Dennis Shaffer: I still think it’s fairly quiet on the M&A front. I mean everybody is talking but there’s a few banks that are struggling that I think you would like to partner up, but they are just tough deals to do right now. The marks are so heavy and just to get done and where banks are — we’re trading at and other banks are trading it. I think those deals are hard to do. So for right now, we are laser focused just trying to grow our capital increase that TCE ratio because I don’t see a lot happening over this first half of the year. So we’re going to be laser focused in growing that TCE ratio banking line.
Operator: [Operator Instructions] Your next question comes from Manuel Navas with D.A. Davidson.
Manuel Navas: Do you have kind of an overall guide for fees? I guess it’s in part driven by VFG trends but just kind of feel like an overall expectation for fees that include the — include that business?
Rich Dutton: I guess what we’re seeing for the line item that was lease revenue and residuals, so that would be the operating piece of it. That looks like it did have a run rate of about $2 million a quarter. And I think that’s maybe a little bit better than what we did this year.
Manuel Navas: Okay. And then the other pieces grow with industry trends?
Rich Dutton: They do. And they’re kind of buried in interest income. I mean, they’re not — I mean, and I guess other as far as the selling equipment at the end of the lease whatnot, that’s kind of buried in stock in leasing.
Dennis Shaffer: Is this question overall fees or just leasing?
Manuel Navas: As overall fees, but I appreciate the lease itself.
Rich Dutton: I’m sorry. I had to lease on my mind.
Dennis Shaffer: So I was going to say we probably will do fairly close to what we did this year and in fees. We have overdraft fees that are — that we had some overdraft reform, and we lose a little bit of overdraft income there. But we do think we’re at least right now with the yield curve so inverted, that we can pick up some swap fees. If rates move down even slightly, I think Chuck fields, we’ve got some portfolio residential loans that we did put on the books that we probably can flip over into saleable loans, which also frees up a little liquidity there. So I think our guide is probably fairly close to that $37-or-so-million of non-interest income that we did in ’23.
Rich Dutton: Mr. Shaffer usually shoots a little high. I would say that number is probably close to $34 million. And I don’t know if it grows linearly because we got the tax — so I think if you had $8 million from the first quarter and $8.2 billion, $8.7 billion to $9 billion, I think that’s the way we’ve budgeted for the year.
Manuel Navas: I like the comments about the NIM with rate cuts, but just kind of for the next — even more near term, you put on a lot of loans this quarter. What — where do you kind of see the NIM going next quarter?
Rich Dutton: I mean it might float a little higher again, just based on what we did on the funding side, and again, we put a lot of higher-yielding loans on in December and November. But I don’t know.
Dennis Shaffer: I think it stays about where it’s at. We think it’s pretty well troughed. But we hope to get some improvement there. We’ll see because we are hopefully getting better pricing on the broker stuff. We’re going to hopefully bring down some of the funding costs, which we’ve talked about, we’ve started to do and then with things repricing. So we’re optimistic that we’ll be able to improve the.
Chuck Parcher: Yes. I think we’re going to see some pressure on the lending side though, too, from that perspective. fourth quarter, we felt like we had a lot of more competition seem like they kind of take on to the size line and the fourth were kind of waiting. So believe it or not, in December, our commercial production, new and renewed was over 8%, which I think is the first time we eclipsed 8% piece. We’re seeing rates in the marketplace right now where they fall back here mid-January, with almost all the competition back in and a lot of the competition now going back to pricing off the treasury as compared to kind of pricing up where deposit costs right.
Manuel Navas: I appreciate that commentary. Overall, I guess that also probably drives some of the loan growth commentary, but is there enough — is there a amount of success on the deposit side that could give you some upside to low single-digit loan growth?
Dennis Shaffer: Well, I think so we’re really focused on the funding side. I think that’s going to be a big challenge only for us in ’24, but for all Comunibanc. So we’re all faced with the same thing. We’ve got a number of initiatives underway, as Rich alluded to, some of those just — we have scrubbed our existing loan portfolios, whether that’s consumer or commercial, there are customers that don’t have a deposit relationship or we know that have substantial other deposits. So we’ll be putting a campaign around that to go after those customers. So that will be 1 of our focus is to try to build core deposits. We are in the process of identifying another bucket of cash on the clients these cash-rich businesses like law firms or title companies, business and professional associations and then kind of creating niche product to go after to try to get some of those deposits.
We’ll probably throw some more dollars at our treasury management area. We’ve had great success hiring commercial lenders who are pretty well connected with books of business and that’s — and we’ve done that on the treasury side. I think we may want to do that some more and see if they move over deposits. We’re going to expand our digital deposit product offerings. So there’s a number of initiatives, I think, to do that we’re going to be embarking on throughout the year. That will give us some opportunity to build upon our strong core deposit franchise.
Operator: Your next question comes from Daniel Cardenas with Janny Montgomery Scott.
Daniel Cardenas : A couple of questions here. Your tax rate has kind of been jumping around throughout the year. What’s kind of a good run rate to use for you guys on a go-forward basis?
Rich Dutton: 15 for the quarter, I mean, 15 or 16 is probably. I think we’re settling that at.
Daniel Cardenas : And then I noticed a little bit of a creep up in your non-performers this quarter. Can you give us a little color as to what was driving that in terms of — was it one loan? Was it multiple loans? The section of the portfolio that it was coming from? And then also, what watch list trends look like for you guys?
Mike Mulford: This is Mike Mulford, the Chief Credit Officer. We had one loan relationship that moved to non-accrual. It was about $3.5 million. That was a big reason for the job. The non-performing — and I missed the last part of your question.
Daniel Cardenas : Yes. Just trying to get a sense of — well, for that one loan, is that — was that a commercial loan assuming?
Mike Mulford: Yes. You asked about watch list. And I think that’s pretty yes. Yes, the loss of credits are pretty stable. Very few great changes for the quarter and systemic issues that we’re seeing right now.
Chuck Parcher: And we’re also a, we’re not really seeing much movement as far as some of our loans are repricing, we’re not seeing a lot of pressure on those loans from the jump in interest rates causing cash flow. We always have a handful and you’re looking at them. But all in all, it’s been very stable and not on it remains that way.
Daniel Cardenas : And then are there any particular segments in your portfolio that maybe you’re tapping the brakes on as you come into ’24? Or is that not necessarily the case?
Chuck Parcher: I mean, obviously, like everybody else, we’re very mindful of office and not to let office exposure get too high. We’re watching the hotel piece of it, but we pretty much stayed pretty much flat from a percentage basis points in that as well. I think somebody earlier mentioned multifamily. We’re still bullish on multifamily, but we are taking a closer look and especially looking at communities, to see if they can sustain the growth of the multifamily has taken place. So other than that, I think we’re probably being a touch more cautious, but we’re not really shutting down any areas.
Daniel Cardenas : And then the last question I have is just the — it looks like your home loan advances came down fairly substantially in the quarter. Was that did you guys do that through the broker deposits that you raised? Or how was that achieved?
Rich Dutton: Yes. That was exactly what it was. It was just — it was cheaper to go out and get the broker deposits than it was borrowing from the Federal Home Loan Bank. And generally, we try to keep the Federal Home Loan Bank stuff freed up because that’s something that’s readily available. So we see and efficiencies or opportunities in other wholesale markets or the broker market. We’re always kind of looking at. And if it makes sense, we’ll take down a chunk of financing there just because again, it’s economically to our advantage and also just from a risk standpoint, we try to keep the Federal Home Loan Bank line as free as we can just in case.
