Michael Hagedorn: I think you have it generally right, Mike. I mean, I think, end of the third quarter, our cash position was normalized. I think Tom referenced the growth that we anticipate in the fourth quarter, and then kind of picking up maybe somewhat in 2024, but I don’t think there’s any type of significant other changes that you would see on the balance sheet.
Michael Perito : Very good. Thank you guys. I appreciate it.
Thomas Iadanza : Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from Jon Arfstrom with RBC Capital Markets. Please go ahead.
Jon Arfstrom : Hey, thanks. Good morning, everyone.
Thomas Iadanza : Hi, Jon.
Jon Arfstrom : Maybe a question for you, Mike. On slide 11, you show the fee income numbers in capital markets being down, and you tied it to loan growth. What kind of expectations should we have for capital markets? And then also curious if there’s any kind of expense offset, how much bottom line impact there is to lower capital markets fees.
Thomas Iadanza : Yes, hey John, it’s Tom. Yes, the capital markets for us has really been driven by gain on sale in the consumer revenue space, as well as swaps in the commercial space. We expect that to be flat going forward. We don’t expect any lift there. We have other avenues here. We have a tax advisory business. We get this slight uptick in the fourth quarter to get things closed by year-end. We continue to build out our FX of trades, which shows progress quarter to quarter, but we’re expecting flat into next year.
Jon Arfstrom : Okay. Okay, good. Credit looks great, but some of the accruing past dues are up sequentially. Anything to note there, anything that you’re thinking about there that we should be aware of?
Thomas Iadanza : No, no. I’m looking at it, really, it’s coming out of the consumer and resi buckets. On the consumer side, it’s primarily our cash surrender value life insurance business. It’s a matter of liquidating and collecting on there. So that’s not going to be problematic from any potential loss standpoint. On the resi side, I just want to point out, our 2Q levels were abnormally low. We are still below where we were a year ago at this point. We’re about 99 million, in the third quarter of 2022. We’re 79 million in the third quarter of 2023. So we’re really gravitating to more normal levels. So no, we don’t anticipate any problems.
Jon Arfstrom : Okay, good. And then, Mike, you referenced Slide 4, that upper right chart with the deposit cost increases. And what do you think that looks like in a quarter or two? I mean, you referenced the 49 and 49 for the last two quarters, but is that curve bending at all from the 49?
Michael Hagedorn : If it’s bending, it’s ever so slight. I think you’ll see the real bend and flexion point happen early next year, but you still see some migration. It’s slowed considerably, but you still see some migration from non-interest bearing into interest bearing. From an incremental next dollar cost of deposit funding and more broadly, even liability funding, that is definitely stabilized in that mid-5-ish range.
Jon Arfstrom : Okay, all right. Thank you very much.
Operator: Thank you. One moment for our next question. Our next question comes from Manan Gosalia with Morgan Stanley. Please go ahead.
Manan Gosalia : Hey, good morning.
Thomas Iadanza : Good morning.
Manan Gosalia : You spoke about getting high yields on new originations and that fixed rate loan repricing will be one of the main drivers of NIM expansion from here. Can you give us some more color on what level of loans are repricing, what level loans are repricing at currently, and if you could size the amount of fixed rate loans that are coming due over the next year or so.
Thomas Iadanza : Yes, it’s Tom here. Give you some context. We repriced about $1.8 billion of loans for the first nine months of this year. The spread, it really depends on asset class, but the spreads are in the mid-350, around the 350 or so range. We expect that to continue. Looking forward, there’s probably another $600 million of reprices over the next six months. We expect those spreads to be the same. There’s also a lot of renewing loans, loans that will mature. So it tends to be in that $1 billion or so range over the next six months in total.
Michael Hagedorn : Yes, I think that number is a little bit overstated, right? So we have a little bit understated, excuse me. So we have a $20 billion fixed rate portfolio. Average life has extended to about five years. So if you do the math, I mean, just assuming all else equal, you’ll get about $4 billion a year of fixed rate loans that come due and would ultimately reprice higher.
Mark Saeger : And I think the one other thing, if you look at, I forget what slide it is, maybe the slide seven, you can look at the credit spreads, right? So if you go back to just three quarter of 2022 and you look at where the new origination deal was versus where the index was, you’re sitting around a 200 basis point spread. If you do the same math just today, you’re sitting at about 270 basis point spread. So new originations are coming on definitely at a higher spread. And as Travis and Tom both alluded to, the repricing is probably going to come on at 300 to 400 basis points above where current rates are today on those. So there’s a significant pickup when you think about the $4 billion plus or minus of what’s going to be next year.
Michael Hagedorn : This is Mike. I’ll just add to what Ira said. So the simple average of new loan originations in the second quarter was 7.38% and for the third quarter it was 7.89% and the last month, September, that quarter finished just over 8%. So clearly we’re seeing repricing on new loan originations both from the spread increases that both Ira and Tom mentioned and then also just because of the discipline that we have around here to make sure that we’re getting paid for the risk we’re taking.
Thomas Iadanza : Can I just add one thought? I mean I think this is an important piece right when we think about sort of our overall portfolio and how we’ve managed the balance sheet. You know obviously based on sort of the sensitivity that we have, there was a decline in the NIM maybe earlier than what some of our peers were. But we do have a significant amount of tailwind coming from the assets that are going to be priced. So once we get into a more stable environment, whether it is higher for longer or just stable from where we are today, there is that tailwind that’s going to come from a significant amount of assets. And I think that would, that will be a significant positive for us.
