The two accounts that Ken talked about are both free. If it’s a settlement account, where we’re just drawing funds for payments against them, those are still free. But if we get the positive base with a Neobank, that’s probably going to be somewhere in the range of Fed Funds minus 50, minus 75.
Operator: The next question is a follow-up question from the line of Nathan Race with Piper Sandler.
Nathan Race: A lot of my questions have been asked and answered at this point. But just one to think about kind of the reserve trajectory, maybe on a percentage or absolute dollar basis after the CECL adjustment in the first quarter. I guess I’m just curious about if you get any major charge offs on the horizon, or how you guys are kind of think about the reserve trajectory over the course of 2023?
David Becker: Well, I guess the question on the horizon is no. We continue to try to stay on top of the portfolio and have all of our teams and credit admin looking at things real closely given the uncertainty. If you, that’s why I kind of threw the number in, in with everything we released, just so you guys out there would see that the reserve is going to go up, call it in the 98 basis point range or so, 98 – 99. I guess what I would also add to that though, is most banks, especially banks are size don’t have a 20% of their loan portfolio that is in public finance. That is we’ve never had a credit loss, never had a delinquency, and the coverage ratio for that portfolio because of its nature and sources of repayment is very low.
When you exclude the public finance portfolio, the coverage ratio is closer to 115 basis points. So I think even though again, maybe credit losses, the unforeseen none of us have a crystal ball, maybe credit losses or net charge offs take up a little bit, but I think, with the increase in where we’re at with the increase with CECL plus factoring in what the coverage ratios are in our commercial lines and consumer lines, I think we feel pretty good about where that coverage is.
Operator: The next question is a follow-up question from the line of Brett Rabatin with Hovde Group.
Brett Rabatin: I just wanted to follow-up on a couple of topics if I could. One on the linked quarter increase in loan yields and funding costs. I guess first a 45 basis point increase in loan yields in the first quarter. Can you talk about how many loans or the bucket of loans it’s repricing in the first quarter? How you get to that 45 basis points? I guess just the first part of that.
David Becker: Well, I mean, it’s a combination Brett. We do have construction, I mean, if you figure that right now, the markets got a couple fed increases in there, because you’re talking about ’23, correct?
Brett Rabatin: Correct.
David Becker: Okay. Yes, I mean, between, — our construction portfolio is virtually all variable, the FBA is virtually all variable. There’s a component of C&I, that’s variable. And we also have pipelines in franchise finance that, again, that pipeline continues to remain strong. Those yields now are coming on high sevens, eights, and nines in some case. And again, we’re not really lending in certain other areas, unless we can get really good pricing. So it’s continued higher yield, new production, lower yielding stuff paying off or just amortize and cash flowing. So it’s just, it’s a combination of all those factors that should continue to drive the overall portfolio yield higher.
