Brian Martin: Okay. And then…
Brad Adams: Based on where SOFR is today.
Brian Martin: Got you. In your commentary, just high level on margin, and I appreciate all that you’ve given me. Kind of last quarter, you kind of talked about where the margin could bottom with x number of rate cuts. Any change in your outlook as far as how much impact it could have on…
Brad Adams: No, that’s broadly structural. It would take a mountain movement to see us fall below 4%. And I’m very comfortable with basically running this balance sheet at a 4% margin, but we are so far from that, that it’s — it gives you a great deal of comfort. It would take a lot more rate cuts than even the most optimistic person who believes the Fed will buttress equity markets to infinity to achieve to get us below 4%.
Brian Martin: Okay. That’s all I had, guys. I appreciate it. Thank you.
Brad Adams: Thank you.
Jim Eccher: Thanks, Brad.
Operator: Your next question is coming from Chris McGratty with KBW. Please post your question, your line is live.
Andrew Leischner: This is Andrew Leischner on for Chris McGratty. I know you mentioned in your opening remarks that deposit pricing has remained aggressive in your markets. Now, how should we think about noninterest-bearing outflows going forward? And when should we expect to see a little more stabilization there?
Brad Adams: I think that the speed of the movement down has slowed considerably. I would expect that to continue. I think that there’s an awful lot of people who thought that the massive amount of deposit inflows into our industry in ’21 and ’22 were somehow because they became great bankers. They elected to plow that money out the curve. And now that rates have reversed, they are forced to compete with fixed income markets for those flows, which is where they should have always been, absent volatility in rate markets in COVID. We don’t feel compelled to compete with that front. But largely, what you’ve seen in terms of noninterest-bearing flows from us is simply a function of earnings credits and needing less balances to offset given fee levels. There’s no real change on economic basis underlying our noninterest-bearing trends at all. As you may or may not know, we are a very granular kind of…
Jim Eccher: Yeah, Andrew, we — our noninterest-bearing balances relative to the entire deposit book has remained around 40%, which is an exceptionally strong position, very sticky. We have not seen a lot of outflows in that area.
Andrew Leischner: Okay. Great. Thank you. I guess on your low to mid-single-digit loan growth guidance, where should we expect the source of that to come from? And what areas are you intentionally pulling back from?
Jim Eccher: The activity within our loan committee remains, as we mentioned on the call, pretty modest, where we’re seeing growth is really in C&I, sponsored finance lease banking primarily. We think in today’s environment, with 3% GDP, probably mid-single-digit outlook is realistic for us.
Andrew Leischner: Okay. And then last one. Sorry, if I missed this on the M&A question. But can you just remind us what your ideal target would look like?
Brad Adams: Trades is significantly less than us. So we’re buying a $1 of earnings for $0.85 or less.
Andrew Leischner: Okay. Thank you. That’s all I got.
Operator: Your next question is coming from Kevin Roth with Black Maple Capital. Please post your question, your line is live.
Kevin Roth: Hey guys. Happy New Year to you. With regard to the two assisted living facilities in California, you mentioned litigation. Are those — is that litigation is a foreclosure actions or some other type of litigation? Thanks.
Jim Eccher: We’re in very early stages. And that’s obviously an option. But we don’t expect a quick resolution on either one of them. We can’t — at this point, we can’t really speak to the course of action we’re going to take. But they are marked. We took aggressive allocations and charges against them that we’re positioning them for remediation.
Kevin Roth: Got it. Okay. I just wanted a clarification on what — it wasn’t some other type of litigation related to some California laws.
Brad Adams: The litigation estimate that have impacted earnings this quarter relates to consumer overdraft and specifically relates to disclosures that were in our account disclosure booklets between three and seven years ago.
Kevin Roth: Okay. Got it. All right. Thank you very much.
Operator: There are no additional questions in queue at this time. I would now like to turn the floor back over to Jim Eccher for any closing remarks.
Jim Eccher: Okay. Thanks, everyone, for joining us this morning. We look forward to speaking with you again next quarter. Have a great day. Thanks. Bye now.
Operator: Thank you. This does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
