Again, I’m not saying we can’t have problems, but this is how life is on a day-to-day basis around here. And so anyway, that’s what I know.
Steven Alexopoulos: That’s great color. Thanks for taking the time to flush that out because it is a major concern. And most of us just read these articles that we don’t know what’s in your portfolio like you do, Phil. So it’s nice to hear you walk through it and that you’re confident things could happen, but you feel pretty good on your exposure. So thanks for taking my questions.
Phil Green: I do. Yes, thanks.
Operator: Our next question is from Dave Rochester with Compass Point. Please proceed.
Dave Rochester: Hey, good afternoon, guys.
Phil Green: Hi, David.
Dave Rochester: I was hoping – hey, I was hoping you guys could talk about what’s your NII guide means for the NIM trajectory. You’ve got the low rate securities rolling off this month and then you’ve got the rate cuts coming in later in the year. So is the thought that you get some expansion here in the first half of the year, then maybe that turns South in the back half of the year? And then what does that mean for the exit NIM by the end of the year? Is that going to be higher than where you were this quarter? Are you thinking that might be lower? And then you mentioned deposit betas earlier. I was just wondering what your guys’ thoughts were on how fast you can do those deposit costs down since you were very focused on being proactive, I know on the way up. Are you thinking you can bring those down just as fast basically assume the same type of beta on the way down? Thanks.
Jerry Salinas: Yes. I guess I’ll start with that last question first. I think the thought process is that we could be – go down just as fast. But at the same time, I’ll say that we are – we don’t ignore the market. I said earlier, we’re not going to feel like we need to lead the market. But we’re going to be competitive. So I would answer the question by saying that, yes, we were up fast. I think we’ve kept up all along with all the hikes and I feel like we can be pretty aggressive going down, but we’re not going to keep our head in the sand. And if the market is not moving down as quickly as we thought it might, we’ll certainly react accordingly. As far as the NIM, I guess what I’d say is that, yes, we are relatively flattish all year.
And so yes, I think you said it. We really kind of take a step up in the first quarter as a current expectation. We do have, in our projections, a cut in March. But – so we do take a hike up in the NIM in that first quarter and then really kind of given the conversation that we had earlier, and a lot of it will be dependent on liquidity, right? And what happens with deposits, how much we’re keeping at the Fed, et cetera. But right now, our guidance I would give is it’s – once we – in the first quarter, the rest of the quarters will be relatively flat. So we get a lot of the help in that first quarter.
Dave Rochester: Okay. What are you guys assuming for the NII or the NIM impact from a single rate cut at this point?
Jerry Salinas: I – the answer I’d give you is about $1 million a month. And again, I think that’s one where it will be dependent on what happens with how much liquidity we’ve got at the time it happens. It could be more if there was more liquidity on the balance sheet.
Dave Rochester: But how are you guys thinking about managing the securities book through the year? I know you’ve got – you didn’t purchase anything this past quarter. You’ve got the securities rolling off this quarter. Is the thought to just let that run off this year flowing any kind of cash flow into loans or paying down borrowings that kind of thing? Are you going to be replacing some of that along the way?
Jerry Salinas: Our current expectation is that – I think I’ve said earlier that our – we’re projecting about $3 billion in cash flow from that portfolio. Right now, we’re projecting that – I’m sorry.
Dave Rochester: Oh, yes. No, go ahead.
Jerry Salinas: So we’re projecting that $1.5 billion to $2 billion is what we would be invest more likely closer to that to the lower end. And we’re really just kind of saying we’ve got our investment guys who really are paying attention to the market and we’ll just look where there’s value, and we’ll continue to try to be opportunistic. I think we’ve been successful in a lot of cases. And we just have to see what’s happening, but that’s what our current expectation is. We spend about half of that liquidity. We feel good about deposits, like I said, but kind of would like – you know us well enough to know that we tend to keep a pretty high level of liquidity. But that’s our guidance. We’ll spend about half of it.
Phil Green: Half of the runoff.
Jerry Salinas: About half of the runoff, right? Half of the – $1.5 billion of the $3 billion that we expect.
Dave Rochester: Got it. And maybe just one last one. Where are you seeing securities yields at this point? I know they’ll change for the year, but curious for what you are buying again.
Jerry Salinas: Yes, we’re not buying anything.
Dave Rochester: Right.
Jerry Salinas: I think that the last time we talked, we were looking at mortgage backs, and I think they were a little bit – yes, I almost hesitate to say, yes, we really haven’t been spending a lot of time with that our investment guys are. We haven’t made any purchases for two quarters now, but certainly north of 5%, and nothing’s really enticed us. We’re really – we just kind of want to see how this first quarter plays out. But if we do see something where we think there’s real value. The good thing about an organization like ours is that the group that makes those sorts of decisions is works very closely together. We’re meeting all the time and certainly could make a decision really at the snap of a finger. So our guys are keeping their pulse on the market, but at this point, really haven’t felt a lot of pressure like that we need to do something today.
