Bart Caraway: Yes. We talked before about the deposit campaign that we did in the summer, and we were incenting particularly the retail staff to be salespeople to ask for deposits and it has worked exceedingly well, better than I would have expected. They’ve done a fantastic job for us. I mean, they’re taking money from — for the most part, it’s existing customers that have money at multiple banks and they’re bringing — consolidating more of their money with us. So it’s really been a bright spot. And we expect that to continue. And the community bankers as well, all of our bankers actually, we’ve changed up the incentive plan, and that takes a little while to roll out, but they’ve all been hunting for deposits. And so that, along with Treasury has had a more outward-bound sales focus that’s been bringing on more commercial accounts.
And some of this, too, is just as we bought business on, sometimes the loan comes first, and it takes a while to onboard the customer for a full-wallet relationship. And what’s been nice towards the end of last year was a lot of those deposits finally came on.
Graham Dick: No, that definitely makes sense and it’s helpful. And I guess just looking more so at the margin, I heard the NII guidance, and I guess you can kind of back into this, given your loan growth outlook as well. But with the NIM, obviously, I guess, loan growth is probably coming on at a dilutive margin relative to where it is today. Where do you see the margin, I guess, sort of bottoming out or settling out in 2024? And then assuming we get no rate cuts, where would it go? And then I guess the second part of the question would be, if we do get rate cuts, what’s sort of the initial reaction? I know you guys are very neutral on the balance sheet side, but I just want to know if there’s something that I might be missing there.
John McWhorter: Yes. So new loan growth has a slightly lower spread than our margin. So we have some pressure there. And then specifically, in the fourth quarter, we saw non-interest-bearing demand deposits decline, which was a little bit of a drag on the margin. And again, kind of one of those hard things to predict, I wouldn’t have thought non-interest-bearing demand year after the liquidity crisis would still be going down, and some of that may come back, by the way. And then — I lost my train of thought. Yes, the NIM, just quite went flat versus going down. I think we are pretty well neutrally positioned. I think we all agree that there may be some impact, but it’s not that material. Yes. So the other thing that I was going to say — sorry about that — was the loan-to-deposit ratio declining from 98% down to 95%.
We weren’t necessarily expecting that either. So at year-end, we had — I don’t know those $350 million in cash or somewhere thereabouts, and it was just basically in Fed funds. So our spread on that was virtually nothing. So it was the decline in demand, the change in mix of the loan-to-deposit ratio went down, that probably affected the margin. But you’re right, we are evenly matched. Our December numbers are going to show that we’re very evenly matched again. We will have a little bit of a tailwind from this swap for the first quarter, and we do have a gain in that transaction right now and at least as of today, it looks to be a good trade that all our modeling shows that as long as we don’t have a dramatic more than 200 basis point decline in rates, that we should be better off in virtually every interest rate scenario.
Graham Dick: Okay. Good to hear. So really, at the end of the day, it’s more balance driven than anything or a balance sheet mix at this point rather than rate. And then I guess you mentioned on non-interest-bearing deposits there at the end, they declined a bit. I mean, they seemingly can’t go to like all that much lower. Do you feel pretty good about maybe bounce around the bottom here a little bit, but nothing super meaningful in 2024?
John McWhorter: Yes. We think that’s a good accurate description. You have folks paying property taxes and other expenses and some tax management at the end of the year that’s fairly common that we see, because we have such a lot of commercial accounts. So there’s nothing really irregular there.
Graham Dick: Okay. Okay. Good to hear. And then if I could just sneak one more in on credit and more specifically the provision. I heard you say that the loan loss reserve or allowance for credit losses is above your longer-term target, what does that imply for provisioning cost this year in terms of your you’re also need if, say, the economy there’s uncertainty persisted, but not a huge credit cycle?
Bart Caraway: Yes, with buyer models, I’ll let Audrey jump in. But for us, we’re not seeing deterioration in our loan portfolio. As a matter of fact, it remains very strong. So we’re expecting more or less the provisioning based on the growth and what our model shows more than anything.
Audrey Duncan: Yes. We’ve been carrying a fairly sizable unallocated portion based on the CECL methodology. So when you saw the ACL, the total loans go down from 107 to 102, we did have that $1.5 million charge-off. We didn’t need to fully provision to cover that charge-off because we already had it in the ACL. So we still have a — we’ve kind of whittled down the unallocated portion that we had, but we’re still well within our range on the ACO.
