A lot of those bank portfolios — you saw sort of Silicon Valley was an outlier, but other banks had a little bit of the same issue, but to a lesser extent, lots of Fannie 2s, lots of Fannie 2.5s. These are sectors that went down 18, 20 points in price far more than a lot of these banks thought could happen, they had big losses on available for sale, held-to-maturity portfolios. And now they’re sort of underwater with their deposit cost versus the book yield on those assets, right? So it’s been challenging for them. And so some of them were doing relative little securities investments last year, and we’re doing a lot more on the loan side to reduce mark-to-market volatility in their portfolios. Now in response to Silicon Valley Bank, you’re seeing a new regime sort of like a bank regulation talking about different capital charges, especially different capital charges for banks to $100 billion to $250 billion in size.
Different ways of thinking about CECL. So what loan loss reserves you’re going to have to have on loans, referencing FICO. And so it’s all those things in aggregate, sort of, I think tilt the attractiveness from banks a little bit away from loans and back more towards securities. I think the issue so far this year is that there’s just been — the first and foremost concern has been about deposit stability because if you’re not concerned about — you don’t believe you have a stable deposit base, then you don’t want to buy anything, right? And so they bought very little. I think that — I think as Silicon Valley and Signature Bank, as those takeovers get further and further in the rearview mirror and you have some deposit stability even at a higher cost, you’re going to start to see some banks that will say — look at the investment landscape, want to make investments.
And I think when they look at that investment landscape, they’re going to find MBS as attractive relative to treasuries, may be attractive relative to parts of the commercial mortgage market. And so I think you can see the ones that are sort of in the best position to take advantage of that.
Crispin Love: Great. That makes sense. And then just one last quick one for me. Could you give any update or book value third quarter to date?
Larry Penn: No, we don’t.
Operator: And our next question comes from Eric Hagen with BTIG.
Eric Hagen: One follow-up on the spread environment, just the portfolio. I mean how do you — do you have an idea for how much prepays could pick up in the portfolio if mortgage rates sort of rally from here to kind of different levels of rallying? And is there a realistic upper bound do you think you think about for the portfolio even in like a bigger rally for rates?
Larry Penn: Well, yes, I think there’s — obviously, there could be a lot of numbers to go over. I think we can — happy to take that off-line, but — and sort of go through maybe each coupon. The non-banks are such a big portion, especially as refi activity starts to pick up of production that I mean and loan balances are higher. I mean there’s a lot — if rates rally a lot, I think you could see some very, very fast prints, but I think it probably makes sense to maybe talk about that offline, sort of go through the market generic coupons and we can tell you kind of what we think.
Eric Hagen: Sure. I mean I’m not trying to get too exact, just maybe more how you think about it in kind of just the sensitivity in the portfolio, just maybe at a high level…
