Thank you, Jackie, and good morning, everyone. Third quarter activities and results demonstrate our commitment to continued progress toward regaining long-term top quartile performance. We grew core deposits even as we reduce their cost.
We also completed the near-term initiatives we detailed in April, and we continue to reinvest in our people, systems and processes to drive our franchise profitably forward. When we spoke last quarter, I outlined the drivers of 270 million in merger to date, gross expense reductions, and we fully achieved our target during the third quarter.
Our operational effectiveness work, eliminated redundancies and streamlined operations, making our organization more efficient. This work is enabling us to better serve our customers and our communities while enhancing long-term shareholder value.
Our gross expense saves represent double the $135 million we outlined at the announcement of the merger. The merger to date net savings of roughly 213 million accounts for 45 million of franchise expansion and reinvestments made leading up to and shortly after the merger close, as well as the additional $12 million of investments planned in the coming months and quarters.
Our expense run rate in the third quarter was just below the expected fourth quarter annualized run rate we have consistently discussed since March. Planned reinvestments will continue into 2025. Our cost conscious culture will support a reasonable amount of inflationary lift from this level over, we will continue to remain diligent with resource allocation and work defined expense offsets for franchise reinvestment beyond the $12 million already earmarked, we believe our reinvestment dollars will support the continued growth and competitor this of our company.
We continue to remain an employer of choice for experienced bankers throughout our footprint. Our ability to attract top talent enabled us to enter and grow our newer markets like Arizona, Colorado and Utah, while continuing to invest in long established regions.
Recent examples include establishing a team of seasoned private bankers in Colorado, commercial banking teams and southern Idaho and Northern California and one new market leader for Southern Nevada. In all cases, these new team members have spent their careers serving a broad range of customers ranging from families and entrepreneurs of through larger commercial clients.
Within these markets, we opened our second retail branch in Arizona and announced a plan third location in Mesa to supplement the commercial teams that establish our presence in the state three years ago. Subsequent to quarter end, we have identified the site for our fourth Arizona office and will provide more specific details on next quarter's call. We also continue to enhance our internal technology and support of our associates.
We are piloting new applications to improve efficiency, and we are onboarding 1,000 associates to an upgraded CRM tool. The third quarter also included a reduction in transactional loans and funding sources. Solid seasonal customer deposit growth and an intentional reduction in transactional real estate loans enabled us to reduce brokered deposits by 20% during the quarter, although commercial loan growth was below our expectations, portfolio activity reflected healthy customer behavior, which Chris will cover in more detail.
We are very optimistic for the future of our company with the merger and integration behind us. Activity throughout our organization is fully focused on driving balanced growth with new and existing customers, and we continue to win business every day.
We're driving franchise value through relationship banking, and we will continue to opportunistically reduce our exposure to transactional loans and funding sources. We've continued to remain laser focused on regaining Colombia's placements as a top-performing bank that produces long-term consistent and repeatable results. I'll now turn the call over to Ron.
Okay. Thank you, Clint. We reported second quarter EPS of $0.7 and operating EPS $0.69 per share, and our operating return on tangible equity was 16%, while the operating PPNR was June $21 million. Please refer to the non-GAAP reconciliations are provided at the end of our earnings release and presentation for details related to our calculation of operating metrics.
On the balance sheet, we maintained our target interest-bearing cash levels of approximately $1.5 billion. As Clint mentioned, loans declined $200 million in the quarter, driven mostly by reduced transactional loans and deposits in total were flat within deposits, with all the seasonal increase in non-interest-bearing DDA, along with strong customer interest bearing deposit growth and utilize the excess to reduce broker deposits by $635 million or 20%, along with reducing term borrowings at quarter end within investments.
The increase in available for sale investments was market value driven as the bond market rally during the quarter for locked out structure of the portfolio, combined with this rally loads of a 50% reduction in our accumulated other comprehensive loss, adding $1.6 or 6% to our tangible book value per share.
Overall tangible book value per share increased 10% to $17.81. Our net interest margin was stable at 3.56% in Q3 and on the upper end of our estimated range of 3.45% to 3.60%. Our interest-bearing deposit cost declined 2.95% for Q3.
