Ebrahim Poonawala: Good morning. Yes, a few follow-up questions. Maybe one, I’m not sure if you already mentioned this, apologies. Just around the expense outlook as we think about core expenses. Just remind us in terms of the growth rate you are thinking about as part of your PPNR guidance. And also the one key seasonality that we should be thinking about.
Ken Vecchione: So I think about last point. What is the one thing we should be thinking about? Do you hear that point?
Ebrahim Poonawala: The first quarter seasonality, like I’m assuming like first quarter historically is marked the high watermark for the efficiency. I’m just wondering if there should be a seasonal lift in expenses that we should be baking in.
Ken Vecchione: Yes, I’ll take the second part of that first. The answer is yes. Our expenses tend to pop up a little bit more in Q1. But overall, our efficiency ratio we’re targeting is in the low 40s, which we’ve always targeted, and we have one of the leading efficiency ratios in the industry. We kind of feel that that’s the right place to be. It allows us to continue to make the appropriate investments in the bank on both risk management and technology as we continue to get bigger and bigger, but it also allows us to invest in new products and new businesses. And many — for the last several years, we’ve been investing, as I said, in settlement services, in business escrow services. We’ve got a new initiative. We just recently launched in deposits that we’re not ready yet to talk about, but we built last year that’s off to a good strong start.
So keeping the efficiency ratio in the low 40s allows us to generate the operating leverage we want, also invest money today for future performance.
Ebrahim Poonawala: Got it. And what does that imply just in terms of how you’re thinking about just the expense growth for the year? Is it high single digits?
Dale Gibbons: So it’s going to be high single digits, might be low double. If you look at the kind of the PPNR element, of 11% to 15%, holding the efficiency ratio, basically flat at as to where we are. Could provide for a little more room. But what we’re going to do is we’re watching this closely. I mean — and so as things — we authorize FTE, as we continue to demonstrate performance on growth of the balance sheet, we’re going to have revenue feed our expense expansion.
Ken Vecchione: I want to make sure we’re not talking across each other. So my commentary was on the adjusted efficiency ratio without deposit costs because Dale just talked about that, putting it towards net interest income. So on the adjusted efficiency ratio without the rise in deposit costs, that’s what we think we’ll be in the low 40s. Okay?
Ebrahim Poonawala: Noted. And — go ahead. Yes. And I guess maybe a separate question. Going back to credit, and I understand the macro uncertainty. But when you look at your PPNR guidance that you’ve given, even assuming provisions mid-year 2020, would imply earnings at about $10.50. I’m just wondering, is there anything around the loan book that causes that hesitation when you think about EPS outlook for this year relative to your guidance? And obviously, you expressed comfort with the asset quality of the book. I’m just wondering why you — what would be the scenario in which that $10.50 EPS plus or minus would not be achievable?
Ken Vecchione: So as you know, CECL works, it really comes down to the end of the year and then the outlook into 2024. So if Moody should turn more bearish as we put on loans, you’re increasing your provision for the life of that loan, not for the risk that’s in the book. And so that’s why we’ve been a little bit more reticent on quoting where we think EPS numbers are and then stay more on the PPNR side. Those are the things that we can control. On asset quality, again, we’re not seeing any issues at this moment. I would point you to a little bit the last two slides in the presentation, where we think we’ve been able to grow in loan growth in a very prudent way and keep our charge-offs down. And I would remind you that 54% of the book is either in short or resilient or resistant categories.
Ebrahim Poonawala: Got it. And if I may, one just follow-up. When we think about the loan growth, 10% to 15% for this year, a lot of macro uncertainty. Like should we be worried in terms of the quality of loans that you’re putting on the balance sheet right now at this point in the cycle? Like what — how — just from a client selection standpoint, is there a risk of adverse selection?
Ken Vecchione: No. So we’re not going to grow for growth’s sake. So the asset quality is incredibly important. In my opening comments, one of the things I want to get rid of is any connection to the GFC 2007 and ’08, ’09. I want no connection to that, and we are a completely different company. So we want to grow above trend. Yet at the same time, we want to have above-trend asset quality or best-in-class asset quality. We’re working on doing both. So we’re not going to sacrifice the asset quality for higher loan growth. Having said that, after going through our reviews, we think the range that we gave of 10% to 15% allows us to grow the loan book without growing into a recession and also protect or remain with stable and strong asset quality.
Dale Gibbons: We will pivot as necessary as new facts and situations emerge. I mean we did this during the pandemic, one of the few banks that sustain a growth trajectory during that point in time and where we go. We weren’t sure, how is it two years or four years to a vaccine. So it went into a capital call and a low LTV residential, and never lost a dime on either of those. And so we’re going to be nimble about what about our — using the flexibility of our business model to sustain — hearing to sustained earnings performance improvement over time.
Ebrahim Poonawala: Got it. Thank you for taking my questions.
Operator: The next question comes from Brandon King with Truist. Please proceed.
Brandon King: I wanted to touch on loan yields. I know, Ken, you mentioned last quarter, seen a loan committee turn down 31 loans initially getting better pricing. So I wanted to get a sense of what the outlook was for loan spreads going into this year and if you’re still getting the same reception from clients?
