And then where that results in having a relationship that is not good for the bank long-term or good overall then we’ve allowed the natural attrition to occur. You saw that reflected in the quarter.
Chris O’Connell: Okay. Got it. And then, as far as the credit trends in the quarter ago just any detail you could provide? I mean, there is a number of large upgrades it seems like on criticized and classified loans that were fairly substantial and a couple of payoffs. And then in particular the multifamily $1.2 million net charge-off in 3Q was that getting sold at par should we expect a reversal of that in 4Q?
Jason Darby: So I’ll take the multifamily charge-off part of that first, Chris. I think that was one credit that we had kept our eye on for quite some time. And the resolution of that credit and not having it move into an REO position, all things equal, was a good outcome for the bank. Really at the end of the day that there was an improvement related to that $1.2 million in our non-accrual assets but that really just got traded out into a charge-off metric. So, I don’t view that as an overall favorable improvement for our nonperforming assets. But to your question of could we see more of those types of things? There’s probably one credit where we’re keeping a very close eye on where you — and that’s already in our non-accrual numbers where we could see a similar instance.
I don’t think the numbers would be at the $1.2 million range. It’s something less than that. But there is probably one more credit that we’re just keeping our eye on right now that could follow a similar path albeit I don’t have a good estimate as to when the timing will be on that. And so, aside from those two loans that we’re speaking about on the credit quality side though, we’ve been able to see some substantial improvement that occurred during the quarter. I’ve talked a couple of times about substandard loans not substandard — excuse me, special mention loans that we were waiting for some updated financial information and some other factors that would be triggers for improvement to the quality rating. I think we were very prudent in waiting for those.
Perhaps some of those could have been upgraded sooner and you would have seen a smoother trail on that criticized asset trend line. But at the same time, we’re not really the type of bank that’s going to just upgrade something because we think it’s going to be in a past great situation. So once we got empirical information on the metrics, we made the decision to do the upgrades. But these to us are not substantial surprises we felt for quite a while that these would be upgradable and hopefully we’re able to reasonably communicate that in past quarters.
Chris O’Connell: Yes, absolutely. And then I know you guys are moving towards on PACE for your capital targets and still was able to eke out some repurchases along the way this quarter. Do you think that is something that you can continue to do in Q4 while moving towards those targets?
Jason Darby: I reasonably do, yes. I think everything that we put into our capital projection targets assumes a constant dividend. It assumes a fair level of capital allocation for buyback. And it also assumes a reasonable loss on undervalued assets like securities. And I’m sure you saw we took another $1.8 or so million in securities losses this quarter. So the plan really kind of allows for some capital flexibility. We could probably accelerate the capital build if we pulled back on some of those other shareholder-related metrics. But I’m not sure that that’s really something we want to do. It’s always an arrow in the quiver, but we feel like the earnings stream that we’ve developed really gets us an ability to quickly accumulate capital.
I think this quarter we slowed a little bit on the capital build because we carried a little bit of a larger balance sheet than we wanted, but I do expect that to return to the levels of previous quarters mainly because with the deposit gathering we had, we brought in a little bit of excess cash and our borrowings or CD — broker CD maturities were really scheduled to start releasing this month and the next month. So, we’ll be able to reduce that balance sheet size by about $150 million over the course of the quarter just because of the brokered CDs that are going to be maturing and hopefully that will continue on our continue aiding our capital building PACE.
Chris O’Connell: Great. Sorry, did I hear you at $100 million for the full balance sheet next quarter down?
Jason Darby: It will be $150 million for the brokered CD maturities for the full quarter and we have about $100 million that will be maturing before the end of this month October.
Chris O’Connell: Got it. And then just thinking about like the balance sheet as we move beyond Q4 and into 2024, how are you thinking about the amount of PACE growth as we get beyond this quarter in loan growth and just the overall kind of net balance sheet growth as we get into next year, given there’s still a fairly short duration securities portfolio? And obviously, you have some — still some ability to bring down brokered CDs or borrowings?
Jason Darby: Yes. So, not really prepared yet, Chris, to talk much beyond the second quarter of next year. We’ve targeted the second quarter as sort of the potential end to a flat balance sheet structure. Now within that, we will continue to add PACE assets. Do you think we were a little bit higher than we expected this quarter and that’s fine because they were great volume opportunities for us? But I like the idea of somewhere between $35 million and $40 million a quarter in net PACE growth between now and the middle of the second quarter. We’ve got the capacity coming through from our provider and we think it makes a lot of sense for us to be able to add assets in that space. Between the securities portfolio runoff and cash flow from that, we think that the ability for us to generate loans that 2% to 3% sequential quarter loan growth is still very viable.
I do think we’re going to keep moving our loans to secure — I’m sorry our securities to loans ratio in an inverse direction we’re about 50-50 right now. And I would expect that to be somewhere around 40% security 60% loans by the time we get to the end of the second quarter next year. And then in terms of like absolute balance sheet growth and where we might go from there if you don’t mind I’ll reserve on that until we give you our full year projections when we do our Q4 earnings release. They do think will be if we do things the way we expect we’ll be in a spot where we’ll be able to grow the balance sheet by some amount.
Chris O’Connell: Great. That’s helpful. And do you have how much of the loan portfolio is set to mature over like the next 12 months or so?
Jason Darby: I do. And these are somewhat move around numbers just because of the prepayments and other types of events that might occur. But I would guess you’re going to be somewhere in the range of over the next 12 months on the commercial portfolio $350 million to $370 million. And I think it’s going to split somewhere around two-thirds for commercial real estate including multifamily and about a third of that in C&I. And maybe to answer a follow-on question I think the yield on that particular in the real estate portfolio is going to be a nice opportunity for us to replace a blended yield on the real estate portfolio loan is about just a little over 4%, maybe 4.5% somewhere in that range. So, you’ll see quite a bit of the older assets set to mature and whether we reprice on those or we choose to allow those to refinance elsewhere. We think we have plenty of pipeline to be able to keep our repricing PACE going and not have any balance sheet erosion.
