Michael Rose: I figured that was the case. Well, most of my questions have been asked and answered. But, obviously, I think one of the positive stories here has been on credit. The reserve is sitting here at 115 of loans. Non-performers have really worked their way down. I assume criticized and classifieds have trended in the right direction as well. But I think what I hear from some investors is there’s some verticals out there that maybe could cause some concern, whether it be real estate, I think, is what we hear most often. And then I think what I hear about you guys is kind of an untested loan portfolio and a lot of growth over the past couple of years, both organic and inorganic. What would you say to those that maybe kind of doubt the performance? And how can you help us get more comfortable with just credit in general? Thanks.
Randy Rapp: Yes. Hi, Michael. It’s Randy. Good question. We’re very comfortable with our portfolio and our credit metrics. We’ve seen significant improvement in those metrics over the last three years. And one thing you said, there is a portion of our portfolio that has been through COVID and some unique economic times and performed well. I think of lodging and how our sponsors stepped in and supported projects through that. And today, that portfolio has nothing criticized or classified. And so we feel good about the credit quality. We’re closely monitoring the portfolio. We’ve had very successful third party loan reviews and regulatory exams recently, which confirmed our grading accuracy and reserve levels. So we do have third parties also looking at those portfolios closely.
At the reserve level, in our conversion to CECL, we did complete our first year. And like the other institutions, we’ve been making sure we learn how CECL acts in different environments. But when we close the year, our total reserve is a 1.31. We feel very adequately reserved at that level. And where we saw some of the increase in reserves in CECL was in the reserve for unfunded commitments area. And we don’t think that will continue to increase at that same pace. And so again, we look at our non-performings at 20 basis points, our classified to capital at 10 and our reserve level of 131, we think the portfolio is really well positioned for future growth and also for some economic uncertainty. We spent quite a bit of time stress testing the portfolio, not only the real estate, but also the C&I portfolio, as we continue to run those tests, and the portfolio holds up well, even with additional rate increases.
So we’re adhering to our underwriting standards and think we’re being very conservative in our underwriting. So overall, again, just feel good about the quality of the portfolio, although we’re closely monitoring it.
Mike Maddox: Michael, I’d just add. Randy and the team have done a great job on the credit side. We’ve been telling investors and analysts that we feel good about our credit quality for three years now. And it’s proving out that our credit quality is performing and our portfolio is performing. We went through an energy crisis, and that was something they looked at. And our energy portfolio, although we had a lot of great migration, we had very little loss, and that portfolio has come back and is performing very well. We told everybody we would get our energy concentration down from where it was to that 5% to 7% range. It’s at 3% today and we think there’s room there for us to grow. People talk about the hospitality. Our hospitality portfolio performed very well.
