The First Bancshares, Inc.

Good day, and thank you for standing by. Welcome to the review of fourth quarter 2023 financial results conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference call is being recorded. I would now like to hand the call over to Hoppy Cole, CEO. Please go ahead.

Good morning, everyone, and welcome. I've got several team members with us today in the room. We've got Didi Lowry, our CFO. We've got George Noonan, our Chief Credit Officer, and JJ Fetcher, our Chief Lending Officer. I'll cover a few high-level items for the quarter and the year, and then turn it over to each of the respective team members for more color in their respective areas. The fourth quarter of 2023 operating earnings were lower than the third quarter. We expected some margin compression during the quarter, and we experienced that about 13 basis points of core margin compression, primarily due to the deposit campaign that we talked about in a previous earnings call associated with being a bit more aggressive toward the end of the year to support our loan growth and stem deposit outflow. Credit was solid, again, for the quarter. We had $80 million of debt loan growth. It's on 6.3% on an annualized basis. Credit quality metrics remained strong. We had six basis points of charge-offs, $2 million reduction in MPAs, and past dues at a pretty low point of 23 basis points. Danielle also talked about in her presentation, we did a bond restructure during the quarter in order to reposition a portion of the portfolio to improve our yield, improve our EPS. For the full year of 2043, the company performed extremely well. As you remember, we closed our acquisition of Heritage Southeast Bank on January 1st of last year and had about $1.7 billion in assets to the overall organization. Through the year, our operating income increased 41.6% to $96 million, gave us an ROA for the year of 122 and a return on tangible common equity of 17.5%. We grew our tangible book value about 7% during the year to $19.35 a year in. And we increased our dividends 21%, 74 cents a share to 90 cents a share for our shareholders. So all in all, a good year, a good growth year, a good year in terms of profitability. And with that, I'll turn it over to DeeDee Lowry for a financial presentation.

