Tim Seltzer: Can you guys remind us, what percent of your loans are floating rate and how you’d expect loan yields to trend in a downward rate environment? And then maybe what the overall impact on the NIM would be if we just got maybe one or two basis cuts towards the end of the year?
Dennis Shaffer: Well, we think that will benefit us. The rate cuts probably benefit us a little bit because again we’ve been funding some of that with overnight borrowings. So, those have been trending kind of upwards. I think they were up $30 million from 12/31 to 3/31. So, we would benefit from that and we also have more loans repricing. A lot of our loans are tied to 75% of our book or more is tied to treasuries and those even short-term rates come up, it looks like the yield curve is trying to correct itself a little bit and those treasury rates are higher. So as that book re-prices, we should benefit.
Rich Dutton: So, just to kind of give you some raw numbers, a little over 25% of our book is floating daily, Tim. So then, and we started out the year we did a deep dive and we had about $140 million that we’re going to reprice in 2024, of which only 15 million of that was repricing in the first quarter. So when Dennis mentioned earlier that we feel good about some of the repricing and some of the margin help in the second half of the year, out of that 140 million, 93 million of them is going to be moving in the second half of the year.
Operator: Your next question is from Manuel Navas from D.A. Davidson. Please ask your question.
Manuel Navas: I think a lot of my questions have been answered, but could you help to quantify the potential size of the wealth management opportunity? You said it was $75 million in the third quarter. Is there more after that or is it just that amount?
Rich Dutton: Manuel, this is Rich. Yes. It’s just a transaction. Those deposits are sitting in our wealth department now. Once we get the mechanics of that squared away, we’ll just move that money over to the bank. It’s not going to be super cheap money, but it will be certainly less than what we borrow overnight at. I would add that, we mentioned those two initiatives, but there are a number of other initiatives that we think that we’ll be able to add deposits. So we have a — we’re looking at all our public funds in the markets where we have branches. We’re looking at schools and libraries and municipalities and county money and stuff. And we’re proactively going to be reaching out and get a little more ground to be more aggressive get a little bit more of that funding.
We have pulled a number of reports, for instance, with customers with lending with no or little loan or deposit relationships. We’ll be targeting those customers and stuff. I think there’s a number of initiatives underway in addition to the State of Ohio’s Homebuyer Plus Program and that Wealth Program that we think can have an immediate impact on our funding costs.
Unidentified Company Representative: I wouldn’t say immediate.
Dennis Shaffer: Over time, over the next year, I would say, as I mentioned in my remarks, over the next year.
Operator: [Operator Instructions]. Your next question is from Daniel Cardenas from Janney Montgomery Scott. Please ask your question.
Daniel Cardenas: Yes, good afternoon, guys. A couple of questions, on the fee income side. I mean, I appreciate all the color that you guys have given, and it sounds like you’re working to try to patch up some of the holes that have been created. But should we think of a good run rate for you guys on a go-forward basis?
Dennis Shaffer: So, if we had $8.5 million for the quarter, again I think the wild card in there right now for us is mortgage bank. Again, we’re coming into probably the best time for that. I’ll let Chuck talk about it, but I guess the other wild card is at least the fees related to our leasing and again, more. I guess we’re a year into it, but we’re still, those are some pretty lumpy revenues depending on when pieces of equipment get sold and whatnot but I’ll let Chuck talk about mortgage banking a little bit.
Chuck Parcher: Well, Dan, our first quarter production and mortgages, even though it doesn’t show as well on that gain on sale, we did about 10 million more dollars in production in the first quarter this year as compared to the first quarter last year. We feel like we’ve got a really solid pipeline there. Again, I guess we’re a year into it, but still those are some pretty lumpy revenues depending on when pieces of equipment get sold and whatnot. But I’ll let Chuck talk about mortgage banking a little bit. We’re still limited a little bit in Ohio and just the amount of inventory that’s out there, it’s just we’ve got a lot of pre-approvals, and people can’t still buy houses. But we have put a concerted effort going into this year about getting more of our production being saleable as compared to our portfolio.
Obviously, the construction piece and our CRA piece have to go on the books, but the rest of the stuff, we’re really pushing toward more of a saleable product. And it seems like the consumer is getting a little bit more adjusted to having higher rates. I mean, a lot of people still are going to want to come off a 3% rate to get to a 7% rate, but people that actually have been holding off making a move or starting to come into the marketplace because they need to, and it doesn’t look like the rates are going to come down in the real near distant future.
Dennis Shaffer: Well, in the spring and summer months, volume should be up. So optimistic there. Also, we did create a syndication desk at our leasing company, which I think will help us with some of that gain on sale because we’ll be in a, that’s going to be their sole function, to work our relationships and get us the best pricing so that our gains improve. The cadence will happen, get us in some sort of cadence where that’s happening a little bit quicker and things. So that was another one of our initiatives that we looked at was, how do we maybe do a little bit better? We’re going to incentivize who’s running that area based on the bigger gains that he can get. He’ll have a chance to earn a little bit of income and stuff. But that was another initiative that we undertook in the first quarter.
Rich Dutton: The only thing I’d add, we talked about the NSF fees being down $375,000, but our service charges were only down about $300,000. We made that up with higher service charges. That’s something we put in place during the quarter.
Dennis Shaffer: We only had one month of benefit on our service charge. We did increase some service charges across the board and we really only had one month of March was the only real month of benefit there. So, we are trying to offset some of that lost revenue in various ways.
Daniel Cardenas: It sounds like maybe you can stay flattish in Q2 and then start building up from there modestly.
Dennis Shaffer: Yes.
Daniel Cardenas: Okay. And then how should we…
Chuck Parcher: I’m sorry. Dan, I can say the wild card on that a little bit too is just our swap income. It kind of bounces up and down depending on our borrower’s appetite for. We did quite a few what I would call mid to short-term swaps in the fourth quarter. I think we generated $475,000 in the fourth quarter, a lot of people jumping on a three-year swap at that time. The way the yield curve has been bouncing around, it hasn’t been as appealing to some of our borrowers. But depending on how the inversion of the yield curve goes over the next few months, we might be able to pick up a little more swap income too.
Daniel Cardenas: That can be lumpy, right?
Unidentified Company Representative: Yes.
Daniel Cardenas: Got it. All right. And then, tax rate for you guys, how should we be thinking about that?
Dennis Shaffer: We came in a lot lower than we thought it would this time. Our effective rate was just under 12% this quarter. But we’ve always kind of said 15% or 16%, and I think that’s what I love. I don’t know what the tax preference items were and I should, that they drove that down this quarter, but that’s about as low as I we’ve ever seen. I should know the answer to that. If you wait until the very last, the question to ask me is one I didn’t know the answer to.
Daniel Cardenas: No problem. I’ll stop there and step back. Thank you guys.
Operator: There are no further questions at this time. I will now hand the call back to Dennis Shaffer for the closing remarks.
Dennis Shaffer: In closing, I just want to thank everyone for joining and those that have participated in the call today. Again, while we are not pleased with our first quarter, we are confident that our strong core deposit franchise and just our disciplined approach to pricing deposits and managing the company positions us well for future success. I look forward to talking to you all again in a few months to share our second quarter results. Thank you for your time today.
Operator: Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect.
