Brett Rabatin: I wanted to start on expenses on just – if I heard you correct, $21.5 million and $22.5 million was the first quarter guide. I assume some of that is FICA and what have you, merit increases in the first quarter. Can you talk maybe about that increase linked quarter and then an outlook for the full year? Could that be low to mid-single digit in terms of expense growth?
John Bordelon: There’s been a little bit of pressure on the conversation in the last couple of years with inflation and such. We will be rightsizing some of our areas where we’ve had a little bit higher turnover. So, we’re trying to remain competitive in those areas. So that’s going to create a little bit more on the comp side than normal. But yes, that’s probably the biggest number in 2024, as far as the increase is concerned is increase in comp, not significant additions. We did add a team in Houston, five people. We’ve added three other relationship managers in other markets. So those came on late in the year. So a part of the comp expense is the full year effect of – the people that we’ve had. We have some other people that – we have some positions that are empty right now, I’ll be meeting with those team leaders to make sure that we have to fill those positions in 2024.
David Kirkley: So Brett, we also had some moving parts in Q4, which lowered the non-interest expense a little bit. As we mentioned, comp and benefits was down about $1.1 million, I believe. A big chunk of that was group health insurance came in much lower than anticipated this year. Our HR Director, we switched healthcare plans and pharmaceutical plans and our health insurance expense for the bank came in about $500,000 less than last year and about flat with 2021. So, we were taking a little bit back by some rebates in Q4 so that lowered Q4 expenses a good bit. Also shares tax expense came in about $400,000 less as those – as that tax expense comes in for Louisiana based banks – end of Q3 and into Q4. And so that was a little bit lower than we anticipated for the year.
So that kind of lowered our non-interest expense run rate in Q4, we are expecting about $21.5 million to $22 million in Q1 and then raises go into effect April 1, for our employees. And so, you’ll see an uptick in that. So that will – increase that range to that $21.5 million range in Q2.
Brett Rabatin: Okay.
David Kirkley: Sorry, $21.5 million to $22 million in Q1 and then $22 million to $22.5 million in Q2 sorry.
Brett Rabatin: Perfect. Yes, no worries. And then you mentioned the 5% share buyback and your capital ratios are a little higher. What’s the right – and I assume we’re going to target CET1, but what’s the right level for capital relative to the buyback plan? And then – any thoughts on possible M&A? It sounds like some people are getting a little more optimistic. It seems like there’s possibilities if we get the marks, figured out, any thoughts on capital? Thanks.
David Kirkley: Yes. Let me take the first part of that question. We really significantly pared down the buyback in Q4. I think only buying back 10,000 to 15,000 shares and that was at a weighted average cost of $33. And with the run-up in the share price, we backed off of the buyback program during the year. And feel comfortable with growing capital in this environment. If share prices do decline, we are poised to take advantage of it and we’ll take advantage of it, if the pricing comes down a little bit.
John Bordelon: Surely, we would look forward to getting back in potential M&A. I’m not sure the first half of the year is going to be very heavy in that realm. We’re hoping if Fed does make some moves that, that will spur on some discussions. But we’re definitely ready prepared to look at some opportunities that are out there. We have a target list – of people that we would like to team up with. It’s just a matter of making sure that they like us as much as we like them. So, I think end of ’24 and ’25 should be pretty heavy M&A.
Brett Rabatin: Okay. Great. Appreciate all the comments.
John Bordelon: Thank you.
Operator: And our next question comes from Joe Yanchunis from Raymond James. Please go ahead, Joe.
Joe Yanchunis: Good morning.
John Bordelon: Good morning, Joe.
Joe Yanchunis: Yes. So certainly back to the margin. The forward curve has a decent amount of rate cuts coming up over the next couple years. How many cuts have you baked in your model and kind of to put a finer point on it, how should we think – how the margin will behave with each rate cut?
David Kirkley: So what we budgeted for was three rate cuts throughout 2024. I’m not saying I necessarily believe that’s going to happen, but that’s what, I guess, general consensus is from – economists that pay a lot more attention to that than I do. So we went with the general consensus. We generally think that the forward curve will provide ability to keep our margin flat for the first half of 2024, with a start increasing with deposit pressure – deposit costs starting to decline in Q3 and Q4. So, we think NIM – can be positive – ending up into 2024.
John Bordelon: I think an important factor with that is – it seems based upon the behavior of other banks in our regions that, they are short of deposits also. So, I don’t think we’re going to see any outliers that keep their rates really high. I think once Fed moves, that’s going to be a good indication for banks to lower their CD rates and bring the cost down. So I do anticipate once Fed does move, or even if they don’t move, we may see a slight decline in CD costs in anticipation of a move perhaps and – sometime during the year.
Joe Yanchunis: Got it. And then just kind of piggyback off that comment. It looks like 85% of your CDs are set to mature in 2024. Is there any color you can provide on the maturity schedule in terms of balances and at what rate they’re kind of running off at?
John Bordelon: We have a lot of different specials that we put out there. We’ve had 17 months, and we’ve had 11 months, a seven-month, a five-month, a nine-month. So, we’ve kind of moved it around a little bit, changing maturity I would think that the remainder of ’24, we would stay relatively short, meaning that probably wouldn’t have anything longer than maybe seven or nine months. So it’s – we not want to put all of our eggs in one basket. So, we’re trying to spread that out between the five and the 11-month period. Hope that helps.
Joe Yanchunis: Absolutely. And then kind of the last one from me here. I heard you reiterate your mid-single-digit loan growth outlook in ’24. So over the past week or so, we’ve heard a number of management teams have talked about a mild recession occurring this year. And if that were to occur, where would you expect that loan growth to come from?