Great. Thanks, Hoppy. And welcome, everyone. And I'd just like to say, kind of reiterate as well, that I think we did have a very solid quarter, you know, despite the increased costs on our deposits that we, you know, knew were coming. We had great loan growth, as Hoppy mentioned, 6.3% annualized, which was the same as the third quarter, both consistent there. And then also our deposits were basically flat when you back out the public funds. So this is the first quarter. I guess, in the past four that we basically maintained our deposits. And that obviously is due to the deposit special, and we'll talk a little bit more about that. But we did have a couple of obviously non-operating items this quarter, acquisition charges, as well as the loss on the securities from the restructure, and we'll talk about that in a minute. But when you look at our reported earnings, it was $11 million, or 35 cents, which was down $13.3 million from – last quarter. But on an operating basis, we back out the acquisition charges that were about 400,000 net of tax. And then the loss on the sale of the securities was 7.3 million net of tax. Earnings were 18.7 million or 59 cents per share. and this compared to 24 million or 76 cents per share for the quarter ended september which was a decrease of about 5.3 million dollars and you know when you look at that 5.3 million dollar decrease um compared to last quarter, it can really be summed up from basically interest expense and obviously increasing more than our interest income. Interest income did increase $3 million for the quarter, but our interest expense increased 6.1 million. with about a million in non-deposit-related interest expense. But excluding the securities loss, our non-interest income was basically flat down a million dollars, mostly related to interchange fee income, which was elevated last quarter with a one-time fee income. But it's in line with the first and second quarters of the year, so non-interest income looked very comparable. Expenses were up from, they were, I'm sorry, $44 million. They were up $1.8 million from the previous quarter. If you back out all the expenses that we mentioned last quarter related to the grant money, that was expense last quarter. So that $1.8 million is represented by a million dollars related to salary expense, and that is our year-end accrual, and also solo vacation expense as well, which is a one-time item at the end of the year. I had given estimates basically last quarter about where expenses might fall. And these are a little bit more than that. I believe I'd say that could be up to 43 million. So this was just a little over that for the fourth quarter. And as Hoppy mentioned, and as you recall from our call last quarter, we did expect our margin to compress for the fourth quarter, obviously, due to a couple of things. The runoff in our public funds, it normally happens in the fall, and especially in the fourth quarter, which usually leads to additional borrowings. And then as well as our increased deposit costs related to the deposit gathering campaign, and also as well as market competition, we still have Competition for deposits in our markets. Some banks still running some higher price CD specials. So we're still facing that competition as well. Our specials ended at the end of the year. And to remind you, we had a 5.25 six-month CD. and a 5% six-month rate guarantee on a money market account. And you had to have non-interest-bearing accounts with us as well to have those specials. But we did bring in about $183 million in new money over the course of, I guess, four months or so when we ran the campaign. And then, obviously, both of those items we've talked about, it led to the increased deposit cost for the quarter. And as we talked about that last quarter, we would be on the aggressive side with the campaigns due to the loan growth, which we had both quarters, I believe, was $150 to $60 million in loan growth for the two quarters combined. So our core margin did decrease 13 basis points down to 314. I expect to see compression again in the first quarter. And then, you know, looking at hopefully that stabilizing in the second quarter of the year, we've got, you know, still with these market competition on these specials, we're still repricing some deposits, but then obviously all these specials will be coming due throughout the next six months. We had a lot of folks got on those specials in September and October, and then again in December, right before we ended. So we could see all of that pricing through, I guess, really through the second quarter. But as those come in and reprice, obviously hoping to reprice those down because we're not running those same specials and be able to. So that's kind of what we're looking at as far as hopefully the stabilization will be in the second quarter due to that. We did have a yield on our interest-bearing assets did increase 15 basis points for the quarter, but our rate on interest-bearing liabilities increased 42 basis points. Our cost of deposits increased 33 basis points for the quarter to 154 basis points. Still a very respectable number, you know, due to our granular deposit portfolio and compared to some of our peers. Our interest rate deposit cost did increase 42 basis points to 218, and that drove our beta to 38%, which was up from 31% through last quarter. As I mentioned, the deposit runoff obviously declined this quarter from our previous quarters to basically almost flat. It was down $17 million, but public funds was right at $15 million of that, so just a couple million dollars. So that was a very good number for us for the fourth quarter. Our non-interest-bearing deposit portfolio changed one basis point. We were 29 basis points to total deposits, down from 30 last month. So overall, still very happy with those numbers as well. On a year-to-date basis, a couple of just highlights, I think, to point out. Operating earnings for the year increased $28.4 million. That was right at 42%, up to $96.7 million. Our loans, excluding the acquisition of Heritage on 1-1, increased 6.3% for the entire year, which was right at $237 million. Assets overall grew $1.5 billion, up to $8 billion. And our cost of our deposits averaged 109 basis points for the year. And then our net interest margin on a fully tax-equivalent basis on a year-over-year basis, actually increased 40 basis points. Just a couple of notes on the bond sale. We did put on that, Kay, in case you didn't see that. I'll go over them really quick for you. But we did have a $9.7 million loss on $123 million in bonds that we sold. They had a weighted average book yield of 1.12%. and an average life of three years. So 92 million of that was reinvested, yielding estimated 5.33%, and then we paid off 30 million of our bank term funding program that had a rate of 482. So overall, with that shifting of the balance sheet, the earned back will take 2.1 years. That's expected a $4.7 million increase in our net interest income, and then about eight basis points related to margin improvement. A couple of notes just in general and other. Our liquidity position remains strong. Loan deposit ratio is 80%. We still have about $2.2 billion in our borrowing capacity, and 40% of our securities are unpledged, which is about $680 million. Over the next year, really 2024, we have about $205 million in cash flows that we'll generate out of our bond portfolio. And then our capital ratios were in line, TCE 7.9, leveraging of a 9.7, and total risk base 15%, all in line basically with the last quarter. Our return on average assets operating was 95 basis points, and efficiency ratio was 62 basis points. So all in all, overall, I think it was solid. It's just, you know, deposit increase, deposit costs, you know, we're up as expected and moving forward.

