessment of the final Volcker Rule regulations. We determined that we had two investments in collateralized debt obligations backed by trust preferred securities that did not qualify for exemption. Consistent with the accounting guidance, we wrote these investments to fair value which negatively impacted EPS for the quarter and full year by $0.02 per share.

  • We are very gratified by the steady improvement in overall performance in 2013 over 2012, even as the operating environment remains very challenging. In general, we are seeing signs of more stability in our local economies and in some communities' stronger economic growth. Employment numbers have improved, but still have room for improvement to signal sustainable growth.

  • The communications from Washington are still leading to inconsistent levels of consumer and business confidence as we believe the level of confidence in government and in the consistency of the economic stability are the key drivers of growth. The modifications in the Federal Reserve's monetary policy have affected the interest rate environment as we have seen rates slowly starting to rise. Even in this operating environment we have made considerable progress throughout the year in sustaining this improvement through the fourth quarter.

  • A few key areas stand out; credit quality improvement was significant and continued through 2013. Commercial loan demand improved and we finished the year with strong momentum. And, finally, our performance was strong despite a significant decline in mortgage banking volume in the second half of the year.

  • The increase in forecasted GDP is a positive sign that nationally economic conditions are improving. We do anticipate that we will see the benefits from more purchases of consumer goods and the higher levels of production to meet the consumer demand. We believe this will lead to greater capital investment in 2014.

  • We did see improved loan growth for the fourth quarter, primarily in the latter part of the quarter which equated to period-end [NIS] growth of 5%. Credit quality metrics on our existing loan portfolio improved as we moved through the year and the fourth quarter.

  • Non-performing assets declined almost $3 million, or 7%, year over year. Non-performing loans declined almost $5 million, or 15%, year over year.

  • While we have seen the lowest non-performing levels in several years, there is still room for improvement. We have several larger credits that have remained stickier than we anticipated that have shown more indications of improvement then deterioration. Classified loans and nonaccrual loans also showed significant progress in the fourth quarter.

  • The deposit side of the balance sheet continued to have strong growth in the fourth quarter. The growth has been primarily in the non-interest-bearing and interest-bearing demand accounts. This is in part due to the low interest rate environment which has many people and businesses parking funds in non-term accounts rather than tying up funds for any period of time.

  • In the near term, however, the significant deposit growth has led to a higher level of liquidity and lower [net] interest margin, although the fourth quarter is still a very solid 3.61%. Going forward, the combination of the loan growth, improved asset quality, and favorable change in the mix of deposits will all continue to play a role in helping us maintain a strong net interest margin.

  • Non-interest income in the 2013 fourth quarter was down over the linked quarter and for the full year of 2013 compared with the prior year, even after netting the securities gains associated with the balance sheet restructure in 2012. The biggest driver was the decline in mortgage banking.

  • Mortgage loan production in the fourth quarter of 2013 declined 72% from the record fourth quarter of 2012. Annual mortgage production declined to $326 million from the 2012 record level of $546 million. Increased income from our insurance and wealth management areas helped to mitigate the negative impact of Mortgage Banking in both the fourth quarter and the full year 2013.

  • Total non-interest expense increased slightly from the fourth quarter of 2012, excluding the $2 million prepayment penalty in the fourth quarter of 2012 relating to the balance sheet restructuring. The full-year non-interest expense total was up about $1 million net of the prepayment fees, with most of the increase being in the comp and benefits category. Incentive compensation and health insurance costs both showed increases in 2013. These were partially offset with reductions in occupancy costs.

  • We are pleased with the ability to increase the quarterly dividend to $0.15 per share, which represents a yield of approximately 2.4%. Our continued strong performance in capital levels support this utilization of capital.

  • I will now ask Kevin Thompson to give you an additional details for the quarter and for the 2013 year-end before I wrap up with an overview and a look and see what we think is developing in 2014. Kevin?

  • Kevin Thompson - EVP & CFO

  • Thank you, Don, and good morning to everyone. As you heard from Don's comments, we were pleased to finish off the year with another quarter of consistent, solid financial performance. Despite the lower level of Mortgage Banking revenues we have now experienced here in the second half of the year and of course the small negative impact from the impairment losses on the collateralized debt obligations securities that were among those considered disallowed under the revised final Volcker Rule of the Dodd-Frank Act.

