Joe Lebel: Yeah, Mike. I think Chris aptly put it the right way earlier. There’s opportunities now for us. The pricing has been going up quarter-over-quarter as you would expect for a variety of reasons. Not only the Fed increases, but also availability of credit. And I think there’s an opportunity for us to continue that and continue it on a prudent basis, right? I think that it does matter a little bit based on asset class. So, for example, in the resi space our focus has been to build and you’ve seen it the last couple of quarters, we’re starting to build the gain on sale business, so that’s not a balance sheet item. That’s an opportunity for us to originate good assets and then put the assets that we want to put on the balance sheet in C&I and create rates that make the most sense for us.
Christopher Maher: Mike, maybe to be in it. [Multiple Speakers]
Michael Perito: So, as we think about. Sorry. No, go ahead.
Christopher Maher: The loans rolling off have a five — mid-5s handle and the new lending coming in has a mid-7s handle. But before you get too excited, we do have to cover there will be an increase in deposit costs. So we think there’s a possibility for margin expansion. But you can see that there’s two levers there, right? I don’t — do not take the $1 billion and play it forward without increased deposit cost.
Michael Perito: Yeah. No, 100%. I guess, what I’m trying to sort out is just — the last 12 months have been challenging, right? Because the assets aren’t repricing as fast as the liabilities have gone up. But I think part of the challenge too has been that incremental margin on new assets hasn’t been probably as good as it needs to be and I’m just trying to get a better handle of. And it sounds like it’s getting closer. The incremental margin in some cases is maybe 3%, maybe a smidge better. But I’m just trying to get a better handle of what the dynamics are driving that. Because if that incremental margin doesn’t kind of get back to that level, it’s probably going to be very hard for kind of the consolidated margin to pick up off of the kind of 2.80% trough level that you guys are guiding to in the fourth quarter.
Christopher Maher: We’re not going to be interested in putting on net growth that doesn’t carry at least a three handle in margin. So if we’re going to be growing the loan book.
Michael Perito: Yeah.
Christopher Maher: We need to fund it appropriately or get above that because we do think that earning our way back to an over 3% margin is an important strategic objective of ours. I can’t give you a time frame on it, but that’s the way we want the company to operate.
Joe Lebel: Mike, I’ll also say that we’ve been really thoughtful about loan growth in the last two quarters, largely because we wanted to make sure that we positioned our deposits out of the balance sheet the way we wanted. We wanted the kind of deposits that we’re used to having. And in an environment like this, you want to make sure that side of the balance sheet provides you with the stable funding for the loan side of the balance sheet.
Michael Perito: Yeah. That makes sense, Joe. And Chris, just as you think about the loan portfolio, I mean, with — especially with the gain on sale business now on the residential mortgage side, I mean, if you guys think about the bank two, three years from now, any thoughts on what you’re kind of hoping the mix seems you’re about? I think what, like almost 30% in mortgages today, about 53% CRE, maybe a little higher than that if you do the owner occupied as well. But just any updated thoughts there?
Christopher Maher: I think you’re going to continue to see the mix shift in favor of commercial. I think about — when I joined the company, we were inverted, so we were probably 70% resi at that time. We’re going to keep chunking away at that. We still want to provide residential finance in our markets. We think we can do so, but more as a fee business. We don’t mind putting it on the balance sheet in certain cases. If it’s a 15-year self-liquidating and adjustable, a relationship customer, we’ll make the right choices there. But I think you’re going to see residential grow very slowly and commercial kind of pick up growth rates over the course of the next year or so. So you’ll see the mix shift just kind of continue quarter-after-quarter with higher percentages of commercial and lower percentages of consumer and residential.
Michael Perito: Helpful. And then just lastly for me, would love kind of a growth and credit comment on kind of each of your markets. I mean, I think the last time you guys spoke, it sounded like Boston and Baltimore had some decent trends. There were some more concerning stuff going on in Philly and New York. But we would love any updated thoughts you’re willing to provide on kind of growth opportunities in those markets and then just credit outlook near term if there’s kind of any deterioration or anything you’re seeing that has you more cautious on one versus the other?
Christopher Maher: Yeah. I’ll ask — Joe will chime in a minute. I’ll give you kind of the high level. One of the most important things I try and stress with folks is, virtually the entirety of our franchise is located in the Northeast, which is always slower growth, but is always remarkably stable as well when you get into weaker economic periods. So, I mean, who knows whether we have a soft landing or not. But if there is economic weakness, usually the Northeast perform — outperforms and we’ve been careful to keep the franchise here. There’s not a lot of differentiation between markets. Boston has a significant life sciences market that’s kept it more stable even through COVID. New York had some of its early issues with public safety that they seem to have largely resolved.
See some of the office sector there you’re worried about, but we don’t have any significant exposure there any longer. And then, Philadelphia is still dealing with a public safety issue, so we’re a little more cautious there. And New Jersey has been doing remarkably well. I think there’s kind of an afterglow that came after COVID with folks that have decided they could spend more time outside the urban centers and New Jersey is squarely positioned between two giant ones. But Joe, any customer comments you’re hearing or anything that — that you would share about geographies or industries?
Joe Lebel: So I’d summarize Chris’s comments about geographies by saying that we stress test the portfolio. We’re doing it almost every quarter. We’re doing the kind of things you need to do to be proactive. And we’re not seeing any real bumps from anywhere in terms of the geographies and client bases and asset classes. On the other end of the spectrum, clients are basically telling us, while many remain cautiously optimistic, they’re telling us they’re delaying on major opportunities to do things, whether it’s M&A, large equipment purchases, new lines of business, until they see more clarity on a national economic scale. So it’s not something we’re surprised by, it’s not something new we’ve heard it over the last couple of quarters.
