Columbia Banking System, Inc. (NASDAQ:COLB) Q1 2024 Earnings Call Transcript

Columbia Banking System, Inc. (NASDAQ:COLB) Q1 2024 Earnings Call Transcript April 26, 2024

Columbia Banking System, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to the Columbia Banking Systems First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question and answer session. [Operator instructions]. Please be advised that today’s conference is being recorded. At this time, I would like to introduce Clint Stein, President and CEO of Columbia, to begin the conference call.

Clint Stein: Thank you, Dede. Good afternoon, everyone. Thank you for joining us as we review our first quarter results. The earnings release and corresponding presentation are available on our website at ColumbiaBankingSystem.com. During today’s call, we will make forward-looking statements, which are subject to risk and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures and encourage you to review the non-GAAP reconciliations provided in our earnings materials. With that, March 1 marked the one-year anniversary of the closing of our merger.

It was a notable milestone for our company for many reasons. Importantly, it provided us with a full year of data points for what was working well within the combined organization and allowed us to identify redundancies and inefficiencies that are a natural byproduct of large mergers. Our one-year anniversary marked the conclusion of our merger integration phase and enabled us to start our operational effectiveness work. Armed with the observations and learnings over the first year, we made significant progress on identifying opportunities for improving our expense profile. During the first quarter, we reduced our headcount by 91 FTE, with additional reductions communicated internally of 142 for the month of April. The FTE reductions combined with other expense savings enacted in the first quarter represent annualized reductions of $18 million.

These savings are reflected as of quarter end, not in the first quarter’s normalized operating run rate of $286 million. The actions taken to date for the second quarter add an additional $25 million of savings annualized to the first quarter number. You have heard me say many times over the years that we target a top quartile level of performance across all financial metrics, and a lower cost structure moves us toward our goal and away from what has been up to this point, average at best. The meaningful reductions to our associate base were done in a thoughtful manner. Eliminated positions and retirements spanned all departments and levels of management, including the executive team, which is now 15% smaller. Over the past year, our leaders gained an in-depth knowledge of their teams, processes, and other factors, allowing them to identify areas for operational improvement.

This full-scale review resulted in consolidated positions, simplified reporting and organizational structures, and an improved profitability outlook. We believe these changes will enable us to operate more efficiently while preserving the premier levels of service we provide to our customers. Associated cost savings will continue to be realized during the second and third quarters with the full benefit of our actions reflected in the fourth quarter expense run rate we outlined in our March update. We expect to incur roughly $13 million in related restructuring expense in the second quarter, which will be fully mitigated by the associated expense reductions within the current year. Our organizational review resulted in a swift elimination of redundancies, but our work is not complete.

Our process identified many longer-term initiatives to enhance operational efficiency and further drive franchise value. Many of you know Columbia has always operated in a cost-conscious manner, and we will continue to seek out additional opportunities to optimize our performance from a revenue, expense, and profitability standpoint. I hope our actions year-to-date demonstrate that we are laser-focused on regaining our placement as a top quartile bank as we drive towards long-term, consistent, and repeatable performance. Upon completion of this initiative, our ability to reinvest in our people, our franchise, and our suite of products and services will remain intact. We believe these investments, along with a lower expense base, will continue to drive additional long-term shareholder value.

Now I’ll turn the call over to Ron.

Ron Farnsworth: Okay. Thank you, Clint. We reported first quarter EPS of $0.59 and operating EPS of $0.65 per share, and our operating return on average tangible equity was 16%, while the operating PPNR was $201 million. Please refer to non-GAAP reconciliations provided at the end of our earnings release and presentation for details related to our calculation of operating metrics. On the balance sheet, we had $200 million of loan growth and $100 million of deposit growth. For deposits, we had a decline in non-sparing demand that occurred in January, but we’re encouraged to see those balances flat for both February and March. Our net interest margin of 3.52% was within our estimated range of 3.45% to 3.60%, and the expected reduction from the prior quarter was driven primarily by the deposit shifts that occurred in Q4 and January.

Our NIM increased to 3.55% in the month of March due to pricing reductions on wholesale and promotional funding. Our cost of inspiring deposits was 2.88% for the quarter. Within the quarter, this cost was 2.90% for both February and March, but ticked down to 2.89% at the very end of March. Our projected interest rate sensitivity under both ramp and shock scenarios remains in a liability-sensitive position, and we expect our rates down deposit betas to approximate those experienced on the way up. Our provision for credit loss was $17 million for the quarter. We updated our commercial CECL models this quarter to better reflect historical and expected future losses. In 2023, the methodology for our combined company was structured to the historical Umpqua portfolio composition.

