Stacy Kymes: This is Stacy. I think it’s interesting to listen to the market pundits over the last 6 months from there’s a deep recession coming to a soft recession to now a soft landing. I don’t think any of us know with any level of precision what the future holds. We’ve got a deeply inverted yield curve but we’re also coming off of pandemic that’s unprecedented. And so all of the economic metrics that people are accustomed to trying to use to predict those types of economic outcomes are probably not as reliable. Our viewpoint is, if you think that we’re going to have a soft landing and we’re going to grow, we’ve demonstrated our ability to grow. We grew loans organically 13% this year, $2.6 billion. We’re in a great footprint and we’re well positioned for growth if the economy does achieve a soft landing.
Our footprint is much better than most. But if your view is that there will be a recession and there will be more likely credit deterioration, then we’re one of the best-performing credit banks in the regional bank space. Largest bank in the United States that didn’t participate in TARP. Our credit performance through the last meaningful downturn materially outperformed our peers. Credit is hard to forecast. We typically will say, the next 6 months are pretty easy to see. After about 6 months, the lens gets really foggy. But as we look forward from here, our classified loans are down, our potential problem loans are down. Our nonaccrual loans are down. We’re starting from an incredibly low point. And so even some migration up wouldn’t necessarily even indicate a deterioration really in long-term credit trends, really just a movement from abnormally low levels.
And so I don’t know that any of us want to forecast exactly what we think is going to happen because nobody really knows. But if it’s a growth scenario, we’re going to perform well. If it’s a credit event that people are worried about, then I think our credit history and our discipline around that will serve us very well if that is the scenario that has people concerned.
Jon Arfstrom: Okay. So the view from Tulsa is not Armageddon, it’s just…
Stacy Kymes: Not in the least. I mean, I think our view, even when people were forecasting a recession, was that it’s entirely likely that our footprint — think about Dallas, Houston, Denver, Phoenix, what’s happening in those markets, that there may be a level of material outperformance in our core markets than there maybe in the rest of the country if there is a recession because the level of in-migration into these markets is significant. And the economic growth that’s happening is far outpacing the national economy. So even when the general consensus was there’s going to be a recession, we thought that we would be in a much better position just because of that footprint. But we’re not seeing anything today in discussions with our borrowers and our own data that would indicate that we think there’s a recession that’s imminent.
Jon Arfstrom: Okay, all right. I appreciate it. Good luck, Steven.
Operator: Our next question is from Matt Olney with Stephens Inc.
Matt Olney: On the brokerage and trading line, I think the slide deck attributed higher levels of trading from elevated margins. Any more color on the drivers of that higher margin? And how sustainable is that into 2023?
Scott Grauer: Well, this is Scott. So we saw in all of the fixed income markets with the market volatility that Stacy alluded to, we saw unprecedented volatility in the fourth quarter. But we continue to see, with the level of rate uncertainty that’s out there in the marketplace, good spread capability. We’re nimble and have a reasonably well-diversified product mix inside of the fixed income arena. So we think that until there’s an abatement of the uncertainty on the market volatility, we’ll continue to enjoy better margins there.
Matt Olney: Okay, appreciate that. And then going back to deposits and funding, pretty big material outflow of demand deposits in fourth quarter and we’re seeing this across the industry. And it sounds like the guidance you put out there assumes continued pressure here. I’m curious what your expectations are. And within that guidance, when do you expect that to stabilize?
Martin Grunst: Yes, this is Marty. Let me give you a little color there. So yes, our guidance does presume our loan-to-deposit ratio comes up some over ’23. And it presumes that our cumulative beta on deposits continues to increase somewhat over ’23 to accommodate the retention of our interest-bearing deposits. The DDA attrition, we see that more in the first part of the year. Any of these attrition factors, they either burn out or conditions change and it’s no longer relevant. That’s kind of how we think about the outlook there.
Stacy Kymes: Matt, this is Stacy. I think that we’ve seen a commentary in the markets around the deposit attrition in the industry broadly. I think a couple of things that are unique about us that I think need to be brought out. Number one is we’re starting from a much lower loan-to-deposit ratio than most of our peers in this space. We end the fourth quarter at low 60% loan-to-deposit ratio. Steven and I were talking, we’ve run this bank at upper 70s, low 80s for a long time. That’s typically much more normal. And so that starting point gave us the ability to manage this liquidity and margin and we are actively doing that. We also have a lot of stored liquidity that’s effectively off-balance sheet through our broker-dealer and our wealth group, where funds that have left our balance sheet have gone to other sources that are controlled through our broker-dealer or our wealth group, that in the event that we need liquidity in a future period, can be brought back at the right price.
So it’s not something that we see is necessarily problematic. It’s something that we’re actually actively managing and watching to optimize for our shareholders.
Matt Olney: Yes. Okay. I appreciate that, Stacy. And I guess just kind of staying on this topic here. In the fourth quarter, I mean, the funding plan was obviously some borrowings to kind of plug the hole. And Stacy, you mentioned some of the store liquidity that you could use at some time but it didn’t sound like that’s a near-term event. So what is the plan, I guess, for funding at least for the first half of the year?
