Samuel Varga: Hi, good morning, everyone.
John Corbett: Good morning.
Samuel Varga: I wanted to go back to the margin discussion just for a little bit. Just to clarify on the — obviously, I’m not digging too far into the 2025 and 2026 guys, but just to clarify, you’re assuming that the mid- to longer end of the curve is staying flattish other levels. So there’s a flat curve?
Steven Young: Yes. If you look at the Moody’s consensus forecast, I believe that today, all that five-year part, which is where we put a lot of our assets is somewhere in the 4% range. I want to say by the end of 2025, it’s in that 3.5% range, give or take a sort of a flat curve by the time they cut rates and so on. So that’s sort of our assumption for rates. We don’t see if the five-year part of the curve went up to 5%, of course, our repricing would be stronger, but we might have other issues. And if the five-year goes down to 3%, the next year, then there’s probably other rate issues. But anyway, that’s help.
Samuel Varga: But you were saying that for the end of 2025, Steve, so there is at the end of 2024 is Moody’s consensus is a little higher than that.
Steven Young: It’s a little higher than somewhere between 350 and 375, I think. And then by the end of 2025, it’s around 3.5. So – yes. As you know, at the end of October, I think when we had our earnings call, I think the five-year treasury Moody’s consistence was 4% like 4.5%. So it does move count for sure. So we’ll find out for sure.
Samuel Varga: Got it. Thank you. That’s very helpful. And then in terms of the down betas for 2024, what sort of assumptions do you have there for deposit down betas?
Steven Young: Yes. Let me take a bit of a longer-term view because there’s always a lag in all of this. But from our experience and from our modeling, as I think about our betas, I would say on the down betas, it’s about 20% total. So for instance, if I kind of run the map on where a 5.5% fed funds rate. And over the next couple of years, they cut it to 3.5% or 200 basis points, you would expect from our peak, maybe 40 basis points of pressure to be relieved coming back by 2026. I know, I’m not suppose to talk about 2026, but it is a linear ramp, and it takes time to do it. But that would be really consistent, if you kind of look back at our history, it’s a 20% beta, but there’s always a little bit of a lag in that first couple of rate cuts.
Samuel Varga: That makes sense. And just a quick one. Do you happen to have the spot — interest-bearing deposit costs for December or year-end?
Steven Young: No, we don’t – not here in front of me or John.
Samuel Varga: All right. No problem. Thanks for answering my questions. I appreciate it.
Steven Young: You bet.
Operator: Your next question comes from the line of Russell Gunther with Stephens. Your line is open.
Russell Gunther: Hey, good morning, guys. Just a couple of quick clarifiers at this point. The 20% down beta you’re contemplating that through the cycle, and that would compare to the update of roughly 30%. Did I hear that right?
Steven Young: Yes, that’s right.
Russell Gunther: Okay. Very good.
Steven Young: And that would be a total — with total deposit beta.
Russell Gunther: Yeah. Okay. Excellent. Understood. Thank you. And then just lastly, as you guys kind of balance, you mentioned the potential for a bond structure versus buying back stock. Just kind of walk us through the thought process there. And then if you could confirm any potential bond structure that would get done would be likely accretive to that NIM guidance for 2024?
Steven Young: Russell, it’s Steve. Yeah. We’ve talked about that on the call. I think it was last quarter, we talked about it. And I think it’s the same kind of calculus. So it’s really just trying to think about our uses of capital. I think we talked up to maybe a 10% more than 15% of our portfolio restructure. And obviously, we’d be thinking about it in terms of earn-back, period less than three years. That’s how we would think about it. It’s a lever. We’re thinking about what we’re kind of just back to positioning the balance sheet, thinking about the future, if rates come down, we are thinking about liability sensitivity a little bit, and we want to think about how to position if rates do fall how to best position all the balance sheet.
And of course, that takes time to do it. But we’ve been thinking about it for the last couple of quarters. Certainly, we want to think about it for the next 4 or 5. So that’s from a perspective of the bond restructure. It’s certainly something on the table. And to your point, it’s a lever if they continue to have higher rates and our NIM has some pressure, that’s a way that we can level set it. But that’s just on restructure on the capital side.
Will Matthews: Yes. And as you noted, I mean, with the 11.8% CET1 that does give us the luxury of considering more than one option. And certainly, share repurchases are users capital that we think about as well. And where we sit today, based on our forecasted risk-weighted asset growth and capital formation rate, if we don’t do any of those things, you’re going to see that CET1 continue to climb from there. So we like the flexibility we’ve got with our capital position today and we’ll continue to think about all of those options we mentioned.
Russell Gunther: That’s great, guys. I appreciate you taking my questions. Thank you.
Operator: Your next question comes from the line of Gary Tenner with D.A. Davidson. Your line is open.
Gary Tenner: Thanks. Good morning.
Will Matthews: Good morning.
Gary Tenner: I wanted to ask about kind of the earning asset mix for 2024. You talked about, I think, flattish earning assets from the fourth quarter level with what looks like somewhere in the range of $1.5 billion of net loan growth. So from a funding perspective of that loan growth, what are the cash flows projected about the series portfolio for the year? And how lean would you run cash as you’re thinking about kind of remixing the asset side of the balance sheet a little bit?
Steven Young: Sure. I guess this really — I don’t think it’s changed a whole lot as you think about if we have mid-single-digit loan growth, that’s — I don’t know, $1.5 billion, $1.6 billion of that. We have our securities portfolio that’s running off somewhere depending on rates, $700 million, $800 million a year. So that would imply that you have about 2% to 3% deposit growth assumptions built in there. We think it’s slow in the front end, it probably ramps in the back end. If you think about QT and all that stuff, they end up bringing that back, I would imagine that liquidity in the system would get better in the back half. But — so just to make sure I was clear, our average — our expected average for the year of earning assets is $41 billion are — if it will start out a little lower than that, of course, end up a little higher than that based on this assumption.
