Good day, and thank you for standing by. Welcome to the Q3 2022 Midland States Bancorp Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Tony Rossi of Financial Profiles. Please go ahead.

Thank you, Michelle. Good morning, everyone, and thank you for joining us today for the Midland States Bancorp third quarter 2022 earnings call. Joining us from Midland’s management team are Jeff Ludwig, President and Chief Executive Officer; and Eric Lemke, Chief Financial Officer. We will be using a slide presentation as part of our discussion this morning. If you have not done so already, please visit the webcasts and presentations page of Midland’s Investor Relations website to download a copy of the presentation. Before we begin, I’d like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Midland States Bancorp that involve risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company’s SEC filings, which are available on the company’s website. The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I’d like to turn the call over to Jeff. Jeff?

Thanks, Tony. Good morning, everyone, and welcome to the Midland States earnings call. I’m going to start on Slide 3 with the highlights of the third quarter. We continue to execute well and capitalize on the loan demand that we continue to see in our markets, resulting in further improvement in our financial performance. We generated net income of $23.5 million, or $1.04 per share, up from $0.97 in the prior quarter. While our pre-tax, pre-provision earnings increased to $36.4 million. Most importantly, we generated profitable growth, which is positively impacting our level of returns, as our return on assets and return on average tangible common equity both increased from the prior quarter. Although, we expected to see a lower level of loan growth in the third quarter as higher rates impacted loan demand, the productivity of the commercial banking teams we have built enabled us to still generate exceptionally strong loan growth, with total loans increasing at an annualized rate of 28%. With the highly productive commercial banking teams and diverse lending platform we have built, we’re seeing strong contributions to our loan growth across asset classes, industries, property types, and geographic markets. Particularly due to the disruption in Illinois resulting from merger activity, we are seeing excellent opportunities to add new relationships with strong borrowers, who we believe will present us with additional opportunities in the future to expand these relationships as they grow their businesses or make additional investments. We operate with a long-term approach. And we aren’t going to pass up the opportunity to add high-quality relationships, even if we have to utilize higher-cost sources of funds to fund the initial loans we are making, as we did to some extent during the third quarter. We believe it’s in the company’s best long-term interest and the best long-term interests of our shareholders to add these new relationships, even if it has an unfavorable impact on our net interest margin in the short term. During the third quarter, we had growth in all of our portfolios, with the largest increases coming in our commercial and commercial real estate portfolios. Our equipment finance business continues to be a significant driver of our commercial loan growth, and this portfolio surpassed $1 billion in total outstandings during the third quarter. This represents a significant milestone and reflects the success we have had in growing this business. At the beginning of 2018, we made a significant investment to expand the business development team and re-brand this group to what is now known as Midland Equipment Finance. At the time, the portfolio was a little more than $200 million. And then ensuing 4-plus years, we’ve grown the outstanding balances by approximately $800 million, and the business has become a consistent source of loans and leases that provide attractive risk-adjusted yields. Outside of the strong loan growth, we continue to see positive trends in many of our key metrics that are also contributing to our improved financial performance. We’re seeing a significant increase in average loan yields, and our business development efforts continue to focus on new and expanded deposit relationships, although this is having an impact on our cost of funds. We’ve made a conscious effort to increase our deposit rates for certain customers in certain account types in order to increase market share and continue to provide funding for our strong loan growth opportunities. We’re also seeing positive trends in asset quality, with our nonperforming assets declining by 14% from the end of the prior quarter. During the first half of the year, we indicated that we would be exploring options to strengthen our capital ratios and make decisions that are in the best long-term interest of shareholders. Given the strong loan growth, we continue to see in the third quarter, we made the decision to raise $115 million through a preferred stock offering. This has enabled us to continue capitalizing on the business development momentum we have built with our commercial banking teams to continue adding new clients, expanding existing relationships, and driving the balance sheet growth that we believe will lead to further improvement in earnings and returns over the long term and create additional value for our shareholders. At this point, I’m going to turn the call over to Eric to provide some additional details around our third quarter performance. Eric?

