Hi, 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. Your host for today's conference call is Curt Myers, Chairman and Chief Executive Officer. Joining Curt is Mark McCollom, Chief Financial Officer. 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 fult.com by clicking on Investor Relations and then on News. The slides can also be found on the Presentations page under Investor Relations on our website. On this call, representatives of Fulton may make forward-looking statements with respect to Fulton's financial condition, results of operations, and business. 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 Slide 2 of today's presentation for additional information regarding these risks, uncertainties, and other factors. Fulton undertakes no obligation other than as required by law to update or revise any forward-looking statements. In discussing Fulton's performance, representatives of Fulton may 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 reconciliation of those non-GAAP financial measures to the most comparable GAAP measures. Now, I'd like to turn the call over to your host, Curt Myers.

Thanks, Matt, and good morning, everyone. For today's call, I'll be providing some high-level thoughts on the year, 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. After our prepared remarks, we will be happy to take any questions you may have. Our performance in 2023 was a result of an extraordinary effort by our team in 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 534,000. We continue to invest in growing our market presence and enhancing the customer experience. We added four new financial centers, two 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 a 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 $0.64 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 $15.15. 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. 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 $0.42. Loan growth moderated as we anticipated during the quarter to $174 million or 3% on an annualized basis. Deposit growth was modest as 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 105%. Turning to our non-interest income, diversity in our Fee Income businesses continues to serve us well. Non-interest income was $59.4 million with Wealth, Commercial, and Consumer and Small business continuing to deliver solid results 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 remain focused on how higher interest rates and higher costs are impacting our customers. We're cautious in our outlook for 2024. 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 acknowledge 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 a new initiative we launched in the fourth quarter. This initiative, named FultonFirst, is a process to evaluate 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 tenets driving our strategic transformation: simplicity, focus, and productivity. We are very excited about FultonFirst 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 2024 impact of FultonFirst will be most visible in our expense line items as it will help us meet the limited expense growth rate in our guidance. Longer-term, FultonFirst will also support accelerated growth. Mark will step you through the 2024 guidance in a moment. 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. Now I'll turn the call over to Mark to discuss our financial performance and 2024 guidance in more detail.