The outcome was increased volatility in our provision expense that wasn’t characteristic of the granularity and quality of our combined commercial portfolio. Our recalibrated commercial models, which now integrate additional data and operating knowledge, have effectively reduced our commercial allowance for credit losses. It’s important to note that the increase in our CRE and multifamily ACL is a response to the transient market conditions in Western Downtown Corvus, where we maintain a minimal presence in our portfolio. Despite these adjustments, our overall allowance for credit loss remains robust, closing the quarter at 1.16% of total loans or 1.36% when including the remaining credit discount. Total GAAP expenses for the quarter were $288 million, while operating expenses were $277 million.

We’ve reflected the FDIC special assessment as non-operating item in the pressure release. Of note, we had a number of one-off items in the quarter that benefited our expense level. Absent these, I peg our normalized level of operating expense at $286 million. As a reminder, on the expense front, we expect to record a restructuring charge of approximately $13 million related to the efficiency initiatives that Clint discussed as non-operating expense in Q2. Now let’s go to our cap for regulatory capital position. Our risk-based capital ratio has increased as expected in Q1. We expect to build capital above all long-term targets, which will provide for enhanced future flexibility. I’ll close with our outlook for 2024 on several key financial statement items.

These are consistent with those included in our early March investor presentation. Average earning assets are expected to remain in the $48 billion to $49 billion range. Our NIM is expected to remain in the 3.45% to 3.60% range, which includes stability and deposit balance. For discount accretion, we continue to expect $130 million to $140 million of securities rate-related accretion, $90 million to $100 million of loan rate-related accretion, and $15 million to $20 million of loan credit-related accretion. We expect full-year operating expense, including CDI amortization, in the $975 million to $1.025 billion range. With the cost savings that Clint discussed earlier, we expect our Q4 operating expense, excluding CDI amortization, to be in the $965 million to $985 million range on an annualized basis.

We expect CDI amortization of $120 million for the year, with about $29 million in each of the remaining quarters of 2024. Merger-related expense of $10 million to $15 million, and our effective income tax rate at 26.5%. With that, I will now turn the call over to Frank.

Frank Namdar: Thank you, Ron. The loan portfolio’s credit performance continues to demonstrate the strength of our through-the-cycle underwriting process and discipline, together with the quality of our borrowers and sponsors. The trends we are observing in delinquency and non-performing loans are consistent with the shift towards a more standard credit environment, which follows an extended period of outstanding credit quality. The $30 million increase in non-performing assets this quarter, primarily attributed to our SBA portfolio and a single C&I-related property, is within expected parameters and reflects the dynamic nature of the credit landscape. After accounting for the government-guaranteed portion, the rise in non-performing loans remains modest.

Our vigilant and ongoing monitoring of the portfolio is augmented by focused reviews of specific asset classes, such as our multifamily and office portfolios. These detailed analysis have consistently shown no systemic issues across different industries, sectors, or regions. We have no delinquent loans in our multifamily portfolio, and our office portfolio delinquencies remain extremely low at less than 50 basis points of the total office portfolio. Neither portfolio has had any charge-off activity. Net charge-offs for the consolidated company were 47 basis points annualized for the quarter, with 22 basis points attributable to the bank and 25 basis points to FinPac. We remain very satisfied with the quality of our granular and diversified loan portfolio, which is highlighted in greater detail in our investor presentation.

I’ll now turn the call over to Chris.

Chris Merrywell: Thank you, Frank. For obvious reasons, deposits remained a key focal area for our teams this quarter. We adjusted how we evaluate and approve deposit pricing during the first quarter. A comprehensive review of exception and other pricing authorities resulted in tighter controls and a renewed discipline around deposit pricing. These changes directly contributed to the stability of our interest-bearing core deposit rates late into the quarter. We also reduced our promotional rates on money market and CD accounts, and the CD repricing impact in the first quarter was significantly lower than it was in the fourth quarter. Beyond our actions related to deposit pricing, the teams are also focused on bringing new relationships to the bank.

