Earnings Call Transcript - ABCB Q4 2021

Operator, Operator

Hello, everyone, and welcome to today's Ameris Bank Fourth Quarter Earnings Conference Call. My name is Emma, and I will be coordinating your call today. I will now pass over to your host to begin, Nicole Stokes, Chief Financial Officer. Please go ahead.

Nicole Stokes, CFO

Great. Thank you, Emma. And thank you to all who have joined our call today. During the call, we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our website at amerisbank.com. I'm joined today by Palmer Proctor, our CEO; and Jon Edwards, our Chief Credit Officer. Palmer will begin with some opening general comments and then I will discuss the details of our financial results before we open it up for Q&A. But before we begin, I'll remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties. The actual results could vary materially. We have listed some of the factors that might cause results to differ in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward-looking statements as a result of new information, early developments or otherwise, except as required by law. Also during the call, we will discuss certain non-GAAP financial measures in reference to the company's performance. You can see our reconciliation of these measures and GAAP financial measures in the appendix to our presentation. And with that, I'll turn it over to Palmer for opening comments.

Palmer Proctor, CEO

Thank you, Nicole, and good morning, everyone. I appreciate you taking the time to join our call this morning. I'm really pleased with the financial results we reported yesterday and excited to share some of the highlights from the quarter as we had a tremendous year for 2022. For 2021, we earned a record 368.7 million or $5.29 per diluted share on an adjusted basis, which is up 22% over 2020 results. This represents an ROA of 1.69% and a return on average tangible equity of 20.19%. We had a fantastic fourth quarter as we earned 81.5 million or $1.17 per diluted share on an adjusted basis, and this represents a 1.40% return on average assets and a 16.88% return on tangible equity. On the balance sheet side of things, we were extremely pleased with our organic growth. Exclusive of PPP runoff and our Balboa acquisition, loans grew over 383 million for the fourth quarter or over 10% annualized. And that brings our full year 2021 loan growth to 1.4 billion or 10.5%, excluding the PPP runoff. The Balboa acquisition brought another 665 million of loans on our balance sheet. We continue to anticipate 2022 loan growth in the upper single digits. We certainly have the liquidity to fund it, as our deposits have continued to grow. Our total deposits now are approaching $20 billion with noninterest-bearing deposits accounting for over 39% of total deposits. Nicole is going to provide more detail shortly, but know that we remain focused on ways to safely deploy our excess liquidity. As to capital position, it remains strong. We've consistently said we're focused on tangible book value growth. And while we did have some dilution in the fourth quarter from the Balboa acquisition, we still grew tangible book value by over 10% in 2021. And with anticipated earnings, we forecast last quarter's tangible book value within the next quarter. As reported last quarter, we have a share repurchase program outstanding until the 31st of October this year. We repurchased 1.3 million during the fourth quarter, which leaves approximately 78 million left on that program. And while we don't anticipate executing on this during the first quarter of 2022, we do like having the optionality if the right opportunity presents itself. As for the dividend, we still remain very comfortable where the dividend stands today. Moving on to credit. Jon Edwards, our Chief Credit Officer, is with us today and certainly available to take any credit questions after our prepared remarks. But overall, we are very pleased with our credit metrics. We had net recoveries of $556,000 this quarter, which is the second consecutive quarter of net recoveries. NPAs were 43 basis points at year end. Loans that remain on deferral at the end of the quarter were minimal. And those that remain are primarily mortgage related. Our allowance coverage ratio, excluding unfunded commitments, was 1.06 at the end of the year. In the fourth quarter, we were proud to announce our purchase of the Balboa Capital Corporation, which is a FinTech provider business lending solutions to small and mid-sized businesses nationwide. We've already begun to integrate and leverage their technology into the rest of the Bank. So when you combine their technology with our strong Southeastern markets, it only reinforces the overall potential for us for 2022. And in terms of momentum, I wanted to share some of the core fundamentals driving our positive outlook this year. We have an asset-sensitive balance sheet with over 40% variable rate loans. And then there's actually another 10% on top of that, which is short-duration fixed rate loans that behave more like variable rate loans. So we're well positioned in terms of margin expansion and NII expansion. We have a strong loan pipeline. And even after we had our best production quarter in the history of the company, it still remains robust. We continue to meet our growth expectations and a lot of that we are very fortunate to be in some of the best markets within the Southeast and more importantly have the experienced bankers to help us execute in those markets. We've also got $70 million of revenue anticipated for the growth and forecasted from Balboa, which will be very meaningful, which allows us to target an ROA in the 1.30% to 1.40% range and a return on tangible common equity well above 15%. So you combine all that with a culture of expense control, that way we should be able to still maintain a sub 55% efficiency ratio. I'll stop there now and turn it over to Nicole to discuss our financial results in more detail.

