Terry Earley: And we just don’t think that it makes sense to leave it sitting at short rates overnight at the Fed because that’s only going to exacerbate our down-rate risk.
Brett Rabatin: Okay. And then given the commentary around the betas, I know, Malcolm, you’ve got quite a few deposit initiatives in place. Can you give us maybe an update on the deposit initiatives relative to the guidance for betas to continue to increase?
Malcolm Holland: I mean the initiatives continues. I mean there’s no difference this quarter than it was the prior quarter in what we’re doing. Again, we’ve got seven or eight different levers that we’re pulling. Some are more expensive than others. We’re trying to stay away and reduce our wholesale funding dependence, if you will. But we’re seeing some good movement. I could pick out a couple right now that if actually does quite well. And this is the time of year where we see every bank, I think, sees a little bit of deposit shrinkage because of taxes, bonuses or what have you. But we’ve actually had a pretty decent start to the year. In terms of betas, Terry, you might want to —
Terry Earley: Well, I mean I just, in general, it’s been so competitive, and that’s driven the deposit betas up. I would say this. We talked on the last call, the Q3 call, about bringing more balance to pricing and volumes. We saw that during the quarter. And we’ve seen it already in Q1. Our total deposit cost, as of two days ago, had declined, and not a lot but a few bps, and I’m encouraged by that. Now, on the margin, our production rates right now are around 460 for new deposits. So, all that to say it’s moving — it’s starting to move. And as you can tell from new client acquisitions, up 172% in new accounts, I mean we’re getting traction. It just takes time to rebuild, remake our deposit base and bring pricing balance to it. And that’s what we’re all about every day.
Brett Rabatin: Okay. That’s helpful. If I could sneak in one last one. Malcolm, how do you feel about North Avenue this year and this maybe fee income generally speaking?
Malcolm Holland: No, North Avenue had a really, candidly from a revenue standpoint, they did revenue from a reduction standpoint, they’re about $180 million in ’23. Candidly, I would expect that or maybe a little bit more in ’24. They’ve got some good momentum. We’ve talked about it time and time again about the government constraints that we have from time-to-time, whether they’re funding stuff or not. But as a bank, we’re helpful because we can do some of these interim funding that is actually a huge advantage in the space. But listen, I think they’re engaged. Their pipelines are huge. And I expect to have — I think it was production, I mean, the revenue was $20 million in fees last year approximately. The one thing about that business that I think people do miss is, they still have some, there’s loans on the books and there’s spread income.
So, spread income is covering the expenses of the company, that the fee income is kind of the upside to it. So, I expect at least what they did last year in the ’24. And just as I’m on that fee business, the SBA business we hired. It would be unfair to say we’ve remade it in ’23, but we hired a new guy to run it and he has done a phenomenal job. And we expect a lot more out of SBA with what he’s been able to do, and we’ve hit the ground running already. So, I would say the fee businesses will outperform ’23.
Terry Earley: And their SBA Q4 production is indicative of the momentum you’re seeing. I mean they did 40% to 45% of their production in Q4 and really encouraged. I agree with everything Malcolm said on the USDA, but I think the SBA has not been as big a contributor, but our outlook on that is really bright.
Brett Rabatin: Okay. That’s really helpful. Thanks, guys.
Terry Earley: Thank you.
Operator: Thank you. And one moment for the next question. And our next question will be coming from Stephen Scouten of Piper Sandler. Your line is open.
Stephen Scouten: Yes, thanks. Good morning. Hey, guys, I wanted to start with the loan and deposit new production spread that you looked in slide 10. It looked like a pretty big jump, quarter-over-quarter, which is nice to see. So, I’m kind of wondering that 493 basis points, what is that actually from a new loan perspective and a new deposit perspective? And could that lead to some core NIM expansion apart from the potential for rate cuts and the debt securities that you noted?
Malcolm Holland: Well, the new loan production, the problem with that, the question is, is it new deposit production or new loan production? The spread is good, but there ain’t enough of it. New loan production is about 9%. And you know, new deposit production has been in the force.
Stephen Scouten: Yes, but just a much higher pace of deposit growth, that makes sense. Okay.
Terry Earley: Yes. If we get the volume on the loan side, Stephen, you’re going to see something possibly, but we’re not budgeting for that production. But if we are able to find it, even mid-single digits is going to be helpful.
Malcolm Holland: Exactly.
Terry Earley:
Malcolm Holland: That’s the point I was going to make is that once you make up that delta of that 500 or so, now you’re on solid footing where if you want to do a dollar in loan, you only need a $1.10 in deposits. Today, you need double that.
Terry Earley: To get our balance sheet.
Malcolm Holland: So, ’25, you should hit the ground running, assuming we do the billion in deposits and half a billion in loans.
