Michael Perito: Thank you, guys.
Operator: Thank you. The next question today comes from the line of Joseph Vafi from Canaccord. Please go ahead. Your line is now open.
Joseph Vafi: Hey guys. Good morning. Thanks for the extra color here in your report. I just wanted to circle back maybe, Alan, to some of your comments you made a couple of weeks ago on the pre-release. And I know you’re not providing guidance, but kind of a broad rule of thumb is to continue. A couple weeks ago you said to look at where Silvergate’s deposit base was, perhaps six or eight quarters ago and kind of extrapolate out interest income today based on that same level of deposits. Then just wanted to make sure you think that that kind of rule of thumb still makes sense and then I have a follow-up.
Alan Lane: Yes. Joe, I really appreciate you asking for that clarity because I don’t — that’s not what I meant when I was referring back to, as you said, six or eight quarters ago. I wasn’t at all focused on like the interest income, the net interest income side of things. It was more reflective of — my comments a couple weeks ago in this regard were more reflective of the fact that it was only a little over two years ago that we were essentially this size in terms of deposits, and therefore, we have a pretty good idea as to what staffing level will be required in order to support this adjusted size. And also kind of embedded in that observation and tying this back to some of the comments that Ben was just making, also reflective of the fact that we expect to have fewer customers and also a streamlined product set, which are all very similar to kind of where we were a couple of years ago.
And so, my comments of a couple weeks ago were really meant to just share with you all that we’ve been here before in terms of running a profitable company in — that it has fewer customers and lower deposits, but that still serves this ecosystem with the critical infrastructure that we provide. As to the interest rate environment, we’re in a very different interest rate environment today versus where we were back then. You may recall that interest rates essentially went to zero shortly after that, like kind of eight quarters ago, when the pandemic hit. And during most of our growth throughout 2020 and 2021, we were in a zero interest rate environment with the three-month treasury yielding less than 10 basis points. And so, today, we’re in a much different interest rate environment.
And so, we’re not at this — we never try to predict interest rates. We just try to understand how different interest rate environments might impact our business. And we’re certainly going through that same analysis today with a lower balance sheet, but a higher interest rate environment.
Joseph Vafi: Sure. Thanks for that color, Alan. Then maybe a follow-up, I mean, obviously you’re maintaining a super liquid balance sheet right now with cash in excess of deposits, which is not something historically that you’ve done. Is there — can you provide maybe some guideposts for us on to when you know that — the balance sheet kind of may normalize over time here relative to maybe shrinking down that overly liquid balance sheet and cash in excessive of deposits? Thanks.
Alan Lane: Yes. It’s a fair question and I’ll just go ahead and take this one too and just say that I’ll mention the same thing I always mention, which is, we don’t provide guidance and it’s really difficult to predict. But, let’s just focus on kind of why are we doing this right now? And it really goes back to the thing that we’ve been saying for the last couple of weeks, which is this industry has experienced a significant crisis of confidence across the ecosystem because of all of the over-leverage in the system and some of the bad actors and the bankruptcies et cetera. And so, when market participants are looking in this ecosystem and they’re trying to determine who can we trust, we want to make sure that our customers know that we are holding 100% of their deposits in cash on our balance sheet so that they can access that cash up to a 100% of their deposit.
And so, it really is meant to instill confidence. We also — the other part of that confidence is to communicate to our customers that we are still committed to this ecosystem. Many of the customers that we service today are customers that we onboarded in 2014 and 2015 and 2016. Many other banks have come into the space during our nine-year tenure. Some have left, some have expanded their operations, and then contracted. What we are trying to communicate is that we are here. We are here for the long haul. We are here to serve our core customers with the core products that they utilize every day, and they can have confidence that we have 100% cash on balance sheet. And so, when will that change, not for the foreseeable future. I don’t know if that’s one quarter, two quarter, all year long.
We want to instill confidence in the ecosystem and especially with our customers. And so, I really appreciate you asking the question, so we could drill down on that a little bit more.
Operator: Thank you. The next question today comes from the line of Steven Alexopoulos from JP Morgan. Please go ahead. Your line is now open.