Given the Fed's 50 basis point cut late in the quarter, it may help to compare the month of September to the month of June, our month of September interest-bearing deposit costs was 2.90%, down 10 basis points from 3% June.
More importantly, the spot cost as of September 30th was 2.74%, down 26 basis points from the month of June. This represents a beta 52% and a very short period of time. Now I want to thank all of our bankers for customers on reducing deposit rates.
It was great to see the speed with which they work, and it is reflective of our relationship banking strategy for our customers bank with us for the value our bankers provide not just rate absent any further Fed moves down.
We expect continued reductions in our interest-bearing deposit costs in Q4, given the term structure on time, deposit repricing and wholesale funding, along with continued expected reductions in wholesale funding balances are projected. Interest sensitivity under both ramp and shock scenarios remains in a liability-sensitive position, and we expect our rates down deposit betas to approach.
We estimate those experience on the way up our slide deck includes enhanced repricing and maturity disclosure, including details on over 8 billion in customer CDs and wholesale funding that matures over the next six months. Our provision for credit loss was $29 million for the quarter.
The portion related to our leasing portfolio declined again as expected this quarter to $16 million. Our overall allowance for credit loss remains robust increase in the 1.17% of total loans or 1.34% when including the remaining credit discount.
Total GAAP expense for the quarter was $271 million for operating expense was $268 million. In Q2, we had the restructuring charge along with a nonrecurring credit. So our operating expense of churn, $68 million for Q3 was lower than the two and $70 million normalized level in Q2 two and two and $87 million in Q1, reflecting continued achievement of our efficiency initiatives.
The Q3 level excluding and see the amortization annualizes nine or $57 million. Clint mentioned our reinvestment plans earlier, which will increase our quarterly operating expense, including CVS. Excluding the amortization into the annualized range of $9.65 to $95 million.
We expect continued annual inflation of approximately 3% on top of our expected Q4 exit range, inclusive of items such as the typical Q1 payroll tax increase of 7% increase in health insurance costs and annual merit cycle for the end of Q1 will always work to find additional efficiencies to help offset these pressures and enable continued franchise reinvestments.
Now closing commentary about our regulatory capital position. Our risk-based capital ratio has increased as expected in Q3 and and now all above our long-term target levels. We expect capital ratios continue to build, which will provide enhanced feature allocation flexibility. With that, I will now turn the call over to Frank.
Frank Namdar
Thank you, Ron. Stable performance of our loan portfolio, highlights the strength of our through the cycle, underwriting process, portfolio management and and the quality of our borrowers and sponsors as we transition to a more typical credit environment.
After a period of exceptional quality, we observed a 22% improvement in 31% to 89% day delinquencies, reducing them to $67 million, following similar improvements in the previous quarter. The slight increase in nonaccrual loans.
90 plus delinquencies reflects normal business fluctuations and the migration of smaller credits affected by higher interest rates. Classified loans declined due to risk rating upgrades and to pay off during the quarter. Our proactive and detailed monitoring of the portfolio continues to reveal no systemic issues across various industries, sectors or geographic regions.
At the end of the quarter, there were effectively no delinquencies in our entire non-owner occupied and multifamily portfolios with no charge-offs in either category. Overall, net charge offs for the company stood at an annualized rate of 31 basis points for the quarter. With the Bank contributed 10 basis points and FinPac 21.
As mentioned in previous quarters, loss activity within the impact was anticipated to improve and did by approximately 20% this quarter, reflective of an annualized rate of 4.7%. We are pleased with this progress, but we are not finished.
We remain very satisfied with the quality and directionality of our granular and diversified loan portfolio, which is detailed further in our investor presentation. It remains relatively predictable and boring similar to waiting in line for AerCap. I'll now turn the call over to Chris.
Christopher Merrywell
Thank you, Frank. Customer deposit growth during the third quarter reflects continued success through targeted small business campaigns, expanding balances with the existing commercial and new relationship customers.
Customer deposit balances increased $602 million, enabling a 20% reduction in brokered deposits. Notably, core deposit growth occurred even as we reduce the rate on both on deposits, both ahead of And following the Fed funds rate reduction.
In September, our teams continued to lead the service not price in their customer interactions. Our branches ramped up their summer Small Business campaign in July, and we launched a new campaign in September that will run through the next several weeks through mid-October or three highly successful campaigns have generated $600 million in new deposits and account retention from the first two campaigns exceeds 99%.
