Operator: And our next question comes from Ken Usdin from Jefferies.
Ken Usdin : Darren, on the cost side, you mentioned, obviously, the conversions being passed. Can you give us an update on what proportion of the initially expected $330 million of saves from People’s were in the fourth quarter run rate; and if not fully there, when do you expect to get there?
Darren King : Yes. Ken, the vast majority of the saves are in there through the end of the fourth quarter. We’re probably — if you think about we were targeting 30% of the cost base, we’re like 27% or something in that range, is what we’ve achieved so far. When you look at it on a percentage basis, we’re almost there. When we look at it on a dollar basis, the run rate is actually a little bit higher than we thought it would be because of inflation. When we talk about the percent save, it’s still the same. And so, some of that will come out over the course of the year. We’re running — we’re carrying a little bit higher staffing in the branches as we stabilize a little bit higher staffing in some of the call centers. And so those things will normalize themselves over the course of the year.
But when we look at where we sit, from my perspective, we pretty much closed the book on the cost saves that we expected to achieve. A couple of other things that have worked out very positive is the onetime expenses turned out to be a little bit less than we thought. We incurred a little bit less in severance expense. We also incurred a little bit less in some contract terminations than we thought at due diligence. And the nice thing is the People’s was an asset-sensitive franchise. And with rates going up, the NII is coming in better than we thought. And so the PPNR is a little bit higher than we expected. So overall, the numbers that we thought we would realize post close and post conversion are in line to slightly better than what we thought, and we’re almost back to breakeven on tangible book value.
So overall, we’re very, very positive about where things sit early on. And as we mentioned before, excited to go to work in New England and bring M&T’s branded banking into that new market.
Ken Usdin : Got it. Great. So then one follow-up to that is then if that’s the case that you’re pretty run rate, then we can all take a look at the kind of implied underlying expense growth off of this fourth quarter and knowing that you have the seasonal step-up in the first. So can you just kind of frame that for us, just what do you think about that organic side, what’s driving it in terms of the initiatives that you’re focusing the most in terms of incremental expense growth from here?
Darren King : Yes. The biggest driver of that is compensation. And when you look at 2022, we made some meaningful adjustments to our associates’ compensation. We raised the minimum wage. We’ve been dealing with competition for talent like everyone has, and compensation expense is about 55% of our total expense base. And so when you look at the driver of that growth, it’s really that compensation cost that’s driving it. Outside of that, the other line item, you’ll see where we’ll be investing and have been is in outside data processing and software, that I think for us and for the industry, you see more and more reliance on purchased software. And with those future software contracts come licenses and maintenance fees, which tend to go up, every year.
And the other place, we’ll probably see a little bit of growth in advertising and promotion. As we continue to stabilize the franchise and introduce ourselves in New England, we’ll see an uptick in that as we go forward and then kind of normalize into what I would describe as a normal percentage of our operating expense over time.
Operator: Our next question comes from Steven Alexopoulos from JPMorgan.
