Matthew Clark: Understood. Okay. And then just the step-up in other noninterest expense, I think it went from — excluding merger charges, so call it, I don’t know, $45 million and change, $45 million, $46 million, up from $38 million last quarter. Anything unusual in there that we should strip out going forward? I’m just trying to get a sense for a…
Ron Farnsworth: Yes, no. Good question. I take a look at Slide 13. Again, Jacque did a great job showing the movement in the bridge and a good chunk of those items inclusive of the FDIC special assessment, but a good chunk of those items are elevated and not expected to continue at those levels.
Matthew Clark: Yes, I know the FDIC, that’s obvious. But I’m talking about in the merger, we’re stripping all that out, I’m just talking about anything else beyond FDIC and merger charges?
Ron Farnsworth: Yes. I mean you look through, again, on that bridge on Slide 13, you’ll see some items were in — to small equipment repairs and maintenance, so even more in the occupancy and equipment area. But then you’ve got legal title and other, those are in the other area. So let’s try to call those out on the bridge.
Matthew Clark: Okay. Got it. Okay. Fair enough. And then back on the deposit beta outlook for kind of the remainder of the cycle. Did I hear you correctly that you’re expecting the cumulative interest-bearing deposit beta to get to 53% at the peak? Is that what I heard?
Ron Farnsworth: That is what our models would suggest, but then again, recognize that those are models.
Matthew Clark: Understood. Okay. Just want to make sure I heard that. And then just on the provision, I mean, obviously a moving target in any given quarter, but it looks like a decent step-up in reserve build here, and I understand classified increased a little bit, but not meaningfully. I think most macro models actually improved this quarter. So I’m a little surprised in the step-up in reserve build relative to the migration in the macro. But how should we think about provisioning going forward? Is this a somewhat outsized you think? Or not? Even — we’re going to assume higher charge-offs just with normalization, but I’m trying to get a sense for kind of reserve coverage and whether or not this provision might be a little elevated.
Ron Farnsworth: Yes. I mean, good question. I guess in terms of the models and the slightly worsened economic forecast, I mean, there are dozens of variables that go into CECL models and not simply just GDP or CPI rates. You also have things along the lines of vacancy rates or rent changes within various markets that are — that we operate in, which factor into those. So I would characterize it as just in total, across, again, those dozens of variables. They were just a little bit worse. But that just means they were a little bit better a quarter ago and they’re all a guess, right? They’re all projections, which we factor in the models from that standpoint. So underlying trends, though, I’d refer back to Frank’s comments earlier, right?
We do expect we’ll see some abatement on the FinPac side, and then the rest is going to be what’s going on with the overall economy two or three quarters from now. And then more interestingly have those forecasts looking ahead over the life of the portfolio at those points in time. So if I have more specifics for you in that but that’s what we’re dealing with.
Matthew Clark: Understood. Okay. And then, sounds good. I’ll leave it there. Thank you.
Ron Farnsworth: Yes, thank you.
Operator: Thank you. One moment, please. Our next question comes from the line of Jon Arfstrom of RBC Capital Markets. Your line is open.
Jon Arfstrom: Thanks. Good afternoon.
Ron Farnsworth: Good afternoon.
Jon Arfstrom: Hey, just most of my questions have been asked and answered. But on Slide 9, the red bar and deposit pricing, just kind of looking at that over the last couple of quarters. And Ron, what do you think that bar looks like in the first and second quarter? I know there’s a lot that goes into it, but I guess it’s this rate of change in deposit pricing. And I’m just if you could take a stab at what you think that looks like over the next couple of quarters that might help.
Ron Farnsworth: Yes, good question. I’d refer back to — we do disclose in here the spot rates as of year-end. So use that as your starting point when you look into Q1. But I also say that this 36 bps change as in the walk on page nine was really — a good chunk of that was related to the decision we paid back in late in Q3, where we brought on broker deposits to help reduce Home Loan Bank advances, which are in the borrowings category, right? So I wouldn’t expect as big of a move. But again, that depends on what we do with those balances over the course of the year. But that was really a good chunk of the driver there, of that 36 bps in Q4. Now that’s specific to interest-bearing deposits. I talked about though, we saw in interest-bearing liabilities, it wasn’t as big of a change, and that’s just because of a shift from a little bit higher cost of borrowings into similar costs in broker deposits.
Jon Arfstrom: Yes. Okay. Okay. Yes, that was kind of my next question. I wanted to ask about funding cost peaking and I think you may be saying you’re reasonably close on that. Is that fair?
Ron Farnsworth: Yes. I mean we, again, models, right? But they also assume generally a 2-quarter lag on the back end of that.
Chris Merrywell: Yes, Jon, this is Chris. And as I mentioned earlier in the call, we’re starting to see the market pull back a little bit. So I think towards — are we at the peak? I can’t tell you that. I don’t know. It appears that we’re somewhere there. I would expect it to start slowing down from what we experienced in the previous quarters. And some of the things that are coming due on the CD side, there’s not as big of a lift between their current rate and where we project we might be in a month or two. So all that being said, I think the pace is going to certainly slow down. And we’ll see what everybody does out there. It’s a fluid market as well. So but pace should slow down.
Jon Arfstrom: Okay. Okay. Ron, one more crack at the most annoying question on the call, but the margin trajectory, is it safe to assume the way it sits right now with your guide, U-shape J-shape type margin for ’24, with kind of a mid-year trough. Is that fair?
Ron Farnsworth: I think, again, assumptions around that are going to be around timing and number of cuts and where the betas are, but underlying all of it is going to be where core customer deposit flows. So just not prepared to give a guide in terms of what that looks like by quarter. We’re giving you an estimate of where we feel it could be for the full year from our target standpoint.
