Thank you.Chris Gorman Thank you, John.Operator Next, we go to Erika Najarian with UBS. Please go ahead.Erika Najarian Yes. Hi, good morning. If I could ask the NII protection question another way. Clark, the loan beta of your commercial portfolio was something like 52% in the second half of 2022 and about 65% this quarter. As we think about the protection for down short rates, and I think a lot of investors are expecting down short rates in 2023. Should we interpret your protection as a lower sensitivity to each 25 basis points of cuts that we’ve seen to the upside?Chris Gorman Sorry, can you ask that one more Erika. I just want to make sure I’m understanding the question.Erika Najarian Yes. Yes. So, I wanted to understand slide 11 in a different way, right?
So, the protection on your commercial portfolio and locking in the upside. So, we saw the sensitivity to higher short rates in terms of the carry through to your yield at about the low 50s in the second half of last year and in the mid-60s this quarter, right?The way investors are interpreting protection to the downside is a lower sensitivity as the Fed cuts, right? And so should we expect the key commercial yields have a lower sensitivity to cut on the way down than it did to increases in rates on the way up?Chris Gorman I mean, yes, if you think about the incorporation of the swaps, right? So, the swaps are there for exactly that purpose and they would reduce the sensitivity on the way down, that’s the intent of those instruments.Erika Najarian Okay.
And what you’re showing us on slide 11 is essentially the assumption that your current swap book as it rolls off, gets replaced with a higher received fixed rate?Chris Gorman Yes, two components, right? In I think our view, the forward curve, I have not seen a view yet where rates come down below where swap rates would be. So we would — we’re going to let that roll through our natural loan rates and yields flow through in 2023. In 2024, we’ve effectively replaced the swap book with forward starters at a higher rate, $3.40 on average and floor spreads with a kick in rate of 3.40%. So if rates were to stay higher, we’ll get the value on the floor spreads, we’ll carry the negative carry on the forward starters. If the forward curve plays out, both of those will be in the money at some point in 2024.Erika Najarian Got it.
And I’m sorry to just put this all together in the third question. But as investors are thinking about whether bank stocks are truly cheap, I think they’re thinking about 24 EPS as a trough. So as I think about your commercial yield today, right? There are essentially sort of ‘headwinds’ right? So the first would be the lower received rate — received fixed rate on your notional. And the second would be — on the other side of that, right, the yield will be better protected as the Fed cuts. So am I thinking about sort of the message on downside NII protection the right way as it relates to your commercial book?Clark Khayat Yes. I think you said that well.Erika Najarian Okay. Thank you.Operator And next, we move to Ken Usdin with Jefferies. Please go ahead.Ken Usdin Hi, good morning.
Just a follow-up on the swaps. So maybe just to ask it a different way. So in the back end number from the 10-K, of the reported impact from swaps in the fourth quarter was minus $162 million, do you have the number of what that negative impact was in the first quarter? And can you help us understand what it will look like when we see the new disclosure for the roll forward next four quarters? Thanks.Clark Khayat You’re talking just swaps specifically, Ken?Ken Usdin Yes.Clark Khayat Yes, $2.15 in the first quarter.Ken Usdin Okay. That’s $215. And then so last quarter’s next four quarters roll forward from the K was 655 after tax. Do you have an idea of what the new roll forward will be when we see that in the 10-Q?Clark Khayat Not at this point, but we can follow up and let you know that.Ken Usdin Okay.
And then the last question is you mentioned the $750 million and the $1 billion and that you’re not going to be replacing now. Can you maybe just flesh that out a little bit in terms of like the any change to that strategy around protection and how you’ll be replacing going forward to get that incremental forward benefit from the roll off versus what you’re putting on?Chris Gorman Yes. So I’ll keep trying. I’m worried, I’m not being super clear. So the $6.2 billion of received fixed swaps in 2023 are going to mature. $1.7 billion of that matured in the first quarter. We’re not planning to replace those to protect the loan book in year from a receive fix swap standpoint.There’s another $7.5 billion that roll out through 2024, and we’ve taken steps to effectively replace that, not all of it exactly.
It’s we’re in the $7 billion range, half of which is forward start received fix with an average rate of 340 — so just think about that as replacing the existing 24 rate and now bringing that up to 340 and then the other half with floor spreads that have an attachment point at also roughly 340 just by coincidence. So that really is the protection against rates coming down, which the forward curve would project at this point, and it would lock that $7 billion or so at a $340 million yield or higher as those other swaps roll off.Ken Usdin Got it. And I know that was asked so I apologize for re-asking.Chris Gorman That’s okay. I think maybe not doing it as clearly as possible. So I appreciate the follow-up.Operator And next, we go to a question from Mike Mayo with Wells Fargo Securities.
Please go ahead.Chris Gorman Good morning Mike.Mike Mayo Hi. This is a tough quarter for you guys. I guess, relative to expectations, you guys missed on NII, NIM, fees, provisions and expenses. You guided NII lower down 1% to 3% this year when before it was up 1% to 4%. You said NIM will go down next quarter. And so that’s just — given all those headwinds and pressures and maybe I’m misstating that and correct me if I did, are you ratcheting down expenses more? Are you becoming more cautious, or are you just have to take the stomach punch of the higher funding and go on with it.And part of that, you didn’t change your loan guidance, but it doesn’t look like you’re being more cautious there. So just I guess, I’m trying to say is, is this as bad as it looks, or are there some silver lining out of this, or I mean with your resiliency, maybe you chan gain share, but that’s not showing up in your guidance?Chris Gorman Yeah.
So thank you for the question. Let me just, kind of, broadly talk about the quarter. Mike, there’s no question it was a challenging quarter for us, but we continue to do the things that we need to do to build the franchise. And so what are those things? You mentioned expenses. We put a hiring freeze in place in November, and we took out $200 million or 4% of our expense base just in the quarter we just completed. So that’s one of the things we do.We’ve talked a lot today about how we’re managing our balance sheet. We have taken significant actions and we have the luxury of taking the actions because they’re short duration, both on our swaps and on our investments to put us in a position where we can benefit from the rise in interest rates. So we’ve done that.And then the other thing we continue to do, as you know, is we continue to strategically invest in our business and focus on targeted scale.
So my perspective is, yes, this is a challenging quarter. Yes, we have to get through this NII drag, but we have a clear path to do so. And that’s what we as a team are in the business of focusing on.Clark Khayat And Mike, I’d just add two things. On the expenses, they’re up because of the charge, $64 million. If you took that out, we’d be in good shape. And I think if you annualize that number, we’re right in line with our guidance of relatively stable year-over-year. And again, that’s in the face of some inflationary headwinds. I think on the provision, you heard in our charge-offs, we didn’t change our guidance, which may beg the question of why did you build your provision? And frankly, we’re doing what we think CECL was intended to do, which was when macroeconomic conditions change, you build the reserve.
