Dale Gibbons: Yes. So, that’s fairly — it’s fairly stable, and so we get to — as we indicated earlier, we have a back-end-loaded forecast starting in June in the rate and so that would kind of curtail based upon kind of how that plays out.
Ken Vecchione: That’s something that — we don’t do…
Steven Alexopoulos: Go ahead.
Ken Vecchione: Steve, you’re on a choppy line a little bit, Steve. But, I would say, to Dale’s point — you there?
Steven Alexopoulos: Yes. I’m here.
Ken Vecchione: Got you. I would say, just keep in mind, you’re either thinking about — your question is based on total dollars and so, while rate will be coming down, total dollars may still rise as we continue to push off on deposit growth. So, just keep in mind the rate volume impact there. Okay?
Steven Alexopoulos: Yes. Got it. Okay. Ken, can I just finally ask you a big-picture question? So, when I look at the Company, right, years back, we had the financial crisis and you guys made quite a few changes after that, right, built-out national businesses, you had top-decile growth for a long time. Then we had March Madness, you again pivoted, right, you made adjustments, pushing up insured deposits, chained-in liquidity, et cetera. When I look at the 2024 guide, it looks like more of the same in the first-half, but then when we get to the second-half of the year and then 2025, what does this company then look like? Do you throttle up loan growth from where we are? Do you throttle that deposit growth? Are you back to a growth Bank? Like, how you see the world right now and a longer-term for the Company? Thanks.
Ken Vecchione: Yes. Good question. We started to pivot by the way in the third quarter of 2022 with higher liquidity and higher capital. And we certainly were very happy that we did. As we entered March Madness, it really served us well. And that’s informed our decision-making as to why we want to keep that moving forward. And as you said, we’ll have that basically completed by the first half of 2024. Then, I think what you’re going to see is a little bit of the same Bank, but I don’t think we’re going to put our foot on the accelerator as hard as we used to put — push down on the throttle there. And one reason is, we never got really paid for that. So, up until the end of 2022, we were probably growing deposits and loans about 24% to 25% per year and we didn’t see that in our evaluation.
And in fact, people always got nervous with that and said, geez, there must be a credit problem that was lurking behind, but really over that period of time, we only had $29 million of net losses. So, what we’re going to do is, we’re going to be targeting for above-industry trend growth going forward in the back-half of ’24 and into ’25, and we think we’ll get rewarded for that, and takeaway concerns that they’ll always linger about going way back even to 2006 and ’07 and ’08, that people bring up and I think we’ll run from there. But we should be higher in our return on equity, higher on return on assets, but not to the old levels of coming back to 2010 to 2013, 2014, 2015. Okay?
Steven Alexopoulos: Got it. Yes. That’s great color. Thanks for taking my questions.
Ken Vecchione: You’re welcome.
Operator: Thank you. Our next question comes from Ebrahim Poonawala from Bank of America. Your line is now open. Please go ahead.
Ebrahim Poonawala: Hey, good morning.
Ken Vecchione: Good morning.
Ebrahim Poonawala: I guess maybe just one bigger-picture question around earnings. If I have the math right, in terms of your earnings outlook, you probably shake-out on $8 in EPS for ’24, should we expect EPS to dip in the first half before re-accelerating in the back half of the year? How do you think about earnings growth relative to the $1.91 you printed in the fourth quarter? Just given the moving pieces around what you’re doing with HQLA, the benefit of rate cuts in the back half, I would love to hear just the earnings trajectory that you are looking at.
Dale Gibbons: That’s a good — that’s a really good question, Ebrahim So — and maybe implicitly in your comments, so the first quarter generally does have a dip and you can see this in prior years, but as we get to 4Q — and some of it is diesel, or we pay some higher fiber costs. Of course, there’s a fewer number of days in Q1. So, as we get into that, that should be — that should have a bit of a softer point at the beginning of the year. Moving into Q2 and Q1, it’s going to be impacted by what Ken was talking about in terms of continuing to build out and finish by the end of the second quarter, early in the third, our HQLA position there. So, that would result in a little lower earnings growth during those first two periods as basically the deposit growth, which we think is going to be fairly strong, is diverted into an asset class that doesn’t yield as much.
As that changes and as the loan-to-deposit ratio is in the 80%s, you’re going to find this by the — by summer, that’s going to be a more proportionate growth rate in loans, as well as deposits, and hence, you do get a growth rate picking up through the end of ’24 and carrying into ’25.
Ebrahim Poonawala: That’s helpful. And I guess the other question, you mentioned about never getting paid on the — for loan growth back in the day. When we think about how you are acquiring and what type of deposits you are acquiring today, may Ken, is it different? Means, you’ve obviously emphasized the regions and the deposit growth from the regions, but I’m just wondering if your view around large chunky deposits has changed given sort of the emphasis on liquidity? And as a result of that, should we expect you to kind of go about differently when it comes to deposit growth and client acquisition?
Ken Vecchione: Yes. So, Ebrahim, thanks for the question and I think your question is insightful because that’s how we’re changing around the business. So, we’ve been working on a number of new deposit verticals that are really getting legs behind them. And the first is Settlement Services. And just this quarter alone, we grew Settlement Services $2.1 billion. And so, there the deposits are a little larger and — but the growth rate is steady and consistent. So, as you get to a certain level, large deposits will flow off and then you got to bring on the large deposits in. Additionally, we have our business escrow and Corporate Trust business and that too is beginning to get some legs. And in this quarter, that grew by $350 million.
Now, that business will continue to grow, but it really will be helped once we get our investment-grade ratings back. And go back to the pivot, the pivot is to get to our investment-grade ratings, so that Corporate Trust could be a bigger contributor to our deposits and we think with an overall 11% CET1 ratio, mid-80%s loan-to-deposit ratio, steady asset quality, we will position ourselves to get upgraded there. Now, HOA, it’s been a long — actually, what was probably our first national business line, and that continues to knock the ball out of the park. And usually, what is a slow quarter, the fourth that is, they grew $300 million. For the year, they grew about $1.2 billion and those are steady, smaller deposits. They come in from either new business that we win and the existing clients growing their book of business.
