Chris Navratil: Yeah, Andrew. I’d say there’s some conservatism built into that number just based on unknowns on the liability side of the balance sheet. We understand pretty well our asset repricing and our capacity to continue to drive some asset repricing via being opportunistic in the bond portfolio and other means. But the liability side is just too much of an unknown as we move forward as to how deposits might reprice where the real kind of top of the cycle is going to be and how long it’s going to extend and based on that, there’s just some uncertainty as to where we’ll level out on NIM. We’re very optimistic, a lot with you that on the asset side will continue to drive up and we’ll continue to realize the appreciation in the marketplace, but the liabilities are just uncertainty at this point, what’s driving that forecast figure.
Andrew Liesch: Got it. All right. That’s really helpful. And then just shifting gears just to the allowance and the provision reserve ratio has been in mid-130s now for the last few quarters. Just kind of — I mean, absent (ph) any major shift in Tulsa modeling or the credit environment, just kind of the level that you guys think that we should be forecasting out those here?
Chris Navratil: Yeah. We continue to think about provisioning and 10 basis points of average loans. We’ve kind of been running CECL in this challenging economic environment for a while, which has led to a continuation of that 130-ish basis points, 130 to 140 of total loans. I don’t know that I have a number of post any economic constraint of where we would think that CECL levels out in a normalized operating environment. But it’s less than 135 basis points based on historical loss experience to date. So if the economic turmoil was to resolve itself and losses work to be realized, you’re going to wind-up having to release some of that provision via credit provisioning. But as we stand today with the level of uncertainty it still exists, keeping it around that 135 basis points continues to make sense.
Andrew Liesch: Got it. All right. That covers my questions. Thanks so much. I’ll get back.
Chris Navratil: Thank you.
Operator: Thank you. One moment for questions. Our next question comes from Damon DelMonte with KBW. You may proceed.
Damon DelMonte: Hey. Good morning, guys. Thanks for taking my questions. Just wanted to circle back on the margin outlook as we look into ’24. How would you characterize the positioning of the balance sheet should the Fed start to cut rates in the back half of the year?
Chris Navratil: Yes. So we’re working continually on assessing sensitivity, both asset and liability to manage the risk as it relates to downward trend in the Fed stance as we move forward. And today, we’re — we continue to be a little bit asset-sensitive, which is what you’ll see in our changing NIM period-over-period. But the majority of our liability book is still a variable rate deposit portfolio, so capacity to reprice very quickly. The challenge just becomes how does the market dynamic behave as we go into a rate reduction cycle from the Fed, so if competition is aggressive, very irrational and rates continue to go up, even if the Fed begins to drop down, we’re going to see some asset sensitivity, which is detrimental to NIM in the near term. But the majority of that of our liability book is variable rate deposit pricing. So we do have capacity to reprice it quickly, just depending on overall market dynamic.
Damon DelMonte: Got it. That’s helpful. Thank you. And then with respect to expenses, it looks like the outlook for ’24, if you basically take your forecast for the fourth quarter and add that to the first three quarters of ’23. It seems very minimal growth, ’23 over ’24. What are some of the things you guys are doing or what gives you confidence that you can kind of keep the growth at a very minimal level kind of in light of the inflationary backdrop that we continue to deal with.
Chris Navratil: Yeah. So we’re working hard on a number of things to rationalize some vendors and to the extent that we’re adding folks into our vendor mix, replacing legacy vendors. So it’s not incrementally additive cost. And there’s some things that are just built into non-interest expense that won’t repeat next year from a baseline perspective. So we’ve talked about in the past, those solar tax investments that we’ve made that historically have been reflected above the line as part of non-interest expense, that’s going to go away materially next year. So this year, we’re modeling about $4 million in total expense above the line. That moves into tax expense next year and will essentially be pulled out of non-interest. So that’s incremental cost saves of about $3 million because there will still be some dollars in that NIE line.
And then just being strategic on some contracts, I think we have opportunity to mitigate some additional cost there as well where we can hold the line a bit and the expansion of NIE on a normalized basis when you pull out that solar tax, those solar tax dollars.
Damon DelMonte: And those solar tax dollars coming out of the non-interest expense are probably what’s driving the higher effective tax rate as well?
Chris Navratil: Yeah. That’s right.
Damon DelMonte: Okay. And then just lastly, on the M&A, Brad, you imply that kind of optimistic that some deals will be happening in the future. How would you kind of handicap the odds of you guys signing up a partner in the next call, six to nine months?
Brad Elliott: I would handicap — I’m not giving you a percentage, but I’d handicap it as pretty strong.
Damon DelMonte: Okay. That’s all that I had. Thank you very much.
Operator: Thank you. One moment for questions. Our next question comes from Terry McEvoy with Stephens. You may proceed.