Our branches are wrapping up a three-month small business campaign launched in early February, which contributed $225 million in deposit generation to our first quarter results and an additional $75 million to date in the second quarter. The campaign includes bundled solutions for customers without promotional pricing or special products. Additionally, 25% of the balances are non-interest bearing. Total cost of funds for these deposits was 1.95%, and in addition, we have seen an increase in our commercial card and merchant card activity from the increased referrals. These actions all contributed to a significantly slower pace of increase in our cost of interest-bearing deposits, which was 2.89% as of March 31, compared to 2.75% as of December 31 and 2.27% as of September 30.

So, the first quarter’s increase was a less impactful 14 basis points compared to the 48 basis point increase during the fourth quarter. While these recent pricing and balance trends are encouraging, we expect continued declines in non-interest bearing deposit balances during the second quarter due to seasonal pressures that include customer tax payments. Non-interest bearing balances were down 3% on an end of period basis in the first quarter, but they were down 7% on an average basis due to seasonal declines late in the fourth quarter. The higher rate environment and inflationary pressures have contributed to non-interest bearing balance migration over the past two years. With the Fed funds rate seemingly stabilized and given our proactive pricing discussions, we expect deposit pricing pressures to remain moderated when compared to 2023.

But persistent inflation continues to draw down customers’ account balances, which may exacerbate the tough seasonal deposit flows we typically experience in the second quarter. That said, our teams are focused on generating new business to offset this headwinds, and their success will be key to containing our deposit costs regardless of where we see any rate cuts from the Fed this year. Turning to the loan portfolio, relationship-driven growth remains our primary focus. Loan balances increased 2% on an annualized basis during the quarter. Commercial lines of credit and owner-occupied commercial real estate drove half of the quarter’s expansion and were the primary drivers of the new originations. Lastly, on the loan book, I’ll note that our customers had a number of projects in process, which resulted in construction draw-downs and the transition from construction financing to permanent financing during the quarter.

This activity accounted for the remaining portfolio growth. Our bankers remain focused on the activities that drive balance growth in customer deposits, core fee income, and relationship-based loans. And with that, I’ll now turn the call back over to Clint.

Clint Stein: Thanks, Chris. We’re committed to optimizing our financial performance to drive long-term shareholder value. In line with our expectations, our total capital ratio has increased more than 100 basis points over the past year since we closed our merger with Umpqua. At 12% for the parent company, we are now at our long-term target. The bank remains modestly below at 11.7%, so we’re on the cusp of all regulatory ratios exceeding our long-term targets. However, our TCE ratio was 6.6% at quarter-end, and we would like to see that ratio grow closer to 8% before considering meaningful options for deploying excess capital. We still expect to organically generate capital well above what is required to support prudent growth and our regular dividend, providing us longer-term flexibility for additional returns to shareholders. This concludes our prepared comments. Tory, Chris, Ron, Frank, and I are happy to take your questions now. Dede, please open the call for Q&A.

See also What is an Annuity for Retirement? 15 Dividend Stocks to Buy Instead and 27 Cheapest Housing Markets in the US.

Q&A Session

Operator: Thank you. [Operator instructions]. And our first question comes from David Feaster of Raymond James. Your line is open.

David Feaster: Hi, good afternoon, everybody. You guys have been extremely busy since announcing the cost-saving initiatives. The cost saves have come through a lot earlier than I think we had expected. I was hoping maybe you could help us think through some of the initiatives that are in place and where you’re reinvesting some of those savings. You talked about opening a few de novo branches. I know you’re always looking for new talent and have had several announcements and then just kind of how you think about that expense line trending over the course of the year. Would you expect to be fairly steady improvement or more heavily weighted towards the fourth quarter to get to kind of those targets? I mean, you’re already at the top and in the range right now.

Clint Stein: Well, David, as we’ve come to expect from you, you pack a lot into a question. And there are several of us here at the table that can provide insight. So I’ll kick it off, and then you’ll probably hear from Tory, Chris, and Ron as well. I’ll start with in my prepared comments. We had a year of running the company. We set the original organizational design in place in January of ’22. So, almost 14 months before we could actually start operating the company on a combined basis and what we didn’t want to do at that point in time was cut too deeply, do things that make cuts that would have a direct impact on customer facing areas of the company. And we also, kept some redundancy in place because, as when you go through any type of merger, let alone one of this size and where we blended the teams, some people self-select out.

