And so initially our view was, hey, we have some more rate sensitive balances, they’re moving away and we’re willing to stomach that. We don’t think that really changes our franchise value. In fact, having a higher percentage of core deposits is probably a good thing. And so, we’ll let that happen. We did though, as we continue to see deposit balances run down, decided at some point, hey, we don’t want to be too far away from the market and where we need to be. We do want to balance rate with balances and sort of find some sort of balance in there. And so, we did make the determination to increase the rate on that balance product, not in the higher ed space, but on the BaaS product. And we initially moved the rate by 50 basis points in July, and we did move the rate again by another 75 basis points in October.
So, we have had those rate increases that does affect our revenues because as I say, the cost of interest is part of the servicing fee calculation. So that reduces what we earn on those deposits. And then, obviously, the low — or balances means you’re earning on a lower base. So, you sort of have both a volume and a rate impact from the movements and rates and balances. And then I think he did ask too, longer term, how do we get to pass that through? Or how do we benefit? Again, if we had today a variable rate servicing agreement where the yield that we were earning on deposits was moving up with Fed funds, then if we are able to move deposit pricing up at the same time, there would be no impact if we’re able to lag deposit pricing increases, which is what I think you find is typical in the industry.
You actually could see some temporary widening of the spread, although over time it would probably catch back up, but you would be able to pass through the — earn more on deposits to offset that increase in rate. And that is ultimately the goal. And longer term, I know we’ve talked about this quite a bit, but the goal is, hey, variable rate pricing agreement is going to help us in the near-term offset these rising deposit costs and will give us an immediate benefit. Longer term as part of a bank, we see further upside because then we’re able to earn more on the asset side, the loan side of the balance sheet as well. So, I think there probably are two steps to this. One is sort of getting away from the squeeze and sort of normalizing some spread just on the deposits.
And then longer term, by layering in loans, you should see some additional pickup in earnings.
Brian Dobson: Yeah. Excellent. Thanks for that color. And so your new banking-as-a-service partner that’s a very exciting prospect to be announced next year. Do you have any more color on maybe when we could expect that? Is that going to be a first half event, or a back half event?
Bob Ramsey: Yeah. So, the expectation is that it will be in the first half. So that’s what we are working towards. But we will — we’ll let you know as soon as we’ve got something more definitive to send.
Brian Dobson: Excellent. Thank you very much.
Operator: Your next question will come from the line of Chris Sakai with Singular Research. Please go ahead.
Bob Ramsey: Good morning, Chris.
Christopher Sakai: Good morning. To go along the last question. So can you provide any color as far as what sort of revenue opportunities this new large banking-as-a-service client will bring in the first half of 2023?