Mike Achary: Yes, Brandon, this is Mike. And they have — again, as I mentioned, with respect to deposit rates in total, things have absolutely stabilized as we’ve gone through the last 4, 5 months or so leading up to the third quarter. But specifically, if we look at the CD maturities, again, in the third quarter, we’ve got the — in the third quarter, we had just under $1.4 billion that matured at $3.95 and repriced at about $4.75. So there was an 80 basis point difference there in the fourth quarter. We think that difference will shrink to about 58 basis points. And again, that’s the difference between the rate that the CDs are maturing and where we think they will renew at. And then just taking a peek into the fourth quarter — I’m sorry, the first quarter of next year, we think that difference will shrink even more to about 23 basis points.
So the stabilization of deposit rates is really coming to life, so to speak, in terms of how our CDs — reprices we’ve gone through, not only the last quarter but looking ahead to the next couple of quarters.
Brandon King: Okay. Very helpful. And then on credit quality, I noticed that accruing loans 90 days pass through and modified loans still accruing, there was a noticeable increase in those two items. Just wanted to get some more details around what’s going on there.
Chris Ziluca: Yes. I mean, just at a high level, a lot of those are loans that we’re working through maturities. And so they end up kind of crossing over in that process of processing a maturity or arranging the maturity to be extended in its normal course.
Brandon King: Okay. So the anticipation of those will end up paying off or?
Chris Ziluca: Or just being rewritten and then getting back to payment status. And maturity oftentimes drives it falling into a “past due” bucket that may not otherwise really be past due.
Brandon King: Okay. And what about the modifier, is that the same situation for the modified loans as well?
Chris Ziluca: Yes. Yes.
John Hairston: To be clear, Brandon, it’s a little picky just of the way we obviously report things, but a loan could be past due without necessarily having a payment past due, right? Just because it’s past maturity. So they sometimes will cross over the end of quarter, and that’s the reason for that. So there’s not really a linkage between, call it, reserve appetite and that amount of past dues unless the payment itself is light. Does that make sense?
Brandon King: Yes.
John Hairston: No real concern there.
Brandon King: Okay. So we should be expecting that to kind of trend lower going forward is that…
John Hairston: It goes up and down based on timing. And I don’t know if it’s still this way, Chris can correct me if I’m wrong, but there’s a fair amount of seasonality in some of the book on the middle market side. So there’s larger numbers of renewals that occur in different parts of the year. And typically, in the second and third quarter is when we seem to have a little bigger bucket of those that all renew. And unfortunately, they’re all kind of stacking in the quarter. So if everything doesn’t come together perfectly, they will sometimes drag over the first day of the quarter and therefore, get reported that way. Chris is that still accurate?
Chris Ziluca: Yes.
Brandon King: Thank you very much for taking my questions.
Mike Achary: You bet. Thanks for asking.
Operator: Your next question comes from the line of Catherine Mealor with KBW. Your line is open.
Catherine Mealor: One follow-up just to the deposit cost discussion. Can you remind us seasonality around your public fund balances and any impact that might have on your NIM guidance for next quarter?
Mike Achary: Yes, I’d be glad to, Catherine. So we have a pretty robust public fund business. Those deposits average around $3 billion or so as you look through the year. Typically, those deposit inflows will begin to ramp up a bit in the fourth quarter. So they can range from about $150 million to about $175 million in the fourth quarter. And as we get into the new year, they begin to kind of trail off as the municipalities begin to kind of allocate and spend those dollars. So every one of those relationships are contractual, and the vast majority are tied to primarily spreads to short treasury bills. So there is a bit of an impact in the fourth quarter in terms of the deposit inflows, but then also related to deposit rates. And the dynamic around our public fund book was built into the guidance we gave for the fourth quarter in terms of deposit costs and potential NIM compression.
Catherine Mealor: Okay. Perfect. And then my other question just on loan growth, just — loan growth has slowed as it has for everybody in the back half of this year. Just — can you just give us some color around the new ones that you are putting on, typically, what kind of credit you’re comfortable with, type of credits that you are doing less of, and maybe an initial peak at how you’re thinking about loan growth, how it could look as we move into next year in that higher-for-longer scenario?
John Hairston: Okay. Thanks for the question. It’s John. I’ll let Chris speak to sector appetite and then I’ll come back on just sentiment and what not. So Chris, on just sectors in focus or appetite for or not.
Chris Ziluca: Yes. I mean again, we’re obviously very mindful of the sectors that are potentially most impacted by higher interest rates, the wage and employment challenges and then just higher operating costs. In some instances, the customers are able to pass them on and others may be more challenged to be able to do so. I mean, clearly, when we look at consumer discretionary, I think we’re obviously a little bit more thoughtful about what we’re looking at there, things like hospitality, and then even the asset classes that we sort of talked about earlier about office and retail, both retail as a C&I product and C&I as a CRE product is something that we continue to be a little bit more tighter on, I guess, in that regard. We have pretty robust discussions and a lot of the larger credits go through kind of a prescreen process, and so there’s a lot of healthy debate before we look to either pursue an opportunity or maybe even renew an opportunity in those areas or in general.
John Hairston: Catherine, any question back on that before I give you some more? Or would you…
Catherine Mealor: Well, one follow-up, this might be where you’re going, John, too, is also just on that mortgage one-time closed product? I know that’s been a piece of your loan growth over the past year. I’m just curious if that’s something you would expect to slow as you just look at the pipeline into next year or still kind of keeping new — kind of at a level of growth over the next few…
John Hairston: Yes. I’ll start there. Thanks for asking about it. So the one-time close product, and I think I said this a couple of times in the comments just because sometimes people forget about it. But it originally comes into construction classification, because it’s an in-construction designation until the completion of the project and the owner takes residents. So that amount of balance sheet in the construction project is clearly in the, I’ll call it, fourth quarter of the game — we’re in football season, so fourth quarter of the football game. And so we’ll still see some mortgage growth net and probably another, I would say, two quarters maybe before it begins to play over and we see mortgage portfolio shrinkage in the second half of the year.
