Tom Bell: That’s a good question. I think, again, subject to the Fed, short-term rates are certainly higher today. We’re actually inverted right on overnight to one year, which we were flat before. So, we’re already seeing some benefits to repricing some of our, I’ll call it, book of CDs that are on the shorter end of the curve. But we have — our CD book is about 8.5 months. So it’s relatively short, and we’ve been positioning the bank to try and adjust betas down. Obviously, the CD book will reprice more on at a 89% — 85% to 90% reduction. And then the core accounts will continue to operate as we have in our model in that, call it, again — some of our products, the rack rates haven’t really moved, so you can’t really lower those rates but your high-yield money market accounts, certainly, we expect the betas to be pretty substantial on the way down.
David Long: Got it. Thank you, Tom. And then…
Alberto Paracchini: Yeah, I think, David, just to add two things to what Tom said, I think in Tom’s remarks earlier, when you think about that CD book, the average rate on the maturities that we’re seeing for 2024 was like 4.67%, I think. So, just keep that in mind relative to kind of, as Tom said, if the duration of that portfolio is 8.5 months, and you have a rate at 4.67%, you kind of can see where market rates are. So that gives you a sense in terms of kind of what the reprice would be, all else being equal. If you have declines in rates, obviously, that’s going to come into play, obviously, subject to competitive dynamics in the market and so forth. But I think to Tom’s comments and the comments earlier in the call, I think the deposit pricing is starting to moderate.
I think it will be rate-dependent. If we get rates declining faster, obviously, that’s going to impact that more in a quicker fashion. If rates lag for a little bit, that’s going to be slower. But on that end, to the degree that it’s slower than what the market repricing, given our interest rate positioning at this point, that’s probably to our benefit as opposed to our detriment. So, just keep that in mind.
Tom Bell: The only other thing I would add to, David, is this quarter, right, we had a significant reduction in our FHLB borrowings, and we had a brokered CD mature. So that’s $384 million of wholesale type pricing. And that — which that ultimately gave us less cash at the Fed, so to speak. So liquidity is still really strong, even improving. So it’s — that’s going to help just the NII numbers as well.
David Long: Got it. Okay. Cool. Thanks. And then wanted to talk M&A just for a second here. The Inland deal seems to have gone pretty well. Integration, mostly done with that. First question is, are you seeing a pickup in discussions or serious discussions? And then, secondly, what is Byline’s appetite to do something else at this point?
Alberto Paracchini: I think let me take the latter question first. I think our appetite is high. I think we are certainly open to entertaining M&A. To the prior question, to the first part of the question, in terms of kind of what’s the environment for M&A, I think — look, I think it’s — clearly, with the rally in rates towards the end of the year, I think a lot of the friction that was causing M&A to be very difficult for a lot of institutions, meaning the impact of AOCI, the impact on interest rate marks on portfolios, that’s gotten better. It’s not to say that we’ve reverted back to where it was maybe 18 months ago, but it’s certainly gotten better, which I think given the recent announcements that you’ve seen, I think it’s indicative of the fact that M&A and the M&A math, so to speak, is getting a little bit easier for people.
So, as far as we’re concerned, look, we remain — we have our kind of our framework for evaluating M&A. We continue to think that there’s going to be consolidation. We think we are a terrific partner for institutions that are looking for a long-term partner, and we’re hopeful that there will be some activity in 2024.
Operator: Your next question comes from Damon DelMonte from KBW.
Damon DelMonte: Hey. Good morning, everyone. Most of my questions have been asked and answered, but just a couple of little ones here. Regarding the outlook for expenses here in the first quarter, I think the guide was $53 million to $55 million. Tom, can you just kind of help walk us from kind of like the operating number of sub-$51 million up to that level? Does it come in through salaries and benefits, or is it data processing? Just kind of looking for some guidance there.
Tom Bell: Some of it is definitely salaries and benefits. We’ve had some delays and some hires that we’re still looking to seek out as well as some new teams to bring into the organization from a business perspective. The real estate numbers that came in were actually a little bit lower than what we originally accrued for, and so that won’t materialize in 2024. So, we’re trying to give full year guidance there. I think we would expect to be a little bit on the lower side, on the guidance side of $53 million, maybe for Q1. But absent that, we think just given the spend that we want to make to invest in the business and bring on teams, we’re going to have to increase cost to do that.
Damon DelMonte: Got it. Okay. All right. That’s helpful. Thank you. And then as we think about the provision expense going forward and kind of like a normalized net charge-off level, I think you had like 38 basis points last quarter, and that’s on the rise from the last two years, understandably. But do you think that high 30s, 40 basis point level is reasonable going forward?
Alberto Paracchini: I think we’ve always said, Damon, somewhere in the kind of the 30 to 40 basis point range historically, and I still think we’re comfortable with that. Keep in mind a couple of things that maybe are a little different today than historically. We added some additional disclosure for PCD loans. I mean those are loans that, over time, you can expect us to try to move those out of the bank relatively quickly. We’ll add to the degree that we take charges related to those. As you know, those are obviously subject to a credit mark. So, we’ll disclose and give you color around that. But back to the first part of your question, in terms of kind of like the underlying rate, I still think that 30 to 40 basis points is reasonable.
