It helps us from an interest rate risk management. And we just think that today, there are still better uses for our incremental capital other than turning out some portion of the investment securities only to replace it with like-minded instruments that are 300 or 400 basis points higher.
Matthew Breese: Got it. Okay. And I was curious your thoughts around the NIM and the NIM outlook and when do we finally hit that kind of the parity moment between deposit cost increases and earning asset increases?
John Watt: I’ll run at that. And if Annette has more comments you can chime in too. I think what we’re pleased with is that the pace of decline has slowed down a 3.15 to a 3.14 [ph] outcome quarter-over-quarter is promising relative to, quote, finding a floor. But that being said, and if you looked at us from just a sheer interest rate risk profile, we’re very, very neutral. So as much as I think there’s a school of thought out there that lower rates would allow for a huge pickup relative to the banking industry. For us, we thought it could have a positive impact, but that positive impact is almost more tactical, which is if the Fed were to lower rates, it would create an opportunity for us to go to our customer base and say, we have to lower some of our funding costs.
Costs that we have supported or we’ve supported our customers’ outcome for the last 1.5 years, we would have a reason to be able to say the Fed’s coming down and so are we. We’re having that dialogue today on a tactical basis, but it’s more centered around our inability to be able to say if we’re going to offer competitive loan rates. And those are typically priced off the midpoint of the curve if incremental funding sources are coming from the front end, that inversion is just not very pleasant. And it’s been out there for quite a while. And so from that practical standpoint, I believe we think margin management in and around where we’re at today is probably likely to continue. And if the opportunity presents itself for our assets to reprice a little bit faster than any kind of mix change in the deposit side, we could be the net beneficiary of that.
But I think we’re pretty happy that again, we’ve sort of reached a point that we think is sort of stable and supportable.
Matthew Breese: Okay. And then understanding there’s some – a few onetime or, I should say, seasonal items in expenses. I would just love kind of an idea of what we should expect expenses to shake out in the second quarter and then for the remainder of the year given some of those seasonal aspects.
Annette Burns: Sure, Matt. The seasonal costs, we said was about $0.03. So you back that off. And then we know that the occupancy, we’re expecting that to be offset by other upticks in costs like travel and training as those kind of resurface after the winter. So I think where we are at today, plus or minus a few hundred thousand depending on the activity going forward, probably the second quarter being down from the first. And then as we said, additional payroll days will impact the back half of the year.
Matthew Breese: Okay. And then the last one for me. And John, I think this is in your ballpark. It’s just optimism around upstate New York and the chip dollars that are flowing towards Micron and GlobalFoundries. It’s hard to fathom how much money is actually going to these companies. When do you realistically start to see some of the benefits permeate down to your customers? Micron set to break ground, I believe, by the end of the year. Do we start to feel the impacts sometime in early 2025? Is that a good guess?
John Watt: So I think first Q ’25, the shovel goes in the ground. And I think depending on what sector you’re in on the commercial and small business side, you’re going to start feeling lift right around then. The number of subcontractors that are going to be necessary to accomplish this is very large. The planning around additional housing needs is well underway and projects will go in the ground next year, market rate, workforce housing. All of those things pick up momentum with this announcement of the grant last week. So it will build. It will build in 2025, 2026. I think the first fabricated chip rolls off the line up there end of ’26 into ’27. That means there’s probably 9,000 workers who have been hired and or will be hired and that will also generate a lot of activity.
That’s just Central New York. Think about also bringing a fab plant out of the ground next to the existing GlobalFoundries plant in Malta, New York. I’ve cited the number of construction workers and full-time technicians that are going to be necessary to man that plant once it’s operational. So that also creates momentum. So on the consumer side, every one of them needs a car and a truck to get to work. Every one of them needs a house to live in or apartment to rent. All of that is going to generate positive economic activity. I think Scott and Annette have given some thought about when to start quantifying that. It’s – we still have to give that a little bit of time before we get out there with actual percentage growth forecast. But it’s coming, it’s real, and that shovels going in the ground in Clay, New York in first Q 2025.
Matthew Breese: I appreciate that. And John, just congratulations on retirement, well deserved. And I’m excited to see what you have in store for the next chapter. Thanks, guys.
John Watt: Appreciate that, Matt. It’s been a pleasure.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Christopher O’Connell from Keefe, Bruyette & Woods. Your line is open.
Christopher O’Connell: Hey, good morning.
John Watt: Morning, Chris.
Christopher O’Connell: I just wanted to circle back on the residential solar portfolio. Am I understanding it right, is that going to run down to zero now? Or is it just for the next few quarters, it’s in runoff mode and kind of reassess at another point in time down the line?
