Ken Lovik: Yes, probably. Yes, that sounds, that’s about right.
John Rodis: And then also on the fee income side, I think last quarter you talked about growth of 15% to 20% next year, is that still sort of a good ballpark figure?
Ken Lovik: If they hit my $500 million number I just threw out, it’s going to be better than that.
John Rodis: I’d rather see you under promise and over deliver, David.
David Becker: Then book in the 440 that they’re telling me and you’ll be okay.
John Rodis: Yeah.
Ken Lovik: I think you’re okay with that assumption, John.
John Rodis: Okay. Okay. Okay, guys. Thank you.
Ken Lovik: Thank you.
David Becker: Appreciate it. John, sorry I missed your show, buddy. I had a conflict. I couldn’t get out of, but I’m sure Ken and Nicole did a great job.
John Rodis: No problem at all.
David Becker: All right. Thank you.
Operator: Thank you. Your next question comes from Brett Rabatin from Hovde Group. Please go ahead.
Brett Rabatin: Hey, guys. Good afternoon. Thanks for the questions.
David Becker: Hey Brett.
Brett Rabatin: Hey. I wanted to go back to the loan yields and you talked about 20 basis points to 25 basis points of improvement in the fourth quarter. They were up 9 basis points in 3Q. What’s the – can you talk about the loans that matured 3Q versus 4Q and then maybe if you have a maturity schedule for 24 out of the fixed bucket?
Ken Lovik: Yes. I think the loan yield; some of it is just timing of funding. The opportunity for us on the loan book is, again, we continue to let some of the lower stuff come off. And we have – we had good quarter-over-quarter growth in construction, but the timing of that was probably a little bit more weighted on the back end of the quarter. So that impacted the yields a little bit in terms of for the quarter. And then we had good production in franchise for the quarter. That sets us up for a good starting point for the fourth quarter. And obviously, the SBA balances were up as well. So I just think with some of the production perhaps being a little bit more weighted in the back end of the third quarter, it sets us up really good for the fourth quarter in terms of loan yield improvement.
I guess looking over the course of the next, let’s just call it the next 18 months, in terms of our variable rate loans are about 20% of our loan portfolio today. And then when you take into account what’s going to mature and also pay down in our fixed loan portfolio, I mean, we’re probably looking at almost $1.1 billion or so, about 30% of the loan book that’s going to turn over between now and the end of 2024. So for us, a lot of the loans aren’t necessarily renewals. They just mature and they’re replaced with new loans or new borrowers. But as we remix and optimize the compensation, we’re just going to see a lot of good loan repricing and loan replacement, if you will over the next 15 months.
David Becker: A lot of our municipal portfolio also, Brett, has semiannual payments on it, so we get a big bump in June and we also get a big bump in December. We’ve got, I think this quarter, $20 million plus in repayment on the municipal loans and that’s the 2.5%, 3.5%, 4% paper, so that’ll help as well.
Brett Rabatin: Okay, that’s helpful. And then you guys talk about some of the CDs that are coming off the books and those rates versus the market CD rates that you’re seeing obviously in the 5%, and a 5.6%, where are you guys pricing CDs today and how does that contrast to the CDs that are rolling off the books here in the fourth quarter?
Ken Lovik: Right now we’re priced in that six to 12-month range in the upper fours and what’s going to be rolling off is going to be on the commercial side, it’s going to be about 5.5%, and on the consumer side it’s about 5.12%, 5.14%, so we should pick up 40 basis points, 50 basis points and plus we hope to reduce the outstanding cash. A lot of that’s going to roll during December. We have over $157 million, I think, coming up for maturity in the month of December and we’ll probably see about half of that go away, so it’s late in the quarter but it should still have an impact on our interest expense.
Brett Rabatin: Okay, and then just lastly, the DDA growth this quarter, can you talk about that and if that’s the start of a trend or if that was a function of particular clients or business?
Ken Lovik: Yes. Most of that growth and interest bearing demand is actually BaaS deposits, which we’ve been continuing to grow, obviously over the last two to three quarters, but most of that growth is BaaS within that category.
Brett Rabatin: Okay. What about the non-interest bearing piece, Ken?
Ken Lovik: The non-interest bearing, sometimes that can be a little bit volatile. Some of the – there can be some big balances that impact that because a lot of times in our construction business when the sponsor, the borrower puts equity into the deal upfront, they’ll put that into a non-interest bearing balance here and then that gets drawn down, but as we do more construction, it’ll go up. So that’s probably the biggest piece of any quarter-to-quarter movement in that line item.
David Becker: We also have some municipal sites that, Brett, like the City of Fishers here, come mid-November, they’ll have a big pop when they get property taxes in and that’ll set in a non-interest account for 30 days, 60 days until they get it reallocated, so there’s some seasonality in some of our municipal deposits.
Brett Rabatin: Okay, all really helpful. Thanks so much.
David Becker: Appreciate it, sir. Thank you. See you next week.
Brett Rabatin: See you next week, that’s right.
Operator: Thank you. There are no further questions at this time. I’ll hand it back to David Becker for closing remarks. Mr. Becker, you may proceed.
David Becker: Thank you, Sergio, and thanks everybody for joining us on today’s call. As we look forward to 2024 and beyond, we remain extremely excited about the future and the opportunities here. Strong performance in the commercial and consumer lending teams, including our growth in the small business construction lending and further growth opportunities with the fintech partnerships and banking as a service are expected to drive greater revenue growth, which combined with stabilized deposit costs. We believe will translate into the stronger earnings and the increased NIM over the course of the next year. As fellow shareholders, we remain committed to driving improved profitability and enhanced shareholder value, and we certainly thank you for your time today and have a good afternoon. We appreciate it. Thanks.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.