And so we just felt like it was prudent to take the first year, continually evaluate what was working well, more importantly what we could do better, and then make an assessment as to, if it’s in a leadership role, which leaders are going to be able to help push us forward to the level and degree that we expect. And then, if we have processes that didn’t work, and I kind of alluded to that in my prepared remarks, there’s the opportunity, I think, longer term to re-engineer some processes and enhance and improve some automation. That’s going to be to a much lesser degree just kind of a continuous improvement, get better every day type of mentality, like what you’ve expected from Columbia over the years. The real, what I’ll call right-sizing the expense-based work, some of it was done in the first quarter before we even started talking about it.

Some of the — we did some branch consolidations. We had some miscellaneous contracts that we were able to renegotiate at their maturity. And then we had the FTE initiative, which came, towards the end. And then really the big number I mentioned, $25 million of annualized savings that have been announced just this month. And that work started the first of the month, and associates were notified. And then we started that process. So I would say that it’s going to trickle through the third quarter, but the bulk of the effort will happen and be concluded in the second quarter. But, by the time you get a full, clean run rate of the entire scope of this initiative, it will be the fourth quarter. So that’s why we put that number out there.

Ron Farnsworth: And David, this is Ron. Just one thing, because you mentioned we’ve already achieved it today. I would just reiterate that as we look back at Q1, we did have some one-off credits in the operating expense number. That ended at $277 million. We pegged the normalized number at $286 million when you think about go-forward quarters prior to the saves kicking in. And then I expect a range of $965 million to $985 million of Q4 2024 operating expense, excluding CDI.

Clint Stein: Yes, so sitting here today with the numbers I threw out, it’s $43 million annualized that’s done. So if that helps you as you’re kind of thinking about how to tune your model going forward.

David Feaster: Terrific. That’s helpful. And then maybe just as we think about the margin, I think Chris alluded to it. I mean, obviously one of the primary keys to the margin is going to be core deposit trends. So I guess I’m curious maybe your thoughts on core deposits and some of the initiatives you’ve got in place. It sounds like there were some really encouraging trends from that targeted deposit campaign, $300 million of core deposit growth. I’m curious, what else are you working on and maybe some other campaigns or initiatives that you’re considering to help support core deposit growth, especially on the NIB front?

Chris Merrywell: Yes, David, I can’t. This is Chris. I won’t give you our complete playbook, but I can give you some color. I can give you some color to it. The retail campaign, it shows what can be done with a little over 300 branches and their focus and really going about and looking at that small business market. We’ll see there’s a lot of work involved in that. There’s a lot of referrals to follow-up on and getting customers on boarded. The team’s worked extremely hard during that time. So, we’ll look to take a little breather and I’d say look into the second quarter, later into the quarter, and we’ll announce probably another focus, maybe something very similar. So that’s one piece as far as the gathering of new names and, pretty excited about the non-interest bearing balances that are coming in on that specific customer segment.

To date, or I said in the prepared remarks, actually as of last night, we’re up to about 5,300 accounts and $314 million in deposits. And those accounts are maintaining their balances. They’re higher than our average balance that we currently have. And they continue to come in at a nice pace. We’ve got another five days or so to run. The other pieces are really around we talked in the fourth quarter and we talked in the first quarter about those results, about CDs and things of that nature. Really looking at the role on all of those, where they’re coming in, there’s a lot less coming due in the second quarter as we had previously talked about. The delta on that to where today’s rates are is nowhere near as great, which is good news. And then on the other side, as we move throughout the year, there’s some opportunities, all things being equal with rates as they are today.

We have some opportunities to begin to lower a lot of those rates as well. So I don’t have the specifics that I can share with you right this second. But as I said, as we go throughout the year, we’ll start to see that CD base change and start to bring those rates down as well.

Tory Nixon: Hey, David, this is Tory. I want to just add a couple things to it on the commercial side. We’ve identified a couple of big places in the commercial side of the house where we’ve got a lot of opportunity for some deposit growth. I mean, most notably our FinPac portfolio and our multifamily portfolio, which traditionally have been more transactional. And we’ve kind of put a plan in place to go after and make them full-fledged customers and relationships for the company. So I feel very good about just kicking that off and hoping to see some really strong results as the year progresses.

David Feaster: Okay, great. And then maybe just touching on credit more broadly, you talked about re-calibrating the CISO model. Could you maybe touch a little bit about what went into that and kind of the methodology there? It looks like we increased reserves on CRE and maybe reduced a little bit the commercial. But more broadly, it seems like FinPac has kind of stabilized a bit. I’m curious what happened to that one commercial credit, which was the larger driver of losses, and then just, again, broader commentary on what you’re seeing on the credit front.

