Michael Perito: Got it. Okay. That’s helpful, BJ. Thanks. And then realize this is a challenging question, like asking you guys to find a needle in a stack of needles here, but the renewable energy tax credits, any line to site on additional projects or investments, and do you guys have an initial kind of budget range on what you expect the tax burden to be in 2024?
Walt Phifer: Hey, Mike. This is Walt. Yes, right now we are not planning another one of these renewable energy IPC tax investments in 2024. We continue to evaluate what our tax rate is going to be, which will probably be somewhere in the 25% range given federal and state. I think the – as we think about kind of long-term planning, tax strategy planning, trying to find things of essentially a portfolio of whether it’s low-income housing tax credits or things of the like that all fall within the income tax expense line, so you’re not creating that quarter-over-quarter noise with the non-interest expense and the impairment, is something that we’re aspiring to do. Yes. I don’t – at this point, you don’t see a lot of movement in 2024 really to bring that tax rate down from that 25% range or so.
Michael Perito: Okay. All right. And sorry if I misunderstood this, but I thought when the tax benefit would come after the impairment was recognized, but is that not the case? Is it – was the tax benefit before the impairment?
Walt Phifer:
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Michael Perito: Got it. Okay.
Walt Phifer: Yes.
Michael Perito: Got it. Okay. So the 25% at this point is a pretty clean and best guess for you guys absent taking any other actions to lower your tax burden that you’ll obviously tell us once you do.
Walt Phifer: That’s correct.
Michael Perito: Okay. On the loan growth side obviously for good reason, a lot of focus on kind of the SBA and some of the changes going on there, but what about on kind of the non-SBA, the general lending side? Any kind of recent additions or updates on the team there and thoughts around what type of production you could – we could expect from that group in 2024?
Chip Mahan: Yes. So if you look back on Slide 14, I really like looking at this because visually it kind of helps with where we’re seeing growth and originations and where we aren’t. But because of the IRA, the Inflation Reduction Act, and the incentives, our solar business, which has always been very strong, had a particularly strong year. You can see the green bubbles, if you look at those, are our more conventional lending businesses. And particularly specialty healthcare, which a lot of that is our lending to DSOs, dental service organizations, that’s the rolling up dental practices, still very, very healthy business. Seniors housing had a great, great year because, as you might imagine, a lot of other banks were trimming their commercial real estate concentrations and not doing as much.
And so our teams took great advantage of some really, really high quality developer relationships and putting some loans on the books there. But if you look at the purple, which is where our small business banking verticals are, our traditional bread and butter, you can see that while a few, like senior care and self storage, had really good growth year-over-year in 2023, the majority of our small business verticals were actually down in originations from 2022 to 2023. 2023 was just a grind. It started tough in the first half of the year, rapid rate rises, borrowers and sellers, still not on the same page in terms of valuations. We started to see that come back in our small business areas in the last half of the year. And we expect that small business verticals across our company are going to have quite a good year in 2024 as rates have stabilized and likely come down.
We think there is going to be a heck of a lot of activity in 2024.
Michael Perito: Helpful. And then just lastly for me, following up on the kind of the technology investment about the SBA loan sub $500,000, is this going to be a good test track for the Finxact core and hopefully being able to accomplish things a lot faster and lower cost than maybe historically? Or do you guys not feel that way? And I’m just kind of wondering has it generally, I don’t think we’ve talked about it a bit since the conversion and maybe I’m forgetting a comment or two here or there, but has the Finxact core been kind of working out as you expected? And is it correct for us to assume that like your ability to turn around on a technology project like this is still going to be enhanced from all those investments made in prior years?
Walt Phifer: It will certainly, but down the road Finxact for us is continuing to be primarily on the deposit side and where we’re doing a lot of development and innovation is on the deposit side. Finxact itself is still maturing their loan capabilities. So, while this will help down the road as we ultimately migrate everything from a core perspective to Finxact, the technology solutions that we’re building for small dollar 7(a) will be more standalone innovative as opposed to relying on Finxact at this point.
Chip Mahan: Mike, I think the answer is over time, yes, because if you think about grabbing a person’s tax return, I mean, that’s like betting on race run on yesterday. I mean you know it’s 2022, 2023, what does that have to do with the current state of the business? Integrating Plaid and Finxact together where we have up-to-date transactions and complete understanding of exactly where those small businesses are, will be quite helpful in figuring out how to credit score those $100,000 to $500,000 loans.
Michael Perito: Excellent. Thank you, guys, for taking my questions. Appreciate it.
Chip Mahan: Thank you, Mike.
Walt Phifer : Thanks, Mike.
Operator: There are no further questions at this time. So I’ll hand the call back to Chip Mahan, Chairman and CEO.
Chip Mahan: We enjoyed talking to you, investors, on our Q4 call and look forward to talking to you at the end of April in the new year. Thank you.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
