So that’s a bit of a crystal ball right now, from where the 10 year stands right now, it’s up a bit from where it was at year-end, something like 8 or 9 basis points. But it will depend on where rates go up, I think, in the first quarter.
Christopher Marinac: Got it, perfect. And then I had a question for Chris on the credit side. What is the time frame and impact of sort of just the annual review process of your accounts for both stress testing, commercial borrowers in addition to just new appraisals that come through on the CRE side?
Chris Ziluca: Yes. Good question. Obviously, the annual review cycle in general, we try to spread it out across the year. Some of it is driven by the timing of getting various financial statements from customers to the extent that they’re audited or accountant prepared financial statements. They tend to come in the middle of the second quarter. If their tax return type statements, they tend to get pushed out. A lot of people file extension, so they come a little bit later in the year. And if — we’re also relying upon kind of business prepared information around the performance, especially if you’re talking about commercial real estate, around end of year performance, which will get spread throughout the first and second quarter of the year.
We regularly stress test our portfolio outside of just getting the financial information in to be able to do that. And we’ll — a lot of times, we’re only getting updated appraisals, if there’s an issue that we’re dealing with or if there’s a renewal situation, that sort of thing. We’re not getting appraisals per se on every loan on the commercial real estate book unless we perceive an issue and we want to get our arms around it and get ahead of it a little bit. So it’s kind of a mix of an answer for you there, but we do update our stress testing and our risk ratings and our view of individual credits spread throughout the year, but usually tends to kind of come in the middle of the year, unless there’s an event that occurs.
Christopher Marinac: Great. That’s a helpful background. Thank you for sharing that. And that concludes my questions.
Mike Achary: Thank you. Good questions.
Chris Ziluca: Thank you.
Operator: Your next question comes from the line of Stephen Scouten from Piper Sandler. Please go ahead. Your line is open.
Stephen Scouten: Thanks. Good afternoon. Hey guys, I’m wondering what you’re seeing in terms of kind of customer acceptance of higher loan rates. I mean, you guys laid it out nicely on slide 16 of what your new loan rates have been and kind of you can see how that’s affecting production. But I’m curious what you’re seeing, hearing from customers and if there’s any sort of wait-and-see approach from many customers are saying, “hey, we think rates might be lower in the future so we might hold off for the time being? Just kind of how that affects overall demand?
John Hairston: Thanks. Good question. I mean, certainly, that’s the case. For new real estate transactions, both consumer and investor CRE. There’s very much — I wouldn’t even call it tepid, I would say, anemic demand and that type of activity, primarily because even though there’s a tremendous housing demand for building multifamily and resi construction the cost right now to do that in addition to the debt costs are just really high. So I think investors are interested in waiting a couple of three months to see what’s really going to happen. Now some of that hope was based on buying into the six rate decreases starting in March activity, which we never really believe, and I’m afraid we’re going to be proven right. And so they may move forward in Q2 with that realization thinking that they’ll renegotiate the deal when they can as rates begin to decline.
So on the real estate and mortgage side, that’s absolutely the case. When we get into revolvers, line utilization is as low now as it’s ever been, both on the consumer and the business side. And that’s simply just good money management on the part of our clients, both business and consumer. Where they prefer not to have any more than the revolvers than they can manage, and that’s what they’re doing. So as those attitudes change, we would expect one of the tailwinds to NII will be line utilization actually going up. I’m surprised it hadn’t happened already as average balances came down on the deposit side. But in reality, really hadn’t stayed, it went down low. And every quarter, we think it’s going to finally creep back up a bit it stays flat or goes lower, and that was the case in Q4.
The other item is acquisition finance is obviously very low right now as people struggle with what the appropriate valuation is for different businesses that could be available for sale for whatever reason. And I think that, that’s going to probably continue to occur until we get past the election and people understand what the tax posture might be in terms of those types of transactions and income getting to ’25 and ’26.
Stephen Scouten: Yes, that makes sense. That’s a lot of good color. And then just one clarifying question for me. Mike, I think when you were answering Michael’s question earlier, you were talking about the trajectory of NII should be fairly similar to what you expect the trajectory of the NIM to do. Would that imply that NII could be kind of flat to down on a year-over-year basis given the tough comp in the first part of the year? Or how would you kind of look at that from a year-over-year NII growth perspective?
Mike Achary: Yes, great question. I think year-over-year, flat to slightly up would be the way to look at it. And I don’t know that we’ll have a core experience, kind of, a quarter-over-quarter decline. But certainly, in the first-half of the year, I think more flat than not, if that makes sense.
Stephen Scouten: It does very much. Thanks so much for clarifying. Appreciate the time.
Mike Achary: You bet.
John Hairston: You bet. Thanks, Stephen.
Operator: Your next question comes from the line of Ben Gerlinger from Citi. Please go ahead. Your line is open.
Ben Gerlinger: Hey, guys. Good afternoon.
John Hairston: Hi Ben, and welcome to coverage. We appreciate you picking us up.
Ben Gerlinger: Yes, thanks. I was curious if you could just take a quick second here. I’m trying to Square Circle to some extent because I know that you guys have 3 cuts in the forward curve is, let’s call it, 6% at this point. So the 6% is correct. What I’m getting at or what I’m kind of coming up with the model is that you have a flat is margin for the full year and then your PPNR is probably a little bit more compression than the 1% to 2% you gave guidance. Obviously, your guidance is based off up of 3 kind of layered throughout the back half of the year or starting in the middle of the back half of the year. So, one, just kind of confirming that thought process, but two, is there anything from an expense perspective that you could kind of push out a little bit further. Potentially towards the year ended into ’25, if that revenue is a little bit softer than expected?
