Q2 2024 ServisFirst Bancshares Inc Earnings Call

Operator: Greetings and welcome to the ServisFirst Bancshares second quarter earnings call. At this time, all participants are only permitted to ask questions. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone screen.

Unknown Executive: Greetings and welcome to the Servis First Bancshares second quarter earning call. At the time, all participants are aimless and only note.

Greetings and welcome to the therapy.

Thank you second quarter earnings call.

This time, all participants are in a listen only mode.

Unknown Executive: A brief question-and-answer session will follow the formal presentation.

Speaker Change: A brief question and answer session will follow the formal presentation if anyone.

Unknown Executive: If anyone can acquire operators' assistance during the conference, please press star zero on your telephones you have. As a reminder, this conference is being recorded.

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Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Davis Mead, Director of Investor Relations. Thank you, Davis. You may begin.

Speaker Change: As a reminder, this conference is being recorded it is now my pleasure to introduce your host senior director of Investor Relations.

David Page: It is now my pleasure to introduce your host, David Page, Director of Investor Relations.

Unknown Executive: Thank you, David. You may begin.

Speaker Change: Hey, David you may begin.

Unknown Executive: Good afternoon and welcome to our second quarter earning call. Today's speakers will cover some highlights from the quarter and then take your questions. We will have Tom Broughton, our CEO; Henry Abbott, our Chief Credit Officer; and Kirk Pressley, our CFO.

Davis S. Mange: Good afternoon, and welcome to our second quarter earnings call. Today's speakers will cover some highlights from the quarter and then take your questions. We will have Tom Broughton, our CEO, Henry Abbott, our Chief Credit Officer, and Kirk Pressley, our CFO. I'll now cover our forward-looking statements. Some of the discussion in today's earnings call may include forward-looking statements. Such statements speak only as of the date they are made, and ServisFirst assumes no duty to update them. With that, I'll turn the call over to you.

David: Good afternoon, and welcome to our second quarter earnings call. Today's speakers will cover some highlights from the quarter and then take your questions. We will have Tom Broughton, our CEO Henry Abbott, our Chief Credit Officer, and Kirk Presley, our CFO I'll now cover our forward looking statements disclosure.

Unknown Executive: I'll now cover our forward-looking statements disclosure. Some of the discussion in today's earnings call may include forward-looking statements. Actual results may differ from any projection shared today. Due to factors described in our most recent 10-K and 10-Q filings. Forward-looking statements speak only as of the date they are made, and Servis First assumes no duty job taken.

Speaker Change: Some of the discussion in today's earnings call May include forward looking statements actual results may differ from any projections shared today due to factors described in our most recent 10-K and 10-Q filings forward looking statements speak only as of the date. They are made and service first assumes no duty to update them with that I'll turn the call over to Tom.

Tom Broughton: With that, I'll turn the call over to Tom.

Thomas Ashford Broughton: Thank you, Davis, and good afternoon. Thank you for joining us on our second quarter earnings call. We think we'll have a really nice report that will please our investors. I'll start by discussing deposits. We did see strong deposit growth of 16% annualized for the quarter. This is a bit unusual as we normally see flat deposits in the quarter due to April tax payment. We did see the usual decline in deposits in April due to tax payments, but we did see solid deposit growth in the last two months of the quarter. Our deposit pipeline is still really solid. Though many deposits never make it onto the pipeline, they just show up.

Tom Broughton: Thank you, David, and good afternoon. Thank you for joining our second quarter earnings call. We think we'll have a really nice report that will please our investors.

Speaker Change: Thank you Davis and good afternoon. Thank you for joining our second quarter earnings call.

Speaker Change: We think we'll have a really nice before they would place our investors.

Tom Broughton: Today, and I'll start by discussing deposits. We did see a strong deposit growth of 16% and annualized for the quarter. This is a bit unusual as we normally see flat deposits in the quarter due to April tax payments. We did see the usual decline in deposits in April due to tax payments, but we did see solid deposit growth in the last two months of the quarter. Our deposit pipeline is still really solid, though many deposits never make it own to the pipeline; they just show up, so they're not as typically as accurate as a loan pipeline would be.

Speaker Change: Today I'll start by discussing deposits, we did see a strong deposit growth of 16% annualized for the quarter.

Speaker Change: This is a bit unusual as we normally say flat deposits in the quarter due to April tax payments.

Speaker Change: We did say the usual decline in deposits in April due to tax payments, but we did see solid deposit growth in the last two months of the quarter. Our deposit pipeline is still really solid so many deposits never make it onto the pipeline. They just show up so they're not as.