Thanks, Jeff, and again, good morning, everyone. Starting on Slide 4, we’ll take a look at our loan portfolio. Our total loans increased $403 million from the end of the prior quarter. We had increases in all of our portfolios with the strongest growth coming in commercial loans, which increased at a 36% annualized rate; and commercial real estate loans, which increased at an annualized rate of 22%. As Jeff mentioned, equipment finance contributed to the growth in the commercial loan portfolio during the quarter. But the largest contributor was conventional commercial loans generated within our community banking markets, which led to our other commercial loan portfolio increasing at an annualized rate of 44% in the third quarter. The consumer portfolio increased by approximately $71 million, which is largely attributable to loans that we are now originating through our fintech partnerships, including GreenSky with an increase of $33 million and LendingPoint with an increase of $25 million. We increased our GreenSky portfolio slightly during the third quarter, which led to the consumer portfolio increasing a bit more than we expected. But going forward, we are reducing new originations in the GreenSky portfolio in the fourth quarter and are expecting the portfolio to run off approximately $50 million over the next 3 months. Now turning to Slide 5, we’ll look at our deposits. Total deposits increased $211 million from the prior quarter. We had an increase in noninterest-bearing deposits, and all of our interest-bearing deposits. As Jeff mentioned, we are continuing to focus on deposit gathering and we’ve seen strong growth and balances over the past 2 quarters. Our commercial banking and treasury management teams continue to do a good job of developing new commercial deposit relationships which is driving improvement in our overall deposit mix. At the end of the third quarter, noninterest-bearing deposits accounted for 31.7% of our total deposits, up from 29.9% at the same point last year. Now looking at Slide 6, we’ll walk through the trends in our net interest income and margin. Our net interest income increased 4.4% from the prior quarter, primarily due to higher average loan balances. Our net interest margin decreased 2 basis points from the prior quarter. As the increase in our cost of deposits exceeded the increase we saw in earning asset yields. The increase in cost of deposits is largely due to servicing deposits, insured cash sweep accounts, and certain interest-bearing checking and money market accounts that are pegged to the fed funds rate or a similar benchmark. We’ve also increased rates with certain specials and promotions in order to attract new customers and increase our overall deposit balances. Those rate increases have resulted in an overall increase to our cost of deposits, but also had the desired effect of increasing our balances. We’ve been able to generate our strong loan growth without compromising on our underwriting criteria or loan pricing. And, as a result, we continue to see positive trends in our average rate on new originations. In the month of September, the average rate on our new and renewed loans was 5.53%, which was an increase of 74 basis points from the month of June. In particular, we are seeing higher rates on commercial loans, including equipment financing. We also used a portion of the capital we raised in the preferred stock offering to redeem $40 million of subordinated debt that has an interest rate of 6.25%. With the redemption, we have eliminated a higher-cost source of funds. Turning to Slide 7, we’ll look at the trends in our wealth management business. Our assets under administration decreased by $153 million from the end of the prior quarter, primarily due to market performance; despite the decrease in assets under administration, we were able to keep our wealth management revenue relatively consistent with the prior quarter. Now on Slide 8, we’ll look at noninterest income. We had $15.8 million in noninterest income in the third quarter, an increase of 8.3% from the prior quarter. Most fee-generating areas were relatively consistent with the prior quarter, and the increase was attributable to the impairment on commercial mortgage servicing rights that negatively impacted noninterest income in the second quarter. We are currently in the process of selling the commercial mortgage servicing rights portfolio, which will eliminate a source of earnings volatility, as well as provide a small benefit to our capital ratios. The commercial MSR portfolio also includes approximately $200 million in low-cost servicing deposits. These deposits will either reprice at market rates or could be moved to another institution as part of the sale of a portfolio. We’re expecting to complete the sale later this quarter, although it could push into the first quarter of 2023. Turning now to Slide 9, we’ll review our noninterest expense. Our noninterest expense was up from the prior quarter, primarily due to 3 factors: first, we had higher salaries and benefits expense primarily due to increased incentive compensation and commissions; second, we had a general increase in expenses due to greater loan and deposit activity; and third, we had the full quarter's impact of the branch acquisition that was completed in June. For the near-term, we now expect our operating expense to be in the range of $42.5 million to $43.5 million per quarter. Turning to Slide 10. We’ll look at our asset quality trends. Our nonperforming loans decreased $10 million from the end of the prior quarter, which was due to a combination of payoffs, a note sale, and a charge-off of a previously reserved relationship. The decline in nonperforming loans is reflective of the positive trends we’re seeing in the broader portfolio with continued upgrades of watch-list loans. Within the consumer portfolio, the delinquency rate remains exceptionally low. And as a reminder, should any deterioration begin to occur, we have approximately $41 million in an escrow account that is available to cover any losses on the GreenSky portfolio. We had $3.2 million in net charge-offs in the quarter, or 21 basis points of average loans. The charge-offs this quarter were largely driven by 2 credits. We charged off approximately $1 million on a note that we sold during the quarter. And we charged off $1.1 million on a nonperforming loan that we had previously established a specific reserve for. We recorded a provision for credit losses on loans of $7 million during the quarter, which was largely related to the growth in total loans and the impact of negative economic forecasts. On Slide 11, we show the components of the change in our allowance for credit losses from the end of the prior quarter. Our allowance for credit losses increased by approximately $3.7 million. The increase was driven by the growth in total loans, changes in the mix of the portfolio, and changes in forecasts from weakening economic conditions. And then on Slide 12, we show our ACL broken out by portfolio. While our overall coverage ratio remained unchanged, we had adjustments in the coverage ratio of most of the portfolios to reflect the same economic variables and forecasts. And with that, I’ll turn the call back over to Jeff. Jeff?

