Michael Young: Yes, it’s a good question. I think we did see the outflow in Q4. It’s been a continuing trend as we see clients use deposits to pay down their variable rate loans, in particular, that have moved to pretty high rates. We could see that continue. Some of that, as I mentioned, may be dependent on what the Fed does, but we would expect, like you’ve seen with other banks in the industry as a whole that you would see some continued bleed of demand deposit balances. We’re about 30% mix today with growth, we’ll probably be growing interest-bearing categories a little faster than DDA as well. So the mix shift may continue to head lower, a historical range for us would be somewhere around 25% to 27% potentially. So that may be kind of a good area to focus on.
Stephen Scouten: Great. That’s helpful, Michael. And then just last thing for me. I’m curious what you guys think could drive maybe upside to this kind of low-single-digit loan growth. I mean it sounds like the pipelines are improving nicely. You feel like you’re getting good structured credit. It sounds like a little bit more on the offensive. So what do you think would have to play out for that to maybe be higher than those expectations?
Chuck Shaffer: Lower rates. I mean that would probably be the biggest thing. The biggest challenge…
Stephen Scouten: Improved CRE?
Chuck Shaffer: Yes. The biggest challenge is just with higher rates, just the demand for stabilized product is just not there. So really what would be the biggest driver is demand for stabilized products or operating companies wanting to make investments with debt. What we see today is operating companies making investments with cash. So we need lower rates, I think really would drive the bulk of it.
Stephen Scouten: That makes sense. Thanks for the comments, guys. Appreciate it.
Chuck Shaffer: Thank you.
Operator: [Operator Instructions]. We’ll go next to Brandon King at Truist Securities.
Brandon King: Hey, good morning. Thanks for taking my questions.
Chuck Shaffer: Good morning, Brandon.
Brandon King: So on the fixed rate repricing, could you quantify how much of your loan portfolio, I guess, fixed rate loans you expect to reprice this year and kind of what the runoff yields are?
Michael Young: Yes. You said fixed rate loan repricing, right, Brandon?
Brandon King: Yes.
Michael Young: Okay. So this year, we’ll have about $650 million roughly of — that’s a combination of maturities and amortization. Recall we’re fully amortizing lender in most cases. So that’s kind of the combination of that. And it’s around a 5% rate effectively. That’s kind of what you should think about for 2024.
Brandon King: Okay. And just looking out, does that amount increase in 2025 and 2026 potentially?
Michael Young: It’s pretty consistent. We do have more, I would say, maturities if you go out another year or two from some of the origination vintages in ’20 and ’21. But again, given kind of the amortization that we see off our book, the cash flows, if you will, are pretty consistent around $500 million or so a year with various rate profiles, but actually somewhat declining rate profile. So we actually get more benefit into ’25 and ’26.
Brandon King: Okay. And I guess with the expectation of those repricing for that 8% level potentially, are you pretty comfortable with your borrowers being able to absorb that sort of increase?
Chuck Shaffer: Do you want to take that, James.
James Stallings: Yes. Well, we’ve done pretty extensive testing, particularly within our existing CRE portfolio relative to maturing fixed rate loans in — sorry, we have done a pretty extensive testing within the portfolio for maturing loans with fixed rates and I would say, less than 10% or 15% have any sort of significant impact. And of those that do, we have proactively reached out and found sponsors, largely willing to right size the loan to accommodate the higher debt service carry.
Chuck Shaffer: So we feel pretty good about where we are Brandon.
Michael Young: Okay. And I would add, Brandon, given the fixed rates and the full amortization, the loan-to-values are amortizing down with time. And the projects, given that they’re not bridge floating rate facilities and things like that, they have time to react and respond to that as well.
Brandon King: Yes. Got it. That’s an important point. And then lastly, in regards to credit quality, I know you kind of mentioned how your borrowers are dealing with inflationary pressures. But could you speak to the impact of higher insurance, I know, particularly in your markets, is more of an issue than other areas of the country. But could you talk about that and how your customers have been able to deal with that or manage through that? And if you’re still concerned about that to this day?
James Stallings: Yes, it’s a great question, and it is one of the few, what I would say is sort of Florida-centric negative headwinds that we’re facing today. We are seeing it primarily on the increase in wind coverage relative to larger properties. We’re sort of dealing with it on a case-by-case basis. And in most cases, the sponsors have the ability to address the higher premiums. But in some cases, they’re coming to us and asking for the ability to adjust lower coverage. And what we’re effectively requiring is that they’ve got the liquidity to self-insure and so that’s how we’re making accommodations. But we’ve done a lot of work around this, and we’re finding that all banks in Florida are sort of facing the same issue.
Chuck Shaffer: Yes. So it is an issue, but it isn’t super widespread, but there are unique situations where we’re having to deal with it, and we’re hoping we get some resolution to that in the coming years. But that is a challenge, Brandon. There’s no doubt.
Brandon King: Got it. Thanks for taking my questions.
