Jack Plants: I think an appropriate measure for provisioning expectations is maintain the coverage ratio of around 114 basis points with the loan growth estimate of 1% to 3%. And then as you suggested, the MTO from that 30 basis points to 40 basis point range.
Damon DelMonte: Got it. Okay. Great. And then just to clarify, you said on the fee income, you’re expecting that to be flat on a year-over-year basis. Is that on the reported — no, that’s on your operates. So it’s like on like, call it, $44 million-ish, is a flat level?
Jack Plants: Yes.
Damon DelMonte: Great. Okay. That’s all I had. Thank you.
Operator: We have the next question from Alex Twerdahl from Piper Sandler.
Alexander Twerdahl: Hi. Good morning.
Martin Birmingham: Hi, Alex.
Alexander Twerdahl: Jack, I appreciate all the guidance on the NIM, I guess, on your outlook as it is now, but can you just help clarify your expectations for how the balance sheet would react to a Fed cut?
Jack Plants: Yes. We did some modeling that was aligned with our expectations that if the Fed did cut as they intended, which is the 3 cuts that they’ve outlined in the dot plot and we’re fairly neutral. I think we were showing about $500,000 of interest income benefit under that scenario. And the reasoning behind that is that it comes down to repricing in our time deposit portfolio. And then repricing in the money market campaign that we launched in the summer of last year, which did have a guaranteed rate for a 12-month period. So those deposits would be expected to start to come up on their 12-month guarantee maturity in July of 2024, which would align with that Fed reduction. So modest improvement in the current period or the current projection, and then I would see expansion in 2025.
Alexander Twerdahl: That’s great color. Thanks. And then on the auto book, is that just fully in rundown complete mode at this point? Or do you think that stabilizes that — at a certain percentage of the loan portfolio or a certain dollar level?
Martin Birmingham: That’s — we’ve been thoughtfully considering the percentage of the overall loan portfolio in terms of our indirect book. And this is just a reflection of some adjustments we’ve made in the last year, the exit of Pennsylvania, consistent with trying to simplify the business and focus on our core upstate markets and continuing to drive it forward in a way that’s consistent with our plans relative to our budget and the market opportunities. So I think that will continue to moderate, but be around the $900 million mark plus.
Jack Plants: Yes, I think that’s fair, Marty and this is the only thing I would have to add, Alex, is we’ve had the ability to really test price elasticity in that platform for the course of the last 18 months, and we’ve gotten to a level where the spreads that we’re originating for new to production that aligns with our ideal credit mix are really great opportunities for us to expand the profitability in that line of business. But as we think about the big picture for the company and opportunities to improve tangible and regulatory capital, we’re comfortable with our approach for 2024. Although that is a — expect that we can adjust, so to speak, from a pricing standpoint as we see the landscape unfold in the future periods.
Alexander Twerdahl: Got it. Is — presumably, there’ll be some mix shift then commercial grows a little bit faster, indirect continues to wind down a bit towards that $900 million level. Does that — I guess, what’s the ACL like in the auto book versus the commercial? And does that provide a little bit of relief on the provision?
Jack Plants: So the ACL on the indirect book is a little bit higher. And generally, what you see in that portfolio is — as the portfolio seasons, the credit performance becomes a little bit more pronounced as far as delinquencies are concerned. Our — you wouldn’t expect to see even with a low tier credit or level of delinquency in a short period of time. So with the seasoning in the portfolio, that’s what’s pushed up a little bit in the fourth quarter, and we expect that trend to continue at our current levels for at least the first nine months in 2024. But overall, it’s layered into our overall NCO and provision guidance.
Alexander Twerdahl: That’s like $3 million per quarter is of charge-offs level?
Jack Plants: Yes, I think that’s a good estimate.
Alexander Twerdahl: Okay. And then I mean just as you kind of look at that, I mean, it’s just — I know you just sort of seasoning in the portfolio, but it does seem like that level is higher than historical standards based on the ranges you gave and whatnot. Is there any specific like subsegment of the indirect auto, the borrower that’s kind of driving those higher losses that you can point to? And is there a way to sort of ring-fence those specific types of customers?
Martin Birmingham: So I think what we’re experiencing in the current time is working through some vintage buckets, production buckets that relate back to pandemics, high stimulus periods, et cetera. And now we’re overlaying the economic headwinds, and that has definitely impacted the performance of the portfolio. But we continue to ground the focus in origination of 70% or above right now in 700-above credit work, our Tier 1 bucket and 88% is Tier 1 and 2, 680 and above. So no changes. It’s just kind of the idiosyncrasies of the last several years are working their way through the portfolio and the fact that we are shrinking it, those good credits are paying off faster than the slower credits.
Alexander Twerdahl: Got it. And then just a final question for me. Marty, last quarter, I think you expressed some openness to exploring the idea of seeing what your insurance business was worth. Is that something that’s still on the table and still being considered?
