Paul Langdale: Our focus Brandon really remains on growing the core deposit base. And we believe that we’ve equipped our teams with the tools necessary to successfully compete both offensively and defensively against what we’re seeing in the market. It’s important to note also that relationship deposits do factor into our lending decisions. And we believe that our ability to produce loans also translates to an ability to produce deposits. We’re going to be very focused on making sure that we can grow deposits and we can fund loans with deposit growth. Obviously, the accelerated attrition that we saw in Q1 we don’t expect to repeat in Q2 because we’ve seen some stabilization since quarter end. So given what we’ve tasked our teams with and given what we’re seeing in the market, we think we’re in a good position to grow deposit .
Brandon King: Okay. And I know you mentioned in the commentary as far as the deposits moving kind of off balance sheet, we’re still within the bank. What do you think it would take for those deposits to come back? And kind of when do you anticipate that happening?
Paul Langdale: I think it depends entirely on the trajectory of monetary policy and specifically the yield in the treasury market. Most of the liquidity management products out there based on treasury yields and a later treasury strategy. So as we see the Fed hit the terminal rate, especially if we have some economic storm clouds on the horizon. I think there will be an opportunity for banks to be very competitive on rate versus the treasury market. But it’ll just depend again, on the trajectory of inflation and monetary policy.
Brandon King: Okay, and there’s nothing, I guess, internally that you plan on doing to kind of encourage those deposits coming back sooner rather than later.
Paul Langdale: I think it depends on the idiosyncratic beliefs and behavior of the customers and what they’re specifically looking for. Obviously, we have opportunities to incentivize customers to return that cash on the balance sheet. But as of right now, it’s a relationship driven strategy that we really focus on understanding the individual customer their needs, and we really want to provide them with a total suite of solutions that fits what they’re looking for.
Brandon King: Okay. I will hop back in the queue. Thanks for taking my questions.
Operator: Thank you. Our next question comes from line of Brett Rabatin with Hovde Group. Please proceed with your question.
Brett Rabatin: Hey, good morning, gentlemen.
David Brooks: Good morning Brett.
Paul Langdale: Good morning Brett.
Brett Rabatin: I wanted to, I guess first start on expenses and the expense levels are obviously something that you’re focused on this year. And the numbers in 1Q on a core basis were a little better than I expected. Can you talk maybe, Paul or David about what you think you’ll achieve from here on the expense side? And just a good way to think about maybe the efficiency ratio relative to what you’re trying to get done on the revenue side? Thanks.
Paul Langdale: Sure, Brett. I’m happy to talk to expenses. Obviously, we remain focused on notching incremental expense discipline, that is something that we have expressed a clear intent to continue to focus on over the last several calls. So if you look at our expenses in Q1 they are seasonally a little bit lower than they typically are. I would expect the expense run rate to be around $88 million for the remainder of the year. Midway through the first quarter, we didn’t have our merit increases. So that does impact the runway on a go forward basis. The trajectory of expenses and the magnitude of savings that we can realize is going to be dependent upon the opportunities that we see across our expense base. Obviously, we’re looking under every rock and making sure that we’re being mindful of gearing the organization for the current economic environment.
Brett Rabatin: Okay. That’s helpful. And then on capital, I want to make sure I understood that correctly. You repaid the $30 million of sub-debt post quarter. Was that correct?
Paul Langdale: No, we repaid that at quarter ends though it is a–
Brett Rabatin: At quarter end. Okay.
Paul Langdale: And that was three month LIBOR plus 283. So that was a little over 8% APR for modeling purposes.
Brett Rabatin: So would the plan be to replace that in the near term?
Paul Langdale: We continue to create enough capital to be able to not replace that little $30 million tranche.
Brett Rabatin: Okay. And then any thoughts on capital generally, just that I think some banks are thinking about running with excess capital, just due to some uncertainty. Is there a specific capital ratio that you’re focused on? And maybe what kind of level would you be trying to target maybe later this year, or in the environment?
David Brooks: Yes., Brett, let me address it from a high level, just where I believe the board is and what our strategy is how we’re thinking about it. We have continued to improve our dividend at its current level that we came into the year with, we finished up with quarter of ’22 and into ’23 with our dividend level, we expect to keep that constant for the foreseeable future in the next few quarters as we observe what’s going on macro economically as Paul said. We have a buyback in place approved, but we’re not expecting to be active with it for the foreseeable future. And part of that is what you alluded where you we’re watching closely, what’s going on with the economy, the markets seems to be pricing in now at least a moderate recession.
And some rate declines in the back half of the year. We’re not making any assumptions around that. But we’re watching and preparing. And so we’re going to allow capital to increase as Paul just said, here in the next few quarters and continue to strengthen that ratio. We’re not expecting, as Paul said, to add any additional sub-debt or capital at this time. And then we feel really good about where we are, as far as specific capital ratios on it. Paul, you may have a thought on that. But I think, broadly, we feel good where we are, Brett, and we expect those to creep up over the next few quarters.
Paul Langdale: The only thing I would add Brett is that we continue to talk TCE ratio in north of 7%. That’s something I think you’ll see continue to increase as we have free capital over the remainder of the year.
David Brooks: Yes, we like we realized from that standpoint, Brett particularly the fact that we have a small bond portfolio and a relatively insignificant AOCI charge at this time. So we think that puts us in a good spot from an overall capital standpoint.
Brett Rabatin: Okay, that’s helpful. Thanks so much for the color.