Thank you. Appreciate the report.

Yes, sir. Thank you, Hoppy. I think for the third time, I'll mention about $80.2 million in loan growth. So very happy to see that. And as DeeDee and Hoppy both mentioned, in line with third quarter, so about 6.3% annualized really for the whole back half of the year. So I think we were encouraged with loan production really for the second half of the year. December finished on a high note, which you never know at the end of the year how things are going to pan out but we had over 100 million dollars in originations and also saw an uptick in our actual funded loans as compared to uh bank for future construction at about 70 percent uh were funded in december uh that historically has been 50 to 60 so that gave us a boost at the end of the year unfunded construction commitments however uh remained steady and virtually unchanged since quarter three so we still have uh enough underfunded commitments to run out for 2024, so we're encouraged by that as well. Small contraction of pipelines at the end of the year. I think we did close a lot by December 31st, but anecdotally at the end of the year and into the first couple weeks of January, a lot of conversation about new credits, so very encouraged about where we're starting 2024. Regionally, I just want to mention Louisiana had a great quarter we talked about on our last call, the integration of the new team there in New Orleans. They actually contributed about $38 million in net loan growth for the quarter just in that market. So very encouraging there. Tampa and private bank, as I usually say, had great quarters as well. And then we also saw a pretty nice uptick in our cash value lending program in the heritage legacy market. really for the first time had a nice increase in the outstandings in the fourth quarter. So as Didi mentioned, average yields for the quarter continue to tick up. We got to 826 for the fourth quarter. We finished the third quarter at 767. We have a pretty rigid pricing model nowadays with hurdle rates and anything above certain rates have to go to myself or Hoppy. So I think we've been diligent in our pricing the last quarter, actually the last couple of quarters. And then regarding personnel, a lot of exciting movement In the fourth quarter, we had a couple of hires, one particularly in our North Atlanta market that we're very excited about, bringing a lot of experience in the commercial and construction market to augment that team. And then we actually had four offers out before the end of the year, three of which have been onboarded as of the date of this call. So we're very excited there. Most strategically, a new regional executive for the Tampa State peat market, and that gentleman brings about 40 years of experience in that market, with a high level of experience in commercial, wealth management, and private banking. So we're very excited about 2024 in Tampa. Lastly, and George may, you know, correspond on this, we had migrated the rest of the HSBI team to our LOS platform, and then with George's help, continued to add efficiency to our small business lending group during the quarter. So very encouraging quarter, and I think 2024 hopefully starting out as well. So Turn it back over to you, Hoppy.

Thank you, JJ. George, can you talk about credit quality?

