And so, when I look at commercial, I think between the quality of people we have and the program we have and the focus we have and those other items I mentioned and the addition of RMs, I fully expect that to be one of the significant drivers of growth for us. We’ll have steady growth in auto, and that steady growth will kind of grow at a decreasing pace each year that we go along as we execute on our commercial plans. The other thing is — and I know you asked about 2024, but this is a program that continues to build on itself. As you well know, when you bring in quality commercial bankers, it takes time for them to grow their pipeline and their portfolio. But as we head to the end of the year, having had people on as we got 10 people on, and we will have significant amounts of this hiring done in the first half of the year, meaning that they will have fully formed pipelines as we head into the end of the year, head into 2025.
So I think you can see that as a continuation of the balanced reshift of our portfolio that leads to profitability improvement.
Jon Arfstrom: Okay. Fair enough.
Derek Meyer: Jon, Maybe I can add one tit-bit also because Andy will remind me later that I didn’t bring it up. We do expect, and as part of our strategy with the transaction we did for the portfolio growth, to change from a residential real estate orientation that we had before. So we are in that business. We have switched our product mix and made investments to support originate to sell and then judiciously use our portfolio for arms and wealth. But that mix of our total loans should drop by the end of 2024 to about 25% of our loans being resi. And in 2025, something more like 23%. So you sort of have to have that piece in the equation to help make the NII and the NIM guidance work the way we expected to.
Andrew Harmening: And translated from mortgage, the importance of that is we’re doggedly determined to lend to our customers. Our customers define that people that do full business relationships, people that deposit with us and tend to do that on the construction lending side for depositors and intend to do that on our core business, but the third-party origination is something that we no longer do. And that will change the trajectory over time of the residential real estate book.
Jon Arfstrom: Yes. Okay. Got it. And I guess, mass affluent is probably tied in with that as well on resi?
Andrew Harmening: It absolutely is.
Jon Arfstrom: Yes. Okay. Just two more kind of more hypothetical. But back to Scott’s positive operating leverage question. Andy, would you be spending than investing more if the revenue environment were more robust? Or do you feel like you have everything you need from a budget point of view right now?
Andrew Harmening: That’s a great question. Well, what I would say is we’re being pretty aggressive on the hiring on the commercial banker side. And no, we’re not looking to fill seats, we’re looking to hire talent. And so as we get good folks in, if there’s an opportunity, we — I’ve said all along to each line of business, if you find somebody that you believe is a game changer, you should hire them. So we will. But that being said, there’s only so fast you’re going to be able to hire responsibly. And so we like the plan that we have. If we add the 20 to 25 bankers this year and they’re all very strong, I like where this company is going, based on everything else that we have in flight. That being said, I promised halfway through the year I will be asking our executive leaders, Okay, now what?
What’s next on the deposit front? What other initiatives can drive returns? What is the next phase of what we see being important in banking? And to me, really, that’s just the way you stay ahead of the curve. And I will tell you, over the last, almost, three years now, I felt like we had a first phase, and we ran hard to get that as foundational. The second phase is additive, and the third phase is let’s get ahead of the market. So I like the path we’re on, and we’ll think about investments that way, frankly, for as long as I’m here.
Jon Arfstrom: Okay. All right. Good. In the interest of time, I’ll leave it there and save the others [indiscernible]
Andrew Harmening: Thank you. Have a good night.
Operator: Our next question comes from Timur Braziler with Wells Fargo Securities. Please state your question. Thank you.
Timur Braziler: Looking at the deposit guidance for 2024, can you just maybe talk us through the expectation for mix shift and what the potential for mix shift out of noninterest-bearing remains here in the near term?
Andrew Harmening: You want to take that, Derek?
Derek Meyer: Yes, I’ll answer the first part of it. The big challenge, obviously, has been — aside from interest-bearing, has been what’s happening in the noninterest-bearing. That has slowed down quite a bit. It’s — the way we’ve got our outlook shaping up is we expect us to bottom at about $5.8 billion or $5.9 billion and then finish the year up a little over $6 billion. I know people use the shorthand of percent of deposits, but that includes brokered, and it’s just easier for us to communicate the absolute dollar expectation, and that’s what’s in our guidance and our expectations.
Andrew Harmening: And I’ll just say that in a different way, is that we’re a pretty low point on noninterest-bearing. It’s what gives me confidence to say that I don’t think there’s a big story in margin distraction in the first quarter. So whether we call bottom right now or we call it during the first quarter, I think you’re only talking 0 basis points, 1 basis points or 2 basis points. And so, I think the story comes into, can you shift your balance sheet? Can you bring in full relationships? Can you put loans on the books that have a little bit better yield? And can you grow deposits, overall? So I think from a position of margin decrease, I think we’re quickly closing in on the bottom.
Timur Braziler: Okay. Thanks for that. And then as we start looking at rate cuts, Derek, did I hear correct that betas on the way down, you’re expecting 45% to 55%? And if that’s not correct, and I guess, on the way down, what do you expect the deposit beta to be? And is there going to be a lag for the first couple of rate cuts before that beta actually kicks in?
Derek Meyer: That assumption includes a lag assumption, but we don’t — I can’t say we’ve formalized a view on it. We’re going to try and be as early as we can while still hitting our growth numbers, and we position the balance sheet that way. Our brokered CD portfolio has a contractual maturity that runs the whole thing down and gives us options by the end of the year. And of our $2.8 billion in the customer CDs, $1.7 billion of that is scheduled to roll over this year, 95% of that by the end of July. So we’re trying to be very opportunistic while still growing and giving us lots of pricing options, so that we can take advantage of any opportunities and keep the beta where we’d like to have it.
Timur Braziler: Great. And then just last for me, you mentioned this briefly in your prepared comments, but maybe can you just talk to the cadence of office paydowns in ’24?
