Q4 2023 Fulton Financial Corp Earnings Call

Customer needs and delivered on their expectations.

As a result in a very challenging environment, we grew customer households, and now serve more than 534000.

We continued to invest in growing our market presence and enhancing the customer experience. We added four new financial centers to new loan production offices and talented team members throughout our company to support our continued growth.

We continue to invest in and develop our customer digital experience with customers now using our digital solutions over 6 million times a month.

We also made tremendous positive impact on the communities. We serve in 2023, we launched our diverse business banking program accelerating our outreach to businesses that have been traditionally underserved by our industry.

Through this program, we are adding new customers and new revenue for our company, while making a difference in our communities.

For more information on our overall community impact. Please review our 2022 corporate social responsibility report that was issued in 2023. In this report you can see how we are changing lives for the better.

Our 2023 financial performance was very solid pre provision net revenue eclipsed 400 million, a new record and our operating EPS of $1 71 was the second best in the long history of our company.

While continuing our strong focus on pricing profitability and credit strength.

Loan growth exceeded $1 billion for the second year in a row.

We increased our liquidity during the year, maintaining 8 billion in committed liquidity at year end.

Our net interest margin expanded 15 basis points during the period of significant interest rate volatility.

We managed and deployed capital with discipline during the fourth quarter, we increased our common dividend for a second time during the year, returning 64 cents in common dividends to our shareholders in 2023.

In addition, we repurchased just over 5 million shares of Fulton stock throughout the year at a blended cost of $15 and 15.

Even with these capital actions, we maintained strong capital ratios.

We also navigated the credit environment effectively in 2023 as performance was even better than we anticipated at the beginning of the year.

And as a result, we delivered a 15% return on tangible common equity in 2023.

Overall, we were pleased with our performance and the results our team generated this year, we look forward to continuing to execute on our corporate strategy to grow the company by delivering effectively for customers and operating with excellence. So that we can serve all of our stakeholders.

Now, let me turn to our quarterly performance with particular emphasis on growth credit and our forward outlook.

Operating earnings per share for the quarter was 42.

Loan growth moderated as we anticipated.

During the quarter to $174 million or 3% on an annualized basis.

Deposit growth was modest at total deposit balances grew $116 million or 2% on an annualized basis during the quarter our loan to deposit ratio ended at 99, 1% relatively stable with the last quarter and well within our long term operating target of 95 to 100.

5%.

Turning to our noninterest income diversity in our fee income businesses continues to serve us well.

Noninterest income was $59 4 million with wealth commercial and consumer and small business continuing to deliver solid results. So on an overall basis.

Moving to credit the provision for credit losses was $9 8 million down slightly from $9 9 million last quarter. We saw some migration in our credit quality metrics during the quarter and remained focused on how higher interest rates and higher costs are impacting our customers were cautious in our outlook for 2000.

24.

Now looking forward this year will be full of opportunity for us our focus remains on growth and profitability.

Actively managing credit and taking action on improving efficiency overall.

Even with solid results for the quarter and the year, we acknowledged the need to grow appropriately in this market and improve our productivity and efficiency in 2024 as you saw in our press release, we took implementation charges related to our new initiative, we launched in the fourth quarter. This initiative named Fulton first is a process to evaluate.

<unk> and improve all aspects of how we operate to support our continued growth we recognized and have begun to act on the need to streamline operations create efficiencies and leverage our significant investment in technology, we have three key tenants driving our strategic transformation simplicity.

Focus and productivity, we're very excited about <unk> and believe that over the next several years it will accelerate our growth rates and improve our operating efficiency on a sustained basis.

We will have more discrete details to share with you during the year the.

The 2024 impact of Fulton first will be most visible in our expense line items as it will help us meet the limited expense growth rate and our guidance longer term Fulton <unk> will also support accelerated growth.

Mark will step you through the 2024 guidance in a moment.

Mark: These high priority initiatives and the leadership team that we have in place will drive performance and deliver the next phase of long term success for our company.

Mark: Now I'll turn the call over to Mark to discuss our financial performance in 2024 guidance in more detail.

Mark: Thank you Kurt and good morning to everyone on the call unless I note otherwise the quarterly comparisons I will discuss are with the third quarter of 2023.

Mark: And the loan and deposit growth numbers I will be referencing our annualized percentages on a linked quarter basis.

Mark: Starting on slide six operating earnings per diluted share this quarter were <unk> 42.

Mark: On operating net income available to common shareholders of $68 8 million.

Mark: This compares to <unk> 43.

Mark: Of operating EPS in the third quarter of 2023.

Mark: Moving to the balance sheet as Curt noted loan growth was modest during the quarter growing $174 million or 3% annualized.

Mark: Commercial lending contributed $120 million of this growth or 3% annualized construction lending grew $142 million driven by additional draws and new originations during the quarter.

Mark: Commercial real estate lending growth slowed to $22 million or 1% annualized and C&I lending declined modestly down $32 million or 3%.

Mark: Consumer lending produced growth of $54 million or 3% during the quarter.

Mark: While at a slower pace, we continue to originate and portfolio adjustable rate mortgages.

Mark: Total deposits increased $116 million during the quarter.

Growth in Cds, and brokered deposits more than offset seasonal outflows in our municipal deposit business of approximately $220 million.

Mark: Our noninterest bearing DDA balances ended the year at $5 3 billion or 24, 7% of total deposits, which was modestly better than we anticipated during our third quarter earnings call.

Mark: Our shift from noninterest bearing deposits to interest bearing was $552 million for the second half of 2023 versus a shift of $1 1 billion in the front half of the year.

Mark: Our NII guidance for 2024 assumes we'll continue to see migration from noninterest bearing deposits into interest bearing products throughout 2024, but at a slower pace than we saw in 2023.

Mark: We currently expect noninterest bearing deposits to end 2024 at approximately 22% of total deposits.

Mark: Our investment portfolio was relatively flat for the quarter closing at $3 7 billion.

Mark: During the quarter, we did repurchase a small portion of subordinated debt $5 million, which generated $750000 gain reflected in other expense.

Mark: This gain was offset by a similar level of securities losses, as we sold $120 million of securities, yielding one 4% using the proceeds to pay down overnight borrowings at 535%.

Mark: This very small repositioning will add modestly to our net interest income and net interest margin in 2024 and is included in the guidance, which I'll step through in a few minutes.

Mark: Putting together all of these balance sheet trends on page on slide eight our net interest income was $212 million a $2 million declined linked quarter.

Mark: We were pleased with how well our net interest margin held up declining only four basis points to 336% versus three 4% last quarter.

Mark: Loan yields expanded 11 basis points during the period, increasing to 583 versus 572% last quarter cycle to date, our loan beta has been 49%.

Mark: Our total cost of deposits increased 23 basis points to 179 basis points during the quarter.

Mark: To date, our total deposit beta has been 34%.

Mark: Turning to asset quality nonperforming loans increased $12 $7 million during the quarter, which led to our NPL to loans ratio increasing from 67 basis points at September 30 to 72 basis points at year end.

Mark: Net charge offs of $8 million or 15 basis points, we're diversified with no individual charge off greater than $2 million.

Mark: Overall loan delinquency increased modestly modestly but remains at a low level increasing to $1 one 9%.

Our allowance for credit loss as a percent of loans was relatively flat at 137% at year end.

Mark: Turning to noninterest income on slide 10 wealth management revenues were $19 4 million consistent with the third quarter.

Mark: As a reminder, wealth management represents about a third of our fee based revenues with over 80% of these revenues recurring.

Mark: The market value of assets under management and administration increased over $500 million during the quarter to $14 8 billion at year end, a new record for our company.

Mark: Commercial banking fees increased 1 million to $20 8 million as capital markets and SBA revenue increases drove the quarter.

Mark: Consumer banking fees of $12 1 million were consistent with the third quarter in all areas and continues to deliver a very consistent fee income stream.

Mark: Mortgage banking revenues declined 900000 to $2 3 million and were driven by a seasonal decline in mortgage originations as well as a decline in gain on sale spreads.

Mark: Our net market value change of $1 1 million in other fee income was recorded during the period related to the LIBOR Super transition.

Mark: Moving to slide 11, noninterest expenses on an operating basis were $171 million in the fourth quarter in line with the prior quarter.

Mark: Material items excluded from operating expenses were charges of $6 5 million for the special FDIC assessment and $3 2 million related to our <unk> initiative.

Mark: Additionally, our operating expenses were impacted by $1 $6 million increase in marketing expense and $700000 gain on the aforementioned debt extinguishment.

Mark: Turning to slides 12, and 13, we're providing you with updates on our capital base.

Mark: As of December 31, we maintained solid cushions over the regulatory minimums, and our bank and parent company liquidity remains strong.

Mark: We've also provided you with an alternative view of our regulatory ratios, including the impact of OCI.

Mark: Our tangible common equity ratio improved to seven 4% at year end, a 60 basis point increase during the quarter driven by solid earnings in a material decrease in OCI due to lower interest rates.

Mark: Our accumulated other comprehensive income balance on the available for sale portion of our investment portfolio and derivatives is currently $299 million versus $480 million last quarter.

Mark: On slide 13, including the loss on our held to maturity investments, which is $140 million after tax on an HTM portfolio of $1 3 billion, our tangible common equity ratio would still be 7% at December 31.

Mark: Representing $1 $9 billion of tangible capital.

Mark: On slide 15, we are providing guidance for 2024 are.

Mark: Our guidance assumes a total of 75 basis points of fed funds decreases occurring in the second half of the year.

Mark: Our 2024 guidance is as follows we expect our net interest income on a non FTE basis to be in the range of $790 to $820 million.

We expect our provision for credit losses to be in the range of $45 million to $65 million.

Mark: We expect our noninterest income excluding securities gains to be in the range $235 million to $250 million.

Mark: We expect noninterest expenses on an operating basis to be in the range of $670 million to $690 million.

Mark: This estimate excludes any potential charges, we may incur as a result of potent <unk> throughout the year.

Mark: And lastly, we expect our effective tax rate to be in the range of 17% to 18% for the year.

Mark: With that I'll now turn the call over to the operator for your questions.

Mark: To ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Mark: Please standby, while we compile the Q&A roster.

Mark: Yeah.

Mark: Our first question comes from Daniel Tamayo with Raymond James. Please proceed.