Thank you, Curt, 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, and the loan and deposit growth numbers I will be referencing are annualized percentages on a linked-quarter basis. Starting on Slide 6, operating earnings per diluted share this quarter were $0.42 on operating net income available to common shareholders of $68.8 million. This compares to $0.43 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. 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. Commercial real estate lending growth slowed to $22 million, or 1% annualized, and C&I lending declined modestly, down $32 million, or 3%. Consumer lending produced growth of $54 million or 3% during the quarter. While at a slower pace, we continued to originate and portfolio adjustable rate mortgages. Total deposits increased $116 million during the quarter. Growth in CDs and broker deposits more than offset seasonal outflows in our municipal deposits business of approximately $220 million. Our non-interest-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. Our shift from non-interest-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. Our NII guidance for 2024 assumes we'll continue to see migration from non-interest-bearing deposits into interest-bearing products throughout 2024, but at a slower pace than we saw in 2023. We currently expect non-interest-bearing deposits to end 2024 at approximately 22% of total deposits. Our investment portfolio was relatively flat for the quarter, closing at $3.7 billion. During the quarter, we did repurchase a small portion of subordinated debt, $5 million, which generated a $750,000 gain reflected in other expenses. This gain was offset by a similar level of securities losses as we sold $120 million of securities yielding 1.4%, using the proceeds to pay down overnight borrowings at 5.35%. 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. Putting together all of these balance sheet trends on Slide 8, our net interest income was $212 million, a $2 million decline in the linked quarter. We were pleased with how well our net interest margin held up, declining only 4 basis points to 3.36% versus 3.4% last quarter. Loan yields expanded 11 basis points during the period, increasing to 5.83% versus 5.72% last quarter. Cycle to date, our loan beta has been 49%. Our total cost of deposits increased 23 basis points to 179 basis points during the quarter. Cycle to date, our total deposit beta has been 34%. Turning to asset quality, non-performing loans increased $12.7 million during the quarter, which led to our NPL to loans ratio increasing from 67 basis points at September 30th to 72 basis points at year-end. Net charge-offs of $8 million, or 15 basis points were diversified with no individual charge-off greater than $2 million. Overall, loan delinquency increased modestly but remains at a low level, increasing to 1.19%. Our allowance for credit loss as a percent of loans was relatively flat at 1.37% at year-end. Turning to non-interest income on Slide 10, wealth management revenues were $19.4 million, consistent with the third quarter. As a reminder, wealth management represents about a third of our fee-based revenues with over 80% of these revenues recurring. 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. Commercial banking fees increased $1 million to $20.8 million as capital markets and SBA revenue increases drove the quarter. Consumer banking fees of $12.1 million were consistent with the third quarter in all areas and continue to deliver a very consistent fee income stream. Mortgage banking revenues declined $900,000 to $2.3 million, and were driven by a seasonal decline in mortgage originations, as well as a decline in gain on sales spreads. A net market value change of $1.1 million in other fee income was recorded during the period related to the LIBOR to SOFR transition. Moving to Slide 11. Non-interest expenses on an operating basis were $171 million in the fourth quarter, in line with the prior quarter. Material items excluded from operating expenses were charges of $6.5 million for the special FDIC assessment and $3.2 million related to our FultonFirst initiative. Additionally, our operating expenses were impacted by a $1.6 million increase in marketing expense and a $700,000 gain on the aforementioned debt extinguishment. Turning to Slides 12 and 13, we are providing you with updates on our capital base. As of December 31, we maintained solid cushions over the regulatory minimums and our bank and parent company liquidity remains strong. We've also provided you with an alternative view of our regulatory ratios, including the impact of AOCI. Our tangible common equity ratio improved to 7.4% at year-end, a 60 basis point increase during the quarter, driven by solid earnings and a material decrease in AOCI due to lower interest rates. 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. 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, representing $1.9 billion of tangible capital. On Slide 15, we are providing guidance for 2024. Our guidance assumes a total of 75 basis points of Fed funds decreases occurring in the second half of the year. Our 2024 guidance is as follows: We expect our net interest income on a non-FTE basis to be in the range of $790 million to $820 million. We expect our provision for credit losses to be in the range of $45 million to $65 million. We expect our non-interest income, excluding securities gains, to be in the range of $235 million to $250 million. We expect non-interest expenses on an operating basis to be in the range of $670 million to $690 million. This estimate excludes any potential charges we may incur as a result of FultonFirst throughout the year. And lastly, we expect our effective tax rate to be in the range of 17% to 18% for the year.

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

Good morning, guys. Thanks for taking my question.

Hey, Danny, good morning.

To begin with the FultonFirst initiative, I appreciate your insights, Curt, about its background. I'm wondering if there are any profitability targets or goals linked to that program. Additionally, you mentioned that the expense guidance does not factor in any other potential charges for 2024. If you have an estimate for what those might entail, that would be helpful. Thank you.

Yes, Danny, thanks for the question. Our team is really excited about the FultonFirst initiative. We're really focused on the long-term growth strategy for the company, as well as the operating efficiency. We're being really transparent with the program early on because we wanted to help you understand some short-term cost impacts that happened this past quarter and then explain how we're going to meet the guidance specifically on the expense guide going forward because it's probably a little light 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 to grow more efficiently over time. So, to answer your specific question, we don't have targets at this point, but we feel this initiative is going to help us meet our 2024 guidance and then probably even more importantly lead to long-term sustained improved efficiency for the company. But at this point, we don't have any specific targets. We're going to share more over time, and we wanted to be early with this so that we are transparent and that you could understand some of the initial costs as we launch the initiative.

Sorry, are you expecting this to be a longer-term situation regarding the costs involved, or is most of it what you incurred in the fourth quarter? Should we anticipate this being an ongoing initiative in relation to the costs you are addressing?

Yes, Danny. I mean, we will have ongoing one-time costs to implement the changes that we decide to implement and then we'll match them with cost saves and revenue expectations as we move forward, so more to come. This is the beginning of the initiative, and we're being very thoughtful, and diligent about working through the process, and we wanted to be transparent with everyone. It is not just a simple cost-cutting initiative, but there will be cost cutting that is associated with it. We'll keep you informed throughout the year.

