Dan Rollins: Yeah, funding costs was — increased slower in the fourth quarter than it had been. When you look at that overall financial expectations page on Page 4, I think our desire was, was to put some confidence behind the consensus numbers that are out there today. We think that we’re in good shape on that front. And specifically, the ability to grow deposits is a piece of that. I think that’s the community bank team. It’s certainly been growing on the interest-bearing deposit side. We continue to enhance and improve our treasury management product. And so, I know the team is out there winning some business on that front. This morning in the loan discussion, there was a good customer coming in there. So, I think we continue to feel really good about where we are.
Valerie Toalson: The other thing that of note there, Matt, is the deposits at the end of the year include just shy of $400 million of brokered deposits, about half of that already came down in January. And so, included in that growth number is a reduction of brokered deposits.
Dan Rollins: Further reduction.
Valerie Toalson: Yeah, further reduction.
Matt Olney: Okay. Got it. Thanks, guys.
Valerie Toalson: You bet.
Dan Rollins: Thank you, Matt.
Operator: Our next question today comes from Ben Gerlinger with Citi. Please go ahead.
Ben Gerlinger: Hi, good morning.
Dan Rollins: Hey, Ben.
Ben Gerlinger: I was curious, just kind of point of clarification, really. So in your guidance, does that assume the BTFP static throughout the entire year, or do you — because if I had you guys getting rid of it, there’s some flex in that NII outlook.
Dan Rollins: Yeah, I think that — I guess that depends on what happens with rates. That’s a fixed rate product, and so if rates begin to fall, I don’t know that we want to leave that out there in a fixed rate product. So, I think there’s some questions in there as to how, what happens and when it happens. Today it’s good price funding for us. If rates begin to drop as early as the curve says they are, then we could lose some of that advantage, and you’d want to find other sources of funding that would change.
Valerie Toalson: Yeah, that’s exactly right. And that’s exactly what the model is assuming, is that once the rates become inopportune that we would pay that down.
Ben Gerlinger: Okay. So, it is a bit of a dynamic model on that one. Okay.
Valerie Toalson: Yeah.
Ben Gerlinger: And then very philosophical in nature, Dan, I know, and you can’t speak for other management teams, but what do you think the market is looking for, for M&A to start with? Is it strictly just a political election outcome in December, or are you looking for some rate cuts? Like, why are we not seeing much M&A today?
Dan Rollins: Yeah. I think that the politics is a piece of that. I think some clarity from the regulatory bodies on what they’re looking for, and some speed to get approval would be helpful. And so, I think there’s just some unknowns that are out there. I think there is — the marks is still a question, but I think a lot of people talking. There’s a lot of discussion going on. There’s a lot of desire to continue to get bigger. There’s a lot of — there’s a benefit from a scale perspective. Scale still plays. We’re really proud of what we’ve been able to do over the last two years. We think we’ve got capacity. We think we’ve got ability. We know our team can play. I think the marks and the unknown regulatory questions are still holding things back.
Ben Gerlinger: Got you. That’s fair. And then, if I could sneak one in, if you did do M&A and you had all those question marks kind of answered, what would be the kind of the wheelhouse for an opportunity size?
Dan Rollins: Yeah, I think we want to continue to be opportunistic. So, I think we like our footprint. I don’t know that we need to go outside of our existing footprint. We would like to continue to grow market share within the footprints we serve. We like the dynamic growth markets that we serve. So, certainly, as you look at our footprint, the bigger markets that we’re in from Dallas, Houston, Austin, Atlanta, Nashville, Tampa, anywhere in those markets would be beneficial to us. But more market share within our existing footprint is a target for us. And clearly, it needs to be big enough to make a difference. So, several billion dollars would be what you’d be wanting to get to up.
Ben Gerlinger: Got you. That’s helpful color. I appreciate it, Dan.
Dan Rollins: All right. Thank you, Ben.
Operator: And our next question comes from Brody Preston with UBS. Please go ahead.
Brody Preston: Hey, good morning. Valerie, I was — I just wanted to circle back. I think you said the spot yield in the securities book was 2.6%. And I guess when I just kind of try to do the back of the envelope math, and back into kind of where it would be for the securities that you’ve put on versus taken off, it kind of looks to me like it should be more in, like, the 2.85%-ish kind of range on the spot basis. And I’m getting this question from a few investors as well. What are we missing that’s kind of making it more in the 2.6% range versus the mid-2.80%s?
Valerie Toalson: Yeah, I’m not entirely sure, or the amount that you’re considering. I mean, of that $2.7 billion net that we sold, we’ve reinvested $1 billion into securities. And so, it’s not the entire $2.7 billion, we’ve used some of it to pay down broker deposits, et cetera. The number, you say sounds a little high, so I’m not sure I’m quite tracking with you. But we can go through more detail…
Dan Rollins: Yeah, that’s pretty granular to be able to get to here.
Valerie Toalson: Yeah.
Brody Preston: Okay. But 2.6% is a good number to work off for the spot rate, then, is what you’re saying?
Valerie Toalson: Yeah, I think that’s pretty reasonable. Yeah.
Brody Preston: Okay, cool. And so, I guess any — if I consider kind of what you have in cash at the Fed at 5.4% versus anything incrementally that you might do on the securities front in terms of purchases, there’s a mild benefit to it, but it feels to me like any securities purchases from here might be more about ALCO than necessarily earnings accretion. Is that a fair kind of point?
Valerie Toalson: I’m not sure I’m completely tracking with you. I mean, we definitely believe that there’s some opportunity to further invest the cash that we have held and to further benefit our margin as we look forward.
Brody Preston: I guess what I’m saying is, there’s not that much of a difference between 5.6% and 5.4%. And so, the earnings pick up from redeploying…