  • Our core banking businesses, along with wealth management and insurance, all made meaningful contributions to the quarter and our record year. Both loans and deposits showed good point-to-point growth during the quarter, particularly deposits, although this led to an elevated level of liquidity during the quarter and the net interest margin tightened some as a result.

  • Non-performers edged back down. Non-interest revenues, again except for mortgage, held up well during the quarter and expenses remained in line. All-in, as Don noted, earnings for the fourth quarter were $5.1 million, or $0.50 per diluted share, which included the CDL loss impact of $219,000 after tax or $0.02 per diluted share. This compares to $0.52 in the fourth quarter of 2012.

  • For the year, earnings were a record $22.2 million, or $2.19 per diluted share, up $0.38 per diluted share, or 21%, for the year on an EPS basis.

  • Now turning to the details of the income statement. Our net interest income was $17 million for the fourth quarter of 2013, down slightly versus $17.2 million on a linked-quarter basis and $17.4 million in the fourth quarter of 2012. For the fourth quarter of 2013 our margin was 3.61%, a decrease from 3.84% in the third quarter and 3.92% in the fourth quarter last year.

  • Most of the decrease was a result of exceptionally strong deposit growth of $77.3 million during the quarter, which outpaced loan growth both in volume as loan growth was $19.2 million and timing as average loans were actually down on a linked-quarter basis. This led to significantly increased liquidity which lowered our overall yield on earning assets and lowered the margin. Our yield on earning assets declined 23 basis points on a linked-quarter basis, while our cost of interest-bearing liabilities remained flat on a linked-quarter basis.

  • Total new loans originated in the fourth quarter were put on at a weighted average rate of 4.5%, an increase from 4.18% in the third quarter of 2013. And so we saw just a slight contraction of our loan portfolio yield in the fourth quarter of 2013, declining just 2 basis points to 4.39% on a linked-quarter basis. As our earning asset mix improves going forward through additional growth in loans and investments, we will expect our margin to improve accordingly.

  • Total non-interest income was $6.5 million in the fourth quarter of 2013, down from $7.3 million on a linked-quarter basis and down from $10.2 million in the fourth quarter of 2012. Lower Mortgage Banking revenues were the major reason, although again the fourth quarter included $337,000 of pretax securities losses while the fourth quarter last year included $1.6 million in securities gains related to a balance sheet restructuring.

  • Service fee income was $2.5 million in the fourth quarter of 2013, a slight decrease from the $2.6 million in both the linked quarter and the fourth quarter of 2012. Net NSF fee income was $826,000 in the fourth quarter of 2013 compared to $919,000 on a linked-quarter basis and $1 million in the fourth quarter of 2012.

  • Insurance revenue was $2.1 million in the fourth quarter of 2013, up from $2 million in the fourth quarter of 2012.

  • Regarding the decline in Mortgage Banking revenues, it was mainly due to a lower valuation adjustment and to lower volumes, primarily in refinance activity resulting from higher rates during the quarter versus prior periods. Mortgage Banking originations were $43 million in the fourth quarter of 2013, down from $61 million on a linked-quarter basis and down from $153 million in the fourth quarter of 2012.

  • The percentage of originations for purchase and construction was 54% in the fourth quarter of 2013, up from 49% on a linked-quarter basis and 19% in the fourth quarter of 2012. Overall, Mortgage Banking income for the fourth quarter of 2013 was $1.3 million compared with $1.8 million on a linked-quarter basis and $2.7 million in the fourth quarter of 2012.

  • Gain on sale income dropped to $756,000 in the fourth quarter of 2013 compared with $894,000 on a linked-quarter basis and $2.7 million in the fourth quarter of 2012. In addition, the fourth quarter included only a small valuation adjustment to mortgage servicing rights, a negative adjustment of $4,000, while the linked quarter included a positive valuation adjustment of $480,000 and the fourth-quarter 2012 adjustment was a positive $96,000.

  • At December 31, 2013, First Defiance had $1.4 billion in loan service for others. The mortgage servicing rights associated with those loans had a fair value of $9.7 million, or 73 basis points of the outstanding loan balances serviced. Total impairment reserves, which are available for recapture in future periods, totaled $1 million at year-end 2013.

