Mark Fitzgibbon: Ned, I guess I’m curious, I’m sort of scratching my head. You guys have grown your office loan portfolio this year by 12%. It just seems like an inopportune time to be doing that. Can you help us sort of understand better why you would want to do that given the capital ratios are tight and you’re trying to conserve capital there?
Ron Ohsberg: That’s a fair question. We have no expectations of growing the office book. And I’m going to ask Bill to just talk about the details on the office project that we did in the quarter.
Bill Wray: It was really one deal with an extremely strong sponsor and amazing deal metrics. So in the never say never category, this is one we felt it was the right thing to do. It had a 16% going in debt yield about a 50% LTV, 2.0 coverage, no tenant concentrations. So it was a deal that made sense. And so it’s certainly – we never want to be a bank that just puts up the Heisman and says, stay away, that’s just not the right way to treat our market. So this was one of those deals that was a real cherry to pick. And we also got really good structure in terms of a guarantee on this. So we certainly – I haven’t seen any office deals in a while. This was – this has gotten the pipeline quite a while ago.
Ned Handy: And just to give you a sense, Mark, we came into the quarter with a pipeline that was north of $300 million. Our pipeline right now is below $100 million.
Mark Fitzgibbon: Last question. Okay. Last question is I wonder if you could give us a little more detail on those two nonperforming loans in the commercial real estate bucket. Maybe some color around what’s going on there? Because I think Ron mentioned that they’re performing, but you put them on nonaccrual, what’s going on with those?
Bill Wray: Right. This is Bill again. So one of them is a senior housing facility. LTV of 59%, been challenged on vacancy, been challenge also with staffing costs. A lot of these places have had a real difficulty hiring people have had huge agency staffing, which has put a lot of pressure on their bottom line. It’s had millions and millions of sponsor support over the last couple of years, but was it matured and so the nonaccrual was based on that. It is current. We’re now discussing forbearance possibly going to IO for a while until that will recover. Again, a solid deal with a strong sponsor, but the nonaccrual was tripped by the maturity and then the fact that we had to get the forbearance in place. The other one is a couple of Class B office properties occupancy around 60%, still getting sponsor support, still current.
We believe that they’ll get through this okay, and we’re talking right now about a potential modification to interest only for a while. But again, we felt it was prudent on those to go nonaccrual as well. So – but as I said, both of them, as you noted, are fully performing and haven’t missed a payment.
Mark Fitzgibbon: Thank you.
Ned Handy: Thanks Mark.
Operator: Our next question comes from the line of Damon DelMonte with KBW. Please go ahead. Your line is now open.
Damon DelMonte: Hi, good morning, guys. Thanks for taking my call. Just to kind of follow-up on the credit discussion there. Good morning, Ned. If you look at the loan loss reserve, it’s around 72 basis points. Are there any other credits, I guess, first, that are starting to pop up on the screen as maybe being concerning. And then as you look at the kind of broader credit picture and economic picture, do you still feel comfortable with the reserve that’s well below 1%.
Ron Ohsberg: Yes, Damon, I’ll start with that, and I’ll hand it off to Bill. Yes. I mean we do a very, very detailed review of our portfolio each quarter. And yes, we know 72 is probably on the lower end of the peer group range. But given the quality of our portfolio and our understanding of it, we’re comfortable with that level. Bill?