Thank you, Hoppy. We continue to see acceptable and moderately improving trends for most of all of our credit quality metrics during the year and certainly in the fourth quarter. The leading indicator metric for credit quality trend analysis, 30-day delinquencies, reflected a year-end improvement to 23 basis points. That was the best quarter finish of the year and nicely below our annual average of 38.4 basis points. So good trend there. Asset quality continued to show improvement throughout the year and using that end of quarter one as a benchmark as that was the first full quarter operating post merger with HSB. loans on non-accrual approved from 17.3 million down to 10.7 at the end of quarter four. That's an improvement of 38% in non-accrual loans for the three quarters full operating post HSB merger. Over the same time period, NPA assets as a percentage of total loans improved from 45.1 bps at the end of Q1 to 39.3 bips at quarter end, quarter four. Net loan charge-offs, as Hoppy mentioned, were six bips. Total criticized and classified loans also tracked very positively, reflected by a reduction from Q1 at $143 million down to $107 million at year end. We saw a decrease quarter over quarter at the end million over quarter three. That included payoffs of 5.8 million in criticized and classified loans. So as a percentage of capital plus ACL, the C&C loan ratio improved year over year from 15% down to 12.39%. Again, a strong emphasis on our balance in our loan portfolio mix on our occupied CRE at 25%. Non-owner-occupied CRE at 21%, one-to-four family at 19%, C&I at 15%, and C&D at 12%. Those represent the major categories in the balance and continued focus on that. In CRE, we do continue to place a lot of emphasis on maintaining our balance there. As the exposure chart on page 18 of your deck illustrates and denotes, professional office at 24% of CRE does represent both the owner-occupied and non-owner-occupied categories. And, of course, retail center, retail standalone, hotel, warehouse, and industrial roundup. depicted in your debt. A closely watched asset class, of course, our professional office credit quality has held up very well throughout the year. Substandard office loans were 4.2% of our total office portfolio with an average loan size of $733,000 in the non-owner occupied office categories. Our preference to stick with smaller and minimally vertically constructed building types under four floors across both our legacy as well as our acquired markets has served us very well. We've noted in the past that even in our non-owner occupied loan portfolio, A number of office property loans in that category have a fairly sizable borrower-related entity owner occupancy presence about them. So even in that category, there's a good mix of vested ownership. We've seen minimal lease renewal issues in office, acceptable tenant quality, and very few credit issues in our office loan portfolio. Though insurance costs have had an impact for some borrowers, that issue will be watched very closely for operating margin depression throughout the year and as one item to really provide some focus on this year. In dollar terms, with only 14% of the office portfolio maturing through 2025, the majority of the office portfolio will likely be maturing in a more favorable rate environment in terms of borrower coverage capacity. So not that big of a slice, if you will, at 14% in the next two years. And in summary, asset and credit quality really did reflect a strong resiliency for the year. And by applying the same principles in management through our credit approval and administrative processes into 24, we look forward to supporting the bank in a similar fashion.

Thank you. Thank you, George. That concludes our prepared comments. I think we'll open it up for questions now.

Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced before you proceed with your question. One moment while we compile the Q&A roster. The first question that we have for today is coming from Catherine Miller of KBW. Your line is open. Thanks.

Good morning. Hey, good morning, Catherine. start with the margin. And, you know, as you mentioned, it was a little bit more compression this quarter than expected. But honestly, the cost of interest-bearing deposits wasn't really that much higher than where you were thinking, DeeDee. I remember, I think I had in my notes last quarter, you thought it'd be somewhere between 210 and 215. We came in at 218. So, you know, you're just a little bit above that. Was there anything else within kind of maybe the balance sheet or the margin that the composition of your margin that really drove the greater compression this quarter. And then curious how you're thinking about how the margin is going to react over the course of the year if we get rate cut. I think last quarter you also had said you thought the margin could get back to 360 by the end of the year, but that's a much bigger delta from where we are today. So just curious what you think that potential upside could be as we work through the year. Thanks.

Yeah, on the start, I think, you know, we had kind of indicated that we could kind of have the same amount of compression in the fourth quarter that we did in third quarter. And I really think probably... a little higher than what it was, was just more of the repricing of our current book with that special. We had a lot of, you know, the non-new money that repriced during the quarter really, I think, drove that more than we probably expected that would reprice. On the margin compression, I mean, on the comment for the margin for...

I'm sorry, what was the second question?

Yeah, yeah, I'm sorry. Yeah, yeah, I'm sorry, what I had said last quarter.

I had a long-winded question for you, Deedee, so you said it was my fault.

I wrote down over here, I'm sorry. Anyways, what we had said last quarter was our modeling was showing that for 24, we could have expansion of eight basis points or so in our current modeling and our ALM modeling. That was prior to the bond restructuring. That was prior to the bond restructuring, yes. That was just what our current modeling was showing for 24, and we had kind of indicated that we felt like that would be in the latter part of the year with getting, you know, when we started maybe having some expansion, that that eighth basis point or so would be later in the year. So, I believe that's kind of what we had mentioned. Okay, and that's with or without recuts? That's without rate cuts. That's just what we're modeling right now. I believe our modeling has no change built in right now.