Ron Farnsworth: Yes, David, this is Ron. I’ll start off on that front just in terms of the CISO models themselves. I’d characterize it as just a better reflection of the combined company’s historical loss experience within the commercial and the recalibration of those models to drive towards that later reduction. But you’re right, it was a bit of a shift, right; a little bit lower in commercial, just given lower historical loss rates, and a little bit higher in the commercial real estate categories. Again, those are based off of not loan-level items. Those are based off economic forecasts for rents and vacancies in western downtown cores, slightly deteriorating quarter to quarter. So not something we’re seeing on the ground with our customers, just given the composition of the portfolio, but it is one of the drivers of those CISO models. And Frank will turn it over to you for the second half of that about credit overall and FinPac.

Frank Namdar: Yes. FinPac continues to perform as we expected it to. To your point, the losses have peaked, they are leveling out, and we’ll have a period of leveling out before we see it notably drop. And we expect that drop somewhere around the third quarter, continuing on through the year end as we migrate back down to that 3.5%-ish run rate in charge-offs. We consistently do a deep dive within that portfolio and slice and dice it every which way, looking for patterns of any other systemic-type activity developing within the portfolio, and we see that it’s really not. What we are seeing is, in particular, in the 61-90 day delinquency bucket, which is a key delinquency range that a great deal of those feed into non-performing and eventually the loss, we’re seeing that decrease.

So those levels are at lowest levels that we’ve seen in several quarters, so that’s very encouraging that a lot of the work we did many quarters ago to tighten up underwriting standards and the model are indeed working. So that is encouraging. And with regards to the CRE in particular, multifamily office, I continue to be just extremely impressed at the resiliency of the portfolio, especially in those two verticals that are under the watchful eye of so many right now. Really nothing exciting going on within either one of those portfolios, it’s really quite boring, which somebody like me loves to see. And so I’m very pleased. And we continue to watch all these portfolios extremely closely for changes, and for us it’s important to stay ahead of it, and that’s what we’re doing.

Operator: Thank you. One moment for our next question. And our next question comes from Jared Shaw of Barclays. Your line is open.

Jared Shaw: Hi, good afternoon. Thanks for the question. Maybe looking at first at capital, you’ve been able to grow capital really nicely and, as you said, get your long-term targets. Does this provide an opportunity to maybe look at accelerating or seeing better growth on the loan side earlier than expected? Or is the outlook for earning asset growth really more market-driven than capital-driven at this point?

Clint Stein: Yes, from my perspective, it’s more market-driven. We continue to see even it’s a psychological phenomenon with our customers and some of them where rather than borrow money at high eights, low nines, even though they’re getting fours and fives in terms of their cash. So from a net spread standpoint, it’s really not much different than before the Fed started tightening. But psychologically, they haven’t for over a decade borrowed money at those rates, and so they’re just using their own cash. Some are just kind of sitting on the sidelines waiting for opportunities to see if maybe some of their competitors struggle and they’re able to do some things there. So there’s a little bit of people keeping some dry powder, using their own cash, and then just more of a demand side.

I would say it’s the funding side more than anything. If we saw an influx of deposits, then we might look at ways of growing earning assets, but right now our focus is the loan-to-deposit ratios. At a level that we’re comfortable with, we could see that go a little higher. We’d be comfortable with that, but we’re not really actively looking to grow the balance sheet. It’s more along the lines of the expense initiative and everything else. It’s about driving improved profitability for the company. I don’t know if Tory or Chris or Ron have a different perspective or an additional perspective.

Tory Nixon: No, same thing, obviously, this is Tory. I just think that talking a little bit about the pipeline, because the pipeline has been pretty steady over the last two or three quarters, but the mix has changed. It’s kind of shifted where we’ve got some nice growth on the C&I front in the pipeline and then a reduction in real estate, which is absolutely in line with everything we’ve been talking about for a while and it really fits the strategic direction for the company. Feel positive about the opportunity throughout the franchise to grow the C&I book.

Jared Shaw: Okay, thanks, Ed. Actually, I guess sort of a corollary to that, it looks like the CRE capital concentration is below that 300% threshold now. Would you like to see that continue to trend lower, or do you feel comfortable with where the mix of the loan portfolio is here and future growth will just more be dependent on the market, or should we expect you to continue to bring that concentration lower?

