Frank Schiraldi: Yes. On that front, in terms of the asset sensitivity, you talked about being reduced by maybe 14% just trying to think through numbers here. So I think on the deposit side, you’re basically 40 — your tied Fed funds moves, you get 40% of that move through deposit costs. Is it right now about 60% of the earnings assets move with Fed funds? Or what’s the number on the asset side?
Damian Kozlowski: On the deposit side, it’s. Yes, that’s 40%, so — in versus 60%. So if it — we get 60% and our clients get 40%. So for us, it’s a 60% deposit beta. So our — we got down to under 25% at 1 point of fixed rate assets including our bonds and now we’re approaching 40%. So that time which we’ve closed the gap and we’ve got to get to 60%. So we have another 20% to go, of which almost all of that can be closed by purchasing bonds and every day, we get less asset sensitive because every day, we put on fixed rate instruments in loans. And as you can see, it also impacts our NIM. So we’ve got a longer duration portfolio that’s much more fixed now than a year ago. And we’re — I think we’re on the precipice of closing it in its entirety as you’re seeing a narrowing obviously, of the yield curve and the anticipation of the cut in rates.
Frank Schiraldi: Okay. And do you still think you can lock in a 5% NIM in this environment? I know there’s a lot of variables there but is that kind of a target?
Damian Kozlowski: That would be great, of course. It totally depends on how many bonds we buy at what price and how much origination we have on our other businesses that are going to be fixed rate, longer maturity loans. So it’s incredibly hard to predict. I’d be happy once again, at 4.50%, it’s fine, at 4% it’s fine because it’s not going to — we’re not a traditional bank and it’s not going to affect our profitability. When we — we get a dis-inversion of the outcome, we buy the bonds, our net income is going to go up and ROE is going to go up and ROA is going to go up because we don’t have the same constraints. No, we don’t have to grow the balance sheet yes, it doesn’t really — if the NIM was 1%, our ROE would still be 28%, it doesn’t matter — the math is different than it would be for a traditional bank.
Hopefully you lock it in above 1%. Well, it’s going to be way above the market. So where is the market now. Some of the big banks are like 1.80%. And the whole markets are just over 3% and we’re — we added another 20-plus basis points this quarter and that’s going to continue to increase until we buy the bonds and it’s — this one is a real tough one to predict where it will be.
Frank Schiraldi: And then just lastly, I know you got a lot of questions on the Rebel loans [ph]. People look at that industry, they’ve seen some pain elsewhere away from you guys. And you did see some migration into criticized and classified last quarter. Just wondering what you saw this quarter on that front. And then any change to your general thoughts on that paper?
Damian Kozlowski: It’s — I think we have a more secure portfolio because there was a real lowering of cap rates and structure structurally in the multifamily market, things like subordinate debt, lower reserves not buying the proper interest rate. We didn’t do any of that. We are strict — were very strict in the underwriting. We — our portfolio has matured. So it’s — we do have some deferments. This is very natural, though. No write-offs. No, we don’t believe any substantial risk of default and loss but as you mature that port, it’s hard to know whether it’s just a maturing portfolio where you have some people who have finished the projects or it’s more based on the economy, it’s not abnormal we’re not seeing anything abnormal yet from ours.
Now you hear a lot of these stories in the market but those aren’t our type of deals. Those aren’t with our type of structures in the markets that we inhabit with the type of developers that we have. So we haven’t seen the same stress that you might have read about in other areas.
Frank Schiraldi: Sure. I mean just thinking about, is it fair to assume that classified assets will increase in this business for you guys but just you won’t see the losses. Is that kind of a reasonable expectation of coming quarters?
Damian Kozlowski: Yes, that’s an expectation just on the usual aging of a fix — floating rate portfolio that’s transitional. So we’re very — we work with the sponsors of these deals and they’re going to improve a property. And sometimes they can’t get the refrigerators or they can’t — they take longer than they expect in order to finish the project, even though they might be leasing it up, they didn’t finish 3 buildings. So this is common. Whether that’s driven by economic what’s happening in the economy, we don’t believe that’s the major factor in it. It’s impossible that I can’t give you an answer because I don’t — there’s really not an answer. We’re not saying — there’s, once again, still a significant need for the type of housing we do which is workforce housing.
