We could theoretically, if we really optimize the loan portfolio got it more up to 95% with a greater mix of commercial finance, you could see that going into the low 60s%. But I think, that’s highly that would be about a perfect environment for us more assets in the prime plus half prime plus one to one range and a greater total loan book for that. And I don’t see that for 2024. It would be theoretically possible for 2025. But if we can get ourselves into the low to — mid to high 60s% by the end of the year we think that’s the right place to be, just given the fixed asset base that we have — fixed expense base that we have to deal with.
Unidentified Analyst: Yes. Thanks, guys.
Operator: Thank you. One moment for our next question. Our next question will come from the line of Ross Haberman from RLH Investments. Your line is open.
Ross Haberman: Good morning, Morgan. How are you?
Morgan Gasior: Good morning, Ross.
Ross Haberman: I wanted to go back to your leasing portfolio. I’ve spoken to a number of banks over the last week or two or three. They are — many of them are seeing a pickup in nonperforming and delinquencies in the leasing and residual part of their portfolios in different parts of the country. Are you seeing any of that weakness? I know you talked about the two government leasing issues. But you’re seeing anything else? And could you tell me what your allowance generally is for leasing type of loans?
Morgan Gasior: Well, let’s talk about 12/31 status. First of all, we don’t invest in residuals, so I think that’s an important point here is. Obviously, residual investments can be extremely profitable, if you get the realization that you’re hoping for. But we work with independent lessors and they take the residual exposure. We may help finance it, but we have very, very little exposure. We have no on-balance sheet exposure to residual investments and relatively minimal exposure to financing residuals for our independent lessor customers. As far as credit trends are concerned, the Corporate portfolio continues to perform very, very well. It’s again why we’re focused on the higher-grade corporate for 2024. We still think there could be some uncertainties in the market.
And that’s in part why the spreads are tight in that segment, because I think many people agree with us. And to your earlier point, Ross, the potential experiences that people are seeing are maybe why the spreads are comparably wider. And in some cases, you can almost dictate, your pricing as you get into the middle market space. But the portfolio remains stable for us. We’ll have every once in a while a default in the small-ticket portfolio. We’re working through the handful of issues that work-through that we saw in the second quarter. But third and fourth quarter so far and first quarter in those portfolios have been stable.
Ross Haberman: And going back to my question typically what is the allowance on those type of loans versus say commercial real estate loans? What kind of allowance do you set aside for every, I don’t know $1 million worth of loans you make on the leasing side?
Paul Cloutier: For us, on the Equipment Finance side for the government loans we put away very little because the government is backing those leases. On the investment grade, it’s similar to like an investment-grade security, so we put away very little against that. But for the remainder of the Equipment Finance portfolio, we’re putting away about one point against the loans.
Ross Haberman: And on those government ones, you’re saying they guarantee basically 100% or [indiscernible]?
Morgan Gasior: The government is the counterparty, so we put away very little against that. Now, we do have the nonrenewal issues that we’re dealing with on the two credits. But for the most part, it’s government that is the lessee on those particular leases.
Ross Haberman: Okay. And just one general question, Morgan. You and the top guys there, are your bonuses based on return on equity, return on assets? What is — or EPS growth? What are your bonuses — what’s the makeup of [indiscernible]?
Morgan Gasior: I’d refer to the Proxy statement from last year. That calculation and that matrix has been consistent for several years. So, I’d suggest, take a look at that because I will give you all the information that we have available.
Ross Haberman: Okay. Thank you, very much.
Operator: Thank you. [Operator Instructions] And I do have a question from the line of Jason Stock from M3 Funds. Your line is open.
Jason Stock: Hey Morgan, good morning. As you know, we’ve been long-term investors in BankFinancial and we’re generally not the type of investor who likes to be much of a nuisance. But as owners of over 9% of the company, I think it’d be probably irresponsible of me to not pipe in and say that we agree with all the comments that have been made about the outlook for the bank as an independent entity. And the one positive compliment that we can give you is that, you’ve done a great job building and maintaining what we’d say is a really attractive deposit franchise. You’ve done a good job with your deposit costs and we’d say that in your market area, you’ve got a lot of scarcity value. And we think the time has come to find a partner that can take the bank forward from here.
Morgan Gasior: Thank you for your comment Jason.
Jason Stock: You’re welcome.
Operator: Thank you. I’m not showing any further questions at this time. I would like to now turn it back to F. Morgan Gasior for any closing remarks.
Morgan Gasior: Thank you all for your participation. We’ll be in touch after our next conference — after our next quarterly results.
Operator: Thank you for your participation in today’s conference. That does conclude the program. You may now disconnect. Everyone have a great day.
