Catherine Mealor: One follow-up on just the margin outlook. And thinking about how your margin will react in a scenario where we see rate cuts, can you talk to us a little bit about the puts and takes in just loan yields? I would have thought with 60% of your loan book variable, we may see a period of time where your margin actually comes down first? And then maybe as you kind of see growth improve or the back book starting to reprice at a faster pace, then you may see the NIM expansion? But that size of the variable rate loan book, could have a near-term kind of negative impact on the margin. Is it just that the CD repricing is enough to offset that? Just kind of talk us through why that’s not a bigger negative impact than we may think?
Mike Achary: Yes, Catherine, this is Mike. I’ll start with that. It’s a great question and I think as much as anything else, it really is all about time. So again, if you think about the way we have the rate cuts, you know, kind of choreographed out, the first in June and then a couple of months later, September, and then finally in December. So, as you think about ‘24, the rate drop in December really won’t have much of an impact, obviously a bit of an impact in the fourth quarter. But again, the way we’re kind of thinking about the second-half of the year and the way we’re trying to choreograph, again, our CD maturities, we’d like to be in a position where certainly a rate cut of 25 basis points is impactful in terms of our variable loan rate.
But again, our fixed rate loans continue to reprice higher, a solid 12 basis points per quarter for the past five or six quarters. And we see that continuing at least through the balance of ‘24, so that is a little bit of an offset to the impact of the variable rate impact from a lower rate environment. But again, the CD maturities we think will also be very helpful. So I think net-net, if the rate drops are spaced out the way we think they could be spaced out, that certainly I think will be helpful to avoid any kind of potential NIM compression in the second-half of the year.
Catherine Mealor: That makes a lot of sense. And so then in a scenario where the forward curve is right, and I’m not saying it is, I don’t think it is, but if we say that’s the way it plays out, so there could be more NIM compression if we do get fixed rate cuts this year that are coming at a faster pace?
Mike Achary: Yes, especially if they are bunched up together or in an environment where the rate cuts are maybe more than 25 basis points. You know, so we’ll see. But again, the way we’re thinking about it is kind of the way I described. So that’s the way we have it kind of planned out.
Catherine Mealor: Yes, that makes perfect sense. And then my other question is just in the NII guide, any change to kind of the size of the bond book outside of the ministry’s restructure and how you’re thinking about liquidity size, just kind of trying to think about how you’re thinking about size of average earning assets as we look to that NII growth [Multiple Speakers]
Mike Achary: Yes, in terms of — sure, sure, in terms of kind of managing the balance sheet next year related to the bond portfolio especially. I mean, obviously it’s down considerably because of the restructuring transaction that we affected in the fourth quarter. But as we think about next year, we’re really going to be in the mode of kind of resuming, reinvesting paydowns and maturities back into the bond book. So unless there’s some other activity in the bond portfolio, we would expect that to be pretty flat from where to end the year. And in terms of average earning assets, given the guidance we’ve given are around the kind of loan growth we’re expecting next year, as well as the level of deposit growth, again, what we were striving for is for loan growth to be funded, you know, kind of dollar-for-dollar or as close to that as possible through deposit growth.
And if you put all those dynamics together, including the bond book on balance, compared to last year being down, we would envision a scenario where average earning assets year-over-year would be kind of flattish for the most part.
Catherine Mealor: Great. That makes sense. All right. Thank you for the clarification.
Mike Achary: Thanks, Catherine.
Operator: Your next question comes from the line of Casey Haire from Jefferies. Please go ahead. Your line is open.
Casey Haire: Yeah, great. Thanks. Good afternoon, everyone. So just another follow-up on NIM, so if I’m understanding this correctly, the modest NIM expansion that you guys are expecting this year is predicated on a little bit of deposit beta pressure in the early going and then proactive management funding costs of deposit costs down once you start to get Fed cuts. I’m just wanted to get some color. Is the velocity of the deposit beta in the first-half, is that pretty modest? And then it’s going to be pretty more — it’s going be more, the velocity is going to be faster on the way down as you guys manage once you get fed cuts?
Mike Achary: Yes, I think on balance, Casey, that’s right. So we would expect the deposit beta impact to be pretty modest, if not flattish from where it ended the year. So we don’t see a whole lot of change in terms of our cost of deposits really in the first quarter. You know, with the end of the year at 1.99 in terms of December 1.93 for the quarter. And I think as we think about the first quarter that could be up a handful of basis points, potentially even a little bit less than that. And again, you know, a lot of this depends on our CD maturities that we have over the cross — across the year, not only for the first-half of the year, but the second-half of the year, and how that will line up with any potential rate cuts in the second-half of the year. So I think overall what you said is pretty spot-on.
Casey Haire: Okay great and on the CD maturities which is there any color you can provide on this on the maturity schedule in terms of balances and, you know, what the rate they’re running off at is?
