Texas Capital Bancshares, Inc. (NASDAQ:TCBI) Q1 2023 Earnings Call Transcript April 20, 2023
Texas Capital Bancshares, Inc. misses on earnings expectations. Reported EPS is $0.7 EPS, expectations were $0.87.
Operator Hello, everyone, and welcome to Texas Capital Bancshares, Inc. Q1 2023 Earnings Call. My name is Nadia and I’ll be coordinating the call today. [Operator Instructions]I would now hand over to your host, Jocelyn Kukulka, Head of Investor Relations to begin. Jocelyn, please go ahead.Jocelyn Kukulka Good morning and thank you for joining us for TCBI’s first quarter 2023 earnings conference call. I’m Jocelyn Kukulka, Head of Investor Relations. Before we begin, please be aware that this call will include forward-looking statements that are based on our current expectations of future results or events. Forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from these statements.
Our forward-looking statements are as of the date of this call and we do not assume any obligation to update or revise them.Statements made on this call should be considered together with the cautionary statements and other information contained in today’s earnings release, our most recent Annual Report on Form 10-K and subsequent filings with the SEC. We will refer to slides during today’s presentation, which can be found along with the press release in the Investor Relations section of our website.Our speakers for the call today are Rob Holmes, President and CEO; and Matt Scurlock, CFO. At the conclusion of our prepared remarks, our operator will open up a Q&A session.And now I will turn the call over to Rob for opening remarks.Rob Holmes Thank you for joining us today.
The collective actions taken over the last several years enabled the firm to enter 2023 operating from an unprecedented position of strength with sector leading capital and liquidity.Our goal since our arrival was to build a firm characterized by the strength of its balance sheet and the breadth of its platform. A firm, “that is resilient through market and interest rate cycles”. Our closely held belief was that doing so would enable us to confidently engage our clients when they needed us most. Bringing forward a suite of solutions centered on their needs, not ours.Client and prospect engagement, since the events of March 10, have been significantly and constructively heightened with the agenda focused on their needs and what is in their best interest.
We believe being in market during times of volatility is paramount.Our ability to be front footed during this period of industry instability is a no small park grounded in the completely rebuilt liquidity risk framework installed during 2022. Our structure includes daily liquidity KRIs monitoring in normal times. Then in times of changing market conditions, relies on a defined and well-rehearsed set of governance and operating procedures to ensure we can react quickly if needed.As events began to unfold on March 9, we were confident that our multi-year operational de-risking would ensure that we have the right data and a full real-time view into our deposit and liquidity positions.By Monday morning, our bankers were also equipped with the information necessary to proactively reach out to clients and prospects with a set of solutions meant to ensure their business operations continued seamlessly despite financial industry turmoil.
I’m incredibly proud of the response of our people and of our ability to be there for our clients at a time of great uncertainty and elevated apprehension.As I was in our markets visiting clients during the following weeks, they expressed appreciation for our proactive outreach. And in many instances, we were the first and sometimes only call they received that Monday morning. And they thanked us for the education we provided on what was transpiring in the market real-time.Initial deposit flows following the weekend of March 10, were highly consistent with the assumptions in our liquidity stress testing framework. As the firm’s focus has shifted over the last two years to emphasize businesses where clients find benefit from our broad set of solutions, we have aggressively reduced our reliance on disconnected deposit sources.
They’re a highly credit or rate sensitive and hold highly liquid assets for what little portion remains. This effort has been well highlighted for the past eight quarters.Overall, for the quarter deposits excluding areas previously disclosed as targeted for reduction increased 3%, an indication of the strength of our platform and the depth of our client relationships.Non-interest bearing deposits were down only 1%, the majority of which related to normal business activity such as quarterly tax payments, capital expenditures, acquisitions and quarterly distributions. We did see some activity whereby clients shifted excess operating account balances to treasuries on our platform.Additionally, non-interest bearing operating account balances associated with the previously divested interest premium finance entity were transitioned to their new owner.As expected, on the heels of a seasonally weak deposit quarter in Q4 due to large balances of escrow tax payments, mortgage finance non-interest bearing deposit balances increased meaningfully as we remain focused on deepening relationships with top tier clients in the space.In total, deposit balances were down just 3% for the quarter, a testament to both our proactive business model and the hard work of our employees who are actively calling on their clients to provide best in class treasury advisory services.
