Paul Reilly: Yes and we — I mean the average maturity on that portfolio is somewhere in the four year range and so it takes some time for it to run off. We’re probably going to see maybe $1.5 billion or so of a runoff a year at current levels. So it will take some time. And frankly we grew that securities portfolio over during that COVID period, because we had a pretty significant increase in client cash balances, as you’ll recall. And there really wasn’t demand from third party banks. So we took it on to our own balance sheet to accommodate those cash balances. Unfortunately, we kept the vast majority of those, as Paul indicated in very, very short-term treasuries, and didn’t take too much duration risk. And so now as we look forward, we’re really going to grow that left debt securities portfolio runoff, so the liquidity in the balance sheet should be somewhere around 10% of the bank’s balance sheets combined, which will let us reinvest a lot of those repayments to bank loans, which again, as Paul said, have higher spreads and higher yields on them.
So that will be a nice kind of tailwind for us over the next several years, hopefully.
Paul Shoukry: Right. And then when you just think about NII after this coming quarter down, I guess combined down five, maybe I don’t know, down a little more, how do you think about, do you feel like once you kind of catch up and ESP balances are not growing as rapidly that that NIM starts — in the bank starts to stabilize, and I can be flat up or still think that further declines.
Paul Reilly: And just to be clear, when we raise those ESP balances, cash is fungible. The cash and we move off balance sheet to third party banks, is still making a higher spread than the cost of EIP balances, while we sort of await investment in higher yielding assets and loans. So it’s still a net, not a huge net positive, but it’s still a net positive for us. So we offer the clients a product that’s attractive, allows advisors to gain more wallet share from their clients. And we essentially place that cash with third party banks until we have better investment opportunities. There’s a lot of geography involved in terms of what shows up in NII, and BDP fees, but we obviously look at it from a consolidated basis. So it’s really a win for the clients, a win for the advisors, and a win for the firm, and gives us a lot of capacity to grow the balance sheet over time.
So that’s kind of how we’re thinking about it. And, to the extent that when demand returns for loans, both corporate loans, and then loans to the Private Client Group clients, then there will certainly be a nice tailwind to our net interest income.
Paul Shoukry: If you look industry-wide there’s still a competition for cash and as long as there is an upward and the Feds raising rates, it’s going to impact I think rates on both ends. And until that dynamics, once that dynamic stabilizes, or if it ever does go the other way, which some people predict we haven’t believed the board curved for over a year now, but the ones that does happen, spreads should improve, but that’s, we don’t know. So we’re operating, we know, on the ESP balances. They’re not cheap, but we still make a spread off of them. So it’s positive the NII and so there is no harm and raising them for clients and we make a little money too.
