But it’s a great environment for banking and margins. I feel really good from that. Would we trend higher than where we are today, probably over time, but it really comes down to discipline. You really work on the asset mix change at that time. In times like that, when rates tend to be in that time period, economy seems to be going pretty well. So, you probably have good loan growth out there and pretty decent deposit growth. So, I actually get excited once rates come down a little bit, and we can really operate the bank. Historically, I think we will have good, really good returns.
Brian Foran: And maybe as a follow-up, your predecessor has the theme of kicking off this whole deposit and margin worry cycle at the Barclays conference a couple of years ago. I think at that time, the original message was the NIM was for 4 or 4.1. And through the cycle, you thought 3.6 to 3.9 was a normalized range. Is that still the thinking like we will be at 3.5 or so in ‘24, but normalized at some point in the future is 3.6 to 3.9?
Daryl Bible: I think that’s pretty much spot on, Brian. But I would say. Darren did a great job in this role, and he also called exactly what our charge-offs were going to be in the beginning of the year, and they came in pretty much spot on. So, he did a great job in this role. But when I look at it and see what’s happening, if I call it right, maybe we bottom in the next quarter or two quarters and then it just margin then we can start growing from there. So, I am pretty much in that camp as well.
Brian Foran: Appreciate it. Thank you.
Operator: And our next question comes from Steven Alexopoulos with JPMorgan.
Steven Alexopoulos: Hey. Good morning Daryl.
Daryl Bible: Good morning.
Steven Alexopoulos: Maybe to start – to actually start where you just ended, so that normalized NIM range, 3.6 to 3.9, if we think about your commentary right, you want to move the balance sheet to a more neutral position. Is there any reason in whatever a normal curve looks like, we haven’t seen it in a while, that you couldn’t move to the upper end of that range. I think most would be disappointed if you were 3.6, like why wouldn’t you move to the very upper end of that range?
Daryl Bible: Steve, I don’t know, I suspect.
Steven Alexopoulos: I am not going to – here by I am just talking about 2025, 2026, because is there a reason that you are not going to be 3.75 margin bank?
Daryl Bible: I feel really good at the way we are positioned. What makes us so strong is we are really good at how we price our assets. But what really makes it is that we are great at growing operating accounts. And that funding source is really starting to come back on and growing nicely. So, we always have and probably will have a top quartile net interest margin. So, I feel really good about that. We may operate a little bit lower just because we are going to carry a little bit more liquidity. Right now, we are carrying about $4 billion more liquidity just because we increased our internal stress liquidity scenarios based upon some of the learnings that we had from earlier in the year from that perspective. So, that cost us 6 basis points this quarter, it doesn’t really impact NII a whole lot, but it impacts your margin just because you were sending water on assets and liabilities, they don’t make anything.
But I feel really good in this rate environment, managing a balance sheet and doing the right thing for our customers and for our communities is really what banking is all about, and I think we will be able to execute and perform really well in that environment.
Steven Alexopoulos: Got it. Okay. And just as a follow-up. So, I know you have had 10 questions already on commercial real estate. But if we look at this deep dive you did covering 60% of all commercial real estate loans, one, what are you learning? I don’t know if you are talking to building owners as you work through that process. But as these come due, you have $1 billion or so and criticized. What’s the expected work out? Will they put more equity in? What are you expecting? And then when you called out the 4.4% office reserve, is that a general reserve on the office portfolio? Are those specific credits coming due where you are anticipating losses? Thanks.
Daryl Bible: Yes. I mean the 4.4 is really a general amount. There could be a little bit of specific embedded in that. But it’s – the bulk of it is more of a general reserve from what we are seeing from that perspective. We are seeing our clients or sponsors really step up and really support these credits. We think that with charge-offs that we had this past year were really more financial and institutional oriented. But our sponsors because they are long-term real estate owners of the property, I mean they basically own properties where they want to own them in a certain block and city of where they have it. So, it’s really long-term oriented. They tend to have really low tax basis in these properties, and they are going to support these credits over time.
So, that’s really what we are seeing there. When we go through and look at whether we should grade it as criticized or not, you are seeing some pressure on the debt service coverage ratio. Once it falls under 1.1, it goes into the 11, which is a criticized camp. But the vast majority of what we have in criticized is between 1 and 1.1. Yes, we had 1s under 1 in that level, but the vast majority we have there. So, over time I think those will cure and won’t result in loss for the most part. We did raise losses up a little bit for ‘24. Some of that was really normalization on the consumer portfolio. And then some of it is maybe working out a few more credits off. But for the most part, what we have in criticized is not materializing into losses.
Steven Alexopoulos: Got it. That’s perfect color. Thanks for taking my questions.
Daryl Bible: Yes.
Operator: And our next question comes from Ken Usdin with Jefferies.
