It has coverage dedicated treasury management. It has wealth and asset management support and then a non-public branch office, which allows us to do things on the pub fund side. What it does not have today is any retail banking presence. I wouldn’t rule that out, but those are very large markets that we’re talking about here. They’re not markets of between 0.5 million and 3 million people, which has been the expansion strategy in the Southeast. So, any effort that we elect to make with branches in those markets will be a thing that we communicate to you in advance, because we’ll be talking about committing 50 to 100 branches in a single city in many cases as opposed to what we’re doing in the Southeast right now, which is really building 10 to 25 at an individual market level and getting to that top five presence that we know we need to be able to support the primary banking model.
Ebrahim Poonawala: That’s helpful color. Thank you.
Operator: Question comes from John Pancari from Evercore. Your line is now open.
John Pancari: Good morning.
Tim Spence: Good morning.
John Pancari: On the NII outlook of down 2% to 4%, I know previously your — last quarter your forecast was forward curve as well and you had five or six cuts in that assumption and now you’re sticking to the forward curve, so much less of three cuts I’d say is in the forward curve now. However, your NII guide has remained intact despite that. Can you maybe just talk a little bit around it — around the ability to keep that outlook without changing it? And then, what does that mean in terms of your margin forecast? I know you indicated that it’s bottomed as well as NII now, but as you look through the year, what type of trajectory do you see in the margin? Thanks.
Bryan Preston: Yeah, John, thanks for the question. It’s one where the main thing that I would highlight for you is that we continue to have very strong benefits from the fixed rate asset repricing at this point. And you can see this — for us, you can see that in our actual numbers. Year-over-year our indirect secured consumer business, which is primarily our indirect auto business, that’s up 100 basis points year-over-year on a $15 billion portfolio. So, $150 million of annualized benefit in a year where we were actually constraining production in auto because of the RWA diet. So, those businesses we have, those medium-term fixed rate lending assets, whether it’s the auto business, RV Marine, whether it’s solar provide, generate a lot of power for us in terms of earnings capacity.
Over the next 12 months, we’ll have enough fixed rate assets reprice that will generate $350 million, $400 million plus of annualized NII benefit. So, even in a higher rate environment and with the curve selling off some, that benefit is increasing for us. So that is a good outcome for us that helps support and offset some continued migration from a DDA perspective, as well as some continued forecasted increases in deposit costs overall. We’re not making any assumptions that the deposit environment and the competition and the increasing cost is over, but it is definitely moderating. From a NIM perspective, we do expect positive NIM from here as well. We’re only talking about a couple of few basis points a quarter trajectory. A big wild card on the magnitude of the NIM increases just ultimately is where the cash position ends up.
If we continue to have really strong performance out of our deposit franchise above the 2% to 3% that we’re guiding to, NIM will be a little bit lower, but NII will be better as a result of that. But overall, we feel really good about the absolute positioning.
John Pancari: Got it. Thanks, Bryan. Very helpful. And then separately on the credit side, NPA is up a bit this quarter. If you could just give us a little bit of color on what you’re seeing in terms of credit migration and maybe by sector. We’re hearing a bit of stress on the transportation sector. We have aviation credit impacted some of the names as well as some banks flagging healthcare. So, if you could just give us a little bit of color there and maybe also your confidence in your 35 basis point to 45 basis point charge-off guidance? Thanks.
Greg Schroeck: Yeah, great. Thanks. Great question. So, of the $59 million increase that we saw in NPAs this quarter, $49 million of it was in commercial, two names, not in the industries that you had indicated. We had a retail trade name and a senior living trade name. So, we are continuing to see stress on the healthcare side, specifically in the senior living. That’s not a huge portfolio for us and we think we have our hands around it, continue to review that portfolio on a consistent basis. So, not overly concerned. The thing that we have been consistently saying and we continue to see is we just — we are not seeing trends by geography, by product, by industry. Our issues that have bubbled up have been more episodic and we’ve been able to deal with those episodic events on a quarter-by-quarter basis.
So, I am not expecting to see a linear increase in our NPAs. To your last question, I still feel very good about the guidance. Bryan talked about earlier, 35 basis point to 45 basis point for the year based on — again, Tim mentioned our commercial real estate portfolio continues to perform very, very well. The rest of our C&I borrowers continue to perform well. They’ve done a nice job with expense cutting. They’ve done a nice job passing along pricing. They’re operating about as efficiently as we’ve seen them. We’re taking a cautious view as well, not sure where rates are going to go. So, we’re not seeing a lot of CapEx. But overall, we like the behaviors of our C&I portfolio, and I think the results of our commercial real estate portfolio speak for themselves.
John Pancari: Great. Thank you for taking my questions.
Tim Spence: Absolutely.
Operator: Our next question comes from Ken Usdin from Jefferies. Your line is now open.