Mark: Okay.

Daniel Tamayo: Good morning, guys. Thanks for taking my question.

Daniel Tamayo: Again, good morning, Bob.

Daniel Tamayo: Maybe just to start on the first initiative.

Speaker Change: I appreciate your comments Curt on.

Speaker Change: Kind of what's behind it but.

Speaker Change: Just curious if there are any profitability initiatives.

Speaker Change: Targets or goals associated with that program and then if there is.

I think you mentioned that the expense guidance doesn't include any other.

Speaker Change: Potential charges in 2024, if you have an estimate of what that might be coming in that line that would be great. Thanks.

Speaker Change: Yeah, Danny Thanks, Thanks for the question.

Our team is really excited about the first initiative.

Speaker Change: We're really focused on the long term growth strategy for the company as well as the operating efficiency will.

Speaker Change: We're being really transparent with the program early on because we wanted to help you understand some short term cost impact that happened this past quarter.

Speaker Change: And then.

Speaker Change: Explain how we're going to meet the guidance specifically on the expense guide going forward, it's probably a little light relative.

Speaker Change: Relative to expectations, So we're being very strategic and an overall review of the company. It's not just a simple cost cutting initiative, but really a strategic initiative.

Speaker Change: To grow more efficiently over time, so to answer your specific question. We don't have targets at this point, but we feel its initiative is going to help us meet our 2024 guidance and then probably even more importantly.

Speaker Change: Lead to long term sustained improved efficiency for the company, but at this point, we don't have any specific targets I'm going to share more over time.

Speaker Change: And we wanted to be early with this so that we are transparent.

Speaker Change: And that you could understand some of the initial cost as we launched the initiative.

Speaker Change: Sorry are you expecting this to be kind of a.

Speaker Change: Longer term then in terms of.

Speaker Change: The costs that you're taking I mean or is it is the bulk of it what you took in the fourth quarter or should we expect this to be kind of an ongoing.

Speaker Change: Initiative in terms of cost Youre, taking yeah yeah.

Speaker Change: Yes, Daniel I mean, we will have ongoing onetime cost to implement.

Speaker Change: The changes that we decide to implement.

Speaker Change: And then we will match them with cost saves and revenue expectations as we move forward. So more to come this is the beginning.

Speaker Change: Of the initiative and we're being very very thoughtful diligent.

Speaker Change: About working through the process and we wanted to be transparent with everyone. It is not not just a simple cost cutting initiative, but there will be cost cutting that associated with it we will keep you informed.

Speaker Change: Throughout the year.

Speaker Change: Okay.

Speaker Change: And then maybe one for mark on on credit I guess.

Speaker Change: The range that you gave for provision for the for the year just curious how youre thinking about what May drive the low and the high end of that range. If that's mostly.

Speaker Change: Just credit volatility or if there is kind of balance sheet growth.

Speaker Change: Estimates embedded in Venezuela.

Speaker Change: Steve just a comment from me and then Mark can add to it if he wants.

Speaker Change: As we look at the provision it's predominantly.

Mark: Charge offs normalizing charge offs were 15 basis points in the last quarter, our long term average and charge offs has been a little less than 20% 20 basis points in recent history. So charge offs drive that and then our growth rate would drive that what's.

Mark: What's the unknown variables, where everybody is just economic.

Mark: The conditions as we move forward in the base allocation.

Mark: With what we know right now.

Mark: <unk>.

Mark: That's the range we're comfortable with.

Mark: Would you say the midpoint is.

Mark: What's the assumption.

Mark: If you were to hit that $55 million is that.

Mark: Like a soft landing or how should we think about what your baseline assumptions.

Speaker Change: Yes, Danny if you think about the baseline assumption as a baseline assumption right now from Moody's does assume a softer landing.

Speaker Change: So our baseline assumption would be again continuing to revert in the fourth quarter, we got closer to our long term average on net charge offs, but.

Speaker Change: The midpoint of our guide would assume we get back to that longer term average of between 15 and 20 basis points of net charge offs and then.

Speaker Change: Growth rate in loans, that's consistent with the.

Speaker Change: That kind of 4% to 6% probably more the lower end of that range for 2024.

Speaker Change: Got it. Thank you for all the color I'll step back guys I appreciate it.

Speaker Change: Thanks, Dan Thanks, Dan.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from Frank Schiraldi with Piper Sandler Your line is now open.

Frank Joseph Schiraldi: Good morning.

Good morning, Greg Greg.

Frank Joseph Schiraldi: Just wondering if you guys.

Frank Joseph Schiraldi: Obviously the growth in the quarter was in part.

Frank Joseph Schiraldi: Loan growth requirements, you talked about mark driven by construction balances.

Frank Joseph Schiraldi: Some of that being additional drawdowns.

Frank Joseph Schiraldi: And some of that being new origination I Wonder if you could just talk a little bit about your thoughts.

Frank Joseph Schiraldi: On growth going forward, and then Malone bulk in.

Frank Joseph Schiraldi: And what the complexion of growth might look like the more opportunity on the commercial real estate side given.

Frank Joseph Schiraldi: Where your concentration limits are.

Frank Joseph Schiraldi: Just general thoughts there thanks.

Speaker Change: Yes, I mean, frankly, if you think about for US historically, we tend to operate on an organic basis that kind of 4% to 6% range I would say for what you've seen in the back half of 'twenty three.

Speaker Change: <unk> has been kind of at the low end of that range.

Speaker Change: And I think you should expect that to continue into 2024.

Speaker Change: Ben.

Speaker Change: <unk> profitability in.

In the fourth quarter, new originations pretty much across all channels, we're in that kind of high sevens.

Speaker Change: 770, 775, it was kind of.

Speaker Change: Our rate on new originations.

Speaker Change: So with that until we would see any kind of expected.

Speaker Change: Decreases.

Which again, we currently expect our expecting in the back half of 2024.

Speaker Change: I would expect to see growth continue to be moderate, but we are open for business.

Speaker Change: We are not.

Speaker Change: Shutting down any any lines of business.

Speaker Change: As you've seen from others.

Okay and then.

Speaker Change: On the assumption you mentioned.

Speaker Change: Three rate cuts in the back half of the year.

Speaker Change: Any sort of.

Speaker Change: Color you can provide I know you talked about it last quarter on the way up.

Speaker Change: That the NII would be impacted given the variable rate book about little over $20 million.

Speaker Change: Annually from a 25 basis point move in rates.

Speaker Change: Is it the right way to think about.

Speaker Change: The same on the way down.

Speaker Change: Offset by the back book Repricing Whats your what is the incremental 25 basis points kind of due to full year margin or NII.

Speaker Change: Yes.

Speaker Change: <unk> basis, we have.

Speaker Change: About 10 billion of loans tied to sofa and about nine of that $10 billion or adjustable rate loans.

Speaker Change: Which would reset within 30 days of after that rate move occurs so.

So absent.

Speaker Change: Any moves to our.

Speaker Change: Non maturity deposit book.

Speaker Change: That's how you get to that $20 million on an annualized basis for 25 basis point move.

Speaker Change: What we've assumed.

As you know we've taken what we think is a conservative stance that for the first couple of rate moves downward.

Speaker Change: Youre not necessarily going to see dips.

Deposit pressures abate.

Speaker Change: But at some point, whether that's 50 basis points 75 basis points 100 basis points at some point.

Speaker Change: The industry will start to feel relief.

Speaker Change: Lots of pricing pressure and be able to react with that non maturity deposit book.

Okay. So maybe incremental rate cuts would be less impactful to the bottom line just given hopefully deposit start replacing.

Speaker Change: Providing some benefit on the deposit side to offset any contraction on that on the loan yield side. So the way to think about.

Speaker Change: That's correct.

Speaker Change: Okay Alright, great.

Speaker Change: And then in an overnight borrowings cost obviously.

Speaker Change: <unk> immediately.

Speaker Change: Alright.

Speaker Change: Okay. Thanks.

Speaker Change: Yeah.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from.

Speaker Change: <unk> Strickland with Janney Montgomery, Scott Research Division.

Strickland: Line is now open.

Speaker Change: Hey, good morning, Curt and Mark.

Speaker Change: Just wanted to start on deposit costs I know you discussed this a little bit but are you starting to see that pressure lessen a little bit but the policy rates.

Speaker Change: Any different behavior from competitors, there as well.

Speaker Change: Yes.

Speaker Change: One other thing better use that.

Speaker Change: When we've been obviously repricing, our CD book and we've been growing Cds throughout the year and those have been repricing higher as <unk> seen kind of roll rates are what matures per quarter.

Speaker Change: In the first quarter of 'twenty four we have $1 1 billion roughly of deposits that will.

Speaker Change: Cds.

Speaker Change: That will mature, but that cost now what's maturing is now up to almost $4 40.

Speaker Change: So that so that churn that you've been seeing upward in our CD cost is definitely going to worsen.

Speaker Change: Throughout 2024, so that will provide some some relief and allow those betas to ultimately slow.

Speaker Change: Got you that you actually beat me into my second question. So that was $1 1 billion of Cds maturing what was the cost they were rolling off versus what they are rolling on that.

Speaker Change: 440 is what theyre rolling off that.

Speaker Change: And then rolling on it would depend on obviously.

Speaker Change: Whether they're retail or or broker.

Speaker Change: Got it.

Speaker Change: I'll just.

Speaker Change: Sorry got.

Speaker Change: Hey, RJ its Kurt I was just going to add that we continue to have high roll rates blind roll rates NCD, so as we're adding customers.

Speaker Change: We still have really strong metrics in the blind roll rate and.

Speaker Change: <unk> acquisition rate blonde roll rate.

Speaker Change: Our difference so that helps as well that we've been able to.

Speaker Change: Continue to do a good job for customers and roll a lot of Cds over.

Speaker Change: And keep that business.

Speaker Change: Understood that's helpful.

Speaker Change: Then just switching gears for a second here I appreciate the continued disclosure on office in the deck.

Speaker Change: $683 million outstanding inclusive of medical office and.

Speaker Change: And if so do you have on hand ballpark, how much is medical office.

Speaker Change: It.

Speaker Change: It does include all office.

Speaker Change: Depends on the use overall, we're digging therefore the stratification.

Speaker Change: And.

Speaker Change: Yes.

Speaker Change: Well look we're looking forward here just.

