Chris O’Connell: Okay, great. And as we get past next quarter and hit the trajectory into next year, I mean, is the pace of funding pressure going to depend more on the core customers that you have or of how the mix shift tends to play out from this point? And if you have what the organic non-interest bearing deposit growth or decline was for this quarter, that’d be great.
Scott Kingsley: Yeah, so Chris, that was probably where I would say, yes, the impact of our core customers is more the determining outcome. If you’re today, and just us or probably most banks, if you’re truly recruiting large pools of incremental cash onto your balance sheet, you’re expecting to pay a 5% yield for that. Doesn’t matter whether it’s a wholesale source or whether it’s a large institutional source. That’s the customer expectation on that. But if you’re down into the granular ads and our ability to add incremental checking accounts, really important attribute for us. And it’s something we’ve historically been very good at. But it’s just in terms of circling the wagons on deposit balances. Those tend to be very effective accounts from us, both on a cost of funds as well as an activity participation.
So we’re still focused on that. In terms of how we think about that going into next year, again, a portion of our core customers got some repricing on some of their deposits in the fourth quarter of last year and the first quarter of this year. And they probably went into instruments that were not long in duration, six to 10 to 13 month type CD durations. So those people are going to be back in front of us for repricing. And the question is, what is their demand today? We assume it’s a little higher than what we put them in at the end of last year. But I wouldn’t think it’s so much higher that that’s going to be something that we couldn’t offset with earning asset yields continuing to productively move forward. Not at the point where we’re declaring victory on that for the fourth quarter or even maybe the first quarter of next year; but, expectation wise, you can see that coming.
Chris O’Connell: Okay, great. And then, do you guys have the dollar amount of what the remaining cost saves are on the SAL deal?
Scott Kingsley: Chris, probably not specifically to a dollar number. Remember, we now have history with Salisbury as of September 30th of 49 days. And we now have 25 more behind us here in the fourth quarter. I think once we get through a full fourth quarter, we’ll have a real sense of that in terms of dollar outcome. Annette, help me, 30% of the base at Salisbury was $9.5 million or $10 million.
Annette Burns: That’s correct, right around $10 million.
Chris O’Connell: Yeah. Okay, great. And then you do have the resharing purchase plan outstanding. It sounds like growth is solid, but not overly concerning in terms of capital usage. Capital should be building at a fairly good pace going forward given the profitability you have. Is it something that you will be exploring using on a go forward basis?
Scott Kingsley: For sure, Chris. I think as we start to talk about that, we like our positioning today because it allows us back to your point of understanding where our natural credit and — I’m sorry, natural capital accumulation, the positioning we have ourselves in we certainly have to leave ourselves room to grow organically because we’ve been good at that over time. As we pointed out in the Salisbury transaction, having a little bit of excess capital to be able to use for a really high-value acquisition is a great opportunity for us. Similarly, we’ve raised our dividend now 11 straight years. We think the shareholders deserve more on a predictable annual basis. And to your point, having an open authorization for share repurchases is an important feature.
I think it’s more important when you think your organic loan growth opportunities are probably a little bit slower and they make — that may come into play in 2024. We may find that there are periods of ’24 where demand is not as robust as we’re enjoying today. I think those are the periods where a buyback is actually productive. And we’ve always had the authorization out there to make sure that we could address share creep from some of our equity programs. And what’s the hurdle you got to get over with that today? It carries a 5% funding cost to do that. To buy your own shares, if you’re being transparent, you got to assume that you’re going to use 5% money to do that. The government sort of mixes us for a 1% toll tax when we buy that stuff.
But again, manageable and part of the long-term capital allocation strategy of the company for sure.
John Watt: And if I could put a fine point on that, too, we review that at the Board level every year. And just coincidentally, this week, Scott led the Board through that same discussion and we reaffirm that’s the priority of allocation of capital as we go forward. So we’re out of place this week where there is consensus at the top of the house and at the Board, but that’s how we’re going to proceed.
Operator: Thank you. [Operator Instructions] Our next question is going to come from the line of Matthew Breese with Stephens Inc. Your line is open, please go ahead.
Matthew Breese: Hey, good morning everybody; just a couple of model-related questions. First, on fee income, Scott, you had mentioned that seasonally, this was the strongest quarter of the year with Salisbury only being here for a partial quarter. Could you help us out in terms of what you expect to roll off, but then also for the full quarter impact with Sal? Where do you expect seeing kind of shake out in the fourth quarter?
Scott Kingsley: Yes. So it’s a great question, Matt. Thanks for actually that. So historically, we’ve had somewhere around $0.02 per share or maybe $1 million to $1.5 million reduction in core revenues in our fee-based businesses fourth quarter versus third quarter. So if you think about that as a backdrop, we do some activity-based billings in our wealth management business in the third quarter. We have some actuarial fees that are more pronounced in the first and the third quarter of each year. That’s typically been our pattern for that. Your point is well taken. We added about $650,000 and a half a quarter in the wealth management trust side from Salisbury, I think it’s fair to assume that you get a full quarter of that in the fourth quarter and that kind of run rate expectations going forward.
The market sensitivity in retirement plan administration and in wealth is still meaningful for us. But that being said, I think we have a more traditional base of customers in there. So their utilization of both fixed income as well as equity instruments is probably a more traditional based outcome that’s not the 100% equity market influence group. And clearly, there’s yields in the fixed income market today, so you expect some productive use of that. So all in that, I would say, we’re looking at saying in the fourth quarter, revenue is probably still down.It probably isn’t down as much as it would have been, say, from last year’s third quarter to last year’s fourth quarter because of the Salisbury impact, but we still think probably a little bit lower than what we had in the third quarter.
First and second quarter of next year is probably you have the outcome that’s similar to your fourth quarter with an expectation of organic growth, which we’ve achieved in all 3 lines of business in 2023 and expect that to continue opening new accounts, expanding our base and having an additional geography to expand those products too is all a net positive.
