Ken Vecchione: Brody, I’d remind you that, by the end of Q4, the 10-year treasury dropped 69 basis points, from 4.57 to 3.88, just punctuate Dale’s point. And these — the MSR balance, we have several outsized valuation firms that come in and look at that MSR and value it for us to make sure that we’re within the appropriate range.
Brody Preston: Got it. Understood. Thank you very much for taking my questions, guys.
Ken Vecchione: Welcome.
Operator: Thank you. Our next question comes from Andrew Terrell of Stephens. Your line is now open. Please go ahead.
Andrew Terrell: Hey, good morning. Dale, if I could start just — I hear your comments around the mortgage banking and kind of the potential upside there not being captured on the go-forward guide. Just to the extent the mortgage market does turn and we do end up seeing kind of upside on the fee income front over time, can you just remind us the incremental efficiency in that business? And maybe just to give us a better sense of how the expenses would fluctuate with the lift in fees?
Dale Gibbons: Yes. I mean so when they were a stand-alone enterprise, they were running at about 50%. And when we acquired them, we were in kind of the low 40s, and they came in, and that took us to kind of the mid-40s. I think that’s basically intact today. So yes, so it’s — frankly, they’re marginal rate of efficiencies, pretty close to the banks overall now that the bank has invested in elements of higher cost with technology and some of this risk management infrastructure and lower investment yields related to the building of the HQLA. So right now, our efficiency ratios are comparable at about 50%.
Andrew Terrell: Okay. I appreciate it. And then just looking at the deposit cost expense line this quarter, if I compare the disclosed expense on deposit costs versus the average balance of ECR deposits. It looks like on a percentage basis, the cost ticked down a few basis points this quarter. Have you lowered rates anywhere on the product already? Or is that more of a function of mix this quarter?
Dale Gibbons: We haven’t lowered rates. But what we have done is we have one-off clients and said, “Look, your spread relative to, say, effective Fed funds has been x and we’re going to make it X minus.” And some of this is going to happen a little — maybe perhaps a little bit later, if you’re going to do something today, but we’ve given them options. If you want to take a rate cut now, will skip to maybe the first one you get. So we’re pushing those down on a basically individually as we kind of go through this. So we are picking that up now. I think that’s going to continue into January, February.
Andrew Terrell: And did you see any attrition as a result of those conversations? Or is there any color there?
Dale Gibbons: There hasn’t been any attrition. And I think that’s an input point for us in terms of what is our pricing like relative to alternatives elsewhere. I think what it means is that the fever is broken on the rate cycle, certainly, and the opportunity to move into either other financial institutions or to move it to some kind of off-balance sheet thing that maybe is invested in treasury, all of those have fallen in terms of what the opportunity is and what they might be able to migrate to. And I think that has helped us in these negotiations. We do these one-off and, to some degree, sequentially, in case we run into a situation like that, where we’re starting to see some attrition like, okay, that’s an important point. And then we’ll ease off in terms of how many we’re doing or what we’re asking for, for them to give up.
Andrew Terrell: Okay, great. Really appreciate the time this morning.
Operator: Thank you. Our next question comes from David Smith of Autonomous. David, your line is now open. Please go ahead.
David Smith: Thank you. I wanted to circle back to those normalized NIM comments earlier in the call. Are you saying that 3.5% should be a floor or more the middle range for NIM in a typical rate cycle?
Dale Gibbons: Well, that was kind of — that was in the kind of an extended conversation of where might we head over time. And getting back to a number for handle, I don’t see that. So I mean that’s an extended expectation of maybe kind of where we might be. I do feel like we’re approaching kind of an equilibrium level now. And so the 3.5% number is not that far from that. But I’m not — that isn’t our guidance in terms of kind of where we’re headed in 2024. [Multiple Speakers]
David Smith: Yes. So if there’s nothing else on the NIM, talking about capital, you’re going to keep doing a high-teens ROTCE, and with your loan growth guide, I think that only implies something like 4% or 5% RWA growth this year. So that just seems to imply a ton of excess capital being generated and you should reach 11% CET1 pretty soon. I know 11% is a floor, but is there a level where you think that it just starts to get excessive? And even regardless of a change in ratings, just starts to make sense to turn on the buyback? If you’re still being measured with loan growth?
Dale Gibbons: Look, as we climb above 11%, I think it introduces optionality. You can build capital and then that could be part of an M&A transaction. There could be multiple things that one could be done with it. But again, it’s just — we’re not there right now. And we’re, again, cleaning up kind of the last few things that we want to change on our balance sheet. And by the summertime, I think we’ll be there in terms of the profile we’re looking for, for liquidity.
David Smith: Got it. And lastly, on deposits. Can you share how much of the interest-bearing deposits are indexed to a rate as opposed to having some level of discretion at the bank in terms of pricing?
Dale Gibbons: Well, I mean — so I mean, if you look at our interest-bearing deposit costs, you can see that that is not as large of a component relative to kind of some of the ECR elements we’ve been talking about. So there is some it is a little bit higher beta, but it is less significant than on the ECR piece.
Operator: Thank you. Our next question comes from Tim Braziler of Wells Fargo. Tim has disconnected. At this time, we currently have no further questions. So I’ll hand back to Ken Vecchione for any further remarks.
Ken Vecchione: Well, thank you very much for joining us today, and we look forward to talking to you about 2024 in a couple of months from now. Thanks again.
Operator: Thank you for joining today’s call. You may now disconnect your lines.
