Asylbek Osmonov: I agree. As we mentioned earlier, our core deposits that excluding public funds, has increased in Q1, but what we see dynamics like Mr. Zalman mentioned that some people taking their non-interest-bearing to putting in the CD with specialty programs we have. So we’re not losing customers just repricing. So we’re still seeing lag effect on that — on those deposits. But overall, we feel good where we are on deposit at currently.
David Zalman: But on a percentage of deposits CDs and our bank, we’re probably still at 10% or 12% about — 14%. So that will probably still continue to grow, I don’t know.
Asylbek Osmonov: Yes, it’s continued to grow, but being a short term, I mean, we can reprice it within — if you look at our CD portfolio, 65% get repriced in the six months and 90% within a year. So it’s very short-term duration for those CDs.
Tim Timanus: What does appear to have come down is the concern over FDIC insurance. I mean, that could change tomorrow if something came out in the news that disturbed people, but just in my conversations with existing customers and potential new customers, they don’t ask about the insurance to the extent that they did going back 6, 9 months ago. There’s still a lot of rate competition, but the insurance issue has waned a bit. So that has resulted in some stabilization of deposits.
Brandon King: Okay. And with the NIM outlook, what does that assume from a deposit standpoint?
Asylbek Osmonov: So if you look at our deposits, I think on March, our period-end deposit cost was $142 million. I think we, in our model, it ticks up a little bit, but it’s around $145 million, $150 million cost of deposits. And on the loan side, I think — we put up loans blended rate in January, February, March, around 8 to 8.50 [ph] on average. So that’s what’s taking account in the model.
Brandon King: Okay. And it stays at that level, I guess, through the rest of the year. Is that kind of what you’re assuming?
Asylbek Osmonov: Yes. We do.
David Zalman: It’s a static model.
Brandon King: Okay. Okay. And then just lastly, sorry if I missed this, but I think you referenced the step-up in NIM, but could you share the step-up in NII in the second quarter, just helpful just given the noise around the deal?
Asylbek Osmonov: I don’t think we have specific numbers, but we — let’s see…
David Zalman: You got to do some of your own work, Brandon — we can get back to the normal.
Brandon King: Okay. I’ll step back. Thank you.
Operator: The next question comes from Manan Gosalia with Morgan Stanley. Please go ahead.
Manan Gosalia: Good morning. Before you put that crystal ball away, I have 1 more on deposits. Do you think that with the change in rate expectations and the fact that you’re seeing a little bit of a slowdown on loan demand, would any of your existing customers revisit their surplus cash balances and see if they can put more money to work elsewhere, especially on the commercial client side?
David Zalman: I don’t know if I understood the question exactly, but my gut — I think what you’re asking is will our commercial customers take money out and put it somewhere else with things slowing down. I would think if rates — this is just my feeling, usually, when rates come down, the customers not using their money, they’re not pushing it, trying to find something to do with it every minute and they leave more in their accounts. I would think as interest rates come down, you’ll probably have an easier time with commercial customers, keeping their balances up. I think as interest rates stay where they’re at right now or even higher, and they can see that they can get 4% or 5% somewhere, they’re really trying to work that money. But again, I think that if the short-term interest rates come down, it would probably be easier on us.
Kevin Hanigan: Yes. Manan, this is Kevin. I think most of that has already occurred. They were using excess money to pay down lines of credit. So we saw unfunded commitments rising through this period of time as they took DDA balances and paid off loans. And then to the extent they still had excess money, they were calling one of us asking for a special rate or some kind of rate bumps. It’s not all the way over yet, but I don’t think it’s going to get — I don’t think it’s going to accelerate from here unless something really odd happening.
David Zalman: I think it’s a good point, Kevin. We talked about that before. Most of that has happened already, where they’re starting to use their money on money.
Manan Gosalia: Got it. Yes. That’s helpful. I was thinking about it more from the point of view of if we get fewer rate cuts this year or do people just put their money elsewhere. But yes, the color you gave is helpful. And maybe to follow up on the loan growth question, is it just a function of rates? Is it a lot more pressure that you’re seeing on the economy too? And the reason I ask is because a lot of your peers are looking for a major inflection in loan growth in the back half of the year, even without too many rate cuts. So I was just hoping to get some more color from you on what you’re seeing on the loan growth side?
Kevin Hanigan: We agree — back, I’d say, back half, but and that would be to get us to that 3% to 5% range. And it — all I’m saying is it might tend towards the lower side of the range based upon what we’re seeing today. But I think it could be more back-half related — and a lot of this is related to rates. A lot of new construction in particular, call it, multifamily or whatever else, retail. It’s hard to pencil these things out at these rates. If you’re going to charge them any kind of premium, you’re getting 8.5% or 9%, it takes so much equity to make that deal pencil out to our underwriting that people are just waiting. It’s either put in 50% or 40%, 50%, 52%, 55% equity to make the deal work. And then your return on equity kind of gets so muted and your return on costs are not that great, people are just holding off.