Thomas Ashford Broughton: So it's not typically as accurate as a loan pipeline would be. But the growth is broad-based throughout our footprint. We also continue to add new correspondent banking relationships, with 377 current correspondent bank relationships. Loan growth was very strong for the quarter at 15% annualized. We were pleased with both the level of loan demand and the profile of credit quality. We think many of our customers delayed projects last year after rates had risen a great deal in a short period of time, or they had decided to make capital expenditures from cash.

Speaker Change: It's not as typically as accurate as it is a loan pipeline would be.

Tom Broughton: The growth is broad-based throughout our footprint. We also continue to add new correspondent banking relationships, with 377 current correspondent bank relationships.

Speaker Change: So the growth is broad based throughout our footprint. We also continue to add.

Speaker Change: New correspondent banking relationships with 377 current correspondent bank relationships.

Tom Broughton: The loan growth was very strong for the quarter at 15% annualized. We were pleased with both the level of loan demand and the profile of credit quality. We think many of our customers delayed projects last year after rates had risen a great deal in a short period of time, or they decided to make capital expenditures from cash. We are seeing them bar again, which led to an increase in our C&I loans, and we still see the loan pipelines very strong, and it's increased 10% over last quarter.

Speaker Change: Loan growth was very strong for the quarter at 15% annualized we were pleased with both the level of loan demand and the profile of credit quality.

Speaker Change: We think many of our customers delayed projects last year after rates had risen a great deal in a short period of time.

Speaker Change: Or are they decided to make capital expenditures from cash.

Thomas Ashford Broughton: We are seeing them back again, which led to an increase in our C&I loans. And we still see the loan pipeline very strong, and it's increased 10% over last quarter. We added 14 new bankers in the quarter.

Speaker Change: We are seeing them bar again, which led to an increase in our C&I loans.

Speaker Change: And we still see the low loan pipeline is very strong.

Speaker Change: And this increased 10% over last quarter.

Tom Broughton: We added 14 new bankers in the quarter. We added five in Florida, four in the new Auburn Obalika market, and the rest spread throughout the footprint. We are pleased with a new team in Auburn-Obalika. That is a $4.5 billion deposit market. It's pretty well-fragmented, so we think it's a great opportunity for us. The Memphis team in Tennessee is all in place; they were all adding the first quarter, some of them in the end of the first quarter. They're all on board during the second quarter. They're beginning to show results, and we are optimistic for the balance of the year.

Speaker Change: We added 14, new bankers in the quarter, we added five in Florida.

Thomas Ashford Broughton: We added five in Florida, four in the new Auburn-Opelika market, and the rest spread throughout the footprint. We are pleased with the new team in Auburn-Opelika. That is a $4.5 billion deposit market that's pretty well fragmented, so we think it's a great opportunity for us. The Memphis team in Tennessee is all in place; they were all there in the first quarter. Some of them at the end of the first quarter; they were all on board during the second quarter.

Speaker Change: And then you.

Speaker Change: Auburn Opelika market and the rest spread throughout the footprint.

Speaker Change: We are pleased with our new team in all of our in Opelika that is.

Speaker Change: Four and a half a billion dollar deposit market is pretty well bag minutes. So we think it's a great opportunity for us.

Memphis team in Tennessee is all in place they were all of that in the first quarter. They're all the you know some of them at the end of the first quarter. So they're all on board during the second quarter.

Thomas Ashford Broughton: They're beginning to show results, and we are optimistic about the balance of the year. With our strong liquidity, we are seeing opportunities to acquire new customers, and we are optimistic about the balance of the year. So with that, I will stop. I'm gonna turn it over to Henry Abbott, our Chief Credit Officer.

Speaker Change: They are beginning to show results and we are optimistic for the balance of the year.

Speaker Change: With our strong liquidity, we are seeing opportunities to acquire new customers.

And we are optimistic about the balance of the year. So with that I will stop I will turn it over Henry Abbott, our Chief Credit Officer.

Henry Abbott: Thank you, John. The bank continued to show strong credit quality in the second quarter of 2024, and we did this while achieving solid loan growth of roughly $450 million, which is 15% when annualized. I would also note that while we experienced loan growth, our ADNC as a percent of capital continues to fall.

Henry F. Abbott: Thank you Tom.

Henry F. Abbott: John, the bank continued to show strong credit quality in the second quarter of 2024, and we did this while achieving solid loan growth of roughly $450 million, which is 15% when annualized. I would also note that while we experience loan growth, our AD&C as a percent of capital continues to fall. At the end of the second quarter, AD&C as a percent of capital was 86%, which has continued our downward trajectory from a high of 100% at the end of 2022.

Speaker Change: The bank continued to show strong credit quality in the second quarter 2024, and we did this while achieving solid loan growth of roughly $450 million, which is 15% when annualized I.