We are also seeing a related increase in cross department referrals as we work towards additional needs based solutions for our customers. As a reminder, there are no special products or pricing associated with these campaigns, and we would like to thank our bankers for their focus and attention to driving new relationships to the bank.
Loan balances declined by $207 million during the quarter as we intentionally allowed transactional real estate balances to trend lower. Healthy customer activity, which includes business and property sales as well as project completions, also contributed to net portfolio current contraction.
During the quarter, we continue to target a low single digit level of loan growth in the current operating environment as our activities focus on relationship driven commercial loans and the balance deposit and core fee income growth.
That activity supports our core fee income pipelines continue to expand across all categories. Treasury management and commercial card income increased by 12% and 19% respectively for the year to date period is all beautiful transitions to year and if their new larger organization handling more referrals and onboarding new relationships.
While overall non-interest income remains a relatively smaller percentage of our total total revenue, the favorable trends in our collective product and service income will drive an incremental bottom line growth over time. Helping to diversify our revenue stream while strengthening and deepening our customer relationships. I'll now turn the call back over to Clint.
Clint Stein
Thanks, Chris. Prudent, and we remain committed to optimizing our financial performance to drive long-term shareholder value. Our bankers activities and the organic runoff of transactional loans and funding sources drives us closer to the optimal capital efficiency.
As Ron mentioned, our capital position continues to build at our ratios are expanding in line with our expectations, with a total risk-based capital ratio of 12% at the holding company and 12.2% at the bank, we are above our long-term targets of 12%.
Our TCE ratio was 7.4% at quarter end, up from 6.8% at June 30th. As capital generation received and added lift from favorable AOC, yes, changes. Our performance continues to demonstrate our ability to organically generate capital well above what is required to support prudent growth and our regular dividend providing us flexibility for considering additional returns to shareholders.
This concludes our prepared comments. So, Chris, Ron, Frank and I are happy to take your questions now. GG, please open the call for Q&A.
Tom, just on the on the core margin on you had a Fed cut, obviously late in the quarter, we gave us the spot rates on deposits, which is really helpful. But any color on kind of where your corn in kind of settled out at the end of September, maybe on a spot basis?
Or just your kind of near term thoughts on the corn in a given I'm not only to the rate changes, but also your expectations for deposit flows AUM at us.
Ronald Farnsworth
Ron. Yes. I mean, am I mean, we're not declaring victory on the inflection point with the core up, but the bigger driver is going to be again, deposit flows. I do feel good about the tailwinds we have with the 8 billion of CDs and wholesale funding that we laid out.
And then new table on slide 20. But again, I think I think normalized deposit flows would be the key generally in the fourth quarter. We see it flat to up slightly early in the quarter and then tailing off during the quarter. Of course, long term seasonal averages around property tax payments in distribution, things of that nature. So we'll see how it plays out, but feel good about the tailwinds, at least at this point.
Matthew Clark
Okay. And then just on the adjusted expense on an annualized run rate guide, how do you feel that that range? Do you feel like you can hit the low end of that range here in Tokyo?
Ronald Farnsworth
Yes, I do. And more importantly, as we look at that range going into 2025, we talked about the expectation for approximately 3% of inflation on that generally seasonally over the course of the year. Your payroll taxes pop in Q1 and Q2 and come down a bit Q3, Q4 merit cycles easily into Q1.
Looking forward health insurance costs Corsair throughout the year, but feel good about that. We know we've got quite a few reinvestments that are in flight will make continue to make additional reinvestments, but you're talking only a couple million a quarter and annualize to get into the basement midpoint of that range right now. So we're pretty close.
Matthew Clark
Okay. Then just on the buyback client, I know rates are up here more recently, but definitely getting close to that 8%. You're you're above where you want to be, I think, on regulatory capital, any chance I mean, what's your expectation in terms of potentially buying back stock and we should be at the wheat from mid next year? Or do you think it could be some collapsing?
Ronald Farnsworth
Well, I mean, I think that this is Tom ongoing conversations that of that, Ron and I have with our Board and um, you know, we're as you mentioned, we're above on the regulatory side on the 8% on TCE. is is a kind of a blade. It's not a hard hard floor like what how we view this, I say, 12% on total risk based capital, for example, on.
