Sam Sidhu: So I think you sort of heard me reference, we’re sort of at that overall inflection point from a deposit perspective. We also talked about the wholesale CDs continuing to decline. I think it’s worth mentioning that from a growth perspective, you also heard me say that we’re not going to be imprudent about taking market share. Our interest expense can and should continue to decline even before rate cuts. So yes, while the output of a cost of interest bearing deposits may change, the deposit mix is really going to be the main driver of ups and downs. Interest expense should be maintained and ideally, it should trend downwards on the sort of flattish type deposit base. So we feel privileged to be in this type of a trend and we feel confident in sort of our deposit pipeline and backlog.
Matthew Breese: And then two other quick ones. The first one is just in regards to the specialty lending balances were down around $400 million this quarter. And I was curious, what was the driver of that, what happened there and expectations for that kind of line item for 2024?
Sam Sidhu: As I mentioned before, it was sort of targeted. These were lower margin, slightly below 300 basis points, 250 plus or minus type spread. From that to particular business line from the specialty, it was within our Fund Finance business, specifically focused on our Lender Finance business. These loans were really rolled off in late December. We’d sort of planned for them and did — and opted and elect not to renew. So nonstrategic from a business line as well as a customer relationship perspective, nonstrategic from a deposit perspective and nonstrategic primacy of relationship perspective. So hopefully, that gives you some color. And we’ll look to — that gives us sort of more opportunity to refill that with more strategic loan growth in the year.
Matthew Breese: And then the last one was just appreciating that credit metrics were solid. NPAs are basically flat at 14 bps or 13 bps. I did see that substandard loans increased about 20% quarter-to-quarter. And I was curious what happened there, and is there anything worth mentioning?
Phil Watkins: So yes, the substandards did increase, but it’s actually really related to a single credit that migrated in the portfolio. And it’s worth noting on that, that we actually have 100% coverage of the loan amount in cash from the borrower at the bank. So it’s a bit of a unique situation. And since the quarter, there’s actually been some positive developments on that credit as well. So we wouldn’t be surprised to see that reupgrade during the quarter. So really not anything that we’re worried about.
Matthew Breese: Just curious, what was the loan tied to in terms of commercial versus real estate consumer?
Sam Sidhu: It was something our commercial finance — equipment finance business. So again, it’s a large relationships, $60 million plus. I don’t know the exact number and it’s 100% backed by cash.
Operator: Your next question comes from the line of Bill Dezellem from Tieton Capital Management.
Bill Dezellem: So relative to your guidance about loan demand, given that that’s a bit unusual for the industry right now. Would you talk to us about what you’ve seen in terms of loan demand changes or trends over the last four months or so, please?
Sam Sidhu: So two major things to highlight that I haven’t already covered on the call today. Firstly is that our lending teams have been sitting on their hands for the past 12 to 15 months really. And I think that there’s a lot of pent-up demand from existing customer relationships, even when not taking into account new opportunities. That’s amplified by there being now fewer competitors in many of our national corporate verticals, which I’ve sort of highlighted what the components of those are earlier on the call. So the combination of the pent-up demand plus fewer competition and our sort of focus on these national low credit risk verticals, it’s not a stretch for us. And because we were targeted in reducing our nonstrategic assets, it’s really just getting our portfolio back to where it was 12 months ago. So it’s not a stretch and it’s all relative to our size and the business lines that we’re focused on.
Bill Dezellem: And then have you seen that loan demand change and get stronger over the last four months or basically, the demand has been there, you just have — your bankers have just been in a holding pattern?
Sam Sidhu: Over the last three to four months, it really hasn’t changed much. It’s just been that our discipline has been on making sure we focus on capital and having a very strong base to build off of. So I haven’t seen a material change. And I think what’s also important to note is we’re not CRE dependent like many of our peers, and I think that’s really helping to benefit us in the sense that we have a broader, more C&I commercial oriented base that’s helping to source this input.
Bill Dezellem: And I know we’re running a little long here, but one final question. Long term, not in 2024 but beyond, how are you thinking about the loan-to-deposit ratio, what’s the range that you find as a comfortable place to settle into?
Sam Sidhu: So I think I talked about between sort of where we are in 80% plus or minus for this year, likely sort of staying in the sort of the mid to high 70s. Longer term, we’ve been sitting on very prudent cash balances, and part of that is by nature of the events of March of last year. Longer term, where we used to be at 120% in 2018, mostly driven by some of our focus on our Mortgage Warehouse business, which we felt comfortable and sort of given the short duration and liquid nature of that portfolio and going to the higher end of the overall peer group. We feel probably more in the mid 80 range, feels like a more medium term, but it’s something we’ll continue to communicate about in the coming 12 to 24 months.
Operator: There are no further questions at this time. Mr. Sam Sidhu, I turn the call back over to you for some final closing remarks.
Sam Sidhu: Thanks so much, everyone. We really appreciate your continued interest in and support of Customers Bank. We look forward to speaking with you next quarter. Thanks so much, and have a great day and a great weekend.
