Yeah, they should be. Do you get to that path with every single one of your offerings? No, not immediately. But I think over time, you make progress at that.
Operator: Thank you, and one moment as we move to our next question. And our next question is going to come from the line of Steve Moss with Raymond James. Your line is open, please go ahead.
Steve Moss: Good morning. Morning, John, Scott; maybe just following up on the funding costs and the margin mix here. I see you guys in a pretty meaningful cash position at quarter end, and obviously, Salisbury kind of makes things a little more difficult. Just curious as to how you’re thinking about NII and an overall margin for the fourth quarter here now that everything’s combined with, given that funding costs are 13 basis points higher for September?
Scott Kingsley: Yeah, thanks, Steve. So to your point, we’ll get the full impact in the fourth quarter. The hope is to tell people that the September cost of funds were the high point of the quarter, which I think we’ve unfortunately gotten to say every quarter end this year, that the last month of the quarter was more expensive than the first month of the quarter. So expect that to continue, and now that’s more of a remix dynamic than it is any other product-related change for us on a going forward basis. So I would kind of frame it this way, that we kind of think of the third quarter’s outcome as a 321 reported margin, probably 316 core, meaning that five basis points of marked accretion was also included in that. You got a number of step down a little bit into the fourth quarter?
I think so, Steve, on a core basis.And we’ll continue to tell you how much that is moving forward in terms of what’s influencing the gap reported number. Your point on the balance sheet, well observed. We were in a Fed Funds sold position and still borrowing money at the end of the quarter. We were very cautious before the closing of the Salisbury transaction that we did not want to put ourselves in any short-term liquidity-constrained position. So we kept some instruments on the balance sheet, including on the borrowing side, into the fourth quarter. I think the lion’s share of that Fed Funds sold position will move itself off our balance sheet in the fourth quarter and into the first quarter of next year. It’s interesting that may result in a little bit of compression on any interest margin, but it actually creates a really modest piece of net interest income.
And again, remember, we spend net interest income and talk about net interest margin.
Steve Moss: Right. Okay. That’s helpful. And just kind of as you’re thinking about the deposit environment here, you guys are still running at a low cost of interest funds on interest-bearing deposits. So how are you thinking about, through the cycle of deposit betas, if we are in a higher-prolonger environment, what’s your sense of the competitive environment these days?
Scott Kingsley: Yeah. So it stays competitive, Steve. And I think that some of the issues that the industry had to engage in following the bank failures in the first quarter is still top of mind if you’re a banker. That has not gone away. And I think we’ve said before, our regulatory reporting of net liquidity and net liquidity sources has continued to be a monthly apparatus. Not daily anymore, but monthly. So I think that that stands out there. I think in terms of we share markets with larger banks and with smaller banks. The smaller banks have a finite group of customers and communities that they can go to from a funding standpoint. So they’ll tend to be a little bit more liberal or a little bit more assertive relative to retention.
And if rate is necessary to retain, that’s what we see. The larger banks we’re competing with across most of our footprint have kind of found a regional and or a national strategy for their depository products. And we line up very well against that. We don’t need to be overtly assertive to retain our customers. We’ve made this comment before, Steve. We have a very, very granular mix of customers from a depository standpoint. So that ability to look at that granularity where we have a large customer base that does not have today or does not enjoy huge amounts of excess liquidity. That being said, our institutional, commercial and larger small business customers do have excess liquidity and they are expecting market yields. So I don’t think that dynamic changes for the next couple of quarters.
Steve Moss: Okay. And then in terms of just following up on loan yields here, quite the move over the past three to four months. Just curious, are you starting to see an increasing number of deals that no longer make sense? And could we see maybe a slowdown in loan growth from the mid single digits if loans are headed towards an 8% plus type rate?
John Watt: Well, let me take that one. We’re right in the middle of the budget process, right? And top of mind every day is, what’s growth going to look like next year? Right now, it’s our view that mid single digits may be slightly moderating down from that. But mid-single digits is our jump off planning spot. Looking at pipelines going into the end of the year, the commercial banking pipeline is pretty strong. The business banking pipeline, pretty strong. So, will there be moderating demand further into next year? We’ll see, but I don’t think it’s unreasonable for us to be planning mid single digits.
Steve Moss: Okay. And then one last one for me, just in terms of the fixed rate loans dynamic here that are repricing over the next 12 months. Just curious if you have those expected repricing, Scott?
Scott Kingsley: Yeah, Steve. So, when we look at our loan portfolio today, we think of about $1.7 billion of cash-flow instruments coming off that. And that’s probably a lower number than we said a quarter, two or three ago, just given the slowdown in prepayment speeds. And that slowdown in prepayment speeds is noticeable in residential mortgage products, in solar loans, in a couple other portfolios. But over time, I still think that people buy a new car and over time people will move again. But I think we use $1.7 million of expected cash flows for the next 12 months.
Operator: Thank you, [Operator Instructions] Our next question is going to come from the line of Chris O’Connell with KBW. Your line is open, please go ahead.
Chris O’Connell: Hey, good morning. I was just hoping to circle back to just a near-term NIM discussion. So, I guess on a core base, well, first off, just for the next full quarter, given where the close was this quarter, like what do you think the quarterly accretion number will shake out at roughly?
Annette Burns: So, I think this quarter’s $1.6 million is a proxy. you double that and that’s what that’ll look like for the next few quarters, depending on prepayment fees. But I think that’s a good proxy.
Chris O’Connell: Okay. Great. And just thinking about the core NIM, where do you guys have where that was for on a spot basis for September?
Scott Kingsley: Don’t not have that in front of me, Chris, but I would probably tell you that if the quarter’s core was 316, I would guess somewhere between 310 and 312 for September, month of.
