Tim Braziler : Hi, good afternoon. Just a couple of follow-ups. With deposit growth expecting to exceed loan growth in ’23, what’s the excess funding going to be used for? Is the primary focus initially to down some of this near-term borrowing? Or is that excess funding going to be layered into the securities book?
Ken Vecchione: Could either or, but our first goal would probably be to lower our borrowings and take down that cost.
Tim Braziler : Okay. Great. And then, again, following up on the large bank exiting the correspondent space, and thank you for not mentioning the bank by name, but pretty large player in the space. What happens to that market share? Is that market share kind of split amongst the rest of the constituents? And are you expecting AmeriHome’s portion to grow? Or are you more or less kind of ring-fencing that and keeping the existing business as is? Was kind of competitors maybe getting more of that market share that’s up for grabs?
Ken Vecchione: So I think like some of the other competitors, they balance market share with gain on sale margin, and that’s what we do. So if we can hold our existing market share and grow the gain on sale margin, that works for us, and that’s sort of where we’ve been. And I think that’s what the industry is trying to do, and there seems to be a little discipline going on here. But without mentioning that bank that left, it’s early days, and we’ll wait and see, and we’ll clearly have more color on it as we get through the end of the first quarter.
Dale Gibbons: During the third quarter, which is when margins dropped, we did a little experiment whereby we pulled back in terms of activity and purchase volume, and we saw margins move up a little bit in that scenario. And I’m not sure that’s the reason why, but they basically stayed at a somewhat elevated place from how far they’ve fallen to in the fourth quarter. So I don’t know if we’re encouraged by that, and we’ll see what happens.
Tim Braziler: Got it. Thank you.
Operator: The next question comes from the line of Jon Arfstrom with RBC. Please proceed.
Jon Arfstrom: Thanks to everyone. Ken, a question for you on the chart you have on the Slide 18, the economically resilient portfolio positioning. That’s a mouthful, sorry. What do you expect that mix to look like in one to two years from now? I guess another way is, where is the emphasis in terms of your growth drivers from where we’re starting today?
Tim Bruckner: Tim Bruckner. You will see us focused growth, particularly through any potential or real recession, any areas that are resistant to recession. At the same time, you’ll see us reduce our exposures in some of the more sensitive areas. So we’ll do that more with precision than with a broad brush, but specifically getting — lowering exposure, getting out of industries that are particularly sensitive and then really the resistant areas that’s sticking to our net. When we talk about growth there, we’re talking about relationship growth. So these are with sponsors that we know not just at the lender level, but at the top of the house. And we’re growing specifically at low loan-to-value, high amount of sponsor investment in the deal. What we’re doing differently though, right now, we can do it, we can be more selective as we’re being very selective about the submarkets as well that we’re in if it’s real estate related, and that’s where we’re growing.
Jon Arfstrom: Okay, okay. Got it. Dale, a question for you. The PPNR growth of 11% to 15%, maybe obvious. But what do you see as the key risks, meaning what brings you closer to 11% or below 11%? And what could put you at the higher end?
Dale Gibbons: I mean, first and foremost, we see our task in front of us is sustaining deposit growth. With deposit growth, we’ve got the balance sheet leverage. We can — believe we have opportunity in the asset side to deploy this at significant spreads, which will drive NII, obviously driving PPNR, which — and of course, avoiding much in terms of the provision costs other than the higher balances. So I think that’s the number 1 thing, sustaining our deposit growth. And we’ve got a number of initiatives, and some of them are coming to fruition, I think, now. And we think we’re going to be on track.
Jon Arfstrom: Qualitative reserve size, any help you can give us on that? How big is the qualitative piece of your reserve?
Tim Bruckner: Yes, I can. It’s — as far as the — you’re talking about the qualitative adjustments on the AC upgrade, about 5%.
Jon Arfstrom: Okay. And then, Ken, just one for you. How are you judged? How are you guys judged? Is it tangible book value growth? Is it EPS? Is it credit? Where are you guys most focused in terms of the financial metrics that we look at for the coming year? Thanks.
Ken Vecchione: So as it relates to performance, it’s sort of up and down both the income statement and the balance sheet as determined by our short-term or STI compensation, EPS, loan growth, deposit growth, asset quality, operational quality and the growth in our capital base. In terms of the LTI, of course, it’s the share price, and the share price is motivated by the growth in EPS. And so those are the things that we focus on.
Jon Arfstrom: Okay, alright. Thank you.
Operator: Thank you. There are no additional questions at this time. I will now hand the call over to Ken Vecchione for closing remarks.
Ken Vecchione: Thank you all for joining us today, and we look forward to talking to you about the Q1 results in the next couple of months. Thanks.
Operator: That concludes today’s conference call. Thank you. You may now disconnect your lines.
