Operator: Your next question comes from the line of Ken Usdin from Jefferies.
Ken Usdin: I just wanted to ask on the securities book. I know you guys do daily LCR calcs and you got still the two third portfolio in the locked out and bulleted as you contemplate what the LCR requirements might look like, and I know we’re going to learn that ton, do you think are you comfortable with the structure of the portfolio and meeting any push down requirements to category 4?
James Leonard: Yes, Ken, great question. And embedded in all of our comments and outlook today, we should have outlined the strategy that our approach here for our company is that we fully expect TLAC to get pushed down. We expect the more draconian capital rules on ops risk to get pushed down, but not any of the benefits from the credit rating risk weighting, and we expect to have to be compliant with the full LCR. So that is the underpinning of all of our strategies for managing the balance sheet, and we want to do that expeditiously. And therefore, we are going to be holding higher levels of cash. We will be rotating more into Level 1 securities. But we love the bullet locked-out structure because that provides the shock absorber to potential low rate environment.
And so the flip side to all of this will be the AOCI impacts with the capital rules. And so we’ll wait to see what those final rules look like, but it sounds like, obviously, AFS inclusion, HTM exclusion. And so we may have to pivot a bit on the HTM classifications given that we’ve not done anything to date. But that might be an outcome from the brave new world that will have to adapt to.
Ken Usdin: Right. And I guess in the near term, with rates high, the move to cash is actually helpful, right, because you’re now earning five and change versus the average yield of the book, which seems like it’s kind of just held in. So it’s fair to say that, that’s kind of what we expect to see as the securities book for now just continues to shrink back down. And as to your point, we just see that cash build continue.
James Leonard: Yes. What we did in the second quarter was we let the portfolio cash flows of $600 million roll off and not get reinvested. So essentially, to your point, bolster cash. For the rest of the year, we’re assuming stable, give or take, $1 billion. We may let it run down, we may rotate into treasuries just depending on the day and the opportunities. But what you should expect from us is continued rotation into Level 1, whether cash or treasuries.
Ken Usdin: Okay. And if I can ask one quick one. In terms of your deposit growth outlook and the higher beta assumptions, I know you talked about 3% year-over-year household growth. I guess, can you parse out deposit growth just coming from the franchise as opposed to pricing up to get it? .
James Leonard: Yes. It’s just that there is a several factors impacting that. So in terms of consumer on the household side, we do have a very strong and consistent growth of 3%, but offsetting that tailwind is the headwind from consumer spending and the declines in the average deposit balance. So when you look at the consumer, the average deposit is still 20% higher than pre-COVID levels, but it is down 10% from the COVID average balance peaks. And so we’re modeling that, that erosion does continue and therefore, it creates a little bit of a headwind. So for us, the majority of the growth is obviously coming from the Southeast de novo market and they’re growing at a 7% rate. But the Midwest, whether it’s same-store sales or the total Midwest networks growing households at 2%. So we like what we’ve been able to do, and I would say it’s more about core new customer acquisition than anything else.