Okay. And then, maybe one for Mark on credit, and I guess the range that you gave for provision for the year. Just curious how you're thinking about what may drive the low and the high-end of that range if that's mostly just credit volatility or if there is kind of balance sheet growth estimates embedded in that as well? Thanks.

Just a comment from me and then Mark can add to it if he wants. As we look at the provision, it's predominantly charge-offs normalizing, and charge-offs were 15 basis points in the last quarter. Our long-term averaging charge-offs has been a little less than 20 basis points in recent history. So charge-offs drive that and then our growth rate would drive that. What's the unknown variable for everybody is just economic conditions as we move forward in the base allocation with what we know right now that's the range we're comfortable with.

Would you say the mid-point is what the assumption is for if you were to hit that $55 million? Is that like a soft landing or how should we think about your baseline assumption?

Yes, Danny, if you think about the baseline assumption, the baseline assumption right now from Moody's does assume a softer landing, 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 mid-point of our guide would assume we get back to that longer-term average of between 15 basis points and 20 basis points of net charge-offs, and then a growth rate in loans that's consistent with that kind of 4% to 6%, probably more the lower end of that range for 2024.

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

Thanks, Danny.

Thanks, Danny.

Thank you. One moment for our next question. Our next question comes from Frank Schiraldi with Piper Sandler. Your line is now open.

Good morning.

Good morning, Frank.

Hi, Frank.

I’m curious about the loan growth from the last quarter, especially since you mentioned that it was driven by construction balances, including both additional drawdowns and new origination. Could you share your insights on the potential growth of the loan portfolio moving forward? What might the composition of that growth look like? Is there further opportunity in commercial real estate given your concentration limits? I'd appreciate your general thoughts on this. Thank you.

Historically, we tend to operate with organic growth in the range of 4% to 6%. The performance you've observed in the latter half of 2023 has been towards the lower end of that spectrum, and I think this trend will carry into 2024. In the fourth quarter, we've focused on maintaining profitability, and new originations across all channels have been in the high 7% range, around 7.70 to 7.75. Until we see any anticipated rate decreases, which we expect in the latter half of 2024, I think growth will continue at a moderate pace, but we are actively engaged in business and not pulling back on any areas, unlike some others in the industry.

Okay. You mentioned the possibility of three rate cuts in the second half of the year. Can you provide any details about that? Last quarter, you noted that the net interest income would be affected by the variable rate portfolio, estimating an impact of a little over $20 million annually for a 25 basis point change in rates. Is it reasonable to assume a similar effect on the way down, adjusted for the repricing of existing loans? What would the impact of an additional 25 basis points be on the full year margin or net interest income?

Yes, on an annualized basis, we have around $10 billion in loans linked to SOFR, with approximately $9 billion of that being adjustable-rate loans that will reset within 30 days after a rate change occurs. Therefore, without any changes to our non-maturity deposit book, this explains the $20 million on an annualized basis for a 25 basis point move. We believe we are taking a conservative approach regarding the initial couple of downward rate moves, as we don't expect deposit pressures to lessen immediately. However, at some point—whether it be 50, 75, or 100 basis points—we anticipate that the industry will begin to experience relief from deposit pricing pressures and will be able to adjust accordingly with our non-maturity deposit offerings.

Okay. So maybe incremental rate cuts would be less impactful to the bottom line just given hopefully deposits start repricing or providing some benefit on the deposit side to offset any contraction on the loan yield side, is that the way to think about?

That's correct. And then overnight borrowings costs, obviously, resets out immediately.

Right. Okay. Thanks.

Thank you. One moment for our next question. And the next question comes from Feddie Strickland with Janney Montgomery Scott Research Division. Your line is now open.

Hey, good morning, Curt and Mark. Just wanted to start on deposit costs. I know we can discuss this a little bit, but are you starting to see that pressure lessen a little bit with the pause in rates, and any different behavior from competitors there as well?