  • As for non-interest expense, fourth-quarter expenses totaled $15.9 million, flat with the linked quarter and down when compared with $17.5 million in the fourth quarter 2012. The fourth quarter last year included a $2 million prepayment penalty incurred as part of the balance sheet restructure, but fourth quarter compensation and benefits expense was $8.3 million, a $500,000 increase from the fourth quarter of 2012.

  • FDIC costs were $359,000 in the fourth quarter of 2013, down from $660,000 in the fourth quarter last year due to the improvement in the Company's risk category late in the first quarter of 2013.

  • Other non-interest expense was $3.5 million in the fourth quarter of 2013, up from $3.1 million on a linked-quarter basis but down from $4.8 million in the fourth quarter last year, which again included a $2 million prepayment penalty. Total credit-related costs, which includes the net gain loss on the sale of OREO, OREO repairs and write-downs, and collections costs, were $835,000 in the fourth quarter and included a $452,000 of OREO write-downs.

  • As a result, these costs were up from $484,000 in the linked quarter and up from $488,000 in the fourth quarter of 2012.

  • Regarding provision expense, the fourth quarter of 2013 totaled $475,000, basically even with last quarter and down from $2.6 million in the fourth quarter last year. Net charge-offs were 39 basis points of average loans for the fourth quarter of 2013 and 23 basis points for the full year of 2013. This compares favorably with 59 basis points in the fourth quarter last year and 1.18% for all of 2012.

  • Importantly, the 23 basis points for net charge-offs in 2013 was the first full year in a while that is in line with management's longer-term expectations of 30 basis points or lower. Of the total charge-offs for the quarter 52% related to commercial real estate loans, 32% commercial loans, 8% residential, and 7% home equity, while recoveries remained basically consistent at about 30% of losses.

  • Our allowance for loan loss decreased to $25 million at December 31, 2013, from $26.7 million at December 31, 2012. The allowance percentage decreased to 1.58% from 1.75% a year ago, primarily due to the credit quality improvements achieved during the past year.

  • While the allowance-to-loan ratio has decreased, the allowance coverage of non-performing loans has increased. The allowance now represents 89.6% of our non-performing loans, up from 82% at December 31, 2012. As we have stated previously, we believe the reserve percentage should track between the current level and 1.5% as asset quality continues to improve.

  • As for the asset quality numbers, we saw a decrease in the non-performing loans in the fourth quarter of 2013 to $27.8 million, down from $30.5 million on a linked-quarter basis and down from $32.6 million at December 31, 2012. However, our OREO balance increased on a linked-quarter basis to $5.9 million from $5.5 million and was up from a year ago.

  • Overall, non-performing assets decreased $2.3 million, or 6.4%, on a linked-quarter basis and accruing restructured loans decreased $380,000, or 1.4%, on a linked-quarter basis. Looking year over year, non-performing assets end the year at $33.7 million, or 1.58% of total assets, down from 1.78% of total assets at December 31, 2012.

  • Total classified loans also declined, down to $55.6 million at December 31, 2013, compared with $59.7 million on a linked-quarter basis and well below the $78.1 million at December 31, 2012. And we still look for continued improvement in the level of our classified assets.

  • The total past due and non-accrual rate was 1.95% at December 31, 2013, down from 2.59% at December 31, 2012, the delinquency rate for the loans 90 days past due and/or on non-accrual decreased to 1.73% this quarter from 1.93% on a linked-quarter basis and from 2.11% in the fourth quarter 2012. We continue to be encouraged by the ongoing improved levels of 90-day delinquencies and non-accruals.

  • Of the $27.8 million total non-accrual loans $16.1 million, or 58%, are under 90 days past due. 30- to 89-day delinquencies this quarter were up slightly from the linked quarter, but well below levels of fourth quarter 2012. While pleased with our progress, we believe that we still have room for continued improvement in overall credit quality and reductions in both non-performing and classified loans in the coming quarters.

  • Turning to the balance sheet, we saw a significant increase with total assets of $2.14 billion at December 31, 2013, up $79 million from last quarter-end and up $92 million from last year-end. Cash and equivalents, including the higher liquidity mentioned earlier, increased to $179.3 million from $136.8 million at December 31, 2012. Securities increased slightly over the year to $198.6 million.