So I do think that as we as we set out at the onset of the announcement of the merger and of what our expectations were terms, capital generation utilization, it was going to be a capital return story for shareholders.
And I do think in 2025, we enter into that to that timing of what it might look like. It's probably too preliminary to really pin that down some. But but it is something that that we're actively evaluating internally.
Hi, good morning, everybody. For David. Tom, I wanted. Yes, let's start on the small business campaigns. I mean, you guys had a ton of success with this. Retention has been extremely high. I'm curious whether these have been more targeted to specific markets or geographies or they've been broad based and do you see additional opportunity here, I guess, for additional campaigns? And then just to deepen the relationship with those that you won and continued driving further growth, I guess, on both of both loan and deposit fronts.
Christopher Merrywell
Yes, David, this is Chris station question on. It's really band and we've talked about previously and continues to be broad based. It's across all markets on wide participation, all branches in every campaign and have achieved results in that.
And it's really too the relationship strategy, bringing in new relationships from the standpoint of getting to know people sharing what we do, sharing the value that our bankers bring each and every day and to those relationships in that kind of Community Bank at scale.
Way that we think about things. I think what's most impressive is that we do continue to see the deepening of relationships with merchants and corporate card and some wealth management referrals, treasury management referrals.
So the targeted businesses are are things that could continue to grow with us were also uncovering on larger opportunities to get referred off to a commercial bank. And we've got some great partnerships. Stories of the team is working well together on to land, some bigger relationships as well with it?
Yes, it's really it's across the board and we have an arm them with, like I say, a special pricing or product. It's everything we have off the shelf put together for the benefit of the customer and and solving their needs. And it's working out extremely well and can be more pleased. I'm going forward. It will take a little break here.
None of our mid November, but everybody kind of catch up refresh. And you know, I fully expect we'll have something that comes out in the first quarter of next year. And and we'll keep will continue. There's kind of more of a way of life that it is a campaign, if you will.
David Feaster
That's great. And then, you know, you guys have also been active with expansion plans, right, both on the hiring side and the expanding the branch network. You talked about that in the prepared remarks. How do you think about opportunities going forward?
It seems like Arizona is obviously a focus just given the branches that you're opening there. But looking at the branch maps, you know, Colorado, Utah, Nevada seem to be pretty attractive opportunities, especially just given those tires.
How do you think about denovo expansion opportunities where you're focused in and whether organics the best way to do it? Or could M&A be an opportunity to help them help supplement the organic expansion that you're doing?
Frank Namdar
Hey, David, it's Frank. I'll take the first part of that and let the Chris and Clint kind of weigh in at the end of it. Yes, we have basically four, I would say, de novo markets over the last year and a half or so of the Utah and Colorado, Arizona and then a little bit Northern California and just kind of a specialty team that we've hired into the bank and then kind of put a branch system around at some private banking folks around it to kind of like phil.
In this full relationship banking, they wanted to one of the great things about the company is our really our ability to attract talent in the organization. As Clint mentioned earlier, I mean, folks want to be here and want to work here and find this place to be a great place to be successful in all of those markets.
The denovo markets, we've been profitable within a year and they're starting to drive some nice, really nice balances and some growth in relationships. It really a prime example is our wind team in Northern California. They've got about $7 million, $19 million in outstanding loan balances in about $95 million in deposits, in just a really nice, really nice mix for the company and some really nice strong relationships, and we see that all of our denovo market.
So we'll continue to continue to kind of infill on that and to grow as as as we are presented with the opportunity to get the right talent into the company continuously. Another real important market for us on the expansion plan is going to be Southern California is just tremendous density in Southern California.
We've got some really good strong teams there today. And we've been very successful, but we will continue to invest in the market and grow in the Southern California as well. So I think really good opportunity just organically for us to continue to invest in those and those markets and to grow quite nicely.
Christopher Merrywell
And I'll jump in on the back half of that question is as usual, David, you packed a lot into it into your questions. But from a from an M&A perspective on our focus is really getting the most performance we can out of the company that we're running today and to of from we're very excited about the opportunities that we have. And some story mentioned in those out a de novo markets.
