Terry McEvoy: Great. Thanks for taking my questions.
Chuck Sulerzyski: Thank you
Katie Bailey: Thanks, Terry.
Tyler Wilcox: Thanks, Terry.
Operator: Thank you. And our next question comes from Nick Cucharale with Hovde Group. Please go ahead.
Nick Cucharale: Good morning, everyone and congratulations, Chuck.
Chuck Sulerzyski: Thank you. Hi, Nick.
Katie Bailey: Good morning.
Nick Cucharale: I wanted to start on fee income. The leasing line was quite volatile across 2023, and you pointed to the large buyout in 4Q. Can you help us think about a more normalized number for that business and how it may play out over the course of 2024?
Katie Bailey: Yes. And as we had kind of noted when we bought this leasing company. This is the one we bought in early 2022. There is some kind of volatility to the fee income associated with that business as they do periodically experience buyouts in which case they generally recognize meaningful gains, which is what you saw in the fourth quarter. This is kind of the first quarter we have had them under our ownership where we’ve seen this, but it’s kind of at the customer’s discretion when those transpire. So I would say they’ll be less frequent, but it’s kind of contingent upon how the customer wants to engage with us.
Nick Cucharale: So if you were to think about a more normalized level for that business, is it closer to the first half of the year?
Katie Bailey: Yes, I think the fourth quarter was kind of inflated by about $2 million.
Nick Cucharale: That’s helpful. Thank you. And then on the short-term higher rate CD offerings are you still running those campaigns? And if so, what rate are you paying for new money?
Katie Bailey: So we have continued to run them. They’re kind of evaluated each month. The rate currently is just over 5%, and we continue to manage that as we meet, like I said, every other week. And we’re keeping them short-term. So the terms on those are anywhere from 7 to 11 to 14 months. And the rate is different for each, each term.
Nick Cucharale: Okay. Great. And then just lastly for me, just a follow-up on the loan growth commentary. The leasing portfolio grew 20% in 2023. Is your expectation for a similar rate of growth in 2024?
Chuck Sulerzyski: Yes. I think that they will have double-digit growth, mid- to high teens. I think it’s probably more likely.
Nick Cucharale: Thank you for taking my questions.
Katie Bailey: Thanks, Nick.
Chuck Sulerzyski: Thanks.
Tyler Wilcox: Thank you.
Operator: And our next question comes from Tim Switzer with KBW. Please go ahead.
Tim Switzer: Hey, good morning. Thanks, again. And Chuck, congratulations on your career.
Chuck Sulerzyski: Thank you.
Tim Switzer: I appreciate all of you guys really detailed guidance on the NII by different scenarios. And so is the right way to think about it? Is that a rate cut in the near-term is negative to the margin just because there’s limited offset in the deposit side due to competition right now, whether a cut later in the year, it’s a little bit easier to digest as the competition moderates. Is that kind of what you guys are talking about in your guidance?
Katie Bailey: Yes. I think that’s consistent.
Tim Switzer: Okay. And then with your comment that there was minimal impact to NII if there’s reductions in mid-2024. Is that just meaning that the full year NII would be flattish relative to 2023?
Katie Bailey: Yes. I think we’ll see some compression 2023 to 2024 is kind of what we’re expecting given that we do expect rates. I think we ended 2023 at something like a 4.5% net interest margin, I think, what we said is if you expect a 75 basis point cuts, which is kind of generally what some people expect for 2024, we ended something closer to the 3%. And some of that is being driven by kind of accretion adjustments in 2023 — accretion reductions in 2024 relative to 2023.
Tim Switzer: Right. Sorry, just a bit more specific. I mean that NII in 2024 is flat with 23% in that scenario.
Katie Bailey: Yes, I think it will still be up. Net interest income would still be up. I mean, we will have the additional four months of the Limestone acquisition in our numbers.
Tim Switzer: Okay. I got you. And if rates are flat throughout the year, is it NIM down in the first quarter or two and then NIM rebounding back up towards the end of the year?
Katie Bailey: I think our uncertainty there remains around deposit competition. I think, the expectation we have is if rates hold flat throughout the year, deposit competition will remain fierce. And will continue to be pressured on deposit costs throughout the year.
Tim Switzer: Okay. And the last question I have is on the loan yield, a lot of the reported yields are lower quarter-over-quarter, most of the categories, except for CRE and leases are down quite a bit. I know some of that might be like moderating purchase accounting and stuff. Can you maybe walk us through that, what you’re really seeing on an underlying basis?
Katie Bailey: Yes. Let us pull, so I think to your point, there is some noise in the yields as you see them by category in the earnings release because of accretion is at the segment level. But as far as loan origination yields, we did see improvement, I would say, in the total portfolio, we were up 31 basis points in the third quarter to the fourth quarter in origination yields?