Speaker Change: On office overall.

Speaker Change: <unk> came down.

Linked quarter.

Speaker Change: We actually had a really positive we have one trending in the wrong direction and was already in the classified criticized that it's about $30 million paid off.

Speaker Change: And we originated a new $30 million, that's a really strong credits that kind of replace that so we're seeing as we continue to.

Speaker Change: Manage that that overall book.

Speaker Change: We continue to manage effectively through those those dynamics and we were pleased with being able to move out a significant credit trading in the wrong way.

Speaker Change: This past quarter or.

Speaker Change: So we have the numbers here.

Speaker Change: <unk>.

Speaker Change: Health care is really split it depends on use of some of that would be in.

Speaker Change: Our health care outstanding as some would be in office as well so we'd have to follow up with you on that specific number that's.

Speaker Change: Thats in the office that would be specific on specific medical office.

Speaker Change: Sure that'd be great. Yeah, just notice generally perceived as a little lower risks so just curious.

Speaker Change: How much was there but anyway, thanks for taking my questions guys.

Speaker Change: You bet. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from Manuel Novice with D. A Davidson your line is now open.

Manuel Novice: Thank you good morning.

Manuel Novice: Hi, Michael.

Michael: Can you kind of comment on.

Michael: What NIM you kind of expect with your NII estimates like a <unk> 24 exit NIM assumption I know that.

Speaker Change: Great forecasts can definitely change just kind of thoughts on that.

Speaker Change: Yes, yes, we are purposely Meanwhile, over the last couple of years kind of backed away from giving specific NIM guidance and instead by giving you.

Speaker Change: NII and <unk>.

Speaker Change: You guys can calculate your own balance sheet and come up with that number of what we have said.

Speaker Change: We do expect in the first half of 2024 again for what I mentioned about deposit pricing pressure to continue.

I would expect in the first half of the year you would continue to see.

Speaker Change: Our deposit costs going up more than our loan yields.

Speaker Change: So I would expect it would be some time.

In the back half of 'twenty four is when you would you would see that trough and then and then margins start to expand from there.

Speaker Change: Okay.

Shifting gears a bit.

Speaker Change: Hi.

Speaker Change: If there is a Falcon first initiative.

Speaker Change: Complete any any like improvement to the C. R.

Speaker Change: Our improved fee growth any any new fee lines or anything that is helpful on that side of things.

Speaker Change: Yeah. It certainly.

Speaker Change: We'll consider fee income businesses.

Speaker Change: And we feel there is opportunities to accelerate growth in loan and deposit business as well as fee and service business. So it's a comprehensive.

Speaker Change: A review of the entire company.

Speaker Change: Okay.

Speaker Change: And.

Speaker Change: We've kind of.

Speaker Change: So a little bit better swing in OCI.

Speaker Change: Any shift in your appetite.

For buybacks or any other capital deployment.

Speaker Change: Thoughts.

Speaker Change: Happy to kind of keep just hear the latest on that front.

Speaker Change: Yes so.

Speaker Change: As we look forward, we renewed our buyback.

Speaker Change: In December the board.

Speaker Change: Our renewed that so we have that full availability.

Speaker Change: For us for the year, we will invest $125 million.

Speaker Change: We will.

Speaker Change: Look at that Opportunistically over time, if you look back over this past year we.

Speaker Change: We've been pretty active throughout the year.

Speaker Change: And.

Speaker Change: If it's conducive environment conducive to that going forward, we will continue to be active.

Speaker Change: I appreciate it.

Speaker Change: Hop back into the queue.

Speaker Change: Thanks.

Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from David Bishop with Hockey Group. Your line is now open.

David Jason Bishop: Alright, good morning, gentlemen.

David Jason Bishop: Hey, David.

David Jason Bishop: Hey.

David Jason Bishop: Mark in terms of the fee income guidance there just curious.

David Jason Bishop: How we should think about the individual components wealth wealth management was up.

David Jason Bishop: Mid single digits commercial backing high single digits consumer maybe dominant single digits.

David Jason Bishop: Just in terms of driving that forecast how are you thinking about maybe some of the individual components. This year.

Speaker Change: Yes, we continue.

Speaker Change: To be very bullish.

Speaker Change: And our wealth group again, hitting a high watermark.

Speaker Change: For assets under management and administration.

Speaker Change: And with a lot of those revenues tied to that balance as we continue to grow customers and grow assets there.

Speaker Change: Our revenue will come with it.

Speaker Change: We have <unk>.

Speaker Change: Commercial banking also had a very strong year.

Speaker Change: Here.

Speaker Change: Eclipsing $80 million in fees, which I think was may have also been a record for the year.

Speaker Change: Close to it.

Speaker Change: There is a little bit more volatility in there in our capital markets business, but theres good fundamentals in there.

Speaker Change: <unk> merchant and cash management, which will continue.

Speaker Change: Consumer banking.

Speaker Change: Has been been down a little bit.

Speaker Change: But both due to some.

Speaker Change: Changes, we made to overdraft at the beginning of 2023 in addition to mortgage banking being impacted by the current rate environment.

Speaker Change: But when you think about those.

Speaker Change: Together each of those.

Speaker Change: Is going to be somewhere right around a third of our total revenue.

Speaker Change: This past year consumer has been a little bit lower because we've been off a little bit in <unk>.

Speaker Change: Mortgage banking, but we made up some of that then with stronger results in commercial banking. So we really like the kind of balance that we have in those fee income businesses in total.

Speaker Change: Got it appreciate the color and then how should we think about maybe the overall level of investment securities in there I think.

Speaker Change: It would be about <unk>.

Speaker Change: 13%, 14% of average, earning assets do you think thats sort of the near floor here at this point and provide us with the annual cash flow expectations are on that portfolio.

Speaker Change: Yes, Yes, you are right now on our cash flows are pretty small.

Speaker Change: About $10 million a month.

Speaker Change: I do think it is near its floor I mean, our target there is kind of between where it sits today and about 15% of the balancing.

Speaker Change: We purposely run it.

Speaker Change: Maybe a little bit.

Speaker Change: A little bit skinnier than some others do because we don't view our investment portfolio as an earnings enhancement stream, but it's really there truly just to balance liquidity and depending on where overall loan deposit ratios are and.

Speaker Change: So I think I think somewhere between where we sit today and 15% of the balance sheet is a good place for you to model.

Speaker Change: Great appreciate the color.

Speaker Change: You bet.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Matthew Breese with Stephens, Inc. Your line is now open.

Matthew M. Breese: Hey, good morning.

Matthew M. Breese: Hey, good morning, Matt.

Matthew M. Breese: I was hoping to touch on expenses, the $670 million to $690 million guide.

Matthew M. Breese: This implies an average quarterly run rate of roughly $170 million, so pretty in line with where we were in the fourth quarter.

Matthew M. Breese: Do you expect.

Matthew M. Breese: With that in mind do you expect the quarterly expense run rate to basically hold flat from here throughout the year or is there going to be any sort of undulation.

Matthew M. Breese: As the year progresses.

Matthew M. Breese: Important because our exit pace for 2024 into 2025 was impacted by some of them. So I'd love some color there.

Speaker Change: Yes sure Matt.

Speaker Change: Curt noted.

Speaker Change: His prepared remarks, we have for the <unk>.

Speaker Change: <unk> guide for the year, we have assumed that we'll start to see some of the productivity enhancements from Fulton first in the back half of the year.

Speaker Change: So in the first half of the year I would expect to see expenses higher.

Speaker Change: And then what that kind of exit number is going to be in the fourth quarter of 2000 and for going into 2025.

Speaker Change: We also have as a reminder, you know in the first quarter.

Speaker Change: Kicking in in April we have annual Merit.

Speaker Change: Which.

Speaker Change: For US historically, then always kind of takes second quarter expenses up a little bit.

Speaker Change: But as.

Speaker Change: As we work through first full first we'll have both growth initiatives, which tend to tend to be a little bit longer term in terms of when those are realized but the productivity enhancements. We would expect to start seeing some of those come through in the back half of 'twenty four with then more of them in the <unk>.

Speaker Change: Annualized run rate impact of those really.

Speaker Change: Manifesting themselves in 2025 and beyond.

Speaker Change: Sure.

Speaker Change: Just along those lines I'm curious you've mentioned productivity improvements a couple of times you've also.

Speaker Change: You mentioned kind of leveraging technology can you give us some examples that are going to drive you.

Speaker Change: Overall productivity improvements.

Speaker Change: Across the.

Speaker Change: The bank.

Speaker Change: Yeah, Matt it's Curt.

Speaker Change: Yeah.

Speaker Change: We have a lot of things that we're taking a look at.

Speaker Change: So productivity could just be operating productivity contracts.

Speaker Change: Different things that that create opportunities for us from a cost or utilization standpoint, so it's either cost or benefit realization from the activities.

Speaker Change: That technology and digital platform.

Speaker Change: Provide for US and then as we look at focusing.

Speaker Change: The business on certain things around growth opportunities and we're going to have expense opportunity as we move forward.

Speaker Change: Understood.

Speaker Change: Maybe moving on to the NIM and deposit balances I would love some color on how.

Speaker Change: DDA balances trended throughout the quarter, given where we are in the rate hiking cycle.

Speaker Change: It feels like most businesses and consumers should theyre going to move the rate. They would have already done. So so I'm curious if you are you seeing kind of a.

Speaker Change: Lag effect, there and it sounds like it will persist for a little bit longer and then I would love some color just on how the NIM performed on a monthly basis to get a sense for.

Speaker Change: The NII starting 2024.

Speaker Change: Yeah sure Matt So first on DDA, Yes, Youre correct I would say the consumer.

Speaker Change: It feels like we're nearing a trough.

Speaker Change: One kind of that migration out of noninterest bearing into interest bearing products.

Speaker Change: So where we are still seeing impact.

Speaker Change: As on the commercial side, where you still have I.

Speaker Change: I think some of the remnants of stimulus money.

Speaker Change: As you know migrating from noninterest bearing.

Speaker Change: Barry as you know, we also had just kind of a seasonal impact in the fourth quarter.

Speaker Change: Migration.

Speaker Change: Our municipal deposit book.

Speaker Change: Chad.

Speaker Change: A little bit of noninterest bearing DDA is but a lot of interest bearing DDA is that.