But even even more long, well-established markets, I mean, we continue to win new business every day in and take market share from the larger banks and so on. So there's a lot of enthusiasm around what we can just do on an organic basis.
The M&A front itself, I need it. I mean, if we should talk next quarter, there's quite a bit of election activity going on and on that, whatever the outcome is on, it will have an impact on a bank, our size and on. And so as as we get greater clarity on that as we get greater clarity on on where the Fed takes interest rates and how that looks on our in our thought might change. But right now, that focus is truly on getting the most that we can out of the company that we're running.
David Feaster
Okay. That makes sense. And then maybe just staying on the organic growth side. I mean, look, quite we've talked in the past about the pipeline, you're paying your bankers have and and the momentum that it seems to be picking up, but it hasn't necessarily materialize yet knowledge, payoffs and paydowns have been a headwind and some of the strategic runoff in the CRE book.
But I'm curious how the pipeline shaping up up, where you see in the most opportunity as you think about that low single digit pace that you talked about in just the competitive landscape on the growth front from your from your seat data story again, on the pipeline, it's been pretty stable and steady over the last several quarters.
Frank Namdar
We talked previously about the total pipeline staying about the same, but the mix changing from real estate real estate pipeline being down a little bit in the C&I pipeline up alone to this order in the overall numbers about the same. And it's a nice healthy loan pipeline spread throughout the throughout the company.
So feel really good about continuing the low to mid single digit loan growth number kind of core relationship banking, excluding some of the the transactional rundown in real estate that we'll see a little bit of as we continue to go forward is a very nice pivoting.
The company is moving away from transactional into full relationship banking. So the lending piece is just one part of it. And going back to even Chris's comment on small business campaigns and bring small-business relationships into the bank deposit and loan and fee income relationship to the banks.
And we look at the pipeline, the fee income pipeline is very strong and healthy. Chris mentioned a couple of statistics on just some growth we had in treasury and other parts of the company and will continue to see that because the bankers are doing an exceptional job on focusing on all different parts of a relationship to bring into the company as we looked at value to our customers.
Just to follow up on loans. Chris, can you talk about how large that pool of transactional loans from all of that you're looking to reduce? Well, I think we've previously talked about between multi-family and single-family was approximately $6 billion on the on the balance sheet that didn't have relationships attached to them and our bankers are working to trying to generate relationships.
That's not always the easiest thing to do, but it gives you kind of marker that's out. There are some that come due over over time. So it's not anything that happens tomorrow by any means, but it's always under evaluation.
Christopher Merrywell
Okay. Yes, it just it seems like it was a pretty heavy prepayment from quarter for you because there is that strictly from the others there. Anything else that's going on there? Yes, let me I'll just this tour Elders weighed in a little bit on that. Part of it was one thing we did have was a very large C&I loan that got paid off the US
The customer had a really nice business that we bank for a long period of time and they sold it and somebody else rather than big giant check and they paid us off. So that was kind of an anomaly for what we typically see. But it was a pretty big number. So that has an impact as well with it, yes.
Jon Arfstrom
Okay. That's helpful. On drug arm, Ron, on slide 21 on that's a good slide. The balance sheet optimization slide on what what do you want us to take away from this large and what could make this more likely to happen?
Christopher Merrywell
I my takeaway from this is recognized these two items together or headwind today in a lower rate environment that will be relatively neutral. We look at it as we've isolated this, as you know, non relationship focus. So and consistent with our strategy going forward.
But just more so from a visibility standpoint that we're going to have a lot of optionality in the future as rates decline to reposition portions of the balance sheet, reallocate capital to continued organic growth and reinvestment opportunities.
So really, just from kind of just calling out for the headers today, ideally in the future will be able to remove that when we get a bit lower on the rate side over time. These will run down naturally based off schedule amortization, but at some point in future while the opportunities to deleverage this portion.
Yes. Okay. And then just a follow up on the, um, the small business deposit campaign, you so that's really not rate driven, but what kind of pricing on those new deposits are you offering? It's just our normal posted rates that are out there. And so there's certainly a range in their mid mid threes to upper threes, some CDs that are still at about four, but it's I'd say it's just our posted rates and nothing special that goes along with.
All right. Thank you very much.