Okay, so still the 8 bits upside, but maybe we're coming from a lower base. But then you add in the bond restructure, so maybe you're not the same.

Right. And so I indicate, I look back, you know, our net interest margin fully taxed equivalent at 352 last quarter. I guess you were adding A to that for the 360. But I'm still looking at our modeling is showing about eight basis points next year. I don't have December's in yet, but through November, it was still showing about eight. So, yeah, obviously, it's off a lower base. So I don't think the 360 is where that will be.

Got it. Okay. And what are your How do you think your balance sheet will react when we start to get rate cuts?

Well, I think that we'll have more opportunity on the deposit side to increase our rates than hopefully on the loan side. Hopefully it's pressured on the loan side without giving our fixed rate nature of our portfolio that we'll be able to reprice deposits quicker than repricing loan rates down.

Exactly.

A little bit more liability.

Yeah, for sure.

There's still enough momentum.

Yeah, so to say, kind of like it's been on the outside, we've been slower as the rates went up to increase on the on the asset side, just because the fixed nature of the portfolio. So I think that definitely be slower and more opportunity on the positive side.

Okay, great. So still enough momentum on the fixed rate side to offset, you know, to kind of help the margin and when you'll move up, even with rate cuts.

Say that one more time.

Even with rate cuts, there's enough momentum in your back book to reprice upward to still push the margin higher. Oh, I think so. Yes, because of where those are coming out of. Yes, for sure. Great. Okay. And I think last quarter you had said you had about 100 million in fixed rate loans repricing each quarter. Is that still where you stand for 2024?

We just were looking at that. That sounds reasonable. We're pulling that right now for next week, yeah.

And about, as we model that, about where is your, I mean, I know I can look at your entire loan book and it's at around 6%, but is there a way to think about where the current fixed rate loan book is and where that's repricing up to?

So we're actually, George and I were talking about that this morning. I could get you that data more specifically. But what it has been the last couple of quarters, the renewals are in the mid-five range because these are typically five years back, so before the rate cut. So typically in that five, five and a half. And then those are all really going into the eight-plus range right now, unless on an exception basis.

So 300 by close to?

Two to 300. Yeah, I think that's reasonable. 250 probably is a good number.

Great.

But I think what Catherine was saying earlier is as we are slower back down, as rates come down, we're still going to pick up maybe two points. So we'll have more, you know, runway there. Yeah.

Got it. Okay. And I know you've got a lot of analysts, so I'll step out and I'll pop back in if I have any more questions after everyone gets in. Thank you so much.

Thanks, Catherine. Thanks, Catherine. Thank you. One moment for our next question. And our next question will be coming from Matt Lonely of Stevens. Please go ahead. Your line is open.

Hey, great. Thanks. Good morning, everybody.

Good morning, Matt.

So, coming back on the margin discussion, I think, Didi, you mentioned that there'd be some pressure on that margin in the first quarter. Can you help us kind of ring-fence what that compression could look like in 1Q? And I think in 1Q, There's usually a handoff of funding as the borrowings come down from the fourth quarter and the public funds come in a little bit higher. Any more color on this handoff and what that one Q&M could look like?

I think that handoff from the public funds and the debt versus that will probably be really won't have much impact on the first quarter. That normally kind of starts. probably in March with really getting some of the inflows of that. So I don't see it having a big impact on the first quarter, but kind of looking at it, I think what we're kind of looking at and anticipating is maybe half as much compression that we had this quarter maybe a little less than that but i just think with what we're facing with the what we're seeing so far in january as a tale on what's repricing really in this in this market competition and people still trying to get in even though our specials ended we still got people pricing i mean you know we have a five and a half we have a bank offering five and a half right now for eight or nine months on a cd We still got some in 540 range. So, I mean, we're still having some market competition. So, I just don't see it. You know, I think max about half of what we had this time, but hoping for a little less.

Much water compression. The potting inflows from the public money really take effect, I mean, at the end of the first quarter.

