David Zalman: I mean just — you have to be cognizant of what the CFPB is always out there and what they’re saying. So all of that stuff can change. But there’s some rule that comes down, of course.
Jon Arfstrom: Yes, they don’t like fees. That’s for sure. Tim, you talked about bringing down NPAs and you gave us a number, and it looks like you’ve moved a chunk since quarter end, but can you talk a little bit about what you expect for bringing those balances down and how material that might be?
Tim Timanus: Unless we get significantly surprised in a negative way, I don’t see it growing substantially above where it is. In essence, about almost 50% of our non-performing assets came from the First Capital acquisition. And — we think that’s going to — well, it may tick up a little more. We think it’s more headed towards leveling out. And our people are doing a pretty good job of collecting these and working through some of these non-performing assets. So I would be very surprised if it went up dramatically from here.
David Zalman: And as Randy mentioned to me, that two of those loans, which total about $20 million are really acute care centers, and they were having a problem people leasing them, and they did get them leased. And even during that period of time, the investors have about 35% real cash into the deal. So I think as the lease matures, and they can’t get it, they’ll be able to get it and sum it out into the secondary market, but that takes a while where they can show some performance because they’ll want their money out to. So we have a couple of bigger, larger deals that they’re working get us take us some time to get them out.
Jon Arfstrom: Okay. Okay. Good. That’s helpful. And then just one smaller item. On your deck or in your deck on Slide 15, you highlight the non-owner-occupied office CRE. It’s only about $500 million. But — just out of curiosity, how was that book performing for you? I’m curious if it’s any worse than or better than in the other CRE performance?
Kevin Hanigan: Over a very long period of time, that’s been a pretty good performing book for us and really a lot of other banks, it’s those businesses, that’s their lifeblood. It’s the last thing to go for them. It’s if — they’ve got to really be in trouble and not keep the real estate going because that’s generate maybe even generate all the other revenue in the business. So — and I’m talking about over 20, 30, 40 years, it’s been a really good book of business, and it’s been particularly good here. It’s well underwritten, and it’s rare to see even on a watch list one of those loans.
Tim Timanus: Those are the customers that they want to own their building. They don’t have a CFO saying leverage up. They want to own their building and pay it all.
Kevin Hanigan: It’s been a really good book for us.
Jon Arfstrom: Non-owner-occupied piece, I guess, is the question for me? Sorry, yeah.
Kevin Hanigan: Yes, heard that wrong. I’m sorry. It’s performed very well. It’s been stress tested. And I think we all these days stressed for up 300, but we don’t stress test for up 500, 550. We’ve been pretty fortunate in that book to be really low — as you know, really low loan-to-cost lenders, which puts us in a really good position. There’s so much equity in these deals. And being in a market where there’s been a lot of population growth, a lot of in-migration from other states and so occupancy in those things has been pretty good, and it’s up until recently, it’s driven rents up to help withstand some of the rate increases. But it’s rare. I think maybe back in January, Jon, I talked about a deal we had that that was coming back in.
It was going to be repriced and I thought it was too low. I think we had like 8.25% something and we’re going to have to move the right on this thing. And then I got back to the back of the package to the cash flows and realize that it can only get us a 125 coverage at 8.25%, but we were going from like a 560 on the rate to 8.25% and while we would have loved to go for 8.25%, it would have put some stress on the cash flows. That’s as close to a difficult situation, as I’ve seen.
Jon Arfstrom: Okay, very good. All right, thank you. Appreciated.
Operator: This concludes our question-and-answer session. I would now like to turn the call back over to Charlotte Rasche for any closing remarks.
Charlotte Rasche : Thank you. Thank you, ladies and gentlemen, for taking the time to participate in our call today. We appreciate your support of our company, and we will continue to work on building shareholder value.
Operator: The conference has now concluded. Thank you for your participation. You may now disconnect your lines.
