Catherine Mealor: On deposit cost, can you give us just a sense as to where deposit costs were maybe towards the end of the quarter? Or where new deposit costs are coming on? And as you think about deposit growth over the next year, you think it’s coming more in CDs or money market and maybe kind of where those really started at?
David Ring: Certainly, from the growth point of view, going into 2023, we’re projecting kind of low single digit overall deposit growth. But to your point, most of that’s coming into the higher cost categories, both money market and CDs, and we’ve been increasing our rates. We have some promotions and specials on those. And that’s where we’re seeing some growth. As John mentioned, we have seen some deposits come back from the fourth quarter or year-end. In terms of the rates going on, so if you look at our December rates for the total deposits, it’s coming on at 85 basis points, is what we reported in December. So, that’s ticked up. And then interest bearing, in particular, now up to 1.23%. So if you look at that versus what we reported on average for the quarter, the cost deposits was 72 basis points, average going up, that’s 85 if you look at on a spot basis.
And the 105 basis points on interest bearing deposits, now 123 basis points. Now, we do expect that those will continue to increase in 2023. As deposit betas actually increase, we’ve seen a lag in deposit betas, we now see more competition in in these categories in competition for deposits. So we are expecting that, on average, you start to see interest bearing deposits kind of landing in the, call it, 1.80% to 2% next year in total deposits, in 1.25% to 1.35%. So, again, if you look at our betas to date, we’re about 25% on interest-bearing deposits, 17% total deposits through the fourth quarter during the cycle. That’s up from 18% and 12%. As we go forward, we’re now looking at through the entire cycle, through the end of 2023, we think interest-bearing deposits will cycle out at 37% beta and total deposits about 27%, 28%.
So, you’re going to see those start to pick up in a more fairly accelerated basis, some of which we saw in the fourth quarter and we expect in the first few quarters of 2023.
John Asbury: Catherine, let’s face it. As an industry, we saw the change happen in December in terms of deposit rate behaviors, increasing rate competition, not just from other banks, but US Treasury bills, money market, mutual funds, etc. And so, we’ve had to respond to that. Our strategy is not to pay the highest depository rates. We’re in an environment now where, I hope, we’ll be able to demonstrate the strength of the great deposit base, which I’ve referred to for six years as the crown jewel of the franchise. I am impressed that, despite having closed 27% of our branches, we actually grew net consumer households last year. I’ve heard through the years questions of why do you even have a retail bank at this point. This is why.
So granular, diversified deposit base. I am glad that we have a diversified deposit base across these markets and isn’t concentrated in any one given metropolitan area, for example. So we’re not immune from deposit, beta. We’ll feel it, but I think we’ll be able to weather the storm. It’s another reason why I am so grateful that the strategy of this company has been not to make long-term fixed rate real estate loans. That’s not a good place to be right now. So having half the deposit base and variable €“ primarily the loan book in variable rate is why we said what we did, which is we may be at an equilibrium point right now that we should be able €“ on the NIM, we should be able to use additional asset beta to help cover increasing deposit bases.
So we’ll see where it goes from here.