Nicole Stokes, CFO

Thank you, Palmer. In the fourth quarter, we reported a net income of 81.9 million or $1.18 per diluted share. On an adjusted basis, we earned 81.5 million or $1.17 per diluted share, excluding the servicing asset recovery, merger and conversion charges, and gain on sale of premises. Our adjusted return on assets was 1.40%, and our adjusted return on tangible common equity was 16.88%. For the full year 2021, we reported a net income of 376.9 million or $5.40 per diluted share, marking a record year for Ameris. On an adjusted basis, we earned 368.7 million or $5.29 per diluted share, also a record, compared to 300.5 million or $4.33 last year. This brings our full year return on assets to 1.69% compared to 1.56% last year, and our return on tangible common equity to 20.19% compared to 19.77% the previous year. For 2021, we experienced a 10.8% increase in tangible book value, ending at $26.26. The tangible common equity ratio was 8.05% at year-end, down from 8.88% at the end of the third quarter due to the Balboa acquisition. Much of this is a timing issue since we added these assets right at the end of the quarter without benefiting from Balboa's earnings. Moreover, approximately $3 billion of excess liquidity on our balance sheet negatively impacted this ratio by 135 basis points. Excluding that cash from total assets, our TCE ratio would have been around 9.39% at quarter-end or year-end, exceeding our stated target of 9%. We project that the TCE ratio will be closer to 8.5% by the end of the first quarter and well above 9% by year-end, if not sooner. We remain well-capitalized and comfortable with our capital and dividend levels. Regarding net interest income and margin, our net interest income for the quarter rose by $5.2 million, with $3.4 million from the core bank, $3.6 million from Balboa, and a $2 million decline in mortgages. Our net interest margin declined 4 basis points, consistent with our previous guidance, from 3.22% in the third quarter to 3.18% this quarter. The yield on earning assets decreased by 5 basis points, while the total funding cost dropped by 1 basis point. The margin squeeze was primarily due to 7 basis points of compression from excess liquidity, offset by 2 basis points from additional PPP accretion and a 1 basis point improvement in total funding costs. If we exclude the excess liquidity, our margin would have actually improved this quarter. On Slide 8, you can see how the approximate $3 billion of excess liquidity accounts for 54 basis points of negative margin compression from a year ago. Without that excess liquidity, our fourth-quarter margin is the same as last year’s. Additionally, we had about $314 million of Balboa debt still on our balance sheet at year-end, which we have paid off. This was beneficial to the margin, and we expect Balboa to positively impact the margin going forward. We continue to anticipate net loan growth this year in the high single digits, around 7% to 9%, translating to approximately $1.1 billion to $1.4 billion of growth. This leaves about $1.6 billion of excess cash to prepare for cyclical deposit runoff and start investing in the bond portfolio as rates rise. From an ALLL modeling standpoint, we have positioned ourselves to be asset-sensitive, predicting NII to increase by 6% to 7% in the current environment. Essentially, every 25 basis points increase in rates raises our net interest income by about $9.5 million to $10 million. In the fourth quarter, we recorded $2.8 million of provision expense, which included $7.5 million on the newly acquired Balboa loans, offset by a $4.7 million release of reserves in other divisions due to improved model loss rates. Within the Balboa provision, approximately $7.3 million covers the CECL double-count on non-PCD loans, with about $200,000 covering gross and net charge-offs. We also maintain about $9.1 million in allowance on PCD loans for a total reserve of $16.7 million on these loans. As Palmer mentioned, we had net recoveries for the second consecutive quarter. Our ending allowance for loan losses was $167.6 million, and when including the unfunded commitment reserve and allowance for other credit