And so those will reprice. And then additionally, as we grow almost all the new loans that are coming on are adjustable rate loans. And so they do have floors often. Those floors sometimes are good and sometimes they’re not as good as far as for us, but they do have some floor usually embedded in them with respect to SOFR to limit our downside risk. So I think if where your question is going is for a little bit of flavor around are we going to have this sort of end of rate cycle compression in NIMs. I think we might, but I don’t think it’s going to be significant. And I think we have a lot of offsetting factors associated with that, that can aid us. And I think it’s going to really be more about credit spreads on new originations given that we have such a relatively quick cycle time for our existing commercial book.
Tim Switzer: Okay. Yes, that makes sense on your last point. And I was actually going to maybe take this a step further along the cycle if we get to where maybe the Fed begins to cut rates sometime in the next year or so, if that occurs, like how do you think you guys are positioned like what’s your sensitivity to rate cuts?
Greg Garrabrants: Well, it depends on the assets. So all single-family loans have a floor at the start rate that are originated. So if you originated in the 8s, they’re not going down. So let’s talk about floors for a second and then I’ll talk about borrower behavior. So we do put floors in certain things, but a cap call facility, for example, is going to have a 1% SOFR floor. Other loans, let’s say, certain CRESL deals might have a 4% or 3.5% SOFR floor. So there’s some compression that occurs immediately in a reduced short-term rate environment associated with those loans. We’ve kept our deposit base in a way that we can reprice it. The question is always what’s the demand for deposits at that time? And what does that repricing do to your ability to grow deposits, et cetera, right?
Now we’re a pretty diverse business. We did grow noninterest-bearing deposits by over $200 million this quarter, if you exclude the runoff that we pushed out on the digital asset side. So there is good stuff happening there, and that all blends together. And if you look at that and you say you grew that by that amount of money and you grew loans by 500, that’s kind of pretty good actually, right? So there’s good stuff happening there. So these things are all going to come together. But if somehow there was a massive demand for deposits, and we weren’t able to cut any deposit rates and still grow and rates came down on that short side, we might see a little compression. But I think the other issue that could arise is you have floors on these loans, if the market rate falls very much below the floor rate, then you could see prepayments, too, right?
So I mean, I think realistically, we’ve thought pretty hard about how to deal with this. Part of the issue is that I’ve had some different folks, of course, they kind of haven’t brought this up lately, but there were investment bankers and such approaching saying, hey, you should extend duration when they thought the long rate was sort of where it was going to be, which was about 100 basis points below where it was now. And we firmly didn’t do that, and their commentary was, well, you’re taking risk on the other side in a short-term environment. And I don’t really think so. Because the tough part is, unless you’re extending loans with absolutely hard lockouts where they can’t prepay, you’re really taking asymmetrical risk there. So I think we’ve positioned it about as best as we can and so if somebody who has a higher floor wants to prepay and the markets there for them, then that loan will have to be replaced.
And then it’s up to our origination engines, which are pretty good, and they’re continuing to grow with our cap call business with our floor plan business, et cetera, to be able to replace those assets. But for what it’s worth, I’m not saying rates are not ever going to come down, but I think all the folks that were so optimistic that we’re going to get rate cuts next year. We were not in that camp, and we’ve been right so far. And I don’t think it’s something imminent.
Tim Switzer: Great, thank you. That was good color. I’m done.
Greg Garrabrants: Thank you.
Operator: Our next question is from the line of David Chiaverini with Wedbush. Please proceed with your question.
David Chiaverini: Hi, thanks. I wanted to ask about the digital asset business and how you guys exited? I was curious, did your regulators bring up any concern with your involvement in the digital asset business? Or was this entirely voluntary? And has there been any legal action at all related to this?
Greg Garrabrants: No. No. We’ll answer all the questions. I’ll answer the last one first. No, there’s no legal action related to it at all and nothing pending or anything we’re aware of. The only reason I even mentioned it is because there’s been some short-seller tweets that have deliberately confused. Evidently, there were some transactions related to binance.com that were widely reported to be involved with the various characters and then there was an attempt to link us to binance.com, which was a false statement. So I just wanted to be able to get a statement out about that. So the short answer is no legal and regulatory action. We’re not involved in any elements of that. From a regulatory perspective, we spent a long time with the regulators seeking a variety of non-objections going through a bunch of different risk reviews associated with these assets.