Speaker Change: Migrated out as tax receipts were spent.

Speaker Change: And then remind me the second half of your question again.

Speaker Change: I was looking for the monthly NIM, if you had right.

Speaker Change: Because I mean look.

Speaker Change: From where we are now NII wise.

The guidance implies a pretty healthy step down in the quarterly pace of NII and I just wanted to get a sense for kind of where we should end up in the first quarter. So I have a good idea for the year.

Speaker Change: Orlando.

Orlando: Yes, yes, I mean, if you think.

Orlando: Our our December NIM was within a basis point of our quarterly NIM.

Orlando: So so.

Orlando: Really for us as we give our guide as I said our assumption with.

Orlando: May prove to be conservative, but our assumption is that we're going to continue to see deposit pricing pressure throughout our markets, which will cause our deposit costs to continue to increase even when you get to the back half of the year and start to see those first couple of rate cuts.

Orlando: If we are wrong on that and that's certainly going to provide upside.

Orlando: To this guidance and we will be refreshing that as the year plays out.

Orlando: Alright.

Speaker Change: I appreciate that last one for me you had mentioned in the release, just generally weakening credit trends.

Speaker Change: You know, obviously npa's were up a little bit charge offs were up a little bit is there anything else you're watching or seeing that drove that comment I would just just a really appreciate some additional color on the on the credit front, what youre seeing on the ground.

Speaker Change: Yeah, I mean, it's really based on that comment I mean, we had four consecutive quarters of Npls coming down.

Speaker Change: Classified criticized being stable or down.

Speaker Change: Those trends just ticking up.

Speaker Change: Is what we're referring to.

That could be.

Speaker Change: Just event driven or time at the time of the year driven.

Speaker Change: Or it could be it could be something as we move forward, but it's modest changes, but it's the first we've really had it.

Speaker Change: Any changes in an upward direction versus continuing to improve.

Speaker Change: We've been really pleased with with credit over the last six to eight quarters.

Speaker Change: And this is the first where we saw any.

Speaker Change: Ticket.

Speaker Change: Wrong direction, so no more color than what Youre seeing there, we're just being prudent and cautious.

Speaker Change: As we as we look at those numbers.

Speaker Change: Great.

Speaker Change: That's all I had I appreciate taking my questions. Thank you.

Speaker Change: Thanks.

Speaker Change: Thank you.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Chris Mcgratty with <unk>. Your line is now open.

Chris Mcgratty: Hey, good morning.

Chris Mcgratty: Hi, Chris.

Chris Mcgratty: Mark I just had a clarifying question on the NII sensitivity.

Speaker Change: I want to make sure I heard your comments right I'm looking at your 10-Q disclosures I think in a down 100 shock. It was around I don't know if 738 million Bucks for 100, which would work out to like $9 million for every 25, I thought I heard it a higher number.

Speaker Change: Earlier in the call I think it's closer to 20 on an annualized.

Speaker Change: I guess, where am I, what number would you point me to.

Speaker Change: Yes, yes, again on the 'twenty again.

Speaker Change: One is just on the variable portion.

Speaker Change: Of our loan book on the loans that are tied to sofa.

Speaker Change: On an annualized basis. So when you are and when Youre looking at our 10-K disclosures in our Q disclosures I mean, those are based off.

Speaker Change: A parallel instantaneous shock.

Speaker Change: This is where I'm, giving you more guidance on our ramp.

Speaker Change: Downward and in that ramp we're assuming that.

Speaker Change: But again in the first 25 or 50 basis points down that you wouldn't see a corresponding decreases to our non maturity deposits.

Speaker Change: But.

Speaker Change: We may be conservative on that and the market might start to see deposit relief.

Speaker Change: Earlier than 50 75 basis points of rate cuts.

Speaker Change: Okay got it thank you.

Speaker Change: And then maybe somebody asked on the buybacks any any signs of decline in the M&A market.

Speaker Change: Maybe more books going around any kind of commentary on that.

Speaker Change: Yeah, we have M&A opportunity that we're looking at continues to be challenging to make the math work on on rate marks and things, but we.

Speaker Change: I would say.

Speaker Change: Compared to six months ago.

Speaker Change: I think the environment is different.

Speaker Change: Improved four.

Speaker Change: Pursuing appropriate M&A as we move forward.

Speaker Change: And on that Kurt just can you just remind us in this kind of environment, what would what would be that kind of sweet spot of a deal size wise business Mexicana and stuff like that.

Kurt: Yeah. Thanks for that question and we really look at it in two buckets.

Kurt: $1 billion to $5 billion community Bank.

Kurt: We did that.

Kurt: That acquisition would supplement our growth add to our franchise.

Kurt: Lower execution risk.

Kurt: We're really really focused on those.

Kurt: The $5 15 billion that would fill out what we would be willing to look at that $5 to $15 billion or much more significant and strategic.

Kurt: There is very few on that list that we would consider I think those are still harder to do in this environment, but.

Kurt: That's how we look at it in those two buckets, but the lower the $1 billion to $5 billion.

Kurt: It makes a lot of sense in the market with what's going on right now and if we have those opportunities and can come to terms with folks we would we feel we're in a position to do that.

Kurt: So it feels like it's something came it would be the smaller end based on what im hearing unless something really materially changed.

Speaker Change: Correct got.

Speaker Change: Got it okay perfect. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Frank Schiraldi with Piper Sandler Your line is now open.

Frank Joseph Schiraldi: Hi, guys just a follow up on.

Frank Joseph Schiraldi: We talked about the variable rate book in.

Frank Joseph Schiraldi: Besides there and just trying to think through.

Frank Joseph Schiraldi: The rest of the book and the back book repricing in.

Frank Joseph Schiraldi: Generally is it reasonable to think in 2024, maybe I'll stick to that book re prices and if so I'm just trying to get a sense of where rates are going on the books versus.

Frank Joseph Schiraldi: Coming off where they are repricing team.

Speaker Change: Yes, Frank in the fourth quarter pretty much across most of our.

Cereal.

Speaker Change: Loan categories, we were coming on somewhere between 715, 8% the average for the quarter about 770.

Speaker Change: So that's so that's the current kind of new money across the board.

Speaker Change: Okay Alright, great.

Speaker Change: And I guess, you mentioned that last quarter weather.

Speaker Change: We pricing from I would assume that hasn't changed much.

Speaker Change: Quarter over quarter.

Speaker Change: Correct Okay.

Speaker Change: Sorry go ahead.

Speaker Change: No go ahead.

Speaker Change: And then I guess, just while I got you and just a last one on.

Speaker Change: You talked I think in the deck.

Speaker Change: <unk>.

Speaker Change: Cash levels, returning to sort of a 50 to 100 million dollar level over time.

Speaker Change: I just wondered in your guidance for 2024.

Speaker Change: Are we seeing.

Speaker Change: A significant move lower from wherever it is now $2 50 down to that.

Speaker Change: Towards that level or how much excess liquidity I guess baked into that guide.

Speaker Change: No no no nothing's really changed in the past quarter with respect to cash and liquidity.

Speaker Change: Okay. So youre not 2024, our guide doesn't assume really much of a change then from where you guys were in the <unk>.

Speaker Change: That's correct, Okay, alright, great. Thanks.

Speaker Change: Thanks, Brian Thanks, Brian.

Speaker Change: Thank you.

Speaker Change: I'm showing no further questions at this time I would now like to turn it back to Curt Myers for closing remarks.

Curt Myers: Well. Thank you again for joining us today, we hope you'll be able to be with us as we discuss first quarter results in April. Thank you everyone.

Curt Myers: This concludes today's conference call.

Speaker Change: Thank you for participating you may now disconnect.

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Hi, Yes, good morning, and thanks for joining us for Fulton Financial's conference call and webcast to discuss our earnings for the fourth quarter and year ended December 31 2023.

Speaker Change: Host for today's conference call is Curt Myers, Chairman and Chief Executive Officer, joining care is Mark Mccollom Chief Financial Officer.

Mark Mccollom: Our comments today will refer to the financial information and related slide presentation included with our earnings announcement, which we released yesterday afternoon. These documents can be found on our website at F. U L. T dot com by clicking on Investor Relations and then on news.

The slides can also be found on the presentations page under the investors under.

Mark Mccollom: Under Investor Relations on our website.

Mark Mccollom: On this call Representatives of Fulton May make forward looking statements with respect to <unk> financial condition results of operations and business.

Mark Mccollom: These statements are not guarantees of future performance and are subject to risks uncertainties and other factors and actual results could differ materially. Please refer to the safe Harbor statement on forward looking statements in our earnings release and on page on slide two of todays presentation for additional information regarding these risks uncertainties and.

Mark Mccollom: Other factors.

Mark Mccollom: Fulton undertakes no obligation other than as required by law to update or revise any forward looking statements.

Mark Mccollom: In discussing <unk> performance representatives of Fulton ne refer to certain non-GAAP financial measures. Please refer to the supplemental financial information included with Fulton's earnings announcement released yesterday and slides 16 through 20 of today's presentation for a reconciliation of those non-GAAP financial measures to the most comparable GAAP.

Speaker Change: Measures now I would like to turn the call over to your host Curt Myers.

Curt Myers: Thanks, Matt and good morning, everyone for today's call I'll be providing some high level thoughts on the year I will discuss our fourth quarter business performance and share some key objectives for us in 2024, then Mark will review our financial results in more detail and step through our guidance for 2024.

Speaker Change: After our prepared remarks, we will be happy to take any questions you may have.

Speaker Change: Our performance in 2023 was the result of an extraordinary effort by our team and what was an unprecedented year in 2023, our commitment to our customers was on display as we adapted quickly to customer needs and delivered on their expectations. As a result in a very challenging environment. We grew.

Customer households, and now serve more than 534000.

Speaker Change: We continued to invest in growing our market presence and enhancing the customer experience. We added four new financial centers to new loan production offices and talented team members throughout our company to support our continued growth.

Speaker Change: We continue to invest in and develop our customer digital experience with customers now using our digital solutions over 6 million times a month.

Speaker Change: We also made tremendous positive impact on the communities. We serve in 2023, we launched our diverse business banking program accelerating our outreach to businesses that have been traditionally underserved by our industry.

Speaker Change: Through this program, we are adding new customers and new revenue for our company, while making a difference in our communities.

