Damon DelMonte: Hey, good afternoon, everybody. Hope everyone is doing well. Kevin, welcome, and Bryan, best of luck in your new endeavors. Just wanted to follow up on the outlook for provision. I think you noted that it’ll be up slightly over the 2023 year. Does that include the elevated amount here in the fourth quarter, or you talking about if it was a normalized level?
Kevin Thompson: That mostly includes loan growth and it does carry forward our current credit outlook in the credits that Nathan mentioned earlier, which we think are well-controlled. But we do — we are being conservative in case the economy softens a little bit, then we’re providing a little bit for loan growth there.
Damon DelMonte: Got it. And the one credit that drove the provision higher, was that loan included in the NPL increase this quarter as well?
Nathan Jones: Yes, it was. It was a smaller piece of it. And honestly, if those two loans weren’t there, it would have been recovery. So, the other one — the major driver was the other one that was a manufacturing company that was primarily driving the increase.
Damon DelMonte: Got it. Okay. And then lastly, just on fee income, do you kind of expect it to remain flattish, but a little bit of pressure? I think you said on the service fee line kind of offset by growth in some other areas. Did I hear that correctly?
Nathan Jones: That’s correct. Yeah, a little bit of pressure that we already saw in the fourth quarter, and you saw we were flat till the third quarter. So, we’ve already started to overcome that in treasury management and some of the other HTLF 3.0 initiatives that we’re working on.
Damon DelMonte: Got it. Okay, that’s all that I had. Thank you.
Bruce Lee: Thank you.
Operator: Thank you. One moment, please. Our next question comes from the line of David Long of Raymond James. Your line is open.
David Long: Good afternoon, everyone.
Bruce Lee: Hi, David.
David Long: I wanted to follow up on the footprint review question. Maybe Terry was kind of going this route, but as you’re completing this footprint review, one of your subsidiary banks could that potentially be a sale candidate? Is that something that we can go that far to mention or to talk about that as an option?
Bruce Lee: Yeah. I would say that everything is on the table when we look at one of our subsidiaries. And again, we’re very focused on the capital that we have allocated, the growth of our subsidiaries, as well as the expense structure of those same subsidiaries.
Nathan Jones: I’ll just add. As part of HTLF 3.0, part of that is bringing on talent, and we brought on a really talented team to help us understand the underlying economics of our business and really help us understand capital allocations and funds transfer pricing, what is truly contributing to the profitability of this company going forward so that we can really dynamically and strategically look at that and adapt to this interesting banking environment I believe we’ll see in the next several years.
Bruce Lee: Nathan, I would also say, David, now that we have all of our charters consolidated and we’re looking at everybody through the same lens, it does have a different approach to things where before when we had separate charter, separate balance sheets, they may have a different investment portfolio, it was a different yield, which generates a different answer. But now as we’ve consolidated everything and we’re looking at everybody on a consistent basis, it comes up with different answers.
David Long: Got it. No, that’s a great color. Thanks, guys. And then, the other question I had, I think, Kevin, you had mentioned a $6 million in incremental NII from the sort of portfolio restructuring with the security sale. Is that — when you say $6 million incremental, is that on top of what you reported here in the fourth quarter? What does that $6 million incremental based on?
Kevin Thompson: We benefited from some of that in the fourth quarter. The securities repositioning happened on November 14, so we saw about half of that benefit, $3 million of that in the quarter. And so, there are obviously a lot of puts and takes in your net interest margin going forward. That’s a benefit. There are still headwinds in the economy with banks still experiencing higher deposit cost. Thank goodness we did not, we were flat this quarter, which is a really good sign going forward. But a lot of good puts and takes going forward. We could do better than that on net interest margin if the — again the yield curve cooperates. But we’re not sure how the Federal Reserve is going to react. We’re not sure how — what competition is going to look like. This is kind of unchartered territory that we’re making sure that we’re prepared for.
David Long: Excellent. That’s great. Thanks for the clarity. And then just finally, the HTLF 3.0, are you expecting any non-core expenses on top of that $109 million to $110 million run rate? Or do you think most of those have already been included?
Kevin Thompson: Most of those are already included. There could be some as we’re going through. We’re just in the initial stages of HTLF 3.0, and we’re evolving as we go. So, there could be areas where there are additional expenses, but there would be, from our view, a very quick earn back of those expenses to buoy up our model.
David Long: Awesome. Great. Thanks for answering my questions.
Kevin Thompson: You bet. That includes real estate, I’ll add, if there is something in our footprint that needs adjustments.
