Andrew Terrell: Okay. That’s helpful. And then is there a way to quantify the €“ I know you mentioned some rate-sensitive depositors leaving the banks that led to the deposit decline this quarter. Are you able to quantify how much the deposit decline was kind of due to rate sensitivity from your customers? And have you identified kind of what you view as maybe surge deposit balances or rate-sensitive deposit balances remaining that could be at risk of migration moving forward?
Jeffrey Deuel: Don, do you want to take that one?
Donald Hinson: Sure. So as far as the surge deposits, that’s a hard one. We’ve had a lot of change since, you might say, the beginning of COVID. We were at, again, I think $4.5 billion or $4.6 billion in deposits. Then we peaked to $6.5 billion in early 2022, we’re down to $5.9 billion. But we’ve also €“ at the same time, we added, I think maybe 1,000 customers through PPP. We’ve added teams of people, various producers. So where that should finally shake out, it’s kind of hard to say if you talk about surge deposits. I think we’re continuing to see some outflow similar to what we saw in Q4, at least in the first part of the quarter. I expect that to slow down as we get further into the year. So it’s really hard to give you a number on where that’s at. And I’m sorry, what was your first part of that question?
Andrew Terrell: Are you able to quantify the amount of deposits, I guess, of the $300 million deposit decline this quarter?
Donald Hinson: The rate sensitivity piece?
Andrew Terrell: Yes. That’s right.
Donald Hinson: I don’t have, again, a number, but from getting the intelligence from our bankers out there, I would say, 80%, 90% are probably due to rates.
Andrew Terrell: Yes. Understood. Okay…
Donald Hinson: Some of it’s asset purchases, some of it’s order distributions. So there was some of that going on, but I would say most of it’s due to rates.
Jeffrey Deuel: Andrew, what Don is quoting how the deposits change through the last couple of years, what also complicates it is you’ll recall that we gathered up a lot of new customers as a result of our work around PPP. So they’re embedded in there, too, and that includes their surge deposits, but also their operating deposits as well. So it’s pretty complicated.
Andrew Terrell: Yes. No, understood. Well, I appreciate you guys taking the time for the questions today, and the rest of mine have been asked or addressed. I’ll step back.
Jeffrey Deuel: Thank you.
Operator: Thank you, Andrew. The next question is from the line of Kelly Motta with KBW. Kelly?
Kelly Motta: Hi. Kelly with KBW. Thank you. Thanks for the question. Most of mine have been asked and answered at this point. But I was hoping to get a little color on your office portfolio. Your exposure is a little bit larger than some of the other banks that follow. I know you guys are really conservative on the lending front. But can you just provide any color on kind of the location of that, whether it’s downtown versus suburban? And any sort of credit metrics would be helpful.
Jeffrey Deuel: Yes, Kelly, just to give you a little bit of perspective, we consider the core locations to be the ZIP codes in the primary downtown markets of Seattle, Tacoma and Portland. And if you focus on those areas, we don’t have a lot of exposure there. I think it boils down to a total of 27 loans with total outstandings of just under $48 million, which boils down to 8.3% of the office CRE portfolio. And those would not be the high-rise buildings that are experiencing the highest levels of vacancy. They’re probably medical facilities or whatever that might be in those markets. But if you look at our criticized office loans, for example, they totaled $23 million. And there’s €“ I think it boils down to about 15 loans, and three of them are considered in those core markets.
So our exposure is pretty limited. And while we are seeing vacancy for downtown offices, to be going up, we’re not necessarily seeing a significant impact in the broader market. You might be reading about all of the tech companies would be sort of breathtaking numbers of people that they’re laying off, which is something we haven’t seen in a long time and that industry hasn’t seen probably ever. But I think for us, those layoffs are still kind of to be determined for the Puget Sound area. And we think that the impact will be roughly proportionate to the overall size of the company’s footprint and geography. So while it will have some impact as we go along, it may not be as significant as the numbers would imply. We also are seeing some of the tech companies reducing their footprints for hybrid work in addition to the headcount reductions, but we’ve been seeing that for several quarters now.
So that’s not necessarily new. And I don’t get the impression this is a bubble bursting. I think it’s more a correction for the tech companies. But overall, as you can see from our credit quality metrics, things are pretty benign right now.
Kelly Motta: I appreciate all the color. I guess more broadly speaking, are there any other areas that you think, from our seat, we should be watching more closely?
Jeffrey Deuel: Not for us in this region. I mean, we just got some information from our chief appraiser. He gives us an update every month. And there’s a little softening in industrial and multifamily not significant enough to necessarily cause concern. Retail is actually pretty good right now. And hospitality, we know the hotel portion of the market is still in recovery mode. But as we’ve said in some of our comments, even our hotel portfolio is improving. One of the €“ I guess, the metrics that I watch for is what’s going on with single-family. And you know we had a pretty significant rise in values of homes in the general region, people moving around and buying new homes in different markets. But the information we have would suggest that while things have slowed down a little bit, single-family housing maybe pricing dropped back from what it was at the end of the year to what it was maybe at the beginning of the year.
