We continue to successfully execute against the strategy, Matt, of moving upmarket and serving stronger and larger clients with the strategy similar to what we have across the commercial franchises that we want to be relevant to those clients through a wide range of products and services, have done so originally through the capture of more of the treasury wallet as well as the deposit wallet. So that ratio generally for us has been 100% to 120% self-funding in a seasonally and certainly cyclically slower fourth quarter. We think that ratio could go up to about 150% from that, which has some near-term negative impact on NII and margin. We’ve got a material set of new capabilities that are coming online with those clients and over time, we think are going to drive a higher and less volatile return on capital, but there’s certainly going to be near-term pressure as we continue that build.
Matt Olney: Okay. That’s great, Matt. Thanks for the color around that. And then just as a follow-up on the positive operating leverage in the near term, I appreciate the updated guidance around the challenges of achieving, kind of, your goals in the fourth quarter. Can you speak just more broadly about operating leverage in 2024, what are the just the puts and takes around the challenge of achieving the operating leverage in ’24 versus ’23? Thanks.
Matt Scurlock: Yeah, Matt, the update to the guidance certainly incorporate seasonality associated with that mortgage business in the fourth and the first quarter. I’d say the other item that was included in our comments that’s important to call out is that we continue to be quite aggressive on capital recycling, which has obviously been a core part of our playbook since Rob got here. So between the noted loan sale at par, which was a set of consumer-facing C&I credits that were loan-only, about $160 million reduction in balances and then exceeding expectations on our ability to reduce capital committed to relationships, where we don’t see a path to being relevant. And we pulled down about $300 million of C&I loan balances this quarter and then parked it in cash, in preparation for the ability to be able to redeploy at much higher risk-adjusted returns moving into 2024.
So we’re obviously extraordinarily committed to delivering on the 2025 targets. We see all sorts of leverage to get there, which again would include continued maintenance of non-interest expense, delivering on the fee income target and then a lot of opportunity to reposition within the asset base. So I won’t — I certainly appreciate the question. We’re not going to give the detailed guidance on ’24 yet, but that’s how I would think about — that’s how we are thinking about balance sheet positioning as we get closer to achieving those ’25 targets.
Matt Olney: Okay, that’s helpful, guys. Thank you.
Matt Scurlock: You bet.
Operator: [Operator Instructions] Our next question comes from Zachary Westerlind of UBS. Please go ahead.
Zachary Westerlind: Good morning. It’s Zach on for Brody. Just had a couple of quick ones. On the consumer-dependent commercial loans that got moved to criticized and classified, are those oriented towards sub-prime consumers or just any color you could provide on what’s driving the move into criticized, classified for those?
Matt Scurlock: Yeah, they’re not oriented towards subprime consumer, Zach. So — and we called out, I guess, [the current call] (ph) last year, so a year ago, that we expected to see some downgrades across certainly C&I, but CRE as well as we move into the middle part of this year. Those have materialized largely as expected. There’s nothing that’s unique enough about these consumer-dependent C&I credits to go into a whole lot of detail around them. There’s some franchise finance that sits in there, but there’s nothing that we’d call out as sort of systemic across the portfolio and it needs additional color beyond what we’ve provided. I would note just generally on credit, we’re quite pleased with the progression this quarter.