All right. Thanks, Eric. We’ll wrap up on Slide 13 with some comments on our outlook. With the stronger capital ratios we now have, we are better positioned to support continued balance sheet growth. One area that we are continuing to invest in is the equipment finance business. Our equipment finance team continues to generate strong production, with $147 million in new loans and leases in the third quarter. Our equipment finance pipeline continues to be strong, and we are expecting continued growth in the fourth quarter and beyond, although not at the same level as in years past, but the continued growth of this business will increase our production of loans and leases that provide attractive risk-adjusted yields. Entering the fourth quarter, our overall pipeline remains strong, but smaller than what it was earlier in the year. And we’ve started to see some loans fall out of the pipeline as borrowers reconsider planned investments in light of the higher interest rates and uncertain economic outlook. As a result, while we still expect to see loan growth in the fourth quarter, that will likely moderate from the levels we have generated earlier in the year. But with continued loan growth combined with a higher net interest margin and improved efficiencies that we are now generating, we believe we are well-positioned to continue delivering strong financial performance for our shareholders, even as it appears that the near-term operating environment will become more challenging. We also continue to make good progress on our Banking-as-a-Service initiative that we believe will become an important contributor to enhance franchise value over the next several years. We recently added a Director of Banking-as-a-Service with experience managing similar initiatives that to other banks. The Director will be responsible for evaluating and securing new fintech partnerships and managing those relationships as they are added to our banking platform. We’re building a good foundation for this initiative and expect it to start making a positive impact on our deposit gathering and fee income generation during 2023 and steadily grow in the years to come. As we head into the final months of 2022, we believe we have never been better positioned to create value for our shareholders, both in terms of improved financial performance we are generating and the continued progress we’re making on longer-term initiatives like Banking-as-a-Service that we believe will improve our ability to generate profitable growth and further enhance franchise value in the future. With that, we’ll be happy to answer any questions you might have. Operator, please open the call.

Operator Instructions. Our first question comes from Terry McEvoy with Stephens. Your line is now open.

