Patrick Ahern: Office paydowns. Yes, I mean, we saw, I think, in 2023, a good trend of office. We had a handful of probably half of the deals that we came through. Our maturities, end of 2023, were payoffs. I think it’s still going to be kind of a similar pattern, but it’s all case-by-case. We’ve got about — I think the ones that were kind of circled for the first half of 2024, about 40% of them are going to either refinance or sell, and that’s the strategy put in place. The others are going to — we have extensions in place, so they qualified for extensions, but that’s under the current environment. So it’s still a mixed bag. Clients are starting to — the office market is hard to tell. I think that stabilization is still early to call that.
I think in other areas, we’re seeing payoffs from multifamily as long-term rates have come down. I think we’re starting to see a lot of clients kind of move off the sidelines there in the industrial market as well. We’re still — it’s not as hot as it was two years ago, certainly, but still a pretty steady pace of lease-up and therefore, sale in that asset class as well.
Timur Braziler: Okay. And then just the maturities for office, both in the first half and for the year, if you have those numbers?
Patrick Ahern: We’ve got — first half of the year, we’ve got about $140-some million in maturing office loans coming up. And like I said, we’ve kind of circled the majority of those with strategies in place.
Andrew Harmening: I’ll just close out on commercial real estate by saying we’ve had five straight quarters without a charge-off. We like how that portfolio is holding up. We’re all over both the office portfolio and the overall CRE portfolio. And frankly, the experience level of our bankers in the CRE group is very strong. And I think relative to the industry, we feel pretty good about the position we’re in. Certainly, it could be lumpy as time goes by, but have a pretty good handle on that. Thank you for the questions.
Operator: Our next question comes from Chris McGratty with KBW. Please state your question.
Unidentified Analyst: Hi. This is Nick [Mutares] (ph) on for Chris McGratty. Maybe just on the capital levels, given as we move through 2024 and further out, any appetite for a buyback or even further tweaking or derisking of the loan portfolio as we look more longer term?
Andrew Harmening: Nick, I like our organic plan. If we can hire the most talented in the industry and grow our balance sheet in the key areas that we have, I believe the investment community will be happy with the return. So that’s where our entire focus is right now. With regards to another action on the portfolio, we don’t have anything planned there at this time. And buybacks, that is not front and center for me. I think we have ways to use our capital that we’ll be happy with the midterm and long-term results.
Unidentified Analyst: Okay. Great. And then just on the cash flow from the bond book, do you guys have like the quarterly cadence of runoff of the securities?
Derek Meyer: It’s about 150 to 200. And because we’re growing it with fixed assets, you would expect to reinvest maybe 300. So think of a 150, 200 runoff, 300 million purchase quarter. And then the spread on that, the runoff rate versus the buy rate would be 150, 200 basis point difference.
Unidentified Analyst: Great. Thank you for taking my questions.
Andrew Harmening: Thank you, Nick.
Operator: Our next question comes from Brody Preston with UBS. Please state your question.
Brody Preston: Hi, good afternoon, everyone.
Andrew Harmening: Hey, Brody.
Brody Preston: I just wanted to ask a handful of questions on the NII. Derek, I just want to put a finer point on the beta commentary. Was that 45 to 55 what you expect to achieve by year-end 2024? Or is that more of a comment about where it will be over the next couple of years?
Derek Meyer: That’s March to December of this year.
Brody Preston: March to December. Thank you very much for that. Within the core deposit growth guidance that you guys have laid out, how much of that is coming from CDs?
Derek Meyer: I don’t think we’ve provided that level of detail. I guess, it’s going to depend on the market. I’d be happy with the mixed detail I gave you already on the noninterest-bearing deposits and the residential real estate.
Brody Preston: I want it all there.
Derek Meyer: I wanted to say, when you said five questions or six questions or whatever it was.
Andrew Harmening: I did ask Derek why he is providing so much detail, and he said Brody demands it.
Brody Preston: This is true. I’m a little bit of a pain in the butt. I just wanted to also ask on the BTFP. I noticed in the appendix, you kind of called out how much you have in capacity. I wanted to ask how much of the BTFP you’ve used at this point?
Derek Meyer: As of the end of the year, none.
Brody Preston: None. Okay. Thank you very much for that. I felt like I had one more for you guys…
Andrew Harmening: Brody, I feel compelled to say that I wouldn’t be afraid to draw on that. In fact, I think there’s a reason that is put in place. And if we can get advantageous terms relative to the market, then we’ll use it.
Brody Preston: Got it. Last couple for me on the loan growth guide. Wanted to better understand, another mix question, how much of that — how much of the growth you’re expecting to come from the auto portfolio?
Derek Meyer: We’re looking at similar levels that you’ve seen quarter after quarter. So in dollar terms, it’s about $200 million to $250 million.
Brody Preston: Got it. And then the last one I had is just on the auto yields. The pickup this quarter was pretty strong at 35 basis points. I wanted to understand if given the growth guidance that you just outlined for auto, what we could expect for maybe the yield cadence from a repricing perspective within that book?
Derek Meyer: We’re not providing that specific guidance on that. Nice try.
Andrew Harmening: But I think you had a nice pickup from the fourth quarter. Look, the business is a good business for us, and the average FICO in December was 786. So when you think about an opportunity, when you see the yields that we’re getting and you see the quality of the credit, we’ve said before, we don’t want to just be the auto bank, but it’s a nice portfolio for us that is performing well, that we’re getting a good yield on and has a very, very strong underlying credit.
