Andrew Terrell: Hi, maybe – just starting on loan growth, looks like timing might have been an issue for some of the fourth quarter loan growth. I guess Tim wanted to hear your thoughts on just how the pipeline stood and overall kind of loan growth expectations? And then maybe more specifically, any pockets of strength within the portfolio where you would anticipate more growth? And then conversely, any areas where you’re kind of pulling back?
Tim Myers: Yes, you know it’s a good question. In terms of the timing, yes, if you’re looking at our pipeline now at Q1, it’s not as quite as robust as it was last year, but last year was a very different rate environment. What’s encouraging is it is increasing. And depending on where you set your threshold for probability close, it’s actually the fairly decent amount given that external environment right now going into Q1. There’s, not a lot of areas where we’re pulling back per se certainly, we’re going to be cautious about large new investor real estate office property request in San Francisco. But by and large, we’re going to continue to look for – look at credits, the way we always have. And that’s why we do it the way we do.
So we don’t – whiplash our customers and our prospects with disparate credit parameters. But we are looking closely at everything the timing certainly on the payoffs. Yes, we had – a fairly large chunk of the problem loans that paid off. Certainly, the volume did decrease in the fourth quarter. I’m not sure that was fully unexpected, given the rate environment and the caution among the borrowing universe out there in this economic environment. But we are continuing to focus on growing every one of the regions we have. Certainly, one of the things that was an absorption of time and effort this year was bringing American River Bank into Bank of Marin and then certainly on the commercial banking side embedding credit culture people. It took some time to rebuild that team, as we’ve talked about in the past, and they’re doing a really good job.
So the production across our regions was fairly typical. Marin, Napa, Sacramento, Oakland, and we continue to believe we can drive growth in all those areas, and we’ll continue to look for ways to generate activity that leaves the loan growth.
Andrew Terrell: That’s great color, I appreciate it. And maybe just kind of sticking on that point, the competitive dynamics for new loan growth today and I’d be curious, are you – have you seen spreads compress as rates – market rates have gone up or are you still getting kind of similar spread as 12 months ago for new loans?
Tim Myers: So certainly, the yield on loans that we’re booking is up in every category. I really can’t speak to a consistent trend on spreads, but I have no doubt the level and type and nature of the competition that we’re going to see heading into early this year is not the same we saw in the first two quarters of last year. It’s always a competitive market, but we have a lot of competitors that are focused on very disparate things and different things right now than they were last year at this time. So, I can’t really promise how the spreads are going to continue – by way of competition, but we’re certainly happy for the higher yields and being asset sensitive helps.
Andrew Terrell: Okay. And maybe last one for Tani. Do you have an expected tax rate for 2023?
Tani Girton: That’s a tough one. I mean I think it – kind of hovers around 265. Our tax rate was a little higher this year because as a total percent of the balance sheet. The tax-exempt earnings from munis and bank-owned life insurance played a smaller role in reducing the tax rate. On the other hand, we didn’t have as many non-deductible merger expenses in 2022. So, there’s nothing jumping out on for that – in the horizon to have a significant impact on our tax rate.
Andrew Terrell: Okay that’s it from me. Thank you for taking the questions.
Tim Myers: Thank you.
Operator: And we’ll get to our next question on the phone lines – it is from Woody Lay with KBW. Go right ahead.
Woody Lay: Hi, good morning guys.
Tim Myers: Good morning, Woody.
Woody Lay: I wanted to circle back on the buyback. I know it depends on sort of a myriad of factors, but just as it relates to capital. I mean, do you have a constraining capital ratio that you sort of look at in regards to the buyback?
Tim Myers: Well, I think that’s been a bit of a moving target. Early on, when deposits were running up, there was obviously a focus and a lot of talk about the leverage ratio, now tangible common equity to tangible assets and certainly taken sort of more aerospace about conversations. So we’re really looking at all of those, honestly. And we want to, again, be in a position to take advantage of opportunities, but being cautious about the impact that would have and how that might affect our margin of safety of capital going forward in the environment.
WoodyLay: Yes. Makes sense. And then just last for me, I believe in your opening remarks, you sort of mentioned that you’re focused on improving profitability ratios. If I sort of look at sort of focus on pretax pre-provision, I mean, do you think 4Q is sort of the high watermark? Or do you think you can continue to see improvement in the year ahead?
Tani Girton: That’s a tough question. I mean, with provisions — okay, you want to talk pretax pre-provision. We still stand to benefit from an increase in interest rates. So not necessarily, but also the balance sheet size does make a difference. So to the extent that our balance sheet is steady, then I think we can continue to see improvement. So there are just a lot of moving factors in that question. So sorry to punt on that one, but I can’t really predict.
WoodyLay: All right, awesome. Thanks guys.
Tim Myers: Thank you.
Operator: We do have a question queued up from the line of Tim Coffey with Janney Montgomery Scott. Go right ahead.
Tim Coffey: Great. Thank you. Good morning. Thank you for the opportunity to ask the questions.
Tim Myers: Good morning, Tim.
