That worked for us. So it’s good to see that there are still some opportunities out there, too, when it doesn’t set our risk profile going forward, that there are opportunities for them to refinance. So all in all, I feel good about things that have come up for maturity, our ability to work with them, and the options that we have.
Steven Alexopoulos: Thanks for the color. And Susan, congratulations on the upcoming retirement.
Susan Springfield: Thank you. I really appreciate it.
Operator: Our next question comes from Timur Braziler from Wells Fargo.
Timur Braziler: Hi. Good morning.
Bryan Jordan: Good morning.
Timur Braziler: One more for you, Susan, on commercial real estate. Just looking at the allowance build over the last couple of quarters, compared to the coverage ratio on the CRE book, the coverage ratio looks like it’s 115% today. That’s been tracking lower. I guess, how should we be thinking about the coverage ratio here? And if we don’t get any kind of improvement in rates and we see some broader kind of degradation in that space. Are you modeling it to a coverage ratio? Are you modeling it to an allowance ratio? Maybe just give us the puts and takes of those two.
Susan Springfield: As it relates to the allowance process, I would tell you, we don’t really — we don’t shoot for a specific number. We go through a process — a disciplined process each and every quarter and look at various scenarios such as different economic outlooks, things that are base case, things that are ultra-stressed cases. We don’t put a lot of emphasis on upside cases, but there are those out there as well. And then we have qualitative overlays related to certain segments that we may decide either that may need more than what just an economic outlook would look like. As you know, with CECL, CECL is considered a lifetime loss approach. So based on what we know today and what we’re — what external economists and our own internal experts are saying, we believe this is the right reserve coverage based on several different outcomes that could emerge.
But as I mentioned earlier, each quarter we’re reevaluating that. And as you know, as we all know, things like interest rate outlooks can change pretty dramatically quarter-to-quarter. All that being said, I do think the economy – Bryan talked about this. I think the economy remains strong. We’re still seeing borrowers being able to adapt to higher inflation, higher interest rates. But this is something that we take a look at each and every quarter.
Timur Braziler: Great, thanks. And then my follow-up, looking at Slide 22 on the C&I loan buckets, the 12% of C&I, that’s to finance and insurance companies. Can you just give us a reminder what that composition is and maybe more specifically, what component of that balance is to borrowers that are then using those funds as leverage for commercial loans?
Susan Springfield: Yes, so the finance and insurance bucket has a number of different things in it. And the — probably one of the things, our asset-based lending business, we lend to companies that lend to others. A good part of that is consumer finance companies, and we’ve been in that business for many, many years. We’ve got very sophisticated borrowers. I would tell you just as a sidebar, we’ve also seen them adapt nicely to higher interest rate environments as it relates to how they deploy. I don’t have the exact number with me on how much of it is to then further commercial funds. It’s not a big number for us. We do have some of that, kind of a business-to-business like lending arrangements, but it’s not a significant portion of that finance and insurance bucket. So those are the ones I would highlight in that bucket.
Timur Braziler: Okay, thanks. Thank you for the question.
Bryan Jordan: Thank you.
Operator: Our next question comes from Ben Gerlinger from Citi.
Ben Gerlinger: Good morning, everyone.
Bryan Jordan: Morning, Ben.
Ben Gerlinger: I was curious, I know we’ve belabored quite a bit here on guidance change, and it seems like the uptick in fees, one, that’s the big positive. So I think going from four to six, now six to 10, should we kind of assume the expenses are closer to that six range, given you’ve cited the fixed income and mortgage, which are typically higher percentage ratio businesses, or can you also see fees at the high end and expenses on the lower end? Just kind of think about the cadence of the two throughout the year.
Susan Springfield: Ben, thanks for the question. I would not say that the expenses will be on the high end, but that’s a foregone conclusion. As we mentioned, we are continuing to look at operational efficiencies. We are looking at what is the right way to run the organization in a lower loan growth environment. We have spent a significant amount on technology that’s going to go into place this year that creates additional efficiency. We’re looking at every contract that’s coming up and looking at what we’re doing for it. And so our goal would not to be on the high end of that, but things can change. But no, I would not make that assumption. If I thought we were in the high end of that, honestly, I probably would have just increased guidance at the same time I told you to increase revenue and de-risk it.
Ben Gerlinger: Okay, that’s great. It kind of leads to my next question, actually, because I know you’re apprehensive that you took out a cut in your guidance. To me, it kind of implies you’re close to a higher end. Like if we get to the middle of the year, would it even be worth going from plus one to four to something like two to five? Or is that too nuanced to think about?
Susan Springfield: Ben, I wish I could. If you saw the number of models we run every single month, and as soon as we get to ALCO every month, somebody has said something, Powell’s released something, there’s new CPI data, which puts it out. So I just don’t think we’re in an environment where we could be that specific. If we thought it was going to be kind of like our fee income, we knew that the high end of the guidance was probably the low side, so we immediately let you guys know that we don’t expect to – we don’t expect to come in, we could have said we expect to be on the high side, instead we said previous high side and our low side. Forecasting NII in this environment is very, very hard, even within a 3% range, with as much moving parts as we have.
