John Hairston: Okay, thanks for the question. This is John. I’ll start it and Mike can color if he likes. I wouldn’t want to break the 3% to 4% down between different sectors, because it gets a little complex. But what I’ll share is that on the technology side, the bulk of the increase in technology expenses ‘24 over ‘23 is the carry cost to a large extent of all the technology we already completed and put into service in the early part of the year. So when you get a full year of the amortization of the capital and the contracts, that impact on ‘24 carries over to the year-over-year comparisons. So there’s a good bit of tech expense that isn’t really new. It’s simply the full 12-month impact of all of that. As Mike said in his earlier comments, our expectation is that as that technology, as the company really matures in using that tech, then we get more efficient, more effective, and to the degree more effective on the revenue generating side, then we see a bit of a tailwind, top line revenue as the environment improves.
So that’s the tech part. In terms of additional spending, we really have done all the heavy lifting. I mean, what I call the big systems are all done. They’re current. It’s running well. We’re very happy with the investments that we made. And in terms of just new stuff, we’re really down to, I guess I’ll call them dogs and cats. So, you know, our ability to compete with a fewer number of larger banks, we believe is helpful to, we believe it is helpful to continue spending more in our digital front office, to continue to invest in fraud detection early to manage any charges that we could have avoided by having good tools to help both our clients and our bankers and our risk professionals identify problems before it’s too late to get the money back.
And so I think a lot of that type of work is what’s left. So the preponderance of the big stuff is actually all the big stuff is done and we’re now I think we’re adding things that just enhance value for our clients in the future. In terms of people, the average time it takes in terms of months for a banker to cover themselves got extended a bit during the degradation and spreads as rates began to go back up. But the investments that we made in SBA and in business banking continue to bear fruit. And in fact, because of the liquidity coming in with those relationships, the time it takes to cover the cost of a new banker is held on its own and maybe even got a little shorter, shorter being more attractive on the business banking side. So we haven’t set a number that we’re ready to talk about in terms of adding those folks, but I can tell you that if there were an area, if I could create a little bit more room and expenses to add people, it would probably be in those areas, because frankly the returns have been so good.
The fourth quarter was the best quarter in our history in SBA income. It was also the best quarter in our history for annuities income from the Cetera investment we made back in 22. So overall, I think we would continue investing those things that are working.
Mike Achary: Brett.
Brett Rabatin: Yes, I think that’s really helpful. Thanks.
Mike Achary: The only other thing I would add to that is we’re not seeing a repeat, we’re certainly not expecting a repeat of some of the things that drove our expense levels last year to the uncomfortable levels of around 8%. So it’s things like, you know, kind of other regulatory costs and some of the FDIC increases outside of the special assessment. We don’t see that repeating. We also had some increases related to our pension and other retirement plans that we don’t see a repeat. And finally, we did have a pretty big increase in our insurance costs related to our own properties last year that we don’t see at least right now repeated. And some of those increases were related to some of the storms that we had in the prior couple of years. So that’s also very helpful to have those things not repeat this year. And puts us in a place where we feel comfortable about the guidance of between 3% and 4% for the year.
Brett Rabatin: Okay. That’s really helpful. Thanks for all the guidance.
Mike Achary: You bet. Thank you.
Operator: Your next question comes from the line of Brandon King from Truist Securities. Please go ahead. Your line is open.
Brandon King: Hey, good evening. Thanks for taking my questions.
John Hairston: Hi, Brandon.
Brandon King: So following up on deposits, Are there any deposit categories besides CD that is a part of your strategy as far as managing costs lower? Just how are you thinking about the deposit beta lag on the downside, excluding what you expect on the CD front?
Mike Achary: Yes, so as we said before, Brandon, when rates start to come down, you know, our posture and plan and this is the way we’ve kind of approached it in prior environments where rates were down, is to be fairly proactive in reducing our deposit costs and that the lead there would be on the CD side especially as we try to you know aggregate the CD maturities in an environment where rates are potentially lower than they are now. So that’s probably the biggest driver of what we’re trying to do. We’re also very, very mindful of the rates on our money market accounts. And we’ll start to come off of some of our promotional rates related to that category of deposits at the appropriate time. So that’s kind of how we think about that.
Brandon King: Okay. And are there Any sort of customer segments that you envision you could be more proactive in, regarding consumer versus commercial?
John Hairston: Right, and this is John. In terms of rate or just focus?
Brandon King: Rate.
John Hairston: On rate, I mean, the segment that’s enjoyed the best spread over year-over-year was in the segment we call business banking. So really it’s the lower end of a commercial. And the reason we feel pretty good about is because even though they’ve enjoyed the highest growth in lending, because we’ve added resources in some of our growth markets for that purpose is they’ve been very successful at covering on literally a par basis with incoming deposits that are carrying a cost well below our total cost of funds. So it’s really been on both sides of the balance sheet that the small business sector has been performing. In terms of retail, and we define retail as consumer and micro businesses, all of which are handled inside our financial centers, our branches.
Those segments were really under siege from a pay down perspective through the excess liquidity portions of the pandemic recovery. And in Q3, they began to get better. And in Q4, particularly on the very small business side, that began to also dampen to the degree that we’re actually expecting retail growth in 2024. It’s modest, but it’s growth. And it’s really been in pay down or in reduction, really for the past three years or so during the pandemic. So on a year-to-year comparison, the absence of that vacuum is very helpful. And just as a reminder, the indirect portfolio, which had been amortizing as we shut that business down, that impact in 2024 is relatively immaterial, really for the first time on a year-to-year basis.
