Michael Perito: Yeah. No that’s helpful and makes sense. And so on that last point, obviously, switching I think in the slides I saw 80% of production in the last few quarters has been variable. Now obviously that’s been very advantageous and particularly on the loan sales right? I mean the fixed rate SBA loan sales were pretty nonexistent for a while there. But curious how you guys are thinking about that dynamic as we approach theoretically the top of the cycle here and rates aren’t quite as volatile. I would think that the market for fixed loan rate sales might come back a bit stronger if that’s the case. And just wondering how you guys are thinking about the mix of loan production going forward where we’re — given where we’re at today?
BJ Losch: Yeah. I think there’s obviously much less appetite right now for fixed rate product where we and a customer think it’s the best for them. We’ll certainly put them there. But variable rate is the flavor of the day right now. When rates do start to come down, obviously, our portfolio loan yields will come down on the variable rate side commensurate with that. But we also think prepayments would slow, because rates are coming down on those loans and making a cash flow a little bit more palatable for existing clients. So that will continue to help us expand our balance sheet growth and our net interest income growth. So we feel good about that. And then our ability to move the deposit portfolio rates down with market at the betas that we usually do. We feel like in a higher for longer but even in a probably more importantly in a declining rate environment our margin will have tailwinds. That will be very helpful.
Chip Mahan: Michael let me add to that in another way, right? I have said for the 50 years I’ve been in this business that historically loyalty in the bank and this ought to be somewhere between one-quarter and 8.25%. I really don’t feel that way right now relative to our small business borrowers I tell you why. So the theory of verticality exists. When you’ve been in the for us in the vet lending space for 15 years and your reputation is out there when times get tough, people need capital. I think that matters. So, our folks in the field every day understanding the businesses that we lend to I think makes a difference in terms of everything including, that bid on that last rate on the loan.
Michael Perito: Helpful. Thanks, Greg. Just two more quick ones, if I can. And I’ll just ask them together even though they’re really not related. But BJ, I was wondering if — just as we think about the model, wondered if you’d be willing to provide a little guidance or some guardrails around charge-offs and the tax rate for 2024. I realize both are probably incredibly difficult. But obviously, the charge-offs starting there have been kind of up and down and I imagine that will just continue to be the case given the environment. But it’s like a 30 40 basis point number annually, you think pretty fair given the type of portfolio, you have and where we’re at? And then secondly, on the tax rate, just any initial thoughts about what you’re budgeting there for next year just given the pipeline of tax credit activity?
Chip Mahan: Michael, this is Chip. That — way to take a shot buddy. We’re not going to predict charge-offs in 2024. So I’ll take that one and leave the other one to BJ.
BJ Losch: Thanks. On the tax rate Mike, we currently don’t have any investment tax credit activity in the pipeline for 2024. If that changes, we’ll certainly let you know. But in the absence of any ITCs you should expect our effective tax rate, more in the 20% to 22% range next year.
Michael Perito: Got it. That’s helpful. I understand on the chart off maybe, I’ll ask the credit question just a little differently, Chip and take the numbers out of it. I think this quarter over the last two weeks, we saw some data points from others particularly about my credit card data and like Discover and stuff like that that wasn’t great. Obviously, that’s not directly correlated to you guys. But just curious, as you think about the reserve levels the $232 million you guys mentioned, could you maybe go a layer deeper in terms of why you think that’s kind of the right level just given where we’re at. Obviously, a unique portfolio and it’s kind of a unique metric. So some — maybe just some context around it additional context would be helpful.
Chip Mahan: So I’m going to Steve up, but let me just say this before I do, right? So in anticipation of this call, earlier this week I spent — Steve and I spent a considerable amount of time with that business advisory group, our 62 young people that are in the market every day with all 6,000 customers. And then they went industry by industry all 35 industries engaged Steve and I, a complete write-up of what their view is currently of those industries, at this time. So Steve, you can take it from there.
Steven Smits: So, I’ll provide my thoughts around our portfolio today and then maybe from that, you can answer that question for yourself. So, I am cautious, first of all, I feel the portfolio today is stable. I am cautiously optimistic, that the portfolio will continue to be stable if not improving over the next few periods. My confidence stems from a couple of points. First, and foremost what Chip articulated very well, is we continue to double down in our servicing as we always have. I feel we have a very good pulse, on the health of our borrowers. And I think we will continue to do that. That provides me confidence that I’ve identified where there is areas of stress, and we’ve wrapped that in support. Secondly, we made adjustments to our underwriting criteria, I believe at the right times and they appear to be proving out to be such.
If we look at our performance by cohort year, we will see that 2020 cohort originations is significantly stronger than 2019. So we made adjustments with the anticipation that we will be entering into more rocky economic environment, for a prolonged period of time higher interest rate environment for a prolonged period of time. And I feel like that loans were underwritten, to account for that. So I believe that those businesses will do quite well. I do believe that the government programs at the right time provided meaningful support that has translated into stronger balance sheets and we went to very strong operators, that have done the right things taking advantage of that additional balance sheet strength and I believe they can navigate. We don’t have the CRE challenges that many of our other banks have.
Our CRE portfolio, I’ll remind you again, is not multi-tenant office. And then finally, I think we’ve been very strategic and smart, about when others have — there’s a disruption in the lending environment. Our government-sponsored programs bode very, very well to attract higher profile applicants and we’re seeing that. So I again, feel really strong about what we’re putting on the books today. So I think you put that all together, I would call it confidence and stability knowing that we’ll have pockets of challenges that we always will.
