David Brooks: A couple of add ons to have there Brady, one is I think, what Dan is saying at the granular level is playing out a little bit at the higher, more strategic level. We saw for instance, in our loan growth, we generated right at about the amount of loans in the first quarter that we expected, but we had an unusual number of pay downs in the first quarter. And that was driven by mostly asset sales, that were driven by the cap rates continuing to be lower in our markets than what I think sellers may be expected. So for instance there are investment groups and wealthy families that are getting offers on properties that are lower cap rates than what you would expect in our interest rate environment. So it speaks to the strength of the underlying markets.
And that’s the point I’m making with that is we’ve seen these pay downs are coming from asset sales at really strong prices. And as Dan said, as we’ve seen these loans, reset pricing and things the NOI have been very robust the growth in the last three or five years, since we’ve made the loan or since it last price reset to where it is today. So we’re not seeing pressure there. And the final comment I’ll make about CRE portfolio, just to emphasize again, what Dan said, is that our loan sizes, our loan holds are just different than what a lot of banks that have a big CRE concentration or large CRE concentration have our average hold sizes are much smaller. We have many more loans against many different properties. So diversification of risk by not only asset classes but within the asset classes.
So again, and I understand, right now, we’re facing a potential as Paul said earlier, storm clouds on the horizon that people are concerned about, and we get it. And to some extent it’s going to have to play out right and so that investors and folks can see exactly how different banks asset quality holds up. We continue to be very confident in how ours will hold up. And but we’ll just have to play it out the next few quarters and see how the economy does. But we remain competent and not seeing any difficulties on the horizon at this point.
Brady Gailey: That’s good color. Thanks, guys.
David Brooks: Thanks. Brady.
Operator: Thank you. Our next question comes from line of Matt Olney with Stephens Inc. Please proceed with your question.
Matt Olney: Hey, thanks. Good morning, everybody.
Speaker: Good morning Matt.
Matt Olney: Paul, thanks all the commentary on the deposit cost and the marginal. I’ll take a swing of the topic too. If I assume a deposit beta that that moderates into 2Q from what we saw in 1Q and if I assume that the NIV outflow, the pressure there kind of eases up quite a bit in the second quarter as well. I’m still getting a margin that drops below 3% in the third quarter, and that would still be kind of less than that margin pressure that you talked about in the first quarter. I just want to make sure I’m thinking about this right as far as kind of where that margin could ultimately fall. Thanks.
Paul Langdale: The NIM execution is going to depend upon a variety of factors Matt. Obviously, we have a few offsets relative to our costs redeeming that tranche of sub-debt as I noted, we did repay part of the borrowings that we had at the end of last quarter as well. So while we do still expect some incremental NIM compression, we do believe it should hold in a reasonable area around three. So that’s our expectation going into Q2.
Matt Olney: Okay, thanks for that, Paul. And you mentioned you pay down a part of that FHLB more recently. Any color on kind of what that balance is, currently?
Paul Langdale: I don’t have the updated balance right in front of me. But we continue to use short term advances on the FHLB front. What we did Matt, in the back half of March is we really focused on using short duration FHLB advances so that we could replace those funds selectively with brokered and core deposits as we pursued our growth initiatives in that category. The funding markets were very dislocated in the last two weeks of March. And the cost for both broker deposits and specialty deposits were significantly higher than where they are today. So we waited for those rates to come down at quarter end and added those, started adding those funds back after quarter end.
Matt Olney: And Paul on that note, how favorable is that trade as you move back into some of those specialty products of the last few weeks relative to FHLB? Any context for you know how much more favorable that is versus the FHLB?
Paul Langdale: So it’s not meaningfully favorable over FHLB. It’s probably a spread of about 15 basis points today. But it was very favorable related to versus the brokered market and mid March.
Matt Olney: Got it. Okay. That’s helpful. Paul, thanks for that. And then other questions have been addressed. I guess, just lastly, on the mortgage warehouse. I think Dan mentioned expect some stability there. Just any color on stability versus in a period are averaged quite the delta we saw in the first quarter. Thanks.
Dan Brooks: Yes, Matt this is Dan. Good morning. I think we indicated in there that we averaged right around almost $300 million for the quarter. We actually saw a significant increase in March and ended the quarter above $400 million. We continue to be at that level here in April. As we have indicated in the past, we expect it to be fairly flat for the year and following the rest of the market. But we did see some increase as you will see there.
Matt Olney: Okay. All right. Thank you, guys.
David Brooks: Thanks Matt.
Paul Langdale: Thanks, Matt.
Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. And I’ll turn the floor back to Mr. Brooks for any final comments.
David Brooks: Thank you. I appreciate everyone joining this morning. We remain encouraged about the position of our company relative to being nimble, whatever comes our way for the balance of the year. And we expect that we’ll continue to see good growth and we’re competent on our team and confident in our ability to execute in this environment and looking forward to what the next few quarters brings and appreciate everyone’s interest. Always happy to be available. If you need us for anything feel free, reach out. Hope everyone has a great day. Thanks.
Operator: Thank you, this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
