Rob Holmes: The legacy issues that we’ve talked about in the past, Jennifer, that I think it was pretty vocal for a while about the amount that we saw have worked — has worked its way down to about $130 million left in the portfolio. And that’s — that — those are loans and clients that we would like to work off the balance sheet over time, but it’s down to a very manageable number.
Jennifer Demba: Okay, that’s not too much left. And is that $130 million concentrated in any one industry or type of loan or?
Rob Holmes: No, it’s, what, it’s price, you know what, I’ll let Matt correct me, for what I understand is it’s the majority of it is, is four sponsors across the country, without a sponsor relationship, some of the same sponsors that the firm had trouble with in the past, and we’re working our way through those, the rest is pretty distributed.
Matt Scurlock: Yes. I think that’s entirely accurate, Jennifer, there are legacy credits wholly inconsistent with how we underwrite today. And we comment in the script that the weighted average origination date of those charge offs was 2013. So we’ll continue to work our way through those as we get opportunity for resolution, but wholly inconsistent with underwriting since Rob’s arrival.
Jennifer Demba: And what are you seeing in terms of credit trends in the rest of the portfolio other than what you noted in terms of non-accruals being up from businesses, more dependent on discretionary on consumer discretionary?
Matt Scurlock: Yes, Jennifer, I mean the Fed has been on the path now for nearly a year to try to increase unemployment and lower consumer spending. Over that same period, we’ve been consistently conservative in our view and our approach to how we manage the reserve adding nearly 40 basis points over the last 12 months. So while all the later stage indicators of credit health have actually improved year-over-year, so criticize down 12% and LHI down 33%. We are seeing some downgrades in the past rated book, which we would honestly expect. So when coupled with our conservative outlook, that’s what drove the provision expense. There’re no real trends to highlight there, other than just we’re going to continue to take a conservative approach and be timely in our changes and underlying credit grades.
Operator: The next question goes to Brady Gailey of KBW.
Brady Gailey: Thank you. Good morning, guys. So I want to start with the share buyback, if you look at, yes, thank you. I wanted to start with the share buyback, if you look at last year, so 2022, you repurchase about $115 million of stocks about 4% of the company. And despite doing that your common equity Tier 1 increase from 11% to 13%. So it feels like the buyback could be a lot larger in size this year versus last year. I mean is that correct? Is there any way to help us size how big the share buyback could be this year?
Rob Holmes: As you, yes, thanks, Brady. I thought you’d be happy with our first share repurchase program, but you want more. I’m kidding. I thought on a serious note, we talked about before we have a highly disciplined framework that we go through on share repurchase, as you know, much to your frustration, and some others. We look at organic growth, other opportunities, there’s a whole metric of framework that we work our way through, before we decide on capital actions. Before two years ago, we weren’t in a position to do any capital actions whatsoever. Now, as you know, we’re still balancing that against business opportunities. And as you know, my preference is to invest in the business, in organic growth and progress across the firm.
But the fact of the matter is, when you can buy back $150 million of shares at tangible book, that’s pretty good. And you can’t ignore that. And we could afford to do both at this period in time, with very conservative capital liquidity levels, and still reinvest in the business. So we felt good about it. And we will continue to be disciplined and opportunistic in the buybacks as opportunity presents himself. So to project how much this year, I can’t do that. But I’ll tell you we’ll, sorry. Sorry, Brady, go ahead.
Brady Gailey: Yes, I just got my follow up question is just kind of a bigger picture question on the ROA. Now we have the 1.1% target out there for 2025. As I look at the core ROA for last year it was about 50 basis points. That’s down from 65 basis points in 2021. I know you guys are investing a lot in a revenue producing activities. So when should we expect to start to see the ROA really inflect higher? And do you guys still feel good about the 1.1% in 2025?
Matt Scurlock: We definitely feel good about our ability to achieve the longer-term targets, Brady. And you’ll see material progress throughout the course of the year. So seasonal step back in the first quarter, which will include most performance metrics, as you have seasonally slow warehouse but then for the duration of the year, you’ll see a steady build, as we continue make progress against those targets. And if you look at the guidance, we have given you a lot of components to assess what that progress looks like this year, including how we’re thinking about capital and liquidity levels so in one of the slides checks as a comment we’ve made quite often we fully realize that this is the year to transition from capability build to financial performance, and the company is oriented to do so.
Operator: And our final question goes to Brad Milsaps of Piper Sandler.
Brad Milsaps : Hey, good morning. Thanks for taking my question. Matt, I joined a few minutes late, but I think I heard you mention that the increase in professional fees after making the adjustments in the last couple of quarters, primarily related to maybe ECR costs. I was wondering if, in fact, that is correct. And then can you give us a sense of as we see further rate increases, how much more that could go up. It would almost seem that if you have a roughly $80 million year-over-year increase in expenses, maybe half of it is coming from that if professional fees sort of hold here, but just wants to make sure I’m understanding that relationship correctly as you kind of move forward?
Matt Scurlock: Yes. Thanks, Brad. So just a couple of points to call out. So there’s a lot going on with noninterest expense this quarter and this year. The $680 million adjusted noninterest expense is what we’re building full year guidance off of. And then if you’re thinking about run rate for those who may have interest in building models, that $182.3 million is a pretty good fourth quarter number, although the underlying composition is going to shift a bit. There’s some — somewhat unusual or exotic items that inflated what we’d call sort of other noninterest expense and then decrease some of the salary benefits expense as we reset accruals. So if you look through that legal and professional line, I think you could keep about $2 million of that increase.
And then there will be some sensitivity in that line on the income statement as we see or don’t see rates move up. So disclosing individual or incremental move is probably not what we’re willing to do at this point, given some of the competitive nature of how we compensate folks. But you’re right that, that will be an area that’s going to be sensitive to interest rate changes.
