Will Jones: Okay. That’s great. And then last one for me, this is maybe more technical, I think I might have been answering the slides but with the multifamily loan sale, within that $30 million charge you guys took, I am assuming that was mostly, if not all rate related. Was there a credit related piece to the — they made a charge-off with the loan sale or could you just kind of give us the break, there.
Jerry Plush: Yes. No, well, they were all performing, they were all high quality, there’s low loan to values on those, no issues on those properties.
Will Jones: Yeah. Okay. Any other larger chunkier pieces of the portfolio that you may look to do a similar strategy with or was it was just really just kind one-time opportunistic…
Jerry Plush: Yeah, this is definitely a onetime opportunistic evaluating. Again, I think we’ve we kind of hammer around this a lot — hammer this home that we want to be a relationship-based organization and while there’s others that may not take that same approach as us, that’s one of the biggest drivers of why we identified that portfolio in particular as one that made sense for us to exit and to basically replace it with knowing the sponsors and having a much broader relationship with those sponsors.
Will Jones: Okay. Great. Well, thanks. Thanks for the color.
Jerry Plush: Sure.
Sharymar Calderon: Thank you.
Operator: Thank you. Our next questions come from the line of Stephen Scouten with Piper Sandler. Please proceed with your questions.
Stephen Scouten: Hey, good morning everyone. Just firstly, I was curious if you had an update on the consumer balances. I don’t think I saw that in the slide deck anymore, the indirect consumer, just kind of curious where that falls and what the pace of run off you think it’s for here?
Jerry Plush: Yes, around the indirect consumer all right. Just to clarify, you’re talking about [indiscernible]
Stephen Scouten: Yeah. I think it was in slide previously maybe $250 million or something.
Jerry Plush: Yeah. It’s about $220 million. And I think as Sherry commented, the expectation is based on current payment rates. It will be off the books over the next, I guess the best way to say it is by the end of ’25, maybe a little bit residual in the first quarter of ’26.
Stephen Scouten: Okay. And I know there was kind of a question around that book with charge-offs in a sense, but obviously charge-offs have been elevated kind of the last couple of years, what do you think a normalized level of net charge-offs is for you guys in this kind of environment with the book you have today after kind of clearing the decks a bit from here?
Sharymar Calderon: Yeah, if we remove these charge-offs from the indirect consumer and we look at a more normalized charge-off level, we’re seeing a close of 30 basis points.
Stephen Scouten: Okay. 30 bps ex indirect consumer and then that’ll just kind of be piecemeal over that two years as that book runs off.
Sharymar Calderon: Right.
Jerry Plush: Yeah. Look, I think what’s happening Stephen in that portfolio is you remember these are debt consolidation loans. It’s a pretty granular portfolio. It’s not concentrated in any one state, but I do think it reflects the consumer debt load and the pressure that’s on the consumer. And so we’re seeing that. I think the one portfolio because of the different vintages is actually starting to show signs of the charge-off levels improving, I guess I should say declining. So we’re hopeful that we’ll continue to see that.
Stephen Scouten: Yeah. Okay. And then just kind of last question around the NIM. So it sounds like — so we’re not taking a 3.72%. I guess if we take the 3.72% minus the loan recoveries kind of starting from 3.56% and then kind of flattish from there, and then even with, if you could just repeat what you have in there from a Fed cut perspective, but how do we think about the ability to expand NIM with the asset sensitivity there? I would have expected in a down 100 basis points. I think you showed down 3.1%. So kind of wondering how that plays out in a down rate environment that we think we might be moving forward.
Sharymar Calderon: Right. So going back to the first part of the question. When we think about the NIM for the first quarter of 2024, we are expecting to see a slight reduction on average balance sheet size because we’re going to use a portion of the proceeds to pay off institutional funds. That should pick up once we continue with the loan pipeline materializing, right, so that’s what’s going to make us go from the lower to the higher end of the range of the guidance we provided through the end of the second quarter. As we think about the NIM more prospectively and how we’re managing the rates or protecting the balance sheet from a downward trend, we can — there are couple of things we were thinking about. The first one is from the investment portfolio, the purchases we have made and that we’re looking forward from an expectation around fixed-rate securities but also looking at the quality of those securities and characteristics that slowed down the level of prepayments in a typical prepayment speed environment that we would have on a downward trend.
The second piece is on the loan side, and I think I mentioned something of this in my comment. It’s the floor that we are using for variable-rate loan production and also looking into fixed-rate loan production as well. That together with the reset of our liability side, I’ve seen an increase in interest bearing products versus CDs, are positioning our balance sheet in a better spot for a downward trend.
Stephen Scouten: Okay. That’s extremely helpful. And just last thing I guess is the core spread you’re seeing today. What are you seeing kind of on new loan production versus where new deposits are coming on, I guess, as we think about this maybe 15% loan and deposit growth next year kind of what that core spread looks like?
Sharymar Calderon: I think the spread is pretty similar to what we’re seeing in the fourth quarter production. I think we got to a point where the deposit side already maxed the rate level and the loan production is already at the high level as well. So I think we’re going to think about projections for the first half, I would see a pretty stable level versus the fourth quarter 2023.
