Bryan Jordan: Michael, I’ll pick up on loan demand. Loan demand is okay. It’s not great. It really is in pockets that you see real strength. You have some aspects of the Carolinas where loan demand has been very good and you see other pockets where it is probably a bit softer. As you mentioned, we do have the benefit of some fund up on some existing relationships, and you started to see the tick-up in seasonality in our mortgage warehouse lending business. And that’s usually stronger in the second and third quarters of the year as the moving season kicks in. But overall, we’re still seeing good opportunities. We’re still being very selective about how and where we participate, particularly on price and structure. But we’re looking for long-term growth and really those generational opportunities to move business.
But I expect that the loan demand is likely to remain somewhat more modest, broadly speaking, in the economy, simply because we’re in that space between rates not going up anymore and rates not coming down. And I think people are still a little bit cautious and it’s going to take a little bit more certainty about when the Fed is going to move and I think people will start to lean in. The economy is still very good in our view, relative to all that’s going on in the world and how much rates have been moving up. And as you know, we benefit from being in a sector of the U.S., the South that has a very strong general economic dynamic. So we think loan demand will be fairly soft, but improve over the course of the year.
Michael Rose: That’s great color. And maybe just as my follow-up, maybe one for Susan, and congratulations on your upcoming retirement. Well deserved. Can you just describe or what drove kind of the increase in non-performers? And then if you have an update to the criticized balances at quarter end, I think they were a little over $2 billion at the end of the fourth quarter. Thanks.
Susan Springfield: Sure. Thanks. And thanks, Michael, for the nice comments. As it relates to new non-performing, we saw non-performing go up about $43 million. And that’s there were a few new non-performing loans. That increase was largely driven by two credits. One was a senior living facility, a senior living, assisted living memory care facility, and the other was a consumer finance company. Again, so when we’re seeing some slight movement in NPLs, we’re still seeing it kind of not any specific industry or sector. And as it relates to criticized, we have had a continued focus on conservative grading. And as we somewhat seasonal getting in year-end financials on borrowers, we did see criticized balances go up about 20%. But most — much of that was in — on special mentions, kind of a watch status.
So those are not defined weaknesses at this point there. They’re more potential weaknesses where we’re just taking a more frequent look working with borrowers. The other thing I’m really pleased to see, and this is in commercial real estate, as well as C&I is borrowers really coming to the table wanting to work with us. We’re wanting to work with them. We’ve seen good opportunities to bring in additional equity reserves, et cetera, as we have loans that may be temporarily challenged due to interest rate environments. And then classified loans were up less than 10% quarter-over-quarter.
Michael Rose: Perfect. Thanks for taking my questions. Appreciate it.
Susan Springfield: Thanks, Michael.
Operator: Our next question comes from Jon Arfstrom from RBC.
Jon Arfstrom: That’s close. John Armstrong. Good morning, everyone.
Bryan Jordan: Hi, John. How are you?
Jon Arfstrom: It’s like trying to pronounce Hope’s last name. It’s just as challenging. Just, Susan, for you, just to follow up on Michael’s question, anything new or surprising that you’re seeing on credit? And what should — what do you think we should expect on non-performing trends for 2024? Can you just set the expectation there?
Susan Springfield: Yes, I don’t really see anything that surprises me. Again, we’re still — each one kind of has a story as we’re talking borrower by borrower. We’ve had a number of deep dives in portfolio reviews across lines of business in different regions. Great conversations with our bankers about what’s going on. Our bankers are having great conversations with clients. As I mentioned earlier to Michael’s question, I’m still really pleased to see how we’re able to be at the table, talk about rightsizing alone or what do we need to do? What do you think is going to happen? Getting updated projections from clients, so we still feel good about the ultimate performance of the portfolio. I think depending on what happens with interest rates, John, that’s probably going to affect.
If — obviously, if we start seeing rates start to go down, I think you’ll see non-performing loans start to slow in terms of any increases. The good news about not having any increased rates right now, though, you’re seeing a lot of borrowers who have adapted to this new interest rate environment, whether it’s able to pass along costs in their businesses or just learning how to do things differently, being more efficient, learning how to operate in a higher interest rate environment. So with this, we’re still being cautious. Bryan mentioned we’re always selective with discipline in how we underwrite, discipline in client selection. And so, that’s serving us well, but we’re keeping an eye on the portfolio.
Bryan Jordan: John, I would add to that, I’m not really surprised at all by anything I see in terms of credit performance. You’re getting what you would expect with higher inflation and higher interest rates and a lot of movement in a fairly short period of time. And across the entire economy, you’re going to have borrowers who are a little more stressed by that and it’s going to show up in terms of their performance. I would say, Susan and her credit teams, as well as our relationship teams, our RMs and PMs have been very proactive in doing deep dives through our portfolio, understanding at a transaction level borrowers’ financial position. As Susan said, being very proactive in working with borrowers. And as Susan also said, we’ve had tremendous success with borrowers who want to work with us and stepped up with right-sizing loans, et cetera.
