Dan Rollins: Yeah. In the past, we have used that in an opportunistic way. I think as we look at where we sit with capital today, I think we’ve got all the tools in the toolkit and we’re ready to use all of them. So, I think we feel really good about what we did in the fourth quarter from a capital standpoint. And it lets us execute however we want to go in 2024 and beyond.
Stephen Scouten: Great. Thanks so much for the time. Appreciate it.
Dan Rollins: Thank you, Stephen.
Operator: And our next question comes from Casey Haire with Jefferies. Please go ahead.
Dan Rollins: Good morning, Casey.
Casey Haire: Good morning, everyone. So, a couple of NIM questions. Dan, you mentioned, so you model towards the forward curve. Just wondering where you expect the cum beta to peak versus that 41% level. And then, when you do get these cuts, what kind of beta you have for ’24 when rates are declining?
Valerie Toalson: Yeah. So, our total deposit beta right now for the fourth quarter was 41%, that’s compared to 38% last quarter. We actually — because of the forward curve, those rate cuts in the modeling begin in March. We actually have deposit cost peaking in the first quarter of next year before coming back down. And so, from a beta perspective, I don’t have a specific number for you, but just very slightly, we saw deposit costs, like I said, increase at the lowest pace this fourth quarter, and we would expect that pace to further decline a little bit in the first quarter as well.
Casey Haire: Got you. Okay. Appreciate the guide on the first quarter NIM up double-digits at least. But just can you guys provide the spot securities yield and borrowing rate just so we have a better starting point?
Dan Rollins: Borrowing rate, so we’re borrowing today in the bank term loan fund, if that’s what you’re asking about. I think that’s what you’re asking about.
Casey Haire: Yeah. So, I think you said, so that goes to 4.80%. And then, the securities yield, the spot securities yield at 12/31?
Valerie Toalson: Yeah. So, at 12/31, I think the overall securities book is close to 2.60%, given where the changes are.
Casey Haire: Okay, great. And just last one. So, Slide 18 is great. You guys mentioned — so it looks like the real opportunity is that you got a little less than $9 billion of fixed rate loans with a 4.60% weighted average yield. How much of that matures this year? And then, within your bond book, you got $1.3 billion coming back at you. Do you have the weighted average yield for that? Just trying to get a sense on the fixed asset repricing tailwinds you have for the margin this year.
Valerie Toalson: Yeah. So, on the bond book, we don’t have a weighted average yield because part of that is cash flow off of some of the longer-term ones. So I would just really factor in, just kind of think about the overall securities yield as a whole is probably not going to get you too far off on some of those. And then, on your loan question, some of those are maturities, some of those are simply repricing. They’re actually combined in there. But obviously, as we generate new loans that offset some of those changes, those are coming on at higher rates as well.
Casey Haire: Okay. But no color as to how much of that $9 billion comes this year?
Dan Rollins: I guess, I’m confused.
Valerie Toalson: So, on the floating rate, so if you — yeah, if you take a look at on that Slide 18, the very first two columns are basically the repricing within the first year. So, we’ve got 49% of our total loans that actually reprice within the next year. Is that what your question? Sorry, I’m not sure…
Casey Haire: Yeah. I’m actually looking — if you look all the way to the right, it looks like to your point, like the three months or less is 8.29%, that’s pretty much at market rates, and the 6.20% is — but the real opportunity is the 4.62% all the way over to the right, which is about $9 billion, right? And I’m just wondering how much of that $9 billion comes, it reprices or matures within ’24?
Valerie Toalson: Yeah. Got you. There is — it’s probably close to $1 billion, give or take a little bit of that, that’s actually maturing this year. But that doesn’t reflect early payoffs, refinancing, anything like that. So, it’s always higher than that.
Casey Haire: Excellent. Thanks for all the — taking all the questions. Thanks guys.
Valerie Toalson: You bet.
Dan Rollins: Appreciate it.
Operator: And our next question comes from Manan Gosalia with Morgan Stanley. Please go ahead.
Manan Gosalia: Hi, good morning.
Dan Rollins: Good morning.
Manan Gosalia: I wanted to start on credit. Your guide for 2024 implies essentially flat NCOs versus 2023. I guess you’re seeing limited signs of new credit deterioration. Can you expand a little bit on that? And what part of that includes an improvement in credit once the Fed cuts rates versus is there any deterioration that could still come through in credit if you only get three or four rate cuts here?
Billy Braddock: Yeah, thanks for the question. This is Billy. So what we’ve seen over the last several quarters is just a nice, stable, manageable level of our criticized portfolio from a percentage standpoint. The population has turned a little, but I would say the bulk of that population has remained in that criticized category. So, as we see improvement, I would anticipate that there’s favorable pressure towards the later half of the year if that improvement comes. But what we’re assuming for now is that, that stability remains, we keep our processes capturing the bulk of the portfolio that has been identified over the last several quarters. The deterioration that we have seen has been within that population. It’s just a handful of corporate credits, so nothing real — very idiosyncratic, independent name basis of deterioration. But I would expect it to stay manageable within this level to slightly down as the year goes, like we’ve seen since Q1 of ’23.
Manan Gosalia: Got it. So, does that also mean that the ACL ratio goes down from here as some of those charge-offs come through, and you don’t see too much additional deterioration?
Billy Braddock: Under those assumptions, I would say, yes, that’s accurate statement.
Manan Gosalia: Got it. Okay. And then just separately on the capital side, just as a follow up. Now that we have more clarity on the trajectory for rates as well as the macroeconomic outlook, do you have a target of where you’d like to maintain that CET1 ratio? I mean, it seems clear that it should move lower from here, but how much lower?
Dan Rollins: Yeah, we don’t have a CET1 target that’s out there. We agree with you that CET1 is healthy today. And again, we’re hoping that we have clarity on rates, but I would like for them not to do what the forward curve says. I’d like for them to stay a little more stable.
Manan Gosalia: Got it. Thank you.
