Melinda Chausse: Yes. Ebrahim, this is Melinda. Obviously, the credit performance continues to be really strong. It was a really nice quarter for us obviously third quarter of net recoveries kind of unprecedented, nonperforming assets, again, modest decline and very low inflow. But we did see an increase in the criticized category, which is exactly what we’ve been expecting to see over the last couple of quarters. The preponderance of the increase that we saw is in our, what I call, core middle market C&I portfolio, which would include a number of leveraged loans in that automotive supplier sector. So again, we have expected that we would begin to see normalization. It’s taken a couple of extra quarters to actually get there.
We’ve been bouncing around the bottom for a long time. Our current economic forecast that we use in our CECL process does call for a mild recession. And I think whether it’s a mild recession or we end up with a soft landing, I think, we’re prepared for a mild recession as it relates to the reserve build, and the reserve build this quarter really reflects kind of the portfolio growth, as Jim said, as well as that migration. But as of now, we don’t see a lot of lost content. And as Jim guided, we think that for the remainder of this year, we’ll be below that average that we’ve typically guided.
Ebrahim Poonawala: It’s helpful. Thank you.
Melinda Chausse: Welcome.
Operator: Your next question comes from the line of Jon Arfstrom from RBC Capital Markets. Please go ahead.
Curtis Farmer: Good morning, Jon.
Jon Arfstrom: Good morning, everyone. Hey, good morning. Melinda, just to follow up on that one. How do you expect — do you expect more normalization? And how do you generally expect those numbers to progress on criticized?
Melinda Chausse: Yes. I mean I think we expect that we’ll continue to have some migration in the portfolio. There is no doubt that the customer base has been incredibly resilient. Obviously, came into the last couple of years, challenges, very low levered, lots of liquidity, lots of availability. But inflationary pressures over the last 18 months are starting to show up in the portfolio in terms of pressure around growth in net margins. So cash flows are a little more stretched, and I would expect that we’ll continue to see some additional migration. I think we’re very well reserved and all of that is taken into sort of the process that we go through each quarter.
Jon Arfstrom: Okay. And maybe this somewhat ties into it, but maybe if you repeat. But you talked about increased selectivity in lending. Can you talk a little bit more about that kind of where you’re being a little bit more cautious? And then the CRE number, it sounds like that was more construction projects funding up. I think you said things are slowing there, but can you just confirm that?
Peter Sefzik: Jon, it’s Peter. Yes, I think when we talk about it, it’s really around quite candidly, pricing expectations across the loan portfolio. And we continue to be really selective about it. I’ve said in the past, we’re more focused on sort of credit than we are maybe trying to earn business on pricing over time. And right now, between those two options, we want to make sure that we’re earning for the company. And so our selectivity and expectations on pricing. And I think you’re seeing that across the industry just as capital is kind of being contained here that we’re being very careful about where we deploy it. We’re taking care of existing customers. Our expectations on profitability or higher relationship or higher that’s kind of across the portfolio.
