Damon DelMonte: Got it. Okay. And then on the margin. Appreciate the commentary, the prepared remarks and then the commentary around Erik’s question earlier. If we don’t have four rate cuts like you guys are forecasting and let’s say we get two, is it — is the impact, kind of, linear? Like we could just, you know, instead of it being 10 to 15 basis points, maybe it’s closer to, you know, 6 basis points to 8 basis points or 8 basis points to 10 basis points?
Gavin Mohr: Yes, it’s not, it’s not linear in that manner. And we — so we ran it without — we’ve looked at it multiple ways, but interestingly, the balance sheet is currently configured and what we’re anticipating to happen with deposits and loan growth next year, plus rates unchanged is marginally better, but just marginally. So, yes, it’s not linear.
Damon DelMonte: Got it. Okay. So the benefit to the margin is not truly dependent on rates being cut. It’s more of, I think you noted continued loan growth at a higher rates and the remixing of the earning assets. Is that fair?
Gavin Mohr: Yes, that’s right, Damon. Like so — like all most of our peers, time is our friend here. So, we got a $140 million-plus of securities coming off next year, you know, sub-3.5% that we’re going to redeploy, you know, in the 7% range. So, that’s really the big driver. Now if deposits, the deposit remix we really miss that as we all are aware, could be a material headwind.
Damon DelMonte: Got it. Okay, great. That’s all that I had. Thank you.
Gavin Mohr: Thank you.
Operator: Thank you. We will now take our next question from Peter Winter from D.A. Davidson. Your line is now open. Please go ahead.
Peter Winter: Thanks. Good morning. I was wondering could you talk about maybe borrower sentiment today versus 90 days ago? And secondly, would you expect that loan growth would pick up more in the second half of the year if the Fed cuts rates?
Joel Rahn: On the commercial side, I would say that the borrower sentiment is — has been pretty stable. As I’ve talked to our customers, especially our significant customers, I think most of them I would characterize their outlook for ’24 as much the same as ’23. Most businesses are doing well. I wouldn’t say, great, but doing well. Automotive strike fortunately was resolved before it really inflicted a lot of pain on the supply base. So I think the outlook is pretty stable. And I do think that if we get to the second half of the year and rates do start to come down, that could provide some lift to things like commercial construction and future project planning would be my take on it.
Peter Winter: Got it. And then just the credit quality. Net charge-offs have really been excellent. Is there much left in terms of recovery? And I’m just wondering what a more normalized level of net charge-offs looks like?
William Kessel: Yes, that’s a great question. We have been successful year-over-year in producing some level of recoveries. I think we’ve milked that pretty good. There is still a portfolio that’s being worked, they’re probably more lumpy and smaller. And so, well, we feel really good about our overall credit quality in each of the loan portfolios. When I look back on ’23, I think our early problem loan identification, and then managing those situations, either to health or to somewhere else has been really good. So, you know, credit quality continues to be a real strength for Independent.
Peter Winter: And just what would you think a more normalized net charge-off is for you guys?
William Kessel: I would probably pen it to something near the provision range that we gave in the prepared remarks, so that 15 basis points to 25 basis points, say the middle of the range 20 basis points for a net number is sort of how we model it.
Peter Winter: Got it. Great. Thanks for taking my questions.
William Kessel: Sure. Thank you.
Joel Rahn: Thank you.
Operator: [Operator Instructions] We will now take our next question from John Rodis from Janney. John, your line is now open. Please go ahead.
John Rodis: Good morning, guys.
William Kessel: Good morning.
John Rodis: Brad, maybe just a big picture question for you. You’ve got the buyback approved, you increased the dividend, but you know, in the guidance, you said you don’t at least right now, you’re not modeling repurchases. So, maybe your thoughts on other capital use M&A, the like in the current environment or is it more sort of focused internally as you guys have been doing?
William Kessel: Yes. So John, that’s a great question. And first off, I am really pleased with the improved TCE levels that we’ve seen year-over-year. And over a very challenging and a period with a lot of uncertainty, we continued to stay focused on the long run, and hence you saw us with some pretty material levels of buyback in ’23 when maybe others weren’t doing that. And so, you know that the dividend is an important part to our story and to have increased that again for the tenth, the eleventh consecutive year here in January was important for us. So, we want to continue that trend. And ultimately it’s a — it’s a function of excess, excess capital. Our first priority would be to support the growth and you heard a little bit about what we think on the organic growth side of it.
