Just looking at the existing customers that we started — that we started say Q2 with, that the rate of migration for the last two moves has been way less. We’ve been able to offset it and grow this quarter. But still, it seems like customers, obviously, they just not having us much of an impact. Those people who are — and customers, who are aggressively managing liquidity. It seems to be not as high a priority, I would say.
Michael Rose: Yes. It certainly didn’t mean to discount the fact that you’re one of the few banks that’s actually growing DDA this quarter. So certainly appreciate that — the progress and a lot of stuff that you can — that may not be apparent kind of what’s under the hood. So a lot of good stuff there. So — but the deposit costs continue to increase. Obviously, you guys added some higher-cost deposits this quarter. Are we getting closer to a peak in deposit costs in your eyes?
Malcolm Holland: Not with the way I think CDs are going to roll. I don’t think — I don’t think we’ve hit a peak in deposit costs. We have lowered production rates. But just as we’ve got fixed rate loans, I talked about it, 3.95% being reduced. We’ve got some earlier dated CDs at lower rates that are going to roll too. So I think it’s going to — that’s why I think we’re near the bottom, not at the bottom or down.
Michael Rose: Okay, helpful. And then maybe just last for me. Through the pandemic, obviously, you guys hired a lot of producers, got a lot of growth during that period. Now the fundings increased. It seems like growth is kind of poised to kind of pick up. And, you know, just wanted to get some kind of initial nearer-term thoughts on what the drivers would be? And then, obviously, you’re trying to bring the CRE and A&D concentration, you know, down. Where would you expect kind of that growth to be just trying to get the puts and takes as we think about next year? Thanks.
Malcolm Holland: Yes, so the growth is going to be largely dependent on payoffs. And then the whole funding look — outlook, which we had some really good vision into is on the second quarter of next year. It basically falls off a cliff because we’ve been funding $300 million and $400 million closer to $400 million a quarter. By the time we get to Q2 next year, that falls off. And so you’re funding — some of the funding, it’s already in the book. It’s going to stop. If payoffs continue then growth is going to be a pretty good challenge, but some of the things that we’re doing here and we are focused on growth, but we’re focused on growth, on what the market is going to give us. We are not outsized growth is what we’re looking for.
And we’re still trying to determine what that looks like. I mean, candidly, our clients have not asked for a lot lately. But I do see some things getting a little better. So overall, I think, I would tell you it’s low-to-single — low-to-middle-digits on growth for next year, but the paying on payoffs that could be a challenge.
Michael Rose: Totally understand. Thanks for the color. I appreciate it guys.
Malcolm Holland: Yes, let me remember this and my memory came back and I remember other items in Terry, I was just going to make a comment that — if you look at our deposit pipelines, to our loan pipelines, it’s 4 times today. Yes, deposits to loan. Yes, it’s four — deposits pipelines four times greater than our loan pipelines today. So that’s just new one. Operator, next question.
Operator: Thank you. One moment, please. Our next question comes from the line of Matt Olney of Stephens. Your line is open.
Matt Olney: Hey, thanks guys. I appreciate all the good commentary this morning. And I apologize if I missed this, but want to ask about the overnight liquidity levels, cash balances, I think, with the third quarter liquidity build, I think cash balances are now 6% of earning assets. Where are you looking to maintain these levels in the fourth quarter and into 2024?
Terry Earley: I would like the cash levels to be a little lower. Actually, we’ve started investing excess liquidity this quarter, you know, cash balances, you know, I would like for it to be, you know, 5% to 10% lower. But the important thing is just, you know, when this whole thing went off the rails with Silicon Valley on March 8, the available liquidity to the bank right now is double what it was. We’ve got $6.25 billion cash in available cash. So we — team has done a good job and getting everything placed in the right place, et cetera. So, but I do want to see this managed cash a little tighter — and depending on what loan growth does start to invest in excess liquidity in a very capital-efficient way.
Matt Olney: And Terry, just following up to that you say and invest that, are you talking about maintaining investment securities portfolio? Or are you talking about building that from here slightly?
Terry Earley: I’m talking about growing the portfolio over the course. You know, if we’re going to continue to make progress as Malcolm talked about on the overall strength of the balance sheet, we’ve got to put more liquidity into the investment portfolio. The other good thing it does is it can help protect for downgrades given our floating rate loan book. So, and so it — I’m not going to leverage to do it now. I’m not looking immediately to do a loss trade to do it, but as we have excess liquidity, we are investing, blocking in spreads and we’ll build that portfolio over Q4 into ‘24.
Matt Olney: Yes, okay. That makes sense. And then I guess shifting over different topic, on the out-of-state loan portfolio. I appreciate that disclosure in the deck there. As we think about next year, is there a strategy to change the amount and the shift at all of the out of state 8% or are you just trying to update us the community here in light of some of the questions you’ve gotten on that topic?
Malcolm Holland: I would say, the latter to start. There has been some confusion and frustration. And I understand and that’s why we just got really, really clear and granular. I would see, so just as a function of the property type, you’re going to see that out of state number come down fairly drastically with almost $0.5 billion in that 800 in warehouse and retail multi — actually for that much closer to 600. A lot of those are construction deals. And they’re going to be paying off. The payoffs are going to come out of those books. So you’re going to see that number come down.
Matt Olney: Okay, perfect. And then I guess, for Clay on the office portfolio. That disclosure this quarter in the deck was a little bit different than last quarter. So I can’t tell if there is any migration in office. Any — just commentary on the office portfolio?
