Dan Rollins: Thank you.
Operator: Thank you. And our next question comes from Brett Rabatin with Hovde Group. Please go ahead.
Brett Rabatin: Hey, good morning, everyone.
Dan Rollins: Hey, Brett.
Brett Rabatin: Wanted to ask on the — hey. I wanted to ask on the balance sheet, the $1 billion that you have remaining to reinvest, maybe Valerie, kind of how you think about that $1 billion, and what you’re looking for from a duration and yield perspective? And then just, Dan or Valerie, any thoughts on replacing the $3.5 billion with the bank term funding program, what you might do to replace that?
Dan Rollins: I’ll start with that one. I think we’re really proud of what we’ve been able to do from a deposit growth perspective in the community bank over the last couple of quarters, and we’ve challenged the team to continue doing that. So, if we can continue to grow those core customer deposits that are out there, that will allow us to continue to reduce wholesale funding.
Valerie Toalson: Yeah, the — I’m sorry, what was your other question?
Dan Rollins: Yeah, what was the first question?
Brett Rabatin: The remaining $1 billion…
Dan Rollins: The $1 billion, yeah…
Valerie Toalson: Okay, I’m sorry about that. We got distracted. There is about $1 billion left of that. We’ll probably do a little bit more in purchases and securities in the first half. We’ve been able to average five to six years or so given where rates are right now, that’s probably not an unrealistic expectation for some of that. The other half, say, give or take, is really it could be in securities, it could be in various fundings. First quarter has a little bit of volatility with some of our public fund deposits. It could be lowering some of that bank term funding program borrowings. We’re really kind of playing it by year on what the balance sheet does, and what’s going to make the most benefit for us from yield perspective.
Brett Rabatin: Okay. And then secondly, on the NPAs and the formation, and I heard Billy earlier, so I’m just going to presume it seems like credit is fairly stable, but there’s been some migration through criticized to non-performing. And my question is, is there anything that’s underlying that? Is it in healthcare, which is my guess? But are there any other industries that might be moving through the pipeline, so to speak?
Dan Rollins: Yeah. I think criticized has been basically flat now for multiple quarters, I think you go back to 3/31, it was actually higher than we are today on criticized. From that perspective, it’s been really stable. It’s very well spread across multiple industries, multiple geographies.
Billy Braddock: It is. The one area, and we’ve highlighted this for several quarters, and again, it’s a couple of credits. We’re not talking about widespread, but I would say restaurant is something that continues to have some follow-through impact. It’s not any specific brand, it’s not any specific geography. Like I said, those are idiosyncratic cases, but they are that industry. Otherwise, the other industry that we’ve seen some is kind of senior living. If that’s what you mean by healthcare, then, that’s the one piece of healthcare where I would agree. Otherwise, in healthcare, we’re seeing pretty much stability.
Dan Rollins: Yeah.
Brett Rabatin: Okay. If I could sneak in one last one, maybe Valerie, just on the DDA balances and average size of commercial and consumer checking accounts. Are those getting to levels where you think the drain of those accounts is not going to impact the balance sizes as much from here? And maybe they stabilize to move higher with new customer creation?
Dan Rollins: We haven’t seen a big change in average balance size.
Valerie Toalson: Right. Yeah. I think you’re talking about our noninterest-bearing deposits.
Brett Rabatin: Right.
Dan Rollins: But I don’t think we’ve seen a big change in average account size.
Valerie Toalson: Right, not in average account, but a little bit of movement between the two. Yeah. So, we’ve continued — for two quarters at a row now, it’s been kind of a consistent, slower pace, about a 1% movement. Our forecast, we do continue to be a little bit conservative in that. Our forecast has those noninterest-bearing to total deposits going down to 21% by the end of the year. But obviously, that’s a big focus for our sales teams and our community banks, is to bring in those operating accounts and bring back some of those noninterest-bearing deposits that flowed out during the — they actually did flow out, they flowed at the higher yielding products for the most part in 2023. So, yeah, there is some opportunity there.
Brett Rabatin: Okay. That’s really helpful. Thanks for all the color.
Valerie Toalson: You bet.
Operator: And our next question today comes from Brandon King with Truist Securities. Please go ahead.
Brandon King: Hey, good morning.
Valerie Toalson: Good morning.
Brandon King: So, Valerie, on loan yields and betas, could you potentially see a scenario where loan yields actually stay stable in the event of Fed rate cuts? Just how you thinking about loan betas from here from yield base?
Valerie Toalson: Yeah. The loan beta, excluding accretion, went up to 46% in the quarter, down from — or up from 44% in the prior quarter. As we look into next year, like I said, because we have recording or we’re forecasting that forward rate curve, we likewise have that yield on our earning assets, which includes the loan, actually continue to improve slightly through the first half of next year before really kind of stabilizing off. And that’s because of a couple of things. One, and significantly is that level of repricing of loans as they’re coming on the balance sheet that we showed on that Slide 18, as well as, of course, the impact of loan growth being higher — at higher yields than the overall portfolio. So, that’ll continue to drive that up once there is some changes in the interest rate environment, there is a moderating impact on that. But on a net-net basis, we believe it’s all going to be positive to the NIM.
Brandon King: Okay. And Dan, with your loan growth expectations for the year, could you talk about what areas you’re seeing the most opportunities and the strongest growth, and kind of how your customers are starting to feel now that potentially we may be hitting a soft landing, and if there’s more optimism just as far as investing in their own businesses?
Chris Bagley: Yeah, this is Chris. I’ll kick it off. Our view is that it will be broad-based. We have a great loan generating teams out there, and we — our view would be we can grow in all aspects, in all areas and all geographies as we look forward, especially if the rates do what they say they’re going to do, that’s going to generate some excitement and activity in the borrowing world.
Hank Holmes: Yeah, I completely agree with Chris. This is Hank. One thing we have is a continuing advancing in our CRE portfolio of multifamily construction loans. So, you’ll see some modest growth there. And as the calendar changed in 2024 and we start reviewing pipelines, I’m pretty encouraged by what we’re seeing, and it’s pretty broad-based, as Chris mentioned. We’re excited about the bankers that we have in place and our footprint, as Dan mentioned in the opening remarks. And so, I’m feeling optimism.
