David Bishop: Yeah, good morning, gentlemen.
Jeffrey Jackson: Hey, good morning, Dave.
David Bishop: Hey, Jeff. Obviously, you know, you have a focus on operating expenses. Probably some of the growth this year reflected, you know, the aggressive LPO expansion and lender hires, you know, employee benefits up. Just curious, within the compensation and maybe employee benefits, is there anything specific you can do other than maybe slowing the rate of growth to restrain that? Just curious how you’re thinking this year to really, you know, keep a lid on expense growth overall.
Jeffrey Jackson: Yeah, Dave, we’re looking at everything. And, you know, we just went through a retail transformation and we’re hoping to wrap that up in the next month or two. You may have seen we’re down 65 employees in retail. We’re looking to take down another 20. We are reinvesting some of that into the business banking space. The other thing we’re looking to do is there are some processes across the bank that we’re looking to see if we can make them more efficient. And then going back to the retail space, you know, we always evaluate kind of our bottom performing branches. And so we expect to do that again this year and also look at our hours as well. So I think there are couple of things we’re really looking to do that. We think we can reduce expenses and become more efficient. We’re always looking to do that. But I do think we have some opportunities as we move forward this year.
David Bishop: And remind me, in terms of the ATM fleet upgrade, is that — are those expenses down behind you? Is that fully in the run rate?
Daniel Weiss: Yeah, I would say the 50 ATMs — the final 50 ATMs were put into place here in the fourth quarter. So they’re not fully baked into the run rate. I think on my prepared commentary there, I expect somewhere around about $1 million of impact on a quarterly basis in that software and equipment line item related to basically ATMs and some other investments.
David Bishop: Got it. And then circling back to the margin and the funding of loans, remind us what the prospect for quarterly securities cash flow is entering 2024?
Jeffrey Jackson: It’s usually $100 million a quarter.
David Bishop: That’s where it’s still at?
Jeffrey Jackson: Yeah, it’s still $100 million a quarter. And we’ll still continue to use that, obviously, to fund loan growth.
David Bishop: Got it. Then finally, you know, you mentioned the success, obviously, on the loan side from the new LPOs. Just curious if you’re seeing any traction yet in terms of the deposit and funding side out of these new locations. Thanks and I’ll hop back into the queue.
Jeffrey Jackson: Yes, we are seeing a little bit of traction. It’s more of, obviously, a loan funding. But yes, we are seeing some deposit growth there, especially as we continue to focus on expanding our C&I focus. So that’s one of our main strategic goals is really to expand our C&I lending because it does bring deposits. It also brings fees, opportunities. And between that and obviously continuing our swap fees as well, as Dan mentioned, we overachieved our goal of $8 million last year. We feel like those LPOs are really driving some nice returns for us.
David Bishop: Great. Thank you.
Operator: The next question will come from Russell Gunther with Stephens. Please go ahead.
Russell Gunther: Hey, good morning, guys. I wanted to follow-up on the margin discussion. Dan, I appreciate all the puts and takes. Maybe just sticking with the deposit data, could you give us a sense for where you expect that to peak in the first half of the year? And then what are you assuming for the way down and what’s kind of baked into your three-cut — fed fund cut guidance for ’24?
Daniel Weiss: Sure. So we generally try to stay away from disclosing betas, as you know, Russell. But I would say, you know, we are anticipating the peak in deposit costs really to occur here in the first half — in the first half of the year. But on the way down, you know, within our own modeling, we’re right in that 25% range in terms of beta. And really the question — there’s a couple of questions that come to mind. One is, you know, is that an immediate — is that immediate? Is that lagged? Is that after, you know, one or two or three cuts? And so I think that’s all, you know, potentially up for debate. But what we see in our modeling is under multiple scenarios, we benefit in terms of margin. So we see deposit costs coming down at a faster rate than asset prices — pricing.
Russell Gunther: Okay, that’s great, Dan. I appreciate that. And then just switching gears for my follow-up. Jeff, I believe you mentioned the potential for new LPOs as a part of the growth strategy this year. Just any color on geographic appetite would be great.
Jeffrey Jackson: Sure. We evaluate a lot of different geographies, but really our focus is on Tennessee continuing to fill in there. We have Nashville and Chattanooga. We would look at potentially Knoxville or continuing to fill out the Nashville and Chattanooga areas. Virginia is another expansion state for us. Richmond, Northern Virginia. And then I would say potentially in Ohio, we always look at opportunities in Ohio. Obviously, we have a good presence there in part of the state, but continue to look there as well. I would say those are our three main areas. North Carolina could be a possibility down the road, but once again, mainly either filling in where we’re at or potentially continuing to move South.
Russell Gunther: All right, Jeff. That’s great. Thank you, guys. That’s it for me.
Jeffrey Jackson: Thank you.
Operator: The next question will come from Daniel Tamayo with Raymond James. Please go ahead.
Daniel Tamayo: Hey, good morning, guys. Thanks for taking my question.
