Brett Rabatin: Wanted to go back to credit and if I look at Slide 11, the total substandard and granted, your criticized assets are still at very low levels, but I saw that the substandard bucket moved up about $7 million linked quarter. I was just curious what you were seeing in terms of migration in or out of the substandard bucket in particular? And then, just any in the industries or things that you’re seeing incrementally where maybe there’s pressure either on revenue or just overall sales?
John Bordelon: I think the general thought for Home Bank that 2024 will continue as ’23 did in reducing classified assets. These two one-offs that we discussed momentarily are really not because of the economy as much as it is just mismanagement a little bit in the project. So I don’t anticipate that continuing throughout ’24. I would anticipate those classifieds coming down as they did towards the end of the year. So we’re not seeing any signs that there’s a wave of bad assets coming our way.
David Kirkley: Outside of the two credits that we mentioned, there was a little bit of a migration in from a mix between some residential properties, some small CRE, some very small C&I as well as some outflows that basically were the exact same thing, some residential, some small CRE and some various pay-offs. So they kind of washing each other out right now.
Brett Rabatin: Okay. And then from a capital perspective, our ratios are building a little bit. You bought back a little bit of stock. Any thoughts on the level of buyback activity from here? And then are you going to keep maybe some powder dry for potential M&A or do you kind of feel like M&A is less likely with higher marks given where the 10 year has moved?
David Kirkley: We’re going to be picking up — picking back up our buybacks a little bit more in Q2. We did start a little bit in earlier part of Q1. But it’s kind of a balancing act of one, keeping the powder dry and two, buying back at the levels that our stock is trading at today.
Brett Rabatin: Okay. And maybe…
John Bordelon: One other point in that regard. We had kind of pulled off of buybacks. We were engaged in a potential purchase of some branch locations from another bank. And that was very much in line to be announced yesterday and unfortunately, another bank came in and what we felt was a little bit on the high side price-wise, but anyway the seller basically reneged on us three days before closing and took another bank. So that was one of the reasons that we stopped the buybacks about 60 days ago for the most part.
Brett Rabatin: Okay. That’s helpful. And then just lastly, any comments on, I think from — if I have this right, you still want to migrate the loan-to-deposit ratio a little lower. So just how do you fund the loan growth from here? Is it CDs? It’s good to see the DDA was kind of stable this quarter. Any thoughts on how you fund growth?
John Bordelon: Well, I think our focus completely is on C&I customers. And with that comes their deposit relationship. We’re trying to get away right now from non-owner occupied CRE, just from the standpoint that it doesn’t bring the deposits. So bringing the whole customer is extremely important to us, and that’s going to help us maintain the DDA level that we have acquired and/or attained up till this year. So even though some of those balances moved when rates started going up into CDs, we still are ahead of where we were pre-pandemic as a percent of total deposits in DDAs and savings accounts. So we’re going to continue to drive the C&I portfolio much more so than anything else, that will help with that deposit mix. We’d love to get that down to 92%, 93%, something like that.
Brett Rabatin: Okay. Appreciate all the color, guys.
David Kirkley: Yeah.
John Bordelon: Thank you, Brett.
Operator: [Operator Instructions] Your next question comes from Joseph Yanchunis with Raymond James. Please go ahead.
Joseph Yanchunis: Hi, there.
John Bordelon: Good morning, Joe. How are you doing?
Joseph Yanchunis: I’m doing well. So something to start with, kind of, it sounds like the cost of interest-bearing deposits may have peaked kind of based on what you said earlier. So if we assume the forward curve, do you have a sense for how deposit betas will behave when the Fed starts cutting rates?
David Kirkley: So I don’t want to use the word peak because I still think that’s going to continue to drift up a little bit, but just at a much slower pace. So there is still some low-hanging fruit out there. So there’s still going to be some upward migration in deposit costs, but it’s slowing. It’s coming down pretty quick — the pace of increase is slowing. As far as the deposit betas, when rates start ticking down, I think a lot of banks are going to be one anxious to lower rates. But a lot of loan to deposit ratios are not where people want to — banks want to be. And customers are getting used to five handles on their CDs, which will force those customers to be a little bit shop a lot more. So I think the 25 basis point or 50 basis point rate cut is going to, the beta is eventually going to work its way out to a normalized beta. But I think it might take a little bit longer to play out as customers continue to fight for higher rates.
Joseph Yanchunis: Got it. I appreciate that. And the Houston market continues to generate strong loan growth — so with 18% of loans being in Texas, do you have a medium-term target for how large you’d like to grow that portfolio?
