Tim Switzer: Yeah, that makes sense.
Frank Sorrentino: And just looking at the business, our business for ConnectOne, I’m much less concerned about the rate cuts. I don’t want to say, I don’t care, but I almost don’t care about the rate cuts. I care a hell of a lot more about the liquidity that’s available in the marketplace and the ability to track deposits and what you mentioned, this competitive environment. To me, that’s way more important to whether our margin goes up or down or stays flat than whether the rates are, stays. I actually prefer a market, where the rates stay right where they are, but liquidity improves and we’re not fighting as hard for every next dollar.
Tim Switzer: Yeah, well, that makes sense. I think a steep [ph] yield curve would be helpful as well?
Frank Sorrentino: Yes, it would.
Tim Switzer: I was wondering, have you guys started testing maybe lower deposit rates in certain categories or certain markets at all and what’s kind of been the customer response to that?
William Burns: It’s hard to say. And that’s an ongoing challenge to see how low we can go. We think, it’s over the time when people said, hey, my deposit, I’m only getting 50 basis points. Why am I not getting 450 or five? And so today, we do feel there’s some room for lower rates to some extent without losing deposits. We are looking into that in certain instances. The whole deposit portfolio is a little bit complicated, whether it’s commercial customers, big retail customers, small retail customers in different products. And so as you said, we should be testing those things and we are.
Tim Switzer: Awesome. Thanks for taking the question.
Frank Sorrentino: You’re welcome.
Operator: Again, if you would like to ask a question, press star, then the number one on your telephone keypad. And your next question comes from the line of Matthew Breese with Stephens.
Matthew Breese: Hey, good morning.
Frank Sorrentino: Good morning, Matt.
Matthew Breese: I did want to go back to the loan growth discussion. And I was curious for how long do you think, it’ll take, you to kind of de-emphasize non-relationship lending? Is that isolated to just 2024? Do you expect that to continue to 2025?
Frank Sorrentino: Yeah, I think the most of it occurs this year as we go through a complete cycle or a cycle and a half of bringing loans up on review, going through the entire portfolio, and getting the message out there that, this is that, we’re pretty serious about this aspect of the business. Yeah, I would say by year end, look, it’s a continuous practice because, as you know, Matt, everybody promises you the world on the day you sign all the documents and, someone needs something from you. And then a year later you look back and you say, wait a minute, this isn’t what we all signed up for. And I’ve got to believe that’s going to continue in the future as well. But we certainly have a very laser-focused eye on those types of relationships and whether or not people did, in fact, do what they said they were going to do and how we recognize those things.
Matthew Breese: Yeah. I mean, the follow-up here is, you know, in 2025, and I know it’s a long way off, do we get to some normalcy in terms of loan growth, even if it’s kind of mid-single-digit growth for you all?
William Burns: If liquidity conditions improve, there would be more higher probability of higher growth.
Frank Sorrentino: And maybe that speaks more to why we should be voting for some Fed rate cuts, right? There’s definitely parts of a variety of businesses that have been negatively impacted by higher rates, and so they’re just borrowing less. While we may be out there and we may have a very strong pipeline of new loan product coming in, which now currently is being offset by loans that, we’re intentionally moving off the balance sheet, at some point that’s going to right-side itself. And at some point I would hope that liquidity comes back to the market, rates begin to get more in line with a steeper yield curve, and there’ll just be additional opportunities. But I don’t know. Can you tell me if that’s going to be at the end of this year, the beginning of next year, or the end of next year? I don’t know the answer to that.
Matthew Breese: Neither do I. But I did want to touch on, Frank, maybe the priority stack of capital deployment options for you right now. Obviously loan growth is going to be muted this year. If you have to deploy the next dollar, does it go into buybacks? Does it go into securities? Where are you putting it right now?
William Burns: Well, I think our first choice is widespread lending business. As long as it’s a good deal and it’s bringing in deposits, that’s going to be the priority. The dividend is kind of fixed. And whatever’s left over, as long as I’m seeing the capital ratios constantly reaching up, we would go for that. At this level, we did 280,000 shares this quarter. That seems to be the right level, the way things are going now, in terms of buybacks per quarter.
Matthew Breese: Okay. We can assume kind of security portfolio flat at this point. That’s not going to move too much?
Frank Sorrentino: Yeah. Our securities portfolio has never really been widely fluctuating. We’ve kept a certain amount, and that’s about it.
William Burns: It’s margin volatile, right, securities purchases. And I’m of this belief, Matt, once upon a time the securities portfolio was viewed as a place for liquidity. Today I’m thinking more, what is readily available in cash this minute? And, security portfolio takes time to convert into cash. If you need the money today, it may not be good to have that. Not that we’re cutting back the securities portfolio, we’ve played a greater emphasis on the lines, readily accessible lines at the Federal Home Loan Bank and the Fed.
Matthew Breese: Right. Okay. The last one for me is that you’d mentioned that rent-regulated multifamily is less than 5% of loans. That’s a tough one to define, and companies are defining rent-regulated differently. How are you defining it? Is that the bucket that’s 100% rent-regulated or 50% and above or any?
William Burns: It’s about 5, a little under 5%. All of it, all of it, any portion. If it has no rent-regulated unit in it, then it’s not rent-regulated. But if it has one, then it goes into the 5% bucket. If you go to the 50%, I think we’re down to 3.75%, something like that. Okay. Does that make sense?
