Woody Lay: Right. That’s good color. Lastly, I just wanted to touch on profitability and you kind of touched on it in your opening remarks, but I know there can be some seasonal impact over the next couple of quarters just with mortgage and payroll increases. But as you look out over the near term is the expectation that you will remain profitable over the near term?
Mark Mason: Yes. Now having said that, our profitability is going to remain low, right, given our net interest margin and the circumstances of funding costs today. But we believe that we will remain profitable or we wouldn’t have made the statement. And that’s the same statement we’ve been making each quarter, right?
Woody Lay: Right. All right. Got it. Thanks for taking my question, guys.
Mark Mason: Thank you.
Operator: The next question comes from Timothy Coffey of Janney Montgomery Scott. Your line is open.
Timothy Coffey: Great. Thank you. Good morning, gentlemen.
Mark Mason: Hey, Tim.
John Michel: Good morning, Tim.
Timothy Coffey: Mark or John do you have the substandard loan balance as of September 30?
John Michel: We don’t. We can try to look at that real quick but we — it would have been filed with our call…
Mark Mason: Yes I don’t have the call report in front of me.
John Michel: Yes.
Mark Mason: But I will tell you it is not changed materially. I think it actually — hopefully. I’m correct declined slightly I think.
John Michel: Yes, I will report.
Mark Mason: We can look it up while we talk but it’s either a substantial change or no material change is what I..
Timothy Coffey: Okay. And then sticking on credit is there any updated color on the non-accrual from 2Q? I think it was the $27 million relationship?
Mark Mason: No update other than at the time that we downgraded those loans we restructured the loans with requirements for funded interest reserves of a year to 18 months and where necessary additional collateral or cross collateralization. And so we still feel fine about the credit loss potential on the loans, but there’s no update to the circumstances. But we think that the restructured loans are in the place they need to be given the circumstances.
Timothy Coffey: Okay. And then on the efforts to create more prepayments in your loan portfolio you’ve been doing that most of this year earlier you’ve bee talking about most of this year I should say maybe you’ve been doing it longer. Do you have any kind of details on how that’s going?
Mark Mason: Well I can give you a little color. I wish it was going better I believe that we have restructured about $100 million of multifamily loans. And when you look at our loan origination numbers Tim and you look at multifamily I think there’s $40-some million this quarter. Look at the other day. The details in the…
John Michel: In the release.
Mark Mason: It is in the release that we are looking up on talking. That represents restructured loans not new loans. We actually write a new loan as opposed to modifying the existing one. So it will show up as a loan origination. Yes, $44 million this quarter. Last quarter you see $65 million quarter before $18 million. Those are the restructuring numbers to date right? About $100 million or a little more. And why isn’t that number larger? In our multifamily portfolio as you know these are hybrid loans with initial fixed rate periods. And given when the loans were originated and the fixed rate periods of the loans these loans were mostly five-year but five- and seven-year fixed rate periods. Well a lot of these loans are originated in 2021 and 2022.
So they’re not up for repricing or moving from fixed to variable rate interest rates for a few years still. And because that date is further out we have a harder time getting borrowers to be concerned about that change in debt service. There’s a widespread belief that rates will be down by then and circumstances will be better. And so this is activity that is at a low level today. But as you can imagine, over the next year or two years that activity will pick up. But what also will improve is our view of the risk of that activity and we will probably be less interested in restructuring some of these loans, given their loan, loan to values and good cash flow. So we’ll see. Does that help?
John Michel: And just to add to Mark’s comment is, so what we’re seeing now is some of the loans are actually repricing, which normally they’ve paid off in the past. So we’re seeing a couple of loans reprice. And when they reprice, it’s good for us because they reprice to the 6.5% 7% level. So we pick up interest income on that.
Mark Mason: Right. But underlying that and maybe further to John’s point, we may not see the level of prepayments we would normally see at or around the repricing dates. If the new variable rate is not materially higher than the refinancing rate many of these borrowers may choose to pay that higher rate and wait for rates to decline, if indeed that’s the view at the time. So it’s kind of curious. We value these loans and the market value values these loans generally kind of like a yield to call on a bond right, assuming they prepay on or around this rate transition date or repricing date. We may not actually see that to the extent that we have historically. So it remains to be seen.
Timothy Coffey: Okay. And then just one final question for me on expenses. What – if we kind of look at we strip out the goodwill write-down from the second quarter, expenses have been coming down, call it $1 million-ish per quarter this year. Is that a trend you’re looking to accelerate, or would you expect – should we be expecting 4Q expenses to be kind of at that same cadence?
