Steven Chubak: Sorry, go ahead.
Paul Reilly: Important thing for us, I mean just not on earnings, but the fact that we have so much money to third-party bank. So, we could use if we wanted to. And we really haven’t been borrowing. So, we have a lot of comfort to be able to go ahead and still have all the flexibility we need. But there has been the mix change with ESP with higher deposit costs. That’s what you’ve been seeing net-net.
Steven Chubak: Got it, that’s helpful color. Thanks for taking my questions.
Paul Reilly: Thanks, Steve.
Operator: Our next question comes from Mark McLaughlin with Bank of America. Your line is open.
Mark McLaughlin: Hi, thanks for taking my question. I was hoping you could provide us with some more color around deposit cost mix and specifically the pickup in money market and savings account yield?
Paul Reilly: Yes, I think we just sort of covered the growth and enhanced savings program balance for us, I mean in terms of the deposit cost, that is the biggest factor because that those costs somewhere around 5%. And so, to the extent that the mix of the total client cash balances shift to those Enhanced Saving Program balances, you’re picking up probably 350 or so, 3.5 percentage points of cost effectively. So, I would say that’s probably the biggest factor and the higher deposit costs. And why you saw the NIM really contract sequentially was largely due to us intentionally growing the higher cost deposits. But again, a lot of that is geography. Because effectively what we have done is raised the higher cost deposits of the Bank segment to that and savings program, and then essentially shifted more of the lower cost sweep balances to third-party banks.
And so, that shows the NIM at the Bank segment, contracting sequentially, but you see the corresponding benefit to the firm with third-party fees, which shows up in the PCG segment. And that’s why, as Steve pointed out, we were able to generate better than expected and better than industry trends, at least on the sequential basis.
Mark McLaughlin: Yes, very clear. I appreciate that context. Also, for my follow-up, how is feedback and adoption for RCS been. I was curious on what the mix between outside advisors joining the platform was versus the transition of existing advisors on the platform?
Paul Reilly: I think that the growth has been great, we’re over 10% now of our assets in the RCS division. When we first probably opened it, we had a bigger movement of internal people who wanted to go just switched platform, which again as part of the noise and advisor count, when the advisors moved from our employer independent division, we count them as advisors. And once we’re in the RCS, they’re not registered. They’re RIAs. So, they’re one firm, right? So, we dropped them out of the advisor count, so but the assets have stayed and I think the proof point in that is the growth, D&A and assets, which I think for the year, and for the quarter have been above most of the players in the market. The speed and the recruiting outside has picked up to now that we’ve gotten the platform much more robust and increased the technology significantly.
Hopefully the long-term growth will come from the outside. But we do have people here if they want to operate in the RIA format. They’re welcome to switch affiliation options. But that has slowed down over the last couple of years from the initial opening of it or more people came over.
Mark McLaughlin: Appreciate the color. Thanks.
Operator: Our next question comes from Jim Mitchell with Seaport Global. Your line is open.
James Mitchell: Thanks. Good afternoon, guys. Maybe Paul, I mean you talked a lot about sorting, I guess starting to decelerate, ESP growth, decelerating. You have some pricing benefits on third-party sweeps. If we look beyond the first quarter or next quarter in terms of the guidance on rate sensitive revenue, do you start to see things stabilizing? I guess I’m not asking for specific guidance, but if it kind of help us think through the puts and takes and when we start to see those revenues, maybe potentially stabilize?
Paul Reilly: I don’t think anyone can really tell you exactly when cash sorting will fully stabilize across the industry. I know a lot of firms have been trying to convince you of that for the last 12 to 18 months, but we’ve been trying to be pretty transparent with you guys. And so, what we have said in the last three months, at least is that we feel like we’re closer to the end of the sorting dynamic than the beginning. And you sort of are seeing that in the numbers. But we’re not going to sort of declare an end to that dynamic until we have several months of data to support that. But to your point, longer-term, we are excited about the position that we’re in now with a strong capital position, with the $16 billion, almost as cash with third-party banks.
That gives us a lot of dry powder to really grow the balance sheet when the attractive opportunities come. And we think we’ll be in a position of strength there because not a lot of other firms in our space will have the capital and funding to pursue that attractive growth. So, we’re in a great position. Again, it’s a reflection of that long-term client focus, the flexible balance sheet that we’ve always strived to maintain even when being criticized for it over the last few years, but it puts us in a pretty good position now.
Paul Shoukry: I think, Jim, I think for us to really be able to call it in and it’s really when interest rates stabilize if the Fed was starting to raise rates again, that ultimately has securities and if it’s money market funds, you have a higher rate competitors, so you have to raise rates. I mean that’s really the if — and it appears that the Fed is closer to the end of the cycle of doing that, and rates stabilize, I think sorting will stabilize also.
James Mitchell: Right. That’s fair. And maybe just to follow-up on the credit side, some pretty big additions to reserves. You said you feel comfortable. I guess, what changes that, you mentioned macro, just trying to think through how you’re feeling about the credit provision story there, given that loan growth has been pretty flattish.
Paul Shoukry: We think credits are — we like the profile, we like the risk, we’ve always tried to be proactive on adding to reserves to make sure we’re well-reserved and often are ahead of movements. The one thing we don’t control sometimes is our models. Some of our macroeconomic models are based on Moody’s. If they change their outlook, that has an impact to us. But we try to stay ahead of the credit and more, as you could see in ’09 through a very tough credit period, we did pretty well, but we’re pretty credit tough. Maybe what’s different this cycle and starting in COVID, we have sold off loans, but we didn’t like the credit yield trade-offs and risk trade-offs, and we continue to do that kind of a one-off basis. So, that’s been an extra tool that we’ve used to manage credit.
