If you look at the last three year averages in our swap business is a little over $60 million. That makes us feel good about that $50 million to $60 million guidance number that we’re giving you.
Nathan Race: Got it. And then if I could just ask one more follow-up across this line of business, are you seeing any competitors pull back that are maybe more liquidity-constrained who don’t have the secondary market options as you guys now have on the securitization front to continue to lean into this product, whereas maybe some competitors don’t have those opportunities?
Larry Helling: Yes, it certainly could be playing a factor in it. It’s hard to tell. Our competitors in this space are all the big national players and our value proposition in this space is really speed of execution. And as we’ve talked previously, the securitization gives us a lot of runway to continue to add business at a steady pace here. So I don’t necessarily know, if you look at the ten biggest banks, it’s hard for me to gauge whether they’re feathering the throttle here a little bit and they’re lending in total, but that — it’s really the 10, 15 biggest banks are our primary competitors in this space.
Nathan Race: Okay, got it. And then just one last one for me. I imagine some of what we discussed last quarter on expenses, but I imagine the guidance of the first quarter kind of contemplates the middle ends of the next 12 months’ capital markets revenue guidance. Is that a fair assumption again, Todd?
Todd Gipple: Yes, it is, Nate. That would be the assumption of somewhere in the middle of that guidance for the first quarter. And we’re candidly very pleased to be able to provide that kind of a guidance on non-interest expense run rate. Our guide only moved up 2% year over year and testament to the strong team that we have keeping an eye on expenses and efficiency and being able to produce these kind of results. So that really is in a nutshell why we’re guiding that for Q1.
Nathan Race: Okay, great. Congrats on a great quarter.
Todd Gipple: Thanks, Nate.
Operator: The next question is from Damon DelMonte with KBW. Please go ahead.
Damon DelMonte: Hey, good morning, guys. I hope you guys are doing well today.
Todd Gipple: Good morning, Damon.
Larry Helling: We are.
Damon DelMonte: Excellent. Just to follow-up on Nate’s question there at the end on the expenses. So Todd, do we kind of think about the guided range in the first quarter of 49 to 52 would reflect kind of a seasonally weaker or slower spot fee income level? So as we go through the year, we’re probably going to be growing outside of that range because you’re going to have presumably higher swap fees as we go through the year. Is that fair?
Todd Gipple: Yes, Damon, kind of two-parter there. So as Larry described, we still expect solid results here in the first quarter from capital markets revenue, but our expense guide would be based on the midpoint of those goalposts in terms of what we expect for the quarter. So say $12 million to $14 million and that would fit us within that guide we just gave you of 49 to 52. What we like about our compensation structure here at QCR is very high percentage of all of our comp is incentivized. So we would really only expect that non-interest expense result and guide to go up if we do have really outstanding results in terms of profitability. So in a quarter like we just had here in the fourth quarter, we can see a pretty high percentage of incentive comp jump for outstanding results like that.
But we think that strong alignment is good for us where we reward our people after we reward shareholders. And that’s part of our strategy to sustain top quartile peer performance. So really the only outlier to that guidance would be if we’re already providing really strong revenue outside of the guidance range.
Damon DelMonte: Got it. I appreciate that color. And then just to touch on the provision level here, you noted that the 133 reserve, you feel pretty comfortable with that. And this quarter included some allocation for unfunded commitments. How do we kind of think about balancing the traditional loan reserve and the unfunded commitments going forward? I mean, if you’re continuing to book these loans, should we start to kind of incorporate a provision that’s maybe not as high as this quarter, but maybe indicative of what we saw the last three quarters of — or the first three quarters of 2023?
Larry Helling: Yes, good question, Damon. As we think about provision expense, it was 18 basis points in 2023. So if we think longer term, we’ve talked about credit historically on these calls and maybe with you individually, Damon, about things are returning to normal in a credit outlook standpoint and that probably applies to provision too. And so unfunded commitments was an outlier. That was a good thing this past quarter because you saw what that produced for us from a fee income standpoint. And so that was certainly — that level of provision needed for unfunded commitments will certainly come down and probably come back closer to normal as we go through the next few quarters. But as you think about the long term and credit returning to normal, part of the provision is to replace charge-offs.
And so, gee, I think it’d be a reasonable expectation to think that provision expense would stay steady year over year to a little bit higher as we go into what I think is maybe a more normalized credit environment as we come off of zero interest rates the last three, four years.
Damon DelMonte: Got it. Okay, that’s helpful. That’s all that I had, I’ll step back. Thank you.
Todd Gipple: Thanks Damon.
Operator: The next question is from Brian Martin with Janney Montgomery Scott. Please go ahead.
Brian Martin: Hey, good morning, guys, great quarter.
Larry Helling: Thanks, Brian.
Todd Gipple: Thanks, Brian.
Brian Martin: Say just wanted to — just one follow up on that provision question, Larry. I guess was that total credit loss expense or I guess, are you just referring to kind of the provision for loan losses, given kind of the dynamics this quarter with those unfunded commitments?
