Jason Darby: Yeah, I think that’s right. And then, Alex, I think to add on to Priscilla’s comment, the nature of the political deposits as we get a little bit closer to the election, we’re now inside of a year, those become in our view much more transactional in nature with shorter duration. So the ability for us to deploy funds against that is a bit limited, but I think more importantly, we’re certainly prioritizing capital and the building of that as one of our key focus and key objectives. And moving some of the deposits off balance sheet helps maintain our upward trajectory on capital. And the other side of that strategy really gets into how we stage the wholesale funding that we have on our balance sheet right now. We have another $220 million coming due for maturity during the first half of this — of this year of 2024.
So in a lot of ways, we will be also bringing those deposits back on to balance sheet to match off the funding extinguishment on the wholesale side as we go into the — go into the half of this year.
Alexander Twerdahl: Okay, that’s helpful. Is it fair to assume that the sort of the economics of moving off balance sheet and the fee generated would be pretty comparable if they are just invested in cash, if they’re on your balance sheet?
Priscilla Sims Brown: Yeah.
Jason Darby: Yeah. We’ve been able to negotiate a pretty competitive rate for the off-balance sheet movement. And some of that has started to flow through non-interest income. So we made a conscious decision to — to think about the off-balance sheet deposits in that way. We obviously could have done something through NII. But I think the reality is we can have a flow-through of non-interest income on that spread and still maintain our capital targets at the same time, which is the essence of the strategy.
Alexander Twerdahl: That’s great. Thanks for walking through that for me. That’s all my questions for now.
Jason Darby: Thanks, Alex.
Operator: Our next question comes from the line of Janet Lee with JPMorgan. Please proceed with your question.
Priscilla Sims Brown: Hello, Janet.
Janet Lee: Good morning. Hello. I’ll start with loan growth. Is the 2% to 3% sequential loan growth that we’ve talked about still viable? It appears that the paydowns of C&I revolving lines impacted the 4Q results. But if you look into 2024, can we expect the pace of loan growth to pick back up versus a more muted level of growth in the fourth quarter?
Jason Darby: Yes, Jan. I think that’s exactly right. We are still very comfortable with a 2% to 3% sequential loan growth target, particularly in our neutral balance sheet position through the first half of the year. And while we had some lower loan growth in the fourth quarter, the originations were certainly robust and we also feel like the pipeline that we’ve got established and they talked about a moment ago will have some nice pull through in the first quarter and the second quarter to support that.
Janet Lee: Okay. And the key driver of that is going to be from your impact lending area, including sustainability, C&I and CRE? Okay.
Priscilla Sims Brown: That’s correct.
Janet Lee: And in your NII outlook for 2024, can you talk us through the interest-bearing deposit beta that’s assumed on the way down?
Jason Darby: Absolutely. So on the way down, we’re assuming a 35% deposit beta on our interest-bearing accounts. And that is a lower rate than what we would assume and have assumed on an up scenario, simply because we just feel like the rates aren’t going to be able to move as quickly in relation to how the Fed would move. But we are taking a conservative approach, and 35% is a move, but I think there is obviously room for that to be an improved number. But we’re not going to model it that way. I think we’re going to be very cautious about how we would affect our customers’ rates and make sure that our customer feels very comfortable with how they’re being compensated by the bank and what the bank’s pace of movement is. We certainly don’t want to be one that’s snap reacting to a drop in rates because with our profile as it is right now, we have a little bit of an ability to be patient and really allow our customers to feel as much benefit as possible in a down rate scenario.
Janet Lee: Okay. And in terms of your NII sensitivity, if I heard that right, $1.6 million annualized decline in NII for a 25 basis point movement in rates. I think it’s a little bit a step-down versus maybe $0.5 million that you talked about in the prior quarter. What has changed over the past quarter in terms of your sensitivity because a lot of other banks have reduced their asset sensitivity? It’s on a more incremental basis, but still —
Jason Darby: Yeah. I think the guidance that we were giving in the prior quarters was really mainly based on an increase in interest rates. And so, that $0.5 million reduction was really on an increase in interest rates, as we start to think about it on the decrease moving to $1.6 million is a little bit more of a shift for us from where we had previously been. Now that said, what we’re modeling is that’s on top of what the forward curve is already suggesting. So we’ve baked into our NII guidance for 2024, an assumption around — a conservative assumption around what the forward curve suggest for rate cuts through the back half, really through all ’24 but accelerating in the back half of ’24 and additional $1.6 million. And remember it would be a parallel shift with short-term and long-term, but that one $1.6 million is incremental, should the rates decline at a rate further than what the forward curve is currently suggesting.
