Stephen Scouten: Got it. And new loan yields and kind of what sort of spreads you might be seeing, I guess, can you deliver like a 3% spread on new loan production?
Rajinder P. Singh: Loan production is now getting into the SOFR plus 300 range, yes.
Stephen Scouten: Okay, great. And then maybe just last thing for me. It sounds like the team in New York that you’re looking to add is non-CRE focused presuming C&I focused. But I guess I’m curious if you’d also have additional interest in potential signature loan sales when those become available later this year?
Rajinder P. Singh: Yes. We are familiar with that book, and I don’t think we will have much interest.
Leslie Lunak: The other thing I would say is we’re really leaning away from credit only deals. We’re really looking for relationship-based business where we’re getting a fulsome relationship with the client. We’re getting some operating deposits as well as the loan and really deemphasizing credit-only business.
Stephen Scouten: Yes, makes a lot of sense. Okay, thank you very much for the color. Appreciate it.
Operator: Thank you. One moment for our next question. And that will come from the line of David Bishop with Hovde Group. Your line is open.
David Bishop: Yeah, good morning. Leslie, you mentioned the — on the Federal Home Loan Bank side, there could be some maneuvering there, some restructuring. Just curious, maybe you can give us some color on maybe what might be contemplated there, are you going to maybe term that out or…?
Leslie Lunak: I don’t have a lot of details yet because we’re still really analyzing and deciding what makes the most sense to do, but probably swapping some of it out, it makes more sense swap it out and determine out to get better pricing because of their term premium. But we’re analyzing all of that right now, and I think we can bring the cost of that portfolio down, and I also am fairly optimistic about us being able to pay some of that down in the near term as well.
David Bishop: Got it. And then, Raj, in terms of the de-emphasis on the resi mortgage side there. Is that — is that interest rate was positioning, just reducing as a percent of capital as it’s gotten too big from that perspective, just curious at the pullback?
Rajinder P. Singh: Yes. I think it’s just too large a portfolio. I mean when you look at our mix of loans, I just made a comment about we took CRE down by $2 billion since the pandemic. Well, when you take something down, something else grows and it wasn’t C&I. I mean C&I grew nicely, but it was resi because in 2020 and 2021, when the world was shut down, that was sort of the safest place that it felt that we needed to be. But now in 2023 standing here, I look at the mix of loans and I say, well, you got too heavy in resi, too heavy at securities, and we need to kind of remix this a little bit, which is what will help returns. By the way, I just want to make a comment about the resi portfolio. It is a very high credit quality portfolio.
And it also is not some a 30-year, 10-year I/O type portfolio. That’s not what it is. It’s very carefully constructed. There’s a lot of arms. There is some 15-year paper, some 10-year paper, some 30-year paper as well and very little IOs. So our CPRs are — while they’re lower than historically, everyone is lower, they’re not that low as some other banks are because of the hybrid portion of the portfolio. So it will run off. It will be very sensitive to interest rates. Interest rates go down even a little bit, you’ll see more runoff. By the way, the Ginnie Mae portfolio is in that too. The portion of Ginnie Mae, which is not going to reperform, that’s going to have a very short life because in a year or so, that gets foreclosed on and cash flows.
So it’s a nicely mixed portfolio, but we have just too much of it. And we need to reduce it and take it back to the levels that it was before the pandemic and replace it with more core business that generates not just good returns, but also good liabilities.
Leslie Lunak: It’s more a return question than an interest rate risk question. The interest rate risk is nicely balanced by the short duration bond portfolio.
David Bishop: Yes. Got it. Appreciate that color. One final question, Leslie, the preferred securities that you sold that drove the loss was that the entire exposure to those entities, just curious to get some color on that?
Leslie Lunak: Closer to that issuer, it’s not the entire preferred securities portfolio that was sold.
Rajinder P. Singh: The preferred securities portfolio, the mark in that goes through the P&L every quarter. So yes, I’m sorry, go ahead.
David Bishop: Do you have the size of that portfolio?
Leslie Lunak: What, I’m sorry.
David Bishop: The overall size of that portfolio.
Leslie Lunak: Give us a second. Somebody is looking that up for me, we’ll answer that question in a minute.
Rajinder P. Singh: It’s not as big as you…
Leslie Lunak: It’s not huge, but we’ll answer the question in just a minute.
David Bishop: Okay, thanks.
Leslie N. Lunak: We can move on, I will throw that — I will just throw that in when I get it.
Operator: Okay, thank you. Our next question will come from the line of Brody Preston with UBS. Your line is open.
Broderick Preston: Hey, good morning everyone. Leslie, I just wanted to circle back on that one multifamily loan that went special mention, but has obviously paid off. Was that a New York City-based multifamily property?
Leslie Lunak: No, it was actually in Florida. . We need to special mention this quarter and then it paid off. So it’s gone.
Thomas M. Cornish: It wasn’t an individual loan. It was a loan in our institutional real estate group that was a fund investing in multi-families. It wasn’t an individual property and it paid off.
Broderick Preston: Got it, okay. And I appreciated the stress test slide that you all included. I wanted to ask just a couple of questions about it. How does the — I guess, like how does the probability of default and loss given default in these scenarios shake out versus what you guys consider in your baseline modeling?
Leslie Lunak: I mean both are higher. I don’t have the exact numbers in front of me, both the PD and the LGD are higher, obviously, in this scenario than they are in the baseline, but I don’t have the PDs and LGDs in the stress scenario in front of me, I’m sorry.
Broderick Preston: Okay. No worries. And I guess I was just trying to — I guess I was particularly curious of the hotel, the increase in the hotel losses like…?
Leslie Lunak: Really just in a recessionary scenario, the kind of underlying assumption there is people just stop traveling and stop staying in hotels. So that’s why you see the big spike in the hotel losses and some of that may be influenced by what happened in the pandemic. But yes, just the assumption there is that the business just drops off considerably and the NOI go down dramatically, recessionary scenario with the hotel portfolio that’s what you’re seeing there.
Broderick Preston: Got it, okay. And then…
Thomas M. Cornish: Portfolio was very modest.