The deposit flows we experienced in March did not require us to access brokered CD markets or to utilize any of our other available sources of contingent liquidity.We exited the quarter in the same strong position in which we entered 2023 with the balance sheet necessary to continue executing against our strategy and supporting our clients. Our proprietary account opening and onboarding solution called Initio has been fully implemented and delivered to the market with over 70% of all treasury onboarding processes now occurring digitally.Texas Capital’s commercial clients can self-serve account openings and fund them within 24 hours. A unique advantage we utilized during the middle of March, as clients and pipeline as well as others were looking for a new banking partner with capital and liquidity.In total, we doubled the number of accounts opened in March compared to February on the Initio exclusion.
And account openings have improved 60% compared to January. The previously detailed technology enabled solution is making us safer, more efficient, and easier to do business with while improving the client journey.Investment banking and trading income had a second consecutive record quarter, with revenue up $6.8 million or 57% quarter-over-quarter to $18.8 million with contributions from multiple components of our newly built platform. We continue to achieve milestones along our product roadmap with the successful execution of the first securitization and the first mortgage finance, whole loan trade from the sales and trading desk.Sales and trading has now completed over $17 billion in notional riskless flat trades since the first trade last May, closing everyday flat as we said we would.
Additionally, in April, the first gestation transactions were completed, and we expect gestation activity to be a consistent part of our mortgage finance business going forward.We are very proud of the business we built in a short period and believe the diversified revenue stream will be an important contributor to earnings going forward. With a substantial and transformative investments made over the last two years to deliver a higher quality operating model supporting a defined set of scalable businesses, we are now generating expected efficiencies.Last quarter, we noted that the pace of non-interest expense growth would moderate in 2023. And with additional selected actions recently completed, we will begin realizing these efficiencies in Q2, allowing us to confidently pull in our expense guidance again which Matt, will detail in his comments.Year-over-year quarterly PPNR grew 55% in Q1, an acceleration of over the 20% growth excluding non-recurring items experienced in Q4.
As a foundational tenant of the financial resiliency we have established and will continue to preserve along with the value creation for our shareholders, tangible book value per share grew 3% quarter-over-quarter and 6% year-over-year, ending at $58.6 a record level for our firm.As you have heard me say in the past, while fully committed to improving financial performance over time, maximizing near-term results is not the primary goal. We are instead focused on responsibly scaling high value businesses through improved client adoption and realized operational efficiency. The thoughtfully and deliberately rebuilt client focused business model is designed to earn above our cost of capital through cycle and drive structurally higher more sustainable earnings.Importantly, as a reminder, our strategic planning process acknowledge that we would go through an economic slowdown during our planned horizon.
As such, we are prepared and positioned to continue investing against the strategy to bank the best clients and support them through cycles.We do not manage the bank in a risk-on or risk-off posture, but instead, based on the belief that client selection is always paramount. This remains our focus as we help our clients continue navigating a challenging operating environment in 2023.Thank you for your continued interest and support of our firm. I’ll turn it over to Matt, to discuss the quarter’s results.Matt Scurlock Thanks, Rob, and good morning. Starting on slide 4, as Rob described, we’re proud of the deliberate steps taken over the last two years to solidify our competitive positioning. The firm continues to maintain substantially more liquidity and capital than required to sustainably deliver against our strategic objectives.At quarter end, on hand cash liquidity totaled $3.6 billion or 13% of total assets compared to 3% median in our peer group.
Total shareholders’ equity is 6.7 times that of total unrealized loss compared to 3.6 times for large U.S. financial services firms. Uninsured deposits as a percentage of total deposits decreased to 45% in the quarter.Deposit coverage ratios were strong at quarter end and compared favorably to peers with the ratio of cash and contingent funding to uninsured deposits of a 153% and cash and contingent funding to total deposits of 69%.Moving to slide 5. Capital levels remain near the top of the industry. CET1 finished the year at 12.4% with tangible common equity to tangible assets increasing slightly to 9.72% a record since the year of the firm’s founding and reflective of our stated objective to manage the balance sheet in a manner supportive of tangible book value with lower than peer levels of unrealized losses.The allowance for credit losses continues to increase and is now up 55 basis points since day one CECL.