  • Gross loan balances increased $55.2 million, or 3.6%, year over year including $19 million in the last quarter. We were pleased how our loan growth finished the year and we believe we have good momentum as we enter 2014. Total deposits increased $68.3 million from a year ago and increased $77.3 million on a linked-quarter basis, including a $48.1 million increase in non-interest-bearing deposits this past quarter.

  • Non-interest-bearing deposits increased to $348.9 million at December 31, 2013, from $315.1 million at December 31, 2012. We are pleased with our ability to generate deposit growth while maintaining our low cost of funds in this interest rate environment. While we will continue to focus on our deposit mix and pricing opportunities, loan growth will be a top priority.

  • Looking at our capital position, total period-end stockholders' equity ended December 31, 2013, at $272.1 million, up from $258.1 million at December 31, 2012. Our capital position remains strong with period-end shareholders' equity to assets of 12.75% at December 31, 2013, compared to 12.66% at December 31, 2012. The bench risk-based capital ratio remains strong at approximately 14.6%.

  • Regarding our stock repurchase program, back in September the Company announced a new share repurchase program that authorized the Company to buyback 5%, or approximately 489,000 shares, of the common stock outstanding. During the fourth quarter we did repurchase 71,000 shares.

  • In our release last night we also announced that our quarterly dividend, which reflected a 50% increase, rose to $0.15 per share. You can see that both of these actions are important in bringing additional value to our shareholders.

  • That completes my financial review and now I will turn the call back over to Don.

  • Don Hileman - President & CEO

  • Thank you, Kevin. As we enter 2014 I feel very good about the way we have positioned First Defiance. We are coming off a record-setting earnings performance in 2013 which followed improved performance in 2012.

  • We enter the new year optimistic concerning the prospects for another successful year. Unemployment rates throughout our markets have improved and we expect to see sustained improvement throughout the coming year. Manufacturing, led by the automotive industry, has been the primary reason for the rebound. We continue to see increased production at area facilities along with other positive economic development news, all of which helps us to build our optimism for future improvement.

  • Our three areas of focus at First Defiance are growth, expense control, and core balance sheet growth. We have made significant strides in all three of these areas in recent quarters and we must continue with this effort to achieve even higher levels of profitability.

  • We do believe loan demand will improve in 2014 with most borrowers in a stronger economic position than they were prior to the recession. The balance sheets of clients and our corresponding cash flows continue to improve. However, there still remains some hesitancy on the part of many to make commitments due to the lack of overall confidence in our economic growth.

  • While we have some clarity concerning what the future holds in regards to regulation, taxes, and healthcare costs, a lot still has to be integrated in the economy. Sustaining the pace of the recovery is going to depend to a large degree on the level of confidence that can be established within the business community. We see the trend toward optimism, and if this continues, loan demand will certainly build.

  • We are committed to maintaining our underwriting standards and will not compromise on our standards to get loan growth. Pricing will be a challenge in this competitive environment and, while we are not going to be out trying to buy business with illogical rates, we will work hard to maintain and grow our existing relationships. All this leads to the need for our focus on building our other revenue sources and controlling costs.

  • We have defined several key initiatives for 2014 that we believe will allow for a more focused approach to business. The first is business banking. We are organizing a business banking group that will provide for the needs of our midmarket clients in an expedited manner. We will be focusing on building small business relationships with more products and services oriented to their needs.

  • The second is alternative delivery. As technology continues to evolve our customers want to be able to bank at their convenience. In 2014 First Federal will be rolling out several key services that can help our customers bank anytime, anywhere, through any device.

  • These channels have the ability to produce revenue for the Company by providing a cheaper cost per transaction than we have seen in the past. Alternative delivery channels such as mobile banking, online banking, live chat, online mortgage applications, online credit applications, and online account creation play a vital role in the future of our company. We look to expand these services in 2014.

  • We also continue to look for opportunities to strengthen insurance and wealth management as growing sources of revenue. We have expanded our efforts to grow these product lines by streamlining processes and adding additional leadership. It is important to reflect on 2013 as a great year for our company and the progress made to achieving our strategic goals.

  • We were particularly pleased with the significant progress in credit quality reflected by lower charge-offs and overall lower classified loans. We completed the implementation of a new commercial loan origination system and a new mortgage loan origination system. These systems will help enable us to be more efficient in the origination of loans and we anticipate that we will see the benefits related to increased efficiency and lower costs.

