Bryan Donohoe: Yes. Stephen, I’ll start, and I’ll let Tae-Sik chime in as well. I think part of the challenge of the industry is measuring a lot of what we do by quarter, but certainly year-end is a good hallmark date to turn the page, so to speak, philosophically and financially. I think what we see is, especially with the offensive side of the market being so compelling, that while managing resolution price, we’re going to balance that with resolution timing. So, our conversations with borrowers, if you were to go back, what feels like a long time ago, 3-plus years, where extending duration of assets on the book was really the primary playbook. As we sit here today, we’d like to resolve assets and crystallize a lot of those resolutions and get back to the offensive side as soon as possible.
So, tough to put demarcation lines in terms of the calendar. However, certainly when we look forward the 3 quarters to year end, that’s a pretty good place to plant a flag. But Tae-Sik, feel free to add some color there.
Tae-Sik Yoon: Yes, Bryan, I think you covered it well. Stephen, I think, you probably heard from our opening remarks that resolving our underperforming loans, certainly including the nonaccrual loans, is really one of our top-top-top priorities. We’re hyper-focused on that effort. We think that will bring a lot better clarity to our balance sheet as well as be accretive to our earnings, as we mentioned. But as Bryan said, I think, it’s very difficult to provide precise numbers. We did resolve, as we mentioned, about 4 loans this past quarter, and we hope to continue to report some news on further resolutions in the quarters coming ahead.
Operator: Our next question will come from Steve Delaney with Citizens JMP.
Steven Delaney: Busy quarter for you, and it sounds like it’s continuing. With the 4 nonaccrual loans that you reworked, resolved in the first quarter, and then the 2 office REOs in the second quarter, I’m having a little trouble, haven’t had a chance to go to the deck and just roll all this through. But after these second quarter REOs, can you tell us what is left at this point in 5 rated loans after the 2 REOs?
Tae-Sik Yoon: Sure. I can see if I can try to take a shot at that. Yes. So, as we mentioned, there are 8 loans that are risk rated 4 and 5 as of quarter end. And certainly it includes the 2 office properties that you mentioned that we anticipate going REO in the future. We also mentioned a new 4 rated loan, a $97.5 million multifamily loan. And as we mentioned in our closing remarks, the reason it was downgraded from 3 to 4 is that the sale process of the underlying property, this multifamily property in Texas, is just taking a bit longer than we had originally anticipated. And so, because of that, it was downgraded. So, that’s really, call it, 3 of the 8 loans, again, the 2 REO plus the 1 multifamily loan. And then when you really look at the remainder of the portfolio, what you have is you have some loans that had been on our balance sheet for a while.
We mentioned, for example, 1 of the mezzanine loans that we put on nonaccrual, and then really it is the condominium development that we have in New York, and then it’s the large office loan out in Illinois, and it is an industrial asset out in California, the $20 million loan out in California. So, I think, that covers — I’m just trying to recollect are there others, but I think that makes up the remaining 5 loans that are in the 4 and 5 rated loan category.
Steven Delaney: 5 loans, as we sit today, less than 4 and 5. And I understand this is fluid and things are going to be coming and going, but nice to see some resolutions and some progress there. Bryan, I know this is a decision the Board goes through probably every month or certainly every quarter. But the issue of your current $0.25 dividend and working to maintain that and the opportunity for share buybacks I would guess even with the loss of book value, you’re still probably a little below 70% of book. How are you thinking about that in this market where everybody is having problems and you’re looking at your stock with a mid-teens dividend yield. Just your thoughts, please, on how the company or shareholders are best served between paying out that cash or buying back your shares here. I didn’t notice that you bought any shares in the first quarter. If I overlooked that, please let me know.
Bryan Donohoe: No, appreciate the question, Steven. As you said in your prior comment, the market is fairly fluid, and it is something that the Board and management considers each quarter. As we characterized when we chatted 60, 90 days ago, what we established with the dividend at $0.25 was what we felt was attainable over the near- to medium- to long-term, right? And I think that’s something that we will continue to evaluate. And over the past 18 months, I think, we as an industry, have contemplated the best way to serve our shareholders. And that is a combination of dividend, which is the core charge, I think, of the mortgage REIT business, as well as the relative value of buying back shares, which we’ve done previously. So, it’s a balanced approach alongside managing liquidity and ultimately crystallizing the best returns possible for our investors.
So, I would put forth that I think we’ll continue to evaluate that in the coming quarters based on the results of that fluid market you mentioned.
Steven Delaney: Glad to hear that it’s going to remain on the table regardless of — and I know Board will make the right decision quarter by quarter.
Operator: And our next question will come from Rick Shane with JPMorgan.
Richard Shane: I apologize if some of this has been covered. First, as you move from paying down, shrinking the balance sheet to moving back to offense, curious if there are any covenants that you need to be aware of or any limitations related to your debt that could make that more challenging?
Tae-Sik Yoon: Yes. Rick, as we mentioned in response to some of the prior questions, we have been actively in dialog with our lenders. And as you’ll notice in our filing this morning in the Q that we are starting to make some amendments to those facilities to make sure that we have the flexibility to implement the strategy that we talked about. So far, our strategy, as Bryan mentioned, is to focus on resolving our underperforming loans. And in order to do that, we want to make sure we optimize the balance sheet to provide that flexibility. Deleveraging has been certainly a big part of that strategy, as well as maintaining good levels of liquidity. And so, we continue to focus on those 2 elements. And then again, we’re proactively working with our lenders to make sure that the covenants and the loan facilities provide us that flexibility to attain the overall objective of resolving underperforming loans.
So, the answer to your question is yes, we are definitely proactively working with our lenders on this.
