Andrew Liesch: Okay. And then just on capital, you had that $32 million share repurchase from the estate of a single stockholder. How should we think about your capital priorities for 2024? And can you just remind us if you have any specific capital targets?
Kevin Riley: We have some internal things that we don’t publish or talk about our internal capital levels or what we strive to have. But I will tell you that our priority is to maintain a healthy dividend throughout the year and into the future. So that’s our first priority with capital. And then to use capital for organic growth would be the second priority. I would say that unless things really go really well, I would say, share repurchase at this time has been shelved. So those are probably our biggest priorities at this point.
Operator: The next question comes from Brody Preston at UBS.
Brody Preston : Marcy, within the net interest income guidance, did you give the down beta that you’re assuming with the cuts that you have in the back half of ’23?
Marcy Mutch: So we didn’t give the down beta in the back half, under our assumptions, we’re assuming some lag. We actually think there’s — if rates come down, we think there’s some potential to do better than we’re assuming in our guidance. So we assume it will go up modestly from the 34% that it is in December, which if rates come down, we could see some benefit there.
Brody Preston : Okay. The NII guide itself, is that GAAP or is that FTE? I just wanted to clarify.
Marcy Mutch: That is GAAP. Well, it’s ex-purchase accounting. Yes.
Brody Preston : Okay. Ex-PAA. Okay. the expense guidance, I just want to —
Marcy Mutch: The guide, Brody, just to be clear, is GAAP.
Kevin Riley: Which includes –
A –Marcy Mutch: Yes, which includes purchase accounting.
Q –Brody Preston : On the expense, I just wanted to clarify, it says excluding the $10 million – the $10.5 million FDIC, you’re expecting a low single-digit increase, but that includes – I’m assuming that, that means that you’re including the severance charges and stuff that you had last year. So if I kind of just took the $10.5 million out, it kind of implies that you’re looking more towards like [658, 659] in expenses for next year, kind of like the midpoint of 1% to 3% up? Is that – am I thinking about that correctly?
A –Marcy Mutch: That’s a fair way to think about it, yes.
A –Kevin Riley: You’re right on it.
Operator: The next question comes from Jeff Rulis from D.A. Davidson.
Jeff Rulis: On that credit side. I wanted to get into that ag loan kind of group. I guess, first, just safe to assume those were legacy — Great Western credits. Is that fair?
Kevin Riley: Are you talking about the ones that moved into nonperforming?
Jeff Rulis: Correct.
Kevin Riley: Okay. Yes, they were — yes, legacy Great Western credits. But the thing is that we believe that’s temporary because we’re restructuring those loans. And what we need is a payment performance for like 6 months on account rows before we can move them out of nonperforming into performing. So we believe those loans will move out of nonperforming into the third quarter of this year.
Jeff Rulis: Yes, I heard it in the prepared. I appreciate it. I was going to follow up is just — it seems like moving that to held for investment that allows you to sort of move those through. Is that the messaging of the move? more or less?
Kevin Riley: Yes. And it’s also the messaging is that we kind of were able to restructure these into performing loans. So I think that’s more of the message that they’re kind of getting cleaned up.
Jeff Rulis: What is the type of — if maybe they’re pretty granular in mix, but is there a type of ag that, that represents? And what type of geography did that come from?
Kevin Riley: It’s dairy and it’s Arizona or California, down in that area.
Jeff Rulis: All right. And on your guide of net charge-offs of 15 to 20 basis points, is that broad-based? Or is that including likely some of that those ag loans to contribute to the bulk of that?
Kevin Riley: Well, we’re not looking at any kind of charge-offs on those loans at this juncture, but we’re talking — that’s just broad based.
Jeff Rulis: Okay. So no particular segment. Just you think that’s where you are in the cycle of 15 to 20 basis points for ’24?
Kevin Riley: Yes, I guess the thing s we haven’t hit that, but we’re forecasting that.
Jeff Rulis: Got it. Okay. And within the loan growth expectations kind of flat or low single digit, I guess within segment, would you — got the discussion on the construction commitments. But trying to peg what segments of growth do you see in ’24 versus some areas that may be flat or maybe running off within that overall guide on growth?
Kevin Riley: I would say the way our franchise is, we’re kind of — we have — we’re in every different industry and verticals. So it’s hard to say at this point, we think that’s pretty much going to be growth that’s going to be brought across all different verticals.
Marcy Mutch: I think we’ll continue to focus on our small business initiatives. We’ll continue to focus on C&I growth. All of those things, of course, but to Kevin’s point, it’s going to be pretty broad-based and spread across the 14-state footprint.
Jeff Rulis: Okay. So the commercial real estate growth largely from construction completion, that’s a bit timing of Q4, but the balance of ’24 again, kind of pointing to a pretty mixed contribution, albeit modest for the full year?
Kevin Riley: That’s correct.
Operator: The next question comes from Adam Butler from Piper Sandler.
