Manuel Navas: And there’s some seasonality here, right? Is there a seasonality towards the end of the year with those two businesses?
Charles Sulerzyski: Seasonality, not — yes, there’s a little bit of seasonality, but not that much that it makes that much of a difference.
Manuel Navas: And I’m just making sure I confirm that, 19% yields and 9%, right?
Charles Sulerzyski: Yes. More or less.
Operator: Our next question will come from Daniel Cardenas with Janney.
Daniel Cardenas: I may have missed this, I joined a little bit late here. But on your leasing income for the third quarter, I noticed a significant drop. Can you give us a little bit of color as to what drove that and what’s the potential for a bounce back in leasing income in the fourth quarter?
Kathryn Bailey: Sure Dan. That relates to the purchase accounting related to the Vantage transaction that we did last year. They have residual values on their books and when we went through purchase accounting, we had to mark those as we have to mark the whole balance sheet to fair value. And so we had to put on a premium related to that portfolio. And as those come to term, we have to realize that premium against any gain that would otherwise be recorded. So that is what you see about $1.8 million — $1.7 million, $1.8 million premium amortization in the third quarter. In prior quarters, it has not been that significant, but it is choppy on a quarterly basis, just given when those leases kind of come to term.
Daniel Cardenas: And then on the credit quality front, good to see some improvement in the nonperformers, but did notice that your 90 days past due were up a bit there. Can you give us some color as to where that was coming from categorically?
Charles Sulerzyski: Yes, the majority of that is coming from this small ticket leasing business.
Daniel Cardenas: And then how are trends, how are watchlist trends looking for that business?
Charles Sulerzyski: Look, the trends in delinquencies are increasing. The charge-off rate, we do expect it to increase. As I mentioned earlier, we’ve had multiple years with like 1.5% or less charge-off rates. Obviously, at a 19% yield, you’re not going to get over a cycle 1% to 1.5% charge-off rates, and we’re very comfortable. We frankly price that stuff to a 4.5% charge-off rate. We do not see ourselves getting near that 4.5% charge-off rate. But if it creeps up to the 2s and the 3s, we’re perfectly comfortable with that.
Daniel Cardenas: And then on the lending front — thank you for the guidance for 2024. Are there any areas that you’re maybe tapping the brakes a little bit on in terms of growing those portfolios? And then how should we be thinking about your provision on a go forward basis?
Charles Sulerzyski: How should we be thinking about our provision? We’ve never been a lover of hotels. We are acquisitive and we pick up hotels and we try to run — tighten up that space a little bit. That being said, if somebody has built hotel that’s cash flowing and good sponsors, we will certainly look at it, but it’s not our favorite place to land. But for the most part we’re open for business. We think we’re benefiting from that. We’re seeing some competitors having to pull back because of liquidity issues. At the 86% loan to deposit, we have room. So, we’re hoping to see the benefits of that over 2024.
Kathryn Bailey: Yes. And as it relates to provision, I think, it’s safe to assume that we’ll follow what the forecast does. So that to the extent the forecast worsens, we will likely be building reserves. And otherwise, we’ll just be reserving on the growth that the rates are kind of at, that you see on as it relates to the coverage ratio.
Daniel Cardenas: And then last question, I guess with competitors pulling back somewhat, is that being reflected in current yields?
Charles Sulerzyski: I think it’ll be more reflected in future yields than current yields. I don’t think we’ve got a ton of books — a ton of business on our books in the first three quarters from competitors pulling back. We tend to see more and more of that more recently. And I expect that, that will continue.
Operator: At this time, there are no further questions. Sir, do you have any closing remarks?
End of Q&A:
Charles Sulerzyski: Yes. I want to thank everybody for joining our call this morning. Please remember that our earnings release and the webcast of this call will be archived at peoplesbancorp.com under the Investor Relationship section. Thank you for your time and have a great day.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
