Damon DelMonte: Got it. Okay. That’s all that I had for now. I’ll step back. Thank you.
Bruce Lee: Thanks, Damon.
Operator: Thank you. Our next question comes from the line of Terry McEvoy of Stephens Inc.
Terence McEvoy: Hi. Good afternoon, everybody.
Bruce Lee: Hi.
Terence McEvoy: So with the charter consolidation complete, can you just remind me of the $20 million of savings, how much of that do you think falls to the bottom line, let’s say, in 2024, versus how much of that is – will be reinvested into growth? And really, how could that or how does that play into the HTLF 3.0 in terms of accelerating organic growth across the bank?
Bryan McKeag: So I think we’ll double team, this one. I’ll take the first part. In terms of what has fallen to the bottom line, we have a slide in our deck. I think it’s – let me just find that real quick. I think it’s Slide 10, where we show what our core operating expenses to assets has done over time. And so we started this back in 2021. We were running at about 2.22% of cost to assets. We’re now down this quarter down to 2.08%. If you do the math on about – we’ve been about $20 billion that whole time, give or take. That’s about $28 million of run rate reduction in our expenses. So the $20 million is in there. We do have a little bit, so it’s more than that. There are some other things in there, but I think we’ve gotten the $20 million plus.
I think we’ll get just a little bit more here as we do the span of control changes here in the fourth quarter. So that’s what we’ve got steaming into next year. However, I’ll let Bruce talk about what we’re planning to reinvest and a little bit more about 3.0.
Bruce Lee: Yes. So Terry, you’ll hear us talk at the end of the year and the next quarter kind of more about HTLF 3.0. But I guess the way I think about it, everything that Bryan just described is really going to fall to the bottom line. We’re going to be reinvesting the span of control as well as looking at management layers, looking at our branch footprint, looking at the size of our branch locations, that’s where we’re really going to get the investment dollars for next year in 2024.
Terence McEvoy: Understood. And Bryan, I appreciate all the forward-looking commentary for the fourth quarter. Specifically the service charges, which were $18.6 million in the third quarter, how much of a decline do you expect because of the new policies that you mentioned? And I guess, what gives you confidence that the capital markets line will return?
Bryan McKeag: Yes, a couple of things. So I think it’s around $600,000. We’ll be implementing this in December, so NSF reduction for Q4 is about $600,000. And then as I said, mortgage banking for us has been coming down. I think it’s going to continue to kind of fall off, just not seeing a lot of good activity there. The capital markets piece, I think third quarter was just soft for us. I think there are some things that we now see coming into the fourth quarter. And I think Bruce may have a couple of comments here, but I feel pretty confident we can make that up there.
Bruce Lee: Yes. So Terry, one of the things on the capital markets front, we’ve taken a really hard look at our pipeline, and we’ve really spent the last probably two weeks, maybe even three weeks, out there talking to a lot of our customers who currently have floating rate debt sort of adding value, showing them the inverted yield curve and looking at a three-year or four years out, they can actually reduce. By doing a swap, they can reduce their interest costs. So we’ve seen our pipelines really begin to grow as we’ve been out there talking to customers and helping them look at how to create some fixed rate debt from floating on their own balance sheets, which help them manage their own interest rate risk.
