So, there is a pretty wide range out there. And I am very much appreciative of the fact that we are not in a must appraised situation in the CBD for a while. I do think there has been some erosion in the suburban properties, but not nearly at the same level. A, properties and trophy properties are not seeing the same level. I think we are – for the remainder of the year, have gone through everything that’s coming up over the year and have given it kind of in that ballpark number, I gave you our best estimate of what could move for the rest of the year.
Catherine Mealor: Okay. Very helpful. Thank you so much Jan. And maybe one question just on the margin. You reiterated your outlook for the margin to be 2.50 to 2.70 for the year. Of course, it came in lower this quarter, but I know some of that was from that the interest reversal. So, what gets your margin? I mean it feels like the low end of that range is kind of safe – is the safe place to be, but what gets the margin towards the mid to high-end of that range? Does it take rate cuts or are there things that you are doing just within your balance sheet that you think can push that higher?
Eric Newell: Yes. No, I appreciate the question. And on that note, on the interest reversal, the $522,000 that Jan mentioned, we estimate that to be about 7 basis points impact on the margin. So, had we not had that reversal, our NIM would have come in at 2.5% for the quarter, which is at the bottom end of that range. To answer your question about what gets us higher up in the range, I think a lot of it comes down to our successes, and we are starting to see that, and I think it’s building momentum on deposit growth from our digital channel, for example, and that – while there – it comes in at a higher price because that’s just how you acquire that type of customer, our success in building those into deeper relationships can have the effect of reducing our cost of funds.
And as we are growing the core deposit customer or the core deposits, then we are able to reduce usage of FHLB borrowings, for example, and that has a higher cost than the deposits. So, I think a lot of it is our liability strategy. We do have 300 – for the full year of ‘24 it was $340 million of investments that are rolling off our books, which is earning us about 2%. So, you have the benefit of a higher yield even if it’s just sitting in cash at about 300 basis points of yield. I do think that the spreads that we are seeing on new loan originations are pretty close to what the market is giving us. So, I think a lot of it is our liability strategy, getting success, becoming more successful in that liability strategy in the back half of the year and really honestly setting us up for a good 2025 and 2026.
Catherine Mealor: Thank you so much. Appreciate it.
Operator: Thank you. And one moment for our next question. Our next question comes from Christopher Marinac with Janney Montgomery Scott. Your line is open.
Christopher Marinac: Hi. Good morning. Eric, just a quick one for you on the non-accrued interest, so you are going to get that back, but you still have the portion of the loan that’s still on non-accrual, is that correct?
Eric Newell: Correct.
Christopher Marinac: Okay. And then I guess for Jan, can you talk a little bit about sort of the kind of the level of modified loans you have now or are you not really having many modified loans or simply renewing them with the reserve build and some charge-off where appropriate.
Jan Williams: Well, I think we have a full menu of options that we are exercising. In some cases, we are doing modifications within the office portfolio in particular, if you have got a maturity issue. It’s generally, once in a while, we see a payoff, but not that often. I think it’s difficult to get financing certainly from banks. Perhaps private financing is more available for office – imagine at a hefty premium. So, we are looking at situations. We do have to modify those ones to extend them. I think in other cases, we are looking at getting pay-downs as part of that process. We are working with each borrower and have been successful so far in providing an avenue for the borrower to continue to stay in the deal and have the potential for some upside down the road while minimizing the risk to the bank from ultimate loss perspective, the wildcard and all of that being appraisals.
We are fortunate that we have projected out, as I mentioned to Catherine earlier, where we are on maturities that are coming up in the portfolio this year and where we will be in a situation where we have an updated appraisal that’s required and evaluated those loans within a range for what could be theoretically possible in the charge-off arena.
Christopher Marinac: Great. And all of this is done within sort of the current guidelines on modifying loans that the regulators put in place last year and really that you have used in past cycles, too. So, it’s all consistent.
Jan Williams: Yes. Absolutely.
Christopher Marinac: And then can you just give us a little more color about how often you are getting more collateral and more cash? I thought your comment on the prepared remarks was really helpful. I just want to drill down further on how often that’s happening?
Jan Williams: It’s happening in more deals than it’s not happening in. I think we have instituted cash flow sweeps and accumulated funding, but on a go-forward basis for office you really need to be thinking about the cost of re-tenanting in addition to the cost of making payments. So, we want to be sweeping cash flow that we not only have a payment reserve, but we also have a reserve to re-tenant the property. And I think we have been pretty successful with that. In at least three of the large deals that we have worked through, we have had that in place and are currently working through that. We have had pay-downs in a number of instances. We have had modifications where we have done an interest-only exception or extension because the borrower has entered into a long-term lease with a credit tenant for substantially all of the space and rent doesn’t commence for six months, so we will give them six months of making IO payments to make a return to amortization consistent with the rent payments.
