Scott Siefers: I guess I want to revisit that fourth quarter margin just to make sure everybody is on the same page. But the reported margin, it sounds like will be below the 3%, however, right, because you do — and I know it will be dependent on liquidity build, but it sounds like you do anticipate liquidity build. So will we be talking kind of something in the [mid-2.90s]? Would that be sort of the reported expectation?
John Woods: It will be lower. It just depends on the NII neutral liquidity build that we determined to be appropriate. So it’s sort of — it’s — I think it’s useful to talk about an ex liquidity build, given the fact that that’s the driver of NII, and there’ll be possibly additional — just in terms of the variability of cash and how that gets funded, it will be — that’s flat to NII, but it will be a denominator effect that would take the NIM below that plus or minus 3% that I talked about before, but not an NII driver.
Scott Siefers : Yes. Okay. All right. Perfect. And then maybe as we look out just in terms of sort of the handoff from the Non-Core loan runoff to more visible Private Bank growth. When do we sort of think that will become sort of more neutral from — in terms of visibility to the balance sheet? Like when would we expect the loan portfolio to sort of level out?
John Woods: Yes. I think that we were saying that we think that the Non-Core runoff will be a continued driver of sort of in the first half of — in 4Q and the first half of ’24, you’ll see some declines in the loan portfolio. But in the second half of ’24, we start seeing the Private Bank contributing as well as organic contribution starting to see loan growth such that year-over-year, we would have an expectation you’d see us starting to see loan growth in the second half of ’24.
Operator: Your next question comes from the line of Peter Winter from D.A. Davidson.
Peter Winter: Just — I was wondering on the credit side, we’ve just seen, in general, some pre-announcements on charge-offs in the shared national credit space. Can you just remind us what your exposure is to shared national credits and how you fared in the recent exam?
Don McCree: So do you want me to take that, John?
John Woods: Sure.
Don McCree : So, just in general, as I think — there’s a lot of focus on shared national credits. Actually, when we came through the exam this year, we had more upgrades than we had downgrades. So we didn’t have any forced charge-offs in terms of our shared national credit book. We’ve been taking our participations down as part of our BSO exercise. We’ve there about 10 basis points — 10% lower than they were a couple of quarters ago. I think there’s a lot of focus on shared national credit. We treat participations or share of national credit deals exactly as we treat every other credit extension. So one, it has to return people think about it as hanging paper and then deploying loans and not returning. We go through the exact same process, whether we’re participating or leading a transaction or a sole lender.
And then also, we do full credit analysis of every single extension that we make, whether it be shared national credit extension or not. So our SNC book doesn’t perform any worse than any other book that we have in the bank. And actually, in some cases, it’s larger credits, so they might perform marginally better than some of the middle market assets that we have on the book over time.
Brendan Coughlin: Yes. And I think just as part of BSO, as Bruce said, as part of BSO in general, we’re kind of looking at the total relationship returns. And if we went into credit as a participant thinking we can kind of move left and become a more important bank, that’s not panning out. We’re not getting the cross-sell we anticipated, then we’re extricating ourselves at the next available opportunity. So I think you’ll continue to see that trend.
Don McCree: Yes. And let me just pick up on that. Just in the last quarter, back to the loan growth question, we had about $900 million front book loan originations, offset by about $1.6 billion of BSO activity. So we’re really churning the book towards full relationship credits and away from some of those participations that Bruce mentioned. And I think a lot of the competition is doing exactly the same thing. We see people supporting their lead bank relationships and moving away from more speculative future opportunities.
Peter Winter : Got it. And then — just can you just provide a little bit more color maybe on the deposit repricing and migration and how you see it playing out with a longer — higher for longer rates just impacting the deposit pricing pressures?
John Woods : Yes, I’ll go and handle that. I mean, I’d say, first off, I mean, I think when you look at our performance from a deposit beta standpoint, we feel like we’re basically in the pack with what you’re seeing across the industry, which is a really positive results compared to where we were last cycle, which is part of the ongoing investments we’ve been making in primacy and product capabilities and delivering the entire bank for our customers. So we’re really kind of pleased to see where we — how things are playing out cycle to date. That said, we still are — and frankly, when you look at the overall metric of noninterest-bearing to overall deposits were around 22%. That’s basically back to where we were pre-pandemic.
We’ve seen a decelerating migration out of noninterest-bearing into interest-bearing and seeing decelerating migration even inside of the interest-bearing book. Nevertheless, it’s getting smaller every quarter. We would expect to see that really dissipating over the coming quarter or two and that’s really what you see when you get late in the cycle and the Fed’s on hold. So feeling very good about that trajectory.
Bruce Van Saun: Yes. Maybe, Brendan, do you track very carefully how we’re doing versus peers and some of our strategies to continue to maintain that low-cost focus. So maybe you can add some additional color.
