I think you pointed out a good thing in 2024 because we know we have some planned runoff on the loan side, the balance sheet probably does not grow holistically at 4% or 5%. It probably grows less than that. So we will accrete capital again, most likely, hopefully. And again, how to use that capital. We’re really happy that we are now back to the point from a capital ratio standpoint that we enjoyed prior to the Salisbury transaction closing, at least on the tangible side. So we don’t think we have any sort of restrictions or limitations around that. I think most people understand that the dynamic of economics around M&A transactions are challenged at the current time. But we’re still having very productive conversations with like-minded smaller community banks across our 7-state franchise.
And if something presents itself that we think is actionable, I think we feel like we have the capital to support to do that and support our primary organic growth objectives at the same time. So I don’t think that there’s any limitations just where we are from a capital standpoint.
Christopher O’Connell: Great. Thanks, Scott. I appreciate you taking my questions, and congratulations on the retirement. John.
John Watt: Hey, thank you, Chris.
Operator: Thank you. One moment for our next question. Our next question will come from the line of Bader Hilje [ph] from Piper Sandler. Your line is open.
Unidentified Analyst: Hey. Good morning, guys. Just filling in for Alex today.
John Watt: Morning.
Unidentified Analyst: I just want to touch on the NIM. Can you guys give us at least from the loan yield side, can you guys give us a sense for the lift in loan yields that’s left moving forward? I see the loan yields have been slowing down a little.
John Watt: So Bader, if I go back and look at sort of the period of time post the Salisbury transaction, just to think about it for the last three quarters, we’ve been picking up somewhere between 8 and 9 basis points on the loan yield on a quarterly basis. I think that that’s probably sustainable back to that whole idea of new originations being 100 to 125 basis points above what expiring loans are going off the balance sheet at. So no reason to think that, that can’t be sustained. And again, I think in terms of – on the higher for longer side, does it make it easier to actually generate new loans with that construct behind them? You would think, yes. The question is, does that stifle [ph] demand a little bit. So I think that’s the holistic trade-off that we’re looking at.
We’ve had some opportunities in our market for some additional growth and I would argue that we’re turning away single asset opportunities that we don’t think meet our pricing characteristics and instead promoting our best sponsors and using our balance sheet to fulfill full relationship banking for them.
Unidentified Analyst: Got it. And do you think that is sufficient to drive the rebound in the NIM? Or does the funding side also need to experience seasonal pressures for us to see the inflection?
John Watt: Yes. I mean we’ve been really close for the last 2 or 3 quarters. So I think we’re optimistic that, that opportunity presents itself. But that being said, that means that we’re out in front of our customers. And remember, we’re providing treasury management services to those same customers. We’re providing timely and appropriate advice to our customer base. And we’re never going to ask our folks to change that as their primary focus, so it’s incumbent upon us to have competitive products to be able to hold funding levels in and at the same time, create profitability opportunities for us as a company.
Unidentified Analyst: Got it. Thanks. And one last question. On the other side, on the funding side, assuming muni deposits flow out next quarter and you guys replaced that with borrowings. Is it fair to assume that at least until next quarter, we continue to see NIM decline and a delay in the NIM inflection as cost of borrowings push up the cost on the funding side?
John Watt: I would say that cost of borrowings are definitely higher than most of the deposit classes that we have on the balance sheet today. But again, that’s tactical funding management 101. And hopefully, we’re pretty good at that. So we’re not just conceding that everything that leaves the balance sheet becomes replaced by a borrowing instrument. We have objectives to grow our funding base, and that’s consistent with historical results.
Unidentified Analyst: Got it. Thanks for answering my questions. And congrats on retirement, John and Scott, Joe and congrats on the promotion as well. Joe Stagliano Thanks so much.
Annette Burns: Thank you.
Operator: Thank you. And I’m not showing any further questions at this time. I will now turn the call back over to John Watt for his closing remarks.
John Watt: Thank you, Victor, and thank you all for your interest and your time this morning, and thank you for all of your questions. I’ll end where we started. The shareholder is averaging up here, and the wind is at our back. So thank you.
Operator: Thank you. Mr. Watt. This concludes our program. You may now disconnect. Everyone, have a great day.
