Stephen Steinour: Erika, this is Steve, I’ll start with that because you’ve asked a broader history. And then secondly — so first, we do think the discipline on our aggregate moderate-to-low risk appetite, which has been in place now for 14 years has been a [indiscernible] and it has helped us as we’ve decided with this just to pursue and whatnot to see. With that in mind, we’ve been very purposeful and strategic about growing these businesses. And you saw at the Investor Day a mid-teens rate of growth in like a specialty banking. So we have a very strong middle market core banking set of capabilities. We have a tremendous amount of small business capabilities and capacity. We have market density in Ohio on small business and we’re achieving that now in other states.
So the core sort of regional banking franchise is performing very-very well. When you add to that these specialties that have been put in place, just three new ones last year, which by the way they’re all off to a terrific starts. And then the expansion. We’ve been in like Dallas and Charlotte for a decade or more. When we see opportunities, we then pursue them. An example of that is in the Carolinas, where we believe we’ve got fantastic group of new colleagues coming to us with teams in to some — just outstanding people who we’ve been following for years and it all came together. We were investing, others were not and there was some moment to be dynamic. In addition to that, we still have opportunities in these TCF markets. We are doing incredibly well in Michigan, but I would say, we’re early-stage still in Chicago, the Twin Cities and Denver.
And we like those markets, each of those margins. So we believe with the investments we made in specialty banking, the core regional bank performing well with opportunity, we’ve got lots of growth potential in the next few years, and that’s where the — I didn’t talk about the asset finance business. So our distribution finance business is a horse. They had a phenomenal year last year. Our auto business is one of our best businesses. We’ve got one of the really terrific teams in that area and Floorplan has done very, very well in terms of its growth as well. So lots of growth options. The equipment finance more broadly, a lot of growth options in that, and we’re seeing that through the cycle. And so, we believe we’re poised to outperform and budget it and expect our colleagues to do so in the coming years.
This is — I can just talk on two things. First of all, thanks for the compliment on the guidance and all the credit to our terrific Investor Relations team. But just, one thing I would add on top of that is, we were pretty purposeful about staying on a growth footing across the board, and importantly, in terms of the financial resources and investment that we’re putting against our core growth opportunities. And recognize that the net outcome of that, including some of the other things that we wanted to do in terms of data automation capabilities, would result in an overall expense growth that was higher than we would want to have relative to revenue growth, higher than we would typically target. And it certainly was something we discussed at length, as you know.
But we took that view purposely and recognized it was contrarian, because in our view, the long-term earnings potential of staying in that growth posture is so much more advantageous than worry to have really significantly rationed back investments and expenses. And so, a bit of short-term challenge with respect to operating that will yield very significantly better earnings growth trajectory through the course of 2024 and 2025, the earnings outlook looks exceptionally strong as well. So just to tap on Steve’s point, I think the whole system is really working and [indiscernible] results here.
Erika Najarian: For sure, and you had the capital, so it all makes sense. And just a follow-up question, again, so many moving pieces in terms of the rate outlook, but Zach, if maybe update us on your rate sensitivity as of 12/31, how does some of the [Technical Difficulty] in terms of your balance sheet management? And also, if you could give us a little bit more detail about what you mean in terms of managing the betas on the way down in a similar discipline? And I wonder if you could give us maybe your expectations on deposit beta for the first hundred basis points of rate cut.
Zach Wasserman: Sure. Great questions. There’s a lot in there to unpack. So let me address those both. As it relates to asset sensitivity for December, I expect it to be roughly consistent with the asset sensitivity we saw, that was reported in October. And you’ll see that come out in the Q. I’m sorry, in the K. As we’ve discussed over time, the business is naturally asset-sensitive. And so clearly on the way up with the industry cycle, we’ve benefited very significantly in terms of margin expansion and revenue growth. I will note as well, something just as important to assess as you’re thinking about asset sensitivity is, in our securities portfolio, as you know, we’ve hedged a large portion of our variable for sale securities, which has benefited significantly in terms of yields rising higher, protecting capital in the asset sensitivity metric in the Dow 100 [rapid] (ph) scenario, for example.
It represents about a percentage point of additional sensitivity from those swaps. Those swaps will roll off over the course of the next 12 to 18 months. And most of that impact of sensitivity will begin to ramp off starting in the second half of 2024 and continuing on for about a 12-month period thereafter. The other thing I’ll just say is that, as an important point is, those sensitivity metrics are pretty academic and not standardized across the industry with lots of assumptions, the beta being the most significant, but also whether those analyses are ramps on top of the forward curve, or whether they’re just from a start point, ours is a ramp on top of the forward curve. So certainly, advising is important to assess those assumptions pretty carefully in comparing those metrics across firms.
