Tom Cornish: Far better to — for a variety of regions to be the agent on the deal because generally, the agent gets 75% of all ancillary business, although in the SNC market today. Everybody wants part of the ancillary business, and that’s a big challenge in the SNC market is there’s not enough ancillary business to go around everybody.
Graham Dick: Right. Yes, understood. And then I guess the last thing I wanted to touch on is just capital and the CET 1 ratio, maybe including those AOCI losses of 9.8% — is this the ratio you guys are managing around right now? And then is there a specific near-term, I guess, level you guys are looking at?
Leslie Lunak: I mean I would say, just tends to be the ratio that most stakeholders are focused on and interested in. So we do pay a lot of attention to it. It’s not the only one that we look at. Obviously, we’re aware of TCE to TA and Tier 1 leverage as well. I think in terms of a target, like Raj said, I think in the very near-term, we’re comfortable where we are, and we’ll — as we go through our capital planning process at year-end, we’ll take through and discuss with the Board the outlook going forward around target. Another way of saying, I’m not prepared to give that information today.
Graham Dick: Yes, understood. Alright, well thank you guys. I appreciate it.
Operator: Thank you. [Operator Instructions] And our next question is going to come from the line of John Arfstorm with RBC Capital Markets. Your line is open. Please go ahead.
John Arfstorm: Hey, guys. Thanks, good morning.
Leslie Lunak: Good morning, John.
John Arfstorm: Leslie, I’m not going to ask you about the ’24 margin, but…
Leslie Lunak: Do, I want to answer to you.
Jon Arfstrom: The question is that you made a comment about over the course of the next quarter, this trend is going to continue. And I don’t know if it’s for you or Raj, but how long does it take to accomplish what you want to accomplish on the balance sheet remixing the assets and remixing the liabilities. I hate to term what inning are we in, but I’ll just ask you, how long does it take to get to where you want to go?
Raj Singh: I think we’ll be in a better position to answer that once we go through our year-end planning process. So we’ll probably be able to answer that in January.
Leslie Lunak: Yes. I mean I think it’s safe to say it’s not a one or two quarter effort. It’s going to take some time.
Jon Arfstrom: So we can expect more of the same, essentially. I mean we have to make some assumptions, but we can expect more of the same over time, okay?
Leslie Lunak: In the near-term sure. Yes.
Jon Arfstrom: Yes. Okay. And Raj, what do you want the balance sheet to look like when you’re done?
Raj Singh: Well, I wanted to — if you look back at our balance sheet, 3 pandemic levels and compared to now, it looks quite different. It’s got too heavy in securities, too heavy in Resi. And I think the pre-pandemic norm is kind of where we want to take it. We don’t want to take Resi down to 0. But we certainly have a lot of work to do in bringing it down to a more sort of reasonable level. . And so I think a good guide might be going back to 2018, ’19 and taking a look at our mix, not just with loans but also with securities I think that’s what we’re looking for. On the right side of the balance sheet, obviously, we don’t want to go back to ’18,’19. We want to kind of make progress on where we are today at 28% DDA, I’d like it to get to 32%, 33% DDA. And I think we can get there over time.
John Arfstorm: Okay. Okay. Good. Anything you’d call out on the non-interest-bearing growth this quarter on the drivers?
Raj Singh: Something extraordinary.
Leslie Lunak: It’s just across the franchise, just continued progress pursuing that pipeline.
Tom Cornish: Lots of new relationship wins.
Jon Arfstrom: Okay, okay. Yes, I guess that’s what I was getting at as well, okay. And then, Tom, maybe a question for you, last one for me. But I understand what you’re saying on the commercial office, the CRE office portfolio. I’m curious if — what the discussions are like when these renewals come up? How difficult are they with your clients? And then secondarily, is there anything different between what you’re seeing in New York and Florida?
Tom Cornish: Yes. I would say the renewal discussions generally, as the metrics show the portfolio is performing very well. So right now, there is we have seen a couple of opportunities pay off because people have gone to the CMBS market. But there’s not a big alternative market for office right now. I mean everybody has kind of got what they got. There are some small openings here and there, but generally, our renewal conversations are going well because the performance of the properties is generally very good. And we know we have strong debt service coverage ratios. We have strong leases, not in every single property, obviously, there’s always a couple of the loans that you’re looking at that are slightly different. But generally, the occupancy is very good.
The lease rollover is manageable that they have. As I said, the total 12-month lease portfolio rollover is about 11%. So the conversations generally go pretty well. I mean our properties in New York, we don’t have that big of a — I say New York, I’m specifically referring to Manhattan. Our properties in Manhattan, we have half a dozen or so, the lease rates are in the mid-90s. The properties have low levels of leverage and are performing well. They’re starting to see a gradual return to the office. I’m not sure what inning we’re in, but we’re in the early part of the baseball game, but they’re reporting people are coming back to the offices gradually. When we’re around our office on 57th in part, there’s certainly a lot of people on the street.
If you look at ridership on the subways, if you look at the metrics that people are following, people are gradually returning back to the office. So we’re going to see that portfolio gradually be reduced over a period of 5 through amortization and some selected movements to the CMBS market. But it it’s fairly stagnant right now, but performing well.
Jon Arfstrom: Okay. And maybe to Florida versus New York, is there any material difference? I know there’s — it’s all granular, but anything there?
Tom Cornish: Yes. The difference in — well Florida is different — Florida is different from New York and then different markets in Florida are different from different markets in Florida. So if you look at the Miami market, in particular, where we do not have any CBD exposure, but the Miami market is extremely strong right now. The Palm Beach market is very strong. Tampa continues to show good strength, particularly in the suburban market area. We have an Orlando portfolio that, again, is not a CBD portfolio. But predominantly in the northern suburban office markets, all of those continue to perform very well. These are typically 3-, 4-, 5-story suburban buildings that house medium-sized businesses that are located close to where the employees live. And general trends are people who are in the office 3, 4 days a week and the properties are performing well.