Hey, good morning. Morten. Tom, I was hoping to dig into maybe just some of the loan yield repricing dynamics. The core loan yield up kind of six basis points this quarter. But maybe a little better than I expected, especially given the move of the lockdown, we saw kind of mid-quarter and so far.
So I guess it kind of implies that some of the repricing dynamics of a fixed rate or adjustable rate as a bit better than I was thinking. Can you maybe just talk through some of those dynamics seen over the next few quarters, how much you have coming up at fixed rate adjusts upon the incremental spreads you think you can get on those loans?
Christopher Merrywell
Yes. Great questions. And I want to highlight again, slide 20 of our investor presentation deck. You did a great job pulling together all that information for the bottom left. Just in terms of the loan portfolio between fixed maturity by period floating repricing by period and adjustable repricing vigorous, you can see that that tail over time.
And also we'll call out again the very bottom of that table that we highlight the $8 billion over 8 billion wholesale funding between brokered CDs and term advances, which will have repricing lower opportunities in the quarter anything with the Fed.
Andrew Terrell
Yes. So if I may, if I'm reading it right, you know, and like the four to six month bucket and call it 500 ish million or so of fixed and adjustable repricing that you don't like a fair amount kind of on a quarterly basis. And then what and what type of spread pickup because you get them up spread pickup, but just in terms of as those reprice? Yes, I'd just like what's the adjustable or the fixed rate, say, $10 million or $12 million. What's the what's the yield on that that's coming down versus where you're putting new loans on out today?
Christopher Merrywell
Slides to this story item, I'll answer the new loan side. I mean, the new new commercial production, it ranges based on on asset type loan type of geography, et cetera, is five ranges from the mid-sevens to mid eights, generally speaking for for new loan activity.
And it's been actually climbing just a little bit over the last several quarters, but but relatively stable. Yes. And just my repricing standpoint, we'll continue to move higher just even as rates come down. The spread, of course, depends on the loan type, which are mix throughout those categories, but we'll see continued repression higher from that adjustable bucket.
Andrew Terrell
Okay. And if I could just shift gears a little bit, I appreciate the commentary around capital as far as the discussion around the buyback. I'm just curious, United's you as you kind of have conversations with the board and you contemplate incremental capital deployment from here.
You've obviously also in your markets a couple of portfolios of loans that we have discontinued our kind of running down over time as the other inflation and potentially early exit of any of those kind of loan pools. And how do you compare and contrast the attractiveness of the two?
Christopher Merrywell
Well from we were we were I guess in my prepared remarks was that was fairly generic in terms of capital alternatives. They didn't specify buyback. But Tom, but I think David and and you are zeroing in on that, and that's certainly one of the one of the things that we can consider, um, in terms of of an early exit from from those transactional portfolios, I think as Frank said, you know, credit is boring is waiting in line for haircut.
And we have zero concerns about the credit quality of these portfolios on. And so we look at at scale. I think in March when we first started identifying the sort of been publicly talking about on created it and earnings are there was an earnings headwind.
And it still is in terms of when you look at the wholesale funding that we have on our on our balance sheet, the rates that we're paying on that versus the yields on on these loans. Now as rates have come down, that earnings headwind is getting, you know why Peter and diminishing, it's still there.
Tom But Tom, but the market price, if we were to go price season and look at it, I mean, we just think about it like a bond, it's going to it's going to price at eight, eight, some data at below par that, would probably have a payback period that would exceed something that I would think is reasonable given some given the expectation that rates are going to continue to come down.
Also our deposit growth trends continue, and we're able to continue to replace wholesale funding levels with them. Good core customer deposits than, um, it really does it create the need to do that. It will help our operating ratios of it will free up some capital, obviously, but we're above are broadly above our most well, pretty much all our regulatory ratio targets you know, we're trending in the right direction towards where we'd like to be on a TCE basis.
So there's not a burning need or desire to do it in with zero credit concerns on these portfolios. I think that the best thing for shareholders long term is to just wait it out in either lead them amortize off or when rates get to a certain point than we can decide if we were want to selectively exit of a substantial portion of any of these portfolios.
Andrew Terrell
Okay, great. I appreciate the color that I'll step back. Thanks.
