Chris Holmes: Yes. So, we do have a hotel book. Again, that one also is not outsized for us in terms of where it sits kind of on a comparative basis. I don’t have those specific stats, and we don’t have our Chief Credit Officer with us today. But we have been watching hotel and we frankly haven’t been doing much new there over the last couple of years for all the things that you just mentioned. We do have a few, but when — we’re pretty much restricted to really strong flags in nice and good areas. We’ve got some suburban stuff. We don’t — we do have a little bit of central business district, hotel stuff, but I’m thinking the ones I can think of, we’ve got a Hampton Inn in the central business district. But it’s that type of flag if we’ve got that.
Travis Edmondson: One other thing I would add is, it wasn’t too long ago, it was the pandemic where hotels were on everybody’s mind. And we did a thorough analysis during that time frame to make sure that our borrowers were able to withstand that pandemic. And what we found was we have very strong borrowers in this asset class that did everything that they said they were going to do. We continue to monitor that portfolio. We’re not seeing any struggles to date on RevPAR. We are mindful as the consumer spending goes down in ‘24, that’s something we need to definitely keep our eye on. But no alarms at this time.
Chris Holmes: We have done in the last, say, a year, 18 months, one, again, I guess I can say it’s a Hilton and it’s — with just fantastic parameters around it. That has — we had extremely high expectations for it, and it’s crashed the room. And so it’s — again, that’s the only one we’ve done here very recently.
Brett Rabatin: Okay. If I could sneak in one last one just around M&A. And Chris, it sounds like you’re more interested in expansion, if it makes sense strategically. And so I think everyone in the environment realizes that’s kind of — the tough thing is the marks on the balance sheet. Can you guys talk about — or maybe Chris, just how you think about dilution to tangible book or what kind of parameters would be acceptable to you relative to an opportunity?
Chris Holmes: Yes. Brett, certainly, there’s a lot — there’s conversations that seem to be picking up and seem to be — a lot of that going on. I think folks are thinking. I think ‘24 is going to force a lot of that. And I know it is forcing a lot of that. And I think folks are having to think strategically. And the landscape continues to change, and I think you have to think more and more strategically. As we think about it, and I made this comment, we only think about it strategically. So we don’t — we’re not thinking about just asset size, unless it makes really good strategic sense for us, we don’t engage in a deep way. And so — and then when we think — so when we think about it, it’s going to be strategic.
And usually, those aren’t going to be I’ll call them tangible book value type deals because they’re going to be valuable properties. And so we’ve always thought about it as a three-year earn back is kind of the — where we draw the line. I will tell you one of the most frustrating things that I deal with is because we say that on this call and therefore, investment bankers hear that, and so they just automatically go out and calculate what a three-year tangible book value is, and then they go out and tell everybody here. Here’s what they can afford to pay for you and generate conversations around that. And then the line I use often is because that’s what we can afford to pay doesn’t mean that’s what you’re worth. And so we have that conversation sometimes.
And again, I’ll draw the analogy of selling your house. If Elon Musk is interested in your house, he can afford to pay a lot, but that doesn’t necessarily mean your house is worth more than the comps around your house. And so, we get into that. And so that’s — when we think about it, we think about that as kind of a parameter, but we’re thinking about, hey, what does this mean to us? And it could — in some cases, I suppose it could take us over that. It never has. But we think about it quite strategically in our parameters as really we — obviously, we want to see EPS accretion and we want that to be, again, on a reasonable size institution, you’d like for that to get up into double-digit EPS accretion. And then on a smaller institution that might not reach that because it just doesn’t have the impact.
But then we really focus on what happens to our tangible capital level. And one other point there that is what you’re — part of what you’re alluding to is that’s a harder computation than it used to be because of AOCI and what that does. It can create more tangible book value dilution, but that also tends to come back much more quickly in the way that that comes back to you on your earnings and GAAP accounting, so.
Operator: The next question comes from Alex Lau from JP Morgan.
Alex Lau: What are the key areas of the bank where you’re seeing the expense reduction coming from? Can you give some color as to how much of this retirement or cuts are coming from front office, back office? And also, what are the types of projects or investments that you’re putting on the back burner for now?
Michael Mettee: Yes. I mean, it’s broad-based across the Company, front end, back office. Early retirement was probably more management-driven activity. But again, it’s front end, back office, some leadership type stuff and change. Positions, as you look across, obviously, we’ve had slower loan growth, so we’ve seen some reduction in relationship managers, but not very much. And some of that is just a product of the environment. I’ve mentioned the branches. That’s a piece of it. And then just some other back-office stuff. But I think if you think about projects, Chris mentioned the investments we’ve made. I mean we’re still positioning ourselves for becoming a larger, more scalable institution. So, we’ve invested a lot in risk management, a lot in data, a lot in audit functions.
And so those continue. We’re just in a really sustainable, scalable place at this point operationally. And so, we’re looking to capitalize on that. But yes, it’s just making sure that we’re well positioned for next year and the years after.
Chris Holmes: Hey Alex, if I could just add just a couple of comments. Some of the — some of the expense reduction comes from — remember this — remember, we — since we did our IPO in late 2016, we have quadrupled in size. We have made four acquisitions, the last one being 40% our size. And so — and then that — we went through a pandemic right after that. And so when you do all that, you put a lot together. And so the expense reductions which we have been very thoughtful about, notice we did — we haven’t built up and try to build a lot of anticipation around this because we’ve been very thoughtful about that now over a number of months. And it’s something that comes — and frankly have been — the execution has been over time as well.
