Scott Wylie: Just to give a little bit more transparency, Brett, on Q1, I think the total number in Q1 was 700,000 for workout and special legal fees, that sort of thing. And like David said, I don’t think that goes to zero in Q2, but if you look at our underlying core expenses, I think it’s typically much less than that and hopefully will normalize here over the course of the year. We also had a $0.5 million operating losses in Q1, which were related to wire fraud, and that’s a very high number for us. That’s not typical of what we see here. So those numbers are in our Q1 expenses that, again, I wouldn’t really consider to be core expense.
Brett Rabatin: Okay. Appreciate all the color.
Operator: Thank you. [Operator Instructions] Our next question will come from the line of Brady Gailey. Your line is now open, with KBW.
Brady Gailey: Hey, thanks for taking my questions. Wanted to follow-up on credit to start and just on the NPA bucket, trying to understand all the movements. So how large was the credit that moved into the NPA bucket in the first quarter? And any color you can give on that loan?
David Weber: Yes. The size of that loan was a little bit under $2 million, and it is a C&I loan.
Brady Gailey: Okay. That’s helpful. And any trends to note just in criticized or classified assets in the quarter?
David Weber: No, I think we’re seeing stable to improving trends in most of the credit metrics we look at. The only real exception to that is, I would tell you that we’re definitely increasing our watch efforts. So loans that we think could be under stress, the borrowers could be under stress. If rates continue to higher rates or CRE loans that may be maturing, we’re definitely paying a lot more attention to those these days and they show up on the watch list. So I don’t necessarily view that as a credit indicator or as a concern. I think, I hope those are signs of good credit administration and credit management here. But as I said, I think the headline number on the NPL side and the 56% reduction on the past due loans are both really positive trends for asset quality here.
Brady Gailey: Yes, yes, definitely. I guess last for me, shifting over to loan growth. I believe last quarter we sort of talked about an expected loan growth rate in the mid-single digits. It sounds like you might be strategically pulling back a little bit. How should we think about loan growth going forward?
Scott Wylie: I don’t know. It’s just really hard to predict right now, especially month to month and quarter to quarter, rates are up or rates are down and all that, right? But given that context, what we have said in the past and what we continue to think is in our strong growth markets that we have and with the platform that we have and the people that we have, producing loan growth in the mid-single digits this year seems like a reasonable goal. Now, obviously, when you start down in the first quarter, that gets a little less likely, so I would say, you know, if we saw flat in the second quarter that would be great. And if you talk to our regional presidents and our marketer presidents, which we have, they seem confident that we’re going to see some loan growth here this quarter and this year on a net basis.
So, I think for modeling purposes, given a lot of uncertainty, flat here for the next few months and then growth over the course of the latter half of the year, depending on what happens in the economy, makes sense. One of the things we’ve been looking at internally is we’re seeing some really aggressive pricing now coming out of the community banks and the credit unions in our markets on certain types of loans. And those are particularly in the case of owner occupied real estate and in C&I loans. And we’re just not going to play that game. We have encouraged our people to stay disciplined on pricing and structure and not chase rates. In the C&I area in particular, it’s frustrating because we’ll get a client, a prospect that wants to move here and bring their deposits and whatnot.
And then wherever they are gets really aggressive in terms of retaining them. And so these are just the challenges that our frontline folks are dealing with these days in the market. But I think that stuff sorts itself out over time. We’ve seen some nice growth, really, across the growth opportunities, across the different loan types here and I think you’re going to see loan growth across the different loan types over the course of the year as things stabilize.
Brady Gailey: That’s really helpful details. Thanks for taking my questions.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Adam Butler with Piper Sandler. Your line is now open.
Adam Butler: Good morning, everyone. This is Adam on for Matthew Clark. If I could just start on the deposit side, looks like there was some remix into interest bearing during the quarter with NIBs down at a slightly faster pace than last quarter. I was just curious to get your updated expectations on if you expect that will slow going into the second quarter or just kind of how you’re seeing deposit flows move around right now. Thanks.
Scott Wylie: Yes. Thanks for the question, Adam. We – again, hard to predict, we were thinking that our DDA shift into interest bearing accounts had really stabilized in Q4 because we saw it actually grow. The DDAs were growing and then we see a $48 million decline in those DDAs in Q1 and like obviously very disappointing trend. So we did a deep dive on that. And what we found is about 40% of that decrease are just kind of operating account fluctuations. So people using their money and at quarter end it was $20 million lower than it started. And then about 40% was people shifting out into interest bearing accounts. And then the remaining 20% was people that had DDAs related to construction projects that are funded here. And the cash from a borrower in a construction project goes in before our loan does.
