Brandon King: Great. Thanks for taking my questions.
Dan Rollins: Thanks, Brandon.
Operator: And our next question today comes from Joe Yanchunis with Raymond James. Please go ahead.
Joe Yanchunis: Good morning.
Dan Rollins: Hey, good morning.
Joe Yanchunis: So, the $3.1 billion securities restructure you did in the fourth quarter was a little bit larger than the $1.5 billion minimum that you kind of laid out when the sale was announced. What drove the decision to land on that number? And what are you buying with two years duration at a 5.6% yield?
Dan Rollins: Good questions. I think when we look back at what happened to us, so when we came out with our announcement of the sale of Cadence Insurance in November, we weren’t sure where we were going to be at the time of the close, we weren’t sure where rates were going to be. We were looking at what our opportunities were, and we gave you a minimum number in that presentation. As we look forward, rates actually moved in our favor. And so, as we were looking at what portion of that gain we could offset against a loss, we actually came in much lower on a loss than we thought we would, and that allowed us to do a larger portion of the bonds that had the low yield. So, to be able to eliminate $3.1 billion at 1.26% return, we thought that was a good answer for us. What are we buying, Valerie, is the next question.
Valerie Toalson: Yeah. Well, a variety of different products, front-end, sequential, Ginnie Mae, CMOs, laddered treasuries, a few SBA floaters out there, but really some of the laddering product, and again, focusing on the duration that is shorter, focusing on products that ensure adequate cash flow. The cash flow is important to us coming off this securities portfolio, again, focusing on liquidity and flexibility with our loan growth, [indiscernible] all the characteristics.
Dan Rollins: The restructure, shortened duration, lowered risk weighting, improved cash flow…
Valerie Toalson: Yeah, improved cash flow, it’s just a win every way you slice it.
Joe Yanchunis: No, absolutely. I appreciate that. Just a couple more for me here. So, your loan and deposit guidance kind of implies your loan deposit ratio ticking up a little bit, from the 84% level you’re at, at 12/31. What kind of range are you looking for, or what range would you be comfortable managing the balance sheet in that way?
Dan Rollins: Yeah, we’ve said for a long time, we’re certainly comfortable where we are, and moving up towards 90% is very comfortable for us.
Joe Yanchunis: Great. And then, the last one from me…
Dan Rollins: That helped you, Joe?
Joe Yanchunis: Yes, it did. Within your revenue guidance, what’s the split between net interest income and fee income growth?
Dan Rollins: Say that one more time.
Valerie Toalson: The split.
Joe Yanchunis: What is the split between NII and fee income growth in your revenue guidance?
Dan Rollins: I don’t have that.
Valerie Toalson: Yeah. And really, we didn’t provide it that way just because of the variability between the two, but I mean, it’s not going to be materially different on each category. Obviously, the net interest income is a much larger dollar amount, but from a percentage standpoint, it’s within a couple of percentage points.
Dan Rollins: I think when you look at fees in ’23 and ’24, I mean, clearly mortgage was hurt in a big way in ’23, and if rates do fall as they’re talking, there’s real opportunity there.
Joe Yanchunis: For sure. All right, well, great. I appreciate you taking my questions.
Dan Rollins: Thank you.
Operator: And our next question today comes from Matt Olney from Stephens. Please go ahead.
Dan Rollins: Hey, Matt.
Matt Olney: Hey, great, thanks. Hey, good morning, everybody. I heard the comments that you think that the balance sheet is now fairly neutral. But it seems like that restructuring and the build of overnight liquidity would result in increased asset sensitivity in the fourth quarter. But sounds like you think it moderated. Any more color you can help us appreciate kind of why you think that’s more moderate now than last quarter?
Valerie Toalson: Yeah, it’s really as we look out over the next twelve months. So, I would say, yes, there is more sensitivity on the short end of that. But as you look out over the next twelve months and really kind of in a normalized state, it’s a little more neutral. So, we definitely have some upside with the cash in place right now.
Matt Olney: Okay. So, no other movements or migrations on the balance sheet beyond that restructuring that we’ve already covered?
Valerie Toalson: No, nothing else of note.
Matt Olney: Okay. Appreciate that. And then, on the deposit — go ahead. I’m sorry.
Valerie Toalson: No, I just was saying, you bet. Go ahead.
Matt Olney: Okay. I’m sorry. On the deposit growth outlook, I think the guidance calls for the low-single-digit growth. We’d love to hear more about just expectations of where this could come from, which products, and any color on the incremental funding costs more recently. Thanks.