losses, the total was $200.8 million at year-end, compared to $188.2 million at the end of the previous quarter. Noninterest income increased by $5.2 million this quarter, boosted by a $4.5 million servicing rights recovery versus a $1.4 million impairment last quarter. Excluding that MSR activity, total noninterest income declined slightly. Similar to last quarter, retail mortgage originations as a percentage of our pre-provision pre-tax income continued to drop, now making up only 13%, down from 50% this time last year. Although production in retail mortgage declined to $1.8 billion this quarter, the average gain on sale increased to 3.27% from 3.17% last quarter, offsetting some of the production revenue decline. The open pipeline at year-end was $1.6 billion compared to $1.9 billion at the end of the last quarter. Total noninterest expense increased by $1.2 million from $137.2 million last quarter to $138.4 million this quarter. However, adjusted for the loss on bank premises and merger charges, noninterest expenses actually fell by $1.4 million during the quarter. We also incurred about $1.4 million of operating expenses from Balboa. Excluding those, our operating expenses would have decreased by $2.8 million for the quarter, aligning with our previous estimates. We expect operating expenses from Balboa to increase overall noninterest expenses by about $6 million per quarter, but these expenses will operate at a sub 40% efficiency ratio, offsetting the costs through revenue generation, with Balboa being favorable for our efficiency ratio overall. We are pleased with our efficiency ratio and the progress made, ending the quarter at 54.85% compared to 56.56% last quarter. For the full year, we remained steady at 55%, within our guidance of 52% to 55%. Despite tight margins and decreasing mortgage revenue, we are satisfied with achieving our projections. We continue to carefully assess other noninterest expenses, expecting minimal increases in the core bank, with actual decreases in variable costs for the retail mortgage segment as production lessens and expenses normalize. Although cyclical first quarter costs such as payroll taxes may arise, we remain confident that an efficiency ratio in the low to mid 50s or below 55% is realistic and attainable. On the balance sheet side, we closed the year with total assets of $23.9 billion compared to $22.5 billion last quarter and $20.4 billion last year. We are very pleased with our organic loan growth of $383.9 million or an annualized 10.4% for the fourth quarter. We faced $319 million of headwinds against $701 million growth in CRE, C&I, and residential sectors. PPP loans declined by $147 million and indirect loans fell by $59 million. Excluding the PPP runoff, our net loan growth was $536.6 million or 14.8% annualized for the quarter. Our total loan growth for the year was $727.5 million, or 5%, factoring in the PPP runoff. Excluding that runoff, net loan growth for the year was $1.4 billion, or 10.5%. We have around $134 million of PPP loans and $265 million of indirect loans remaining. We anticipate the headwinds from the runoff in both portfolios to ease early in 2022. We already covered the excess liquidity reflected in other earning assets. Due to significant deposit growth, deposits increased by $832 million this quarter, with noninterest-bearing deposits growing by $158 million and interest-bearing by $674 million. Included in this deposit growth was about $540 million of temporary municipality funds that we expect to exit our balance sheet within the first few months of 2022. To conclude, we are enthusiastic about the year ahead. Our balance sheet is well-positioned as rates begin to rise, and we are excited about the Balboa acquisition's positive effects on our operating results, margin, net income, and efficiency ratio. We are consistently monitoring expenses and identifying methods to fund new technology through resource reallocation. The excitement and momentum within our company are palpable, as our teams strive to deliver exceptional performance and shareholder value. Thank you for your time today. I will now hand the call back to Emma for any questions.

