John Watt: I think that’s a great way to frame it, Chris, is for the foreseeable future, certainly in 2024, we would not expect incremental originations to end up on our balance sheet. And then as we go forward, we’ll see if that becomes an attractive spot for us to allocate our capital to grow some of that back over time. We still like the asset class. It’s performed very well, probably better than our expectations. Remember, this is a homeowner who has decided to put meaningful improvements to try to have a solar cost savings on their property. We like the FICO band that, that customer is in, and we quite frankly think that’s a customer that makes really good decisions. For us, we’ve always had to look at that and say to the extent that not all of those originations were in the seven states that we operate branches in, it is somewhat difficult to bank the customer on a holistic basis.
So – but that being said, we like the asset class. That asset class is capable of being pledged as collateral. And again, to date, it has performed above our expectations relative to asset quality performance.
Christopher O’Connell: Great. And is the quarterly runoff similar to Q1, you think, for the rest of the year?
John Watt: I think that’s a pretty good estimate, Chris.
Christopher O’Connell: Great. And the – can you remind us what the yields are on the resi solar and then also on the consumer specialty also running off, what the yields are on those?
John Watt: Yes. So Chris, we should probably go off-line to get that from a detailed standpoint. But if you looked at our existing portfolio today of consumer loans and we’re around 6% in total, I would argue that solar residential probably fits right down the middle of that yield outcome. Some of the specialty stuff that we’re in, our relationship with Springstone and LendingClub that again is in a runoff status. Those rates might be a touch higher. But again, that’s mostly unsecured credit. So we would have expected that.
Christopher O’Connell: Great. And can you just give us an update as far as the loan origination yields and what’s coming on these days?
John Watt: Sure. In the – on the commercial and the consumer side, we’re in the low to mid-7% range, again, depending on the asset class. In residential real estate, we’re probably 6.25 to 6.5 currently, and that’s really a function of mix, 30-year versus 15-year instruments or adjustable rate mortgages versus fixed long-term rates. To date, because volume characteristics in residential real estate are certainly lower than certain past years. We’ve been putting all of that into portfolio. If rates get to the point where we start to see a productive pickup in that, we always have the opportunity to sell to Fannie Mae or Freddie Mac. And – but today, the amount of originations are not forcing us to do that from a liquidity sources standpoint.
Christopher O’Connell: Great. And what’s the runoff of these portfolios and expected strong pickup on kind of the commercial book going forward? How are you thinking about holistic net loan growth for this year? Has that changed at all from the start of the year?
Annette Burns: So I think that the first quarter loan growth is a good proxy for how we’re thinking about the rest of the year. The mix might change a little bit, but that’s somewhere in the 3% to 5% change, excluding the runoff portfolio is a good proxy.
Christopher O’Connell: Great. That’s helpful. And just wanted to confirm the comments on the expenses, some shifts from occupancy to kind of other areas and other in travel kind of net out into the second quarter and some of the compensation still as a couple of months left to come in and you’re settling out pretty – you said pretty similar to the first quarter, give or take, a couple of hundred thousand. Is that right?
Scott Kingsley: So Chris, I’ll jump in and Annette, please feel free, that I think within the categories that are not salaries and benefits, we expect some modest shift between occupancy and other costs that are probably modestly net beneficial for us in the out quarters. As it relates to the salary and benefits line, we did incur about $0.03 a share of equity compensation costs and payroll taxes that are first quarter higher than the natural run rate for the balance of the year on a quarterly basis. We think some of that will be offset by a full quarter impact of the 2.5% merit raises that we actually processed in March. So a full quarter impact in the second quarter and then going forward. And then again, I think as Annette pointed out, and we’re getting pretty granular, that there’s one extra payroll day in the third and the fourth quarter compared to the first and the second but there’s also an extra day of earning asset improvement.
Christopher O’Connell: Okay. All right. I got it. And then any thoughts around any appetite for share repurchases here? I know you guys are probably looking at pretty strong growth down into 2025 and beyond. But you’re now at an 8% DC regulatory capital is robust, and it seems like net growth this year is still relatively contained? Do you guys have any thoughts on that?
Scott Kingsley: For sure, Chris. So great question and timely, by the way. So again, I would say that we look at share repurchases as probably something close to the end of our capital allocation process. First and foremost, we’re committed to the shareholder getting a better outcome on an annual basis. So trying to keep our streak of 11 years of dividend improvements in place. That’s clearly a function of making sure the earnings can support that. But if we were to just use our first quarter as an example, we’re paying $0.32 a share. We made 71. That’s a 45% payout ratio. If you went back to operating earnings, it’s 47, we’re very comfortable with that level and think that the ability to continue to improve on that still persists for our environment.
