David Becker: I’ll let Ken hit ROE question for you. But from an earnings perspective, as we discussed last quarter, we think earnings for the year will be right at the $3 mark, a little above — maybe a penny or two below compared to — and that’s with no change in the Fed funds rate. If that happens, then kind of a little bit of modeling, for every quarter point they drop the Fed rate, that impact to us is going to be somewhere in the $500,000 to $600,000 range. So, it could move significantly if the Fed starts popping. But we’re pretty comfortable we’re going to have a three handle on earnings at the end of the year. And Ken could convert that to ROE for me.
Ken Lovik: Yes, maybe — yes, I mean in terms of — if we just look our baseline —
Michael Perito: I’m not necessarily asking for ROE guide, but like just — well, if you guys are picking where to allocate capital and what businesses to grow, and where do the ROEs you think the business can start to generate as this NIM finally gets some recovery here, which is great to see?
Ken Lovik: Well, I think if you think about what we’ve doing on the lending side, where we’ve been — in terms of — I would maybe even say allocating or re-allocating capital, right, with this interest rate environment it hasn’t made sense to be lending in competitive long-term fixed-rate verticals, and we focused on the SBA, which obviously has higher yield. Then you have the fee income. You have construction, which when we started we were coming from almost nothing. And the higher — not only the benefit of a higher yield, but certainly improves the interest rate risk profile of our institution. And we’ve had some growth in franchise spending. And since some of that growth will probably not be as pronounced as it was this past year, we’ve pulled forward some growth there.
But in terms of the lending areas, that will be the primary focus as we remain in this elevated rate environment. I think all-in, if we’re looking on our baseline assumption, we’re probably getting — starting to get close to a 10% ROE by the fourth quarter. And as David talked a little bit about the impact of rate cuts on that, then it goes north of that.
David Becker: Pre the run-up in rates and stuff, when we were running at a 1% ROA, our ROE was in that 10.5% to 11.5% range. And I can tell you senior management for the bank, our long-term incentive this year is based on, Mike, us getting back to 1% ROA. That’s going to be a tough call, but we think it’s achievable. And so if we hit the 1%, as Ken said, we should be back into the low double digits on ROE.
Michael Perito: That’s helpful, guys. And it makes a lot of sense. And then I guess the follow-up I have is just, understanding you guys are allocating capital to a bunch of different things. But with that frame in mind, doesn’t it make — does it make sense for buybacks to continue at some pace here? And any updated thoughts around that capital, for the next couple of quarters here?
David Becker: Yes. We’re still in the market and we’re buying back shares. But I would tell you, we slowed down significantly in the fourth quarter, and until we get kind of back above the 7% and the 10% on the TCE and Common Equity Tier 1. Common Equity Tier 1, we are going to be conservative a little bit on the stock repurchase. But we are in the market. We’re out there. The numbers will be a little thinner than it was last quarter. But again, that’s a tremendous use when book value is $45 I think we were top to $30 today. That’s still a pretty serious discount to book value. So, we will take advantage of it. And for some reason, some geopolitical event or something blows up out here, we will be back in the market, but knocks down pricing and become an active purchaser again.
Michael Perito: Got it. And then, just lastly for me, the SBA and the Banking-as-a-Service businesses seem like good stories where you guys invested early and they’re now kind of bearing fruits from those early labors. Is there any other kind of initiatives you feel like you’re at earlier stages where you think over the next year or two we should be mindful of revenue ramp or is it just kind of or is there just more kind of continued runway in those two that you think is still worth the majority of your attention? Just would love a kind of an initiative update.
David Becker: I would tell you that, yes, there’s still a tremendous upside for both of those. And as I stated, we don’t even within the BaaS Businesses we have aligned today, we don’t add another one. We have phenomenal upside and opportunity. If somebody folds out, we might take a look or a good opportunity comes along. But yes, there’s tremendous upside there. We continue to look at other verticals. We’ve talked to different equipment leasing firms and things. But I would tell you, those two will be the Lion’s share of our effort and focus in 2024.
Michael Perito: Got it. Great. Hey, guys, thanks for taking my questions for all the color. Appreciate it.
David Becker: Appreciate it, Mike. Thank you.
Operator: Thank you. Your next question is from George Sutton from Craig-Hallum. Please ask your question.
George Sutton: Thank you. David, you were pretty optimistic about the construction loan market and you have some pretty big year-over-year growth. Can you just talk about the pricing dynamics in that market? How it might compare to the overall portfolio?
David Becker: Yes, George. And Ken, correct me if I get this wrong. It’s SOFR — bingo plus 3% on average, some cases a little bit higher, maybe just a tad bit lower, but it’s all yielding north of 8% now, adjustable rate. So, it is very accretive to day in and day out earnings for us with the portfolios averaging a little over 5%. That’s a nice bump and it’s a big number. It’s solid. We’ve got no concerns about any of the commitments that we’ve made, and it’s a real strong piece of business for us.
George Sutton: That sounds great. One quick question for Ken, how do we think of the economic impact to you? What you mentioned $1.4 billion of volume coming through the fintech partnerships. How do we think of that netting down to you?
