Brad Elliott: So, I would say, we haven’t changed our parameter on earn back. So, if accretion waters down equity, we would, I mean, it still has to be less than a three year earn back, or maybe even less than that, because there is some risk in that accretable yield going away quicker. But we haven’t changed any of our parameters on what we’re looking at from a transaction standpoint.
Chris Navratil: Yeah. And one other thing I’d just add Brad is, as we think about those transactions, we’re trying to look at them in terms of the fair value of that balance sheet after we’re done, so when the marks are kind of all the way through the process. So, as we look at pricing, as we look at a lot of the conversations we’re having, it’s focused more on what is the balance sheet worth versus what is tangible book value today. So, willing to accept a little bit less dilution, typically just because of the way we’re looking at structuring those transactions.
Brett Rabatin: Okay. That’s helpful. Thanks, guys.
Operator: Our next question today is from the line of Andrew Liesch of Piper Sandler. Andrew, your line is open if you’d like to proceed with your question.
Andrew Liesch: Thanks. Good morning, guys. So, just a question. Now with the Bank of Kirksville deal closed, has the asset sensitivity of the balance sheet shifted much at all?
Chris Navratil: Not meaningfully, Andrew. The Kirksville assets are relatively short, but there’s a little bit of duration in there. So, you’re still looking at kind of two to three years overall. They don’t have a lot of fixed long term on the loan side. And then, their liabilities are predominantly non-time based. So, in theory, completely flexible, but just kind of depends on how the market moves in competition base.
Andrew Liesch: Okay. So, still pretty neutral to rate changes?
Brad Elliott: Yeah. You might talk about some of the positives we’re already seeing in there.
Chris Navratil: Yeah. I mean, we’re seeing deposit growth right now. We’re seeing a really engaged group of folks. And so, it continues to be a really good source of deposits for us. And what we’re able to do is, in that market, bring in a lot of the digital products that we have. And so, there’s actually a, from the clientele side, really liking what we’re doing. And as a result, I think we’re going to continue to see maybe a little bit — we were kind of wanting to just hold serve there on deposits. I think we might continue to see some decent growth there through the end of the year.
Andrew Liesch: Got it. That actually kind of leads into my next question on funding the loan growth for this year. Is it going to come from client deposit growth, or is there any remixing of assets that might fund it as well?
Chris Navratil: I think, the answer to that is both, Andrew, and then optimistically, we’ll get all the loan growth that we could hope for. And then, you can see some funding via wholesale and borrowing as well because we have the capacity to do it. Now, our bond portfolio, especially the Kirksville portfolio is very short, so you’re going to see some cash flows coming in that give us opportunities to reposition into loans. We also have some cash, as we kind of — as you mentioned on the phone call, that excess liquidity we’re carrying, that can be repositioned into loans. So, we have opportunities today to redeploy assets ideally in the customer relationships. And those cash flows will continue to come through as the year goes on.
Brad Elliott: And I would add that given the discipline that we’ve had on cost of funds, it just gives us dry powder to make a decision as things move in the market. So, I think we’re on a real strong point there, as Chris had said, to do either one.
Andrew Liesch: Got it. That’s all really helpful. I’ll step back. Thanks for taking the question.
Operator: Thank you. Our next question is from the line of Jeff Rulis of D.A. Davidson. Jeff, your line is open. Please go ahead.
Jeff Rulis: Thanks. Just a couple of credit questions, if I could. Some encouraging linked-quarter statistics. Maybe going back to last quarter, that primary residence mortgage credit that was brought on or identified, any movement on that specifically?
Brad Elliott: Yeah. We were able to get that. We actually sold the note and moved that credit on.
Jeff Rulis: Okay. And then, a broader question on, I guess, the balance of existing NPAs or even classifieds, of that, what were acquired versus kind of legacy? I know that blurs the lines, but as we’ve talked about, I think, you’ve been successful in chasing down sort of gains from or recoveries from acquired loans. Just trying to get a sense for of the bucket of NPAs or classifieds, what of that is acquired and what was underwritten legacy?
Brad Elliott: Yeah. So, if you look back on the last few years on a historical basis, you’re going to find that majority of our problem assets are acquired loans. So, more than half of what you see is actually acquired. And that’s been the case for the last few years. And as you can tell, our assets are — problem assets are going down quarter by quarter, seems like it. And part of it is due to kind of slowdown in the M&A space, but also on our special assets teams and our legal team is just focused on resolving some of these issues and execute on the contracts that we have in place and better our positions.
Jeff Rulis: And Krzysztof, of those acquired that you’re sort of going after, I don’t know if there’s a — if we’re in the seventh inning of all that have been acquired, do you think you chase down recoveries? Is there a percent of that? Just trying to get a sense for. It sounds like maybe there’s potential for further recoveries. Any way to position where you are in that process of at least of what you know of what you’ve acquired to date?
