Don Fandetti: Yes. Katie, if you kind of step back and think about what’s happened in office, I mean, the performance of the company has been pretty stable. And I was just curious if you — if your base case is that we kind of stay in the zone where there’s provisioning, but book value remains pretty steady, or is this a type of situation where, you know, there’s just enough lumpiness that we could come in and there’s a big quarter where the book value’s at risk, or do you see more of like a steady path based on your ability to modify and things of that nature?
Katie Keenan: Thanks, Don. I think that it will still take time for this to play out, but I think we have made a lot of progress in terms of, just working through the issues that have come up, as you mentioned. We’ve had a lot of situations where we’ve seen you know assets that are in more challenged position And we’ve worked with our borrowers to stabilize them as I mentioned sort of 80% of the four rated office coming into the quarter, we have secured deals with our borrowers in terms of more equity coming in and putting those assets, moving them from an unknown to known in terms of what we’re going to see going forward from those assets. We’ll continue to see some issues crop up in a portfolio of 200 loans. There’s always credit migration, both positive as we saw this quarter and negative as we also saw.
And I think we’ll see that continue, and I do think there could be some lumpiness because we do have some larger loans in the portfolio. But overall, I think the experience we’ve had to date is a good indicator for what we could have going forward. And while we may have some lumpy quarters here or there, I think in the fullness of time, the earnings power of the portfolio as a whole provides such meaningful cushion against these pockets of deterioration that I think again, when we zoom out from the potential quarter-to-quarter, the strength of the business, the inherent installation of the business from having this earnings power offsetting what we’re seeing in a small portion of the portfolio, that dynamic seems to be working well.
Don Fandetti: Okay. Thank you.
Operator: And our last question comes from the line of Stephen Laws with Raymond James. Please go ahead sir. Your line is open.
Stephen Laws: Hi, good morning. I want to start, Katie, with I think it was referred to in the prepared remarks, kind of, barbell in the portfolio. But when you think about identifying the problem loans, or maybe how should we think about velocity of rating changes going forward? Will they slow down as you really identify the problems, or how much unidentified problems do you feel are left? And how much does that have to do with when you start originating new loans?
Katie Keenan: So I think that we certainly have progressed through a lot of this. And we’ve been going through this rate cycle for over a year. We’ve certainly seen some of the challenges concentrated in older assets. So a lot of them have come to the floor, and at this point, we’ve — nearly all of our Chicago, San Francisco, DC office, we’ve already watch-listed. We’ve taken impairment on some of those appropriately, just given the environment, and I think we have made a lot of progress in the watch-listed assets of moving them into a more stable position, narrowing the range of outcomes. But as I said before, we do have a large portfolio. In the history of the business, we’ve always had credit migration. And so I think that we will see that continue, but the more we work through the portfolio and start bringing on new loans or not, but just working through what we have in the existing portfolio. Again, I think we’re really narrowing that range of outcomes.
