Ben Gerlinger: Got you. No, that’s good. So the next question I had was the spreads you’re seeing in the market today. Like it seems like a lot of the $100-plus billion bank are stepping back in certain categories. Are you seeing better spreads because there’s less lenders available or less lending being done from the bigger banks? Or is it kind of more just calling your shots and you’re not seeing too many different — because I mean, you do bank solid clients, so they typically would have the best rate available because it’s a competitive market. I’m just kind of thinking about the yields going forward and especially pricing in a couple of cuts in the back half of the year.
Ken Vecchione: Yes. It’s almost market-by-market dependent. There are just things going on in different markets for us. If you’re talking tech and innovation, spreads there really haven’t moved, but a little more competitive because there’s less deal flow because they’re raising less cash there. If you’re talking some very specific lot banking deals, spreads are strong and we were getting our pricing. And some of these banks are moving in and moving out. It’s really hard to give one generic answer as to, well, are they all pulling back or not.
Ben Gerlinger: Got it. Okay. If I could just sneak one more in. It seems like you said 11% is a bit of the floor going forward in capital. You also referenced the credit rating. The moment we get a public announcement from a credit rating agency, is that a catalyst event for you guys? Or is it more just you get to the 11% is kind of what you guys agreed upon? And once you hit 11%, you kind of operate a bit more autonomously?
Ken Vecchione: Well, the 11% is, as I said, a floor for us. We have to engage or continue to engage with the rating agencies. That’s usually a two-step process. They usually put you on outlook positive and then come back and make the change. As far as I know so far, we got a change in our outlook from Fitch, but I don’t know if there’s any other bank that had a change in their outlook. So my friends at the rating agencies may be a little slow to pull the trigger. But when we go in there, we want to go in there with great capital levels, a firm, steady, stable asset quality and very strong liquidity. And that’s how we’re positioning the company. In the meantime, our corporate trust group is still operating and bringing in good business. They could just bring in more business with the upgrade to an investment rating. So they’re doing just fine. This would just accelerate their opportunities to bring in more business.
Ben Gerlinger: Got you. Okay. I appreciate it. You’d probably be at 12 by the time you get that announcement. But I appreciate the time, guys. Thanks.
Operator: Thank you. Our next question comes from Brody Preston of UBS. Your line is now open. Please go ahead.
Brody Preston: Yes, thanks. I just wanted to follow-up on the loan yields. I understand the move from the HFS to HFI. I was hoping, Dale, if you could provide what the spot rate was for the loan portfolio at the end of the quarter?
Dale Gibbons: Yes, 703.
Brody Preston: Okay. Thank you very much. I also wanted to get a better sense for the BTFP. What was the rationale behind paying off the BTFP but not more borrowings. I think the last time in your 3Q 10-Q, I think the rate on the BTFP was 4.76 versus the average short-term borrowing rate of 5.74 this quarter. I just wanted to better understand the thought process there.
Dale Gibbons: We don’t — frankly, we just thought we didn’t need to be borrowing from the Federal Reserve. And so we did that. I agree with you it’s at a modest cost. It was going to mature anyway. This is something that we had acquired in March of last year, and it was a 12-month deal. So it was a couple of months early relative to what it would have been. We thought we just — it was part of the 2023 situation and leave it behind in 2023.
Brody Preston: Got it. Thank you. I wanted to clarify just on the ECR-related deposits. I think the slide says you have $17.8 billion of ECR deposits at quarter end. But you got about $14.5 billion of NIB. So is there another component of the ECR-related deposits that’s technically still interest-bearing but also gets compensated through ECR?
Dale Gibbons: Yes, correct. So what will happen is, depending on what type of client it is, we could have a situation whereby the manager gets the ECR and the owner gets the interest income. So you don’t really see that in mortgage warehouse because those are really non-interest-bearing deposits. But on an HOA, for example, it’s a dual situation most commonly, whereby the aggregator get an earnings credit rate on the dollars that are owned by the HOA itself. That is not interest expense because they simply have no claim on that liability to us and the deposits of that enterprise. So that’s why that doubled up.
Brody Preston: Got it. And then the last question I had was just on the MSR loss. I just wanted to maybe understand the mechanics a little bit, Dale. Did you — throughout the course of this past year, did you maybe put a higher mark on the MSR and the correspondent production? Capitalize it at a higher rate? And did that impact the gain on sale margin at all and then you’d have to take a loss on it when rates moved against you and you sold the MSRs this quarter? I just want to understand the moving parts there.
Dale Gibbons: No, I think — no, no, I wouldn’t say that. I mean, it was kind of the volatility around what happened. So we saw CPRs decline to the slowest that I think I’ve ever seen, and maybe somebody in the business has been around. But they were like 3% to 4% of constant prepayment rate, and that is exceptionally low. And then when rates picked up again, I mean, rates fell, CPRs jumped, and maybe it was a little bit of a catch-up from refis or whatever that had been delayed. And so as a result of that, we had a gain in our hedge that fell short of the loss in terms of the valuation. And the result was the value of those servicing rights fell by $100 million in the fourth quarter, and we were $14 million shy of what we picked up in terms of gain on the hedge. And that was because we had such a rapid velocity change between a very low CPR, maybe the lowest ever, to something that was more normalized.