Speaker Change: For more information on our overall community impact. Please review our 2022 corporate social responsibility report that was issued in 2023. In this report you can see how we are changing lives for the better.

Speaker Change: Our 2023 financial performance was very solid pre provision net revenue eclipsed 400 million, a new record and our operating EPS of $1 71 was the second best in the long history of our company.

Speaker Change: While continuing our strong focus on pricing profitability and credit strength.

Loan growth exceeded $1 billion for the second year in a row.

Speaker Change: We increased our liquidity during the year, maintaining 8 billion in committed liquidity at year end.

Speaker Change: Our net interest margin expanded 15 basis points during the period of significant interest rate volatility.

Speaker Change: We managed and deployed capital with discipline during the fourth quarter, we increased our common dividend for a second time during the year, returning 64 cents in common dividends to our shareholders in 2023.

Speaker Change: In addition, we repurchased just over 5 million shares of Fulton stock throughout the year at a blended cost of $15 and 15.

Speaker Change: Even with these capital actions, we maintained strong capital ratios.

Speaker Change: We also navigated the credit environment effectively in 2023 as performance was even better than we anticipated at the beginning of the year.

Speaker Change: And as a result, we delivered a 15% return on tangible common equity in 2023.

Overall, we were pleased with our performance and the results our team generated this year, we look forward to continuing to execute on our corporate strategy to grow the company by delivering effectively for customers and operating with excellence. So that we can serve all of our stakeholders.

Speaker Change: Now, let me turn to our quarterly performance with particular emphasis on growth credit and our forward outlook.

Speaker Change: Operating earnings per share for the quarter was 42.

Speaker Change: Loan growth moderated as we anticipated during the quarter to $174 million or 3% on an annualized basis.

Speaker Change: <unk> growth was modest at total deposit balances grew $116 million or 2% on an annualized basis during the quarter our loan to deposit ratio ended at 99, 1% relatively stable with the last quarter and well within our long term operating target of 95 to 100.

Speaker Change: 5%.

Speaker Change: Turning to our noninterest income diversity in our fee income businesses continues to serve us well.

Speaker Change: Noninterest income was $59 4 million with wealth commercial and consumer and small business continuing to deliver solid results. So on an overall basis.

Speaker Change: Moving to credit the provision for credit losses was $9 8 million down slightly from $9 9 million last quarter. We saw some migration in our credit quality metrics during the quarter and remained focused on how higher interest rates and higher costs are impacting our customers were cautious in our outlook for 2002.

Speaker Change: 94.

Speaker Change: Now looking forward this year will be full of opportunity for us our focus remains on growth and profitability.

Speaker Change: Actively managing credit and taking action on improving efficiency overall.

Even with solid results for the quarter and the year, we acknowledged the need to grow appropriately in this market and improve our productivity and efficiency in 2024 as you saw in our press release, we took implementation charges related to our new initiative, we launched in the fourth quarter. This initiative named Fulton first is a process to evaluate.

Speaker Change: <unk> and improve all aspects of how we operate to support our continued growth we recognized and have begun to act on the need to streamline operations to create efficiencies and leverage our significant investment in technology, we have three key tenants driving our strategic transformation.

Speaker Change: <unk> focus and productivity, we're very excited about <unk> and believe that over the next several years it will accelerate our growth rates and improve our operating efficiency on a sustained basis, we will have more discrete details to share with you during the year.

Speaker Change: The 2024 impact of Fulton first will be most visible in our expense line items as it will help us meet the limited expense growth rate and our guidance longer term Fulton first will also support accelerated growth.

Speaker Change: Mark will step you through the 2024 guidance in a moment.

Mark Mccollom: These high priority initiatives and the leadership team that we have in place will drive performance and deliver the next phase of long term success.

Mark Mccollom: Our company.

Mark Mccollom: Now I'll turn the call over to Mark to discuss our financial performance in 2024 guidance in more detail.

Mark Mccollom: Thank you Kurt and good morning, everyone on the call unless I note otherwise the quarterly comparisons I will discuss are with the third quarter of 2023.

Mark Mccollom: And the loan and deposit growth numbers I will be referencing our annualized percentages on a linked quarter basis.

Mark Mccollom: Starting on slide six operating earnings per diluted share this quarter were <unk> 42.

Mark Mccollom: On operating net income available to common shareholders of $68 8 million.

Mark Mccollom: This compares to <unk> 43.

Mark Mccollom: Of operating EPS in the third quarter of 2023.

Moving to the balance sheet as Curt noted loan growth was modest during the quarter growing $174 million or 3% annualized.

Mark Mccollom: Commercial lending contributed $120 million of this growth or 3% annualized construction lending grew $142 million driven by additional draws and new originations during the quarter.

Mark Mccollom: Commercial real estate lending growth slowed to $22 million or 1% annualized and C&I lending declined modestly down $32 million or 3%.

Mark Mccollom: Consumer lending produced growth of 54 million or 3% during the quarter.

Mark Mccollom: All at a slower pace, we continue to originate and portfolio adjustable rate mortgages.

Total deposits increased $116 million during the quarter.

Mark Mccollom: Growth in Cds, and brokered deposits more than offset seasonal outflows in our municipal deposit business of approximately $220 million.

Mark Mccollom: Our noninterest bearing DDA balances ended the year at $5 3 billion or 24, 7% of total deposits, which was modestly better than we anticipated during our third quarter earnings call.

Mark Mccollom: Our shift from noninterest bearing deposits to interest bearing was $552 million for the second half of 2023 versus a shift of $1 1 billion in the front half of the year.

Mark Mccollom: Our NII guidance for 2024 assumes we'll continue to see migration from noninterest bearing deposits into interest bearing products throughout 2024, but at a slower pace than we saw in 2023.

Mark Mccollom: We currently expect noninterest bearing deposits to end 2024 at approximately 22% of total deposits.

Mark Mccollom: Our investment portfolio was relatively flat for the quarter closing a $3 7 billion.

Mark Mccollom: During the quarter, we did repurchase a small portion of subordinated debt $5 million, which generated $750000 gain reflected in other expense.

Mark Mccollom: This gain was offset by a similar level of securities losses, as we sold $120 million of securities, yielding one 4% using the proceeds to pay down overnight borrowings at 535%.

Mark Mccollom: This very small repositioning will add modestly to our net interest income and net interest margin in 2024 and is included in the guidance, which I'll step through in a few minutes.

Mark Mccollom: Putting together all of these balance sheet trends on page on slide eight our net interest income was $212 million a $2 million declined linked quarter.

Mark Mccollom: We were pleased with how well our net interest margin held up declining only four basis points to 336% versus three 4% last quarter.

Mark Mccollom: Loan yields expanded 11 basis points during the period, increasing to $5 83 versus 572% last quarter cycle to date, our loan beta has been 49%.

Mark Mccollom: Our total cost of deposits increased 23 basis points to 179 basis points during the quarter.

Mark Mccollom: Cycle to date, our total deposit beta has been 34%.

Mark Mccollom: Turning to asset quality nonperforming loans increased $12 $7 million during the quarter, which led to our NPL to loans ratio increasing from 67 basis points at September 30 to 72 basis points at year end.

Mark Mccollom: Net charge offs of $8 million or 15 basis points, we're diversified with no individual charge off greater than $2 million.

Mark Mccollom: Overall loan delinquency increased modestly modestly but remains at a low level increasing to $1 one 9%.

Mark Mccollom: Our allowance for credit loss as a percent of loans was relatively flat at 137% at year end.

Mark Mccollom: Turning to noninterest income on slide 10 wealth management revenues were $19 4 million consistent with the third quarter.

Mark Mccollom: As a reminder, wealth management represents about a third of our fee based revenues with over 80% of these revenues recurring.

Mark Mccollom: The market value of assets under management and administration increased over $500 million during the quarter to $14 8 billion at year end, a new record for our company.

Mark Mccollom: Commercial banking fees increased 1 million to $20 8 million as capital markets and SBA revenue increases drove the quarter.

Mark Mccollom: Consumer banking fees of $12 1 million were consistent with the third quarter in all areas and continues to deliver a very consistent fee income stream.

Mark Mccollom: Mortgage banking revenues declined 900000 to $2 3 million and were driven by a seasonal decline in mortgage originations as well as a decline in gain on sale spreads.

Mark Mccollom: Our net market value change of $1 1 million in other fee income was recorded during the period related to the LIBOR so for transition.

Mark Mccollom: Moving to slide 11, noninterest expenses on an operating basis were $171 million in the fourth quarter in line with the prior quarter.

Mark Mccollom: Material items excluded from operating expenses were charges of $6 5 million for the special FDIC assessment and $3 2 million related to our <unk> initiative.

Mark Mccollom: Additionally, our operating expenses were impacted by $1 $6 million increase in marketing expense and $700000 gain on the aforementioned debt extinguishment.

Mark Mccollom: Turning to slides 12, and 13, we're providing you with updates on our capital base.

Mark Mccollom: As of December 31, we maintained solid cushions over the regulatory minimums, and our bank and parent company liquidity remains strong.

Mark Mccollom: We've also provided you with an alternative view of our regulatory ratios, including the impact of OCI.

Mark Mccollom: Our tangible common equity ratio improved to seven 4% at year end, a 60 basis point increase during the quarter driven by solid earnings in a material decrease in OCI due to lower interest rates are.

Mark Mccollom: Our accumulated other comprehensive income balance on the available for sale portion of our investment portfolio and derivatives is currently $299 million versus $480 million last quarter.

Mark Mccollom: On slide 13, including the loss on our held to maturity investments, which is $140 million after tax on an HTM portfolio of $1 3 billion, our tangible common equity ratio would still be 7% at December 31.

Mark Mccollom: Representing one $9 billion of tangible capital.

On slide 15, we are providing guidance for 2024.

Mark Mccollom: Our guidance assumes a total of 75 basis points of fed funds decreases occurring in the second half of the year.

Mark Mccollom: Our 2024 guidance is as follows we expect our net interest income on a non FTE basis to be in the range of 790% to $820 million.

Mark Mccollom: We expect our provision for credit losses to be in the range of $45 million to $65 million.

Mark Mccollom: We expect our noninterest income excluding securities gains to be in the range $235 million to $250 million.

Mark Mccollom: We expect noninterest expenses on an operating basis to be in the range of $670 million to $690 million.

