Brett Pharr: So, on the working capital arena, these are accounts receivable and inventory. In those kinds of transactions, we either have a borrowing base of receivables where we’ve pre-approved the debtor, which is the one that owes our customer money. In many cases depending on the situation, we actually have dominion of funds, where all the payments are coming straight to us. And obviously, you have a security interest in those things. And we do some things that are kind of unique, at least for bank, in the way that we manage those. In the inventory cases, we have pre-planned buyers often for the inventory or at least appraisals on it. So we know what we would do in the event of liquidation. In equipment arena, it varies a little bit about what it is.
Some of it is mission critical equipment, which means that even in the event of a reorganization bankruptcy its mission critical, and they’re going to reaffirm the debt and pay us. So we emphasize that a lot. Or in other cases, we have relationships with third parties who are ready buyers for that and we regularly work on and cultivate those relationships, so that we can take advantage of them. So, it’s not like a traditional C&I lending. It’s — we go in assuming there’s going to be a default and then how would we get out, if there was a default and not lose money. So generally, particularly in the working capital, where there is a problem, it’s because of fraud, not because of an actual weakness in the collateral position.
Tim Switzer: Okay. And you
Glen Herrick: And, Tim
Tim Switzer: Oh, yeah. Go ahead.
Glen Herrick: Tim, this is Glen. I would also refer to Page 16 of our investor presentation on the deck. Some additional information around our different types of commercial finance and then at the end of the deck, we have some industry concentration information.
Tim Switzer: Great. Yeah, that’s helpful. And when you guys stress the portfolio run in your stress test, what are some of the scenarios you use and like, which variables are you focusing on? We’re just trying to get an idea of like how different parts of the loan book would react to certain stressed environments?
Brett Pharr: Yeah. So, Glen, I’ll let you answer here in a second. What I would tell you is that, we’re always looking at every transaction as if it’s stressed. We certainly look at industry concentrations, what can happen in that industry and adjust appropriately. Particularly strong thing that we do is, we look at the debtor credit book, that again, that’s the people that are paying our borrower and make regular decisions about that. And so, examples of some fairly common high named bankruptcies that have occurred recently, 18 months ago we were out and wouldn’t accept receivables from them. So that’s more of a kind of thing we do. Each transaction is so unique in this space. It’s really not conducive to a portfolio stress type arrangement that you might be used to in a traditional C&I.
Tim Switzer: Okay. I got you. Going back to the guidance a little bit. What is sort of the NIM expectations you have for like Q1 and Q2, like you’re through all the interest rate floors, right, and I mean you had like 40 basis points of NIM expansion for the last two quarters in a row basically. Like, is it reasonable to expect that again or should it start slowing down?