This alongside a multiyear transition to a more balanced loan portfolio positions us well as the industry prepares for credit migration.Turning to slide 6. We delivered notable progress in our fee generating businesses in the quarter, which continue to growing contribution as we improve our relevance with a now consistently expanding client base. Quarterly investment banking and trading income was $18.8 million up more than 300% from the first quarter of last year and 57% linked quarter. Notably, this was our second consecutive record quarter since launching the business last year.Treasury product fees increased 4% quarter-over-quarter as our advisory centered offering and newly built cash management and payment capabilities are enabling clients to more effectively manage liquidity based on their individual business objectives.
This is in part reflected in linked quarter AUM growth of 10% and select clients decide to augment their liquidity strategies by perching U.S. treasuries, leveraging our broad platform to satisfy their changing needs.Taken together fee income from our areas of focus increased by approximately $14 million or 91% year-over-year, representing steadily improving client receptivity to the completely refreshed operating model and capability set.Turning to slide 7, as expected, adjusted total revenue decreased $4 million linked quarter, seasonality associated with the mortgage business and increases in deposit costs offset continued structural improvements across the franchise. It is precisely the seasonality that causes us to incur operating leverage guidance for the same quarter in the previous year.Revenue increased $68.9 million or 34% when compared to Q1 2022.
Year-over-year results benefited from an 84% increase in non-interest income coupled with disciplined balance sheet repositioning with the higher earning assets, including loans, following the sale of our insurance premium finance business, last quarter.We stated that while our long-term plans do account for continued investment, much of the initial lift to deliver the foundational talent, technology and capabilities to support our 2025 objectives, was incurred over the past several years, and that as our target operating model begins to mature expense growth will slow in 2023.Total adjusted non-interest expenses increased 6% linked quarter of Q1 salaries and benefits reflected increases of approximately $9 million in seasonal payroll and compensation expenses that peak annually in Q1 and $12 million in annual incentive and insurance accruals that reset annually.Taken together, quarterly PPNR increased 55% percent year-over-year to $78.7 million.
As Rob mentioned, after achieving this important milestone in the third quarter of last year, we do expect to maintain year-over-year quarterly PPNR growth moving forward.Net income to common was $34.3 million for the quarter, down $1 million year-over-year, while earnings per share increased $0.01. Overall credit quality remains stable. Although, we are seeing the early signs of inevitable normalization we expect and are prepared for. We recognized $19.9 million of net charge off during the quarter compared to net charge offs of $15 million in Q4. Criticized loans increased $48 million quarter-over-quarter to 2.8% of LHI, primarily as a result of continued migration and a small number of consumer dependent C&I credits. This quarter’s provision expenses impacted by both realized charge offs and observed and anticipated portfolio trends.Turning to the balance sheet on page eight.
Balance sheet metrics remained strong, with end of period positioning reflective of continued execution on a previously defined set of core objectives. Investments in the securities portfolio of $850 million coupled with approximately $750 million of largely Texas based C&I related loan growth reduced Fed cash balances by $1.4 billion an intended result of the repositioning of proceeds related to the insurance premium finance divestiture.The loan to deposit ratio rose during the quarter to 91% from 84% in the prior quarter. This is within a range we’re generally comfortable with, although we would expect loan and deposit growth to be more evenly matched moving forward, as we continue our now multi-year process of aggressively recycling capital into relationships consistent with our defined strategy.As evidenced by this quarter’s results, we continue to bias capital use towards supporting franchise accretive client segments where we are delivering our entire platform.
Share repurchases remain a secondary tool for creating longer term shareholder value. Although the March market dislocation did provide opportunities to selectively repurchase $25 million at prices below tangible book. When paired with shares repurchased in January, as part of the completion of our inaugural program, we repurchased 1 million shares or $59.7 million of common stock in the quarter.Finally, the decline in interest rates across three year to five year points of the curve resulted in modest AOCI improvement of $44 million which contributed to record tangible book value per share of $58.6 at quarter end.Turning to slide 9. C&I loans grew $747 million or 7% quarter-over-quarter as a result of continued disciplined calling from our still new coverage teams that they recently developed, but highly competitive product suite.
