Chris Bagley: Yes, if you look at the growth from the quarter I think is about a third, a third, a third generally from the real estate side, primarily driven by the larger corporate pieces that was multifamily and industrial. The biggest percentage of that we also had nice increase in our mortgage book. So the ability to write, it held some portfolio on mortgages is a win for us and the rest of it was maybe a general kind of, I call it general C&I. The Community Bank has a tremendous amortizing loan portfolio. So we get a lot of cash flows from that and that’s where we’ve seen the slowdown in the pipelines first. The Community Bank is — this because of that headwinds on their amortization it’s tougher for them to grow in an environment like this and we are seeing some nice opportunities in some of our business segments. Energy still has some nice opportunities, the renewable piece. So, that’s looking — that’s looked pretty well for us in the recent months.
James Rollins: Billy Braddock with us today too. Billy is our Chief Credit Officer on the corporate side. Billy, I know you can cover some of that.
Billy Braddock: Yes, sure. You guys covered it pretty well. But the color, I’ll add is that a lot of our approvals that we’ve been doing have been at higher price points, more ancillary that’s been covered. But the structural discipline has been there too. So while we are getting a lots of looks we are also alluded in some deals because of those structural enhancements, but we are winning more than our fair share, I’d say. So wherever we are winning, we are winning at tighter standards. I don’t want to say that credit is tightening, but we are able to win good business at tighter standards, which is good for us going into the cycle. So that’s really the point I wanted to make that I hadn’t heard come up yet.
James Rollins: Thanks, Billy.
Brett Rabatin: That’s great. If I could sneak in one last one on fee income. Valerie, I didn’t quite get to the linked quarter 1Q to 2Q ’23 obviously other was up SBA and some other lines, but typically insurance is stronger in 2Q. Does it make sense the 2Q fee income is better than 1Q?
James Rollins: Well, insurance is typically the highest in 1Q Brett and then that would drop off a little bit in 2Q and come back again in 3Q. So the best quarters for insurance for us historically have been 1Q and 3Q, but not that far of a drop off in 2Q, but not as good as 1Q. Valerie, I’m sorry, I jumped in on you.
Valerie Toalson: No, that is fine. We would expect card fees to up perhaps a little bit in the second quarter. They tend to be seasonally low in the first quarter. So that’s an area that can continue, obviously our wealth and our brokerage those businesses continue to really build upon themselves. And so modest growth throughout the year, is what we are looking toward there. And then on the mortgage banking fees, they had really nice originations last quarter and slower paydowns. And so that combined led to some of the improvements in the first quarter. And just kind of depending on what we see it is coming up into the buying season. We could continue to see nice revenue continue to come off them as well, although obviously with the higher rate environment, we wouldn’t expect that to be a material change in the coming quarters.
James Rollins: Remember the deposit fees both card fees and deposit fees, day count is also a factor there too, certainly business days. So the low day count in 1Q is a negative impact on the deposit fees and the card fees a little bit.
Brett Rabatin: Perfect. Thanks for all the color.
James Rollins: Thanks, Brett.
Operator: And our next question will come from Catherine Mealor with KBW. Please go ahead with your question.
Catherine Mealor: Thanks. I just wanted to circle back to the margin. Valerie you mentioned, you added $1.6 billion of brokered CDs late in the quarter. Can you remind us what’s the average rate is on those CDs and the maturity?
Valerie Toalson: Yes, sure. So the average maturity at the end of the year or at the end of the quarter weather was about five months. So really pretty short and the average rate was just under 5%.
Catherine Mealor: Okay, great. So part of your, I guess outlook for the margin to improve or maybe the bond restructuring to be accretive in the fourth quarter. Is part of that as we run off these brokered CDs and maybe we kind of redeploy some of the cash by lowering borrowings that way?
Valerie Toalson: Obviously, that’s all factored into the margin. Projection as far as the $10.5 million of incremental on the security sales that’s really completely different, that actually had to do with more of a reinvestment of those dollars, but yes on the brokered CDs as those runoff we anticipate that those will be used likely to either fund additional investments or fund loan growth, and that will obviously be better yields.
Catherine Mealor: Great. Okay, great. And so as we look at excess cash, I guess, what is your — how are you kind of feeling the pace of deploying that excess cash look like over the course of the year?
Valerie Toalson: Yes, I think, I mean in the near term we may run with about $1 billion or so of excess cash. But again, that could vary fairly significantly depending on volatility in the industry. We want to make sure that we have excess cash just to be prepared. And so that could vary, but otherwise expect that come down fairly quickly and be managed at that level.
James Rollins: We wanted to make sure we had plenty of excess liquidity obviously through the month of March after things started blowing up and we want to make sure we’ve got plenty of liquidity going forward too.
