Ralph Babb – Chairman and Chief Executive Officer
A lot of optimism even though that may have waned a bit
Steve, I think that, really, when you think about the loan portfolio, you’ve got to think about it more broadly, so across really all of our business lines, as Ralph and Dave alluded to, with the exception of mortgage banker and Energy. And when you think about sort of the path we’ve been on, there is definitely a lot more optimism than we saw in the third quarter or fourth quarter of last year, even though some of that may have waned a little bit. And really, across all of our geographies, across all of our business lines, we are seeing increased activity and increased optimism with our customers. Now some of that still is cautious on the part of many of those clients, but I think it’s a lot higher than we have seen in the last 6 or 12 months, and again, broad spread across all of our businesses and across all of our geographies, with the exception of mortgage banker and Energy.
Auto sales gliding down
“Yes. The SAR rate glides down slightly from its peak of over $18 million. We’re still expecting annual SAR rate somewhere in the $16.6 million range, which, by historical standards, it’s still very high. When you think about the floor plan business, actually, a little bit of slowing helps us because vehicles stay on the lots longer.”
releasing reserves in energy portfolio
“Scott, as you know, we’ve been releasing reserves on energy now for a few quarters and a lot of that has really been as a result of payoffs and pay-downs. Now we’re starting to see the risk rating upgrade. And I think you’re going to see that happen in an even bigger way this quarter. We have the redetermination process occurring this quarter. And of course, a lot of these credits are Shared National Credits, so they’re a little bit sticky to upgrades. So that whole process will probably take us through the end of the year. So I think throughout the end of the year, we’ll be – as long as energy prices remain relatively stable, we’ll be seeing upgrades and pay-downs approved as credits. And therefore, there will be an opportunity for us to release more reserves on Energy.
CRE performing extremely well
“No, actually, our Commercial Real Estate portfolio is performing extremely well. And it’s heavily weighing toward Class A multifamily construction, and we like that a lot because particularly how it performs not only in the good times, but in the downturns as well. We do have a small amount of retail, but the vast majority of that retail is in what we call neighborhood shopping centers, so vis-à-vis the construction of small shopping centers, the patrons of which are within 5 miles of the center. It’s the grocery stores, restaurants, hair salons, that type of tenants. And that portion of retail actually has been holding up pretty well and that would be a very large majority of that retail segment.”