Yes, one other thing to note is that we have been adjusting our certificate of deposit portfolio and have been increasing our CDs throughout the year, which have been repricing at higher rates as you can see from the maturity roll rates each quarter. In the first quarter of 2024, approximately $1.1 billion of our deposits will mature, with the cost of these maturing CDs now reaching nearly $440 million. Therefore, the increase you've been observing in our CD costs will begin to decrease throughout 2024, providing some relief and allowing the betas to ultimately stabilize.

Got you. You actually anticipated my second question. So that was $1.1 billion in CDs maturing. What was the cost of those that are rolling off compared to what's rolling on?

$440 million is what they're rolling off at, and then rolling on it would depend on, obviously, whether they're retail or brokered.

Got it. And I'll just, sorry, go ahead.

Hi, it's Curt. I'm just going to add that we continue to have high roll rates, blind roll rates in CDs, so as we're adding customers, we still have really strong metrics in the blind roll rate, promotional acquisition rate, blind roll rate are different, 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.

Understood. That's helpful. Then just switching gears for a second here, I appreciate the continued disclosure on office in the deck, is that $683 million outstanding inclusive of medical office? And if so, do you have on-hand ballpark how much is medical office?

It includes all office, and it depends on the overall usage as we dig into the details. We're looking specifically at the overall office, and our balances decreased from the previous quarter. We're actually quite optimistic. We have one account trending negatively, which was already classified as criticized; it involves about $30 million that was paid off, and we originated a new $30 million loan that is a strong credit replacement. As we manage our overall portfolio, we continue to handle these dynamics effectively, and we're satisfied with being able to address a significant credit that was on a negative trajectory this past quarter. Regarding healthcare, it's divided based on usage, with some in our healthcare portfolio and some in office as well. We'll need to follow up with you on the specific number related to medical office.

Sure. That'd be great, yes. I just know it's generally perceived as a little lower risk, so just curious how much was there, but anyway, thanks for taking my questions, guys.

You bet.

Thank you.

Thank you. One moment for our next question. And our next question comes from Manuel Navas with D.A. Davidson & Co. Your line is now open.

Thank you. Good morning.

Good morning, Manuel.

Can you kind of comment on what NIM you kind of expect with your NII estimates, like a 4Q 2024 exit NIM assumption? I know that the rate forecast can definitely change, but just kind of thoughts on that.

Yes, we have purposely, Manuel, over the last couple of years kind of backed away from giving specific NIM guidance and instead by giving you NII, and you guys can calculate your own balance sheet and come up with that number. What we have said is that, 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 our deposit costs going up more than our loan yields. So I would expect it would be sometime in the back half of 2024 is when you would see that trough and then margins start to expand from there.

Okay. Shifting gears a bit, does the FultonFirst initiative contemplate any improvement to the fee or improved fee growth, any new fee lines or anything that is helpful on that side of things?

Yes, it certainly will consider fee income businesses and we feel there's opportunities to accelerate growth in loan to deposit business as well as fee and service business, so it's a comprehensive review of the entire company.

With a slight improvement in AOCI, are you considering any changes to your strategy regarding buybacks or other capital allocation? I would like to hear your thoughts on that.

Yes, as we look ahead, we renewed our buyback in December, providing us with the full availability for the year, which amounts to $125 million. We will approach this opportunistically over time. Reflecting on the past year, we have been quite active, and if the environment remains favorable, we will continue to pursue this activity.

Appreciate it. I'll hop back into the queue.

Thanks.

Thank you. One moment for our next question. Our next question comes from David Bishop with Hovde Group. Your line is now open.

Hey, good morning, gentlemen.

Hey, David.

Mark, in terms of the fee income guidance there, just curious how we should think about the individual components? Wealth management was up, I guess, mid-single digits, commercial banking high-single-digits, consumer maybe down mid-single-digits, just in terms of deriving that forecast, how are you thinking about maybe some of the individual components this year?

Yes, we remain very positive as our wealth group has reached a new high for assets under management, and as we continue to grow our customer base and assets, revenue will follow. Our commercial banking also had a remarkable year, surpassing $80 million in fees, which may be a record or close to it. While there is some volatility in our capital markets business, we have solid fundamentals in merchant services and cash management that will persist. Consumer banking has seen a slight decline, mainly due to changes made to overdraft policies at the start of 2023, as well as the impact of the current rate environment on mortgage banking. Together, these segments will account for about a third of our total revenue. Although consumer banking has been a bit lower this past year due to mortgage banking challenges, we offset some of that with stronger performance in commercial banking. Overall, we are pleased with the balance we have in our fee income businesses.

