$50 million of that became callable last June and the Tier 2 treatment of that started to fade out. Another 20% will pay out this coming June. And so if capital ratios continue — capital levels continue to build, we may be in a position to call that. And that would affect Tier 2 capital would affect PCE.
Michael Perito: Got it. And sorry, Jim, do you mind just run through that again? So, you have $50 million that’s callable already. The other $50 million is callable when?
Jim Reske: Yes, it will be another four years from this day.
Michael Perito: Okay. All right. but that — sorry, go ahead.
Jim Reske: Yes. No, when we issued it, we issued $100 million, $250 million tranches. One was a 10-year — was five-year now called 10-year maturity the other was 10-year now called 15-year maturities. So, we’ll be living with the other $50 million, I think it’s another four years from this June. It will first be callable.
Michael Perito: And the rate on the first $50 million tranches I could look it out, but if you haven’t had the–
Jim Reske: It’s floating, yes, it’s about 7.1% right now. So, if we funded it, we save some money because we would just borrow even at overnight rates of 5.36% right now, we borrow and pay it off. It takes some money, but you lose, of course, Tier 2 treatment, you want to make sure your total capital ratios are building to the pot where you could absorb that. And it would affect total risk base by about 40 basis points to call that $50 million.
Michael Perito: Perfect. Thank you guys, I appreciate the color as always.
Jim Reske: Thank you.
Operator: Thanks for your questions. Our next question comes from the line of Manuel Navas with D.A. Davidson. Your line is live.
Manuel Navas: Hey. Another way to ask about the margin. What kind of are you — what’s the marginal NIM of added assets right now? You said you have, I think, 7.50% new loans was kind of current funding and the NIM that’s added on those new assets?
Jim Reske: Yes. The incremental rate on the new originations is about 7.80%. The incremental cost of funds is right around 5%. I borrow the money overnight, it’s 5.36%. But if we gather the money through our money market specials are 4% and our CD specials are split between 5.25% for seven months and 4.85% for the 11 months. So, the all-in rate of new fund acquisition is probably in the high 4s. That gives you high force funds originations in the high 7s, that gives you a 3% spread coming in roughly.
Manuel Navas: Okay. And what kind of — can you just kind of review your deposit channels and where you’re seeing the most success? And which ones you’re going to accentuate over the course of the year?
Jim Reske: Yes, the deposit channels are all retail. We do not see broker deposits. We just really don’t believe it gives us any credit. And quite frankly, economically, it hasn’t been any cheaper than wholesale borrowings, so really have not tried to do any of that. The deposit retail, we find that our customers have responded to specialists that we offer in the market like everybody else, the specialist are all in money markets and CDs, not in other categories like savings are now. And one stat we’d like to say, which is buried in one of our disclosures is that for every dollar that we bring in, in these specials, about $0.60 is new money. And of that $0.50, it’s new, about half is new money from our own customers and the other half is new money from new customers. So, I think that’s pretty well. But Jane, I don’t know if you want to give any other color on the deposit channels and the origination channels to add to what I was saying.
Jane Grebenc: Manuel, thanks for the question. We are investing in digital channels. We’re opening digital accounts, but we still like branch-generated deposits. They’re stickier and they’re generally lower cost. And we do a good job in that channel. We still like it.
Mike Price: We also somewhat unusually have branch managers calling on small business customers, calling on public entities and we think that’s very effective.
Manuel Navas: I appreciate that. You highlighted at one point investing in the Central PA region. You had some hires there. Can you just talk about the opportunity there? And that’s kind of the build-out of the Centric acquisition?
Mike Price: Jane, do you want to start?
Jane Grebenc: Sure. We love Central Pennsylvania. It feels a lot like our footprint in Southwest Pennsylvania and in our community markets, Manuel. We’ve had some good luck hiring some folks from some of the largest banks who by necessity need to run a very concentrated line of business model and we’re a little bit more regionally focused. And so we’ve been able to hire some good commercial lenders, good treasury management, good portfolio management folks and we’re bullish on that. We love Harrisburg. We love Lancaster and that’s our kind of geography.
Manuel Navas: That’s great color. My last question is that a region of focus for you in terms of potential M&A? Can you talk about that in general as well?
Mike Price: Yes, I mean, as you know, we’ve been very picky on M&A. We’ve done six things and looked at 60. And you also — when we did this acquisition, we were off flush with cash, right, summer of 2022. And so now we might be looking at more of a depository with a loan-to-deposit ratio of that would add to our liquidity. So, our vantage point in our box might even be a little tighter, but there’s opportunities out there. But we were — our batting average is about one in 10, and that’s more of self-choice. So, — but we like doing M&A. We feel like we can integrate banks, and we get excited about the geography, particularly if it’s strategic. It adds to our geography, it’s contiguous. We really see it as accretive longer term. But you know us, we’re pretty conservative and we just don’t do a deal every year to do a deal.
