Unidentified Analyst: Great. That sounds amazing. I appreciate the update. Maybe just jumping around a bit here. Could you provide a little color maybe around the ROA? Kind of what’s a reasonable target there for 2024 or kind of what the expectation is as some of these initiatives kind of pull through?
Ken Lovik: Yes. I mean, I think as we look into – I mean, I think we feel good about what next quarter looks like. And I think over the quarter of little over the course of next year in terms of like, NII, we should continue to see gradual improvement quarter by quarter. In terms of NIM improvement and NII improvement, we expect the SBA team to continue to grow next year as well. David talked about the BaaS initiatives and the revenue opportunities there. So I mean, I think, look, it’ll be a little bit lighter in the front end of the year, probably similar to fourth quarter, probably a little bit better than fourth quarter, maybe in the mid 40 basis point of ROA. But I think by the end of the year, by fourth quarter, we’re looking to be back up north of 80 and perhaps closer to 90 basis points.
Unidentified Analyst: Great. Appreciate that. And then just last question for me and then I’ll hop back. Any room for buybacks to accelerate here? I know there’s some good activity there in the third quarter. But maybe just is there any acceleration here in fourth quarter and then into 2024?
Ken Lovik: One of the things that we’re focused on, and we know the outside world pays a lot of attention to it the TCE. We fell under seven. Our goal is to get us back above seven at the current time at the price. We really can’t be out of the market on share repurchase, but we’re diligently paying attention to that 7%. If by chance the Fed does nothing and the long-term rates come back and AOCI drops down yes, we’ll stay in actively purchasing. I think we’ll do something. I doubt that we’re going to expand much over what we did last quarter, particularly, hopefully the share price continues to climb as well as our numbers are getting better. So – but when we’re trading 30%, 40%, 50% a book, we can’t afford not to purchase shares back.
But it’ll be a balancing act, really, kind of keeping an eye on TCE as well as the price of the shares. So we’re in the market, we’ll stay in the market. But it won’t be probably as aggressive as we were in the first half of the year, but we’ll stay out there.
Unidentified Analyst: Great. Thank you. That’s all for me. I appreciate all the color.
David Becker: Great. Thank you.
Ken Lovik: Thank you.
Operator: Thank you. Your next question comes from George Sutton from Craig-Hallum. Please go ahead.
George Sutton: Thank you. David, you mentioned in your script that you’ve grown to be the 9th largest SBA player. What is your goal? What is the governor to your growth? How much more can you expand in that area?
David Becker: George, we really don’t have any limitation out here. I think we’re going to finish this year at about 380. My guys will be beating on me here. But we haven’t forecasted for 440, 450. I think they got a real shot at 500 next year. And you’re going to be hearing phones drop all over the office here, the folks that are listening in on the call. But I wouldn’t be surprised to see us get pretty close to 500 million next year. As long as we’re selling 75% the insured portion and getting a good return on that. We’re in great shape. I would say we could run up to probably 1 billion on our internal portfolio and $0.25 on the dollar. That gives us a lot of room for new production. So if we start bucking them and holding them on the balance sheet, that could slow down the gross number a little bit.
But as Ken said a couple of minutes ago, we’re getting an 11.5%, 12% yield versus a 5% or something on the purchase side. It makes sense to hang on the balance sheet, but anything less than 1 billion, we have no qualms whatsoever in keeping it going.
George Sutton: And I wanted to make sure that I understood the 11% opportunity in terms of because you were couching it in the sense that the government could shut down and I think therefore would hold more. Was I hearing that correctly or what would motivate you to increase the amount that you’re holding?
David Becker: If the government closes, we’ll hold the assets because we can’t sell them in the secondary market if the government’s not there to make the transfer. So we’ll hang on to them. That could reopen if they’re down for a couple of days, it’ll reopen in a week to 10 days to get the machine oiled and back running, they’re down for 24 hours, they’re going to come right back. So might put a little lag in there. The return, as Ken said, and I’m going to blow this up. So you can go back and fact check me, but we grew the sales by 20%, but the actual sales yield we got was down 30% over last quarter. If that continues to decline, if the market is saturated, a lot of banks across the country are not buying assets or boosting their balance sheets.
So if the market falls off and I can only get a 5% or 6% purchase price, why would I sell an 11.5%, 12% asset? Because I’ll make that back up in 12 months. So it’s really two focuses. Government shutdown could slow it down as well as if the yields in the secondary market continues to soften. We’ll just keep them on the balance sheet.
George Sutton: Perfect. That’s it for me.
David Becker: Thank you, Sutton. Nice to hear from you.
Operator: Thank you. Your next question comes from John Rodis from Janney. Please go ahead.
John Rodis: That was close. Hey, good afternoon, guys.
David Becker: Hey, John.
Ken Lovik: Hi, John. How are you?
John Rodis: Good. Good, David, Ken. Ken, maybe just back – circling back to the margin. I think last quarter you talked about by the fourth quarter of next year, the margin could sort of be 190 to 195. Do you still think that’s possible?
Ken Lovik: Yes. I think there’s a pathway there. I mean, certainly into the 180-ish range and the upper bound of that, but yes, I think we still feel good about that outlook.
John Rodis: Okay. Okay. And again, you feel like this current – the third quarter was sort of the inflection for the margin and net interest income dollars.
Ken Lovik: That’s how we feel right now. Again, the caveat of things that are out of our control. But right now, at least with our forecasts [indiscernible] and what we saw, I think, as David said in his comments, we were – we probably hit bottom in July and August in terms on a monthly basis. And in September we had a nice rebound there. So the trajectory is already going up.
David Becker: Interest expense actually dropped September over August by over $400,000, and portion some higher cost funds walked out, and we shrunk cash just a little bit, but we really are leveling off, and when our peers are out here at 30 basis points, 40 basis points on CDs, having to buy in today’s market for 400 plus, as Ken said, our CD average out here now, what’s coming up for renewal is in a 440, 450 range, and if we pick them up at 490 at 30 basis point move to us, it’s going to be nonexistent. So we really, really do think we hit the bottom of the barrel on them compression.
John Rodis: Okay. Good. Ken, maybe just two other things on expenses, you upped the target $20 million to $21 million, would you still expect for next year sort of mid-single digit growth off of, I guess the fourth quarter level?
