Larry Helling: Yes, that was really just, this last quarter was a little unique because of the spike up in unfunded commitments. So the 18 basis points was total provision in 2023. Our net charge-offs for the year were 13 basis points. That number is really pretty consistent with our last five-year average, but a little lower than our ten-year average, if you want to go back and look at those. And so again, I think as we expect things to normalize, as we get into a more normal interest rate environment, normal economic environment, it’ll probably move up slowly over time
Brian Martin: Got you. Okay. Yes. And just the new loan yields in the quarter, kind of the new production you put on late in the quarter, can you give some color on just kind of what you were seeing there and then just maybe your outlook as far as what the production this year, how you’re kind of thinking about where those yields are?
Todd Gipple: Sure, Brian. We actually saw a bigger delta in December between payoff rate and new funding rate than we had previously. So payoff rate, 675, new fundings, 751 for 76 basis point delta. That’s the highest that we’ve seen. That’s one of the reasons, again, we feel very good about a more static margin from here on out. Fundings on a tax equivalent yield basis for floating rate loans. And that would be really, the LIHTC portfolio were 819 yield for December, and we have a lot of production and still had a really high outcome there in terms of yield. So feel very good about that. And certainly, we are starting to get more pricing power really all around the footprint of the company. So our bankers are doing a great job helping us get paid better.
Brian Martin: Got you. Okay, that’s helpful. And Todd, I think you mentioned that the securitization could help the margin, and then once you got past the first one, it could potentially offer some other benefits. I guess as you look at potentially doing another one here mid-year, any thought on how to think about the benefits that roll through there or came through on this one as we look forward on that one?
Todd Gipple: Sure. We really view it as incredibly helpful tool for us to help manage the balance sheet more efficiently is probably the right word. We know that when we sell off couple hundred million dollars of high-quality assets, that we’re going to impact NII for a bit. And so the great news was we did that in the fourth quarter. We were able to overpower those assets going away and actually improve NII as part of the process. So as Larry has said over the last several quarters, there’s a whole lot of benefit to being able to securitize those assets. But with respect to margin, it really takes the pressure off of that new deposit funding. It really — we can see it. It’s really been meaningful in terms of what it’s done for our deposit mix and pricing.
And just to give you an example of how powerful that is, in the first quarter of this year, our cost of funds increased 53 basis points. In the second quarter, it was 43 basis points. In the third quarter, it was 33 basis points. Kind of interesting symmetry there. But last quarter, in the fourth quarter, when we did the securitization, our cost of funds only went up 14 basis points. So it’s a very powerful tool for us to help manage a more effective balance sheet and efficient balance sheet.
Brian Martin: Yes, and the cost of funds — go ahead, Larry. I’m sorry.
Larry Helling: I’m sorry, Brian. The thing I would add maybe is if you’re thinking about gains on securitization sales, we learned a lot doing our first two securitizations. We haven’t learned everything yet, so we probably don’t expect only modest income statement impact on the next couple of securitizations. We can continue to learn about the right way to securitize and the timing of the quarter. And we’re pushing on the expense structure of our securitizations now. It may take us a few more to get all that ironed out. Eventually, there will be some gains, but it might take us 2024 to get through a couple more securitizations to learn the right scaling and economies of scale and right expense structures because we’re pushing on our providers to be more efficient there. But it might be 2025 before we sort through lots of that.
Brian Martin: Got you. Okay, and the — Todd, the cost of funds exiting December is for the month of December. How did that look relative to the quarter? Or does it get mixed up with the securitization where it’s maybe not a fair question or not appropriate?
Todd Gipple: No, I think it’s certainly appropriate. It really didn’t have much of any impact on cost of funds and net interest margin. Our margin intra-quarter was 327 in October, 329 in November and 329 in December and we reported 329. So again, we saw a very good outcome in terms of almost no mix change during the quarter. And again, that 14 basis point increase in cost of funds was the best since tightening cycle started and I would tell you, we expect more of the same in the future in terms of helping us manage cost of funds.
Brian Martin: Got you. Okay. And last one for me was just on capital, really building it here. Just kind of wondering how your — what your thoughts are on just utilization of capital this year and does the buyback become a bit more and part of the narrative or not really with the growth, given strong growth outlook you still have. Just trying to understand how you’re thinking about that with continuing to want to build it.
Larry Helling: Yes, Brian, good question. As we think about ’24, I’d say, it’s too early to declare victory over the economy here yet, so we’re going to be cautious going forward for a bit. Six weeks ago we thought we were going to have interest rates higher for longer and we’re going to have a recession. And now we’ve all changed our minds in the last six weeks. So I’m hoping that the world is right, but sometimes they’re not. And so it seems prudent for us to continue to hold onto capital for a while. And so our focus is to really get our TCE into the top quartile of our peer group and build that fortress balance sheet. And when we arrive there and think the other factors are appropriate and it’s a prudent time, we do want to be in a position to do buybacks, but it’s probably certainly several quarters down the road.
Brian Martin: Okay, that’s all I had guys. I appreciate it and keep up the good work.
Larry Helling: Thank you.
Todd Gipple: Thanks, Brian.
Operator: The next question is from Jeff Rulis with DA Davidson. Please go ahead.
