Michael Rose: That’s great color. I appreciate it. Maybe just as a follow-up, expenses step down this quarter, and I think you said less than kind of 5% year-on-year growth. Can you just talk about some of the — I know you guys have done some cost cutting and you guys are highly focused on expenses. But at the same time, I mean, ongoing investments to continue to build the earnings power of the company, right? And I know some of that is on the deposit side, as you just mention, John, or Bart, excuse me. And then can you just talk about some of the other areas that you’re continuing to invest in as we think beyond kind of this year and into the next couple of years?
John McWhorter: Yes. So Michael, the biggest number, of course, the salary expenses, and we do all of our annual raises in the first quarter. So we have a pretty good handle on that number going forward. We don’t have a lot of openings. We’re not looking to hire a lot of people, so it helps give us confidence on that number. We did talk about opening a branch. Obviously, we have to hire people for that, but we literally have 30 fewer employees today than we did a year ago. So we think we’ve done a pretty good job managing that. I’d say a pretty good confidence on salary numbers going forward, not increasing too much. Some of the other things are a little harder. Sometimes you have legal expenses you weren’t expecting or consulting or that sort of thing that no big expenses that I’m aware of that we’re soon to add.
We do have one more branch that is kind of in process, but we already have employees there. So there’s not going to be a big increase in expense. It’s an administrative office today and will come a full branch within months, I think. But again, no big increase in expense. I think holding under that 5% unless something out of the ordinary happens, should be relatively easy.
Bart Caraway: And a little different color, taking into a different perspective, Michael, is that we kind of have decided to really focus in on priorities. So for us, particularly when it looks like, like project management or new software. I mean we have really been surgical in our approach that we simplified our processes and any new projects have been tailored down to just a handful versus broader. So we’re spending more resources and focusing on the important things, which is developing deposits, developing business and less distractions from other things. And I think we’re just seeing better and better refining. And what I’d also say is there’s a philosophical difference in the company that it’s not just big things like staffing, it’s little things.
So there’s a focus in just everywhere in any job position looking at how we can simplify it and do it more efficiently. And a lot of little things add up to big things, right? And so it’s big and little things happening, and it’s kind of changing hearts and minds internally that we’re all rowing in the same direction. And I think we still have a lot of efficiencies to gain as these things take momentum.
Michael Rose: No, that’s great and well understood. And I think putting it all together, just last question for me. It’s just, Bart, you talked about operating leverage and the strength there, I think, for a growth bank, especially given the intense focus on the expense side, it’d be in surgical, as you mentioned. As we think kind of intermediate to longer term, balancing the growth and investment together, I mean, do you think, ultimately, the goal at this point in your life cycle is going to continue to drive that efficiency ratio down, again, intermediate, longer term to somewhere below 60%. Is that just theoretically feel right as you think about the franchise over the next 3 to 5 years?
Bart Caraway: It’s funny to say that. One, it’s not going to take 3 to 5 years. But there’s a strong emphasis internally to get our efficiency ratio to something that starts with a 5. So that’s what I’ve been said and everybody in the organization knows it and everybody has been just great supporters of trying to get us there. So I’m not going to predict exactly when we get to something that starts with the 5, but I will tell you, internally, there’s a heavy emphasis of us finding our way there. And part of that will be a little growth, but it’s also more focused on the expense side and the 2 is going to marry up and hopefully, we get there a lot sooner than what you all think.
Michael Rose: Perfect. And like maybe one last one. Just for John. What drove the increase in service charges this quarter? And is that a decent run rate to think about? I’m just curious if there’s any kind of onetime catch-up or anything in there?
John McWhorter: So the service charges this quarter related more to loans or at least the increase related more to loans then deposits, which is something we haven’t necessarily seen in the past, but it’s just all the little things. I mean, charging customers for not using unfunded lines and things like that. So that line item itself may tick down just a little bit, but I mean, for the most part, I think it’s a good number. I mean that same $2 million run rate is pretty good. We don’t expect a lot of swaps income like we’ve had in years past. But I think there’s other little things making up for it we’re comfortable with that $2 million number, a little bit more than $2 million going forward.
Operator: Next question, Woody Lay with KBW.
Wood Lay: Wanted to ask one follow-up just on expenses. As we think about next quarter, it sounds like you remain very expense focused. But is the roughly $26 million, is that a pretty good run rate going forward?
Bart Caraway: It is. It was a pretty clean number.
Wood Lay: Okay. And then shifting over to credit. The NPAs remained stable, but I was just curious on any trends within the criticized or classified bucket that you could speak on?
Audrey Duncan: Sure. This is Audrey. I can answer that. We had a few downgrades in the quarter. They don’t show in the nonperformings because they are still paying and accruing. But one of them was a consumer — kind of consumer note receivable loans. We’ve got a 60% LTV on that. We have a few assisted-living facilities, brand new appraisals on those with a 69% LTV. And then another kind of discretionary consumer goods manufacturer. We have an owner-occupied building and a line of credit, and we’ve got below 55% LTV on that owner-occupied real estate.
