Peter Conner: Yes, David, it’s Peter. Yes, so to kind of address the deposit outflow composition. So in the fourth quarter, when we looked at the — if we were to dive into the composition of that outflow, two-thirds of that decline came from business accounts. And those clients were reducing excess operating cash and/or paying down loans with their excess cash in the fourth quarter. And then we also saw some of the more rate-sensitive components of our existing consumer client deposit accounts move to online high rate offerings. But we think a lot of this kind of initial decline was some of the surgery excess balance an the most rate-sensitive clients moving early first. As we get further into ’23, we think the pace of that outflow will decline as we get to the bedrock of our core deposit base and some of the surge buoyances have already moved.
As we said, our deposit base is very diversified both from a geographic market perspective, both in rural metro markets, but it’s also very granular. We have a lot of deposit accounts with a relatively low average balance, compared to our peers. And so we think that is going to create integrity and stickiness to our core deposit base through this rate cycle. In terms of our tactics around pricing, we tend to price right in the median of our peer bank and community bank competition market-by-market, and we continue to do that. And then we couple that with selected CD specials to retain some more rate-sensitive balances with Banner. And then finally, we have a delegated exception pricing model that goes down to our branch network that allow on a selected basis, exception pricing of certain clients for retention purposes without having to reprice the entire portfolio.
and those tools worked effectively in the last rate cycle back in ’17 or ’18. We think they were going to be effective again in this rate cycle. That being said, we anticipate low low single-digit pace of core deposit outflow here for the next couple of quarters. Nothing that was unanticipated, and we’ll see some of our CD balances actually go up over the same period of time, but we have ample liquidity to support some modest outflow of the higher rate-sensitive balance as we get through the cycle, but we do anticipate a continued slowdown in the pace of outflow as we get further into the rate cycle.
David Feaster: Okay. That’s helpful. Thanks, everybody.
Mark Grescovich: Thank you, David.
Operator: Perfect. Thank you, David. Our next question is from Andrew Liesch from Piper Sandler. Andrew, please go ahead. Your line is now open.
Andrew Liesch: Thanks. Hi, good morning, everyone. So just given where liquidity now sits and some of these balance sheet trends that you’re noting, do you think the margin has now peaked?
Peter Conner: Hi, Andrew, it’s Peter. There’s some more to run here in terms of upside. It’s just — it will be at a slower pace, and we have some confidence there in the form of the pace of loan yield repricing and to a lesser extent, in the aggregate securities portfolio continue to move up with the pace of Fed funds hikes and the lag effect of the loan book repricing based on prior increases in Fed funds. And you can see the loan mix reflects that in terms of our adjustable and floating rate book, but also higher yields coming in on the fixed rate side, all overall active. We put a chart in the investor deck this quarter that illustrates not just the production, but the average yield on new production. And if you look at that chart in the fourth quarter, the average yield on new loan originations was about 6.4%.
