Zach Wasserman: Sure. Yesh. But the point on the higher NIM and the scenario will stay higher for longer, it’s not only a scenario where short end stays higher for longer, but also longer end stays higher for longer. I will note, historically much of our balance sheet yields key off the belly of the curve, the two to five year range. So I think that’s an important point to consider. Look over the longer term I see north of three — into the low three’s in terms of NIM as a sustainable level. Of course, the business mix continues to shift. So I think it’s hard to really be precise about that. [indiscernible] several years out, we’ll have to continue to do our modeling. But over the foreseeable future, we see that range of 3 to 3.10 in a quicker rate reduction scenario, maybe as much as 10 bips higher than that, if rates stay higher for longer through 2024. And then I would see another step up into 2025, assuming the yield curve holds generally [indiscernible].
Steven Alexopoulos: Okay, Thanks for taking my question.
Zach Wasserman: Thanks so much.
Operator: Our next question is from the line of Jon Arfstrom with RBC Capital Markets. Please proceed with your questions.
Jon Arfstrom: Hey, thanks. Good morning.
Stephen Steinour: Good morning, Jon.
Jon Arfstrom: A couple of guidance clarifications for you, Zach. When you say 1Q net interest income is a trough, how deep is that trough, how much lower? Where do you want us to start, I guess, for 1Q?
Zach Wasserman: Good question. Q1, by the way, is typically seasonally lower, just with day count and just other mixed items. And so, I think we’ll probably see a level that is lower than Q4 by around the same amount that Q4 was lower than Q3, and then begin to grow from there. And so, it’s really the trajectory from there that’s really the major difference in the guidance range, given that, if you just pull back loan growth, I would expect, in Q1 we will be about the same year on year as we saw Q4 and year around 2%. And then steadily accelerating from there and ending the year growing at or even potentially above the high end of the loan growth range. The average should be 3% to 5% that I discussed. There’s a trajectory for sure during the year.
And likewise, in terms of NIM, I think it’s likely that the NIM will likely meet its lowest point in the year in the first quarter and then kind of rising pretty heavily depending on the scenario you look at. But that’s a general trajectory I’m expecting.
Jon Arfstrom: Okay, good. I think it’s important to set that up. And then on expenses, when you say consistent, there’s a lot of hand-wringing last quarter on your expense guide. And when you say consistent, are you basically saying flat-line expenses quarterly for 2024, meaning that all the expense investments and hiring and things that you’ve done are essentially in the run rate today and you don’t see a lot of these pressures as 2024 progresses, is that fair?
Zach Wasserman: That’s an excellent point, I really appreciate the chance to clarify that. Broadly speaking, the answer is yes. The dollar amount of expenses overall we saw in core basis in Q4, the forecast we’ve got in our budget represents pretty similar dollar amounts overall for each of the quarters during 2024, coincidentally. In my [indiscernible] illustrate this picture for you, there’s a variety of factors that are offsetting each other and driving within that. I would say there’s still a little bit of additional ramp-up of run rate, some of the incremental capability investments that we’re doing. Likewise, a little bit of additional ramp up on some of these new initiatives like in the commercial business. We’re also actively tuning our overall strategic investments to modestly offset that.
And then lastly, you’ve got these efficiency programs, which are cumulating in their impact over time. The business process re-engineering initiative we’ve been driving for quite some time. We internally call it Operation Accelerate. The business process offshoring initiative, which by the way is also growing, accumulating. So there’s sort of a series of factors that are netting together, but the result of it is basically dollars that are pretty consistent with [indiscernible] to Q4.
Jon Arfstrom: Okay, good. Very helpful. Thank you very much.
Zach Wasserman: Thank you.
Operator: Thank you. [Operator Instructions] Thank you. And our next question will be from the line of Matt O’Connor with Deutsche Bank. Please proceed with your questions.
Unidentified Analyst: Hey, good morning. This is [Nate Stein] (ph) on behalf of Matt. I just wanted to ask about commercial credit. Commercial real estate net charge-offs increased versus 3Q levels. Can you talk about what drove that and just touch on the outlook for commercial real estate credit quality this year? And then on the C&I side, these also continue to normalize. Can you talk about what you’re seeing in this book? Thank you.
Brendan Lawlor: Sure, Nate. This is Brendan. I’ll take that. For the quarter, yes, we did see on a basis of my perspective, there was an increase in the commercial real estate side. But I want to point you to the dollars there. It was $20 million of charge-offs in the quarter. And it really represented three transactions. So it’s consistent with our view of the real estate portfolio at this time, which is from a charge off perspective, the focus will be in the office portfolio. That’s where we think that there is potential for lost content, which is why we’ve increased our reserves to approximately 10% there. And so, what you’re seeing in the current quarter is sort of the manifestation of that message that we’ve been delivering for some time.
