So much less of a driver of earnings performance in this rate environment than it was expected 90 days ago. And just maybe the last thing I’d mention on that. Like that’s clearly the result of a very deliberate strategy, balance sheet repositioning and business model build over the last three years. The bank had 50% of total assets sitting in mortgage warehouse when Rob got here. So to now flip that where you have half sitting in C&I and then the appropriate concentration levels around mortgage gives us confidence to deliver those returns.
Ben Gerlinger: Yes, that was great color. I appreciate it. And then coming to following up on Brett’s question about credit. I know you guys talked through this credit migration is what you guys were previously expecting and guiding towards – if it really is following that path, where do you think based on what you guys have previously expecting, we would see special mention go? Like where would it kind of top out at in terms of a credit trend? Because it seems like it’s following your guys’ plan. What is your plan, or guidance really anticipated those marks going?
Matt Scurlock: Yes, I think it’s difficult to call out a peak in special mention. I think that the macro backdrop, particularly around rates, I don’t really see any indication that you would see it slowing down. I mean, it was a bit faster this quarter, 16% relative to 10%, which have been our average over the last four, five. But that was largely driven by just a smaller number of credits moving back to watch, not as much by an increase in credits moving from watch to special mention. We’d expect continued move up, which is why we have the 50 basis points provision guide for the year. And to be candid, it’s also why we managed a pretty specific concentration levels on commercial real estate. So, we’ve got 30% of our total loan portfolio.
That they reside in commercial real estate. I think that’s probably peer-leading depending on the group that you look at and while we carry out a bunch of capital and liquidity. So, we’re – as prepared as you possibly could be, for the uncertain credit environment.
Ben Gerlinger: Yes, so that’s helpful. Thank you for that.
Operator: Our next question comes from Matt Olney from Stephens.
Matt Olney: Hi, thanks. Good morning. I wanted to ask about loan yields ex mortgage finance. I think they increased about 12 bps during the quarter. A little surprised that we saw that given that the changes of the SOFR during the quarter. Any color on that change sequential? Thanks.
Matt Scurlock: Yes, Matt. So, we called out in the comments and it mentioned a bit, I think last quarter that over the last five quarters, we’ve cycled about $1 billion of capital into higher returning relationships and you continue to – we continue to see pretty advantageous spreads over index on newly originated credit. So over the last five quarters, I think the headline balance sheet and headline loan growth numbers have been perhaps a bit misleading, in terms of just all the new business that we’ve been adding. And those trends really continued in the first quarter, which was supportive of the yield.
Matt Olney: Okay. I appreciate that. And then on the credit linked note that was mentioned in prepared remarks, remind us of the savings on that and the timing when we’ll see the savings?
Matt Scurlock: Yes. You’ll see about $2.5 million of quarterly saves that will show up beginning in the third and fourth quarter. That’s already embedded in our outlook. So the reduction in CET1 will be at the end of the second period, and then you’ll have the pickup in NII that begins in the third quarter.
Matt Olney: Okay. Got it. Thanks for that. And then on the securities repurchases during the quarter, you mentioned the 6% coupon. Any color on when those purchases were made? And then kind of what’s the appetite for additional kind of consideration of higher security purchases?
Matt Scurlock: Yes. So, we had about $250 million mature at the end of January that had a coupon around 1%, which takes you back a bit as you think about how fast yields have moved higher. And then I’d say, the average settlement date was kind of mid to late February. We definitely have appetite to reinvest cash flows, based on what we see elsewhere on the balance sheet, and we would expect new securities to come on at similar yields.
Matt Olney: And just following up on that Matt, it sounds like that the cash flows you expect for the remainder of the year, I think you mentioned $60 million to $80 million per quarter. Is that the next few quarters, I would assume?
Matt Scurlock: Yes, you got it Matt.
Matt Olney: Okay. Perfect. Thank you, guys.
Operator: Our next question comes from Woody Lay from KBW.
Woody Lay: Hi, good morning, guys.
Rob Holmes: Hi, Woody.
Woody Lay: Wanted to start on the investment banking trading fees. Last year, we saw a pretty nice ramp-up in the second and third quarter. Should we expect something similar in 2024? And can you just talk about how your pipelines, are responding in the current macro environment?
Rob Holmes: Yes. I would just say Woody that all five major components of the investment bank, I think Matt said in his comments, revenue increase quarter-over-quarter. So syndications, capital markets, capital solutions, M&A and sales and trading, all delivered revenue growth. I would say, going into the second quarter and today, the pipelines are much healthier. And what I mean by that is more granular across – the entirety of the platform as you have more bankers bringing out more product partners on a more regular basis, and the client receptivity to the investment bank proving to be very, very strong. So, it’s good to see the overall platform maturing, which is increasingly helping the health of the pipeline. So I feel good about it going into the second quarter. It’s probably the healthiest pipeline we’ve had.
Woody Lay: That’s good to hear. And then I wanted to shift over to multifamily real fast. I see that 55% of your portfolios in Texas, is that primarily in Dallas? Or is it pretty broad-based among all of the Texas markets?
