David Zalman: I’m try to hear the question. Going up — our model shows in six months to be around 2.96. And with a static balance sheet, yes.
Ben Gerlinger: Yes, got you. I just — we’ve thrown out a lot of numbers. I just want to make sure I had that one right. And then a little bit of a cleanup push on Asylbek. You said for the expense base, 1.34 to 1.36. When you look towards the back half of the year, is that a good starting point on an organic basis, i.e., not including the deal closing?
Asylbek Osmonov: Yes, I agree. I think 1.34, 1.36 is a good starting point. And I think this is going to be that range probably the first half of the year and probably increase a little bit in the second half of year. And I think I gave the guidance last quarter being around 2% maybe from the starting point, 1.34, 1.36. For second half of what I think is still good guidance, about 2% increase because due to our merit increases and what we talked about, there’s a lot of technology expenses coming to you with that. So 1.34, 1.36 is a good starting point, not including one-time off items.
Ben Gerlinger: Right. Got you. Okay. And then loan growth is better than expected. Should we assume that’s probably on the higher end of the range with like payout commission kind of things?
Asylbek Osmonov: Yes. I mean if you have a loan growth, there will be some pick-up there. Higher.
Ben Gerlinger: Yes, it’s a good cost.
Operator: The next question comes from Brody Preston with UBS.
Brody Preston : I just wanted to ask a few questions. The first one was — it’s a little ticky tack, but I noticed that the borrowing rate ticked down this quarter. I wanted to ask if you maybe substitute any borrowings for BTFP usage at all?
Asylbek Osmonov: We have substituted pretty much 100% of it. So we own the BTF right now. That’s why — and with that rate decrease, we were able to reprice those.
Brody Preston : Okay. And did that all happen — did that happen early in the quarter? Or did that happen late in the quarter? I’m just trying to think about the spot rate on the borrowings.
Asylbek Osmonov: Yes. It was later in the year, and the spot rate was 4.80
Brody Preston: Got it. All right, cool. On the loan yields, I just wanted to better understand the trajectory of the core loan yields that you’re expecting within the margin modeling that you all are doing on a quarterly basis through 2024?
Asylbek Osmonov: Yes. On that loan margin, I mean, it’s just based on the model we’ve — our model shows that, like I said, we have that $4.5 billion coming due, which is 60% fixed, 40% is all the variable so that rate is already baked in. So we’re repricing about 60% of it in the market. Repricing of the loans, I think the average loan rate on those fixed loans about 5%. So we’re repricing around 8% in the model.
Brody Preston: Okay. And then the last one was, I just want to circle back to the buyback. I know you said that you’d do it, you’ve never not done it if you have the authorization. But it seems like capital returns are becoming a bigger theme amongst your mid-cap peers. And so just given the capital advantage that you all have and given the fact that this Lone Star deal is taking longer, is there any reason to think that you might not look to be aggressive at all? And I guess I’m asking, is there anything is Lone Star stopping you from wanting to be aggressive on the buyback? I’m just trying to better understand what’s the holdup as it relates to it, just given the stock price.
David Zalman: I think historically, we’ve really — buying our stock back, we have when the price didn’t seem appropriate when it went kind of crazy. That’s really what we always use our buyback money for. But our machine really has always been to take our earnings and increase dividends and also to do mergers and acquisitions. And I think that’s our focus since last year. I would have to tell you that — I mean, we’re almost forgetting that what we went through in March through December. I mean the regulators and everybody just got really nervous. So we were really trying to build capital at the same time too. We didn’t care that we had so much capital. In fact, it was a good position to be in. And I think it’s a good position to be right now. But when it’s appropriate, we will buy stock back if it’s an appropriate time. There’s no question. But again, we’re focused on M&A and increasing dividends.
Tim Timanus: And I think it’s important to emphasize that the potential for M&A right now is very significant. May or may not happen, but it’s out there.
Brody Preston: What’s the — what’s like — yes, go ahead, David. I’m sorry.
David Zalman: We think we, in the past, think that you can really make more money through — if you make a good M&A deal and you can just see more accretion there than you can just buying back your stock. But again, that’s not always true. And so we’ll have to look at each deal on its own at the same time.
Brody Preston : Got it. Is there a minimum threshold on CET1 that you wouldn’t want to go below? Or is there like kind of like a medium-term or longer-term level of CET1 that you think is appropriate for the bank, just given the relatively lower risk profile of it?
David Zalman : I’m more of a leverage ratio guy. I understand that really. You just take your goodwill out, divide it by your assets and that’s your leverage ratio. And I think we’re probably at around 10% right now. And gosh, I remember in the old days, if you had 5% or 6%, that was pretty good. So I think the regulators want you to get to where this double-digit is. I don’t think you have to be, but I think they like us that we are right there. I’d like to maintain if we do a deal or — I don’t think I’d ever want to drop below 8% on a leverage ratio. That’s just my gut feeling right now.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Charlotte Rasche for any closing remarks.
Charlotte Rasche: Thank you. Thank you, ladies and gentlemen, for taking the time to participate in our call today. We appreciate your support of our company, and we will continue to work on building shareholder value.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