Okay. All right. That's helpful. And I guess... I would have thought that restructure that you did in a few weeks ago that you announced, I would have thought that that would have further supported the margin than you're saying, but I guess it goes back to the deposit competition. It's kind of just more than offsetting that. Is that right?

well that we didn't sell we did that the last week of the year so we sold those securities by december 27th or 28th and then reinvested that this in january so i mean we really just got all that done uh the 10th or so of january on the on the pre-purchase side so it really didn't have any impact this quarter this this month this or fourth quarter yeah

And just to clarify, that restructure that will see more impact in the first quarter, that is embedded in that margin commentary you just provided, I assume, for 1Q. Is that right?

Yeah, because that's really two basis points a quarter anticipated from that, eight for the year. So that's really definitely two basis points.

Okay, understood. And then as far as that deposit special that you mentioned, I think you said you ended that. I think that was at the end of the year, so no real impact in January. Is that right?

That's right. It did end, but, you know, still had some people trying to come in and get it, obviously, with the competition I mentioned. But as some of those start coming out, that will be, you know, February, March area. And so, you know, hopefully we'll get some, you know, Some reduction in, yeah, for sure.

Okay. Okay. Thanks, guys. I'll be back in the queue. Thank you, Matt.

Thanks, Matt. Thank you. One moment for the next question. If you would like to ask a question, please press star 11 on your telephone. And the next question that we have is coming from Christopher Maranek of Janie Montgomery and Scott. Your line is open.

Hey, thanks. Good morning. Hoppy, I'm sure this has not been your first deposit special over your career, so I'm kind of curious what market intel kind of gives you and what you may be able to do with that as the rest of the year goes on, either it's on the deposit side or even, you know, pricing earning assets, too.

No, it's not. So we were, you know, to stop the deposit outflow and protect that deposit base is critical. So, you know, the ability to get it in and price it down and give us some margin to some margin freeway as rates come down. So we've got a storm going on here, I don't know if you can hear it. But we'll be able to replace that down as those maturities come up.

Gotcha, thanks for that. And then on the new hires you mentioned in Atlanta and Tampa, are these replacing anybody or is this kind of net new additions just to enhance your growth profile?

So in Tampa, that was replacing a former market exec who came over with Beats but then left after the first year of integration. Most of the others are, well, it's a mixture. We've got some placements overall. We've still got personnel gaps that we need to fill. But, you know, however you want to look at it, from a budget standpoint, they're probably replacements. But we are strategically hired in markets where we see the need or where talent's, you know, presenting itself from fallout from other banks.

And I guess Atlanta specifically, you had always wanted to push what you inherited with Heritage Southeast into the central and northern parts of the city. So that's probably a good thing long term.

Most of the lenders have stayed. I think we talked about last quarter, we were at 90%. No one left in the fourth quarter and our retention Agreements are up, and everybody's intact. This was really, we had one or two spots, but a great opportunity to hire this gentleman with a construction background, which, as you may know, is a lot of our work up there in the South Atlanta market. So, yeah, we're always looking. Also in the Atlanta market, I will say, we're trying to acquire or recruit a private banker for that market because we really don't have a specialty private bank unit there in Atlanta, which is something we need.

Got it. And then last question, just more kind of big picture on credit. As you look across your footprint, particularly in the Gulf Coast areas, are any kind of areas softer than there would have been six, nine months ago? I'm just kind of curious of how the temperatures are across the footprint.

I don't know that we would single out or point out any particular area across the very coastal markets. know obviously real estate residential real estate might have seen a little bit of a slowdown in the one to four family category particularly and maybe some of our tourism related markets so a little bit there but generally we've seen as JJ could speak to you know pipeline contribution from

every area of the bank across the footprint. Great. Thank you for taking my questions today. Thank you, Chris.

Thank you. One moment. And we do have a follow-up question coming from Matt Loney of Stevens. Your line is open.

Hey, guys. This is Matt. Can you hear me?

