If you ask me what I think the industry should be worrying about in ’24, I would put fraud and the increasing activity around fraud on the list first with credit below that. So we are just hyper-focused on fraud management, protecting our clients and protecting the Bank.
Andrew Terrell: That’s very helpful, Tim. I really appreciate all the color there. If I could ask maybe another on just the mortgage business. Can you remind us, just as volumes have kind of come down over the past couple of years, have there been any changes you’ve made within your mortgage business? And I’m really just trying to get a sense of how you think about kind of potential upside there should rates come down and mortgage rates come down as well.
Tim Laney: Yes. We, in fact have – I’m proud of the mortgage banking leadership team, they probably do some of the more difficult work in times like these and that they’ve made a commitment to never losing money in that business. And only way you can support that commitment is during slow times is bring down your staff. And so, they methodically brought down staffing over the course of 2023. And in fact, we’re a positive albeit smaller than we’ve seen historically, but in fact we’re a positive contributor during the year. So, that leads to the second part of your question which is, they also, and again I think this is why their jobs are interesting and challenging. At the same time are continually recruiting and looking at building a pipeline to bring the right mortgage bankers back online at the right time. So I don’t know, Aldis anything you would add to that?
Aldis Birkans: Well, I’ll say in terms of my fee guidance for the 2024 embedded in there is mortgage benefit or mortgage income that is similar to what we recognized in 2023. So, I’ll let you kind of make judgment calls from there, whether how the economy evolves and what the upside potentially could be there.
Tim Laney: And Andrew is exactly right. I mean, the reality of it is if rates drop, we’ll see greater activity. We’re in – we’re certainly in markets that support the business and we need to see downward rate movement to really realize that full potential.
Andrew Terrell: Okay, got it. That’s really helpful. And Aldis you said in the ’24 fee income guidance a pretty stable level to this call it $12 million or so of mortgage banking in ’23.
Aldis Birkans: That’s correct.
Andrew Terrell: Okay. Perfect. Well, thank you for taking the questions.
Aldis Birkans: Yes. Thanks so much.
Operator: We’ll now take a question from Andrew Liesch with Piper Sandler.
Andrew Liesch: Hi, good morning everyone.
Tim Laney: Good morning.
Andrew Liesch: Aldis, on these – on the rebuild of the securities book, what – how do you plan to fund those repurchases? Is it going to be to some of the cash you have on hand or are you going to go ready deposits to complete that?
Aldis Birkans: Well, it’s going to be combination of, I think we be sitting a little too much cash still from March of last year – of the perspective, so it does not need to be as much cash on day to day. So we’ll probably repurpose some of that into investment portfolio, and then we’ll go ahead and raise additional deposits to fund for increase in balance sheet there. And again for us, we use investment portfolio just a reminder I know everybody here knows on this front. But we don’t look for incremental necessarily yield due to credit or structure or whatever on investment portfolio. We look for liquidity and as a store of liquidity for us and therefore maintaining short duration and highly liquid asset is what we do. And from the – how we manage liquidity and model liquidity, this just implies that we need call it another $200 million for the rest of this year in growth in this bulk to maintain our liquidity thresholds.
Andrew Liesch: Got it. That’s helpful. And then is there any detail you can provide on the reserve that you set aside for that non-accrual loan? I guess how long it’s been you’ve identified it and what drove the increased provision this quarter as far as like just monitoring collateral or any update in your business?
Tim Laney: Yes. Maybe I’ll start at a high level and I’ll reference cooperative loan that we were discussing at the end of the third quarter, that has been resolved. We’ve had one other operating entity that you are referring to that we’re dealing with now. I will say we’re dealing with it in partnership with another bank and it’s moving a little more slowly than we would typically like. But I fully expect it to be resolved in the first half of this year, strong collateral, strong operating potential, and again believe we can have it resolved in the first half of this year. Aldis, you want to cover any more detail?
Aldis Birkans: Yes. I’ll just say the provision expense of $4.6 million embedded in there was approximately $2.5 million, the specific reserve related to this credit. And come time, that credit is being worked out and that certainly would become a charge-off, but our ACL to total loans accordingly would drop by that percentage point or basis points too. So we feel – we are fully reserved for it. The ACL to total loans is little inflated because of that additional specific reserve.
Andrew Liesch: Got it. But it still seems like a decent portion of the allowance quarter was also for growth. Is that right?
Tim Laney: Absolutely.
Aldis Birkans: Absolutely, yes.
Andrew Liesch: Okay. Nothing else that you’re seeing in the portfolio?
