Matt Olney: Thanks, good morning everybody. On that last point, Harold, on the broker deposits coming up for renewal next year. Any color on the cost of those deposits as compared to your more recent incremental cost of core deposits that you could potentially replace that with?
Harold Carpenter : Yes. I think those deposits were acquired right around the first quarter right around Silicon Valley and Signature. I think they were probably in the, call it, the mid-4s, somewhere in that.
Matt Olney: And how does that compare to the incremental deposit cost for the bank?
Harold Carpenter : Well, right now, new accounts are coming in at around 3.5 in a weighted average rate. So, there ought to be some pickup there just based on that.
Matt Olney: Okay. And then you mentioned earlier about the pressure on the noninterest-bearing deposits has slowed quite a bit. Any other data points you can provide about what you saw maybe later in the quarter or the first few weeks of this quarter. And then as you talk to customers, what are your expectations for that balance from here?
Harold Carpenter : Yes. We think there’s going to be some drift downward. But largely by about the, call it, the middle of July, the end of July, we started seeing stabilization in those numbers every day. So, we’ve been hanging in there now for a while. And so hopefully, that will continue through the end of the year. We typically get a buildup in balances in the fourth quarter. So, we’re keeping our fingers crossed on all that, Matt. So, we may be planning for some decreases, but hopefully, we’re more flattish going into the fourth quarter.
Matt Olney: Okay. That’s helpful. And then just lastly, just to clean up on the BHG commentary. I think you mentioned some adjustments that were made. Mark have a building and some software I think you said the impact was around $10 million. Did I get that right? And how much has been accrued for so far through the third quarter? And how much could we see in the fourth quarter?
Harold Carpenter : Yes. I think they’re done with respect to those two issues. They exited there, call it, their [indiscernible], which is their merchant financing business. They decided to get out of it. I think that was about a $4 million charge and they wrote down a building for about $6 million. So that was an accrual where they’re putting that building on the market and hope to sell it here over the next couple of quarters. But for those two situations, they’re done, they feel like they’ve got adequate reserves in place for those.
Matt Olney: And with respect to BHG’s repositioning examples like that, any more — are there any more items where there could be additional impairments or events like what we just saw?
Harold Carpenter : Yes. I think BHG has taken a much more diligent review of all of our product set. I would imagine that going into 2024, they’ll be keenly focused on our core lending products, the securitization network, and those two products because they spent quite a bit of effort with some ancillary businesses that I think they’re looking at whether or not they want to continue to invest in.
Operator: The next question is coming from Catherine Mealor from KBW. Catherine your line is live.
Catherine Mealor : One follow-up on BHG. I guess maybe just a big picture question on BHG. How are you thinking preliminarily about earnings growth in BHG into ’24? It feels like we’ve got — so there are a lot of moving pieces, but it feels like we’ve got potentially credit costs improving once we get through the losses in this E&S tranche from the ’21 vintages, but then you’ve got the impact of CECL providing at 9% and maybe a little bit of a softer gain on sale margin. So, is this a scenario we could still see stable earnings into next year? Or potentially could there be downside?
Harold Carpenter : Yes. I think we’ll be looking at probably — and I’m not trying to be cute here or more boring. BHG going into 2024. And I think part of that is because they’re going to be focused on their core businesses and less on some of these ancillary businesses that they’ve been investing in over time, but you’re right, there’s a lot of puts and takes here. But I think their plan is to generate some growth next year into 2024 in spite of whatever headwinds they might have regarding CECL or where the rate curve is, what have you.
Catherine Mealor : And is the difference in the gain on sale margin between the placements to banks versus the places to institutional investors. Is that difference large enough to make a big difference in the revenue outlook?
Harold Carpenter : I think they will plan on a stronger allocation to the bank network next year. Now keep in mind, those spreads are all point in time spreads. So those transactions are occurring every day, and that’s the spread they flag. The bank — the on-balance sheet spreads are a culmination of three years of buildup. So, there’s historical spreads built into that, which were higher two years and three years ago than they are today. So, there’s a weighted average kind of process on those spreads. But I do think, as far as to your question on new production, they’re likely to allocate more to the bank network where they get the gain on sale.
Catherine Mealor : Great. Okay. So, your comment about that being less. That was more of just a fourth quarter comment versus the strategy into ’24.
Harold Carpenter : Yes, I think so. I think what they want to do is try to build some inventories going into 2024. and then be in a position to kind of make sure 2024 comes out where they want it to come out.
Catherine Mealor : Okay. Great. And then circling back to the conversation of NII growth. It seems like you still have a fairly positive outlook for just balance sheet growth this year. And typically, you’re able to hit EPS growth targets because you grow revenue so fast. And so, as we think about this next year with revenue growth, still better than your peers, but probably moderating just given the rate environment we’re in. Can you help us think about just the optionality you have with actually generating positive operating leverage, growing expenses at a slower pace than your revenue growth as a way to hit EPS targets? Is that something that you feel like you would be able to do in the scenario where revenue growth comes in lower than expected?
