Avinash Reddy: Yes. I think we plan to be very aggressive on the deposit side in terms of cutting rates. As I said, our book is weighted more to business and municipal customers. So that will allow us to be more aggressive on that front. That’s on the liability side of the balance sheet, right? On the asset side of the balance sheet, as we mentioned, there’s less repricings in 2024, and then that really starts to pick up in ’25 and ’26. So some of it will depend on the pace of which payoffs pick up on the asset side of the balance sheet. But I would say on the deposit side, if you split the two question up into how are you going to see deposit costs and what are you going to see on the asset side. I’d say on the deposit side, that’s something we can control, and we expect to be very aggressive around that.
On the asset side, it will just take a little bit of time given the structure and nature of our assets. I think throughout all of this, Chris, it’s just really important to keep in mind, operating a bank with 30% DDA, right? It’s just a matter of time before we get back to those margins over time, given the repricing opportunity that we have. The other piece that I just wanted to add is we have around $1 billion of borrowings that are at around $900 million to $950 million of borrowings that we’ve kept really short term, that’s really going to reprice immediately as well. And we’ve intentionally kept that shot. We’ve been messaging that all across and really to position the balance sheet when rates drop. So we do have the benefit of that as well.
Stuart Lubow: Yes. And just anecdotally, if you look month over month, on November and December, we saw like two basis point increase in deposit rates each month. And in December, we saw an eight basis point increase in loan rates. So hence, we do feel that as Avi said, we’re expecting relatively flat NIM within a few basis points until the Fed cuts.
Christopher O’Connell: Great. That’s helpful. And kind of along the same lines, I know it really hasn’t been much of the margin for the past, I don’t know, two years or so. But I mean when the Fed is kind of — I mean, what do you think that a normalized kind of prepayment impact would have on the margin?
Avinash Reddy: Yes. Look, it’s going to be — it has to be a whole lot better than what it is right now because right now, the prepayment fees on the margin is like one basis point or two basis points. I think if you go back to legacy Dime, we used to have between 10 and 15 basis points on prepayment fees. Now obviously, that’s Multifamily is going to be a smaller piece of the overall portfolio. So I would say anywhere between five and 10 basis points when speeds really pick up, it’s probably not a bad assumption. But I don’t think that’s going to happen in 2024 necessarily, just given…
Stuart Lubow: Yes, most likely, if it does, it’s going to be towards late 2024.
Avinash Reddy: Yes.
Stuart Lubow: Assuming the Fed rate cuts.
Avinash Reddy: Yes.
Christopher O’Connell: Great. And could you just provide a little bit of color on what the drivers of the net charge-offs were for this quarter?
Avinash Reddy: Yes, sure. So we just fully charged it off a loan that we had previously fully reserved for. So last quarter, we took a $4 million charge. Stu mentioned that credit last quarter was still in the legal process on that loan, but we thought it was prudent to charge that fully off. It’s something that we had put in nonaccrual status a couple of years back so nothing really new over there.
Christopher O’Connell: Got it. And then I assume given the reserve ratio in some of the comments in the release that you guys did like we’re reserving for a couple of other loans being individually analyzed. Just any comments around those?
Avinash Reddy: Sure. So there was one net new addition to the C&I portfolio. It’s a couple of million dollar loan, we fully reserved against it. However, they too have started paying at this point in time, and so there’s a potential for that coming out.
Stuart Lubow: Yes. That was a C&I loan contractor loan that was — had matured, and we couldn’t come to terms on a renewal. And so we were very conservative in our approach. We made it — so we fully reserve for that. Since then, we have — they have agreed on basic terms of a renewal, brought through on current and we’ll probably close that in the first quarter and put that back on accrual status.
Operator: Our next question comes from the line of Matthew Breese with Stephens.
Matthew Breese: Just a couple of quick ones for me. Stu, just in light of your Multifamily guidance for getting to 25% to 30% of loans over the next two, three years. It feels like the pace have runoff, needs to accelerate to get there. And so I was curious if this quarter’s kind of 2% quarterly reduction in Multifamily is a good run rate or a better representation of what we should be modeling in order to kind of achieve those goals?
Avinash Reddy: Yes, Matt, I think for the near term, yes. So like we said, we have a limited amount of re-pricings and maturities in 2024, which is specifically why our guide is over the course of two to three years, we’re going to get there. So it’s — if you go back a couple of years, our payoff speed on the Multi-family portfolio was 37%. Right now, it’s 6%, right? So I think what the Q4 and Q3 numbers are reasonable estimates for the next six months or so. But then as the Fed starts cutting rates, you’re going to start seeing a pickup in that. And then eventually, the loans do come up for maturity or repricing, which is again why this is a two-to-three-year goal for us.
