Matt Olney: Okay. No problem. While I was asking about the commentary you made on the prepared remarks about the margin trajectory for the rest of the year kind of flattish more near term, I got that part of it, but I think you mentioned the back half of the year, the margin could have some upward support, driven by the fixed rate loan pricing. I assume that was in a flat rate scenario given your comments about if the Fed does cut, you’d be asset sensitive, but there’d be some pressure. I just want to make sure I appreciate the puts and takes around that.
Wally Wallace: Yes. Thanks, Matt. Your assumption is correct. So the way we kind of think about what might happen if the Fed cuts. I said in the prepared remarks, we kind of assume deposit betas will lag. So, if you look at the repricing potential we have in the portfolio against the pressures that we would expect from a Fed regime that changes to be more hawkish. The expansion opportunity that we have in the second half, we assume and model would offset about four rate cuts. So if the Fed cuts 4 times, we think our margin could be flattish to where it is right now. The cadence would be, it would be down a little bit if they — if they started cutting early, but if they start cutting later in the year, that actually we’ve got so much — so many loans repricing in the second half, we think that would offset the pressures from Fed cuts. Does that help?
Matt Olney: That’s helpful, Wally. And I’m sure embedded within some of your assumptions is something around deposit betas. And I hear your point as far as it lagging initially from the first cut. But maybe beyond that, any preliminary thoughts about deposit betas on the way down in this upcoming cycle?
Wally Wallace: Yes. We think they’ll lag. In our model, we actually modeled a beta of zero for the first cut and then a slightly better beta in the second, and we kind of went to our historical betas, the last time we saw Fed cuts and model that when we get over 100 in cuts. In that environment, we would actually expect to see some margin recovery. But overall, you look at 1 basis points to 2 basis points of pressure in the — after the first 100. When we get kind of to what we would expect would be our cycle betas, if you will.
Matt Olney: Okay. I’ll step back in the queue. Thanks, guys.
Drake Mills: Thank you, Matt.
Operator: Thank you, Matt. Our next question comes from Brady from KBW. Your line is open.
Brady Gailey: Thanks. Good morning, guys.
Drake Mills: Good morning, Brady.
Brady Gailey: So I know with you guys crossing $10 billion this year, in the past we’ve talked about Durbin being a roughly $5 million pretax number. Is that a number you all still feel good about? .
Drake Mills: Yes. With the recent changes that we saw, this probably ramps up to about $5.5 million, maybe max $6 million. And that will start impacting this midpoint $25 million.
Brady Gailey: All right. And then I know it’s probably embedded in your expense guidance of mid-single-digit growth. But do you feel like most of the expenses have been already incurred to get you guys ready for this $10 billion cross? Or are there other expenses that you feel like are upcoming as you guys think about this cross?
Drake Mills: And obviously, we spend a lot of time with everything from GAAP analysis to talking to other institutions that have gone over $10 billion. And I kind of given analogy, I’m driving 100 miles an hour in a rainstorm and the wipers aren’t quite keeping up to understand exactly what additional expenses are. I’ve got this gut feeling, and there’s nothing that’s going to tell you that 60%, 70% of our expense of crossing, we somewhat have behind us. But we are ramping up positions around compliance, around audit, especially around risk management. We understand working with some of our Fed examiners or regulators that some of the expectations are going to be around enterprise risk management and the pieces and parts. I think we have a little bit to go.
But I also realize that day one, we don’t have to have those expenses in place. I look at this as an opportunity over the next 18, 24 months to feather those in. So, I would say more than half of the expense of crossing in my world, and this isn’t anything that I can sit and look at data, because there’s going to be some unexpected. There’s going to be some unknowns. But I feel pretty good that we’re halfway plus there.
Brady Gailey: Okay. And then Drake, you guys have a pretty attractive insurance business. And you’ve been growing it organically. You’ve been growing it through acquisitions. There’s been a lot of banks recently that have been selling their insurance, just given the valuations and using that gain to go off and do something else. It feels like you guys are still in building mode, but maybe just updated thoughts on how you think about the insurance business at Origin.
Drake Mills: Yes. I’m pretty passionate about the insurance business. The teams we have, the ability to expand footprint. The reason we haven’t not been as active as we have in the past is where — you’re looking at a hard market that’s driving increased revenues, but yet we see a multiple that’s been generated, that’s higher than I would like to play in. So we’re waiting for some of that to relieve itself. But we see, as we build noninterest income opportunities, insurance being a significant part of enhancing and growing that. We also like and recently because of the sales that have gone on, started to prepare and look at the benefits outside of just revenue created. What I mean by that is the relationships that we have on the bank side because of the agency book of business, and we see that continuing to enhance the referral process is very good.
