Brandon King: Okay, and just lastly on the CD strategy, how much flexibility do you have in adjusting that strategy depending on the timing and potential magnitude of rate cuts as we look for this year?
Mike Achary: Yes, I think it’s a pretty nimble strategy, Brandon, and I think we have lots of flexibility in how we think about adjusting our promotional rates to kind of deal with, you know, any differences that the rate environment may present us with versus what we’re kind of assuming. So obviously the CD maturities are in place and there’s no flexibility related to those. But certainly our, you know, our main way of dealing with that is going to be our promotional rates. Not only the rate, but the maturity that we attach to a specific rate. So I think we have good flexibility to deal with whatever is kind of thrown at us.
John Hairston: Brandon, this is John. Will that add too much on CDs? A little earlier, one of Mike’s answers to the question about the timing of CDs alluded to how high a concentration of those renewals are in the first-half of the year and the expectation that we are offering a pretty good promotional rate to keep all that money and perhaps gather more, but it’s got a very short duration to the point that we would be repricing a lot more of that money in the second-half of the year in a better rate environment. So whether you use flexible or nimble, as Mike said, whichever word you prefer, one of those items of flexibility is how much we’re prepared to pay for how short a duration to allow us to benefit of the repricing opportunity in the second-half of the year. So that’s why we feel pretty good about it, is because the book’s already short, and it has a pretty good likelihood that it’s going to get shorter in the first-half of the year as we reset.
Brandon King: That’s very helpful. Thanks for taking my questions.
Mike Achary: You bet. Thank you, Brandon.
Operator: Your next question comes from the line of Matt Olney from Stephens. Please go ahead. Your line is open.
Matt Olney: Yes. Thanks, guys. Just a quick follow-up on the credit front. The charge-offs, I think there were $16 million of charge-offs, of which around $13 million was commercial. Any more color on kind of what those commercial charge-offs were in the fourth quarter? Thanks.
Chris Ziluca: Yes Matt, Matt is Chris Ziluca. Really it was kind of a handful of accounts that we’ve been tracking for a while, so they weren’t really kind of any sort of surprise for us. And many of them were really post-pandemic impacted and kind of had to get resolved as we kind of move forward in time. And it was compounded by the fact, and I think I’ve mentioned this previously, that we are experiencing lower recoveries during earlier periods. We had a higher rate of charge-offs that allowed us an opportunity to generate greater recoveries. But at this point in time, we’re down pretty substantially on the recovery front, which is a good news, bad news thing. More bad news than good news on the NCO side, but certainly kind of supports the good performance that we had in that regard during the past couple of years.
Matt Olney: Okay thanks for that Chris and I guess the second part of that would be those charge-offs higher in the fourth quarter. How much of that is just kind of an interviewer cleanup? Or is this more the normalization of the charge-offs that you’ve been talking about for a while? Is that what we saw in the fourth quarter? And is this kind of 27 bps of charge-offs for the quarter? Is that something that’s a reasonable assumption moving forward from here?
Chris Ziluca: Yes, I mean, there’s, again, it’s Chris. We don’t really kind of handle clean up in some respects. Obviously, we take charges when it’s appropriate and necessary. You know, we did have probably more as a result of kind of end of the year activity that occurs as people make decisions. Mostly our customers make decisions around what they’re going to do in the way of selling parts of their business or selling themselves, that sort of thing. And a lot of that stuff does kind of bunch up towards the end of the year. So, you know, it’s hopeful. I mean, we’re never happy with any sort of significant level of charge off. So, we’re hopeful that we can get below that number. But there is a normalization going on for sure.
John Hairston: Matt, this is John. The only thing I’d add to it, I think Chris said was accurate, what I would add to it is when we describe something as normalization, there is a certain chunk of NCO level we’re concluding as part of normal of things that we just don’t know about yet. And so we’re trying to count in the guidance for the types of activity that occurs when the economy is performing the way it is right now where even though we may get a little rate relief in the back half of the year it’s still somewhat higher for longer relative to the last decade or so of debt service requirements. So we’re presuming that the number of unanticipated charge-offs that occur on a very short degree of notice are inclusive in the guidance that we gave. So that’s another way of saying that we’re trying to factor in what we don’t know, but not just what we know about, because we would otherwise give you a number that may be a little optimistic in this type of an economy.
Matt Olney: Sure, okay. Thanks, guys. Appreciate the commentary.
Mike Achary: Of course, thank you. Thanks for the question.
Operator: Your next question comes from the line of Christopher Marinac from Janney Montgomery Scott. Please go ahead. Your line is open.
Christopher Marinac: Hey, thanks. Good afternoon. Mike, I just wanted you to go back to the AOCI change this quarter. Is there any way to either predict further gains in the next quarter or two? Or just anything just to explain the mechanics on why that was maybe putative at 9/30 and quite a change this quarter?
Mike Achary: Well, I think the big driver there was obviously lower rates. So the 10-year treasury was down, what, 70 basis points between 9/30 and 12/31. And so that — and certainly the impact of restructuring transaction affected in the bond portfolio had the impact of producing our unrealized loss on AFS pretty significantly. And when you combine that with the improvement on the HCM side, on a pretax basis, it was somewhere in the neighborhood of $411 million or so. And so that had the impact of 77 basis points on our TCE from AOCI and also was extremely helpful in improving our tangible book value per share. So that was some 11%, 12% kind of quarter-over-quarter. So going forward, without the consideration of any additional transactions where something similar to what we did in the fourth quarter, more than anything else, any kind of further improvement will depend on rates coming down a bit compared to where they were at 12/31.
