Kevin Blair: Kevin, I think we said simplification of our business model, and really it’s a money management firm that we’ve owned for some time and so it didn’t really compete. It actually served as an investment vehicle for our financial advisors to place money. They largely do ETF funds, and as you know, in that sort of business, we’ll continue to use them and partner with them as we look to move our clients’ assets under management into the best products for optimizing their returns, but it’s a high efficiency business and we believe that we can take the operating expense from that and put it back into either the front end of the wealth originations, so the financial advisors or the private wealth advisors, or we can put it into other businesses and earn more from an efficiency standpoint. It’s really about taking operating expenses and re-deploying those into businesses that have higher returns.
Kevin Fitzsimmons: Great, makes perfect sense. Thank you. Thanks Kevin, thanks Jamie.
Operator: We have the next question from Timur Braziler of Wells Fargo.
Timur Braziler: Hi, good morning. I wanted to circle back to your commentary about NII and NIM and an easing Fed cycle. Appreciate the color on a lagging deposit base. I’m just wondering, given the fixed rate re-pricing schedule versus variable rate loans that would go down a little bit more quickly, is than an offsetting element or could we actually see some NIM compression over the first couple of quarters following a Fed easing?
Jamie Gregory: In that scenario, it depends on the timing. I would have to think through, but if you think about the immediacy of loan re-pricing, we have a little more than 60% of our loans are floating rate that would re-price immediately, and then the deposits would lag, so–you know, about 20% of our deposits would also re-price immediately. I mean, you could think of them as index-based, even if they’re not all directly index-based. It would likely lead to a decline in the margin for those periods, for those early Fed ease time periods. Now that being said, this fixed rate re-pricing, this chart doesn’t just–it wouldn’t just end in the fourth quarter of ’24, like we displayed here. That continues for multiple years because you think about those exposures, especially when you look at residential mortgages, you look at the securities portfolio, we continue to benefit incrementally way beyond this–this time period, so this benefit will be–will overcome the headwinds of that lag headwind when the Fed does start to ease.
That will be a temporary issue, so we have a long term benefit from fixed rate re-pricing, and at some point if you do assume the Fed’s next move is an ease, there will be a headwind for a couple quarters.
Timur Braziler: Okay, that makes sense. Then just looking at the timing of some of the loan sales and the other PP&R activities over the last couple of quarters, maybe just talk through the cadence on NII over the next quarter or two. Does that cadence follow margin, or is there something within the timing of recent sales that maybe we see NII performance a little bit better than what the expected margin performance would be, at least in the next quarter?
Jamie Gregory: It will trend along with the margin, so you’ll see a decline in the fourth quarter and then flat in the first quarter, and then you’ll see NII growing with the combination of loan growth, as well as margin expansion as you go through ’24.
Timur Braziler: Great, thanks for the color.
Operator: We now have Brody Preston of UBS.
Brody Preston: Hey, good morning everyone.
Kevin Blair: Morning Brody.
Brody Preston: Jamie, I think I’ve got it, but I just wanted to put a finer point on the guidance with the revenues. The guide kind of implies that we step down a bit more than I would have expected in the fourth quarter, just with the NIM commentary and some of the fees. Is there something that I’m missing, because I think it implies about a $25 million step down in operating revenues.
Jamie Gregory: Brody, I think that what you’re looking at there is really in fee revenue, and so we have fee revenue of $106 million in the third quarter and that included $2.5 million of Globalt revenue, so when you adjust for that, our fee revenue in the third quarter was around 103 to 104. Looking forward to the fourth quarter, there will be an incremental headwind in NIR from–on the retail side because of deposit fees, but we expect to overcome that headwind and we expect to be flat to slightly up from the 103 to 104 in the fourth quarter. Then on NII, as we mentioned, we expect the margin to decline in a similar amount as what you saw in the third quarter, but then you also have the impact, the full quarter impact of the sale of the medical office portfolio.
Brody Preston: Got it, okay. Just to clarify on the revenue component, Jamie, I think if I was reading the slide correctly, that the expectation around the beta is more of like a spot in December kind of expectation for the beta, and not the average for the quarter, correct?
Jamie Gregory: That’s correct. It’s the month of December.
Brody Preston: Okay, cool. Could I follow up on what Bob said in this next, real quick? Bob, did you happen to have what percent of that SNIC portfolio you guys are the lead underwriter on?
Bob Derrick: Yes Brody, on the SNIC portfolio, it’s about $500 million, so of that $4.3 billion, we’re the agent on about $500 million.
Brody Preston: Okay, thank you for that, and then I did just have a couple last quick ones. Bob, do you happen to have the ACL on the office portfolio?
Bob Derrick: We don’t–I’ll let Jamie follow up with you, Brody, but from an allowance perspective, we don’t disclose by asset class. Just generally speaking, our CRE allowance in the 1.5% range in general, but then within that, obviously the asset classes are broken down. But our office portfolio today, criticized and classified is less than 10%, NPLs are 1.5, so in the context of the size of that portfolio, it’s relatively stable. Now, we obviously see–we have a watch list there, we’ve been working that. We’ve talked about that before. But right now, the performance is relatively stable and the allocation just follows the CRE allocation.
