George Gleason: Well, I think the floors will matter for 2024 and 2025. But you are correct that you have got to look at the vintage of origination of the loans to determine the floor. And obviously, the floors that we got in 4Q of 2022 were much higher floors than we got in 1Q of 2022 before the Fed started increasing interest rates. We have never been able to negotiate floor rates that were higher than the contractual start rate of the loan. So – and as I have said earlier, in the first part of 2022, and most of 2022, we were getting floors at the start rate on the vast majority of loans. But it was at the start, right, not a higher rate. So, you are correct. And again, honoring the request earlier will probably put in our next quarterly management comments a chart that shows where the – what the floor rates look like on the portfolio at that point in time. I don’t have that information with me today, but we will work to provide that in the future disclosure.
Brody Preston: Got it. Maybe if I could just extend this into 2025 specifically though, George, if I am kind of correct in my thought process. Is there a point if the forward curve does come to pass where, as the stuff that you originated in 2023 starts to fund up, the loan yield could actually reverse course and start to inflect just by the nature of the 2023 commitment starting to fund up, because those floor rates are more in the 8% to 9%-ish kind of range.
George Gleason: Again, 2025 is hard to predict and where the Fed is going to be in 2025 and what they are going to do and 2025 is very hard to predict. So, I am going to let you develop and go with your own thesis on that based on the information we provided, because I am not comfortable trying to give you that number.
Brody Preston: Understood. Do you mind kind of giving me some insight, for the non- RESG loans ABL, the RV, all that kind of stuff, what’s the origination yields on those loans currently?
George Gleason: Oh, gosh. In the ABL world, it’s very dependent. And the – most of the ABL loans have a spread matrix that is dependent upon the total leverage or availability, utilization of the line. So, though it’s hard to comment on those because they are so deal specific, and there may be four tranches of spread, three or four tranches of spread in those loans typically, that is dependent upon their total leverage position and utilization of available borrowing numbers. So, those are hard to comment on. The indirect stuff is, again, dependent upon credit score of the borrower and so forth. Those are all fixed rate loans in the indirect lending world. So, we are probably around eight plus or minus, I would guess on that. Actually I am not – I am guessing on that. I don’t know, Jay, do you know?
Jay Staley: That feels directionally correct, yes.
George Gleason: Yes. So – and those are fixed rate loans. So, every month, we are rolling off millions of dollars of lower rate loans and rolling on millions of dollars of newly originated at current market rate loans in that portfolio. So, that’s helping incrementally improve our margin. And the same phenomenon going on in our securities portfolio, which is pretty much all fixed rate. We expect to roll off about $1 billion of that portfolio in 2024. And either will not replace it, or if we do replace that, we would suspect it’s going to be substantially higher yield than what’s rolling off. So, those fixed rate components of our earning assets, whether it’s securities or indirect or other fixed rate loans that are rolling off will help us re-price some elements of the loan book and securities book at a more favorable pricing.
Brody Preston: Got it. I just got one last one on the margin and then a couple more on credit. So, I guess if I tick and tie all the commentary that you just gave, George, and then the commentary earlier around deposit rates, I understand that you are baking three cuts into your NII outlook, but say we did get six cuts, five or six cuts like the forward curve, how would that change what you think the trajectory of the NII is for 2024?
George Gleason: Well, if we bake in five or six cuts in ‘24, that’s certainly a more challenging scenario for us, because we don’t have our floors in our loans set us broadly in the portfolio as we would like to have set for a declining rate environment. So, that would be a more challenging NIM scenario for ‘24.
Brody Preston: Okay. And then I just had two last ones on credit. The current OREO loan that you called out in the release is planning on the plan is to close the sale of that by the 31st of March, and I think you said you don’t expect to take a loss. Are you all planning on financing the sale of that property to the eventual buyer?
George Gleason: Brannon, do you want to comment on that?
Brannon Hamblen: Sure. Yes, you read our comments correctly. We do not expect for that sale to result in a loss. And in terms of the transaction that’s going forward, I think we got – we told you guys in the past that we are under a confidentiality agreement around the transaction. So, we have tried to share with you everything we can without being in breach of that transaction. So, beyond that, I don’t know, George, if there is anything else you feel safe to share. But it is under confidentiality agreement. Everything is moving forward in terms of the sponsors’ due diligence. They are the normal closing conditions and due diligence that would be attached to a transaction like that. But sponsor continues to move forward in all their due diligence there. So, as we guided a quarter ago, we still expect the sale to happen inside of March 31, 2024.
Brody Preston: Got it. Okay. And then my last one was just on that Chicago land loan. With the reserve that they have that they are paying interest out of, I think you said, George, maybe it’s a handful of months or less that they would have to pay for the interest of that reserve. At the end of that, if there was a moment where they decided maybe this doesn’t make sense anymore, would that loan kind of go the same way as this other L.A. land loan one where you guys would take it into OREO and then try to look for a similar kind of sale process?
George Gleason: Again, presuming – you are sub-position there is that the sponsor gives up on it and say if they are done, then yes, that would – I would assume would be a fairly similar scenario.
Brody Preston: Got it. Okay. Great. Thank you very much for taking my questions everyone. I appreciate it.