Operator, Operator

Thank you. Our first question comes from Brady Gailey from KBW. Please go ahead. Your line is now open.

Brady Gailey, Analyst

Thank you. Good morning, guys.

Palmer Proctor, CEO

Good morning, Brady.

Brady Gailey, Analyst

So mortgage really held in quite nicely in the fourth quarter. I know volume was down a little bit, but gain on sale was up a little bit. As we head into 2022, I think most people think mortgage will kind of continue to normalize lower. How do you think about gain on sale and volume at Ameris this year?

Palmer Proctor, CEO

Brady, I will tell you that we're still very encouraged by the contribution that mortgage will make. And I do think what you're going to start seeing as mortgage normalizes throughout the industry is that seasonality that you would typically see in mortgage, especially in the first quarter, is going to be there for all of us. So that will normalize. We feel very comfortable based on our pipeline of where we are in terms of the contribution going forward. And I think what you'll find is that first quarter will be adjusted as it historically has been in terms of seasonality, and then second, third quarter will be very strong. The margin, we were pleased. A lot of that has to do with timing, the pair-off and everything for the fourth quarter. And as we go into the first quarter, I think we'll still feel a little more pressure, downward pressure on that gain on sale margin. But in terms of the volume itself, we remain encouraged and positive. And one of the things too that we're pleased to see is that it will still be a meaningful contribution, but a lot of the growth we're also seeing is reflected in a lot of the other areas of the company. So that's kind of our take on mortgages. Our outlook is still very positive.

Brady Gailey, Analyst

Okay, great. That's helpful. Assuming deposits don't grow at all this year and you achieve the upper end of your loan growth guidance, you will still have a considerable amount of excess cash on the balance sheet. How do you view the bond book, which has remained relatively stable or even decreased post COVID, especially as the long end of the curve hopefully continues to rise?

Nicole Stokes, CFO

Great. Brady, that's a great point. So as we said, we have about $3 billion of excess liquidity. And one thing that I wanted to make sure that I know was in our prepared remarks, but we had about $350 million of Balboa debt that because of the timing, there were some 30-day notices on that. So we weren't able to pay that off before year-end. But it's already been paid off this year. So there's that piece. And then again, about $0.5 billion of public fund cyclicality that we think will run out in the first quarter. So that's 1 billion right there in those two items. And then if you have somewhere between 1.1 billion and 1.4 billion of loan growth, that leaves us about $700 million to $1 billion to be able to put in the bond portfolio. If you look historically, we're down to 2.5% of earning assets. And we'd like that bond portfolio to be kind of close to about 7.5% of total assets. You go back to 2019, we were over 9% of earning assets. So if we added 1 billion to 1.1 billion in our bond portfolio, we would be back to where we were in 2019.

Brady Gailey, Analyst

All right, that's helpful. And then finally for me, there's a lot of talk industry-wide as far as what's going to happen to NSF fees and overdraft. Any thoughts on kind of how Ameris fits into that and can you just share with us what was the level of NSF and overdraft when you looked at last year?

Nicole Stokes, CFO

Sure. So when you look at our service charge income on our income statement, about 36% of that is NSF fees. So it was about $16 million in 2021, which was already down. It's been coming down gradually over the last couple of years. We've budgeted a 25% decline in that, so about a $4 million decline is already in our internal budget. About 90% of those fees are consumer. We do have a plan that we're in the process of developing and we do think that there will be an impact to that. As I said, we've already budgeted a 25% decline in our budget.

Brady Gailey, Analyst

Okay, Nicole, that 16 million, is that just NSF or is that NSF and overdraft?

Nicole Stokes, CFO

That’s both, NSF and overdraft.

Brady Gailey, Analyst

Okay, great. All right. Thank you, guys.

