Robert Franklin: Yes, Matt, as we had conversations with our borrowers about that, they’ve known that if they’ve got a maturity coming up that the rate is going to be higher, and they’ve been accepting of that. We have a lot of good guarantor support in our loan portfolio. So the guarantors have stepped up wouldn’t been necessary for them to do that. But for the most part, I would say there hasn’t been much pushback at all about not being able to afford that. They know this is coming, and we’ve been working with them and the move up in the rates that they’re paying that they fully understand that and have been able to absorb it.
Ramon Vitulli: Yes. And Jeff — Matt, with the dynamics that are going on in Houston, the ability to still price up on leases is still out there, the exception of office, which we’re not talking about office, but for most of the stuff that we have, there’s still ability to increase rates. Now they’ve got to get through a lease cycle. So that’s where we’re trying to bridge the gap with folks to get from one lease cycle to the next so that they can increase those rates and move on. We still have rate increases. There’s not a huge amount of stuff coming on to the market. So these guys are pretty well positioned and be able to increase rates on their tenants when they get the opportunity, but they got to get the opportunity. So we actually feel good about our position. We’ve got guarantors that can bridge the gap there, sometimes to get additional collateral paydowns. But the market is helping us along with the borrowers themselves.
Matt Olney: Okay. Appreciate that. And I guess from an overall perspective of the net interest margin, obviously, you’ve got the headwind of the deposit costs, offset by this core loan yield dynamic going the other direction. Paul, I’m curious kind of what your thoughts are on the core margin from here?
Paul Egge: Sure thing. I mean we’re fighting battles on a couple of fronts. First, overall cost interest-bearing deposits, deposit mix shifts as well as this uptick in nonperformers on the loan revenue side hits us from the other end. So we feel good about our positioning as it relates to maintaining a relatively strong margin, but we definitely see pressure in the second quarter relative to where we were in the first quarter.
Matt Olney: Okay. And then just lastly, on the investment security side, it looked like there was a nice step up of the overall balances from 4Q into 1Q. Any color on that step-up? And specifically, from your recent purchases?
Paul Egge: Certainly. Well, we’re focused on liquidity, as you’ve heard Bob and I mentioned in our prepared remarks and building liquidity through our securities portfolio has incrementally has been something that we’ve been trying to be thoughtful about. The types of securities we’re going into are largely cash flow-oriented since liquidity is paramount when getting a high level of principal back from the standpoint of cash flows from that overall securities portfolio. We think we’ll be able to post better yields in the go forward as a byproduct of that build in the portfolio.
Matt Olney: Okay, guys. That’s all for me. Thank you.
Operator: Your next question is from the line of John Rodis with Janney.
John Rodis: Hi, good morning, guys. Just a follow-up — just to follow up on Matt’s question on the securities portfolio. Paul, would — I guess, directionally, would you expect it to remain relatively stable going forward? Or how should we think about that?
Paul Egge: We’re on a path of trying an intermediate target of getting to securities as a percentage of assets of more like 15%. We’re at about 14.2% currently. So we’ve got just a little bit of incremental ways to go before we kind of read the tea leaves to how we want to manage our balance sheet, but that is an interim target for us.
John Rodis: Okay. On the fee income side in other income, what was the SBIC impact this quarter?
Paul Egge: I believe it was around $400,000. So we can’t necessarily set our watch to when we get some SBIC income, but we have a diversified range of investments and when — we welcome it when it comes.
John Rodis: Okay. And so other income was $3.1 million for the quarter, back out that $400,000, was there anything else unusual or of size this quarter in that other line item?
Paul Egge: Actually, the gain on sale is, obviously, separate from other income, but the gain on sale as we called out before was kind of the largest unusual item. There may have been a couple of smaller items that added up to that being higher than expected.
John Rodis: Okay. And then, Paul, just on expenses, $71.4 million for the quarter. I think last quarter, you talked about sort of for the year around $280 million or so. Do you still feel comfortable with that range, maybe a little bit higher just given the first quarter run rate?
Paul Egge: Well, the first quarter was very much aligned with our plan because we are — we did expect some seasonal dynamics to make the first quarter be relatively larger. But as we go forward in 2024, we do see potential for some projects to perhaps put pressure on the $280 million guidance we gave last week — last quarter, but we’re working hard really to manage and how we, ultimately, get the expense levels for our combined company right in the go forward. There you have it.