Great. Thanks for the question. I was just a quick one on on credit. Your charge-offs were very stable. Your trends are very good as well. Tom, any update on maybe I missed there is any update on FinPac normalization and any other potential offsets that you're keeping an eye on?
Christopher Merrywell
Thanks. Sure. Yes. As I as I alluded to in my remarks, we we finally did see some some material improvement in that number for FinPac with improving about 20%. So that's about 4.7% annualized rate. I would expect that to come down over time, somewhere in the 3.54% range.
So you've got a little bit to go and we do expect further improvement of the fourth quarter. I'll say right now is going to be tempered a bit because of the difficult nature of collection activity in the fourth quarter because of holidays, vacations and just of limited days. And that creates to collect accounts.
But but they will continue to drop. And I think that will settle out at that, that 3.5% to 4% range. So delinquencies continued to decrease within that portfolio. That's another indicative signs that things are trending the right way. I mean from Q1 to Q2, Q3, delinquencies have improved 24% and nonperforming leases have performed or have have have also reduced 24%.
So you can see how closely those numbers tied together. I mean, and we in terms of reduction in charge-offs of 20%. So so things are trending in the right way and there's nothing nothing else systemically at issue within that portfolio. That's it. It's normal activity and nothing nothing systemic, which in the commercial C&I portfolio of feel pretty good about.
Hi, good morning. My question is on the COGS mining, the securities accretion. It seems prepayments maybe were elevated again in three Q, and I know you provide some color on kind of near term guide there, but I'm just wondering the last couple of quarters of elevated paydowns, kind of what the remaining schedule might look like. And it's that accretion is maybe pulled forward a little bit versus the original guide?
Christopher Merrywell
Yes. I mean, I had I consider to be relatively stable over time is the last two quarters. It was like an individual security prepaid, which gave a little bit of a pop, but I'd expect to see that effective interest method amortization just to to ratably run down over time, you're not going to see a significant increase in that level unless you saw a rather large rally in the bond markets driving prepays off.
Securities purchased a safe in 2022, okay. Button barring any additional paydowns, I mean, should we expect that level somewhere in the low 30s here going forward? Are you saying? No low 40s and 50s, but I don't have that number right in front of me here, but other than some of the last couple of quarters over the next handful of quarters.
TIM Brasil
Great. And then certainly very encouraging on the early deposit trends from the cycle, but they paid already kind of in the 50s and additional opportunities through 1Q. I guess I'm trying to gauge the results to date versus the expectation for beta mirror what it had been on the way up, which also was somewhere in the mid 50s.
A lot of that liability sensitivity kind of front end loaded over these next couple of quarters and then stabilizes out, I guess, you know, how are you thinking about cycle to date beta versus through the cycle beta with both of those seemingly pretty similar?
Christopher Merrywell
Yes. I mean, this is the historical modeling would suggest that's going to mirror in our disclosure suggests it's going to mirror what we saw in the way up to date with some of the wholesale funding. We've been able to get close to that level over the course of what two weeks by September.
But I think in terms of your question is really the time period of how long that plays out, given the 8 billion of wholesale funding, the short-term nature that it's really more a story of what's the tail or a period of Fed moving rates lower, right? Is that all occurred over the course of a couple of quarters and then they start then yes, that one year window.
But I think it's over a longer period of time that will just continue to reprice lower kind of like the conversation we had earlier on the $6 billion of non-relationship loan multifamily, single-family resi, it's a headwind today. At some point, it's going to be relatively neutral. Can you give us a lot of optionality?
Hi, everyone. Just a quick follow-up on name. So your adjusted name increased about seven basis points in the third quarter, but just given the tailwinds you outline on this call and on slide 20, on the funding side of the balance sheet and the full benefit of the September cut, is it reasonable to assume a similar level of increase in the adjusted them in the fourth quarter or I guess won't hold you back from realizing a similar increase? Thank you.
Christopher Merrywell
See it be bouncing along the bottom. And again, deposit flows will house a bigger impact on that.
Thank you. At this time. I would now like to turn the conference back over to Jackie Bohlen for closing remarks.
Jackie Bohlen
Thank you, Jackie. Thank you for joining us and mining call these contracts. Maybe you have any questions and have a good rest of the day. I think this concludes today's conference call. Thank you for participating. You may now disconnect.