Jon Arfstrom: 30 to 89 day past dues actually it was very, very well in the quarter.
Chris Bagley: Yes, it is. So we are actually — near-term past due is 30 to 90, we are down $4 million. So it was actually flat to down a little bit. So, that was a good sign.
Jon Arfstrom: Yes. Okay. All right. Thank you. Appreciate it.
James Rollins: Thanks, Jon.
Operator: Our next question will come from Brandon King with Truist Securities. Please go ahead.
James Rollins: Good morning Brandon.
Brandon King: Yes. So, in regards to the 35 branches that you’re closing, could you walk us through the decision making process behind selecting which branches to close? And could we potentially see more branch closures potentially know beyond the 35?
James Rollins: Yes, great question. I think we’ve identified the ones that we can close. I don’t anticipate that you’ll see another run of that here anytime soon. Now, you go through an elaborate process. So we look at each branch what the size of the branches from a deposit perspective. What the transaction volumes or what types of transactions are there. What kind of new business is flowing into that branch. How close do we have other branches coming by. What type of adoption to other delivery channels or is that customer base using from the adoption to mobile or digital deposit processes. And so that’s the process that you go through and identifying what’s there. And I think the team did a great job of identifying branches that we can move out or close in the system without putting a whole lot of deposits at risk.
Brandon King: Okay. And was it other branches or was it, I guess more marginal, more some qualitative factors that were part of that decision process?
James Rollins: You cut out on me for a second there. Say that one more time.
Brandon King: in these branches versus you know the last year in footprint or was it just pretty marginal based off some metrics?
James Rollins: Again, unfortunately I think your microphone is not working well. But we were looking at the entire branch structure. So again, the size of the branch size of deposit size of loans, how close we were to other branches, what kind of new business was coming in. Those were all factors we were looking at. I haven’t heard your question, clearly yet. I’m sorry.
Brandon King: Can you hear me now?
James Rollins: Yes.
Brandon King: Okay. Well, I’ll move on. In regards to capital, I mean is there any increased appetite for share repurchases? I know there were any repurchases in the first quarter, but given where your stock is trading right now, is there any increased appetite?
James Rollins: Yes, I would like to be there, but I think as we are flying into potentially darker clouds and potentially unknown in the economy, I think our statement today it would be the same as it was last quarter. I think we are going to sit where we are and hold the capital and hold that power. We would certainly like to be able to take advantage of a price where it is. But today, I would tell you, I don’t think that’s in the cards anytime soon.
Brandon King: Okay. Thanks for taking my questions.
James Rollins: Thank you, Brandon.
Operator: And our next question will come from Matt Olney with Stephens. Please go ahead.
James Rollins: Good morning, Matt.
Matt Olney: Hi, thanks, good morning, everybody. Valerie, I appreciate all your thoughts on the margin. Can you just clarify your thoughts on deposit beta expectations in 2Q, especially with the full impact of those brokered CDs that came on late in the quarter. You think you can improve on that 59% that you disclosed in the first quarter?
Valerie Toalson: Yes. So that is, I think the big magic question there is how much more movement, where we have from the non-interest bearing to interest bearing that’s really going to be the driver. I think the biggest — percentage of that, so we saw quite a bit of movement in the first quarter and there was a much more significant rate movement in the first quarter. What we are modeling is actually when rate moves in May and then stability after that until we get towards the end of the year then potentially coming down. And so if that holds we are actually modeling that mix shift, moves was down and that is what is driving our 30% cumulative beta. We still expect that mix shift will continue, but do model out and project that will actually move down again with the assumptions that we have for the rate environment right now.
Matt Olney: Okay. That’s helpful. And just following up on that, Valerie, any good evidence or good data points that suggest NIB mix shift is slowing in recent weeks, as you look at maybe balances since the quarter end?
Valerie Toalson: I think since quarter end, we call it pretty much business as usual. I don’t think there’s anything of note that we would call out there. Chris, Dan as to your thoughts on that.
James Rollins: Chris?
Chris Bagley: Clearly, interest rates are driving some of that. There’s just a lot of energy out there about interest rates. We are trying to keep all that short. So keeping — and the competition is doing the same. Everybody is competing on short terms right now.
Matt Olney: Okay. Appreciate the commentary. And then I guess switching over to insurance. I think Dan we’ve talked about the insurance segment at Cadence and we’ve seen some interesting transactions in recent months in the marketplace that had been pretty well received. I’m curious about your updated thoughts on Cadence insurance and the openness and willingness to perhaps monetize this in the future?
