Daniel Cardenas: And what were paydowns and payoffs like this quarter?
Mark Kochvar: They were, I mean, in line. We didn’t see heavy path by any stretch. So they were kind of more normal of what we’d expect both on the consumer and the commercial side.
Daniel Cardenas: And then maybe for Chris, thoughts on M&A, what’s the environment looking like right now for you guys?
Chris McComish: Well, as I said, my job from the day I got here is to prepare for growth and build a foundation for growth. And we control — we have a lot more control over the organic growth than we do to the inorganic growth. But we believe and our financial results would tell us that we should be a participant in future consolidations. When, where and if and how that happens is that’s — it will happen in the future, but it’s certainly something, again, that we’re very focused on from a preparation standpoint.
Daniel Cardenas: So as the foundation is laid, I mean, what kind of — in terms of parameters, what size of institution are you guys most interested in?
Chris McComish: Some of it is whether it’s size or make up is probably a better answer. We talk about the health of the deposit franchise and the importance for that being a foundation for our growth. The geographies that we’re in and the adjacent markets culturally are very attractive to us. We don’t see ourselves doing something kind of in that billion dollar and below range, that makes a lot of work for not a lot of gain. But that being said, it’s almost is — you’re really well aware, is very event driven. So it’s about building relationships and understanding that there is the right strategic and cultural fit, while at the same time, the financial opportunity is there for growth.
Daniel Cardenas: And last question for me then. How should we be thinking about deposit growth in 2023 for you guys?
Mark Kochvar: I mean our expectations for growth are pretty modest on the deposit side. I think we’re going to be focusing a lot on mix and developing the relationships that Dave and Chris were talking about. So we would expect, especially on the business side, a decent improvement in the DDA quality. We might not see the largest increase in the balances but the quality of that DDA should be better, but a lot of shifting. We would expect to see some higher CD balances by the end of the year, but some of that’s going to come just from migration from other areas of the bank. So net-net, we’re not looking for huge deposit increases. We’d consider that successful given the rate pressure that we expect.
Chris McComish: We’re very focused on — as we talk about the quality of the franchise and the mix and tying it back to customer relationships.
Operator: Your next question will come from the line of Manuel Navas with D.A. Davidson.
Manuel Navas: Can you add a little bit more color around how you’re thinking about protecting the margin? You said you brought down the floating rate to like 42% in general. Like where could that go, is it kind of opportunistic and what level are you trying to protect?
Mark Kochvar: So we’re trying — when we look at the protection, there’s kind of 2 pieces of that. One is on the — just on rates down protection should the Fed reverse course. So that’s primarily the hedging that we’ve done is more meant to protect that. So we have certain internal parameters that we look at to just shop type analysis and ramp type analysis and we’re trying to limit that net income decline to a percentage we can live with. And so that that additional hedging, combined with the structure of the deposit book and the borrowings that we have, factors in that. So the fact that we’re actually borrowing a little bit now on the short end works in some ways is some additional rates down protection. So if rates move down actually on the Fed side, we would expect to see a little bit larger — or certainly larger compression than if rates don’t go.
So we limit — we’re trying to limit that. On the maintenance side, it’s more about this back to this deposit franchise and trying to maintain higher quality so that, at the end of the day, we have customers that are rate — a little bit less rate sensitive that aren’t as demanding for the top of the market rates and our hot money. So that is something that we’ll continue to work on over the course of the year. So that hopefully, we can tell you at the end of the year that our deposit franchise is of higher quality and that will help support reducing the amount of margin compression that we would see.
Operator: I’d now like to turn the call over to Chief Executive Officer, Christopher McComish, for closing remarks.
Chris McComish: Okay. Well, thanks to all of the analysts on the call and your engagement and your questions. We greatly appreciate your interest in the company, and you help make us better and we thank you for that. So we’re off into the new year. And again, we’re very proud of ’22 and we’re moving forward into ’23. So thanks. Look forward to talking to you again soon.
Operator: That does conclude today’s meeting. Thank you all for joining. You may now disconnect.
