Travis Lan: Yes, Manan, this is Travis. So, I do think there is some lag on the beta side on the way down. Our model assumes around 35% beta on the way down. As you can see, the cycle to date was 57% on the way up. Relative to non-interest bearing, our budget and our forecast assumes that it remains relatively stable as a percentage of total deposits, around 23%. But I do think there is a terminal point – with rates that you do continue to build that back up. And obviously, as we expand C&I and treasury management, I mean those are strategic initiatives that are in place, to continue to grow non-interest deposits faster than what we actually include in our budget. So that’s some thoughts around that.
Manan Gosalia: Very helpful. On the loan growth guide of 5% to 7%, I know that includes some makeshift away from investors’ CRE. So can you talk about some of the drivers? And also, what is the cadence of that look like? Is that more back-end loaded? And do you need some help from the environment there? Or is that based on customer conversations you’re having today and there’s a high degree of confidence that loan growth will accelerate as we get through this year?
Michael Hagedorn: Yes. It is based on the confidence we have in the conversation with customers and seeing the uptick in their requests from us and the build on our pipeline that we’ve experienced in the fourth quarter and so far into January. And again, pointing out to the originations in that fourth quarter, $2.2 billion up from that $1.8 billion in the third quarter. And the uptick in our pipelines and C&I contribution to that pipeline where it is now the lion share at 65% of our pipeline. So, we are seeing that activity. Typically, the first quarter is a slow quarter as people get their financial statements in place and you start seeing progressively more business as the quarters roll on.
Manan Gosalia: Got it. And the loan to deposit ratio should stay at about these levels of between 95% to 105%?
Michael Hagedorn: Yes.
Manan Gosalia: Great. Thank you.
Operator: Thank you. One moment, please. Our next question comes from the line of Matthew Breese of Stephens. Your line is open.
Matthew Breese: Good afternoon, everybody.
Ira Robbins: Hi Matt.
Matthew Breese: I had a few questions. Bear with me. First, I was hoping on the NII guides, could you provide just for context would love a sense of how dynamic it is, what the guide would be, or estimate what the guide would be under a no or minimum rate cut scenario for the year?
Michael Hagedorn: It is effectively captured in 3% to 5% range that we provided. If rates stayed flat, then we think that there would still be upside in NII and margin from our current levels. Again, the most exposure we would have is to significantly lower rates on the long end. So absent that – most other interest rate scenarios would end up in the kind of guide that we provided.
Matthew Breese: Got it. Okay. And I think you had also alluded that the NIM has already started to show some stabilization, hopefully stabilization in the first quarter. Could you provide some detail as to how the NIM provides on a monthly basis throughout the fourth quarter and if we started to see that stabilization already?
Michael Hagedorn: We did. November was the low point I would say on a monthly basis. When we were on the call last time, we looked back at six consecutive months of generally stable NII and margin. Some of the factors that we have already talked about in terms of shortening up the liabilities and other things provided a little bit of pressure in the fourth quarter. But I would say that the margin again was at its low point in November. If you look at what we originated, loan yields, loan origination yields also bottomed in November and bounced back in December. But deposit – new deposit origination costs actually declined throughout the quarter. So October was the high point and November was lower and December was even lower than that.
One thing I would throw out there too, we do provide obviously in the deck what our loan origination yields are and they declined eight basis points in the quarter. But new deposit origination costs declined 11 basis points in the quarter, which kind of feeds into the commentary we provided on spreads. So November again was a low point on the margin. December was somewhat better, if that’s helpful.
Matthew Breese: Yes, any frame of reference for what the difference was low to high?
Michael Hagedorn: It wasn’t that significant to be honest. I think November was four or five basis points lower than December.
Matthew Breese: Got it. Okay. A couple other quick ones. I noticed that service charges on deposit accounts was quite a bit lower quarter-to-quarter, like 15%. Was that driven by the conversion and should we expect that line edge to come back to its normal kind of $10.5 million level?
Michael Hagedorn: Yes, so for about a month around the conversion we waived certain transactional fees. So if you look at the decline it was about a $1.5 million, $2 million bucks. That’s exactly what that was. So otherwise that would have been flat. Obviously we put on a lot of deposits throughout the fourth quarter, customer deposits. So that should continue to drive deposit service charges going forward. That’ll also be supplemented by the treasury management stuff that we talked about. That generates deposit revenue as well in the non-interest income area.
Matthew Breese: Okay. And then on the average balance sheet it struck me as odd. Cash balances or interest with bank deposits was down 90 basis points quarter-to-quarter to 4.6%. I usually look at that as kind of a Fed funds proxy. What happened there? What drove yields down so substantially in cash categories?
Michael Hagedorn: I think you’re generally right. So we go through an accrual process to estimate what the cash payments received from the Fed are. The actual payments do tend to move around a little bit. So there are certain credits that go in and out there. So you can have a yield that may not directly align with the interest on overnight reserves.
Matthew Breese: Okay. But generally speaking we should say or model that back as Fed funds.
Michael Hagedorn: Yes, I think that’s generally right.
