Operator: The next question comes from Gary Tenner with D.A. Davidson.
Gary Tenner : I wanted to ask a bit of a follow-up just on the monetary deposit outlook. I’m curious in terms of the deposit data you kind of get the guide into the first quarter. What are you assuming on the way down? Do you think it’s a pretty similar beta? And what kind of lag do you think there is until you’re able, I mean, you talked about the promotional deposits and brokered. But beyond that, what type of lag do you think you see on the repricing side?
Tom Owens : So, the way I would answer, I gave you the simple answer first, which is about 20% beta. Assuming — you got to start with the reference point, right? Let’s assume that our guidance on first quarter deposit cost of about 219 comes to pass. And let’s say that’s the starting point and that the starting point is the Fed, where they are currently at the top of the range is 5.5%. And so then if you said, well by year end, by the time we get to the fourth quarter — how much of 150 basis points do you think, what’s the relationship between the decline in deposit cost and 150 basis points, and what does that data turn out to be? In round numbers, I would say about 20%, which means 20% of 150 is about 30 basis points. So I think it would be reasonable to model from the 219 in the first quarter, you take 30 basis points off of that, and that’s probably where you’re going to wind up, which is what, 189 or so about, call it 190 keep.
If you want to keep it super round, go from 220 in the first quarter to 190 in the fourth quarter, and relative to 150 basis points of Fed cuts, that’s be of about 20%. And we’re modeling that it’s pretty linear or — well, it’s pretty constant is the word I’ll use. In other words, the first 75 and then the next 50, and then the next 25, we think it’s pretty constant that we’ll be able to get something like a 20% beta relative to those moves each quarter if those market implied forwards come to pass.
Gary Tenner: I wonder if you could just kind of square this with me then. If you’re looking at a 20% deposit repricing beta but your 50% variable rate loans and less than that if you factor in the hedges, of course, but still, that’s a pretty decent repricing gap between the deposit beta and the variable rate, well, the overall loan book.
Tom Owens : I’d have to do that all in my head, which is a little difficult on the fly, but the deposit base is a multiple, it’s 2.5x to 3x as much as the floating rate loan book. Hard to do in my head on the fly, but mathematically that’s the answer.
Gary Tenner: If I can ask you a quick follow-up, just in terms of the mid-single digit deposit growth were low to mid for the year. Does that assume any additional pay down in brokered over the course of time, or do you think you just kind of renew those as they come up?
Tom Owens : I think that’ll be flat down slightly. As I said in my prepared comments, we have really good growth in personal deposits in the fourth quarter. We had solid growth. When you think about it, X the brokered having growth of — for the full year of 3.8% full year in an environment where bank deposits have been declining, we feel really good about that and especially having been able to raise those deposits at a competitive cost. And so, yeah, I think flat to down is the answer on that. Certainly, we do not view broker deposits as a permanent feature of our balance sheet. It was more the utilization broker deposits in 2023 was more to manage the repricing of the deposit book, you know, with 500 basis points of Fed rate hikes. So certainly, we’re going to try and be opportunistic over time to continue to have the broker deposit book tried.
Operator: [Operator Instructions] The next question comes from Catherine Mealor with KBW. Please go ahead.
Catherine Mealor: Thanks. Good morning. Just one more follow-up on the margin, is, do you have what percentage or the amount of loan, of fixed rate loans that you expect to reprice this year? And then similarly, do you have an amount of deposits that are indexed that will outside of kind the promotional maybe, and broker just that it will immediately reprice lower. Just kind of thinking about the immediate repricing lower once rates start moving lower on the deposit side. Thanks.
Barry Harvey : Hey Catherine, this is Barry. I’ll start with the first part and Tom will take the second part, but we do expect around $600 million of fixed rate loans to be repriced in the next 12 months. And then a little bit less than that, maybe $550 million of fixed rate loans to be repriced over the next 12 to 24 months.
Catherine Mealor: Okay. And what’s the rate on average that’s coming up and repricing too?
Barry Harvey : Sure. The ones that are going to be repricing in the next 12 months, the average rate is 5.14%, and then those that were repriced 12 to 24 months out, the average rate is 4.07%.
Catherine Mealor: Okay, great. Thank you, Barry.
Tom Owens : So Catherine, first of all, I appreciate Barry taking some of the load here this morning. Like y’all are wearing me out, here out of the gate. But we do not have a large portion. We have some public fund balances and I’m a little reluctant to throw out a number because I don’t have the numbers in front of me right now, but it’s not a huge portion that reprices down immediately. I can think of some public fund balances that probably add up between, somewhere between $500 million and $1 billion. And then we also have some corporate what we call, CTS, Corporate Treasury Services balances that reprice down that are indexed. And while we’re on the call, I’m going to try and get my hands on that number so I can give you a little more color on that piece. But those are really the two categories I feel good about that range I just gave you on the public. And I’ll see if I can get my hands on a more solid answer on the corporate deposits that are indexed.
Catherine Mealor: Okay, that’s great. And then any thoughts on, we’ve seen some other companies do bond restructures. How do y’all think about that? I know you’re talking about just the bond books running off at a high-single digit pace throughout the year. But any thoughts around doing something more immediate on the bond book?
Tom Owens : You know, Catherine, we’ve gotten that question every quarter and understandably so. I mean, every time we’ve looked at it. The opportunity — I always struggle a little bit with whether you’re truly adding, and there’s two parts of that to me. One is the extent to which you are borrowing on a spread basis to fund securities in your portfolio that are not on a spread basis. And we have a pretty small percentage of the portfolio in the securities portfolio that fits that profile. But we certainly have continued to look at it. And I’ll tell you, I mean, the other thing is, obviously, in my prepared comments, I talk about the cashflow hedge portfolio, and the steps that we’ve done there to reign in our asset sensitivity.
We are very naturally asset sensitive and as best we can tell from call report data, we feel like we’re middle of the pack in terms of our asset sensitivity. But there is a decision to be made there as well, right? I mean, with the uncertainty that we’re facing with respect to the path of the Fed and monetary policy. And so potential restructuring of the securities portfolio is part of that calculus, as well as what we do with the cashflow hedge portfolio. I’d say, we continue to look at it.
