Matt Olney: Okay, thank you, I appreciate the color there. And then one more for me, you guys laid out the impacts of the 25 bps cuts throughout 2024. Can you give us an idea of what you’re internally modeling for cuts?
Malcolm Holland: Yes, if I had a crystal ball. It means, look, if the Fed says six, the market says three; who knows. I’m not — it’s the reason I structured the comment the way I did. If you guys, I think, are modeling three, so — but as volatile as rates have proven to be, making a statement is just not prudent on our part as to what we think. Our job is to try to insulate our balance sheet as best we can for rate movements and hedge the risk as best we can, and that’s all we can do
Matt Olney: All right, I appreciate the color. Thank you.
Malcolm Holland: Thank you.
Operator: Thank you. [Operator Instructions] And our next question will be coming from Brady Gailey of KBW. Your line is open.
Brady Gailey: Hey, it’s Brady. Good morning, guys.
Malcolm Holland: Morning, Brady.
Brady Gailey: So, I understand the commentary about the NIM seeing some additional pressure, I mean you’re growing deposits faster than loans, and putting in the [indiscernible]. So, I understand that dynamic. But when you look at NII dollars, do you expect to see downside in NII dollars relative to 4Q or do you think that could be stable-to-increasing?
Malcolm Holland: I think it — relative to 4Q, I think it should be relatively stable in the front-half of the year, and maybe we start to build some positive momentum in growth in the back-half because I think our loan growth is going to help that. And obviously, with a lot of focus on deposit costs as well.
Brady Gailey: Okay. And then how are you thinking about expenses? Your expenses have been growing at a double-digit pace for the last few years. It seems like it could be less than that this year. How are you thinking expense growth in ’24?
Malcolm Holland: Yes, that’s certainly the goal, Brady. We’ve had a lot of discussion around expenses at the company, and continue to do. The issue is we run a pretty efficient company today. And obviously, the biggest driver of any expense for a bank is people. And we continue to see opportunities in certain areas. Dom’s made a pretty good focus on our small business, our business banking group, and that’s going to require some votes to continue to grow that area. So, our goal is to hold it somewhat flat. Some of this stuff is out of our control. And when we look back at last year, and FDIC insurance, you had benefit costs, you had some marketing dollars that were driving some of these deposits —
Terry Earley: Lower-cost deferrals because our loan production was down 80%.
Malcolm Holland: Yes, the old Fed 91 Rule, you know, was definitely lower. So, we still feel pretty good about expenses. But looking forward, our goal is to hold them pretty flat if we can, but there’s going to be some — there’s certainly going to be some growth.
Terry Earley: I think it’s probably fair to say we’re paying more attention to expenses going into 2024 in at least my five-year history with the company.
Malcolm Holland: And my 13.
Terry Earley: Very true.
Brady Gailey: Got it, that’s good color. Then lastly for me just back to the capital question, I mean your profitability is pretty good. It feels like you’ll be able to still accumulate a decent amount of capital this year. The stock is at nine times earnings, 1:1 of tangible. That is this the year that you more seriously consider share buybacks?
Malcolm Holland: Listen, it’s certainly something we have to look at. And we had a Board meeting yesterday, and it was a topic of discussion. Capital is king. And I would love to have some dry powder, but there may be a situation at some point in time, in ’24, where we try and put something in place and protect ourselves if the stock were to see some dips. So, the answer to your question is, like expenses, we’ve had conversations about it. We don’t have any in place today, but I wouldn’t be surprised if we didn’t have something in place very shortly.
Brady Gailey: Okay, got it. Thanks, guys.
Malcolm Holland: Thanks, Brady.
Operator: Thank you. [Operator Instructions] Our next question will be coming from Brett Rabatin of Hovde Group. Your line is open.
Brett Rabatin: Hey, guys, good morning. Wanted to start back on the margin and just thinking about the outlook. The decision to increase securities portfolio, is that purely from a balance sheet liquidity perspective or can you guys talk about the decision to grow the securities book at this point?
Terry Earley: It’s really — it’s just a remixing of earnings assets, it’s building liquidity on the balance sheet. I think as what we’ve done through the fourth quarter has been to lock in good spreads by using the relative funding rates in the SWOT curve versus the investment to lock in good spreads for three years. I think going forward though, we’re going to — there’s going to be an additional important kind of factor, which is we’re not going to hedge it as much, and we want to have it for down-rate production to help mitigate the NIM pressure on the way down. So, that’s — it is going to kind of shift as rates have moved, as the Fed’s gotten clear of what it’s going to do with rates, we’re tweaking a little bit as we look forward for the rest of ’24, and the investing we’ve got to do to help provide that protection.
Malcolm Holland: And Brett, I would just say go back about 18 months when we decided that we were going to change our balance sheet. And this is an overall balance sheet strategy. And in order to get it down below 90% on a loan deposit ratio you got to put your liquidity somewhere. And so, there’s got to be a bigger securities book. So, it’s a remix, as Terry said, but it’s all a part of the strategy that we started 18 months ago to remake this balance sheet.