Catherine Mealor: And so as I think about stable to up margin and then you kind of got the bigger balance sheet with the cash. Any kind of outlook or commentary you can give on dollar NII growth for the rest of the year?
Valerie Toalson: Yes, I think that just like we saw in the first quarter, we saw the daily net interest income growth compared to the fourth quarter. With the expectations on loan growth, and if we can get the stability in the deposits that we are anticipating throughout the year has been, we do believe that, that’ll be able to continue to grow from a dollar standpoint modestly throughout the year.
Catherine Mealor: Great. And maybe just going back over to the credit. Valerie, you mentioned that you’re seeing some negative migration within classified at quarter end. How do you think that impacts your ACL overtime? I mean you’ve got such a high ACL given the merger, but we are seeing some negative credit migration. I mean do you think you have kind of a stable ACL from here or is there — what do you think would actually take that ACL to build from these higher levels?
Valerie Toalson: Yes, I think that to build it meaningfully would require some meaningful charge-off. There’s a lot of variability, obviously in all of those assumptions, one being significantly the environmental impact, and I think that there is potential for that environmental impact to have a longer-term positive outlook. I don’t think that we’ll be taking that view in the very near term. But I do think that that’s something that can obviously be offsetting the potential downgrades, if those were to occur in the upcoming quarters.
Catherine Mealor: Great. Okay. All right. Thank you.
Operator: Our next question will come from Jon Arfstrom with RBC Capital Markets. Please go ahead.
Jon Arfstrom: Hi, good morning. Just a few follow-ups here. Community Bank deposit increases. What do you think the driver of that? Was it CD driven, rate driven or was it something else?
James Rollins: Yes, I think the CDs certainly play in there, because we just like everybody else we have got rate specials. I think our team does a great job of playing hand to hand combat. We’ve got a lot of customers out there. I think the team is involved in what’s going on in the market and we’ve been pushing them hard to grow deposits. Chris, you want to tag on to that?
Chris Bagley: Yes. We had instituted and kicked off deposit in emphasis promotion well before the events in the March in the quarter. So there was some of that was part of plan and some marketing and some outreach we were already doing, but Dan’s right it’s granular, it’s across the whole geography and it’s reaching out to existing relationships and new clients. I think there’s been some banks probably trading deposits across the street given the recent events and that’s probably part of it too and we have won our fair share of them.
Jon Arfstrom: Yes, okay. You’ve got some good new slides in your deck, but on Slide 5, you have that 98% number and the 70% numbers, 98% of accounts are insured, 70% of the dollar amount is insured. What did you hear from the 2% that was uninsured and maybe the 30% balances that were uninsured. What did you guys hear from them mid-March and after? And any outflows of magnitude?
James Rollins: Yes, so let me make sure we are saying that correctly. So 98% have balances less than 250. That doesn’t necessarily mean that all of that’s insured because they could have multiple accounts in the same name. So that’s a 98% have less than $250,000 in the account. What we heard from customers and we certainly ask our relationship managers and branch folks to be close to customers throughout that process and they’re still doing that today is that there was a little bit of concern certainly the non-profits is where we saw some stress points, the large non-profits we are wanting to make sure that they were taken care of, but our customers again, as I said at the very beginning were mostly business as usual. They were looking to see kind of what’s going on.
Certainly the fear factor play down the news was talking every day. But we saw pretty normal behavior. We had some customers and some of the larger customers. So Jon when you walk back some of the things we talked about during the quarter was that we were at 67% insured or collateralized at the end of the year. And so that number came down which would indicate that some of those large deposits went out and then some of the growth that we’ve brought in we saw — we saw deposits coming in at under 250. So I think we had some growth in the smaller ticket sizes. We certainly saw some reciprocal deposits, lots of customers were using the insured cash sweep or the ICS product. So we saw some movement in that area, but again we are mostly in the South.
The economy appears to be humming along, maybe a little better than other parts of the world and so we feel like our customers are in pretty good shape.
Jon Arfstrom: Okay. Good. That’s helpful. And then just one more follow up on credit. How far along are you guys through the cycle of collecting year-end financial information from borrowers? Then kind of what’s left is I would assume it’s smaller borrowers, but I thought I’d ask that?
Chris Bagley: Yes. On the corporate clients, we are probably almost completely there with — even with audits for the most part. Smaller clients typically that’s tax return driven take little bit longer cycle, but most of those are amortizing credits. So you get to monitor those on their payments and their past due status. So, but we have — that’s a focus for us. So we take a look at everything of size and we are focused on getting that information in. So we can properly grade those credits.
Jon Arfstrom: Yes. It feels like you’re through the bulk of it, though. Is that fair?
Chris Bagley: That’s fair.
James Rollins: Yes. That’s fair.
