Chris O’Connell: Great. And just a last one on this. Do you know when it was originated?
Mark DeFazio: I think on the inside of two years, 2022, ‘21/’22? [indiscernible]
Chris O’Connell: Great. And just, do you view this as a read through to any other parts of the portfolio? And how are you guys seeing credit transform over the past quarter and kind of the outlook going forward? And does it impact any of your appetite for long growth going forward?
Mark DeFazio: No, just as I said in my prepared remarks, this isn’t indicative of any trend or anything that’s happening in the portfolio from an asset class perspective or geography. This is a one-off situation. Keep in mind, we do a fair amount of lending here. You will have NPLs from time to time. The question is, your underwriting will get tested when you have non-PLs. And you’ll see throughout the course of the year how our underwriting did as a result of remediating this problem. I can tell you the clients are fully engaged now and they are talking to us. So I would expect this to get resolved one way or the other pretty soon.
Chris O’Connell: Great. Thank you guys. Appreciate the time.
Mark DeFazio: Thanks, Chris.
Operator: Thank you. Our next question comes from Alex Lau with JP Morgan.
Alex Lau: Hi, good morning.
Mark DeFazio: Good morning, Alex.
Dan Dougherty: Good morning, Alex.
Alex Lau: I wanted to start off with deposits. Which deposit verticals drove the increase in noninterest-bearing deposits on a period-end basis? And what are your expectations for DDA growth outside of the B2C runoff in 2024?
Dan Dougherty: The increase in DDA was driven through GPG clients. And we’ve got a modest assumption in our model that we’ll see fairly limited DDA growth going forward. I think DDA is becoming kind of a unicorn out there. It’s hard to find non-interest bearing deposits at this juncture in the market. But we do have a small — relatively small growth in our models.
Alex Lau: Thank you. And also, thank you for the breakout of the $230 million in deposits from the new deposit initiatives. Can you talk about the opportunities for these deposit verticals to increase their contribution to the funding base this year?
Mark DeFazio: I think you’re going to continue to see stable increase. I mean there are projections out there that are reasonably opportunistic. But I think they’re going to continue to contribute. And our goal is, as we said in the past and as we have been historically, that our funding will be — our loan growth will be funded specifically by core funding, and they will continue to contribute. How much in any one quarter or year, it’s hard to say, but that’s our goal, to continue to stay a core funded institution.
Alex Lau: Thank you. And then a question on deposit costs. Given you’re a higher payer on deposit costs, how do you think about the beta moving downwards as the Fed cuts the funds rate and the timing given your deposit mix? For example, do you have the mix of index deposits or how much is exception pricing? Thanks.
Dan Dougherty: Our assumptions trend toward a very conservative 65%, inclusive of the derivatives that we have on the balance sheet. We take the derivatives off, it gets closer to 75%. I think we’re pretty hopeful that in fact it will be higher than that as the short rates move down.
Alex Lau: Thanks. And then one follow-up on expenses. You mentioned the 10% to 12% growth on core non-interest expense. What is the normalized expense base you were referring to for 2023?
Mark DeFazio: I believe I quoted that as Q4 annualized and then grossed up with the 10% to 12%.
Alex Lau: And were there any project expenses in 2023 already? And on the project expenses as well, is there a sense of timing? Will it be more front-loaded or pretty spread out throughout the year?
Mark DeFazio: There were some modest expenses in ‘23. 2024 is going to be quite lumpy. It’s very difficult to say they will be spread out through the year, but it’s going to be quite lumpy as these sub-projects, if you will, come online.
Alex Lau: Okay, and then just another follow-up on the B2C fee income loss over ‘24. Was that $5 million to $6 million in exit run rate for 4Q ’24? Is that the full year impact versus consensus for full year ’24?
Dan Dougherty: $5 million to $6 million is for the full year. Remember, the — when you look at the 2023 results, you got to back out the crypto from there. That’s obviously not going to be recurring. And then the adjustment, as we just mentioned, over the course of the year will be approximately $5 million to $6 million. And of course, as Mark touched on this, it’s really important. Our B2B pipeline is strong. We have a strong commitment to growing that book of business and remain quite hopeful that, that will continue to grow and provide some low cost — significant amount of low cost funding.
Alex Lau: Great. Thanks for taking my questions.
Dan Dougherty: All right.
Operator: Thank you. And we do have a follow-up question from Chris O’Connell with KBW.
Chris O’Connell: Yeah, I just wanted to confirm the expense guide. I had the Q4 annualized, so $37 million annualized, plus 6% to 8%, and then the 2023 normalized OpEx plus the 10% to 12%. Is that correct, not the Q4 annualized plus 10% to 12%?
Dan Dougherty: It’s overall. Overall is the — the comp and benefit 68% off Q4. That’s kind of a specific quote there. But overall 10% to 12% off fourth quarter annualized.
