So that they’re using those funds to pay their equity essentially in these construction projects. So that was about 20% of it. So that’s kind of the mix. So hopefully, as we go forward through the year, we’re going to see a lot less of that. Maybe the fluctuations are positive other quarters instead of negative and whatnot. So that would be kind of the general outlook. Now, having said that, historically, we’ve seen deposit declines in Q2 because we have clients making tax payments. And so that’s going to be a headwind for Q2, but that’s a normal thing here. And underlying, hopefully, we continue to grow deposits, and some of those are DDAs and we can retain the DDA mix that we have today.
Adam Butler: Okay, thank you. Thank you for that. That was – thank you for the clarification there. If I could just switch over to your NII [ph] outlook. If loans trend flat over the next quarter, is it fair to assume that NII stays relatively flat or maybe drops in the second quarter and then beyond there with your growth outlook, maybe starts to step up again?
Scott Wylie: Yes. David and his team do a really granular look at that bottom up, and it’s largely with a flat interest rate outlook. We originally had started the year thinking, maybe 25 bps decline mid-year and 25 bps later in the year, and we’ve now redone that with just one decline rate cut late in the year. But, David, you want to walk through how we expect that NIM to play out in the coming months?
David Weber: Yes. I think your comments are fair. The two components that we need is we need to continue to see loan production at these higher rates than our average loan yields, which are in the mid-5s, to help churn that loan portfolio. Obviously, the volume of loan production we had in the first quarter really wasn’t enough, frankly, to have a material impact there. So we need to see that continue to churn. And then certainly stabilization of our DDAs is a big component of really stabilizing our total average cost of deposits. And we’ve seen as far as the pricing pressures on existing accounts, it feels like that has certainly declined, but the mix shift has been unfavorable for us from a funding standpoint. So certainly need to see that stabilization of the DDAs, which those two dynamics will give us the ability to see NIM expansion in the second half of the year, we’ll call it.
Adam Butler: Okay. That makes sense. Thanks for the color there. And then just one last one for me. It was good to see the pickup in mortgage production during the quarter. And I think, as you alluded to in the presentation, it was attributable potentially to the originators that were hired this year. How much of that do you think was attributable to them and the original team? And do you think that level is sustainable? I think it was 1.2 million this quarter – 1.3 million this quarter. Do you think that’s sustainable throughout the year or will go up?
Scott Wylie: Sure. What’s going to happen with the 10-year treasury, Adam?
Adam Butler: Good question.
Scott Wylie: Well, to give a little more serious answer, we’ve hired, I think, seven or eight new MLOs since late last year, and there are a total of about 25 or so MLOs that are active producers. So that’s a pretty significant increase. Maybe a third of the MLO for us is new over the last 90 days. And actually, we’ve been pleasantly surprised at their productivity. They, a lot of times take three months or six months to kind of build a pipeline and get it going. And we’re actually seeing them producing some nice results already in Q1 and going into Q2. The real production in Q2, the improved earnings in Q1, I mean, came from a combination of volume and rate. And so we saw a nice improvement in the gain on sale, and we saw a nice increase in volume.
And as looking back, we did our monthly mortgage department review this morning, and I was looking back over the last 12 months, and there were many months last year where we were losing $250,000 in the mortgage operation contribution, and we made $250,000 in March, and that’s just, I mean, obviously, $6 million swing annualized is a very big number for us. So it is really great to see, if we see rate stability it seems like we could have a better year this year as the year progresses. Last year, obviously was record low production in the industry for like 30 years. And so we’re hopeful that that improves as we go through the year this year. And now we have some more MLOs to support that. Julie, you answered that question, because Julie looks over our mortgage area and is much closer to it than I am.
Did I miss any of the key points there? I’m sorry.
Julie Courkamp: No.
Scott Wylie: That’s my bad.
Adam Butler: Well, it’s great to hear, and I hope the momentum within the team continues. And thanks for taking my questions.
Scott Wylie: Yes.
Operator: Thank you. One moment for our next question, please. Our next question comes from the line of Ross Haberman with MIH Investments [ph]. Your line is now open.
Unidentified Analyst: Good morning, Scott. How are you guys? Most of my questions have been answered. Thank you. I just want to go back. I think you said 700,000 in this quarter related was legal. Again, was that mostly related to the non-performers? And hopefully that’ll begin to moderate over the next couple quarters as these non-performers are resolved. Would that be a good assumption?
Scott Wylie: That’s what I said, and David’s nodding his head yes. So I think that’s materially correct, yes.
Unidentified Analyst: Okay. And the half a million you lost, are you insured? Does insurance cover any of that? I think you said it was a check – was it check kiting or something or fraud or something?
