Steven Alexopoulos: Okay. Thanks for all the color.
Operator: Our next question is from Dave Rochester with Compass Point. Please proceed.
David Rochester: Hey, good afternoon, guys. Nice quarter.
Phillip Green: Thank you.
Jerry Salinas: Thank you.
David Rochester: On your outlook for higher EPS versus consensus, are you guys assuming you’ve reached a bottom now in NIM and NII giving your rate outlook? You’ve been pretty stable here for a couple quarters now. Are you thinking that trend continues? And then when do you think you could get back to NII growth?
Jerry Salinas: Yeah, I think that – and I think I’ve been pretty consistent. The fourth quarter for us, I think, is going to be a little bit weaker, I don’t think it’s – and it’s not significant. The guidance I gave last quarter was, I thought they’d be flattish, and I could even still say that with a downward bias. I mean, we were down 1 basis point between these quarters. So I’m kind of feeling that same pressure. I think that as I look out into 2024, and we’ll get more color in January, as I said. But, I think we talked a couple of times that we have some opportunities with some reinvestment of some proceeds that are going to be coming to us pretty early in 2024 from maturities on our investment portfolio.
And even though we haven’t really decided what sort of an investment plan we’ll put in place, just putting it on our imbalances at the Fed would be a significant improvement. I think we’ve made no secret of the fact that we bought $1 billion in treasury securities that mature, I think the first tranche, say, first $250 million is on December 31. So I really say, basically, they’re all in early 2024 and it’s at a 1%. So that’s sort of a pickup that we’re kind of projecting for most of 2024s as those securities get to be reinvested, a lot of it will be dependent on what our assumptions are for lower rates, if that’s the case in 2024 when we get to that forecasting period in January. But, right now, I do think that the same guidance I gave last quarter about kind of flattish to a little bit downward bias.
It’s kind of where I’m at for this fourth quarter.
David Rochester: Okay. I appreciate that. And then going back to the stats that you were talking about on the noninterest bearing, it sounded like October was down. If I heard this right, maybe $260 million-ish from the September average, I know that’ll bounce around. I was just wondering if you had isolated what drove that pickup in the runoff here at this month.
Jerry Salinas: To be honest with you, there’s so many accounts in there, and there’s a lots of positives and negatives and a lot of volatility that goes in with those accounts. And to be honest with you, from my end, when I see a movement like that in a month, I tend to think it’s pretty flattish. And we hope, certainly that we’ve seen the drop at the bottom, as we said, Phil talked about the new relationships that we’re adding on the commercial side. It typically takes us a few months, from 3 months to 6 months to get those commercial deposits on. So we continue to be pretty optimistic about it and hope the worst is behind us.
David Rochester: Good. Maybe one last one just on expenses. You mentioned the mid-teens growth guide. And that implies a little bit of a wider range, I guess, since we only have one quarter left. And it seems like a midpoint would imply a little bit of a step up in expense growth in 4Q. Are you thinking maybe more at the bottom into that range at this point, that you came in a little bit lower this quarter?
Jerry Salinas: Yeah, I was joking a little bit earlier of what its mid-teens mean, right? Because in my mind, that’s one number and it could be a different number in your case. Yeah, I will say, David, that my expectation today versus where we were a quarter ago is that we’ll be lower. We had a really – we beat for the quarter and some of it was on the expense side coming in lower than we had expected. And we do a lot of settlements on incentives and kind of look and see where all those incentive plans come in. Some of our incentive payments all vest and our issued invest in the fourth quarter. So there’s a little bit uncertainty there. But if you’re looking at where I was a quarter ago versus where I am today. Yeah, I certainly feel like it will be a little bit lighter than I thought we would be.
David Rochester: Yeah, when I saw the growth at the slower rate this quarter versus what we expected I figured that that was going to be a response. I appreciate it. Thank you guys.
Jerry Salinas: Sure.
Operator: Our next question is from Ebrahim Poonawala with Bank of America. Please proceed.
Ebrahim Poonawala: Good afternoon.
Jerry Salinas: Hey, Ebrahim.
Ebrahim Poonawala: Hey, so Phil, you talked about growth may be somewhat flowing as we look into next year. Just give us a sense of how customers are holding up when we think about this lagged effect of the Fed rate hikes, may be consumer demand slowing down a bit. I’m not sure whether or not that’s happening in your markets. But give us a sense of just the resiliency of the customer base, where if any place where you think softness from a credit quality perspective, and it may not be within Frost loan book, but just in the market where you think some softness?
Phillip Green: Ebrahim, I think they’re pretty well known, right? The deals that were underwritten that have seen – on a floating basis that have seen the higher rates and operating costs are up. There are – honestly, I mean, I don’t pay a lot of attention to other banks, but I mean, I know our credit numbers are really strong. I don’t get the sense we’ve had a tremendous problem here in the state. We said we’re glad we’re operating in Texas, we really are, I think it makes a huge difference. I don’t see things, imagine, I said it was slower next year, I don’t remember that. I don’t feel like it’s going to be that much slower. I talked to customers, it’s kind of funny. When you go out and talk to them, I was with the construction guy, and he looked at me, and he said, I’m really interested in how you see the economy.
And I said, well, I almost embarrassed saying it, I said, I don’t think it’s that bad. And he looked at me and said, that’s how I think too. And we almost felt embarrassed for each other that we said it. We’d like we’re going to get canceled or something, because there’s – I guess if you watch too much TV, you think it’s supposed to be bad. But, I think there’s more worry about than there are actual problems today. And I’m not trying to be pollyanna. It’s just most people, when you talk about their business and there are some problems here and there. We talked about some increase in our risk-grade 10s. So there are some issues, but it’s not bad. If I had to pick, let’s say, okay, let me see. So I would say probably you buy here or pay here, use card, it’s got some pressure, because they’re a rate-sensitive business.