Clint Stein: I think over the long term, you will see that drift down, and that’s back to Tory’s comment regarding the C&I pipeline, the relationship aspect. Our C&I customers, they own real estate, we have relationships, some of our wealth management customers are in the real estate business. We’re always going to be active in the CRE space, but I think that the focus on as a combined company, the things that we’re able to do now that individually maybe we couldn’t or we couldn’t fully do, I think you’re going to see that level, that concentration level will stay under that 300% over the long run. That doesn’t mean there won’t be variability from quarter to quarter. We have commitments out there that are funding right now and driving some balances on the CRE side, but if we were fast forwarding 12, 24, 36, 60 months, I would fully expect to see that under 300.

Operator: Thank you. One moment for our next question. Our next question comes from Jeff Rulis of DA Davidson. Your line is open.

Jeff Rulis: Thanks. Good afternoon. I wanted to try to chase down the loan and deposit growth expectations for this year. I think you’ve talked about relationship-driven loans and the moves you’ve made on the deposit side, but just trying to get a good direction of is that kind of low single-digit growth for both?

Tory Nixon: Jeff, this is Tory. I’ll start and Chris can chime in. I think that’s well said, low single digits for both with the mix on the loan growth side as best as we can to make that C&I focused. As Clint said, there’s some growth this quarter that is just construction projects and draws of construction, but the lending side, the primary focus is going to be C&I and its full banking relationship. So what comes with it is as much on the deposit front as possible, a lot of operating accounts and non-interest bearing balances, and then I think a really strong, robust core fee income pipeline. So Chris, anything you want to add to that?

Chris Merrywell: Not on the loan side, but on the deposit side, that’s a good target. I would look at there’s a lot of variables that could come into that. How long does inflation remain where it’s at, Jeff, and how much money keeps coming out of the system? Those are obviously going to impact it. So we’re focused on if we can drive the new relationships across the bank, both retail, wealth, and into commercial as well, and drive relationship deposit growth, then it’s really focusing much more on what that mix is and keeping the cost as low as possible. If we were to go out and run a promotion and put a big rate out there, we could certainly drive deposits, but those wouldn’t be necessarily the right type of deposits for the long-term strategic plan of the company. But again, a good place to start. I think there’s a lot of variables, but the teams are going to roll up their sleeves and work really hard to keep driving relationships.

Jeff Rulis: Thanks. And one quick one on the margin. I think in the deck you kind of cautioned that maybe haven’t seen the cycle floor yet, and that would be reflective of your guide. The range is right in the middle of the 345, 360. If we were to pick that apart, it sounds like second quarter, given seasonality, you’d caution maybe if you were to be in that range, you’d be on the lower side and be sort of exiting the year, potentially trending towards the higher end. Is that correct in terms of thinking more pressure up front in the year and easing, especially given sort of deposit rates and what’s occurring in the first quarter?

Ron Farnsworth: Hey, Jeff, this is Ron. Yes, that’s close. And again, the bigger driver over the course of the year, where we end up in that range, is going to be based off those core deposit flows, even more so than if the Fed cuts three times or doesn’t move. That’s given how neutral we are, relatively neutral, slightly sensitive. It’s going to be more so based off of deposit flows. Seasonally, we usually see tax time, DDA outflows, and then they rebuild into Q3. So you could see that fluctuation within the range driven by that.

Operator: Thank you. One moment for our next question. And our next question comes from Ben Gerlinger of Citi. Your line is open.

Ben Gerlinger: Hey, good afternoon, everyone. Good afternoon. I know that you guys gave quite a bit of color on the margin already, but the repricing of deposits is clearly the biggest hit for this one Q. I know you gave guidance that the kind of pig in the python here is much less than it was in deposit pricing. I’m just curious, can you quantify the next six months or so in terms of what the yield might be and any sort of specials that are running on right now or just on pricing in general for the next six months?

Chris Merrywell: So, Ben, this is Chris. I’ll start with the pricing aspect of it. There’s no plan for promotional types of true promotional special types of pricing. It’s really the pricing that we have out there. We continue to monitor it to the market and where we want to be within that range. Some of it obviously depends on what competitors do and what’s out there. We have the ability to exception price if we need to match a competitor or something like that. I think that if you look at some of the other things and you look at the peak of the rates, money markets were around 5%. They’re down to 4.15% to 4.3%. CDs peaked at about 5.25%. Those are down to 3.9% to 4.55%. And that includes a lot of factors that are in there, and those are really just kind of the posted rates.