While aggregate C&I loan balances are essentially flat year-over-year at $10.8 billion when including historical insurance premium financial loans. This now sustained loan growth over the past five quarters has added $2.8 billion of C&I client balances consistent with our strategy, a 34% year-over-year increase when adjusting for divested loans. This represents a nearly 100% recycling of capital previously attributed to loan only relationships in the insurance premium finance business into a client base that benefits from our broadening platform of available product solutions, delivered within a rebuilt and enhanced client journey.Growth in the quarter centered in our middle market and corporate verticals continues to come primarily from new and expanded relationships.
As utilization rates were constant quarter-over-quarter at 51%. Period end real estate balances increased $74 million or 1% in the quarter, continue to experience the expected but still material slowdown and payoff rates from record highs over the last few years. This is one of the most mature businesses at the firm and we take it through cycle view grounded in client selection, managing portfolio using well established and tested concentration limits.New origination volumes slowed in recent quarters and remains focused on multifamily, reflecting both our deep experience in the space and observed performance through credit and interest rate cycles, only 16% of the real estate portfolio has a maturity date in 2023, while over 50% of the portfolio matures in 2025 or later.
Our exposure to at risk asset classes is limited with office exposure of $466 million approximately 9% of the total commercial real estate portfolio.The office portfolio has strong underwriting characteristics with the current average LTD of 58%, 90% recourse as well as strong market characteristics is over 75% as Class A properties and over 60% is located in Texas. Average mortgage finance loans declined by 23% in the quarter, as broad market contraction outpaces year-in estimates from professional forecasters.As a reminder, outstanding balances in this business reflect the typical seasonality associated with home buying activity, rising in the second and third quarter and falling in the fourth and the first. Assuming the current rate outlook remains intact; expectations are for total market originations increased by 35% to 40% in the second quarter.
With full-year expectations still showing a decline of 25% to 30% in origination volume.Moving to Slide 10. Total ending period deposits declined 3% quarter-over-quarter with changes in the underlying mix reflective of both a continued funding transition in a tightening rate environment, coupled with market driven trends and predictable seasonality.As Rob discussed, our well known strategy to proactively reposition away from our highest cost, shortest duration index deposit sources has now been underway for over two years with guidance last quarter that continued intentional reduction would persist. As improving the quality of our liquidity is a prerequisite to establishing a more efficient balance sheet, including the $842 million or 34% reduction experienced this quarter.
We have now exited over $8.2 billion of these deposits since year end 2020, with the period in balances now 7% of the total deposit base, down from 32% at year-end 2020.The current client composition is now more consistent with our go forward strategy and we would expect near term quarterly fluctuations to moderate. As a result of our sound current and prospective liquidity position, we also had $225 million of brokered CDs mature in the quarter without need for replacement.We maintained ample brokered capacity and will always evaluate future liquidity composition consistent with established balance sheet management priorities. Go-to-market strategy remains an tense focus on thoughtfully shifting our balance sheet to businesses where we believe multiple client touch points will over time, result in higher quality funding days, increasingly comprised of our client’s primary operating accounts.Non-interest bearing deposits remained stable quarter-over-quarter.
And proportion to total deposits increased modestly to 43% from 42% at year-end. The underlying composition did shift, however, as non-interest deposits associated with mortgage finance grew $853 million or 24% benefiting both from Q1 seasonal inflows and a continued enhancements of available services to this important client base.We expect average quarterly mortgage finance deposits to remain between 100% to 120% of average total mortgage finance loans through the year. These inflows were partially offset as commercial non-interest bearing deposits declined, mainly impacted by normal business, and a predictable shift into other cash management products on our platform. Overall non-interest bearing deposits were down only 1% as we experienced little to no relationship movement to larger banks.
Our expectation is that we will be able to grow deposits but in a marginal cost in excess of previous expectations given the material change and market conditions experienced over the last 45 days. This increased cost of liquidity is reflected in our NII sensitivity modeling on Page 11.As expected after increasing modestly from the cash proceeds related to the insurance premium finance sale in Q4, our earnings at risk decreased this quarter to 3.4% or $34 million in a plus 100 basis points shock scenario and minus 4.6% or $46 million in a down 100 basis point shock scenario.We described last quarter our intent to reduce the firm’s interest rate risk sensitivity from 8% in an up 100 scenario, down to the mid-single digits by the middle of the year.
