Matthew Clark: Hi, good afternoon. I just want to round out the NIM discussion a bit here. Do you have the spot rate on interest-bearing deposits at the end of the year to give us some visibility going into 1Q?
Heng Chen: Yes. Let me find it. Hold on. Yes. It’s €“ I have it as 1.97%.
Matthew Clark: Okay. Makes sense. Okay. And it sounded like the expectation is the overall NIM kind of hangs in there in the current range. So I don’t need necessarily a monthly NIM, but if you had the December monthly NIM, I’ll take it.
Heng Chen: Yes. Yes. It’s €“ it was down slightly from the full quarter NIM. It’s €“ so the December NIM, that’s a 31-day month. So that was 3.81%.
Matthew Clark: Okay, thank you. Got it. And then just on the overall reserve dipping down a little bit here, 80 basis points. Can you give us a sense for what you considered in terms of macro factors? What’s your overall unemployment rate outlook for this year and how you might be weighing kind of the baseline versus adverse scenarios?
Heng Chen: Yes. Matthew, as I might have mentioned in the past, we use a blended rate for €“ until the fourth quarter, we were at 30%, 40%, 30% Moody’s rating, where the 30% is the S1, the Moody’s S1, which is the most favorable forecast. The base is their base. And Moody’s, in their December base forecast shows no recession in the next eight quarters. And then the S3, the Moody’s S3 has a decline. Well, that has €“ that’s basically the modest recession forecast. So, that has three quarters of negative GDP. Maximum decline is 3.6% in Q2 this year and unemployment goes up to 7.8% in Q1 2024 and declined to 7.3% in Q4 2024. So, what we did is we were €“ since we adopted CECL, we were at this 30%, 40%, 40% €“ sorry, 30%, 40%, 30%.
So, this quarter, we changed that to where the moderate recession is now, 55% of our CECL calculation. And the base is 35%, and the optimistic is 10%. So, we think for 2023, we are expecting 3% to 5% loan growth, primarily single-family residential, which requires very little reserving, about 30 basis points for us. That our provision for 2023 would be basically net charge-offs, plus a modest amount for loan growth.
Matthew Clark: Okay, great. That’s good color. Thank you.
Operator: Our next question comes from Gary Tenner with D.A. Davidson. Please go ahead.
Gary Tenner: Thanks. Good afternoon.
Chang Liu: Hi Gary.
Gary Tenner: A couple of follow-up questions. In terms of the CD specialty running for the Chinese New Year, $600 million of new funds, as you mentioned, Heng. Should we assume that, that is €“ that you largely pay down the FHLB borrowings that you had as of 12/31?
Heng Chen: Yes. Correct.
Gary Tenner: And then in terms of the NIM, again, I think you said it includes 75 basis points of tightening.
Heng Chen: No. We €“ I think you said, it might have been poorly worded. But we are assuming 25 basis points on February 1, 25 basis points in mid-March. And we are not sure, there might be something in December in terms of a rate cut, but that would have a very minor impact.
Gary Tenner: Okay. No, that’s fine. I thought I heard you say 75 basis points, so I kind of may have misheard. So, if you combine the ability to pay down FHLB, the benefit of the hikes in the first quarter and the interest recovery, it would seem to suggest that the first quarter is kind of peak NIM and then you maybe stay in that range for the full year but trend lower from there. Is that the way that you would expect the year set up?
Heng Chen: Yes, Gary.
