But I just don’t have any idea of what that number could possibly be. But we are rifle focused on, and you think about it, Steve, it’s like, what person ever said to you, well, I got a $1.5 million loan from a bank, and everything is fantastic. Most people say, well, I got a $100,000 loan from a bank, or I got a $25,000 loan from a bank, and I really build my business over time. And the fact that we can reach down to some of the underserved communities and take care of them, the ones that are deserving and have good historic credit quality. So I mean it’s a huge difference.
Steven Alexopoulos: Got it. So best guess, Chip, same growth this year as last, like no real changes to the trend line announced.
Walt Phifer: Again, I think close to Chip’s point, these small dollar loans, we would likely sell pretty close to 100% of them right into the secondary market. Because of the dynamics and the optionality it gives us to hold those larger loans like Chip said. So, I don’t think that you would see the opportunity that we’re looking at with small dollar on the loan growth side on the balance sheet you would see it in fee income.
Steven Alexopoulos: Got it. Okay. Thanks for taking my questions.
Walt Phifer: Thanks, Steve.
Chip Mahan: Thanks, Steve.
Operator: Our next question comes from the line of Brandon King of Truist. Please go ahead.
Brandon King: Hey, good morning.
Chip Mahan: Good morning, Brandon.
Brandon King: So just a follow-up on the changes in SBA and I know just early stages and Chip, you’re still thinking through this. But Live Oak is known for such a high touch model. Do you think about kind of extrapolating that towards these smaller dollar loans as well? And what could that potentially mean as far as the people you have in place, and the systems and infrastructure?
BJ Losch: Hey, Brandon, it’s BJ. So we will still be as high touch as we have always been. But I think hi-tech is going to be the emphasis here on small dollar. So what Chip talked about is first and fundamentally very important, the SBA is making it easier for borrowers to, be eligible for SBA dollars, which makes it easier for us to get them approved and get them the money. The way that we’re going to do that is to really automate as much as possible on the front end for our borrowers and our lenders to be able to get the documentation that we need, to make the credit decision, more on an automated fashion, not 100%, but much more than we typically would on a larger deal today. And then build out the appropriate infrastructure to service this the right way. So, it will be much more of a technology solution than not.
Chip Mahan: Yeah, and I think one of the things, Brandon, I’ll add is, is I said on the call a quarter ago, we have 62 22-year-olds that collect financial statements every quarter on every one of our 7,000 customers. We won’t be doing that on these small dollar loans. We’ll get an annual tax return, A. B, if our borrowers are in a jam, our special assets group is really a hand-holding group. We do everything that we can to help these borrowers if it’s deferred this or blah, blah that, we want to do that. We probably won’t do that on these – could be a massive number of under $500,000 loans. So I think that special asset treatment in the event of material adverse change will be a bit different.
Brandon King: Okay, very helpful. And then, Walt, you mentioned how, the CD maturities are chunkier in first quarter and fourth quarter of each year. Could you give us a sense of the sort of maturities you’re expecting or the size of maturities you’re expecting this year? What kind of like the runoff rates and what potential renewal rates could be?
Walt Phifer: Yes. No, thanks, Brandon. Great question. So Q1, it’s not quite as large it’s the $875 million that we saw here in Q4. It’s slightly below that. The average rate of renewal will be pretty similar to what we saw in Q4. So I would say plus 100 bps at the minimum. Typically, with our key, just the way the deposit seasonality forms throughout the year, it’s typically Q1 and Q4, or the heavy quarters, a little bit lighter in Q2, and even lighter than that in Q3. One of the things that we’re working on with just our CD strategy is how we can continue to try to level off those CD maturities. Probably we’ll start to see some more progress here in 2024. So this is more of a 2025, 2026 benefit. That’s where the using channels like wholesale can help you essentially plan and find certain maturity gaps that you can kind of slide funding into.
Brandon King: Okay. Yes, and I was actually going to ask, I saw, noticed the duration of wholesale deposits declined in the quarter. I was wondering if that was intentional and could be potentially preparing for a down rate cycle.
Walt Phifer: Yes. No, that’s exactly right. One of the ways we navigated Q4 was essentially maintaining a competitive rate position, but then given all the uncertainty, with central Fed cuts in 2024 in the range of likely, the amount of cuts that could happen, we really start to leverage some more on the wholesale side for odd maturity kind of month, nine months, seven months, four months, and so forth, just to try to help level off that CD maturity portfolio as much as we can.
Brandon King: Got it. Thanks for taking my questions.
Walt Phifer: Thanks, Brandon.
Operator: Our next question comes from the line of Michael Perito of KBW. Please go ahead.
Michael Perito: Hey, good morning, everyone. Thanks for taking my questions.
Chip Mahan: Hey Mike.
Walt Phifer: Good morning, Mike.
Michael Perito: Wanted to follow-up on the expense question. Just the employee bonus, is that something that will recur annually and be accrued for more evenly going forward, or is there another, can you maybe just extrapolate that out a little bit as I try to think about where kind of full year expenses go year-on-year?
BJ Losch: Yes, I think, Mike, it’s BJ. 2023 was quite an interesting year, particularly with what happened in March. And so, we didn’t have as great of a year as what we thought at the beginning, much like a lot of others. And so, we moderated our incentive pools appropriately throughout the year. At the end of the year, we saw that we were going to have a one-time fixed asset gain and decided that we were going to repurpose that and encourage our employees about navigating through a tough 2023 and moving into 2024. We have fully accrued going into this year, our normal incentive payouts. So, that is included in what our expense expectations are. So, we’ll – we have that included in what we’re looking at in 2024.
