Robert Harrison: Dave this is Bob, I’ll start maybe and hand it over to Lea. It’s a really interesting quarter other than handful of downgrades as she can speak to better. Really across the board, we stayed the same or got better on every other metric, where delinquencies for NPAs, et cetera. So we aren’t seeing any signs, it’s something we pride ourselves on is being very thoughtful about supporting borrowers and making sure that they can — they had the ability to pay us back, but it’s not unusual for this part of the cycle to see a little bit of weakness in a handful of names. So with that, Dave, I’ll hand it over to Lea.
Lea Nakamura: I don’t really have much to add other than our metrics — our delinquency metrics start at a very low base. So it doesn’t take much for it to pop. And we — we are staying close to the borrowers that we think are a little bit under duress, and we talk to them constantly. We understand what the projects are. We are actually quite comfortable even with that loan that we mentioned that we paid off. We actually were very comfortable with the loan. There are circumstances that require us to categorize it a certain way. But I think, fundamentally the portfolio is actually quite strong.
David Feaster: Terrific, thanks everybody for all the color.
Operator: [Operator Instructions] And our next question will be coming from Steven Alexopoulos of JPMorgan. Your line is open.
Steven Alexopoulos: Hi everybody.
Robert Harrison: Hi, Steve.
Steven Alexopoulos: I want to start — so Jamie, you just indicated on the non-interest bearing. I thought you said that trends moderated in March. I’m not sure exactly what you mean by it. Do you mean that you still saw outflows in March, but not to the degree of January, February. And I say that because the period end non-interest bearing deposit balances were, I think, it was $200 million or so below the average. So your period-end was down fairly materially.
James Moses: Yes. That’s right. So I mean, I think the right way to think about it is most of that outflow happened in January and February. And then in March, it was pretty much flat.
Steven Alexopoulos: It was flattish in March, okay. Got it. And you are assuming flattish. Is that what you are assuming for the rest of the year?
James Moses: No. Actually, that 1 basis point to 2 basis point guide would assume that, say, we were $500 million down, say, in the first quarter that, that sort of moderates down to flat by the end of the year.
Steven Alexopoulos: Got it. Okay. What about the public time? What’s your thinking on that for the rest of the year because those continue to come down too?
James Moses: Yes, we think that we are going to be able to bring that down in-line with the size of the balance sheet. Hopefully, we have — hopefully, that non-interest bearing moderation that we are talking about, hopefully that slows down even more, which would allow us to pay even — pay down more of those public time deposits. So at the moment, we think that’s going to come down, then there is going to be a need for a little bit of funding in September with the FHLB borrowings. And so we’ll kind of — we’re going to — we’ll manage that on sort of like what’s best for us in terms of financials, right, around the rate on those things. So it is possible that the public time increases in Q3 with the paydown of the FHLBs or it’s possible maybe we’ll find some other borrowing source that maybe makes a little more sense economically for us at that time.
So the public time really is going to be a function of the extent of the loan growth that we have and the other deposits either growth or declines that we have.
Steven Alexopoulos: Okay. That’s helpful. And actually I was going to ask on the loan growth. Quite a few banks were fairly optimistic with the pipeline. They didn’t have a lot of growth this quarter, but they were more optimistic. What are you guys seeing on the pipeline? I’m talking more commercial C&I pipeline.
Robert Harrison: Sure. Steve this is Bob. So we expect — flooring came down a little bit this quarter, not unusual to have it pop up at year-end and come down in Q1. So we think that’ll have some strength to it. You’re seeing production levels at much higher levels through most manufacturers, some of the foreign brands in particular, Toyota has been challenged. Although, I’m sure they’ll be catching up by year-end. So that’s one area. We are seeing still some deal flow from the commercial real estate side and in particular deals that we put on a year ago that, of course on the construction side, the equity money goes in first, and then you start with the draws. And so we saw that strength in this quarter and we think that will continue to be some strength.
And we are seeing slightly better pricing in the indirect world as well. And so we think the decline in that portfolio will start to moderate, and we’ll see where that goes. If it makes sense, we want to do that business and it’s good business. We know it extremely well. just the economics for a while just didn’t make sense for us. So I think really those areas — one area that we are not forecasting any real recovery in residential. We hope it gets better, but that’s just a hope that’s not a forecast. So we’re going to just watch that and be it for our customers as needed. But hard to see a lot of uptick in residential in the back half of this year.
Steven Alexopoulos: Got it. And Bob, if I can ask one other one, just on capital, you continue to accrete capital pretty nicely here. What are you thinking of from a share buyback perspective, right? Because your credit quality overall is pristine. And you’re not using capital to grow the balance sheet. So it seems like you’re just going to continue to accrete capital. How do you think about returning some of that to shareholders?
James Moses: And a great question, and we have the authorization to do that. I think the only thing we’re looking at now, one, as we’ve talked about previously, we want to get through that uncertainty period of what happened a year ago with SVB and just a lot of questions out there in the market. So I feel that we are past that. So that’s the good news — is the most important thing. Our ratio of across the board, not just common equity Tier 1, but all the other ratios have improved to a point where that is off the table, and I think most people’s minds. And then the second one is there is a remixing and this is what we are watching as we remix the balance sheet out of securities and into loans, obviously, a much higher capital rate going up from 20% to 100%.
