John Woods : Sure. Yes. That sounds good. Yes. I mean, I think overall, as I mentioned before, we’re seeing deposit migration from a DDA perspective as well as from some of our lower cost levels. But broadly, the mix is superior and improved compared to pre-pandemic. I think we’re around 28% DDA in 4Q, that’s probably going to tick down a bit, call it to maybe 27% or so by the end of the year. That’s part of the story. I’d say the — some of the higher cost deposits in money markets and savings will be part of the runoff as well such that you get to something along the lines of 2% to 3% declined spot-to-spot end of ’22 into ’23. And so I’d say that you end up with some, again, improved mix compared to pre-pandemics, but a little bit of mix softening as you get throughout ’23. And I’ll just…
Bruce Van Saun : I would just add — I would add to that is that I’d say we did not take in as much surge deposit as many in our peer group. We have a consumer-tilted deposit base, which tends to be more stable. And so we’ve been monitoring that surge deposits quite carefully. And we have seen it actually be more sticky than we initially expected. I think where you’d see a slight runoff probably is more on the commercial side where treasurers have other alternatives besides bank deposits to move some money out. But again, we’re relatively protected there because we didn’t take in a lot of that money in terms of search deposits. So maybe, Don, you could comment here or Brendan?
Don McCree : Yes. I think our spot is down a little less than 2% year-to-year. We actually ended this year a little higher than we thought we were going to because we had some nice inflow at the end of the year. But back to — I think John said it in comments, we’ve really transformed our deposit base really off the back of our treasury services business, so both specialty deposit offerings, we’ve got two that we’re now in the market with around ESG, green deposits and carbon offsets and then just the strengthening of our DDA deposits with our treasury services business gives us more stability than we would have had in prior years. So we feel pretty good about that projection. And we’re — in general, we’re really managing the balance sheet from a BSO standpoint and really we’re avoiding most new transactions given just the shyness around the credit environment and the uncertainty, and we’re moving clients who aren’t generating positive returns off the franchise and off the balance sheet.
So it gives us a little bit of a dynamic that we don’t really need to go chase deposits because we’re keeping the loan side relatively modestly in terms of how it grows.
Brendan Coughlin : Yes. Without being too redundant to what John mentioned, I’d say consumer has been broadly stable on deposits, which is a really good thing. And the story for us is going to be controlling the mix, but all indications are quite positive. We look at a lot of benchmarking data, and we’re pretty confident that we’re performing in the top quartile of our peer banks in terms of retention of low-cost deposits as well as interest-bearing deposit costs so far in the cycle. It’s sort of midway through the cycle. So we’ve got to stay disciplined and manage it well, but it’s been driven by a lot of health improvements, household growth, improvements in primacy, mix shift to Bruce’s point, we were 45% mass affluent and above five years ago, we’re now 60% of our customer base is mass affluent and above.
So the quality has been quite good. On the stimulus front, what we’re seeing is the bottom two deciles of our customer base is essentially at the paycheck to paycheck. So that stimulus has already burned off and is in the rearview mirror. So the stimulus that remains with us tends to be with the more affluent customers, whether that’s actual stimulus check. So that’s balance parking that happened during COVID for not making mortgage payments and not traveling, et cetera, et cetera. We’re not actually seeing that burn off as much as we’re starting to see that rotate out of low-cost deposits into interest-bearing, which is natural given the stated interest rate. So we’re managing that really tight. All the investments we’ve made in the franchise, whether analytics, new products, the introduction of CitizensPlus in our Private Client Group as well as having Citizens Access to fence off interest-bearing deposits to maintain discipline in the core have all been really big levers for us to manage well.
And all indications we see so far is that we’re right on track with where we want it to be and dramatically outperforming where we were last time and up rate cycle and at worst, in line with peers, but some signs that we may be doing a bit better, which is a big turnaround from where we were five, six years ago.
John Pancari : Okay. Great. That’s helpful. And then separately on the commercial real estate front, I know you stated 60% LTV on overall commercial real estate. Is that origination? And then do you happen to have refreshed LTV? I know you mentioned that a lot of your deals have sponsor participation, but we’re hearing that with sponsors exiting or refinancing out certain deals that’s impacting the LTV, so the refreshed LTVs may be a better read, particularly on the office front.
John Woods: Yes. The office — the 60% was the office LTVs in terms of not the overall CRE book. So we think those are still pretty good. We’re refreshing the property by property. We haven’t gone through and done a total refresh on the entirety of the book yet, but we’re kind of working on the maturing quarter-by-quarter maturities and working with the sponsors to either refinance out, inject equity or adjust the value of the portfolio. And that’s what drove the NPL this quarter. It was really one real estate deal.
John Pancari : Okay. Sorry. So that 60% is a refresh number on the office side? Or is it at origination?
John Woods : It’s all throughout origination.
Operator: Your next question comes from the line of Matt O’Connor with Deutsche Bank.
Unidentified Analyst: This is on behalf of Matt O’Connor. On capital, so the 9.5% to 10% medium-term CET1 target range, that’s well above the regulatory minimum. You’ve built reserves a lot, and it seems like the conversion time line of ISBC is going really well. So I guess my question is, I hold so much capital down the road given solid reserves and successful deal integration time line?
