I think we’ll continue to hear it. But on a positive front, I’ll give you an example, we’ve seen a couple of our largest C&I clients pay lines off to zero and have multimillions in the bank. I think they’re much better positioned today than they were in prior crisis easily over 2008-’09. So that’s a real positive.
Michael Perito: Great. Well, thank you, guys. I appreciate all the color on my questions. Thanks.
Christopher Maher: Thanks, Mike.
Joe Lebel: Thanks, Mike.
Operator: Our next question today comes from David Bishop of Hovde Group. Your line is open.
David Bishop: Yeah. Good morning, gentlemen.
Christopher Maher: Good morning, Dave.
David Bishop: Chris or Joe or Pat, a question for everyone. I know the slide deck mentioned in terms of some of the deposit growth, it looks like about $328 million from a stock high-yield savings account. Just curious maybe what the — what the duration looks like that and what that might be indexed to? It sounds like that could come back in if rates starts up to decline next year.
Christopher Maher: Yeah. So what we decided to do is as we built those deposit flows, we wanted to make sure that we didn’t over-concentrate a duration issue in the deposit base should conditions change over time. And we’re not predicting rates do anything up or down or whatever, we don’t — we try and stay out of that game. But we felt that it was better to have a slug of deposits that we had the ability to reduce the rates when we felt it was appropriate at some point in the future. So what we didn’t want to do is put on fixed-term funding. So all of those, there’s no index to it. It’s a rate that we maintain and we have the ability to change that rate over time if we think appropriate.
David Bishop: Got it. And then, in terms of, I appreciate the continued guidance in terms of the downdraft and expenses that are expected in the fourth quarter. Just curious where you see this coming out of? How should we expect that to look? Is it coming out of salaries and benefits, occupancy, data processing, or other, just curious what are sort of the main segments where you’ll see expenses reduce?
Christopher Maher: It’s coming out of all the above. So we had a couple of significant contracts we’re able to renegotiate, hat was a big win. We’ve been able to fundamentally fix processes. And I don’t want to, the expense part of this has been terrific. There’s a real customer experience improvement as well. We were added — were able to significantly reduce the amount of time it takes to open an account. We’re able to pull some processes out of the branches that could have been distracting to building new relationships and either modernize them, automate them, or do away with them. So it was kind of a comprehensive look of — at everything within the company. So there are equal parts in — there are compensation impacts, there are IT impacts, there are vendor impacts.
So it’s a pretty full spectrum process and it’s taken us about a year to get through to the bottom of all these. And even as Pat said, we have some things we know we’ll be able to accomplish, but it’ll take another quarter or two. So I think if you think quarter-over-quarter where we see the decrease coming, about 50% of that decrease would be in compensation-related lines and 50% would be in professional fees.
David Bishop: Got it. And then one last question in terms of the capital deployment, capital outlook. Appetite for buybacks at this point? Thanks.
Christopher Maher: Look, we have a strong capacity to buy back, but we have been favoring building capital and kind of watching the markets. I just want to make this point, that’s not a comment about how we feel about us, it’s about us watching the world. So external factors are holding us back as we watch what’s going on in the markets and make sure we feel we’ve got a full understanding. So that’s kind of what the issue is about why we’re not buying back today. We have the capacity to do so. And certainly, we think it could be a financially attractive thing to do. We just want to make sure we understand the environment best.
David Bishop: Got it. Appreciate the color.
Christopher Maher: Thanks, Dave.
Patrick Barrett: Thanks, Dave.
Operator: The next question today comes from Matthew Breese of Stephens, Inc. Please go ahead.
Matthew Breese: Hey. Good morning, everybody.
Christopher Maher: Good morning, Matt.
Matthew Breese: I wanted to go back to the office loan charge-offs. And good morning, everybody. Going back to the office loan charge off, was there anything idiosyncratic about that loan and charge-off or was it — what we would expect at a New York office? Lower occupancy — lower asking rents per square foot. It just strikes me as a pretty dramatic change in valuation there, and I appreciate a little bit more color.
Christopher Maher: I think, yeah, there’s a couple factors there, Matt. First, I think it is exactly what you would expect from urban office in a place like New York. And as referenced, it was a block and a half off Times Square. So pretty vibrant area of New York City. Three things happened here. The first thing that happened is we had some vacancy, but not — I want to be cautious about that. I mean, the building is more than half tenanted and its cash flowing, so — but the vacancy comes down. The second thing you do is this was a B office and I want to go back to when the loan was made in 2019, B office would have been perceived as actually more stable because it had lower rents and pretty much divided kind of occupancies.
So you have vacancy, you have a reduction in the asking price for any space you can rent. You have the cost of vacancy, which is kind of re-tenanting. And then the last one is probably the biggest impact, which is, you could express it as a cap rate, or you could just think of it as kind of catching a falling knife, trying to figure out who is going to value New York City office of that nature right now. So that sponsor had been supporting this credit for the last couple of years. Actually made a principal paydown a little more than a year ago. They liked the asset. They just kind of got to that point where they had to make a different decision. And I think, as we’ve covered before, there’s nothing else in our portfolio that looks like this.
