Scott Wylie: We said that we thought we would target mid-single-digit growth on the loan side while we worked our floating deposit ratio back down to where it’s historically been in the 90s. And so, I think that’s kind of exactly the way it’s played out. We saw deposit growth in Q3 outpaced loan growth by a couple of percentage points annualized. And I think if that trend continues, which I would expect it to, Again, , months and months, quarter-to-quarter, , there’s going to be some bumpiness, but hopefully we can get that taken care of here the next quarter or two. And then, , I think there’s adequate loan demand in our markets for the kind of loans and the borrowers that we like to work with to continue to see mid-single digits for now.
I think we can grow deposits to get that loan deposit ratio down. And I think we can do all that while we’re managing, and improve NIM the way I talked about. And I think that’s fine for now. For where we are in the cycle, I don’t know that we need to be doing, , our normal kind of 15% or 20% organic growth rate, that seems to be, , not really what we want to do now. So that’s how we’re thinking about it, Brad.
Brett Rabatin: Okay. And does the concentrations on C&D or commercial real estate, does that play into anything related to how you think about growth going forward? And I know you’re — I think you’re state FDIC, so maybe you don’t have the FED/OCC pressure to be below the 100%, 300%?
Scott Wylie: Yeah, we just had an FDIC exam here. We have an excellent regulatory relationship. And I think for us, our construction loan portfolio numbers are a little higher than where we’ve traditionally had them, where we’d like to see them, part of that is just stuff funding up and not paying off quite as quickly as we had planned. And so we have gone up above 100%. We’re not doing new construction loans right now. And to the extent we see any increase in that portfolio, it’s just the pace of drawdowns versus the pace of payoffs. But we’re going to work that back down under 100% anyway. I think that’s prudent for us and the way we’d like to see the portfolio mix.
Brett Rabatin: Okay. And then just lastly from me, Scott, a lot of banks in this environment are looking at ‘24 versus ‘23 and just the environment and obviously a challenge to go earnings for the industry. And so a lot of banks are thinking about what they might do operationally or strategically over the next quarter or two to try and improve their earning power. And so, I was just curious if you were thinking about anything related to either mortgage banking a possible securities portfolio restructuring or anything else that might be a boost to your profitability?
Scott Wylie: I think the best thing we can do is, stick to our knitting here. I talked a little bit before about the operating leverage in our business. If we control expenses, which we’ve done, I think, a nice job of this year, we were thinking we were going to spend about $21 million a quarter, and we’ve been well under that this year. If we hold that number flat for 2024, and we can have the NIM story that I just talked about play out. We also talked, I think in the last two calls, I know for sure in the last call, about the fact that we were working on a project to raise our fees 10%. And I think Julie or David, I’m not sure which, mentioned in their comments that we had completed the first phase of that and Q2 went into effect on July 1st.
And I was pretty happy to see, you do these things, you’re like, well, I hope it shows up in the numbers. Yeah and sure enough, yeah we thought it was going to be $960,000 from phase 1, which seems like a little bit too, , fine of an estimate to believe and then, I think we did grow fees $240,000 in Q3. So, kind of a bull’s eye there. So hopefully we’ll continue to get these other phases done. We’re certainly working on it. I think that’ll be the largest phase, but we’re looking for an overall 10% increase in our trust fees just from the higher service that we’re providing and the additional value we’re providing to clients. And I think we’re still very competitive at these higher rates. So, I think as all that stuff plays out, we should see opportunity for revenue growth in 2024, stable expenses, and therefore, improved earnings in the bottom line.
Brett Rabatin: Okay. Appreciate all the color.
Operator: One moment for our next question. Our next question comes from Adam Butler with Piper Sandler. Your line is open.
Adam Butler: Hey, good morning everybody. This is Adam on for Matthew Clark.
Scott Wylie: Hi Adam. Good morning.
Adam Butler: Just first touching on a couple questions on the margin. Do you happen to have the average margin in September and the spot rate on deposits in September, either interest-bearing or total?
Scott Wylie: I have it, but I’m going to let David take his first earnings call question. As CFO, David, do you want to answer that question?
David Weber: Yeah, I would love to. Yeah, Adam, the spot rate on deposits was 3.12% on September 30th, and the NIM for September was 2.45%. And that’s inclusive of the negative impacts of the non-accrual loans.
Adam Butler: Okay, got it. Thanks. And just moving over to deposits, they were up nicely in the third quarter, and it looks like they were driven mainly by savings and money markets, and along with the $26 million in new relationships added. I was wondering if you could provide some commentary on how you were able to attract new deposits and your outlook going forward and where you see the loan deposit trending with your outlook for mid-single-digit loan growth?
Scott Wylie: Yeah, good question, Adam and you’re reminding me part of Brett’s five-part question I forgot to answer about pipelines. Pipelines at the end of Q3 for loans were down about 50% from a little over $200 million to a little over $100 million the way we look at it, which is 90-day probability weighted. And then deposits pipeline were actually up quarter-over-quarter. So we’re actually seeing, I would say positive trends in both ways, right. I mean, I think that if we want to grow deposits faster than loans, that’s the setup we’d want to see. So that’s a positive. In terms of your question more specifically, how do we do it? We have a very, I call it, geocentric-based distribution model, where we focus on client relationships in our markets that are served by teams of relationship bankers that are providing local boutique private bank and trust services to that base of clients.
