If we look at our businesses, they’re being successful generally. There’s like normal little spots here and there of management issues that create problems. And then I talked to our Fraser & Neave [ph] people yesterday. I go, are you seeing anything on valuations and cap rates? And the answer is not really. So real estate values are holding up and the strange thing going on in the real estate market that, you know, the last recession was all about housing. The housing is holding up amazingly well in our markets, really because of shortage of supply, which means existing inventory is very marketable. And I think that holds on the commercial side of things too. New construction is more expensive because the inflation and the higher interest rates, so existing properties have value.
And it’s really, well, that’s a big chunk of our collateral that’s help us avoid significant charge-offs.
Nathan Race: Okay, great. All right. Okay.
Larry Helling: Thanks, Nate.
Operator: Our next question will come from Damon DelMonte with KBW. Please go ahead.
Larry Helling: Morning, Damon.
Damon DelMonte: Sorry about that. I couldn’t figure out how to unmute myself. Good morning, I hope you guys are doing well. First question — excuse me, first question, just with regards to loan growth, I think last quarter, Larry, you had said, you know, kind of going into the year, you thought 4% to 6% growth, excess securitization, and kind of 8% to 10% without it. I’m sorry, 4% to 6% with it, 8% to 10% without it. Has that guidance changed at all? Do you still feel that confident for that kind of growth?
Larry Helling: Yes, we do still feel confident that those are the right numbers. Quarter-to-date, we’re off to a really good start in the first three weeks of the quarter here. So more in line with that 8% to 10%, I think the slightly lower loan demand in the first quarter was just kind of seasonality things that sometimes happens over the end of the year. So we certainly feel at this point that that guidance is still solid.
Damon DelMonte: Okay. And the loans that you added this quarter and last quarter, or this year so far, what are some of the rates you guys are getting on new production?
Larry Helling: Yes, it certainly depends on what’s — yeah, it certainly depends on the — go ahead, Todd.
Todd Gippel: New loan pricing was 764 for the quarter, Damon, a roll off of 718. So, 46 basis point left there. And that blended, 764 also has a fair amount of floating at 824 in it for the quarter. So the 764 continues to grow. We’re optimistic about that getting closer and closer to an 8% handle on a blended.
Damon DelMonte: Got it. Okay. It’s helpful. And then with regards to the margin and the impact you had this quarter from the interest rate caps expiring. Do you see that moving higher and being more of a headwind in the upcoming quarter? Or is it kind of fully been absorbed into the margin?
Larry Helling: Yeah, Damon, it’s really cooked into Q2 now that did cost us $1.1 million in additional interest expense and six basis points of margin, but that’s for the most part fully baked into the run rate now. So we don’t expect any further drag from that. The $65 million in sub debt that did reprice went from a 538 to a floating of 812. That cost us 200K and one basis point in first quarter. That will lift to a full run rate of 400K per quarter in two basis points in Q2, so just that additional one basis point of drag there. As we said early in our prepared opening comments, we expect to be able to overpower that with core margin.
Damon DelMonte: Got it. And then just lastly on the provision, credit has been pretty strong. The reserves stayed flat at 133. Do you kind of try to keep that level? And based on the recent net charge off history, kind of use that as the data points to back into a provision is that a reasonable way to look at it?
Todd Gipple: Yes, Damon, I think that’s a good estimation. There’s certainly some science and some art in the loan loss reserve. We’ve tried to be conservative and keeping that number high, but I think your parameters are in line.
Damon DelMonte: Great. Okay. That’s all that I had. Thank you.
Todd Gipple: Thanks, Damon.
Larry Helling: Thanks, Damon.
Operator: And our next question will come from Jeff Rulis with DA Davidson. Please go ahead.
Jeff Rulis: Thanks. Good morning.
Larry Helling: Good morning, Jeff.
Jeff Rulis: I’m sorry to circle back to the margin. I just want to make sure I got this right. If the tax equivalent was 325, it’s not as if those non-client factors go away. That’s your guide for plus or minus five basis points, hugs the 325. It’s not as if it’s kind of around a 330 with the elimination of the non-client headwinds?
Todd Gipple: Yes, Jeff. Thanks for the clarifying question. Our guide to static is at that 325, 324 tax equivalent NIM. That’s the number we’re pulling in on in terms of static, yes.
Jeff Rulis: Okay. Appreciate it. And maybe just on the fee income, obviously capital markets gets kind of the fanfare, but that wealth management piece is growing nicely. And I think you talked about the rollout in Des Moines. Maybe the outlook there and where you’re seeing kind of the winds, it’s kind of a little further outlook seems like a nice, nicely growing business.
Todd Gipple: Jeff, thanks for asking more about wealth management. It is a great business for us. We’re very excited to having had that start last year in Southwest Missouri at Guarantee Bank and getting started here this spring in Des Moines. Des Moines is a great metro for wealth management. We’re excited to have hired two very experienced folks to lead that effort in Des Moines. The good news about this business for us is we can leverage off our infrastructure in the Quad Cities market that really provides the shared services around that business. So when we stand that up in Springfield or Des Moines, we don’t have to put a whole lot of operational folks with it. It’s really client facing folks. So appreciate you asking. We’re very excited about this business.
AUM was up 11% for the quarter. So we’re thrilled with that. We actually brought in 136 new clients in the quarter and 413 of the new AUM crossed all four of the bank charters. So this is a very good business for us. If you think about it, as Larry said, it is opening comments 9-6-5 for us. We really expect this business to continue to grow at a better than 6% clip organically. And it’s the ultimate relationship business. And we think we do it well and we like it very much.