Got it. I appreciate the color. And then, how should we think about maybe the overall level or maybe investment securities here. I think maybe about 13%, 14% of average earning assets, do you think that's sort of a near floor here at this point, and remind us what the annual cash flow expectations on that portfolio?

Yes, right now cash flow is pretty small, it's about $10 million a month, and I do think it's near its floor. I mean, our target there is kind of between where it sits today at about 15% of the balance sheet. We purposely run it maybe 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 so, 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.

You bet.

Thank you. One moment for our next question. And our next question comes from Matthew Breese with Stephens, Inc. Your line is now open.

Hey, good morning.

Hey, Matt.

Good morning, Matt.

I wanted to discuss expenses, specifically the $670 million to $690 million guidance, which suggests an average quarterly run rate of around $170 million. This is fairly consistent with our performance in the fourth quarter. With that in mind, do you anticipate that the quarterly expense run rate will remain stable throughout the year, or do you foresee any fluctuations as the year goes on? This is significant because it will affect our exit pace for 2024 into 2025, so I would appreciate any insights you can provide.

Yes, Matt. As Curt mentioned in his prepared remarks, for our expense guidance this year, we expect to begin seeing some productivity improvements from FultonFirst in the latter half of the year. Therefore, in the first half, I anticipate expenses will be higher than the target exit number for the fourth quarter of 2024 as we move into 2025. Additionally, with the first quarter commencing in April, we have annual merit increases that historically tend to raise second quarter expenses slightly. As we implement FultonFirst, it will include growth initiatives that typically take longer to realize. However, we expect to start seeing some productivity enhancements in the latter half of 2024, with their full annualized impact becoming more apparent in 2025 and beyond.

Just along those lines, I'm curious, you've mentioned productivity improvements a couple of times, you've also mentioned kind of leveraging technology, can you give us some examples that are going to drive the overall productivity improvements across the bank?

Yes, Matt, it's Curt. We have a lot of things that we're taking a look at, so productivity could just be operating productivity contracts, different things that create opportunities for us from a cost or utilization standpoint. So it's either cost or benefit realization from the activities that technology and digital platform provide for us. And then as we look at focusing the business on certain things, we're going to have growth opportunities and we're going to have expense opportunities as we move forward.

Understood. Moving on to the net interest margin and deposit balances, I would like to know how demand deposit account balances changed throughout the quarter. Given the current rate hiking cycle, it seems like most businesses and consumers would have made any necessary adjustments to their rates by now. I'm wondering if you are observing a lag effect that will continue for a bit longer. Additionally, I would appreciate some insight into how the net interest margin performed on a monthly basis to understand the starting point for net interest income in 2024.

Yes, sure, Matt. Regarding DDA, you're correct. It seems that we are approaching a low point in the shift from non-interest-bearing to interest-bearing products among consumers. However, on the commercial side, we are still experiencing some effects from the leftover stimulus funds moving from non-interest-bearing to interest-bearing accounts. Additionally, we faced some seasonal impacts in our municipal deposits during the fourth quarter, where there was a mix of non-interest-bearing and interest-bearing DDA accounts, but many interest-bearing DDAs left as tax receipts were utilized. Could you remind me of the second part of your question?

I was looking forward the monthly NIM if you have it, because I mean, look, 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 where the year will end up?

Yes, I mean if you think, our December NIM was within a basis point of our quarterly NIM, so 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 even when you get to the back half of the year and start to see those first couple of rate cuts. If we're wrong on that, that's certainly going to provide upside to this guidance and will be refreshing that as the year plays out.

Okay. I appreciate that. Last one from me. You had mentioned in the release just generally weakening credit trends. Obviously, NPAs 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 really appreciate some additional color on the credit front, what you're seeing on the ground?