Nicole Stokes, CFO

Thanks, Brady.

Operator, Operator

Thank you. Our next question today comes from Jennifer Demba from Truist. Please go ahead. Your line is now open.

Jennifer Demba, Analyst

Good morning. Could you guys talk about the increase in problem loans this quarter and give us some detail behind that?

Palmer Proctor, CEO

Yes, Jennifer, we put a slide on that in the deck. It's Slide 18. There were really three categories of loan increases. One was the purchased credit deteriorated loans that we bought from Balboa Capital that came in at $9.6 million. There's about $25 million worth of mortgage loans that had been under CARES Act provision previously, and we're working through the mod programs, but we were kind of in that middle. So there were over 90 days, and those came into the NPA number. And then there was about $3 million worth of premium finance loans. But those are very short-term kind of transitory. We'll get the unearned premium sometime quickly. And so those will move off. And that was offset by collections and recoveries of over $7 million; OREO, Repo, and just general collection. So, all-in-all, it's about $31 million worth of increase for the quarter, a third of which was really part of the Balboa acquisition.

Jennifer Demba, Analyst

Okay. And, Palmer, could you talk about your acquisition interest going forward at this point?

Palmer Proctor, CEO

Yes. We are currently focused on completing the integration of Balboa. The advantage of that transaction is that it is already operational, and we are utilizing the technology now, even in parts of the core bank, and we will keep our attention on that. However, I want to emphasize that, despite the efficiency of this acquisition, we are still open to exploring other opportunities in the future. Our primary focus remains on organic growth, which is clear in the results we have achieved, and I am very excited about the growth pipelines we are observing, both geographically and across different lines of business. This is our main priority, but we will stay alert to other potential opportunities, and the Balboa transaction will not prevent us from pursuing them if we decide to.

Jennifer Demba, Analyst

And what kind of deals interest you at this point?

Palmer Proctor, CEO

Well, I'll tell you if we could find more deals like this Balboa deal, it would be great. So I think there's both banking and non-bank opportunities out there. So we're pretty open to look at it at both types of activities. Just depends on what makes the most sense for us.

Jennifer Demba, Analyst

Thank you.

Palmer Proctor, CEO

Yes, sure.

Nicole Stokes, CFO

Thank you, Jennifer.

Operator, Operator

Thank you. Our next question today comes from Casey Whitman from Piper Sandler. Please go ahead, Casey. Your line is now open.

Casey Whitman, Analyst

Thanks. Good morning.

Nicole Stokes, CFO

Good morning, Casey.

Casey Whitman, Analyst

Palmer, I think you mentioned in your prepared remarks 70 million in revenues from Balboa that you're assuming. Just wondering, does that include the fee income piece or is that just the NII piece?

Palmer Proctor, CEO

That includes both.

Casey Whitman, Analyst

It includes the fee income piece. Okay. Thank you. And wondering, can you put some numbers around where we could see the margin shakeout in the first quarter? I know there's just a lot of moving parts with the Balboa yields, a full quarter of that, and then the debt paid down and presumably less cash. But we could maybe see a big jump, right, in the margin in the first quarter, so maybe help us just put some numbers around that?

Nicole Stokes, CFO

We are projecting growth in the mid-single digits, specifically between 3% and 5%. While we expect the positive influence from Balboa, we are also anticipating a reduction in PPP. In terms of core margin, we definitely expect an increase. When I refer to reported margin, the positive impact from Balboa must be considered alongside the decrease in PPP. Additionally, we experienced a slight increase in our bond portfolio this quarter due to an early maturity. Taking all these factors into account, we’re looking at mid-single-digit growth. Furthermore, I would like to mention the benefits of excess liquidity; for every $100 million we can effectively utilize, it adds approximately 2 basis points to the margin. If some of this excess liquidity decreases due to the typical deposits used to pay off Balboa debt, we could potentially see a bit more margin increase. However, if we maintain liquidity levels, we would likely expect a net increase of around 5 basis points.