Good morning, guys.

Good morning.

Maybe first question, Eric, I was just trying to follow your comments on the servicing sale and what that could mean to deposits? What’s the message on the $200 million of deposit? Is it – are you still uncertain about whether that stays with your company?

Well, right now with that mortgage servicing rights portfolio, we’re actively shopping it to a variety of buyers. I think, if we could do it the way we’d like to do it, we’d like to retain those deposits. However, there’s a chance that whoever buys that portfolio could move those deposits to another institution. So, if we retain the deposits, they’re likely going to flip to some market rates, or we could lose them as they go to another institution and we’re actively preparing for that possibility. Does that help?

Yeah. Okay. Thank you for that. And then, I just want to understand the message on the margin. On the outlook slide, it sounds like you see some improvement. But earlier, Jeff kind of said if the loan growth from some new hires, et cetera, occurs and you need to fund that with higher costing funds over the near-term that could impact the margin? Am I kind of understanding how you’re thinking about the puts and takes over the near-term?

Yeah, I think that’s right. The loan growth that we’ve seen – and the deposit gathering we’ve done in the last couple of quarters has come in at probably a slightly lower spread than our current margin. And that’s sort of offsetting the sensitivity that was in the current balance sheet. So depending on sort of how that moves forward, margin could be up a little, it could be flat, it could be down a little as sort of how we’re thinking of it right now.

Maybe one last question, I noticed a couple of weeks ago the woman that will run fast for you, and I think you added somebody to run wealth management recently. So, I guess, my question on the expenses, will you continue to find ways to absorb investments like those two individuals unlike the real estate side? Or do you think how the cost cutting side is complete? And new hires and new initiatives would translate into an increase in the expense growth rate?

Yeah, I mean, I think, the way I think of it is – the 3% increased expenses is sort of how I think about it now, expenses might go up 5%. But we need to, we’re looking for the 2% cost save to offset some of that cost increase. But we’re still working very diligently on our expense line.

Great. Thank you, both.

Yeah, thanks, Terry.

Thank you.

Please stand by for our next question. Our next question comes from Nathan Race with Piper Sandler. Your line is now open.

Hi, guys. Good morning. I appreciate you taking the questions. I hope everyone’s doing great.

Yeah. Thanks.

So going back to Terry’s question around the margin outlook going forward. Just curious with some of the deposit relationships that you’re adding. Are you finding that just the rate sensitivity with these clients is pretty similar to the legacy deposit base at Midland? Or I’m just trying to kind of get a sense of how you guys are kind of thinking about the deposit beta expectations over the next few quarters?

Yeah, I mean, as we’re looking to win sort of larger commercial clients that rate needs to be closer to where the markets at. Over the last 6 months, we’ve been running on the retail side, both CD and money market specials for sort of new money coming in, but also working with existing clients. Although, as rates have increased 300 basis points in a very short period of time, thinking that we’re going to sit here and not pay our depositors and keep deposits is unrealistic. I just heard a story this morning of one of our directors called his bank and said, hey, when you guys start paying me, I got tens of millions of dollars with you. And when you guys start giving me some rate, and if you don’t, you’re not getting the next loan either. So, I think what we’re trying to balance is giving our clients interest on their deposits and doing it slowly over time is sort of the idea, but the lag that maybe what we thought going into this, where you’re going to lag 3 or 6 months on rates, that’s not realistic anymore with rates going up as fast as they are, so trying to balance our cost of funds with maintaining our deposit base, as well as growing the deposit base. And, at the beginning, from first quarter through now, I think our beta is in the high teens, which I think is not bad. Although, we do think that can continue to accelerate as we move forward, as we get another 75 basis points next month, and get some more in December. We’re going to have to start giving clients more interest on their deposits, or they’re going to take them somewhere else.

