John Buran: I think customers in general are a little bit on the sidelines as they are – the uncertainties and possibly the expectation of rate decreases are still out there and swirling in the market. So depending upon how quickly the Fed starts to move, we may see the more near-term jump in back-to-back swap activity. We’re very, very successful in this area in 2023, but it clearly is an area that is driven by expectation of rate movements at any given point in time. So we have the product, we can turn it on very, very quickly in the event that rates are in a favorable position, but given expectations that rates may be coming down, some borrowers are just kind of holding tight at this point in time.
Unidentified Participant: Okay, I appreciate all that color. That covers it for me. I’ll step back into the queue. Thanks everyone.
Susan Cullen: Thank you.
A – John Buran:
Operator: The next question is from Chris O’Connell with KBW. Please go ahead.
John Buran: Hey, good morning. Chris.
Chris O’Connell : Just wanted to follow-up on one of the comments in the prepared remarks. I think it was for each 25 basis point reduction in rates is an impact of $1.4 million on the annual NII. That’s a positive impact, correct?
Susan Cullen: Correct, and that’s assuming there’s no lag or 100% beta in the deposit repricing.
Chris O’Connell : Got it, but it is considering the impact of the swaps, right?
Susan Cullen: Yes.
Chris O’Connell : Great. And then, if you guys have, like are getting into 2025, I know there’s not a ton maturing in 2024, but can you remind us of just the maturity schedule of the funding side swaps?
Susan Cullen: The funding – in 2025, about $400 million I think matures in 2025.
Chris O’Connell : Got it. So, I guess what I’m getting at… [Multiple Speakers]
John Buran: Well clearly, I think the general comment, and we may be a little off on the number, but the general comment is we’re going to have a bigger opportunity in 2025 to manage asset versus liability sensitivity, because we do have a fair number of swaps coming off.
Chris O’Connell : Yeah, I guess that’s what I was getting at, is like that’s probably one of the arrows in your guys’ quiver that you have over time to maybe increase liability sensitivity if it becomes certain that the Fed is going to be consistently cutting.
Susan Cullen: Correct. That’s a good statement, Chris.
Chris O’Connell : Great. And then, I know you guys gave a lot of good color on the expenses and the relative change from in the past. For the overall, just cadence, is there still going to be like a fairly sizable drop-down in the Q1 to Q2 rate? And then, usually it’s fairly flattish after that.
Susan Cullen: So, we expect the seasonal expenses in the first quarter, Chris, to be about $2 million versus a little over $4 million in the first quarter of 2023. But yes, that $2 million will then start to — will fall off in the subsequent quarters of 2024.
Chris O’Connell : Great. And that’s all I had for now. Thank you.
Susan Cullen: Great, thanks Chris.
John Buran: Thanks, Chris.
Operator: The next question is from Manuel Navas with DA Davidson. Please go ahead.
Susan Cullen: Good morning.
John Buran: Hey, good morning.
Manuel Navas : Pre-payment penalties were a little bit elevated in the fourth quarter. Any color there? And do you have any early indications of where they could land in the next couple of quarters? Do you have any sightline to that?
Susan Cullen: They were elevated in the quarter. We had a couple of large loans that had swaps associated with them pay off. We’re seeing pre-payments about $500,000 to $750,000 would be a normalized rate running forward.
Manuel Navas : Okay, and then the color on the CD repricing, you had current CD rates around 5 to 5.45. That’s your CD rates. What is kind of the high in the area?
A – Susan Cullen: 5.50-ish.
Manuel Navas : Okay, so that’s why it’s so easy. You generally can keep them, because you’re right where the market is.
Susan Cullen: Right in the ballpark.
John Buran: We’ll give you an update on the swap maturities. There are about $325 million of swap maturities taking place in 2025.
Manuel Navas : Okay. I know your guidance kind of encompasses the swaps, but is there – if you’re just looking at the swaps and you have some rate cuts, where does the net benefit move to? Like right now the net benefit’s like 2.56%. If there’s a 25 basis point cut, where does it move to?
John Buran: We had the $1.4 million on a 25 basis point cut.
Susan Cullen: Assuming 100% beta.
Manuel Navas : Okay, so you just keep it on the overall guidance. All right, and then any shift in the buyback appetite?
Susan Cullen: No, not really. We continue with our capital plans. We’ve always had it that first we want to invest profitably into the company; second, return through dividends; and third, through the buybacks.
Manuel Navas : Okay. I appreciate the comments. Thank you.
Susan Cullen: Thank you.
John Buran: Thank you.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to John Buran for any closing remarks.
John Buran : Thank you, operator, and thank you all for attending the conference today. We look forward to presenting to you at the end of the second quarter, and as always, if analysts have any additional questions, we’ll make ourselves available. Thank you very much.
Susan Cullen : Thank you.
Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
