Adam Butler: Yes. That’s great to see. Those are my questions. I appreciate the time. Thanks.
Scott Wylie: Good. Yes, thank you, Adam.
Operator: Thank you. One moment please. Our next question comes from the line of Bill Dezellem of Tieton Capital Management. Your line is open.
Bill Dezellem: Is that Bill Dezellem?
Operator: Yes, your line is open.
Bill Dezellem: Thank you. So two questions. First of all, relative to a comment that you made in the press release, are you seeing an increase in loan demand now where — there was a press release simply trying to relay that you are ready when that does happen.
Scott Wylie: Yes. I’m not sure, Bill. I think our loan demand definitely came down from our type of borrowers when rates spiked. And I think people have come back some. And so in that sense, it’s probably improved. Our pipelines at the end of Q4 are actually down from the end of Q3, but I think some of that is this kind of pressure we put on relationship bankers to focus on deposits over straight up loans. I also think that we saw, let’s say, a year ago and probably six months ago, banks doing kind of unreasonable loan terms and rates. And I would say we see a lot less of that now. Although in January, we have heard a couple of anecdotes about kind of pricing that we would never do. And I assume that some of these banks that are looking to grow in our markets that are assuming that we’re going to see big Fed rate cuts and rates come down and that their lower loan price is going to make sense.
But there’s a number of dynamics in place there. My underlying conclusion from all that is we have tiny market share in all of our markets, and we’re in a lot of really attractive growth markets. And so, I think to the extent we want to grow loans, we’re going to be able to grow loans. And I think some number in the mid-single digits seems very achievable to me for this year.
Bill Dezellem: Okay. That’s helpful. And you may have just answered my follow-up question to that is, as you think about running the bank and that you probably have seen your loan pipeline decrease really because of a directive or initiatives that you’ve had in place to focus on deposits, does that lead you to change anything in terms of the direction that you’re asking bankers to go? Or are you still in the same holding pattern that maybe you would have been last quarter?
Scott Wylie: No. I felt like we were in a little bit of a chicken and egg problem in Q3, where we’re telling our bankers to focus on relationships to bring deposits and loans but don’t lead with loans. And frankly, a lot of times, the relationships you want, you do lead with loans and you bring deposits with it. And so, by getting our loan to deposit ratio down to 100%, I feel like that frees us up out of the chicken and egg problem, and we can go out and focus on the kind of relationships that we want. I would tell you also, though, I feel like this second half of the year 2023, gave us an opportunity to really talk to our people about our type of client and focusing on those kind of people that we can really do a range of services for.
I mean, I was in a new business call last week, where we met with this couple that had a business and they’re just going to benefit from all the different things we do. And if you look at our top 10 clients in any office, it’s the same story in every one of them, where they have six or eight or 10 products with us. And so, I think just really helping our people focus on our type of client, with our types of credits and our types of relationships that include deposits, loans, treasury management, risk management, planning, trust, investment management, succession planning, all that kind of stuff, and that’s what we’re really good at. And that’s, I think, where we’ve had the opportunity to refocus people. And I think that will benefit us in 2024.
I think that will be a good thing for us.
Bill Dezellem: Great. Thank you, Scott. And then I’m going to ask one question relative to the large borrower that went bad last — in the Q3. You mentioned that you put provision in place on some of those loans. So my question is, if you were to have more success, say, if you took a loan over and sold it at a premium, that would also apply to offset these other loans that you may come in a bit under. Is that correct? Or is there — and I guess, secondarily, is there any cross reciprocity between the loans as collateral that comes into play that could make your reserving or provisioning conservative that way?
Scott Wylie: Yes. With the litigation, I want to be really careful what we say here. But if the question is, are the loans cross-collateralized, the answer to that is yes.
Bill Dezellem: Great. I’ll leave it at that and keep it easy for you. Thank you.
Scott Wylie: Yes. Thank you, Bill.
Operator: Thank you. One moment please. Our next question comes from the line of Brett Rabatin of Hovde Group. Your line is open.
Brett Rabatin: Hi. Just a couple of follow-ups. I guess, first, did I hear it correct on the expenses, if you have mid-teen revenue growth, the guidance is $19.5 million to $20.5 million, and if it’s single digit then it’s $18.5 million to $19.5 million on a quarterly pace, was that — were those the right numbers?
Scott Wylie: Correct, yes.
Brett Rabatin: Okay. And does that kind of mean that the difference would be kind of the bonus or incentive comp that folks would get for hitting certain targets? Or what — can you talk maybe a little bit more about that differentiation?
Scott Wylie: The vast majority of it is incentive comp accrual related, yes.
Brett Rabatin: Okay. And then, Scott, as I think about mortgage, obviously, it’s tough to know what rates do, but it feels like people are getting more used to higher mortgage rates. And so I was just thinking about the mortgage production from here and potential revenue in 2024. I know it’s tough to predict, but I would assume that we’d see a meaningful pickup in activity and income related to that as we get into the second quarter. Is that fair? Or do you see kind of the challenges remaining for production and overall revenue for that piece of the business?
Scott Wylie: Well, we come in every morning and hope for an uptick, and it’s hard, of course, in December and January, which are slow months, but — you want to address that, Julie?