Understood. Make sense. And I appreciate the commentary around kind of margin outlook for 4Q being flat or maybe up slightly or down slightly. But maybe as we get into early part of next year and assuming the fed remains on its current path, is it fair to assume that we’re not at kind of a peak margin as we can maybe expect some additional expansion in the early parts of next year, or even into the second quarter as well.

I think, we’re also beginning to move our sensitivity more to neutral, because I think as we get to next year rates are going to be going the other way. And so we’re beginning to manage the balance sheet more to a neutral spot. I think, we could potentially see a little bit of margin increase, but we could be getting towards our peak anyway. As we think more long-term around margin, I mean, a 360-plus margin for us. We had a 1.22% million ROA with $7 million in provisioning this quarter. So as provisioning starts to hopefully go away now, who knows what happened next year. But as provisioning and loan growth slows down, provisioning slows down. We’ll be able to continue to grow sort of bottom line and continue to improve ROA, and frankly then ROEs. With our ROE this quarter was 20%.

Right. Yeah. No, definitely impressive. Within the context of moving to a more neutral position, from a rate sensitivity perspective, that a function of just some additional flow in the fixed swaps, I believe you guys entered into some other ones earlier this year, you guys continuing to kind of take some of that floating rate sensitivity off the table to protect against some downside, whenever the fed that begins to become less hawkish?

Yeah, we haven’t – since the beginning of the second quarter, we haven’t done any more of those we’re still contemplating potentially doing more of that. Trying to do a little more on the investment portfolio to maybe take a little more duration as we take cash flow and put more in the investment portfolio, and as we fund some of our good loan growth, we’re funding it with more variable rates funding, which in the down rate, we’ll move down quickly.

Understood. And if I could just ask one last clarifying question. It sounds like with absent the potential for some of those servicing deposits to move off balance sheet in the fourth quarter. Is the expectation that both demand deposit growth is going to revert to kind of mid- to high-single-digit range that I believe we were discussing last quarter?

Yeah, I would – I’m not expecting another $200 million quarter in deposit growth, although our teams are actively working on deposits. But, yeah, I think it’s sort of – I think retail deposits year-to-date are up like 6%. So, I think that upper-single-digit, as we look on a yearly basis is probably the right zone.

Okay, great. I appreciate you guys for taking all the questions. Have a great weekend.

Yeah. Thanks, Nate.

Thanks, Nate.

Please stand by for our next question. Our next question comes from Damon DelMonte with KBW. Your line is now open.

Hey, good morning, guys. Hope you guys are doing well today?

Yeah. We are.

Excellent. Good to hear you. Why don’t we start off on the commentary on the consumer portfolio? I think, Eric, you had said that you expect some of the GreenSky portfolio to be running off? Do you guys expect the originations from the LendingPoint relationship to kind of neutralize that impact? Or should we kind of be forecasting a modest decline in outstanding?

I think, Damon, thanks for your question. A modest decline in outstanding, so we’ve had – I think, we’ve kind of communicated that at some point, we’d like to have several fintech partners with roughly the same amount of that total portfolio. And so we pulled back on GreenSky’s origination, so we think it will decline about $50 million over the course of the next quarter. And LendingPoint will make up a portion of that, say, anywhere from $15 million to $20 million, so down like a net $30 million on the consumer side.

Got it. Okay. That’s helpful. And then with regards to your outlook on the economy in how that factors into your provision expectations? I mean, do you feel like given the strong growth this quarter, and given the view on the economy, the $7 million kind of is a peak provision level for you guys, considering loan growth will be slowing, so you don’t need to put as much away for loan growth. And then offset the economy would still kind of keep that around $7 million? Or do you think that we can start to see a little bit higher levels of provisioning overall?

I got to tell you, I hope that’s the peak. So, we had 7% loan growth in the quarter which drove a lot of that provision. Our forecasting continues to pull in some of the idea of a recession coming in 2023 or 2024, so we’re cautious there. However, when you look at some of our other credit metrics or other credit metrics have been pretty good. So with nonperforming loans were down. Our watch-list or criticize-list is going in the right direction. So as long as that continues and our loan growth slows, I think that would be the peak. But the economy is always the wild card out there.

