Raj Singh: I think you should expect this year, $700 million, $800 million more this year. And we’re not giving guidance for next year, but I think that trend is sort of — will kind of continue because that — I still think we’re way over allocated to resi despite it being a very safe asset. It just doesn’t have the yield on the spread. So yes, I think we did something — I forget the exact number this year, but it will be a similar number about between ’23. It will be a similar number in ’24 in terms of production.
John Arfstrom: Have you ever shared an optimal percentage for resi?
Raj Singh: I’d say kind of what it used to be before the pandemic. So I think there’s a way to go a couple of years to go before we does it.
John Arfstrom : Okay. Okay. Good. You referenced the 30% is where you’d like noninterest-bearing to go. And I think the term you used was gearing up to get back there. How do you do that? What is the strategy to do that?
Unidentified Company Representative: [indiscernible]
Raj Singh: We were over 30% a couple of years back. Obviously, that was a very different monetary environment that we’re in today. But at the beginning of the year, we often come up with sort of a slow business of the company to sort of rally behind. We wanted the company to rally behind. And I point with the idea of putting that up and saying that’s what we’re going to do. So this is not magic to the 30%. It’s just that if we were at 32%, 33%, and I know certainly commercial length are even higher than that, we should strive for a three handle. So — but there isn’t a well thought out sort of logic to this of why you get there. What we will say is the pipeline that we now track closely than anything outside of the company with the treasury pipeline, account by account, which we spend hours every week focusing on is pretty decent [indiscernible] robust.
And that gives me the confidence to say that I think that is attainable goal. It may not happen in the next two, three quarters, but it will certainly something which we can achieve in the next couple of years.
Thomas Cornish: I would add to that since I’m generally in the middle of the battle every day that it kind of comes down to three things. Number one, you have to have the right talent in the right places, so we are driving value at the client level and can make people change from ex-bank to our bank. You have to be focused on market segments that are predominantly more deposit-rich than others. There are some industries that drive significant deposits. And some that don’t. So we have, over the last few years, altered our strategy to be very focused on the types of industries where you do tend to drive significant deposit levels. And the third is just back to something Raj alluded to is intense focus on it.
Raj Singh: You do have to pick those spots based on where the money is and where the industry goes then go in and actually look at where the pain points are in those industries and those spots as you say. And it generally takes a multiyear effort to solve those pain points through combinational technology and process. And then you hit the market and you were able to gather on next share. That’s been the formula for success. It doesn’t happen in the year. A lot of these things take multiple years. But when they do work out, it’s hard for people to replicate. And that’s how this entire business has been built. And there are things in the pipeline that we’re working on even now that we don’t talk about openly because it’s too early to talk about them. But they are about solving those pain points that bigger banks or even sometimes banks of our size are just not focused on, and we do.
Thomas Cornish: If you’re a football fan, it’s 4 yards in the cloud of dots every day.
John Arfstrom: Yes. Okay. I thought it was 3 yards, but I’ll give you 4, Tom.
Leslie Lunak: [indiscernible].
John Arfstrom: Yes. Okay, you’re better than that. The dolphins they run — they throw, they don’t run is what I should say. Yes. Just one more. On Slide 6, it’s interesting looking at 16 and 17, those two slides because obviously, the economic forecast had a huge impact on the reserves for the year, but you actually have a little better economic forecast. But I’m kind of circling that risk migration — risk migration and specific reserves. Is that mix? Or is that true risk migration? Or what’s behind that build? And then how material of a build do you expect for this going forward as the mix changes?
Leslie Lunak: Yes. What you see there this quarter corresponds to the to the increase that you saw in criticized classified outlook that — and one more that we put a specific reserve on it’s not really material enough to go into details about. It’s hard to say where that goes in the future, to be honest with you. I think credit is normalizing, NPL levels are very low. Net charge-off rates are very low, and I think across the industry, we’re seeing some normalization of credit. And I think we’ll continue to see that. There’s nothing for us as we’re not losing sleep over credit, but you will continue to see some normalization of credit. So there’ll probably be a little bit of that.
Raj. Singh: But it also includes the shift from resi [indiscernible].
Leslie Lunak: [indiscernible].
John Arfstrom: In general.
Raj Singh: As the C&I build, CRE build and Resi goes up, you should expect the 82 basis points [indiscernible]
Leslie Lunak: It will still go up.
Raj Singh: Because we just — against C&I, we have higher.
Leslie Lunak: Yes, if nothing else happens, if everything else stays constant, in terms of the economy and specific reserves and risk rating and all of that, the reserve will still go up because of the compositional shift. That will be expected. I mean you can see right now we’ve got a 1.53% reserve on C&I and 0.09% reserve on residential. So.
