Jon Arfstrom: Yeah. Okay. Thanks on that. It’s just bigger than I thought, and that helps me understand that. Ken, you mentioned very early in your prepared comments on the upper teen return on tangible as your goal. How do you view the sustainability of that? I mean if you can do that, the stock goes up, but is that the key metric you look at and what do you think about sustainability of that longer term?
Kenneth Vecchione: Yeah. Well, we wouldn’t have put it in there, if we didn’t think that we had a high confidence level of getting there, it will build up through 2024. And again, everything we talked about on the last earnings call and this one is about the earnings — exit or velocity rate out of ’24 into 2025. Now that return could actually spike up in the event that the Fed does take some more actions and reduces rates, and then you’ll see a greater share of fee income comes from AmeriHome. Right now, we kind of have that at a basic steady state of where it is today. But rates come down, say, 100 basis points over the next four quarters or whatever, you can see AmeriHome really gearing up and reducing far more income and generating a higher return on equity for the entire company.
Operator: Thank you. The next question comes from the line of Erik Zwick with Hovde Group. Your line is now open.
Erik Zwick: Good morning, everyone. A quick follow-up question, maybe kind of a multipart question regarding your loans that are secured by real estate collateral. First, I’m just curious how often are the individual property valuations refreshed and what percentage of your portfolio has received updated valuations, say, in the past six months. And the reason I guess I’m asking is that CRE transaction volume has — in certain markets has been somewhat muted in recent quarters, and that can potentially obscure or slow market recognition of changes in values in either direction, right, up or down. But with current concerns that higher rates have put pressure on values, and how comfortable are you that the valuations you’re currently using and reserving against a reflective of current market valuations?
Timothy Bruckner: Sure. Thanks. That’s a good question. I’ll take it. Tim, again. Okay. So a couple of things just to level set, we’re a bridge and construction lender in commercial real estate, okay? So there isn’t a scenario here where we have term loans that we’re waiting for a maturity to look at or that are benefiting from a long-term fixed rate that was put in place in a different environment. These are floating rate loans. And we value them against appraisal and performance on an ongoing basis. All of our documentation includes terms for reappraisal and re-margin. So those thoughts around value are critical to us and that isn’t something that we wait for it to fall or a maturity to handle. Additionally, we have substantial submarket data that we track to track trends and value.
But in advance of that, we’re tracking the trends in submarket occupancy, so that we can really understand how that will translate to the value in situations when there’s limited market sale activity.
Erik Zwick: Thanks, Tim. I appreciate your color. That’s all for me today.
Operator: Thank you. The final question comes from the line of Zach Westerlind with UBS. Zack, please go ahead.
Zach Westerlind: Hi. Just a quick follow-up on the ECR. Dale, I know you said that you guys are trying to get ahead of those kind of higher cost accounts. Do you think that the beta on the ECR rate on the way down when the Fed start cutting, do you think that could be equal to or exceed the beta that we saw on the way up?
Dale Gibbons: I mean you have to kind of segment that into what types of ECRs there are. Within the mortgage warehouse side, yes, I think we’re going to be at or near 100%, perhaps even over 100% for some clients. But in total, it will be lower than that as we use ECRs for HOA deposits as well. And so those started at a much lower rate to begin with. So I do think that we’ll be at least as fast as we were on the way up, on the way down and maybe in some cases even a bit better.
Zach Westerlind: Understood. Thank you.
Operator: Thank you. I would now like to hand the call over to Ken Vecchione for closing remarks.
Kenneth Vecchione: Thanks, everyone. Look, we think we had a good quarter. We’re very pleased with the balance sheet repositioning as we stated, and we look forward to the next call to tell you more about our progress. Thanks again for spending some time with us today.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect your lines.