  • Our mission at First Defiance is not labored. It is to be a community financial service provider that offers a complete line of financial products with a relationship-oriented approach on a profitable basis. We are very encouraged by our recent performance, but we also know there is still an upward potential.

  • Our consistent strategy and business plan has served us well over the years and we have shown in recent years our ability to adapt to meet different challenges. We also note that this strategy is designed for future opportunities and growth. We are confident in the strategy and the people we have working hard to execute our plan, and we head into 2014 feeling optimistic with the opportunities ahead.

  • We remain committed to all our constituents and appreciate the trust and commitment you have placed with us as we work to grow the Company. Thank you for your interest in First Defiance Financial Corp. and we thank you for joining us this morning.

  • And now we will be happy to answer your questions.

  • Operator

  • (Operator Instructions) Christopher Marinac, FIG Partners.

  • Christopher Marinac - Analyst

  • Thanks, good morning. Don, you mentioned towards the end of your comments about some of the initiatives you have on deposits and whatnot. How much of that is additional expenditure that we should see this year versus what is already in the expense run rate?

  • Don Hileman - President & CEO

  • Most of it is already factored in the expense run rate. A lot of that was put in place in the latter part of this year; value those origination systems. We started that and some of that is already factored into the fourth quarter as we move forward, so most of the expense is in there.

  • Christopher Marinac - Analyst

  • So is it fair that we may see some positive operating leverage as we look at the revenues versus expenses the next few quarters?

  • Don Hileman - President & CEO

  • That is our hope.

  • Christopher Marinac - Analyst

  • Very good. Could you or Kevin just talk about the state of the economy up and down the I-75 corridor as well as into Michigan? To what extent is that expected to be even stronger as this year develops?

  • Don Hileman - President & CEO

  • I will start off. I think that was a lot of the driver of my comments about some of our optimism as we look to where we want to grow. We are positioned well in Toledo market, down into Findlay, and to Lima, up and down the northwest quadrant of the I-75 corridor there.

  • We are seeing really strong growth in our Findlay areas and we expect that to continue. It is not consistent yet, but we are seeing some pretty good signs that there is a lot of pent-up demand. More construction of some small manufacturing facilities, etc., and we anticipate that improving over the course of 2014.

  • Christopher Marinac - Analyst

  • Okay, great. Thanks very much.

  • Operator

  • Daniel Cardenas, Raymond James.

  • Daniel Cardenas - Analyst

  • Good morning, gentlemen. A couple quick questions. On the business banking group can you maybe give us some color as to where you are in that process?

  • How many folks do you have on board right now? What is the size of the team that you envision? And is that throughout your entire footprint or is it going to be concentrated more in the Ohio markets?

  • Don Hileman - President & CEO

  • I will turn that over to Jim Rohrs.

  • Jim Rohrs - President & CEO, First Federal Bank

  • That is a bank-wide strategy. It will be in all of our markets.

  • With the exception of the individual who heads that up, one of our senior executives, we intend to staff this with reallocation of resources of existing people already on board. We have got four market areas. We have a business specialist in each marketing area and the retail branch managers will play a role in this also.

  • So it is kind of a two-pronged attack. One is to serve a market that we don't serve well now, the small end of small business, and it is also later in the year would be more of an efficiency focus where we are going to move small relationships out of the commercial portfolios into small business, where they can be better served.

  • And we will find the 80/0 rule at work there where we are going to find the commercial lenders average loan size in our portfolio going up substantially. So they will have capacity to do more business because of the small relationships with a large number of notes moving out of their portfolios.

  • So it is both a revenue play where we want to service a market better that we don't serve now, the small end of small business, and also an efficiency play where we want to move small loans out of commercial into small business where they can be serviced more effectively and efficiently.

  • Daniel Cardenas - Analyst

  • Okay. But bottom line, it doesn't sound like you are going to be adding any additional expenses to the salary and wages line item?

  • Don Hileman - President & CEO

  • Some modest. We will use the same origination system. There is some additional expense for scoring models and things like that, but other than that it is pretty much reallocation of resources.

  • Don Hileman - President & CEO

  • We have -- Dan, this is Don, identified two senior people to lead both that initiative and the alternative delivery initiative. We felt these were important enough that we have put people in charge of that on an individual basis, so I think that kind of shows our commitment to those areas.

