Brandon King: Hey. Good morning.
Stacy Kymes: Good morning, Brandon.
Brandon King: Yes. So I wanted to get more context around how you’re thinking about the efficiency ratio trends over the next year or so or maybe beyond a year, just given your initiatives and you know, how the initiatives income is trending in fee income. Just when do you think that efficiency ratio finally peaks and you finally see maybe some stability or maybe it’s coming down?
Stacy Kymes: Brandon, the efficiency ratio has never been a metric that we manage to. And so we’re obviously in the middle of our budget preparations for next year. So we’re not going to provide guidance around that today. But what I can tell you is every business that we have has a target kind of efficiency ratio that we think about. And so what changes our efficiency ratio over time more than anything else is the mix of fee businesses. When fee businesses are a higher percent of total revenue, the efficiency ratio comes up. And when net interest revenue is a higher percentage, then the efficiency ratio will go down. But we’ll continue to look at that by line of business and manage each line of business inside of our kind of implied expectations for efficiency.
We’ll continue to look for opportunities as we go through this fall season to look for opportunities for efficiency. But we don’t run our company that way because so much of the mix of revenue guides that efficiency ratio. So that’s not how we think about nor how we run the company.
Brandon King: Okay. And just to follow up on that with these initiatives and your expectations for when that revenue growth will be realized. And I know there’s a lot of moving parts around that. But could you just give us some more context on how you’re thinking about when and the timing of that, which is based off of preliminary plans?
Martin Grunst: Yeah. Just to give you a couple of examples, Brandon. So if you think about our Memphis expansion as one of those, that’s sales and trading producers. So that has a fairly rapid ramp up, just given the nature of that business. Our San Antonio investment, that’s commercial and wealth primarily. And so those all have longer sales cycles. And so that will take a little bit longer to ramp that up than when compared to the Memphis expansion. So it’s kind of individual investment centric. So hopefully, that helps.
Brandon King: Okay. And then on the technology initiatives, could you just give us more color on kind of what you’re planning on doing that you’re currently not doing now? And how you expect that to ramp as you try to manage the company over the next five years?
Stacy Kymes: So Brandon, over the last several years, we’ve made material investments in our treasury platform and our customer interface into our commercial and corporate interface into our existing technology systems. We have significant investments in our wealth platform that are underway that we’re continuing to work through. And so as I mentioned previously, we’re running the company for the long term, not the short term. And so we continue to make investments to ensure our technology platforms are competitive and providing our customers with a really positive experience when they interface with us.
Brandon King: Okay. I’ll hop back in the queue. Thanks for taking my questions.
Operator: Thank you. Next question comes from the line of Matt Olney with Stephens Inc. Please go ahead.
Matt Olney: Hey. Thanks. Good morning. I want to go back to loan growth, and I think it’s good to hear you guys talk about the bank taking advantage of some competition pulling back some as they manage their capital liquidity. Any commentary about how much of the growth is from larger-sized deals or syndications? I just want to appreciate how much of the growth is larger deals, existing syndications versus taking on new customers?
Marc Maun: Well, it’s a combination of all that. Actually, we have not had any material increase like in the third quarter in the number of SNCs that we’re involved with. Our leveraged loans are actually going down. So we’re focused on businesses where we can develop a relationship that’s broad-based. And so we’re getting a mix of new customers as well as finding our way into some club deals, et cetera., but nothing — we’re not focused on just getting into syndicated deals and buying participation where we don’t have a significant opportunity for relationships.
Matt Olney: That’s core middle market right down the middle of the fairway as we consistently are over time.
Martin Grunst: Yeah. As Marc mentioned, the SNC — number of SNC isn’t different for us between second quarter and third quarter. To the extent that we’re in a Shared National Credit, there is a direct relationship with the borrower. We typically have other business associated with them. I think the growth that we’re seeing is really and why I’m excited about it is because it is core, it is direct relationships, people that we’ve been calling on opportunities are being created. And so that’s really important to us and its franchise building over the long term.
Matt Olney: Okay. That’s helpful, guys. My other questions have been addressed. Thank you.
Martin Grunst: Thank you.
Operator: Thank you. [Operator Instructions] Next question comes from the line of Timur Braziler with Wells Fargo Securities. Please go ahead.
Timur Braziler: Hi. Good morning. Following up on that last line of commentary, do you have the total balance of Shared National Credits and participations in the quarter?
Marc Maun: Yeah. The Shared National Credit volumes are about 24% of our total portfolio. And that’s kind of mostly in the Energy and C&I space that make those two areas make up about 80% of the total Shared National Credits. We do Asian about a quarter of those and about 80% of them are in our local markets. So we’re not going outside of our footprint in tracking down those kinds of loans.
Timur Braziler: Okay. Switching to the deposit base. The decline linked quarter and demand deposits still is pretty elevated. Demand is now less than 30% of the total base and is below pandemic levels. I guess, what are you seeing from a liquidity standpoint from your borrowers? I know you said that, that pressure seems to be abating. I guess what’s the outlook for demand deposits as we go into the fourth quarter and into ’24?
Martin Grunst: Yeah. So we saw DDA average balances down $840 million in Q2 to Q3. And when that happens, that’s a shift from DDA to an interest-bearing within the firm. And so we’ll see going from Q3 to Q4, we expect a decline to be near that amount going Q3 to Q4. And then in Q1, we expect to see that rate of decline slow quite a bit. So when we look at kind of deeper into the portfolio and look at size cohorts, we can see the rate of change slowing and that’s what gives us some confidence that we’ll see a slowdown here over the next six months. Q4 will still be a higher number.