Yeah, I mean, our metrics don’t show that that’s there today. I mean, Eric just talked about our substandard capitals, as low as it’s been a long time. And so we’re not seeing cracks. But this rapid increase in interest rates, I mean, I just feel like it’s going to have some impact as we move into 2023, which is hard. I don’t think anybody can tell us what is actually going to look like next year.

Yeah. What kind of building on that is? Are there any areas in the economy or in the different asset classes that you lend to that you kind of become a little bit more cautious on in pulling back from?

Office, for sure, is an area that we’re not real interested in resi development, probably another area. We’re not real high on. We’re looking for really good A-rated credit with good borrowers. Those would be that maybe a couple areas that we’re sort of staying away from, and really stick to our loan policy, and our pricing metrics is sort of the guides that we’re given our risks right now. We can still lend out but, but we’ve got to across every category, it’s to the policy, to the pricing metrics, no exceptions to that.

Got it. Okay. And then just lastly, Eric, any color on the tax rate this quarter seems to come in a little lower than what had been the last couple of quarters?

Yeah, Damon, good question. So we picked up basically some benefit in our state tax rates over the course of the quarter as we kind of finalized our returns and got everything done. And then with that sort of going forward in the next quarter, we’re expecting a tax rate, probably around $23.5 million. So as we filed all the returns and looked at our allocations and looked at the stack, the taxes we’re able to get a little bit of a pickup and then we lowered our outlook going forward just slightly.

Got it. Okay. Appreciate the color guys. Thanks a lot.

Yeah. Thanks.

Please stand by for our next question. Our next question comes from Manuel Navas with D.A. Davidson. Your line is now open.

Hey, good morning. A couple of my questions have been answered. But in talking about the NIM, the increase in wholesale borrowings happened at the end of the quarter. Can you discuss kind of like the makeup and kind of the tenure of it and kind of the expected costs? Any more details would be great.

Sure. There’s a couple of areas there. We did do some additional FHLB borrowings. And so those are mostly short-term at shorter term rates. And then some of the – that was about $100 million of our FHLB borrowings that are at variable rates, which adjust frequently as well. And then we’ve added a couple of, I just call them institutional-type relationships. One is classified as a brokered money market. And the other one is similar what’s not classified as brokered, which moves pretty much with fed fund rates. So, we elected to do both of those in order to continue to fund the loan growth. And then, as Jeff mentioned earlier, we’re really thinking about protection in down-rate environment, assuming that scenario comes to pass a year from now and those rates will adjust pretty quickly too. But those are 2 examples.

What’s the capacity for more of these types of lines to help you with funding?

Yeah, it’s a good question. So we’ve got a slide in our deck towards the end that kind of talks about our available liquidity and we still have a lot of available borrowing with FHLB. And we still kind of look at potentially $500 million of funding that we could do out there in the broker markets, if need to be. So that’s kind of the max target of, I think, we’d want to be with that type funding, but it’s a possibility.

Yeah. But, Manuel, maybe to add to that. I’m not real interested in going over 100% loan to deposit ratio. So there’s a balance in a governor there as well. We’re in the mid-90s now. So we’re actively looking at that ratio, it potentially might run over, but that’s not where we want to operate, I would prefer to operate more, frankly, below 90. So we’re a little ahead of where I would prefer to be. But as I tell our teams here all the time, deposits and loans never come in at the same rate at the same time, sometimes loans are coming in faster, sometimes deposits are coming in faster. And we started to get a – we have targets, but sometimes will be above it, sometimes will be below it.

Okay, that’s great. I appreciate that. Moving on to kind of the loan growth and the mix of the pipeline, I’m guessing a lot more equipment finance into the fourth quarter. So CRE, I guess, it CRE has fallen off a bit, but you’re still having some strong other product contribution. Can you just like kind of talk about what’s in the pipeline it makes versus what has happened year-to-date?

