John Corbett: Yeah. And to Will’s point, I mean, it’s sort of been a situation where it’s gone down a 1%, 1.2%. Just when does the Fed pivot and probably at that point is when all that changes, but that’s — that’s the $64,000.
Stephen Scouten: For sure. Okay. And how should we think about kind of the provision and reserves moving forward? I mean, obviously, you guys have talked about how much you’ve built relative to net charge-offs and Will said you don’t really see material or significant loss content in the book. So it kind of felt like a big directional reversal this quarter. Maybe what’s kind of a normalized net charge-offs for you as you think about your portfolio and do you think we could see this reserve start to trend down given no significant worsening in the portfolio?
Will Matthews: Yes. Yes, Stephen. I think the way I think about it, our charge-offs last year were 8 basis points. And that’s — they’ve been very low for the last several years. But I think it’s reasonable to expect to normalize a bit from such a low level. And to the extent they do, that would impact provision expense. So we did, as we highlighted, build our reserve the last couple of years in advance of potential deterioration in the economy. But depending on our charge-off levels from here that could lead to provision expense to cover those charge-offs and depending on whatever else the model tells us. As far as normalized charge-offs, I don’t have a good number to estimate. I mean, if you look back at peer group, it’s certainly be higher than what we’ve experienced, but I think it’s hard to say for certain that we could hang in there below 10 basis points every year in net charge-offs, but it’d be great if we could.
Stephen Scouten: Okay. Good. And then just last thing for me. Maybe to John, this is maybe more your side of the coin here, wondering around M&A in this environment. Obviously, I know ’23 was a tough year, but you guys turned phenomenally well. So a relatively advantaged currency rate presumably coming down, making the math a little bit better? I’m just kind of wondering how you think about M&A this year and the potential for executing a deal.
John Corbett: Yes, sure. As I’ve said previously, we were open for business. And to your point, I suspect that the math is becoming easier with the lower interest rate marks. But Stephen, really no change from our prior guidance. I mean our ideal partner, if we were to do something, would be 10% to one-third of our pro forma company. We’re in great markets in the Southeast, and we prefer to double down in our existing high-growth markets, but the regulatory environment is a little tough for that right now. So we’ve updated our population map on page 6. And if we were to do a market extension type of deal, we need to be in a similar high-growth market like Tennessee or Texas. But from a capital management standpoint, I think we’re in a good spot with excess capital, and we’ve got flexibility to use that capital. We can deploy it in share repurchases. We bought a little bit of shares back in the fourth quarter. We could do a bond restructure or we could deploy it at M&A.
Stephen Scouten: Yes. Helpful commentary, John. Thanks a lot guys. Appreciate the time.
John Corbett: You bet.
Operator: Your next question comes from the line of Michael Rose with Raymond James. Your line is open
Michael Rose: Good morning, everyone. Thanks for taking my questions. Just wanted to get some comments on slide 12, which is the loan production chart. Obviously, it’s come down since a very strong 2022. I know some of that is just your kind of conservative nature and maybe not wanted to take on other people’s credits as they move out of the banks. But just given your footprint, just wanted to get some thoughts on loan growth expectations as we think about the year, where are areas that you can maybe push the gas pedal a little bit. And I would assume that some of the CRE portfolios are some areas where you’d be a little bit more cautious. But I think you had previously kind of talked about mid-single-digit loan growth rate for next year. So just wanted to get some context there. Thanks.
John Corbett: Yes, Michael, it’s John. That graph is very interesting to me on page 12, and we kind of had peak record production in the second quarter of 2022. And if you think back, well, what happened in the second quarter of 2022, that’s when the Fed started raising short-term interest rates and precipitously after that, you’ve seen a steady trend downward of production. So the Fed is getting what it wants. For 2023, we guided to mid-single-digit growth for the year, and we ended at 7% growth. So, given the uncertain economies, I feel like that’s a very appropriate level of growth with where we are in the cycle. Pipelines for the end of the year are down considerably from where they were at the beginning of ’23, down about 25%.
But even though the pipelines are slowing down, Michael, there’s kind of an embedded tailwind of loan growth because with rates where the others going to be slowing prepayments and there’s continuing to be funding of loans that are unfunded that we made in 2021, ’22. So, our guidance really hasn’t changed. We think mid-single-digit growth is reasonable and until rates decline. But where do we see that growth for us, we’ve seen a considerable amount of residential real estate growth in 2023. And we’re getting a nice coupon for that growth and there’s just more people moving into our markets than there are homes available. So I feel good about those credits from an asset quality standpoint. CRE activity has been very low in 2023 with the rise in rates.
You might see a little pickup there in 2024 with the five-year treasury down as much as it is. And then we’ve just got a continuous push on the C&I middle market space. So that’s an area that we’re leaning into. So I hope that’s helpful, Michael.
Michael Rose: Very much so. And then maybe just one for Steve. I think you stepped down and corresponded — this quarter was a little bit greater than what some of us were kind of expecting. I know there’s typically kind of a seasonal rebound in the first quarter. Can you just kind of walk us through the dynamics there? And I think you had previously kind of talked about a fee to average assets kind of in the 55 to 65 basis point range. Any reason to think that, that might be different as we progress through the 2024? Thanks.
