Nathan Race: Okay. Great. I appreciate all the color. Thank you.
Mark Secor: Thanks, Nate.
Operator: Thank you. The next question comes from Damon DelMonte with KBW. Please go ahead.
Damon DelMonte: Hey. Good morning, guys. Hope everybody is doing well today. Credit has been exceptionally strong for you guys and as you guys continue to grow the loan portfolio, just kind of curious as to your thoughts on the provision level and the reserve level. I think loan loss reserve came down by 4 basis points this quarter to like 1.09%. So kind of wondering how you’re thinking about that. Do you feel you need to increase that going forward because of the nature of the types of loans that you’re putting on the books?
Lynn Kerber: Thanks for the question. Relative to the allowance, first of all, I’ll just say that we had a couple of factors that affected it this quarter as far as reduction, as far as the percent of total loans. First of all, we had a larger nonperforming loan that paid off and it had a specific reserve. So, that was eliminated and that allowed us to decrease the reserve just under $500,000. So, that was sort of extraordinary for this quarter and that’s not always a repeating event. We also had a change in the mix in our portfolio. As we’ve stated, we have been intentionally reducing our indirect auto paper that has traditionally had higher credit losses. And so with that reduction, it’s decreased the allowance that’s needed.
And with some of the loan purchases this quarter, those have a lower loss experience. And one of the portfolios has full coverage with credit enhancement. And so it was really a combination of the specific reserve being eliminated and the overall loan mix. As far as going forward, our provision is really being driven by a couple factors. First, loan growth and loan mix, of course, the economic forecast and our charge-off experience. We were very pleased with charge-offs this quarter. They were roughly half of the fourth quarter and third quarter charge-offs. So that’s been very positive. So I expect the reserve really to be pretty stable as we move forward.
Damon DelMonte: Great. I appreciate that color. And then with regards to the upcoming CRE maturities, that was a great slide, you guys included in the deck. Can you just talk a little bit about the approach that you take with your borrowers as they get close to the maturity date? Are you guys reaching out to them and double-checking financials, making sure they’re comfortable with a higher rate in order to best position you guys to respond to any potential headwinds that you could be facing?
Lynn Kerber: Sure. We actually have several activities that are part of our overall credit risk management and account relationship management that are not new. I mean, this is just part of the fabric of monitoring our portfolio and working with our customers. Firstly, we’re doing annual reviews on these clients, collecting financials on schedule, depending on the type of credit it is. And so on a flow basis, we’re continually monitoring those as part of our underwriting and that annual review process. We do stress testing for interest rates, loan-to-value compression, and some other factors. So, that’s an ongoing activity. And we have the opportunity to see how our customers are positioned to absorb the interest rate changes upon maturity.
We also do a deep dive on certain CRE sectors, including hospitality, office, multifamily, nursing home, CRE that may have a term loan and are going to be approaching that maturity. We do a deep dive on those throughout the year. And so again, we have a pretty good idea of how they’re performing and what their capacity is going to be to absorb any interest rate increase. As part of that stress testing, we go up to 300 basis points. And as you can see from our charts, we took a look at those that are under 7%. I didn’t provide the color here, but by and large, most of the increases in these two tranches is about 200 basis points. So, it’s well within our stress-testing metrics.
Damon DelMonte: Got it. That’s great caller. Thanks a lot for that, Lynn. That’s all that I had for now. Thank you very much.
Thomas Prame: Thank you.
Operator: We have the next question from Brian Martin with Janney Montgomery. Please go ahead.
Brian Martin: Hey, good morning,
Thomas Prame: Hey, Brian.
Mark Secor: Good morning.
Brian Martin: Hey. Just wondering, just one follow up on the credit side. The performance has been great here. Just on the special mention, credits, kind of the criticized assets. As you kind of look this quarter, it sounds like, my guess is there’s not much change given kind of what we saw with the provision in Lynn’s comments just there, is that accurate or just kind of a read-through on that?
Lynn Kerber: Yeah. There really wasn’t a significant change in the first quarter, as noted in our fourth quarter 10-K. We did see some increases on a handful of credits in the fourth quarter. There were some unusual circumstances there. We had one multifamily property that had a fire, and water damage. It was under construction, so we felt it was prudent (ph) to move into that category. We also had a couple of C&I credits that had some interim financial results that warranted additional monitoring, I’ll say. Those companies are all strong. We have strong sponsors. In the first quarter, we saw improvement with stabilization and recovery from the fire from the one property. And for the C&I credits, we’re seeing improvement in their interim numbers.
So, we remain very comfortable with those that there’s not going to be further migration. And then certainly, as you saw in our substandard and non-accruals, those improved this quarter. So we’re very pleased with that performance.
Brian Martin: Yeah. Okay. No, perfect. That’s helpful. I appreciate the added color. And then maybe just for Mark. Mark, you talked about the loans that are repricing and that’s still going to kind of continue. Can you give us an idea of the magnitude of those loans that are repricing and then just how much of a rate pickup you’re getting on those?
