I’m mixing my metaphors here. But we’re fortunate that we have a very clear path and I guess a very clear road ahead, and we can see very clearly what we need to do. And we have it all laid out. And if we execute on the things that we set out to do, we believe it’s largely within our control to achieve the earnings targets and profitability that we set. And that includes potentially having some loan sales. And we have a lot of levers to pull. So if we don’t sell those loans, we got something else that we want to do. But I think loan sales is a possibility along with all of those expense savings that I mentioned that we have listed out. Joe, I don’t know if you or Bill have anything else to add here?
Joe Kauder: I would just say on the balance sheet as the liabilities, in addition to BTFP, we have other broker deposits. As they come do, we’ll look at the market and we’ll look at all the various options we have. Do we let the wholesale funding ratio drift up, drift down, do we loan deposit ratio, et cetera. So there’s lots of options we have and we’re going to make those – as Jared articulated, we’re going to make those decisions as they come to us and based upon the economic environment and what’s best for shareholders at that time.
Gary Tenner: Great, I appreciate it. And if I can ask one more. Jared, you mentioned that you’ve got several stories about former PacWest depositors coming back into the fold, as it were post deal. You talked about the experience as to how those are coming back. Are they kind of utilizing a sweep or kind of shared deposit product? What kind of format are those balances coming back?
Jared Wolff: It’s all different formats. I mean, I got a story right here from someone in one of our offices. During the liquidity crisis, a long-time small business client withdrew $1.3 million out of his account and he was incredibly apologetic. He took the $1.3 million cashiers’ check to BofA and opened the account. Our client quickly realized that he did not receive the same service that he always enjoyed. As he continued to bank with us with much smaller balances, we continued to encourage him to bring the money back. After the renewed strength of the bank and the merger and how dissatisfied he was with the impersonalized service at this other bank. The client brought back the $1.1 million and attributed to our service and our particular banker that took care of them every week.
I mean, I have pages of stories like this. And it obviously is very gratifying and it’s not surprising to me at all. We did this at Banc of California when I joined. We really focused on service and solutions. PacWest is really good at it. They had outflows based on fear that were unfounded, but they had a very, very loyal client base. And I know that if we do what we say we’re going to do and we do it on time and we continue to execute the way we always have, we will be very successful in that effort.
Gary Tenner: Great. Thanks, guys.
Operator: Our next question comes from Andrew Terrell from Stephens. Please go ahead with your question.
Andrew Terrell: Hey, good morning.
Jared Wolff: Good morning, Andrew.
Andrew Terrell: Just a couple of quick ones for me. One just to confirm on the kind of balance sheet size expectations. It sounds like from an average earning asset and then total asset standpoint, relatively kind of stable expectations throughout the year. Is that fair?
Jared Wolff: Yes.
Andrew Terrell: Okay. What’s a comfortable level of cash you’d be willing to run at?
Joe Kauder: I think about 8%. Is that right, Jared?
Jared Wolff: Yes, I think 8% to 10%. I mean, we’re higher than we want to be right now, but I think 10% would be the high watermark. And as we bring it down, and historically, we ran with 2%, 3%, and I think banks today are running with a little bit more, especially because you can get such a good yield on liquidity. And so it’s a function of what we can get right now. So I think Joe’s target is right.
Andrew Terrell: Okay, perfect. And if I could ask, all the commentary is super helpful in terms of – I know there’s a lot of moving pieces here. So I want to appreciate all the color. Just wanted to ask on kind of the exit ROA for $110 million in 4Q 2024. I’m trying to get a better sense of just what type of exit margin you would expect. The expense part is helpful, but it seems like the one kind of detail that I’m trying to get to here is the NIM. So any kind of color you could provide on an exit 4Q NIM that would underpin the 110 ROA would be helpful.
Joe Kauder: Yes.
Jared Wolff: The NIM is – we haven’t defined that yet, I don’t think, Joe, have we?
Joe Kauder: Well, we haven’t defined what we did our exit. We did say our estimate spot rate for net interest margin was $2.75 at 12/31. Andrew, is that what you’re looking for?
Jared Wolff: No, no, he’s asking for Q4 2024, where we’re going to be. And so Andrew, the reason why we’re not there is because the NIM is pretty much an event output for us. And so, if we’re a little bit larger, a little bit smaller, it obviously will affect the NIM and kind of the mix of our portfolio. And so we just haven’t guided to it yet. We know we have all these levers, we have all these models. We’ve looked at three different ways to get there, and the NIM is different in these different models, but we still achieve the same ROA, and so we haven’t provided guidance there yet.
Andrew Terrell: Okay.
Bill Black: Andrew, the easy way to back into that, though, is that, if you think about it of the three main income statement components, fees, net interest income and expenses, if you’re comfortable with your estimate for fees and expenses, you can essentially, in some cases, go through that and back into it. So just to give your own – I mean, to pressure test it on your own.
Andrew Terrell: Yes, I was running that analysis Bill, and it just seemed like the margin that I had to plug in was pretty high. So I just was trying to spot check it. Okay, I can move on. The one other I wanted to ask about was the $16.8 million of additional expense you guys called out as related to the HOA business this quarter. Can you talk about specifically what drove that? And was that more transitory in nature? So we should view it as one-time.
Jared Wolff: It was one-time. It was one-time. It was a catch up expense for a specific client, and we took care of it in the fourth quarter.
Andrew Terrell: Got it. Okay. And then actually last one, the borrowing facility termination for $19.5 million, did that come through operating expense or was it in your interest expense?
