Ebrahim Poonawala: Got it. That’s helpful. And Maybe, Dale, sorry if I missed it, just in terms of your outlook, given the mortgage rates are 8%, how are you thinking about what origination gain on sale fees could look like in the absence of any rate release?
Dale Gibbons: Yes. Thanks. I’ll take that one. As we look forward, Q3 to Q4, mortgage servicing income should be sustained quarter-to-quarter, maybe even a slight growth as our MSR balances grow. In Q4, you generally have a seasonal fall with — that happens. I think it may be a little more acute at the higher rates that we see here presently.
Ebrahim Poonawala: Go it. Thank you.
Operator: Thank you. Our next question comes from Matthew Clark of Piper Sandler. Matthew, your line is open. Please go ahead.
Matthew Clark: Thank you. Just a few questions around credit or maybe one or two here. Just the reduction in special mention nonaccruals, can you speak to how these credits were resolved? Did most of them mature? Or did you push them out of the bank? Just trying to get a sense for the workout process.
Timothy Bruckner: Sure. Tim Bruckner again. So I’m going to take the nonaccrual nonperforming first. About half of the improvement in that area is pay out or pay down, okay? The other half of the upgrade to performing categories. With regard to special mention, we base our credit culture on early elevation. And so we use that category very much as a transitional category. So as we signaled on the prior calls, we completed a deep portfolio review, we move assets into that category, and then we press for speedy resolution. So with respect to the movements in and out, those are dictated then by our strategy, which generally involves required remargin in this environment.
Matthew Clark: Okay. And then the other one for me around expenses. Can you speak to the investments you may still need to make to become or be considered $100-plus billion bank assuming you get treated like one beforehand by the regulators?
Kenneth Vecchione: Yes. I think the second part of that question is right on, which is most banks in our size category will start to be treated like a $100 billion bank well before you get there, and you’ve got to build that framework in advance. And that framework is — begins to look and feel a little more sophisticated around capital stress testing, around liquidity stress testing, and the framework that kind of evolves around that. As we get bigger, we’ll have to make more investments into reporting that the larger banks over $100 billion will have to do. But we believe that starting it early and kind of building it into the run rate because then there’s going to be costs that you’re going to have to have to continue with the — not only the development but the reporting and the management and the monitoring. We’re trying to build it in now and kind of build out towards that.
Matthew Clark: Okay. Thanks, Ken.
Operator: Our next question comes from Gary Tenner of D.A. Davidson. Gary, your line is open. Please go ahead.
Gary Tenner: Thanks. Good morning. A couple of questions. In terms of the ECR deposits, can you give us the average for that in the quarter versus the 17.1 quarter end?
Dale Gibbons: We’ll get back to you on that one.
Gary Tenner: Okay. Thank you. And then in terms of your kind of 2024 expenses and kind of marginal growth, is that inclusive of the FDIC special assessment kicks in the first quarter? Or should we think about it as sitting on top core growth?
Dale Gibbons: Especially with that, we’re considering the special assessment, which it hasn’t been defined yet in terms of exactly how it’s going to come out. I mean I think that it could be revised. Yes, we’re — that excludes that. We think that’s just really kind of below the line, and I think that’s how the Street will treat it.
Gary Tenner: Okay. And then last question. In terms of — Ken, when you’re kind of rolling through the fourth quarter outlook, and you mentioned net charge-offs. If I heard you correctly, you kind of also suggested net charge-offs through the economic cycle in the 5 basis point to 15 basis point range beyond just the fourth quarter. Did I hear that correctly?
Kenneth Vecchione: Yes. That’s correct.
Gary Tenner: All right. Thank you.
Operator: Our next question comes from Andrew Terrell of Stephens. Andrew, your line is open. Please proceed.
Andrew Terrell: Thanks. Good morning. Just one quick one for me. I wanted to ask on Page 11 of the presentation, the earnings at risk disclosure that you provide. In the down 100 scenario, the up 2.2% for earnings there, can you talk about just your comfortability with that level? Is that where you would like the company to holistically be at? Or any changes you’d like to make to that position? And then can you also talk about what the underlying mortgage assumptions are in the down 100 scenario from a gain on sale margin and volume perspective?
Dale Gibbons: So they’re not dramatically different. We do think margins would increase. I mean, look at kind of what happened during — going into the pandemic where margins basically tripled during that period of time. We’re comfortable with this in terms of kind of a decline and that we’re a little bit better off, a little tighter on net interest income, but stronger in terms of expenses related to those ECR as well as AmeriHome revenue. A 100 basis point decline is not enough to jet up a meaningful refinance business. But we do think it would help on the purchase side in terms of what we’d be seeing on volume. And if we went down 200 basis points, we really think that that’s going to open a window for a fair amount of refinancing that’s been done over, let’s say, the past year as well as have something close enough that you’ll get more refinance activity on a cash out basis with somebody moving from 4% to a 6% rather than all the way up to something in the mid- to higher 7s.