Yeah.

Okay. Thanks for taking the follow-up. Just want to revisit just on the deposit pricing competition. I guess we're just hearing mixed things from the banks this quarter as far as competition easing in some markets, but remaining pretty intense in other markets. Anything for us to appreciate from our side as far as when you look at your various states and markets where there's more intense competition in And are these coming from the multi-state regional banks, or are these from the smaller private community banks?

I'll let some others answer as well, but I know a couple here at local in Hatchburg, we're dealing with a couple of these, but they're smaller private banks or, you know, listed on a not really traded, you know. So I think we're facing some of that, and then, you know,

Well, I think across the footprint, the competition is fairly intense. I mean, it's a mix, Matt. It's both the local smaller banks, but then also some of the larger regional banks. So it just seems to be real competitive in really most all of our markets out there.

And, Javi, you're obviously in some rural markets, but also some more metro markets. From that perspective, how would you characterize the the competition relative to where it was maybe a few months ago.

I'd say that the rural markets have probably picked up where it was a few months ago. I think when it started out, they lagged a bit, but now they're kind of catching up to the metro markets. It's kind of the field, Matt.

Sure, understood. Okay, and then on the expense side, operating expenses, I think, Didi, you mentioned they were a little heavier this quarter than you expected. I think you mentioned it, but I just didn't write it down. What was the color of the heavier expenses quarter and then the ALEC for 24? Any change from what you said last quarter? I think it was $170 to $171 million for 24.

So the real difference was about $1.8 million from quarter over quarter on expenses. A million of that was related to salaries and benefits. About $500,000 was related to um sold vacation um you know folks don't use it they can sell it back and then about 500 000 was just a year in a cool on our non-exempt staff you know for the last five days of the of the month so of the year uh those two things were a million dollars and then our um professional services was uh was also up as well um And that was really driven by some of our 10B expenses. And we've mentioned before about in the middle of that doing our gap analysis. And so we had some of that in the fourth quarter as well. Those were the two main things. I think on for 24, I'm still working through all that and trying to tie down that exactly for 24. But, you know, I think it's probably going to be kind of looking at where we've been the last two quarters and that run rate probably more closer to the $44 million a quarter. You know, when you look at where we were this quarter, the $44.4 and back out the acquisition charges, I think even though we had that extra million there, I think just $44 million a quarter is probably where we'll be next year.

Okay. And I assume that's a quarterly average comment, or is that more just you? Yeah.

Okay.

Okay. That's helpful. And then on the fees side, fees looked a little bit light sequentially in the fourth quarter. Anything you see in there that was unusual and any thoughts on kind of where that we should start off the year in 2024?

Well, it was light down compared to last quarter. I think about a million dollars, but... That was in the interchange fee income, but if you look at last quarter, that was elevated. And so when you look at fourth quarter non-interest income and compare it to first and second, it's in line. So we really have kind of been right around that $12 million a quarter in the non-interest income section.

Got it. Okay. All right. That's all for me. Thanks, guys.

Thanks, Matt. Thank you. One moment, please. And we have another follow-up question coming from Catherine Miller of KBW. Your line is open.

Matt hit my expense question, so I was going to ask, but one other one I have for you is just on just your M&A outlook. You know, I feel like it's been really slow. for the industry, but you typically are an active acquirer. So just what are your thoughts on potential deals over the next year or so?

Well, I think things are, we're kind of focused internally in the first half of the year, in the back half of the year, you know, I think we would be more open to thinking about potential things for next year. So I think things are still slow, Catherine.

We had not a lot of conversations going on out there. Great. Thanks for the update. Appreciate it.

Thank you. That concludes our Q&A session. I would like to go ahead and turn the call back over to Hoppy Cole, CEO, for closing remarks. Please go ahead.

Thanks, everyone. I appreciate your participation this morning, and that's all we have for this quarter, and I look forward again to talking to you all next quarter. Thanks.

Thank you for participating in today's conference call. You may all disconnect.