Stacy Kymes: Could you ask that again? You cut out for just a second.
Timur Braziler: Sure. So the NPL migration this quarter for commercial real estate, what sectors those were in, and if there’s any kind of underlying thread that tied those loans?
Stacy Kymes: Yes, we look at non-performing loans for commercial real estate, really a modest increase. It’s mostly attributable to a single office facility. We took a modest charge-off on it this quarter and we expect it to be sold for no additional loss content by the end of the quarter. So we don’t have any specific concerns around lost content today. It really was a single, largely comprised of a single loan there, which is the increase there.
Timur Braziler: Great. Thanks for the questions.
Operator: We’ll take our next question from Matt Olney with Stephens.
Matt Olney: Hey, thanks. Good morning, everybody.
Martin Grunst: Good morning, Matt.
Stacy Kymes: Good morning, Matt.
Matt Olney: Just a general question. I want to ask about the overall level of competition within your core lending businesses. I think over the last few quarters we’ve talked about competitors pulling back and providing some opportunities for the bank to add new customers. I’m just curious if there’s any change here. Are these competitors kind of still on their back seat? And then just kind of any update on loan spreads? Thanks.
Stacy Kymes: Matt, I think what you saw really was some of the regional banks and the larger regional banks trying to manage their capital levels and liquidity levels. And so we’re less aggressive, particularly on the larger end of the corporate side, and we’ve seen some benefit from that. I would say, generally speaking, they’re starting to put their toe back in the water a little bit. Not maybe like they were before last spring, but starting to come back into the market a little bit there. I think spreads generally on the larger end of corporate sides are going to be stable. I think until we get more clarity around Basel III endgame, and then maybe they widen a little bit there as folks figure out what the capital structure has to be. But generally speaking, I would say corporate spreads have remained relatively flat. And that’s our expectation that we see today, even with some being less aggressive perhaps than they’ve been in the past.
Matt Olney: Okay, I appreciate that, Stacy. And then on the expense side, I appreciate that the guidance here that you gave no rule change, but just remind me of the variability of that expense base. And if we were to assume the higher end of fees for the year, is it also reasonable that we should be assuming the higher end of the expense guidance?
Martin Grunst: Yes. So on two businesses in particular, mortgage and brokerage and trading, those have a pretty direct link into the expense base. But those are really the two that you see that tight connectivity and then just generally in expenses, we’ll continue to make investments in the IT space and so the fees and the third party fees and the data processing costs, you might see some variability there. And then as you kind of know that the mortgage expenses, those are seasonally low in the first quarter and those are predictably a little higher than the other three quarters, but those are the only things that I’d point out.
Matt Olney: Okay, thank you.
Martin Grunst: Thanks, Matt.
Operator: [Operator Instructions] We’ll take our next question from Brandon King with Truist Securities.
Brandon King: Hey, good morning.
Stacy Kymes: Good morning, Brandon.
Brandon King: So I noticed that unfunded commitments ticked down in the quarter, so I was wondering if you could provide us any context behind that?
Stacy Kymes: The only thing we’ve really seen is we’ve been able to generate new business and a lot of it is not being actively used yet. There’s construction piece of it that has to fund up over time. And on the commercial side, we’ve just seen utilization stay flat while we’ve added new customers. So the unfunded commitments is a reflection of just increased commitments overall and stable utilization rates.
Martin Grunst: Other than the commercial real estate where they’re using theirs over time and so that’s where you see one of the decline factors.
Brandon King: Okay, that’s helpful. And then lastly from me, just in regards to commercial real estate, could you give us an update on what you’re seeing in regards to extensions for loans that come up for maturity and just what customers are at as far as the request?
Stacy Kymes: Yes, I think, it’s kind of business as usual for the most part. I mean, I think that as loans mature or come close to maturity, we work through that just like we have in any typical cycle. I think that at least thus far, this doesn’t appear a whole lot different than any kind of normal course of business. Borrowers have the option for us to do some kind of mini-perm financing, so where you would put it on an amortization schedule if it’s through the construction phase and if the permanent market isn’t accepting at that particular point in time, they can do what we call a mini-perm with us, the loan amortizes in typically a three-year type term, and then they can wait for the capital markets or the permanent financing markets to get in a better place.
But really what we’ve seen, I mean, we’ve had a very healthy portfolio. I mean, the first quarter, we had really good payoffs in the commercial real estate book, which we really attribute to kind of having a healthy portfolio and so it doesn’t, we’re not seeing anything that’s kind of out of the ordinary there.
Martin Grunst: Yes, the payoff levels that we saw this quarter were much higher than the last couple of quarters, and almost felt like just normal course of business repayment rates in that portfolio, which like Stacy said, indicates just a pretty healthy underlying portfolio.
Brandon King: Yes, very helpful. Thank you for taking my questions.
