Carlos Vazquez: You’ve seen our balance sheet be pretty static actually this year despite the big loan growth because what ends up happening is that we have a big shift for securities and cash into the loan portfolio. So I mean, I don’t – balance sheet growth is not necessarily a target that we’re pursuing. If it happens, but it – we still have significant amount of liquidity. We still have significant amount of part of the investment portfolio maturing every quarter, that is more than capable of funding loan growth. So I would probably expect more shift from the investment portfolio and cash to loans and the overall size may not change ahead of a lot.
Ben Gerlinger: Got it. That makes sense. And then it seems like you are reinvesting some, just given the amount of liquidity fits off. I was just curious where in the curve or in terms of duration? Are you kind of approaching any sort of reinvestment.
Carlos Vazquez: Yes. We are having all those discussions and have not made those decisions.
Ben Gerlinger: Not currently, they’re being invested in shorter-term instruments such as U.S. treasury bills.
Carlos Vazquez: Yes. So it’s basically what maturity is paying in cash or cash-like instruments timer. But we haven’t – we are having the discussions of potential extension in the investment portfolio. We have not executed any of that. The extension we have achieved and is significant, obviously, is the move from tax to our loan book, which has a much higher duration than cash.
Ben Gerlinger: Got it. If I can just sneak one more into. I know you gave the expense guidance. Is that – if it’s the high end of the range on revenue, should we expect high end of the range on expenses as well does that include some sort of a commission or bonus payment as well? Or is that potentially even higher if revenue does come in at the high end?
Carlos Vazquez: No. The range does not necessarily include our profit sharing, which I think is what you’re referring to. We do, as you know, we have to exceed our budget by a given margin for that to kick in. So it’s not necessarily there. I wish there was a perfect connection as you suggest between the high end of one of the – on the revenue on the high end of the expenses, but that’s not necessarily the case.
Ben Gerlinger: Got it. Appreciate it. Thanks, Carlos. It’s been great working with you. Enjoy your retirement. You have always been really helpful. Thank you.
Carlos Vazquez: Thank you.
Operator: Our next question comes from Alex Twerdahl of Piper Sandler. Alex, please go ahead.
Alex Twerdahl: Hey, good morning, all.
Carlos Vazquez: Good morning, Alex.
Alex Twerdahl: Just wanted to dig back into the NIM a little bit or the NII guide. In the past, you guys have kind of quantified each rate cut or reach rate hike has a very specific impact on NII each quarter. Are you able to do that? Or?
Carlos Vazquez: Well, I mean, I think the best way to think about that, I like to go back to my comment that we are luckily rate neutral in our balance sheet composition right now. So a change in rates will not have a very material effect on that range we provided, okay? Because our balance sheet is, to a large extent, neutral to mobile rates in the short-term.
Alex Twerdahl: Okay. And then on Slide 20, the maturity schedule of the U.S. treasury notes, is it pretty fair to assume that the sort of $1 billion or so that comes off each quarter is right around that 1.5% yield.
Lidio Soriano: Yes. That’s the right number.
Alex Twerdahl: Okay. Great. And then just when I look at the net charge-off guidance that you guys provided versus what we’ve seen over the last couple of years and really all the macro data and unemployment rate and sort of the momentum behind the economy. It feels like the net charge-off guide is being a little bit conservative. Are you – when you come up with that guidance range, is it – are you looking at specific inputs? Or is it really just kind of a hunch that things kind of have to get worse from a pretty good – pretty solid level where they’ve been?
Lidio Soriano: I think it’s a combination of things. We look obviously at trends, recent trends, and we also look at the expected economic forecast over the next year, which we provide to you in the allowance slide. So I think it’s a combination of factors, those two of the most important factors.
Alex Twerdahl: Okay. So I mean I think in the past, Carlos, you’ve – I think, a comment that has stuck with me is that people, when they’re employed tend to pay their bills, and with unemployment being as strong as it has been in employment growing and all the momentum in the economy and potential tax – additional tax break coming early this year for sort of the low income sector. I mean is – I mean, it feels like you should be able to do much better than that or at least better than that 65 to 85 basis point range.
Carlos Vazquez: I think, Alex, that you have described the environment well. As I think we’ve discussed in the past, we are a little bit puzzled in trying to make the connection as well. We are doing our best to understand the drivers on why does this happen when the underlying – the underlying economy and employment situation is strong. But while we are seeking to understand the connection better, we also cannot ignore the fact that we are seeing the increased delinquencies and so we have to make sure that we reflect that in our outlook. The other thing, of course, the environment in the mainland is equally positive. And most banks in Mainland, are seeing similar deterioration in the consumer portfolio. So I guess we’re not the only ones with the conundrum in trying to connect how the economy is doing and employment is doing versus how some clients are behaving. But – so we’re working on that.