  • Daniel Cardenas - Analyst

  • Then in terms of the alternative delivery component, are there going to be some additional expenses or do you need to make some significant investments in technology to roll that out the way you envisioned?

  • Don Hileman - President & CEO

  • I would not say significant, but I would say there is some additional expense for new technology to roll that out the way we envision. Some of that is already in place or planned. Some of that is yet to come as we start to really crystallize that overall strategy. But I wouldn't -- we don't need to swap out whole systems or any of that kind of expense. It is just kind more of an enhancement and modest increase in expenses related to the alternative delivery.

  • Don Hileman - President & CEO

  • We essentially need two new products that are already on -- one we are in the process of implementing and one will be later this year. Once we get those online we will have a very, very robust Internet banking alternative delivery set of products and then the challenge is to market those.

  • Daniel Cardenas - Analyst

  • All right. Then maybe just looking at your capital; you seem to be more than adequately capitalized and you are putting some of it to use through buybacks and dividend increases. Maybe just a discussion on M&A; what is your appetite for traditional as well as non-bank M&A and what is the environment like right now?

  • Don Hileman - President & CEO

  • Our appetite continues to be such that we are looking for those opportunities on both bank and non-bank opportunities. I would say the environment is picking up. It seems there is a lot more interest, a lot more discussion now on size of organizations and the impact of a lot of the regulatory environment that has trickled down now and we get a little bit better understanding of what that expense creep is going to be.

  • So I think the expectation is there will be a lot more discussions in 2014 than 2013 and we look to hopefully be in those discussions as an acquirer.

  • Daniel Cardenas - Analyst

  • Great. Then just lastly; as you look at organic loan growth opportunities, just given some of your comments, it seems like that is going to be the low single digits, mid single digit for 2014. Is that a safe assumption?

  • Don Hileman - President & CEO

  • I think that is very consistent with what we expect internally.

  • Kevin Thompson - EVP & CFO

  • It is going to be higher in 2014 than it was in 2013.

  • Don Hileman - President & CEO

  • We would love to see double-digit growth, but we don't expect to see that.

  • Daniel Cardenas - Analyst

  • Absent a deal, that is that right?

  • Don Hileman - President & CEO

  • Exactly.

  • Daniel Cardenas - Analyst

  • Got you. Okay, great, I will step back. Thank you, guys.

  • Operator

  • John Barber, KBW.

  • John Barber - Analyst

  • Good morning. Kevin, you mentioned that new loan production in the fourth quarter was put on at 450 basis points. That was up pretty significantly from last quarter. What do you think is driving that increase? Is it less competition? Is there a mix shift or what exactly is happening in the market?

  • Kevin Thompson - EVP & CFO

  • Probably a little bit of everything. I think competition still seems to be pretty steep, to be honest with you. We have been working pretty hard on our loan pricing and obviously rates have risen, so I think it's just forces like that at work that have made the difference. And we expect -- with the rising rate environment we expect that is going to continue favorably.

  • John Barber - Analyst

  • Thanks for that color. Then just switching to the deposit side; did you make any additional tweaks to pricing this quarter that maybe impacted deposit flows?

  • Don Hileman - President & CEO

  • Not significantly, no. We really have held pretty steady with our pricing. To look at our numbers for the quarter you see that the overall deposit costs were flat on a linked-quarter basis. Overall interest-bearing liability costs are flat on a linked-quarter basis.

  • When you put together interest-bearing liabilities and demand deposits, our costs actually come down -- 1 basis point. Not a whole lot of room to improve, but we have been pretty consistent there and the dollars really have just been coming in.

  • John Barber - Analyst

  • Thanks. Just the last one I had was related to the buyback. How should we think about that going forward? Is there a certain level you guys would be more aggressive repurchasing shares or how do you think about it?

  • Don Hileman - President & CEO

  • I think we will see that continue throughout the year. We thought of the 5% as an annual program, if you will, and we obviously began here in the fourth quarter. We expect to continue toward accomplishing the 5% buyback over the remainder of 2014.

  • John Barber - Analyst

  • Great, thank you.

  • Operator

  • (Operator Instructions) Showing no additional questions, I would like to turn the conference back over to management for any closing remarks.

  • Terra Via - Director, Marketing

  • We thank you for joining our conference call. This concludes our call.

  • Operator

  • The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.