Matthew Clark: First one for me around the reorg and that $40 million of savings you expect to extract. Can you give us a sense for the realization or timing of those savings and whether or not there might be some reinvestment necessary to realign these businesses? Trying to get a sense for whether or not that $40 million will fall to the bottom line or not?
Julianna Balicka: Hi, Matt. This is Julianna. Thank you for that question. A substantial amount of the cost savings that we are expecting of that $40 million, namely $34 million of that is going to come from the staff reduction that we executed last week. So that is already in place and will start to manifest itself in our operating results beginning now. Then in the next six months, we have plans to consolidate some branches and the cost savings from that will roll in over the first half of the year. And then lastly, some cost savings from process improvements will continue and be phased in throughout the whole of the next 12 months. So then the $40 million that we are providing to you on Slide 15, that’s the fully loaded number.
That being said, near-term actions around operational process improvements will continue to generate benefits that are not yet necessarily identified and quantified. And that’s an important consideration to think about when you are reorganizing an organization and removing redundancies and streamlining operations for more efficient, simpler banking. And in terms of how much of this is going to drop to the bottom line, the second part of your question, needs to be considered is that this organizational restructuring was designed to position our bank for high-quality, well-balanced growth regardless of cycle and to promote total relationship banking through collaboration between our business groups and the expansion of our fee-based business products.
And to succeed, we need to continue to invest in our franchise, and we’ve talked to you in the past. So this isn’t anything new about investments that we’ve been making in treasury management solutions. And for example, we recently opened a new branch in Bellevue, Washington. So investing in people, processes and technology to strengthen our bank is going to be ongoing. However, what is important to point out is that the investments that we have been making have not caused large fluctuations in our expenses because we do practice disciplined expense management, and we do not expect that approach to change. So to state firmly, the restructuring was not designed to extract cost savings just so we could redeploy into some new large scale, not yet unveiled projects.
That’s not the case. However, one thing that I would say for your modeling purposes is that the cost savings are improvement to your existing 2024 baseline, and we will share our outlook in January. And your 2024 baselines will naturally have assumptions around typical business as usual expense growth in an organization and so that’s where the cost savings would be applied to.
Matthew Clark: Got it. Great. And then on the mortgage warehouse business, just remind us of the balance there at the end of the quarter? And then, I think I can answer the question myself, but just the rationale to exit that business.
Peter Koh: Yeah. This is Peter, Matt. The balance is actually $65 million, and we’ve been continuing to wind that down. I think as you know, the mortgage business has had a big slowdown. And overall, I think pricing and risk profile of that line of business, we thought that winding down that business made more sense for us at this point.
Matthew Clark: Okay. And then, your SNC (ph) exposure. Can you just update us there on the size of that portfolio and whether or not you went through a recent exam, and whether or not there are any upgrades or any downgrades there?
