George Gleason: Well, there is competition out there, but the competition in the space is significantly lower than it was 2 years ago or 3 years ago, for sure. The number of people out there to provide financing and commercial real estate is – all the visitors, the people who are in it when it’s easy and fashionable and run from it when it’s more challenging and requires more sophistication and expertise, all those guys were gone. So the people that are out there lending today pretty much understand commercial real estate and are committed to it as an asset class. And I would tell you, I think we’re the leader among that group of folks, and that’s why we’re generating good volumes even in an environment where the pie is massively smaller than it was as Brannon alluded to in his earlier remarks.
So we’re going to do things that make sense. We’re not going to let a competitive offer from someone else drive us to do something that doesn’t make sense. That’s always our mantra. That’s why we’ve been successful. And in my 45 years as CEO, we’ve never lost money in a single year, because we just don’t do things that don’t make sense to us when we do them. We’re pretty disciplined. So there is competition out there, though. I wouldn’t say it’s changed much in the last 90 or 180 days.
Brandon King: Great. Thanks for taking my questions.
George Gleason: Thank you.
Operator: Thank you. Our next question comes from the line of Brian Martin of Janney.
Brian Martin: Hey, good morning.
George Gleason: Good morning, Brian.
Brian Martin: Just one question, George, on – just on hiring. I know you talked about some opportunities as you kind of look into ‘24 here. And just wondering if you can give any commentary on just where you see the opportunities potentially as far as hiring goes, and if that kind of involves new business segments as you kind of talk about this handoff to, with RESG are there things you’re looking to do here or seeing opportunities to add new business lines or just add to existing business line? Just kind of curious where that hiring position looks today.
George Gleason: Yes. The answer to that is yes, yes and yes, I think. We are, as I alluded to, I think it was a couple of quarters ago on this call, I think talent is a short end supply commodity in our economy and, certainly, in our industry. And we are trying and have been trying for years and really hit the accelerator on this the last year or so, really trying to upgrade the quality of our talent. So when we have a position become vacant, we’re trying to fill that position with a person that was better than the person that left. We’re trying to continuously upgrade talent. And obviously, as we’ve alluded to in prior management comment documents, we’re adding talent. I mean, obviously, we grew high 20% last year on loans, deposits and everything else.
You can’t achieve that kind of growth without adding people. We expect to continue to grow. We expect to continue to add talent. And most importantly, we expect to continually upgrade talent as we’re adding talent or replacing talent that has left. So that will keep an upward pressure on our salary expense line because of the new applicable AICPA guidance, some of our non-interest expense in ‘24 and going forward has moved to the tax line on those tax credit sort of investments. So our non-interest expense year-over-year will show a 0% to 3% sort of growth rate, probably 1%, 2%, 3%, low single digits, I think, is what we’ve guided. But the salary and benefits line of that is going to show some continued good growth because we’re adding talent to support our growth and we’re constantly trying to improve the quality of our talent.
I think the excellent team that we have is one of our best, if not our best competitive advantage. I mean we have got a great business model that’s unique in the industry and it generates higher returns and lower credit losses than the industry averages by far year-in, year-out. So, we are very confident in our business model. But the key to the business model working is our talent. And our people are our competitive advantage.
Brian Martin: Got it. Okay. No, that’s helpful. And then just – it sounds like the reserve build is – you have talked about over the last 12 months or even further going back, the heavy lifting of that is done. Is that kind of how to think about it given your commentary on credit? I know you mentioned in the management comments about charge-offs being maybe up a little bit in ‘24 versus ‘23. Just trying to understand the aggressive reserve build, if a lot of that’s in the rearview mirror based on kind of how you are looking about the world today.
George Gleason: Well, as I have said earlier, that is going to depend on the economy. If the Fed and world events and Washington events somehow price the economy, then we can have more reserve build, the whole industry can have a lot more reserve build, if the economy crisis in an ugly way. But our – increasingly, I think we are beginning to migrate to the camp that the prospects of some sort of soft or relatively benign landing are getting more likely, time will tell. We will know as the year goes on. But if that is the case, given the fairly conservative selection of economic scenarios we have used to build our reserve, and we can shift to a more benign set of assumptions in our reserve build, and that would give us the room for provision expense to come down over the course of next year.
Those events have got to play out. And again, I would caution, and Tim would want me to caution you that if prospects for the economy get worse instead of better, there will be more reserve builds needed. And obviously, we are going to grow, we have talked about that quite a bit. So, we are going to have to increase our dollar volume of ACL for our growth.
Brian Martin: Got it. That’s understood. Okay. And then just the last one for me was, on the margin, it sounds as though you have got a little bit more weakness here with the funding costs still catching up the next couple of quarters, and you have got loans on maybe under a bit of pressure early on as rates start to cut, and then the floor is kicking in and the deposits re-pricing, I guess. I mean does the general outlook seem as though the margin kind of bottoms or stabilizes midyear or maybe just a little bit lower in the second half and then it’s up in ‘25, is how to kind of think about big picture without giving specifics on the actual level?
George Gleason: Our scenario, Brian, is that we are working more than planning for is that we need to get our floors in our loans set and that we could have enough magnitude of rate cuts in ‘25 that would really make those floors active and important. And as those floors kick in and we get to lock those rates at a good level, in a falling rate environment, our cost of deposits could drop faster in ‘25 than our loan rates because of the floors in those loans. That would then give us a favorable NIM experience like we had in ‘23 or in ‘22, in 2022, when our loan yields adjusted really quickly and our deposit costs adjusted more slowly. We could have the reverse of that scenario in ‘25, if we can get these floor rates set effectively and enough of the portfolio and then see the Fed cut rates dramatically.