Casey Whitman, Analyst

Okay. And minus how much you have left in PPP fees to recognize?

Nicole Stokes, CFO

Yes, so PPP fees that we have left is 5.8.

Casey Whitman, Analyst

Okay. All right. Thank you for taking my questions.

Nicole Stokes, CFO

Sure. Thank you.

Operator, Operator

Thank you. Our next question today comes from David Feaster from Raymond James. Please go ahead, David. Your line is now open.

David Feaster, Analyst

Hi. Good morning, everybody.

Palmer Proctor, CEO

Good morning, David.

David Feaster, Analyst

It was nice to see the increase in production in the quarter, north of $1 billion, broke out of that kind of 900 million run rate that we were at. Just kind of curious, what do you think drove the increase in the quarter? Is it an increase in demand? Is it the new hires hitting stride, or just more increased willingness to compete on pricing? And then just maybe help us think about how the pipelines look ahead of the new year and maybe how the competition might have changed?

Palmer Proctor, CEO

Yes, we were very pleased with the growth. We benefited significantly from commercial real estate, with many loans transitioning from construction to permanent status. We also observed a nice rise in our commercial and industrial activity. One of the most encouraging aspects is that our focus aligns with where we're experiencing this growth. We have consistently seen substantial contributions from mortgage, premium finance, and other areas, including Balboa. The core bank’s pipelines remain strong, and looking ahead, they are full. The business opportunities are present, but we are also maintaining discipline because there is considerable competition pushing rates down, which is affecting margins across the board. While we aim to build strong relationships, we will not compromise our stance in the face of long-term margin compression. We've seen several deals fall out of our pipeline due to pricing, so although I am pleased with our current pipeline and we achieved record production in the fourth quarter, we can expect some fallout because of competitive pricing pressures. The extent to which prices may drop is uncertain, but we have an internal threshold and are disciplined about adhering to it. Thus, we will pass on certain deals. Nevertheless, our outlook is optimistic; there are substantial business opportunities available, and we are confident we will capture our fair share.

David Feaster, Analyst

Just following up on the pricing discussion, it seems that new loan yields decreased this quarter, which aligns with your observation. I am curious about where you are experiencing the most pressure. It appears to be primarily on the variable rate side. Do you believe this is at a low point, or have you noticed at least some stabilization in new loan yields, especially considering the increase in tenure?

Palmer Proctor, CEO

I believe people have realized that we have likely reached the lowest point in pricing and it shouldn't go down any further. However, the competition remains very intense. The challenge lies in balancing rates with structure, as we don't want to compromise too much on structure. I feel that we have indeed hit the lowest point and should see some moderation moving forward. Regarding competition and pricing, I don't expect it to decrease further; in fact, I anticipate improvements going forward, particularly related to our commercial and industrial efforts.

David Feaster, Analyst

Okay, that's helpful. And then maybe following up a bit on that, payoffs and payouts are obviously still a headwind. I'm just curious what you're seeing on the pay down front. It kind of sounds like you might be passing on more deals just for competitive reasons or aggressive structure or pricing. Just curious, any trends you're seeing on the payoff and paydown front? And then just any thoughts on the recruiting side and your appetite in the new hire, lender hire market?

Palmer Proctor, CEO

Yes. I think what we're seeing on the pay downs with our existing C&I customers, our utilization rates are actually up on C&I. The CRE is where we are seeing some pay downs, and a lot of that has to do more with the investor property where people are getting premium prices for the properties, and you can't fault them for moving the property or selling the property. So I think there will still be downward pressure there or a headwind to contend with. But we feel very comfortable with our ability to still maintain our current production levels, and that all comes back to the bankers to your point. We hired 17 bankers this year. And what we were able to do, to Nicole's point earlier, that's reallocating resources. We hired 17 folks but actually moved out 21 folks. And that's all just a function of attrition. And so net, when you look at from an expense standpoint, we're actually down four people on that side, but we're actually up in production. So the folks that we have are more productive. And we've been very consequential about that. And I think that will continue to serve us well when you look at our expense and overhead. So we feel very good about the markets we're in. We saw a lot of good growth this past quarter, fourth quarter, coming from Atlanta and Florida and also the Carolinas. And I think that will continue.