Mark Mccollom: This estimate excludes any potential charges, we may incur as a result of potent <unk> throughout the year.

Mark Mccollom: And lastly, we expect our effective tax rate to be in the range of 17% to 18% for the year.

Speaker Change: With that I'll now turn the call over to the operator for your questions.

To ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Okay.

Speaker Change: Our first question comes from Daniel Tamayo with Raymond James. Please proceed.

Speaker Change: Okay.

Daniel Tamayo: Good morning, guys. Thanks for taking my question.

Speaker Change: Good morning, Bob.

Speaker Change: Maybe just to start on the <unk>.

Speaker Change: Bolton first initiative.

Speaker Change: I appreciate it.

Speaker Change: Your comments Curt on.

Curt Myers: What's behind it but.

Curt Myers: Just curious if there are any profitability initiatives.

Curt Myers: Targets or goals associated with that program and then if there is.

Curt Myers: I think you mentioned that the expense guidance doesn't include any other.

Speaker Change: Potential charges in 2024, if you have an estimate of what that might be coming in that line that'd be great. Thanks.

Speaker Change: Yeah, Danny Thanks, Thanks for the question.

Speaker Change: Our team is really excited about the phone first initiative.

Speaker Change: We're really focused on the long term growth strategy for the company as well as the operating efficiency.

Speaker Change: Being really transparent with the program early on.

Speaker Change: Because we wanted to help you understand some short term cost impacts that happened this past quarter.

Speaker Change: And then.

Speaker Change: Explain how we're going to meet the guidance specifically on the expense guide going forward, it's probably a little light.

Speaker Change: Relative to expectation, so we're being very strategic and an overall review of the company. It's not just a simple cost cutting initiative, but really a strategic initiative.

Speaker Change: To grow more efficiently over time, so to answer your specific question. We don't have targets at this point, but we feel its initiative is going to help us meet our 2024 guidance and then probably even more importantly.

Speaker Change: Lead to long term sustained improved efficiency for the company, but at this point, we don't have any specific targets I'm going to share more over time.

Speaker Change: And we wanted to be early with this so that we are transparent and that you could understand some of the initial cost as we launched the initiative.

Speaker Change: Sorry are you expecting this to be kind of a.

Speaker Change: Longer term then in terms of.

The costs that you're taking I mean or is it is the bulk of it what you took in the fourth quarter or should we expect this to be kind of an ongoing.

Speaker Change: Initiative in terms of cost Youre, taking yeah yeah.

Speaker Change #100: Yes, Daniel I mean, we will have ongoing onetime cost to implement.

Speaker Change #100: The changes that we decide to implement and then we will match them with cost saves and revenue expectations as we move forward. So more to come this is the beginning.

Speaker Change #100: Of the initiative and we're being very very thoughtful diligent.

Speaker Change #100: About working through the process and we wanted to be transparent with everyone. It is not not just a simple cost cutting initiative, but there will be cost cutting that associated with it we will keep you informed.

Speaker Change #100: Throughout the year.

Speaker Change #100: Okay.

Speaker Change #101: And then maybe one for mark on on credit and I guess the.

Speaker Change #101: The range that you gave for provision for the for the year just curious how youre thinking about what May drive the low and the high end of that range if thats mostly.

Speaker Change #101: Just credit volatility or if there is kind of balance sheet growth.

Speaker Change #101: Estimates embedded in Venezuela.

Speaker Change #102: Dave just a comment from me and then Mark can add to it if he wants.

Speaker Change #102: As we look at the provision it's predominantly.

Mark Mccollom: Charge offs normalizing your charge offs were 15 basis points in the last quarter, our long term average and charge offs has been a little less than 20% 20 basis points in recent history. So charge offs drive that and then our growth rate would drive that what's.

Mark Mccollom: What's the unknown variable for everybody is just economic.

Mark Mccollom: The conditions as we move forward in the base allocation.

Mark Mccollom: With what we know right now.

Mark Mccollom: <unk>.

Speaker Change #103: That's the range we're comfortable with.

Speaker Change #103: Yeah.

Speaker Change #103: Would you say the midpoint is.

Speaker Change #103: What's the assumption.

Speaker Change #103: For if you were to hit that $55 million is that.

Speaker Change #103: I guess soft landing or how should we think about what your baseline assumptions.

Speaker Change #104: Yes, Danny if you think about the baseline assumptions as a baseline assumption.

Speaker Change #104: Right now from Moody's does assume a softer landing.

Speaker Change #105: So our baseline assumption would be again continuing to revert in the fourth quarter, we got closer to our long term average on net charge offs, but the.

Speaker Change #105: The midpoint of our guide would assume we get back to.

Speaker Change #105: That longer term average of between 15, and 20 basis points of net charge offs and then.

Speaker Change #105: A growth rate in loans.

Speaker Change #105: Consistent with the.

Speaker Change #105: That kind of 4% to 6% probably more of the lower end of that range for 2024.

Speaker Change #106: Got it. Thank you for all the color I'll step back guys I appreciate it.

Speaker Change #107: Thanks, Dan Thanks, Dan.

Speaker Change #108: Thank you one moment for our next question.

Speaker Change #109: Our next question comes from Frank Schiraldi with Piper Sandler Your line is now open.

Frank Joseph Schiraldi: Good morning.

Frank Joseph Schiraldi: Good morning, Greg Greg.

Frank Joseph Schiraldi: Just wondering if you guys.

Frank Joseph Schiraldi: Obviously the growth in the quarter was in part.

Frank Joseph Schiraldi: Loan growth requirements, you talked about mark driven by construction balances with.

Frank Joseph Schiraldi: Some of that being additional drawdowns.

Frank Joseph Schiraldi: And some of that being new origination I Wonder if you could just talk a little bit about your thoughts on.

Frank Joseph Schiraldi: On growth going forward, and then Malone Balkan.

Frank Joseph Schiraldi: And what the complexion of growth might look like the more opportunity on the commercial real estate side given.

Frank Joseph Schiraldi: Where your concentration limits are.

Frank Joseph Schiraldi: Just general thoughts there thanks.

Speaker Change #110: Yes, I mean, frankly, if you think about for US historically, we tend to operate on an organic basis that kind of 4% to 6% range I would say for what you've seen in the back half of 'twenty three.

Speaker Change #110: It has been kind of at the low end of that range.

Speaker Change #110: And I think you should expect that to continue into 2024.

Speaker Change #110: Ben.

Speaker Change #110: <unk> profitability in.

Speaker Change #110: In the fourth quarter, new originations pretty much across all channels, we're in that kind of high sevens.

Speaker Change #110: 770, 775, it was kind of.

Speaker Change #110: Our rate on new originations.

Speaker Change #110: So with that until we would see any kind of expected rate decreases.

Speaker Change #110: Which again, we currently expect our expecting in the back half of 2024.

Speaker Change #110: I would expect to see growth continue to be moderate, but we are open for business.

Speaker Change #110: Not.

Speaker Change #110: Shutting down any any lines of business.

Speaker Change #110: As you've seen from others.

Speaker Change #110: Okay and then.

Speaker Change #110: On the assumption you mentioned.

Speaker Change #110: The three rate cuts in the back half of the year.

Speaker Change #110: Any sort of.

Speaker Change #110: Color you can provide I know you talked about it last quarter on the way up.

Speaker Change #110: That the NII would be impacted given the variable rate book about little over $20 million.

Speaker Change #110: Annually from a 25 basis point move in rates.

Speaker Change #110: Is it the right way to think about.

The same on the way down.

Speaker Change #110: Offset by the back book repricing.

Speaker Change #110: What is the incremental 25 basis points due to two full year margin or NII.

Speaker Change #110: Yes.

Speaker Change #110: On an annualized basis, we have.

Speaker Change #110: About $10 billion of loans tied to so for in about nine of that $10 billion or adjustable rate loans.

Speaker Change #110: Which would reset within 30 days of after that rate move occurs.

Speaker Change #110: So absence.

Any moves to our.

Speaker Change #110: Non maturity deposit book.

Speaker Change #110: That's how you get to that $20 million on an annualized basis for 25 basis point move.

Speaker Change #110: What we've assumed.

Speaker Change #110: As we've taken.

Speaker Change #110: We think as a conservative stance live for the first couple of rate moves downward.

Speaker Change #110: Not necessarily going to see.

Speaker Change #110: Deposit pressures abate.

Speaker Change #110: But at some point, whether that's 50 basis points 75 basis points 100 basis points at some point.

Speaker Change #110: The industry will start to feel relief.

Speaker Change #110: Lots of pricing pressure and be able to react with that non maturity deposit book.

Speaker Change #110: Okay. So maybe incremental rate cuts would be less impactful to the bottom line just given hopefully deposit start repricing.

Speaker Change #110: Some benefit on the deposit side to offset any contraction on that on the loan yield side. So the way to think about.

Speaker Change #111: That's correct.

Speaker Change #112: Okay Alright, great.

Speaker Change #112: And then in an overnight borrowings cost obviously.

Speaker Change #112: Sets out immediately.

Speaker Change #112: Alright.

Speaker Change #113: Okay. Thanks.

Speaker Change #113: Thank you one moment for our next question.

David Strickland: And our next question comes from <unk> Strickland with Janney Montgomery Scott Research David Your line is now open.

David Strickland: Hey, good morning, Curt and Mark.

David Strickland: Just wanted to start.

David Strickland: On deposit costs I know you discussed this a little bit but are you starting to see that pressure lessen a little bit about the policy rates in any different behavior from competitors there as well.

Speaker Change #115: Yes, the one other thing better use that.

Speaker Change #115: When we've been obviously repricing, our CD book and we've been growing Cds throughout the year and those have been repricing higher as <unk> seen kind of roll rates are what matures per quarter in.

Speaker Change #115: In the first quarter of 'twenty four we have $1 1 billion roughly of deposits that will mature.

Speaker Change #115: Cds.

That will mature, but that cost now what's maturing is now up to almost $4 40.

Speaker Change #115: So that so that churn that you've been seeing upward in our CD cost is definitely going to worsen.

Speaker Change #115: Throughout 2024, so that will provide some some relief and allow those betas to ultimately slow.

Speaker Change #116: Got you that you actually beat me to my second question. So that was $1 1 billion of Cds maturing what was the cost they were rolling off versus what Theyre rolling on that.

