And with our capabilities, with the new TM capabilities that came on board for a lot of our footprint as well. We’re getting looks, and we’re winning that, we’re going to win that business and that momentum is building.
Frank Namdar: And it’s a great funding alternative to — not on the operating, we get the operating account, but then with their surplus liquidity, we provide an alternative to the local government pools. And it’s a way of providing — bringing in deposit balances without cannibalizing our core deposit base or repricing the whole sector of our deposit base. And so it’s kind of a different lever that we can pull. Now it creates noise. And in my prepared remarks, I made a reference to the results of the quarter don’t necessarily reflect the quality of our deposit base. But that’s what I was really getting at, is that this is just a lever we can pull and the fall when tax proceeds are coming in for municipalities is a great time to pull that lever.
Brandon King: Got it. Got it. And just my follow-up would be, could you — do you care to quantify the level of the amount of public funds deposits you have? And would you consider these deposits higher beta relative to maybe some of your more core deposits?
Chris Merrywell: I think you have to bifurcate it because we do have the operating relationship with virtually all of these public entities. And so that’s going to behave more like a traditional part of our portfolio. And then you have the — what I referenced as an alternative to the local government pools. And so I think Ron has got the detail you’re looking for.
Ron Farnsworth: Yes. And again, we do highlight that in those trends on Page 17 of the earnings presentation, but in total, $2.9 billion of total public deposits and that was up roughly $0.5 billion, a little under $0.5 billion for the quarter. And of that, you’re going to be probably in the 15% — 10%, 15% range would be the core operating accounts, 20% probably tops, but a good stable base.
Brandon King: Okay. Okay. And just lastly, Ron, I know you’re working to kind of reduce asset sensitivity just given the — for rate curve and the potential for rates to come down. Are there any actions that you’re considering or looking at that would make sense at this point to achieve that?
Ron Farnsworth: Yes, great question. It’s really difficult on the derivative side just given pricing and expectations, but we took that shot and we did that. And you can see the trending there, too, on page 11 of the presentation, with how we reposition the portion of the bond portfolio in that first week post close back in Q1. And then also utilization of shorter-term wholesale funding, be it the broker deposits or Home Loan Bank advances, to help offset the deposit flows during the year. Those two items in and of themselves basically act as like a swap benefiting rate down because you’re locked out cash flows on the portfolio, and you’ll have fully floating down cash flows on the right side of the balance sheet. So that was really the majority of the change from a year back to now where in the past year back, we had a more traditional asset sensitive profile and today, we’re relatively neutral.
Brandon King: Got it. Thanks for taking my questions.
Ron Farnsworth: Yes, thank you.
Clint Stein: Thanks.
Operator: Thank you. One moment, please. Our next question comes from the line of Chris McGratty of KBW. Your line is open.
Chris McGratty: Okay, thanks for the question. Ron, maybe on your expense guide for a minute, the $1 billion to $1.1 billion, what — I’m interested in your comments on what the revenue environment would be at different points of that guide?
Ron Farnsworth: Good question, Chris. Generally, the — historically, the movement on the expense side directly tied to revenue would have had to do with home lending back in a different much lower rate environment, right? You see seasonality over the course of the year which would drive higher revenue in the second and third quarter, lower seasonal in first and fourth. And you have corresponding expense trends along the lines. I’d say in this — our outlook here is not for significant rates down would — to where our home lending is picking up significantly in volume. So it’s going to be really range band within that NIM is going to be the driver of the revenue side. And I think over the course of the year, ex any legacy home lending seasonality, you’re generally going to see higher payroll tax type items in the first two quarters of the year and then those tail off in the second 2 quarters of the year.
You also generally see annual merit cycles, which basically approximates inflation rates at the start of the second quarter. So you see a little bit of a lift and then stabilization over the course of the year.
Chris McGratty: Okay. That’s helpful. And Clint, maybe on capital. You noted in the release CET1 of 9.6% is above your 9% target and your total is within 20 basis points. Is it — could you help us on when the buyback would be more of a discussion or an announcement? Is it when you hit 12%, do you have to build a buffer to 12%? How are you thinking about the buyback given the outlook?
Clint Stein: Yes. I think that — I mean, 12% is kind of like the Fed trying to stick the landing on the economy. It’s difficult to just get to 12% and keep it there. And so I think that we’d want a little bit of a buffer before we implemented the buyback, probably not a huge buffer, but enough that we could do a meaningful buyback and still be above 12% after you took that into account. So I know I’m not giving you like a hard and fast time line or number. But we do see — and you can see the brand over the last three quarters of how capital builds. There are some things as the rate environment, we do get three cuts. I think that gives us some additional optionality even over and above what we already have on our balance sheet and some flexibility that can put us in a position to do a buyback sooner than later.
But we’re probably really talking, is it 1 quarter or two quarters before. We would do it just naturally through steady state with the 20, 25 bps of capital increase in each quarter.
Chris McGratty: Okay. That’s helpful. And then just a follow-up. Would that be the top use of capital beyond growing your business that you’ve talked about? Or is there an alternative use? I know you have the dividend that’s pretty competitive, but inorganic growth at all on the table?
Clint Stein: Yes. The regular dividend, obviously, is something that we have talked about that we want to be consistent and provide that. And for some of our investors, that’s a very important component of their investment in our company. The organic growth component of it, Tory mentioned in his prepared remarks, the pipelines. And I’ve had the opportunity to meet with some of our market leaders over the past 30 days. And when they talk about what their pipelines look like and the opportunities they have in front of them from a business perspective. Many of you have seen Ron in person when he talks about the bond portfolio, and he just gets giddy. That’s the same type of reaction that our bankers have with the opportunities that they’re currently in the middle of pursuing.