Yeah, so on the equipment finance side, our pipeline and backlog is at record levels. And our fourth quarter in that business is always the strongest quarter. So we expect to have a really good fourth quarter in that business. As our – and we’ve done a lot of CRE over the last sort of 12 to 18 months, and we were – our CRE to capital, I think, 12 months ago was under 200 were 260 today, and we have no desire to go to 300. And so our sort of internal target there is I don’t want to be above 275. So we’re sort of managing commercial real estate sort of to that level. And so what that’s doing on the commercial banking side is okay, we’ve got to look at other asset classes and sort of turning our attention to sort of non-CRE lending. Now, we’ve got a big CRE portfolio. So we’re still going to make a lot of CRE loans because there’ll be payoffs and attrition and things like that. But starting to point our teams maybe some other asset classes other than commercial real estate.

I appreciate.

In general, our pipeline is a little lighter than it was in the beginning of the year, but yeah, there’s a fair amount of business to hone that pipeline.

I appreciate that. With the kind of moving to a different tact on the expense, a little bit higher expense run rate. Can we still – can we see like return to positive operating leverage near-term or more steady state?

The goal here is to get operating leverage, right?

Yeah.

I think expenses were – was pretty broad-based, a lot of growth incentive comp, a lot of – we put a fair amount of marketing into the quarter. And some of that could come back. So, yeah, I mean, we’re looking for operating leverage.

Please standby for our next question. Our next question comes from Nathan Race with Piper Sandler. Your line is open.

Thank you for taking the follow-up. Just a question on the income outlook into the fourth quarter and next year. I imagine if we get some equity market rebounds. I mean, that obviously helped wealth management, which hopefully continues to trend higher like we saw in 3Q over 2Q. But, I guess, other piece up a little bit versus the second quarter as well in 3Q. I guess, kind of think about just the overall fee income run rate into the fourth quarter and kind of just overall fee income growth expectations in the next year as well?

Yeah, I mean, looking at the third quarter, I think it’s a pretty good number. And to your point, I mean, if we can get some rebound in the markets, our wealth management revenue, a year ago was around $7 million, and most of that decrease is market related. So, I think there’s definitely some lift there, we’re making – we’ve hired a new leader there. We’re going to make some investments there to grow that business now. That’s going to take a little bit of time to do to get to hire advisors and get them on and get them producing and all that good. So that sort of back part of next year into 2024 sort of probably impacted – the real impact of the income statement. And then, the resi line item there is really low. I mean, it’s not a big focal point for us. But, we’d like to do more than we did in the current – quite a bit more than we did in the current quarter. $200,000 in a quarter, I mean, frankly, $1 million, $2 million a quarter would be where we’d want to be, but the marketplace is just not there right now. I think there’s some upside to that. So we’re at about $16 million. I think, as we move forward, there’s some upside to that both in wealth management and residential mortgage.

Yeah, in the other income line has trended higher over the last few quarters. It’s kind of the figures that we saw here in the third quarter, is that kind of run rate going forward? Or is there any kind of one-off items that maybe elevated it here at the third quarter?

I think that’s run rate, and we’re doing our retail teams are doing a good job on the fee lines in sort of that service charge in interchange area, we’re doing a lot of work to try to continue to build those revenue lines. Again, that’s more of a longer-term gain that we’re working on. It’s not transformative quarter-to-quarter, but year-over-year we can see some good movement in those lines.

Yeah. No, we’ve definitely seen the success of the efforts in that line in particular. I appreciate you guys taking the follow-up questions, and thank you for all the color.

Yes, thanks.

Thanks, Nate.

At this time, I show no further questions in the queue. I would now like to turn the conference back to management for closing remarks.

Yeah. Thanks for everybody joining this morning and we’ll talk next year. Thank you.

This concludes today’s conference call. Thank you for participating. You may now disconnect.