David Feaster: That’s great. That’s great. And I guess to that point, I’m curious on the C&I growth. Curious, where are you having success driving growth? How much of it’s from client acquisition versus increased utilization or deeper relationships, or even the new hires that you’ve made. I’m just curious your appetite for growth and whether you’d expect C&I to be the key driver of loan growth going forward?
Tory Nixon: Yes, David, it’s Tory again. Definitely C&I growth as the place that we will grow the lending side of the house with full relationship banking. So like we said, I think in very consistently, we’re in eight Western states, great markets. We’ve got great people. They have very strong pipelines. We saw C&I growth, kind of, a mixture between new client acquisition, as Chris was talking about, plus lending to existing customers doing their normal course of business. So it was spread throughout the footprint. So there’s not one place where I can say we got most of our growth. It was kind of spread throughout our footprint. And as Chris said, I mean, I feel very good about the pipelines and the activity that’s occurring out in the field.
David Feaster: Okay, that’s great. Thanks everybody.
Clint Stein: Thank you, David.
Tory Nixon: Thanks, David.
Operator: Thank you. One moment please. Our next question comes from Timur Braziler of Wells Fargo. Your line is open.
Timur Braziler: Hi, good afternoon. Following up on the net interest Income, net interest margin commentary, just with the expectation for deposits and funding to remain a source of pressure here in the near-term, and then the expectation for rate cuts in the back end of the year. Is there an outcome where NII inflects and grows in 2024 or is that more likely a 2025 event?
Ron Farnsworth: Well, Tim, this is Ron. Good question, and again, it’s going to be really a function of the cost of that deposit growth. I could definitely see a scenario where you see a little on the lower end of the front end if we do continue to see pressure on non-sparing demand specifically within that guide range. But then once they start moving, again, I talked about earlier that deposit beta, I think that’s pretty conservative. I would suggest most of the regional banks think their model betas on the rates down side, they’re going to be closer to what they were on the upside. So you could see that scenario exactly where you get some pickup in the second half.
Timur Braziler: Okay. And then I guess, looking at the deposit costs and some of the December 31 spot rates. Is that a good ceiling here? Is that kind of where we expect the funding base to stall out, or is there going to be some more mix shift in the first-half of the year to some of these higher cost categories, which could keep that lag around and costs for a little bit longer?
Ron Farnsworth: Yes. Obviously, it’s an estimate, but we’d expect the lag to continue there. And that’s probably why we showed the 47% beta to date, but we model the 53% on the rates up side. So you got that additional piece. We also have, in the past quarter, we had about $900 million of CDs repricing that were in that 12- to 13-month tenors. So they have been sitting there for a year. And those all repriced up close to 200 basis points. In the first quarter, I want to say it’s around $650 million to $700 million of CDs maturing, which will reprice, but it will be less than $200 million, just given the timing of those compared to when the average raising rates earlier in ’23.
Timur Braziler: Okay. And I guess what’s the thought process of the rationale for maintaining all of those balances rather than being more aggressive with rates here and letting some of that money walk?
Ron Farnsworth: Just overall liquidity levels, where we feel comfortable sitting with cash on the balance sheet, just bringing cash at the Fed. And keep in mind, too, I mean, it’s — we’ve got an incredible amount of optionality, again, compared to the average regional bank with a little over half of our bond portfolio sitting on an unrealized gain. But then again, too, the goal will be to accrete that remaining discount up to par over the life of that book because that’s all the government rate from that standpoint. So we’ve taken the approach of maintaining that flexibility. So we earn back that discount, which reduced capital a year back at the combination closing. And by utilizing that, we utilize overnight or wholesale funding in that two to four month tenor to maintain that overall level of liquidity.
We have reduced the overall level of on-balance sheet liquidity, where we were sitting up closer to $3 billion, early mid-’23, of in-spring cash. We’ve now taken that down into the, call it, 1.5 to 2 range. I can see that probably dropping a little bit more into ’25, but probably not too much more.
Timur Braziler: Okay, great. Thank you. I’ll step back.
Ron Farnsworth: Thanks.
Operator: Thank you. One moment, please. Our next question comes from the line of Brandon King at Truist. Your line is open.
Brandon King: Hey, good afternoon.
Clint Stein: Good afternoon.
Brandon King: So I wanted to talk about leaning into those public deposits, could you just elaborate on the thought process behind that? And if you’re able to achieve that just based off of rate or primary relationships? Just give the puts and takes there.
Tory Nixon: Hey Brandon, this is Tory. So we have a lot of existing customers in the bank that are municipalities spread throughout the footprint. Most of them are smaller rural communities and they’re — we have strong relationships with them and just made a very significant effort to go out and call on that group and ask for more deposits in the bank. And it’s says a lot about the capability of the teams, both in the branches and in commercial banking to have those relationships and to call on them to further deepen and strengthen those relationships. And that was the effort. It’s that time of year as tax payments come in, so they have more money in distributing it to us, we thought it was a really good idea.
Chris Merrywell: And Brandon, I’ll add to that, that as Tory mentioned, that local presence and working together, it’s not just existing customers and then maybe getting a little bit of a priced up on some of the reserve money. That can lead you into — we’re talking about full relationships. We’re talking to them about their operating accounts. That sales cycle takes a little longer, but we’re already seeing positive momentum into new names came on board, a money market type of account that are I want to investigate my operating account with you. That’s when that relationship really gets cemented. And that, as Tory said, that’s due to people that — they live, they work in the communities. They know the individuals that are at the public entities and they’re building relationships and they’re asking for the business.
