Dale Gibbons: Yes. So we have — we subscribe to kind of the Moody’s kind of performance. And that has, as we indicated, kind of gradually deteriorated. Like I said, we’re not seeing that. For us, the most significant variable is really what happens on the commercial real estate metric. I think for most banks it probably has to do with unemployment. And when you look at where they are on a decline on the consensus and then we also consider S-4, those levels are still kind of well above what our advance rates are on — towards the real estate transactions. And so while they pick up a little bit in terms of loss, it’s not as dramatic as maybe some other institutions might realize.
Brad Milsaps: Great. And as you think about areas that you want to grow in, in 2023 in terms of the loan portfolio, would those be areas in your mind? I mean you mentioned wanting to grow in less risky areas, maybe areas that more risk would have, maybe more variable rate loans. Just kind of curious how to think about the areas that you want to grow in vis-a-vis kind of how that might impact provisioning.
Ken Vecchione: So I’ll say our loan pipeline still remains active. I would see us growing a little more in note financing, build-to-rent. Multifamily looks strong as long — as well as industrial. You’ll see some pickup from construction loans that we did in previous quarters that are beginning to fund up, and hotel financing will be active as we look going forward.
Dale Gibbons: Specific residential could be interesting. What we don’t want to do is get in front of Fed action and kind of decrease asset sensitivity until there’s more clarity in terms of where rates are headed, but I do believe that mortgage rates that begin with the 7 is probably going to be something that’s going to work out over time.
Brad Milsaps: Great. Thanks guys. I’ll hop back in queue.
Operator: Thank you. The next question comes from the line of Steven Alexopoulos with JPMorgan. Please proceed.
Steven Alexopoulos: Hi, everybody. I wanted to start on the deposit side. In terms of the deposit growth, the 13% to 17%, could you talk more about how you see the mix evolving through the year? And particularly, I’m curious how much of the growth do you plan on getting from ECR deposits, time deposits. It’s obviously a fairly aggressive deposit growth guide?
Dale Gibbons: Yes. So like we said, I mean in terms of actual kind of core non-interest-bearing DDA, if we could hold that flat, I think that would be a win. So — and I think the larger ponderance is going to be in interest-bearing money market accounts, and those come in different varieties in terms of spreads that we offer depending on the relationship and whether there’s a credit tied to it as well. I do think that the CV side is probably going to increase a bit more than it has, but probably to a lesser — at a lower rate than what we’ve grown recently, and then interest-bearing checking is where I think it’s also going to be kind of a strong growth area. Much of our HOA deposits kind of flows into that category at this point in time. So at the end, the DDA, I think you’re going to see it’s still going to probably diminish as a proportion of total. The growth there is going to be in ECR related, big chunk in money market accounts and a little bit more in CDs.
Steven Alexopoulos: Got it. So Dale, if we follow that through of interest-bearing deposit costs were $197 this quarter, where do you see that moving to by 4Q ’23 in terms of what you need to get in terms of this NIM being stable to up a bit? What are you assuming deposit costs rise to interest-bearing?
Dale Gibbons: No. I mean it really depends a bit on your rate forecast. But what we see is that interest-bearing deposit costs right now and I throw — if I throw deposit costs in there from ECR, we grew during the fourth quarter, our net interest income was up about $39 million. If I add the interest expense, plus the ECR charges, gave up about 3.25 of that, I think that, that range is probably going to more or less be intact. So I think we’re going to incrementally improve net interest income, including ECR debits against it, but at a diminished rate than what we saw the past couple of quarters.
Steven Alexopoulos: Okay. When I look at where some of your peer regional banks have come out this quarter in terms of what they’re paying on deposits, they — many of them have barely budged on some of these categories. Curious what’s the conversation you have with prospects? And is this just a massive opportunity for you to bring over new household’s businesses? And do you see as more of a consumer or a business opportunity? Thanks.
Ken Vecchione: Well, we’re a commercial bank, so we don’t have much in the way of consumer deposits, and so our deposits are going to be floating at the marginal higher end of interest expense. But we focus on net interest income, and we have the ability take those deposits and put them in 100% beta loans, and hence, make the spread on it. And so that’s been the conversation. We’re seeing larger clients move some of their money to us and having conversations about moving money to us. We like that. And what’s really a little bit different for us in terms of how we approach business, thought it to change somewhere in the middle of Q3 of last year is we used to lead with loans, and now we leave with the deposit conversation. And we’re very clear that there will be no credit extended unless there’s a very strong deposit relationship, and that conversation has been well received by our client base.
Steven Alexopoulos: Thanks for taking my questions.
Operator: The next question is from the line of Ebrahim Poonawala with Bank of America. Please proceed.