Speaker Change #116: 440 is what theyre rolling off that.

Speaker Change #116: And then rolling on it would depend on obviously.

Speaker Change #116: Whether they're retail or or broker.

Speaker Change #117: Got it.

Speaker Change #118: I'll just.

Speaker Change #119: Sorry go ahead.

Speaker Change #119: Hey, Alex This is Kurt I was just going to add that we continue to have high roll rates blind roll rates NCD, so as we're adding customers.

Speaker Change #119: We still have really strong metrics in the blind roll rate and.

Speaker Change #119: Promotional acquisition rate blonde roll rate.

Speaker Change #119: Our difference so that helps as well that we've been able to continue to do a good job for customers and roll a lot of Cds over.

And keep that business.

Speaker Change #120: Understood that's helpful.

Speaker Change #120: Then just switching gears for a second here I appreciate the continued disclosure on office in the deck.

Speaker Change #120: That $683 million outstanding inclusive of medical office.

Speaker Change #120: And if so do you have on hand ballpark, how much is medical office.

Speaker Change #120: It.

Speaker Change #120: It does include all office.

Speaker Change #120: Depends on the use overall, where we're digging therefore the stratification.

Speaker Change #120: And.

Speaker Change #120: Yes.

Speaker Change #120: Well look we're looking forward here just.

Speaker Change #120: On office overall.

Speaker Change #120: <unk> came down.

Speaker Change #120: Linked quarter.

Speaker Change #120: We actually had a really positive we have one trending in the wrong direction and was already in the classified criticized that it's about $30 million it paid off.

Speaker Change #120: And we originated a new $30 million, that's a really strong credits that kind of replace that so we're seeing as we continue to manage that that overall book.

Speaker Change #120: We continue to manage effectively through those those dynamics and we were pleased with being able to move out a significant credit trading in the wrong way.

Speaker Change #120: This past quarter or.

Speaker Change #121: So we have the numbers here.

Speaker Change #121: Health care is really split it depends on use of some of that would be in.

Speaker Change #121: Our health care outstanding as some would be in office as well so.

Speaker Change #121: We'd have to follow up with you on that specific number.

Speaker Change #121: Thats in the office that would be specific on specific medical office.

Speaker Change #122: Sure that'd be great. Yeah, just notice generally perceived as a little lower risks so just curious.

Speaker Change #122: How much was there.

Speaker Change #123: Anyway, Thanks for taking my questions guys.

You bet. Thank you.

Speaker Change #124: Thank you one moment for our next question.

Speaker Change #125: And our next question comes from Manuel Novice with D. A Davidson your line is now open.

Manuel Novice: Thank you good morning.

Manuel Novice: Hi, Michael.

Michael: Can you kind of comment on.

Michael: What NIM you kind of expect with your NII estimates like a <unk> 24 exit NIM assumption I know that the great forecasts can definitely change just kind of thoughts on that.

Speaker Change #126: Yes, yes, we are purposely Meanwhile, over the last couple of years kind of backed away from giving specific NIM guidance and instead.

Speaker Change #126: By giving you.

Speaker Change #126: NII and <unk>.

Speaker Change #126: You guys can calculate your own balance sheet and come up with that number of what we have said.

Speaker Change #126: As we do expect in the first half of 2024 again for what I mentioned about deposit.

Racing pressure to continue.

Speaker Change #126: I would expect in the first half of the year you would continue to see.

Speaker Change #126: Our deposit costs going up more than our loan yields.

Speaker Change #126: So I would expect it would be sometime in the back half of 'twenty. Four is when you would see that trough and then and then margin start to expand from there.

Speaker Change #126: Okay.

Speaker Change #126: Shifting gears a bit.

Speaker Change #126: If there is a falcon first initiative contemplate any any like improvement to the C. R.

Speaker Change #126: Our improved fee growth any any new fee lines or anything that is helpful on that side of things.

Speaker Change #127: Yes, it certainly.

Speaker Change #127: We'll consider fee income businesses.

Speaker Change #127: And we feel there is opportunities to accelerate growth in <unk>.

Speaker Change #127: Loan and deposit business as well as fee and service business. So it's a comprehensive review.

Speaker Change #127: A review of the entire company.

Okay.

Speaker Change #127: And.

Speaker Change #127: We've kind of.

Speaker Change #127: So a little bit better swing in OCI.

Speaker Change #127: Any shift in your appetite.

Speaker Change #127: For buybacks or any other capital deployment.

Speaker Change #127: Any thoughts.

Speaker Change #127: Happy to kind of keep just hear the latest on.

On that front.

Speaker Change #128: Yeah, so as.

Speaker Change #128: As we look forward, we renewed our buyback.

Speaker Change #128: In December the board renewed that so we have that full availability for us for the year, we will have that $125 million.

Speaker Change #129: We will.

Speaker Change #129: Look at that Opportunistically over time, if you look back over this past year.

Speaker Change #129: Been pretty active throughout the year.

Speaker Change #129: And.

Speaker Change #129: If it's conducive environment conducive to that going forward, we will continue to be active.

Speaker Change #129: Okay.

Speaker Change #130: I appreciate it.

Speaker Change #130: Hop back into the queue.

Speaker Change #130: Thanks.

Speaker Change #130: Thank you.

One moment for our next question.

Speaker Change #130: Yeah.

Speaker Change #130: Our next question comes from David Bishop with Hockey Group. Your line is now open.

David Jason Bishop: Alright, good morning, gentlemen.

David Jason Bishop: Hey, David.

Okay.

David Jason Bishop: Mark in terms of the fee income guidance there just curious.

David Jason Bishop: How we should think about the individual component wealth.

David Jason Bishop: Wealth wealth management was up mid.

David Jason Bishop: Mid single digits commercial backing high single digits consumer maybe dominant single digits.

David Jason Bishop: Just in terms of driving that forecast how are you thinking about maybe some of the individual.

Sure.

Speaker Change #131: Yes, we continue.

Speaker Change #131: To be very bullish.

Speaker Change #131: And our wealth group again, hitting a high watermark.

Speaker Change #131: For assets under management and administration.

Speaker Change #131: And with a lot of those revenues tied to that balance as we continue to to grow customers and grow assets.

Speaker Change #131: The revenue will come with it.

Speaker Change #132: We have.

Speaker Change #132: Commercial banking also had a very strong.

Speaker Change #132: Year.

Speaker Change #132: <unk> $80 million in fees, which I think was may have also been a record for the year.

Speaker Change #132: Or close to it.

Speaker Change #132: <unk>.

Speaker Change #132: There is a little bit more volatility in their in our capital markets business, but theres good fundamentals in there.

Speaker Change #132: <unk> merchant and cash management, which will continue.

Speaker Change #132: Consumer banking.

Speaker Change #132: Has been been down a little bit but.

Speaker Change #132: Both due to some.

Speaker Change #132: Changes, we made to overdraft at the beginning of 2023 in addition to mortgage banking being impacted by the current rate environment.

Speaker Change #132: But when you think about those.

Speaker Change #132: Together each of those.

Speaker Change #132: <unk> is going to be somewhere right around a third of our total revenue.

Speaker Change #132: This past year consumer has been a little bit lower because we've been off a little bit in in mortgage banking.

Speaker Change #132: But we made up some of that then with stronger results in commercial banking. So we really like the kind of balance that we have in those fee income businesses in total.

Speaker Change #133: Got it appreciate the color and then how should we think about maybe the overall level of investment securities in there I think.

Speaker Change #134: It would be about <unk>.

Speaker Change #134: 13%, 14% of average, earning assets do you think thats sort of a near floor here at this point and provide us with the annual cash flow expectations are on that portfolio.

Speaker Change #135: Yes, Yes, you are right now on our cash flows are pretty small.

Speaker Change #135: About $10 million a month.

I do think it is near its floor I mean, our target there is kind of between where it sits today and about 15% of the balancing.

Speaker Change #135: We purposely run it.

Speaker Change #135: Maybe a little bit.

Speaker Change #135: A little bit skinnier than some others do because we don't view our investment portfolio as an earnings enhancement stream, but it's really there truly just to balance liquidity and depending on where overall loan to deposit ratios are and.

Speaker Change #135: So I think I think somewhere between where we sit today and 15% of the balance sheet is a good place for you to model.

Great appreciate the color.

Beth.

Speaker Change #136: Thank you one moment for our next question or.

Speaker Change #137: Our next question comes from Matthew Breese with Stephens, Inc. Your line is now open.

Matthew M. Breese: Hey, good morning.

Matthew M. Breese: Good morning, Matt.

Matthew M. Breese: I was hoping to touch on expenses, the $670 million to $690 million guide implies an average quarterly run rate of roughly $170 million so pretty in line with where we were in the fourth quarter.

Matthew M. Breese: Do you expect.

Matthew M. Breese: With that in mind do you expect the quarterly expense run rate to basically hold flat from here throughout the year or are there or is there going to be any sort of undulation.

Matthew M. Breese: As the year progresses.

Matthew M. Breese: Because our exit pace for 2024 into 2025 was impacted by some of them. So I'd love some color there.

Speaker Change #138: Yes, sure Matt as <unk>.

Speaker Change #139: Curt noted.

His prepared remarks, I mean, we for the.

Speaker Change #139: <unk> guide for the year, we have assumed that we will start to see some of the productivity enhancements. We're first in the back half of the year.

Speaker Change #139: So in the first half of the year I would expect to see expenses higher.

And what that kind of exit number is going to be in the fourth quarter of 2000 and for going into 2025.

Speaker Change #139: <unk>.

Speaker Change #139: We also have as a reminder, in the first quarter.

Speaker Change #139: Kicking in in April we have annual Merit.

Speaker Change #139: Which.

Speaker Change #139: For US historically, then always kind of takes second quarter expenses up a little bit.

Speaker Change #139: But.

Speaker Change #139: As we worked through first full first we'll have both growth initiatives, which tend to tend to be a little bit longer term in terms of when those are realized but the productivity enhancements. We would expect to start seeing some of those come through in the back half of 'twenty four with then more of them.

Speaker Change #139: The annualized run rate impact of those really.

Speaker Change #139: Manifesting themselves in 2025 and beyond.

Speaker Change #139: Sure.

Speaker Change #139: Just along those lines I'm curious you've mentioned productivity improvements a couple of times you've also.

