And we’ve had a lot of those are down. And where the ups are, generally speaking, aligns with what we would think. But we are pleased that those have been of limited nature. And if you look back historically at what our portfolio LTV is, and we’ve been reappraising projects through a pretty long cycle of uncertain economic conditions and lack of activity, lack of transactions, you are seeing a solid, it’s incremental, but a solid positive trend in our portfolio LTV. And a lot of that’s driven by the fact that our guys do such a great job of originating loans at low LTV, loan LPC, putting these sponsors in a position with a lot of skin in the game and a reason to put more in to protect it, but is another reason that our LTVs don’t move more than they do.
So – and we will continue to reappraise projects through the year and we will see changes. But generally speaking, I think it’d be accurate to say we are not really surprised by most of the results given especially the lack of data in office, in particular, to support any other cap rate than what appraisers are using.
George Gleason: Ben, I would point out also that all of those loans that you mentioned on the reappraised list there are pass rated credits. That pass rating takes into account the higher loan-to-value on the ones where the LTV went up, but there is still pass rated credit. So we don’t consider those are problems. And I would – Brannon made an excellent point, if you look back over the last eight quarters from a portfolio perspective, our loan to cost on the entire portfolio and our loan to value on the portfolio and the loan to value is kind of 42%, 43% loan-to-value range. That has not moved more than a point or two in the aggregate over that whole period of time. And that’s because, while we are having some loans like these three you mentioned where the appraised loan-to-value has gone up in a meaningful way, we are also having a number where we’ve got accretive pay-downs.
We are also having a lot of new originations where we are originating at high 30s or very low 40s loan to value. So the aggregate condition of the portfolio is continuing to perform very well on that LTV metric.
Ben Gerlinger: Got it. That’s helpful color. Appreciate it.
George Gleason: Thank you. Latif, who is next?
Operator: [Operator Instructions] Our next question comes from the line of Catherine Mealor of KBW. Please go ahead, Catherine.
Catherine Mealor: Thanks. Good morning.
George Gleason: Good morning, Catherine.
Catherine Mealor: Just a follow-up on the credit conversation, you mentioned in your prepared remarks or your management comments that you still have a goal to grow EPS in 2024, which is pretty big coming off of a year where you grew 30% some, had a record year. And so as I think about ‘24, I think we all know the NIM and growth headwinds that we’re going to potentially see if we have rate cuts, but I think a big question is, where is the provision? And so just curious how you’re thinking about how the provision should trend kind of versus this past year’s level to reach an EPS growth goal in this year?
George Gleason: Well, great question. And yes, you’re spot-on correct there with the guidance that we’ve given on tax rates and non-interest expense and the net interest margin – net interest income number being a horse race on net interest income every quarter. We think it’s a reasonable scenario that, for the year, we will put up improved EPS versus last year. I don’t know that we have an improving EPS trend every quarter next year like we did this year, and maybe some quarters are up EPS in record and some quarters are a little off the record pace. But we expect a good EPS story and, for the year, expect to beat our 2023 net income and EPS numbers. So our assumption on provision expense in our budget and our guidance on that is predicated upon that Fed achieving a relatively stable planning to the economy.
I don’t know if that’s a soft landing or just not a real hard landing. We have assumed in our ACL calculations, consistently for a number of quarters now, 5, 6, 7 quarters, we’ve been heavily weighted to the downside scenarios. So as you know, last year, we grew our ACL over $100 million last year. Part of that was due to our significant growth. Part of it was due to the fact that we were leaning heavily on the Moody’s downside model, the S4 and the S6 models. We continue to lean that way. So we think our ACL is appropriate and pretty well positioned for a range of scenarios. If the – unless we have a landing of the economy that’s consistent with the S4, the S6 scenarios, if the economy lands in a more benign fashion than that, then we’re going to probably look back and I think we can look back and assume that 2023 was kind of a high point in provisioning.
So we’re not there yet with that conclusion, but I think you could draw a scenario pretty clearly that would suggest we could have some downside in what we provision each month or each quarter. And the flip side of that, of course, is also true. If the geopolitical, global issues, Fed, congressional issues, government shutdowns, whatever, were to somehow all coalesce into a hard landing for the economy, we could have higher provision expense. But those scenarios seem to be getting mitigated and the chance for the Fed to actually engineer a pretty decent landing for the economy is – seems to be growing a little bit. So that could hopefully lead to lower provision expense next year.
Catherine Mealor: That’s really helpful. And it feels like a nice offset if you see – if you do see lower margins and more paydowns in the loan book, an offset to that headwind is going to be this provision if we are in that soft landing scenario. And then…
George Gleason: We still do expect good loan growth, I would remind you of that, yes.
