Michael Perito: Very good. Listen, thanks, guys. I appreciate it. Have a great weekend. Talk to you soon.
Art Bacci: You too.
Operator: Your next question comes from the line of Feddie Strickland with Janney Montgomery Scott. Your line is open.
Feddie Strickland: Hey, good afternoon, everyone. Just wanted to start back on the sensitivity analysis for a second. Could there be some level of upside there, just given the fact that that assumes a static balance sheet and you’re clearly going to grow loans kind of within your guide? Just trying to think through in a little more detail about what happens with the margin, if we as analysts do assume some level of rate cuts.
Art Bacci: Sure, Feddie. I do think there is some upside. The position we have today has been consistent. Our asset sensitivity over a long period of time, it certainly has benefited us when rates have gone up. And even through multiple rate cycles, we have consistently put out a top-quintile net interest margin. The opportunities, because we have a lot of levers to pull, kind of exist in a couple of areas. One, some of our betas, if rates were to start to climb, could be better than we anticipate. But right now, our view is that there’s still a lot of banks out there with high loan-to-deposit ratios and some liquidity concerns. And so, they’re keeping rates higher than maybe we would. And we will — we have the ability to basically defend our market position and go after those competitors.
Secondly, I think that the declining rate environment could very well trigger increased mortgage and other type of asset-backed securitizations, and refinancing of corporate debt, which would give our Institutional Trust business a nice kick in terms of further deposit growth. And a lot of that tends to be non-interest-bearing deposits. So, those are just a couple of levers that could really work to our benefit as 2024 progresses.
Feddie Strickland: Understood. That makes a lot of sense. And I guess along those same lines, can you remind us of where you feel like DDAs could end up over the next couple of quarters? I think I peg them at about 31% of average deposits today. Does that glide down into the high-20%s or what are your assumptions on the level of noninterest-bearing deposits over time?
Art Bacci: I think we’ve got — the 30% rate targets, probably kind of reflective of normalization for us. And on average, it’s been pretty consistent. It might have some volatility from quarter-to-quarter because of the Trust deposits, but when you look at the average, it has been about 30% and that’s kind of the pre-pandemic level. So, we feel pretty comfortable that 30% is a good area. And again, if rates decline and market securitization activity picks up, that could increase actually.
Feddie Strickland: Got it. And then just one last question for me on expenses. I know your guide mentions continued investment in the franchise. Are there any initiatives in particular that could move expenses up more earlier versus later in the year? Any detail you can give on any either technology initiatives or hiring or anything along those lines? What’s driving some of those expenses?
Rodger Levenson: Feddie, this is Roger. I don’t think there’s anything — one big thing of note, we’re continuing to invest in the franchise. So yes, we have a fair number of technology investments that continue, which has been the process that has been going on for several years. And we’re looking to hire. And we have some businesses that already have plans for hiring, most of that tied to potential revenue. And we could see more opportunity there if we think it’s additive to us to hire folks, as well as something like the small RIA investment that we made in 2023. So, a combination of those things, we’re looking to invest and grow the business. We think this is a time to move market share and to invest as others retrench. And that’s really — it’s reflected broad based across all of the NIE categories.
Feddie Strickland: Understood. So, supportive more of long-term growth rather than any particular initiative or new product line or anything like that?
Rodger Levenson: That’s an accurate assessment.
Feddie Strickland: Got it. Thanks so much. I’ll step back in the queue.
Operator: Your next question comes from the line of Russell Gunther with Stephens. Your line is open.
Russell Gunther: Hey, good afternoon, guys.
Rodger Levenson: Good afternoon.
Russell Gunther: Art, I appreciate all the margin. Hey, Roger. Art, appreciate the discussion around the NIM. Maybe — and particularly sensitizing to the three cuts. So, in that scenario, what do you guys assume your deposit beta does on the way down? It sounds like from broader comments you made, you’re being conservative there, but curious what’s baked into that three cut sensitivity.
Art Bacci: Well, obviously, if rates start to go down, we would recalibrate our beta. We kind of initially think early on the beta would be fairly low again, because of the competitive environment. We do have opportunities. We have product, money market, products that are tied to an index. So, if the index declines, obviously our rates will go down. We’ve done some exception pricing, primarily with some sort of public money and commercial money that could be repriced down. But on the consumer side, there continues to be a fair amount of competition in the market. And so, we believe that’s probably going to be a slower decline. Now, if that were to change, clearly we could lower our rates. But that’s our assumption, is the competitive market will require us to continue to provide some premium on deposits to protect our franchise.