Speaker Change #139: Mentioned kind of leveraging technology can you give me. Some examples that are going to drive you.

Speaker Change #139: Overall productivity improvements.

Speaker Change #139: Across the.

Speaker Change #139: The bank.

Speaker Change #139: Yes, Matt it's Curt.

Speaker Change #139: Yeah.

We have a lot of things that we're taking a look at.

Speaker Change #139: So productivity could just be operating productivity contracts.

Speaker Change #139: Different things that create opportunities for us from a cost or utilization standpoint, so it's either cost or benefit realization from the activities.

Speaker Change #139: That that technology and digital platform.

Speaker Change #139: Provide for US and then as we look at focusing.

Speaker Change #139: The business on certain things around growth opportunities and we're going to have expense opportunities as we move forward.

Speaker Change #139: Understood.

Speaker Change #139: Maybe moving on to the NIM and just deposit balances I would love some color on how.

Speaker Change #139: DDA balances trended throughout the quarter, given where we are in the rate hiking cycle.

It feels like most businesses and consumers should they were going to move the rate would have already done. So so I'm curious if you are you seeing kind of.

Speaker Change #139: <unk> effect, there and it sounds like it will persist for a little bit longer.

Speaker Change #139: Then I would love some color just on how the NIM performed on a monthly basis to get a sense for.

Speaker Change #139: The NII starting 2024.

Speaker Change #140: Yeah, Yeah sure Matt so.

First on DDA, Yes, Youre correct I would say the consumer.

Speaker Change #140: It feels like we're nearing a trough.

Speaker Change #140: One kind of that migration out of noninterest bearing into interest bearing products.

Speaker Change #140: So where we are still seeing impact.

Speaker Change #140: Is on the commercial side, where you still have I think some of the remnants of stimulus money.

Speaker Change #140: As you know migrating from noninterest bearing into interest bearing.

Speaker Change #140: We also had just kind of the seasonal impact in the fourth quarter.

Speaker Change #140: Migration in our municipal deposit book, which had.

Speaker Change #140: A little bit of noninterest bearing DDA is but a lot of interest bearing DDA is that.

Speaker Change #140: Migrated out as those.

Speaker Change #140: Proceeds were spent.

Speaker Change #140: <unk>.

Speaker Change #140: And then remind me the second half of your question again.

Speaker Change #140: I was looking for the monthly NIM, if you had right.

Speaker Change #140: Abbott because I mean look.

Speaker Change #140: From where we are now NII wise.

Speaker Change #140: The guidance implies a pretty healthy step down in the quarterly pace of NII and I just wanted to get a sense for kind of where we should end up in the first quarter. So I have a good idea for the euro lined up.

Speaker Change #141: Yes, yes, I mean, if you take.

Speaker Change #142: Our our December NIM was within a basis point of our quarterly NIM.

Speaker Change #143: So so.

Speaker Change #143: Really for us as we give our guide as I said, our assumption, which may prove to be conservative, but our assumption is that we're going to continue to see deposit pricing pressure throughout our markets, which will cause our deposit costs to continue to increase.

Speaker Change #143: Then when you get to the back half of the year and start to see those first couple of rate cuts.

Speaker Change #143: If we are wrong on that.

Certainly going to provide upside.

Speaker Change #143: To this guidance and we will be refreshing that as the year plays out.

Speaker Change #144: Alright, I appreciate that last one for me you had mentioned in the release, just generally weakening credit trends.

Speaker Change #145: You know, obviously npa's were up a little bit charge offs were up a little bit is there anything else you're watching or seeing that drove that comment I would just just I really appreciate some additional color on the on the credit front, what youre seeing on the ground.

Speaker Change #146: Yeah, I mean, it's really based on that comment I mean, we had four consecutive quarters of Npls coming down.

Speaker Change #146: Classified criticized being stable or down.

Speaker Change #146: Those trends just ticking up.

Speaker Change #146: Is what we're referring to.

Speaker Change #146: That could be.

Speaker Change #146: Just event driven or time at the time of the year driven.

Speaker Change #146: Or it could be it could be something as we move forward, but it's modest changes, but it is the first we've really had.

Speaker Change #146: Any changes in an upward direction versus continuing to improve.

Speaker Change #146: We've been really pleased with with credit over the last six to eight quarters.

Speaker Change #146: And this is the first where we saw any.

Speaker Change #146: Ticket.

Raul direction, so no more color than what Youre seeing there, we're just being prudent and cautious.

Speaker Change #146: As we as we look at those numbers.

Speaker Change #146: Great.

Speaker Change #147: All I had I appreciate taking my questions. Thank you.

Speaker Change #147: Yes.

Speaker Change #148: Thank you.

Speaker Change #149: As a reminder to ask a question. Please press star one on your telephone.

Speaker Change #149: Wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change #149: One moment for our next question.

Speaker Change #150: Our next question comes from Chris Mcgratty with <unk>. Your line is now open.

Chris Mcgratty: Hey, good morning.

Chris Mcgratty: Hi, Chris.

Chris Mcgratty: I just had a clarifying question on the NII sensitivity.

Speaker Change #151: To make sure I heard your comments right I'm looking at your 10-Q disclosures I think in a down 100 shock. It was around I don't know if 738 million Bucks for 100, which would work out to like $9 million for every 25 I thought I heard in a higher number.

Speaker Change #151: Earlier in the call I think it's closer to 20 on an annualized.

Speaker Change #151: I guess, where my what number would you point me to.

Speaker Change #151: Yes, again on the 'twenty again.

Speaker Change #151: <unk> is just on the variable portion.

Speaker Change #151: Of our loan book on the loans that are tied to sofa.

Speaker Change #151: On an annualized basis. So when you are and when Youre looking at our 10-K disclosures in our Q disclosures I mean, those are based off.

Speaker Change #151: A parallel instantaneous shock.

This is where I'm, giving you more guidance on our ramp.

Speaker Change #151: Downward and in that ramp we're assuming that.

Speaker Change #151: But again in the first 25 or 50 basis points down that you wouldn't see a corresponding decreases to our non maturity deposits.

Speaker Change #151: But.

Speaker Change #151: We may be conservative on that and the market might start to see deposit relief.

Speaker Change #151: Earlier than 50 75 basis points of rate cuts.

Speaker Change #152: Okay got it thank you.

Speaker Change #152: And then maybe somebody asked on the buybacks any any signs of decline in the M&A market.

Speaker Change #152: Maybe more books going around any kind of commentary on that.

Speaker Change #153: Yeah, we have M&A opportunity that we're looking at it continues to be challenging to make the math work on on rate marks and things, but we.

Speaker Change #153: I would say compared to six months ago.

Speaker Change #153: I think the environment is different.

Speaker Change #153: And improved four.

Speaker Change #153: Pursuing appropriate M&A as we move forward.

Speaker Change #154: And on that Kurt just can.

Kurt: Can you just remind us in this kind of environment, what would what would be that kind of sweet spot of a deal size wise.

Kurt: Mexico and stuff like that.

Speaker Change #155: Yeah. Thanks for that question and we really look at it in two buckets, the $1 billion to $5 billion community Bank.

Speaker Change #155: We did that acquisition would supplement our growth add to our franchise have lower execution risk.

Speaker Change #155: We're really really focused on those.

Speaker Change #155: <unk> 15 billion that would fill out what we would be willing to look at that $5 to $15 billion or much more significant and strategic theres very few on that list.

Speaker Change #155: We would consider I think those are still harder to do in this environment, but.

Speaker Change #155: That's how we look at it in those two buckets, but the lower the $1 billion to $5 billion.

It makes a lot of sense in the market with what's going on right now and if we have those opportunities and can come to terms with folks we would we feel we're in a position to do that.

Speaker Change #155: So it feels like it's something came it would be the smaller end based on what I'm hearing about something related materially change.

Correct got it okay perfect. Thank you.

Speaker Change #156: Thank you one moment for our next question.

Speaker Change #157: Our next question comes from Frank Schiraldi with Piper Sandler Your line is now open.

Frank Joseph Schiraldi: Hey, guys just a follow up on.

Frank Joseph Schiraldi: You talked about the variable rate book in.

Besides there and just trying to think through.

Frank Joseph Schiraldi: The rest of the book and the.

Frank Joseph Schiraldi: The back book repricing in.

Frank Joseph Schiraldi: Generally is it reasonable to think in 2024, maybe I'll stick to that book re prices and if so I'm just trying to get a sense of where rates are going on the books versus.

Frank Joseph Schiraldi: Coming off where they are re pricing team.

Speaker Change #158: Yes, Frank in the fourth quarter pretty much across most of our <unk>.

Speaker Change #158: Interior will.

The loan categories, we were coming on somewhere between 715, 8% the average for the quarter of about 770.

Speaker Change #158: So that's so that's the current kind of new money across the board.

Speaker Change #159: Okay Alright, great.

Speaker Change #159: And I guess, you mentioned that last quarter weather.

We pricing from I would assume that hasn't changed much.

Speaker Change #159: Quarter over quarter.

Speaker Change #160: Correct Okay.

Speaker Change #161: Sorry go ahead.

No go ahead.

Speaker Change #161: And then I guess, just while I got you and just a last one on.

Speaker Change #161: You talked I think in the deck.

Speaker Change #161: <unk>.

Speaker Change #161: Cash levels, returning to sort of a 50 to 100 million dollar level over time.

Speaker Change #162: I just wondered in your guidance for 2024.

Speaker Change #162: Are we seeing.

Speaker Change #162: A significant move lower from wherever it is now $2 50 down to that.

Speaker Change #162: Towards that level or how much excess liquidity I guess it is baked into that guide.

Speaker Change #162: No no nothing's really changed in the past quarter with respect to cash and liquidity.

Speaker Change #163: Okay. So youre not 2024 guide doesn't assume really much of a change from where you guys were on the 14th.

Correct, Okay, alright, great.

Speaker Change #164: Thanks, Brian Thanks, Brian.

Speaker Change #165: Thank you.

Speaker Change #166: I am showing no further questions at this time I would now like to turn it back to Curt Myers for closing remarks.

Curt Myers: Well. Thank you again for joining us today, we hope youll be able to be with us as we discuss first quarter results in April. Thank you everyone.

Speaker Change #167: This concludes today's conference call.

Speaker Change #168: Thank you for participating you may now disconnect.