The goal that was accelerated and achieved this quarter given the market backdrop. This is primarily accomplished through growth in the investment portfolio as we continued the multi quarter process of remixing excess cash into primarily capital efficient [agency CMBS] (ph).We added $850 million to the portfolio in the quarter with new purchases coming on at a 4.9% yield versus those rolling off around 1.5%. The duration of the entire portfolio is now approximately 4.5 years. We exited the quarter with 15% of total assets and securities, which is aligned with our target and we believe an efficient and prudent portion of our liquid asset position at this time.The actions taken in the quarter increased our anticipated base net interest income, while reduced the amount of future income exposed to rate changes not currently contemplated in the forward curve.The core component of our naturally asset sensitive profile is the large portion of earning asset mix that reprices with changes in short term rates.
94% of the total LHI portfolio excluding MFL’s is now variable rate, up slightly from 93% at year-end with 88% of these loans tied to either prime or a one month index.Notably this quarter, we increased our model deposit beta assumptions to account for recently observed and expected continued industry wide increases and funding costs. The increased beta assumptions also contributed to contracting expectations for additional future rate driven impacts to net interest income.Moving to Slide 12. Net interest margin increased by 7 basis points this quarter, while net interest income declined $12.3 million, predominantly is a function of higher loan yields and increased income from cash and investments, partially offset by an expected increase in funding costs and decreased quarterly average loan balances.This slight pullback in net interest income is entirely consistent both disclosed expectations and historical precedent for the first quarter of each year.
The systematic realignment of our expense base with published strategic priorities is beginning to deliver the expected efficiencies associated with a rebuilt and more scalable operating model. The improvements noted on our fourth quarter call, we expect to see contraction in quarterly non-interest expense of the remainder of the year, which when coupled with continued revenue expansion resulting from strong execution on behalf of our clients will enable core earnings expansion despite the market backdrop.Moving to page 13. Criticized loans increased $48 million or 9% in the quarter to $561.1 million or 2.8% of total LHI. As grade migration in these categories continues to be driven by commercial clients’ reliance specifically on consumer discretionary income, as we’ve identified in the past.During the quarter, we recognized net charge offs of $19.9 million primarily related to one C&I loan.
The loan was through a Texas based public company with a management team well known in this market as part of a widely syndicated credit facility. The allowance for credit loss was $283 million or 1.41% of total LHI at quarter end, up almost $56 million or 36 basis points year-over-year and anticipation of slowing economic conditions.As system wide credit availability contracts, we are prepared for the breadth of industries and client types experiencing grade migration to expand in coming quarters across the banking sector.Moving briefly to capital on page 14, tangible book value per share and tangible common equity to tangible assets finished the quarter at record levels. Evidence of our commitment to managing the hard earned capital base in a disciplined manner focused on driving long-term shareholder value.Finally, we include updated guidance on Page 15.
Our guidance accounts for the market based forward curve and assumes a peak fed funds rate of 5% in mid-2023, the year-end exit rate of 4.25%. While we are confident in our ability to continue delivering in areas of defined focus, given the changes in anticipated system-wide funding costs, we do expect net interest income expansion to be slower than contemplated in previous quarter’s guidance. And our lower year-end outlook for full-year revenue growth to low double-digits.As Robin and I both indicated earlier, the significant investments made over the last two years are yielding expected operating efficiencies that will begin positively contributing to financials in Q2. We are lowering guidance on full-year expense growth from low double digits to mid-single digits.Together these expectations should result in the maintenance of operating leverage as defined as year-over-year quarterly PP&R growth We remain committed to maintaining our strong liquidity and capital positions and our intent remains to hold greater than 20% of our total assets in cash and securities and exit with the year with CET1 of at least 12%.Lastly, as previously communicated, our strategic plan accounted for an economic decline during the planning horizon and our long-term financial targets are achievable with both normalized levels of credit costs and under a variety of different interest rate scenarios.
Despite the economic backdrop, we are firmly committed to delivering the 2025 financial targets set forth as part of our strategic plan.I’ll hand the call back over to Rob for closing remarks.Rob Holmes Thanks, Matt. Operator, lets proceed to questions.
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Question-and-Answer Session Operator [Operator Instructions]
And our first question today goes to Michael Rose of Raymond James. Michael, please go ahead, your line is open.Michael Rose Hi, good morning, guys. Thanks for taking my questions. Just wanted to kind of address, what was kind of out there in the news the other day around some headcount reduction just given that you guys have been pretty aggressive on the hiring front since you came in, Rob. Just wanted to get a sense I assume that plays into the reduction in non-interest expenses, but just wanted to get some color there.
