Curtis Myers: Yes. The portfolio has been pretty stable. We’re closely monitoring that portfolio. And you can see from the disclosures that the metrics are pretty consistent. Office continues to have stress. We’re working with making sure we understand borrowers understand the outlook as we move forward. But really not any material changes quarter-to-quarter, but we continue to monitor the macroeconomic environment for office. It is a challenged overall environment.
David Bishop: Got it. And then maybe just one more last question here. In terms of the impact from the SOFR to LIBOR transition, I think you said you’re going to accrete that back into other income over time. Just curious maybe what sort of Mark maybe a good run rate for that other income line on a go-forward basis?
Mark McCollom: Yes. So that’s going to creep back in actually in NII over time, and that will be approximately five years.
David Bishop: Got it. Thanks.
Operator: Please standby for our next question. The next question comes from Manuel Navas with D.A. Davidson. Your line is open.
Manuel Navas: Hi, good morning. Thoughts on that – I just wanted to have some updated thoughts on the NIM direction from here. Also thoughts on the brokered deposits. Like when do you have to kind of seek to replace them? It looks like the CD engine is working quite well. Just kind of some updates on those areas.
Mark McCollom: Yes. We think that we’re going to continue to see our margin drift down. We were pleased that we held constant from 2Q to 3Q. I think last quarter, we had told folks at the time that we – our margin was 3.40 for the quarter and ended the quarter at that same number. In the month of September, our margin was 3.38, so to give you an idea that we will expect to see – and again, with some of those public funds outflows and replacing some of that with some higher cost borrowings in the fourth quarter, I’d see that number drift down a little bit. We expect at this point to see the margin bottom out sometime in the middle of 2024 and then I think back to your question around CDs, yes, we’ve been – we do feel our CD engine is pretty strong.
And the other reason to comment on when margin will bottom out, is that in the middle of 2024 is really where we see our CDs that are rolling off and replacing that, that differential in rate becomes much narrower to today’s market rate as like in the fourth quarter, we still have about $300 million of CDs maturing at about a 2% rate, whereas by the middle of next year, you have $600 million of CDs, but they’re maturing at a 420 rate. So your replacement rate becomes much narrower, which will then help to slow down that margin impression as well.
Manuel Navas: Is the – I appreciate that. Is the expectation is that we kind of drift up on the loan-to-deposit ratio to the higher end of your range over the next couple of quarters?
Curtis Myers: We’re working hard at balanced growth. Quarter-to-quarter, it’s going to ebb and flow within that range, but we don’t see a steady increase to the top end of that range. But quarter-to-quarter, it may move up and down as we have different strategies within each quarter.
Manuel Navas: Okay. You brought up that in the past, you’ve seen a lot of new account openings. Is a lot of the deposit flows ex the public funds coming from your new accounts? Or are you getting from your current account base you’re getting CDs? Can you kind of just talk through that a bit?
Curtis Myers: Yes. So we’re working on both. So we are adding customers and are focused on deposit customers. The customers overall and we are working hard at cross-sell on existing customers to bringing in monies that may be at other institutions, and we’re their primary relationship, but we don’t have all of the relationship, we’re a hyper focused on that share of wallet for current customers to bring in deposits that way and loans.
Manuel Navas: And my last question is on expenses. You’re bringing them down a little bit in the fourth quarter. Can you just talk about some of the corporate initiatives you called out in the release and what kind of drove that line to be a little bit higher? And – is that going to be a little bit elevated into next year? Just some thoughts on that end of the spectrum.
Curtis Myers: Yes. We’re really focused on core operating expenses. We said that expenses will come down in the fourth quarter. We’re confident in that. We are also looking broadly in this environment, how we strategically manage expenses effectively. So we’ll be messaging kind of each quarter, not only results, but what we’re looking at as we move forward, getting that technology, benefit realization and staffing efficiency with smart growth is really how we’re looking at all of those things, but we are very focused on bringing down core operating expenses.
Manuel Navas: Thank you very much.
Operator: Please stand by for our next question. The next question comes from Matthew Breese with Stephens. Your line is now open.
Matthew Breese: Hi, good morning. Just following that line of question, you had mentioned a lower overall NIE to asset ratio. Could you just give us some idea of where you’d like to see that ratio trend next year or over time?
Curtis Myers: Yes. We’re really focused on it. We don’t have a target that we’re public with at this point, but we’re really focused on bringing that down over time. Just with the outlook that we have around maybe a little slower growth, margins more challenged from where we were in the last couple of quarters, really focused on bringing that true expense level down. And we’re going to be able to incrementally move that over time.
Matthew Breese: Okay. So maybe to put a broader point on it, the goal is to bring the absolute level of expenses down from where they are currently versus a lot of expense initiatives where are really utilized to temper growth from the current level. Is that how we should be thinking about it?
Curtis Myers: Well, we’re focused on both. So we do want to look at just core expense levels, but it is a combination of smart growth as well. So it depends on our growth opportunities and opportunities in the marketplace on how we’ll be looking at the balance of those two things in – as we move forward. So we have items like our corporate real estate expense, we will bring that expense down. Other areas we need to look at revenue opportunity relative to expense opportunities. So we’re doing both things.