David Feaster, Analyst

That's helpful. Thanks, everybody.

Operator, Operator

Thank you. Our next question today comes from Christopher Marinac from Janney Montgomery Scott. Please go ahead, Christopher. Your line is now open.

Christopher Marinac, Analyst

Thanks. Good morning. Palmer or Nicole, could you just elaborate on a little bit of the toolset at Balboa? What gives you kind of inside the company to kind of process, improve and kind of how that's going to play out in the future quarters?

Palmer Proctor, CEO

I'll discuss the technology aspect, and then Nicole can touch on additional benefits. One of the key factors that drew us to Balboa was their technology, which is a FinTech solution. This technology allows us to connect with numerous opportunities that banks are missing out on, especially related to vendor financing and critical point-of-sale interactions. It's a new channel for us. Their platform, Portal360, is highly efficient, offering rapid response times, with feedback typically available within a day or even hours. Our goal is to integrate this technology into our core banking platform, especially for small business lending through our retail network. We've already implemented this across most of the commercial group and will extend it to retail in the coming month. The platform is user-friendly; you simply input the necessary information, and the entire application process is automated, allowing for quick turnaround times. Many wonder how we maintain such high yields, and the answer lies in convenience and effective point-of-sale strategies. We see this as a significant opportunity. Building a platform like this independently would take years and a considerable financial investment, making this an added advantage for us. Additionally, Balboa is excited about the support we can provide, especially in enhancing our SBA lending activities, leading to beneficial collaboration between both organizations. Nicole, do you have anything else to add?

Nicole Stokes, CFO

Sure. I want to reiterate my earlier points about the positive impact on our financials. We expect to generate $70 million in revenue, which translates to approximately $5.5 million to $6 million per quarter. Even with the higher-end expense estimate of $24 million, they are operating at an efficiency ratio below 40, making this beneficial for us. In terms of margins, we anticipate an impact of 25 to 30 basis points, although this will be partially countered by a decline in PPP revenue, which influenced my margin guidance. Overall, the potential is significant, and I believe a 10% growth in this area is realistic and attainable, and we aim to exceed that.

Christopher Marinac, Analyst

Great. That's really helpful. Thanks for that. And you have a natural efficiency already happening at the company, so as you kind of get better internally with the technology, we'll see those results as they occur, right. So there's no kind of definitive number there, but just in general should improve.

Palmer Proctor, CEO

Yes, in an ideal situation, we would implement the same technology that Balboa has used across our entire company and in all our lines of business. However, the current reality is different. We have made significant progress in the mortgage sector by utilizing robotics and improving efficiencies, but there is still much more we can do to stay competitive with online lenders. We are committed to making these efforts. The benefit of being a regional bank lies in our strong relationships with builders and realtors, which online providers do not possess. It's vital that we maintain focus on this core strength. At the same time, we believe there is additional volume to be gained through online initiatives and developing a more user-friendly portal. This will be a distinct effort since it is not feasible to immediately integrate Balboa's 360 portal into our mortgage process. However, the efficiency of that operation makes us appreciate the potential we have in other high-volume areas of the company. When we consider premium finance or mortgage, it inspires us to pursue similar initiatives to enhance both lines of business. Does that address your question?

Christopher Marinac, Analyst

Yes, it does. Thanks very much. I appreciate the background here.

Palmer Proctor, CEO

You bet.

Nicole Stokes, CFO

Thank you.

Operator, Operator

Thank you. Our next question today comes from Kevin Fitzsimmons from D.A. Davidson. Please go ahead, Kevin. Your line is now open.