Jay Brogdon: Yes. I’d say, David, a couple of comments on that to try to unpack. First of all, I think the guidance or the outlook that we gave back in January is generally still intact. We talked about the first couple of quarters this year being a little bit range-bound from a margin perspective, down a couple of basis points in the first quarter, within that range in my mind. I expect that to be the same case in the second quarter. If we — again, the majority of that headwind in the first quarter was from January NIB declines. We haven’t seen as much of that since then. So we’re doing our best to kind of hold the line in the first part of the year here and the expectation for margin expansion throughout the balance of the year, the second half of the year and sort of increasing expansion into next year is still our expectation.
A couple of things that I would sort of footnote to all of that. One is we have some liability sensitivity in the balance sheet. And so that is going to be a macro factor that we don’t have full control over what the Fed is going to do nor when the Fed is going to do it, but we do expect to have some benefits when rates do start coming down. The second thing I’d point out is if you isolate for deposit migration, NIB migration, in particular, and just look at the repricing of assets and liabilities throughout the year this year that would naturally lead toward as we look at all of that toward margin expansion. And so we think that’s a good setup for us throughout the balance of the year. The wildcard and the most difficult one really to predict is the level of NIB migration.
So that will be the one, I think, that really helps further shape that inflection and how steep or not that inflection is over the balance of the year.
David Feaster: That’s very helpful. Thank you.
Jay Brogdon: Thank you.
Operator: The next question comes from Woody Lay from KBW. Please go ahead.
Wood Lay: I wanted to start out on deposit costs. I know we sort of in the first quarter had a wave of CDs maturing. Could you just talk to where those CDs priced up to and have your current CD offerings changed much quarter-over-quarter?
Bob Fehlman: Do you want to take that, Daniel?
Daniel Hobbs: Yes. So Woody, this is Daniel. So if you go back and look at our customer CDs over the last 30 day-ish that we have priced that’s in that 350 to 360 range. And then naturally, if you look at the brokered CDs, that’s going to be more of a wholesale level. And so if you look at on Page 15 in our second quarter we’ve got about 1.8 billion that’s going to reprice. Now there’s a piece of that, that’s probably going to be more than that 350. There’s one particular customer in there that’s a public customer that’s going to be higher than that. So I would tell you that group is probably going to reprice in that 375% to 4% range, but absent of that one customer we have call it a 1.4 billion that’s going to reprice in that 150 range. And so — excuse me, 350 range. And so if that new production goes on like historic production over the last 30 days we think there’s some opportunity there to the margin.
Wood Lay: Yes. So do you think it’s fair to assume that the pace of the deposit cost increases — begins to moderate in the second quarter?
Jay Brogdon: I would say so. Yes, I’ll jump in on that. I think that’s fair. I think we’re actually seeing that. And it kind of goes back to my comment just a couple of minutes ago to David’s question. If we isolate for just repricing, not volume or migration and look at asset and liability repricing. We think there’s some opportunity on both sides that are favorable to margin as we move forward.
Wood Lay: Got it. And then last for me, I just wanted to shift over to credit. I appreciate all the details you break out on the NPA segment. But I was just curious on any trends you’re seeing in the criticized or classified segments in the quarter?
Jay Brogdon: So what I’d tell you — I appreciate that question. Classifieds on a linked quarter basis are essentially flat. So when I think about leading indicators from a credit perspective, the couple of metrics I focus on are classifieds being flat linked quarter. And then past due loans are actually down linked quarter, and we were pleased with our level of past due loans at 24 basis points in the fourth quarter. Those came down to 19 basis points in the first quarter. So overall credit feels very stable to us. We’re certainly focused on a couple of pockets within the classified portfolio and we’ll be as we historically are, we will be conservative in how we deal with those classified areas. I’d maybe give you one sub-bullet on the past due trends just to further shape that, at 19 basis points where we ended the quarter, of that within the commercial portfolio, which is obviously the much larger dollar volume of our total portfolio, we’re at kind of mid-single digits level of basis points of past dues.
So overall, I feel pretty good about the credit picture as it relates to the broader core portfolio.
Woody Lay: That’s helpful. Thanks for taking my question.
Operator: The next question comes from Thomas Wendler from Stephens. Please go ahead.
Thomas Wendler: Good morning, everyone.
Daniel Hobbs: Good morning.
Thomas Wendler: I wanted to start off with operating expenses that came in around 2% average assets this quarter. Is that how we should be thinking about them moving forward?
Daniel Hobbs: Hi, Thomas, this is Daniel. Yes, I think that’s fair. It may be slightly above that as we go forward. But I’ll take you back to kind of what we guided last quarter. We told you that we’d be down 1% to 2% from our Q4 adjusted annualized number, which is about $566 million. So you can do that math and that will get you to that $555 million to $560 million number for the year. And then if you take the — where we came in for the quarter, we’re at 137, 138, you just kind of do that math. So we feel pretty good about the quarter. We feel good about the forward view of that. And we have a long-term goal to get our efficiency ratio well below where it is today. And obviously, there’s two components to that. There’s the revenue side if we can get some rate and time to help us there.
