And as we think about, like you mentioned Tim sort of the market trying to force the regional banks into a tighter regime in terms of how they’re valuing the stocks, versus what we know to be, what tends to be a very slow regulatory process in terms of NPR comment period season, how do you balance that sort of market demand for higher capital? And TLAC eligible debt, greater cash liquidity versus the, the regulatory timeline? And what, that we don’t know, nothing concrete today?Timothy Spence I mean, I think the answer is you the way that you manage that proactively as you would have started doing something on each of those topics last year, right. So we were in the market, after every earnings call last year, four times. And as a result, have the lowest incremental need in the event that TLAC had no phase in period, right.
As an example, you were deliberate about the way that you manage the ACL to reflect uncertainty in the forward outlook, and therefore you’re carrying good coverage today, right, which we certainly feel we are. And you would have allowed yourself to a CRE capital during a period when the market was certainly more robust for regional banks, which I think, of course we did as well.I think lastly, what we’re going to see here coming out of this, even if there is no change in regulation, as we all will flow, the empirical data from March Madness, through our models, and it’s going to dictate a very different value for non-operational money and operational money, right. And the by-product of that is the banks that have good core retail deposit franchises, and who have good commercial operational commercial franchises.So linked to payment activity, treasury management services, and otherwise, that that is going to be the place that you want to be because while we think the Fed obviously at some point, rates are going to stay higher than zero on an absolute basis, and our ability to make money on both sides of the balance sheet is going to be a big driver who does well if there is more capital requirements or liquidity requirements are higher.
Thank you.Erika Najarian Thank you.Operator Our next question comes from the line of Mike Mayo from Wells Fargo Securities. Please proceed.Michael Mayo Hi. So you think you expect deposits to be stable or increased from here but for NII to go down in the second quarter. Did I get that correctly? So the driver on NII is really twofold. One is the DDA mix, into interest bearing. And then the second element of the guide is that the movement up in rates in March to have a full quarter effect of that rate increase will bleed through into the second quarter and then that’ll be offset by some benefits from day count as well as some of the consumer loan growth. And how are you or are you becoming more cautious, firm wide and why? So you trend your loan growth guidance down by 1% and in terms of maybe expenses, are you ratcheting that back?
Are you preparing for tougher times? Or are you preserving the infrastructure for the potential for growth? That maybe others don’t expect?Timothy Spence Yes. So I mean us, Mike, we like to try to toe the line. We’re an and company more than we are and more companies. There’s no question that I think we all feel more cautious about the prospect for loan growth. Part of that is the Feds been abundantly clear, they’re going to tamp down demand, right, no matter what it takes that but I note that the 1% decline for us comes on top of what I think was already the lowest full year loan growth guidance. So we have been pretty cautious as it related to loan growth. And in terms of expenses, I think you noted the actions we took during the quarter; we continue to be surgical about pruning the branch network, which creates the capacity to invest in the southeast.
We had little more than 12 million bucks and severance that rolled through attached to expense actions that were designed to take capacity out of businesses that we just don’t believe are going to need it, given the outlook.And I think the discipline that we have had, which is we believe in self-funding investments, because it drives good discipline around capital allocation, and effort is going to be the same here. So we do not intend to pause, the strategic investments we’re making in the southeast or the investments we’re making in the technology platform, those are going to be too valuable for the franchise in the long-term. But we are not going to be spending money on a discretionary basis that we don’t think, is going to generate a near term return, outside of our strategic investments.Michael Mayo And then last one was interesting, as you talked about, you said, you could go ahead and recognize your security losses and AFS.
It’d be manageable. And I guess you could sell those or do all sorts of things with that. So you have the capacity. I guess, how much more in TLAC would you need? You said you’ve been in the market for the last four quarters. And if you had to go ahead and do that and be the only bank that did that, would that set you apart? Would that just be uneconomic?James Leonard Yes, just to clarify on the AFS, my comment was about the AOCI, should it be a capital requirement that we would have significant improvement based on the implied forward curve through the end of 2024 about 45% of that would roll down the curve, given the bullet structure of the portfolio, not necessarily selling at all. So we do like the portfolio. But in terms of the TLAC challenge.
At the end of the year, our gap to the 6%, RWA bank level would be about $4 billion. So for a bank our size that is certainly manageable, and then the question then becomes, what would the regulations change with what you would do with the proceeds.So right now, we’re sitting on $10 billion of excess cash, which is, frankly, the biggest driver of the NIM erosion as we look forward on a full year basis, because that 10 billion of excess cash costs about 16 basis points of NIM. And so if we were to issue 4 billion more in debt, obviously, we would prefer to lend it to customers. But if the liquidity rules tighten, and we have to hold a higher Reg YY liquidity buffer, then we will be forced than any of their just holding an in cash or buying more level ones.And so it starts to become a challenge with the distribution of the proceeds.
When you say what, what it sets you apart, and what your earnings profile improve, I think it would just be a gross up on the balance sheet and, and really not productive. And so that’s why we haven’t done it.Michael Mayo That’s clear. Lastly, $4 billion gap for TLAC, how much have you issued or obviously have?James Leonard We haven’t issued any this year, but total long term debt is $13 billion right now.Bryan Preston Yes, Mike this is Bryan. That’s about 6.6% of assets, pre-COVID, we were at 9% of total assets. And that gap is about $5 billion. So we’re just getting back to levels where we were before COVID. So that TLAC requirement is just not a big deal for us relative to our historic balance sheet structure.Michael Mayo Right.
All right. Thank you.Operator Our next question comes from the line of John Pancari from Evercore. Please proceed.John Pancari Good morning.James Leonard Good morning, John.John Pancari Just a question on the securities book, I appreciate the detail you gave on 525 on the commercial mortgage backed securities, I know there are 52% of your securities book. Can you maybe give us an update there? Are you seeing any stress there in terms of the performance of those securities amid the commercial real estate stress? And then, what type of stress and would be needed to pose risks to valuations or other than temporary impairment in that portfolio? Thanks.Bryan Preston Absolutely. It’s Bryan again, so you need to break the CMBS portfolio into two components, the agency portfolio, which is effective it is Fannie, Freddie, and Ginnie guaranteed, so that portfolio looks just like RMBS that many people are invested in.
So from a credit perspective, no issues on $29 billion of that portfolio, as its GSE guaranteed. The non-agency portfolio, which is only $5 billion, it is all super senior AAA rated. And we perform very significant analysis from a stress perspective, and from an underwriting perspective, every time that we buy and, and as well as when we monitor the portfolio.To give you some color on our recent stress tests that we’ve performed. We assume a 50% decrease in property values across all the underlying properties within the structures. And even in that scenario, we would record we would realize no losses on that portfolio and still have 23% heart enhancement. The Office loans within that portfolio are about 30% of the underlying loans. If we assume that from a weighted average perspective that does office loans, that the underlying properties would experience a 90% decrease, that’s when we would get to our first dollar of credit loss on that portfolio.So we feel very confident and there would be significant loan losses across the entire industry before we’d even recognize our first dollar loss on this on the structure associated in this portfolio.John Pancari Got it?