James Rollins: I appreciate that. We like the insurance business and let me clean up where I was a minute ago on revenues. So, my brain is not all the way on. The question earlier was on what is insurance look like in 2Q. Contingency revenue and cleanup of that gets spread. We used to record all of that in the first quarter which drove the first quarter higher, now it’s a little more spread. And so when you look back second quarter is actually higher than first quarter and I would assume that we wouldn’t see the same thing. We saw good organic growth on the insurance team little over 10% in organic growth new customers and new business last quarter. So we were pleased with that. Your question is more on what are we looking at, same as the question on any other M&A activity.
We are always open to looking at and reviewing opportunities. We like the business lines that we are in. We think that we work well together. We like the fee business that we generate. But just like anything else, whether it comes to selling the bank or buying a bank or buying insurance we just bought a new insurance agency in the last quarter. We continue to look for opportunities that we think will benefit our company.
Matt Olney: Okay, thank you, guys.
James Rollins: Thanks, Matt.
Operator: Our next question will come from Brody Preston with UBS. Please go ahead.
Brody Preston: Hi, good morning, everyone. Thanks for taking my questions. I do have — I just want to follow up just on the margin question, Valerie. I think in response to Matt’s you gave some good color, but I guess I wanted to put a finer point on the beta. What are you assuming for an interest bearing beta within that total deposit beta assumption? And what is the non-interest bearing mix that you’re assuming? And lastly, what is your expectation for purchase accounting accretion?
Valerie Toalson: Okay. Sure. First, I’ll take the purchase accounting accretion. Expecting $24 million in scheduled accretion for the full year that includes what we experienced the $10 million in the first quarter. So it does slow down a decent amount as we get into the next few quarters and into 2024. On the deposit betas really what I think, I’d focus on is a cumulative beta, a 30% and the reason we do that is because that incorporates, that move from the non-interest bearing into interest bearing, and really kind of a gradual increase as we go through the year. Probably, if we get the last rate increase in May as we are projecting, that I would expect that to stabilize out in probably the latter half of the third quarter.
Broderick Preston: Okay understood. And then I wanted to follow-up on the expense guidance. You threw out the possibility of maybe getting closer to the 290 level for the second quarter. I think you called out $5 million of seasonal expenses, at least as it relates to salaries and benefits in the first quarter. So I guess if I think more about a non-seasonal number as 300, the step down to 290 is relatively large. It’s about a 3.5% decrease. And so what are some of the items that will move lower? And are there any specific actions that you’re taking beyond the branch closures that you called out for the third quarter? Are there – is there anything you’ve done in the second quarter that should help us see that number come to fruition?
Valerie Toalson: Yes. So there’s – the focus on efficiency has been something that has been key in our minds really since before the system conversion. And then as Dan mentioned, we had the system conversion in the fourth quarter of last year. And so incrementally, we have been working on that. There are a number of continued system tweaks and refinements at our processes as we’ve merged together that we are rolling out. The timing of some of those things could be earlier, some could be later. And so that’s why I gave a little bit of a broad range there on the second quarter expenses. You mentioned the payroll taxes and that kind of thing, those tend to dwindle down. We’ll still have some of that, obviously, in the second quarter, but it will be less impactful as it was in the first quarter.
The fraud expense that we had this quarter was unusual. And certainly, we are hopeful that does not repeat itself into the next quarter. And then there’s, just a few other things that do tend to be heavier in the first quarter. Some of the annual mailings, some of those types of things actually come down as we look out through the year. So we’re continuing to work on the efficiencies to build into that. Some of the timing of that is a little unpredictable right now until we get to some of the branch closures and some of the other things that are in process.
James Rollins: Yes. And just as a reminder, so the branch closure piece is scheduled for the middle of the third quarter, so you won’t see a full quarter benefit there. But just like Valerie said, I think we’ve always been focused on and we’ll continue to be focused on more things that we can do. Again, we’re less than six months past systems conversions. We’ve got work to do to continue to drive a more efficient operation.
Broderick Preston: Got it, thank for that. And then just on the credit front, I did just want to follow-up on the C&I NPLs. I think the average size there is about $20 million. I guess I would ask, is that fairly reflective of some of the other sized C&I credits you have on the book or is it smaller than that?
James Rollins: Yes. We’ve got C&I credits that range from less than $1 million to more than $20 million. So certainly, in our corporate group, $20 million is going to be right smacking the middle of the sweet spot. Hank, jump in here.
Hank Holmes: I think that’s exactly right. We’ve had a history of kind of playing in that range, and it’s the bite size that we take on an average basis.
