Todd Clossin: Yes. We’ll it’s related to CECL; Dan do you want to jump in and cover that comment?
Dan Weiss: Yes, I would say if you look I slide nine you can see there’s a waterfall chart there that kind of shows the reserve build in dollars. Obviously, we saw a $3.1 million provision this quarter. That’s actually the first time in six, seven quarters that we’ve recorded a debit to the provision; the last seven quarter had been negative. And so, I think what we’ve seen kind of since the pandemic, we’ve seen a number of qualitative factors related to some of those higher-risk areas continue to roll off over the last seven quarters. And we’re to the point where I think those are more or less behind us. So, the drivers of the reserve, the provisioning, going forward, really are going to continue to be more normalized, future macroeconomic forests, loan growth, and then, of course, to the extent that we would see any charge-offs, that would also impact provisioning and reserve levels.
But I think those are the drivers probably going forward. And I would say that that $3.1 million that we recognized here in the fourth quarter is probably kind of the more normal run rate going forward total.
Daniel Tamayo: Terrific. All right, thanks again for all the color.
Todd Clossin: Thanks, Dan.
Operator: The next question comes from Karl Shepard with RBC. Please go ahead.
Karl Shepard: Hey, good morning, and thanks for taking my questions.
Todd Clossin: Morning.
Dan Weiss: Morning.
Karl Shepard: I guess I wanted to start your expanding cost, and you mentioned in the prepared about not being immune to higher interest rates. Can you expand on that a little bit and maybe where you are you starting to see signs of pressure? And do you think that can ease as the Fed slows or do you think there’s some expectation of lagging pressure as we move through 2023?
Todd Clossin: Yes, that’s a really great question, particularly when will the Fed start to drop rates, right? I mean our forecast, as Dan mentioned, is to go to 5% in the first quarter, and stay there throughout the year. So, that’s kind of what we’re anticipating right now. If rates do start to drop toward the end of the year or into 2024, I think what we saw on the last time there was a drop, we were able to continue to have that deposit advantage by being able to be aggressive in dropping our funding costs because that deposit advantage really is throughout all different rate cycles. So, we would be in a position, I think, to be able to bring deposit costs down if the Fed starts dropping rates at some point in the future.
I guess the question here now is we — we’re not immune to deposit cost increase, but because of our strong core funding base, it allows us to lag. And we’ve had that historically, that benefit. And we’re seeing it again now. And obviously rates moved up a lot faster, a lot quicker than anybody in the industry really has seen before. So, relying on betas from years ago really may not be very applicable to now. So, we’re watching it pretty much on a weekly, if not daily basis, what’s going on with deposit cists. We’ve been proactive with some of our higher-tier savings rates, some new CD specials, giving some pricing authorities in our markets, and things like that. So, we are addressing that, but how quickly we need to address that, how much we need to address that would really be dependent upon what we need for loan growth, but also what we see happening in the economy here over the next month or two.
