Bill Carcache: Understood. Okay. Understood. That’s really helpful. And then following up on your – the comments that you made around the deposit base, maybe if you could just speak to whether you see any risk that maybe terminal beta expectations could have to drift a little bit higher next year if rates were to hold just at these current levels.
Asylbek Osmonov: Yes, I think you have to look at what the competition is doing. I think that’s the main driver. I mean, if you stay rate for longer, it might impact it. But what we’ve seen last, I’ll look at last few quarters, we had a – if you just look at cost of our deposit has increased in the first quarter because of the rate environment. We had significant increase in the second quarter on our cost deposit. But in the third quarter, we actually saw the increase being less than what we had in the second quarter. So I think that we’re optimistic that the increase in the deposit is going to slow down, then we’ll forego further because I think everyone who won a reprice, they always took opportunity to reprice. Then there is – we believe it’s going to slow down a little bit on the increase on the deposit level of increase going forward.
Kevin Hanigan: I completely agree with what Asylbek said. I said, if we use history as a guide, once the Fed pauses, it’s not atypical for betas to continue to rise, but it’s vastly reduced rates. And they may rise for up to six months post pause, again, at nominal levels, but it’s not an immediate freeze when the Fed pauses.
Bill Carcache: Got it. That’s helpful. And then lastly, we heard on the…
Kevin Hanigan: Just one last point I would make.
Bill Carcache: Yes.
Kevin Hanigan: Just one last point. We have a really – unlike a lot of banks of our size, we have a really pretty significant, what I would call smaller town retail deposits that seem to be a lot less sensitive to rates.
Bill Carcache: Understood. Yes. That makes a lot of sense. Finally, if I could squeeze in one last one. We’ve heard other banks talk about how a positive operating leverage is going to be difficult to achieve next year. Maybe if you could just help us understand how you’re thinking about positive operating leverage as you look to the new year, given all the moving parts.
David Zalman: What do you mean by positive operating leverage?
Bill Carcache: By the ability to grow your revenues faster than your expenses, and effectively manage expenses for the revenue environment, so potentially cut expenses if revenues were to slow or have a little bit more room to invest if revenue growth was stronger just the idea of managing expenses so that revenue growth outpaces expense growth.
David Zalman: I think that’s the beauty of our whole bank. I mean, that’s the whole story where everybody else is there, almost maxed out because their rights have already taken advantage of the higher rates. We’re just going to hit it. We will just be going into our stride of. Even though we’ll have higher expenses, and we probably manage expenses better than anybody, and we will continue to do that. But the beauty of this whole bank, really, is if the models work and everything goes where everybody else is going to have that challenge, we should be doing much better.
Kevin Hanigan: Yes. We’re expecting some positive operating leverage. Our efficiency ratio because of the NIM declines, largely have gone from 42 to 48. As NIM returns and NII improves because of it, our efficiency ratio is going to drop back down to where our normal level is low 40s, where we normally play and…
David Zalman: Probably.
Kevin Hanigan: That’s really just a function of this kind of late-stage asset re-pricing that we have.
David Zalman: Once the Queen Mary turns, we’ll be doing better.
Bill Carcache: Understood. That is super helpful. Thank you so much. Appreciate it.
Operator: The next question comes from Brody Preston with UBS. Please go ahead.
Brody Preston: Hey, good morning, everyone.
David Zalman: Good morning.
Asylbek Osmonov: Good morning.
Brody Preston: I just wanted to clarify something on the expense guidance. I think you said 2% to 3% for next year, excluding the special assessment. Is that inclusive of Lone Star or would Lone Star be additive to that expense guide?
Randy Hester: That was a core number I was giving. Lone Star will be added on top of it.
Brody Preston: Got it. Thank you for that. And I know it’s challenging, but if you had to kind of hazard a guess for our modeling purposes, when do you think we should layer Lone Star in from a closing timing perspective.
Kevin Hanigan: I’d say it’s hard to say. We’re hoping sooner rather than later. Our latest extension with them is through March 31.
Brody Preston: Right.
Kevin Hanigan: So I think both companies are focused on getting it done before then.
Brody Preston: Got it. Thank you for that. And then I did just want to clarify on the timing of the cash flow from the securities book. Is that pretty even as well, so about $500 million a quarter moving forward?
Randy Hester: Yes, that’s even.
Brody Preston: Got it. And just given that you have seasonal muni strength through the fourth quarter and the first quarter, typically, I think it was said earlier you could pay down more deposits. Is there any thought to maybe just keeping a little bit of that left over in cash just for the eventual third quarter kind of runoff a little bit next year. So you don’t have to take up borrowings next year in case you do get that 3Q runoff of muni?
Randy Hester: Yes. I think we’ll – definitely the cash coming in from the public funds will probably keep it, but we don’t know how long they’re going to keep it, probably not long-term. So from that standpoint, we’re not going to be investing. But, yes, I think we’ll keep it ballpark same. I don’t think we’re going to increase significant or decrease significant our cash.
David Zalman: We don’t – I mean, the bottom line is we don’t want to be borrowing $4 billion.