Thanks.Rob Holmes Yes, thanks for the question. Look, we were led by disciplined process reengineering and review powered by investments over the past two years and dramatically improved operating data and the ultimate impact was an outcome, not a predetermined reduction target. This part transformation is meaningfully complete now, and we have a permanently improved operating discipline.I think it’s really important to point out that when we started this journey, we said that by 2025, we’d have 2.3 times front line client facing professionals than what we — in 2025, and today, it’s at 2 times. So the strategies in cap, we’ll front foot it, we’re with clients, we’re in market, and this has to do with becoming more efficient and breaking the cost curve.
It’ll make us a more structurally profitable firm going forward. And we don’t capture — you mentioned that perhaps that’s understandable based on rumor and assumptions, but we don’t talk about it in terms of percent reduction in headcount, because that implies a one-time save and our transformation is permanent improvement in the operating efficiency. We’re really excited to break down guidance on expense.And one more thing really –Michael Rose Okay.Rob Holmes I’m sorry. Really — I think one more thing that’s important is that it makes the firm safer or more automated and it improves the client journey, so anyway, sorry.Michael Rose No. Not, not a problem. Appreciate it. May maybe just going through this quarter’s loan growth and I hopped down a little bit late.
So sorry if I missed it, but look to be again, kind of very strong ex-warehouse that’s held for sale. Can you just give us an update on pipelines and migration trends just given the lenders that you’ve hired. And, if you have a semblance for what the puts or takes could be to growth outlook for the rest of the year. Thanks.Rob Holmes Sure. Look, I think it’s Matt, mentioned it in his comments. I think it’s important to point out that we expect loan or deposit activity to mirror more consistently one another in the future. I think this is it — our pipelines are really, really strong with new client onboarding. We on boarded new clients, more new clients in the first quarter than in history of the firm. We more new clients in March than any other month, but I think it’s also really important to note that we have not deviated from loan growth not being a goal.
It is not our goal. Our goal is client acquisition and to bank the best clients in our market. And if you look at what’s come through balance sheet committee, which is remember we have two approvals to extend credit. One is risk and the other is the use of capital.Balance committee approves the use of capital after the risk has been approved. And 95% of the submissions by our bankers in balance sheet committee has been more than loan only. So our clients are taking advantage of the broader platform which is imperative for us to earn more than our cost of capital.Michael Rose Helpful. Appreciate the color. Maybe just one final one for me. So, the interest bearing deposit cost can continue to kind of move higher. Do you think that we’re getting to a point though where we’re going start to see that peak off and sorry if I missed any sort of commentary, but any sense for kind of what you’d expect for updated betas as we move through the rest of the year assuming the forward curve.
Thanks.Rob Holmes Yes. Michael, I think terminal beta implies where the Fed is going to stop, and at this point, I don’t think that we do. I think the broad deposit shift certainly in our base half occurred, we wouldn’t expect a continuation of that trend. But I would expect interest bearing deposits to generally stay on the same trajectory in terms of beta until the Fed — until the Fed will particularly slows their trajectory.Michael Rose Great. Thanks for taking my questions.Rob Holmes You bet.Operator Thank you. The next question goes to Brett Rabatin of Hovde Group. Brett, please go ahead your line is open.Brett Rabatin Hi, good morning, guys. Thanks for the questions. Wanted to just start off on just provisioning and looking at the commercial criticized change, it didn’t seem like you had significant changes in your criticized assets.
I was a little surprised at the provisioning level. Was there any change in terms of what you’re waiting maybe on the CECL mood’s model? Or can you walk us through a little bit more the changes and dynamic of the model for the provision. Thanks.Matt Scurlock Hey, Brett. This is Matt. We continue to experience pretty substantial new client acquisition that’s showing up as loan growth. And I’ve been committed since Rob’s arrival, our words to be aggressively conservative and establishing reserve.So, over the last four quarters, we’ve increased our ACL by $56 million or 36 bps. So the aggregated level as a percentage of total loans leveled off quarter. And I think at this point, we’re pretty comfortable with positioning.There was a modest increase in NPAs that’s worth describing.