Michael Mettee: Yes. Tom, I’d say on the other side of the balance sheet and gets less focused externally. We have deposit concentrations that we’re constantly monitoring as well around municipal deposits, public funds, CDs type stuff like that. So a lot of focus internally on that granular deposit base that Chris talked about and relationships. And so it goes for both sides of the balance sheet when you’re managing concentration.
Thomas Wendler: That was a lot of great color. I really appreciate that.
Michael Mettee: Sure. The other thing I would say is just a point of commentary is we consider that a really strong risk management on the liquidity side, because where you know, 2023 was — and we talk about — I think I used the word granular maybe three times in my prepared comments but — and really, we’re thinking loans and deposits there, but we view that as a really strong risk mitigate is the granularity of both those loan and deposit portfolios. And so we actually manage that quite closely because we think, again, that’s a really strong risk mitigate and it’s a really big liquidity advantage for us if things — if we experience things like we did in March of ’23, again, and with the way that money moves today, again, we like our position, so…
Thomas Wendler: Thank you for that. And then just one more for me moving over to mortgage. I appreciate the mortgage visibility is usually pretty poor, but can you give us an idea of how you’re thinking about mortgage in 2024?
Michael Mettee: Yes, Tom. Obviously, mortgage had a tough fourth quarter, specifically in the year kind of fell off volume-wise off the cliff the last couple of weeks of the year, even though the rates were a bit lower. We’ve seen mortgage kind of come back to life here in the first couple of weeks of January. We don’t expect mortgage to be a huge contributor in 2024. We also don’t expect mortgage to lose money. And there are some benefits to the held-for-sale pipeline spits off interest income. So there is some other benefits, but it’s a core piece of the company. Chris talked about retail earlier. We think mortgage is a very important piece of the retail story and something that is a critical product. And I think brighter days are ahead for the mortgage industry, but the whole industry is not out of the woods yet, and we’ll see how things develop with rates but also affordability within the industry, which is a challenge in most of our markets.
Thomas Wendler: All right. Thank you for that.
Chris Holmes: Hey, Tom, could I just — I want to add this one thing on thing on mortgage. Two things — two or three things. One, we had a good quarter. We felt like a pretty solid foundational quarter in spite of mortgage. Mortgage did not have a good quarter. And so when we look at it, there are no sacred cows in any part of our business, including mortgage. So it stays under constant analysis again, just like all the other parts of our business. One of the things that we recognize that we don’t talk a lot about is we don’t give any net interest income credit. We don’t give any credit for that part of our business on what happens to net interest income, which that — that distorts the profitability picture just a little bit.
It’s a business that doesn’t take a lot of capital outside of the mortgage servicing rights. The other part, the origination part of the business doesn’t take much capital, and it has a significant upside. And as Michael said, from a retail standpoint, we think it’s a key customer acquisition part of our go-forward retail strategy. And so as we look into next year, we think that we don’t have a lot — matter of fact, we really don’t have much at all in our projections for next year, and — but we will also — we will make sure we ensure against any downside. And so that’s how we’re viewing it as we’re stepping forward here.
Thomas Wendler: All right. Those were my questions. Thank you, guys, and a good quarter.
Chris Holmes: Thank you.
Michael Mettee: Thanks, Tom.
Operator: The next question comes from Alex Lau of J.P. Morgan. Please go ahead.
Alex Lau: Hi, good morning.
Chris Holmes: Good morning, Alex.
Michael Mettee: Good morning, Alex.
Alex Lau: Following up on the question — comment around reduction of construction concentration and looking at the impact of your provision forecast, do you expect this to be front-loaded in the year or more gradual throughout the year?
Chris Holmes: Yes. It’s a good question. It’ll be perhaps slightly front-loaded, but I’d say just slightly front-loaded because like I said where we are, we are at 93%. We don’t want to go up from here and so you could see a little more front loading and we’ll gradually work it down from here as well. So you could see a little more front loading, but again, once we get down in the 85% range, you’ll see it begin to be much more gradual.
Michael Mettee: Yes. And Alex, you have two kind of phenomenon there, right? You have the — as they go from unfunded, as those balances are reduced, that creates a release from the unfunded bucket. And then you have migration on the ACL side. So as you go from a construction reserve of 2.53%, to call it a multifamily or a CRE bucket. While those balances go up, you stay in that kind of weighted 1.60 range, but it creates a little bit less impact. So to Chris’s point, it’ll be gradual, but that’s where you see some of that release coming from.
Alex Lau: Thank you. And then my follow-up question. Can you give some color on the C&I loans that moved into non-accrual this quarter? Are these idiosyncratic? Or is there any trend that you’d highlight there?
Chris Holmes: Yes. Travis, do you want to take that and I’ll add some color?
Travis Edmondson: Sure. Good morning, Alex. The C&I loans have moved this quarter were just kind of one-offs. There was no pattern or anything we’ve seen. And we still can see just normal course loans moving in and out of the classified assets, moving into special mention, moving out, upgrades, downgrades. So it’s still pretty normal out there in what we’re seeing in credit quality. In fact, the one credit we talked about last quarter that’s got a lot of positive momentum. And so that one is trending where it probably won’t be an issue in the coming months if everything — we’re cautiously optimistic if everything keeps going the way it is. So no systemic issues that we’re seeing right now. It’s just continual portfolio management, and you always have one or two that you’re worried about.
Alex Lau: Thank you. And one follow-up question on NIM and NII. You mentioned moving back to that 3.30%, 3.40% range and also some optimism in an inflection point in NII, maybe in the second quarter. What are you assuming for the rate curve scenario?