Yes, Matt, it's really based on that comment, I mean, we had four consecutive quarters of NPLs coming down classified/criticized being stable or down, so those trends just ticking up is what we're referring to, that could be just event driven or time of the year driven or it could be something as we move forward. But it's modest changes, but it's the first we've really had any changes in an upward direction versus continuing to improve. We've been really pleased with credit over the last six, eight quarters, and this is the first where we saw any ticket in the wrong direction. So no more color than what you're seeing there. We're just being prudent and cautious as we look at those numbers.

Great. That's all I had. I appreciate taking my questions. Thank you.

Thanks.

One moment for our next question. Our next question comes from Chris McGratty with KBW. Your line is now open.

Hey, good morning.

Hey, Chris.

Mark, I have a clarifying question about the NII sensitivity. I want to ensure I understood your comments correctly. In looking at your 10-Q disclosures, it seems that for a down 100 stock, the figure was around $37 million or $38 million, which translates to about $9 million for every 25. Earlier in the call, I thought I heard a higher number, possibly closer to 20 on an annualized basis. Can you clarify which number I should refer to?

Yes, regarding the 20, that figure pertains solely to the variable portion of our loan portfolio, specifically those loans tied to SOFR, on an annualized basis. When reviewing our 10-K and Q disclosures, keep in mind that these are based on a hypothetical immediate shock. I'm providing additional guidance on a gradual decline, where we anticipate that in the initial reduction of 25 to 50 basis points, there might not be a corresponding decrease in our non-maturity deposits. However, it's possible that we are being conservative, and the market could start experiencing deposit relief sooner than a 50 or 75 basis point rate cut.

Okay. Got it. Thank you. And then maybe somebody asked on the buybacks, any signs of decline in the M&A market, maybe more books going around any kind of commentary on that.

Yes, we are exploring M&A opportunities. While it remains a challenge to make the numbers align with rate adjustments, I believe the environment for pursuing suitable M&A has improved compared to six months ago as we progress.

And on that, Curt, just can you just remind us in this kind of environment, what would be the kind of sweet spot of a deal size-wise, business mix kind of stuff like that? Thanks.

Thank you for that question. We view potential acquisitions in two categories: the $1 billion to $5 billion community banks, which would enhance our growth, strengthen our franchise, and carry lower execution risk. We are particularly focused on deals in the $5 billion to $15 billion range, which are more substantial and strategic, but there are very few options that meet our criteria. While these larger acquisitions are more challenging in the current environment, we see a clear opportunity in the $1 billion to $5 billion segment, which aligns well with market conditions. If we can find suitable opportunities and negotiate favorable terms, we believe we are positioned to proceed.

So it feels like if something came, it would be the smaller end based on what I'm hearing unless something really materially change?

Correct.

Got it. Okay, perfect. Thank you.

Thank you. One moment for our next question. Our next question comes from Frank Schiraldi with Piper Sandler. Your line is now open.

Hi, everyone. I wanted to follow up on your comments regarding the variable rate book and its size. I'm trying to consider the overall book and the impact of back book repricing. Is it reasonable to expect that in 2024, we will see repricing effects on that book? If so, I would like to understand where interest rates are headed for the books compared to where they are currently being repriced.

Yes, Frank, in the fourth quarter, pretty much across most of our material loan categories we were coming on somewhere between 7.50%, 8%, the average for the quarter is about 7.70%. So that's the current kind of new money across the board.

Okay. All right, great. And I guess, you mentioned it in the last quarter where they're repricing from, I would assume that hasn't changed much quarter-over-quarter?

Yes, correct.

Okay. Sorry, go ahead.

No, go ahead.

In your presentation, you mentioned that cash levels are expected to return to a range of $50 million to $100 million over time. In your guidance for 2024, are we anticipating a significant decrease from the current $250 million to that target range? Additionally, how much excess liquidity is included in that guidance?

No, no, nothing has really changed in the past quarter with respect to cash and liquidity.

Okay. So you're not, 2024 guide doesn't assume really a much of a change then from where you guys were in the 4Q?

That's correct.

Okay, all right, great, thanks.

Thanks, Frank.

Thanks, Frank.

Thank you. I'm showing no further questions at this time, I would now like to turn it back to Curt Myers for closing remarks.

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.

This concludes today's conference call. Thank you for participating. You may now disconnect.