Philip Mantua: Yes, I would agree, I mean that’s kind of things that Dan’s suggesting and maybe some other things that we could consider kind of what was alluded to in part of the planning process comment early into the call was we’re evaluating all the different things that we might have at our disposal. But I think when it’s all said and done, the puts and takes, I think that’s kind of where we think we’re going to end up.
Catherine Mealor: Okay, understood. And Dan on credit, you talked about just a couple of specific reserves coming on some commercial loans. Can you just give us some commentary on kind of what you’re seeing on those credits that are seeing incremental stress and then any change to classifieds or criticized loans that we should be aware about this quarter as well?
Daniel Schrider: Yes, trends and criticized classified still are nonevents, Catherine, I think the — I hate to refer to anything happening in credit as one off because it just comes back to bite you in the butt. But what we are seeing thus far are give you a little color real estate loan, that owner gets notified that a tenant is not going to renew, but that’s still a year out and we’re recognizing that if they don’t, then there could be cash flow issues and as a result, taking a conservative approach to setting aside some reserves. That’s an example. We’re not seeing anything thematically. If you think about our book, we’ve talked a lot about office, which for us is predominantly suburban with minimal exposure in the urban areas and most importantly, mostly professional office space with number of units that are a little easier to turn as opposed to large floor plate type of exposure.
So, I think the risk we’re trying to understand and manage in that is probably more around rates higher for longer as that book reprices over the course of time than what we’re seeing from an occupancy standpoint in near term. Our hospitality portfolio I think, weathered very well during the pandemic, and that continues to perform. Our retail portfolio, which is the largest exposure within CRE, also performed extremely well during the pandemic when it was under some pressure when everybody was locked up at home. So, we’re continuing to look out 12 months, 24 months. It’s what’s coming on the repricing side and getting ahead of that and then doing the same with we have a multifamily portfolio that with some coming out of construction into perm and monitoring those absorption rates compared to what was expected, and some of those are getting extended out.
But we’ve got credible borrowers and guarantors that can stand behind that. So, I think it’s realistic that over the course of time, if we end up in more of a credit cycle, there’s going to be scratches and dents as we drive through that. But we’re not seeing anything thematically that gives us concern about our reserve levels, our percentage of nonperformance coverage and the like. So the teams — I think team is doing a good job, but we’ll continue to be transparent with you if we see things changing as we have been in the past.
Catherine Mealor: Great. And then maybe if I could ask one last one. Just on deposit remix, it was nice to see the non-interest bearing mix shift flow a little bit from the levels we’ve seen earlier in the year. What’s your — I know it’s hard to know, but what’s your gut on where that kind of percentage as a percentage of deposits balances out?
Philip Mantua: Yes, Casey, this is Phil again. I think — I’m sorry, Catherine, my bad. I think we feel like that the DDA piece has stabilized now to a good place. I’m not sure we anticipate a lot of growth necessarily there in the short-term, but I also think we’re pretty confident we’re not going to see much more of to your question, the remix of the DDA declining from its current levels around 27%, 28% of total deposits. If anything, the remix kind of behind the scene is as we continue to allow the brokered wholesale money to run down and run off the balance sheet, which is already occurring through the current quarter where we’ve already had an additional $100 million roll off, and there’s another $150 million scheduled to mature that we don’t plan to reengage on because we are still seeing really good growth in those other interest bearing categories.
So that’s probably more where we see the remix than anything related to DDA. But again, we feel good about where it’s landed and that it’s fairly stable.
Catherine Mealor: Great. All right, that’s all I got and congrats on your retirement, Phil.
Philip Mantua: Thank you.
Daniel Schrider: Thank you, Catherine.
Operator: Our next question comes from Manuel Navas of D.A Davidson. Manuel, please go ahead.
Manuel Navas: Hey, guys. In your NIM outlook for kind of the turn into next year, does that assume any difference in the rate of growth on the loan side?
Philip Mantua: No, not really. Manuel, this is Phil. No, I think that’s implied at this point as well is the – in general guidance as it relates to just matching off with funding at the moment.
Manuel Navas: Okay.
Philip Mantua: Correct.
Manuel Navas: Should we just kind of assume a beta that kind of matches that guide? Do you have kind of a rough deposit beta peak with that NIM assumption?
Philip Mantua: Yes, I would say that in terms of looking at the forward aspect of the deposit side, I mean it’s clearly, as it has been here, a much slower pull in terms of the overall movement in the cost of interest bearing deposits. So I would think it’s again similar to four or five bps quarter-to-quarter within that on the funding side as well. Just, again because of some of the remix that I mentioned earlier and our desire to try to control it at this point, given my earlier comments about pullback on the rates.
Manuel Navas: No, that was great. That’s going to lead into kind of my next question. So you pulled back on rates, and it sounds like you’re easily feeling good about running off some of the broker deposits. You pulled back on rates and you’re still seeing success on the promotions is what I’m trying to get to.
Philip Mantua: Yes. I mean, that’s still got to play itself out. That’s just kind of current practice here within the last couple of weeks. So we’ve got to see that we can prove that out. But that is the current thinking behind the way we’re looking at it for the foreseeable future. Yes.