Henry F. Abbott: I would also note that while we experienced loan growth our AT&T as a percent of capital continues to fall.

Henry Abbott: At the end of the second quarter, ADNC as a percent of capital was 86%, which has continued our downward trajectory from a high of 100% at the end of 2022. I'm pleased that in the current environment, not performing assets are stable quarter over quarter. We injured the quarter at NPA total assets of 23 basis points, which is one basis point higher than the prior quarter end. We did grow our HRPLL by roughly $2.2 million during the quarter. HRPLL to total loans, you will see did decrease from 1.31% at March 31st, 2024, to 1.28, and this was driven primarily by improved collateral values on two of our substandard credits.

Henry F. Abbott: At the end of the second quarter AT&T as a percent of capital was 86%.

Speaker Change: She has continued our downward trajectory from a high of 100% at the end of 2022.

Henry F. Abbott: I'm pleased that in the current environment, non-performing assets are stable quarter over quarter. We ended the quarter at NPA total assets. 23 basis points, which is one basis point higher than the prior quarter. We did grow our ALLL by roughly $2.2 million during the quarter. ALLLT, Total Loans, you will see did decrease from 1.31% at March 31st, 2024, to 1.28%. And this was driven primarily by improved collateral values on two of our substandard credits.

Henry F. Abbott: I'm pleased that in the current environment nonperforming assets were stable quarter over quarter.

Speaker Change: We ended the quarter at NPA to total assets of 23 basis points, which is one basis point higher than the prior quarter end.

Speaker Change: We did grow our eight triple L I, roughly $2 $2 million during the quarter.

Speaker Change: A triple our total loans.

Speaker Change: You'll see did decrease from $1 three 1% at March 31, 2024 to 128, and this was driven primarily by improved collateral values on two of our substandard credits.

Henry Abbott: Looking at the first six months of 2024, annualized net charge-offs were only 8 basis points, which is less than annual results for 2023 of 10 basis points. Annualized net charge-offs were down from the same period prior year. We had 10 basis points in annual charge-offs for the quarter and had 11 basis points in the second quarter of last year.

Speaker Change: When looking at the first six months of 2020 for annualized net charge offs were only eight basis points, which is less than our annual results for 2023 of 10 basis points.

Henry F. Abbott: When looking at the first six months of 2024, annualized net charge-offs were only eight basis points, which is less than our annual results for 2023 of 10 bases. However, annualized net charge-offs were down from the same period the previous year. We had 10 basis points in annual charge-offs for the quarter and had 11 basis points in the second quarter of last year. We have managed to sidestep some potholes, one being that we don't have any major metropolitan office exposure.

Speaker Change: Annualized net charge offs were down from the same period prior year.

Speaker Change: We had 10 basis points in annual charge offs for the quarter and had 11 basis points in the second quarter of last year.

Henry Abbott: We have managed to sidestep some potholes, one being that we don't have any major metropolitan office exposure. We continue to have a disciplined approach to winning new relationships in our footprint that help provide the bank with both loans and deposits. Loan growth activity should continue at positive momentum given our recent entrance into new markets in 2024.

Speaker Change: We have managed to sidestep some potholes one being that we don't have any major metropolitan office exposure.

Henry F. Abbott: We continue to have a disciplined approach to winning new relationships in our footprint that help provide the bank with both loans and deposits. Loan growth activity should continue its positive momentum given our recent entrance into new markets in 2024. The bank has a granular and diversified loan portfolio that continues to perform at a high level, and I'm very pleased with our second quarter results. With that, I'm going to hand it over to Kirk.

Speaker Change: We continue to have a disciplined approach to winning new relationships and our footprint to help provide the bank with both loans and deposits.

Speaker Change: Loan growth activity should continue its positive momentum given our recent entrance into new markets in 2024.

Henry Abbott: The bank has a granular and diversified loan portfolio that continues to perform at a high level, and I'm very pleased with our second quarter results.

Speaker Change: The bank has a granular and diversified loan portfolio continues to perform at a high level and I'm very pleased with our second quarter results.

Kirk Pressley: With that, I'm going to hand it over to Kirk.

Speaker Change: With that I'm going to hand, it over to Kirk.

Kirk Pressley: Thank you, Henry.

Kirk Paul Pressley: Thank you, Henry. Good afternoon.

Kirk Paul Pressley: Thank you Henry Good afternoon, we are very pleased with the progress the bank has made so far this year.

Kirk Pressley: Good afternoon. We are very pleased with the progress the bank has made so far this year. I'm going to focus my comments today on length quarter because the trends are very meaningful and will highlight our momentum in both growing the balance sheet and earnings. Net income is up 17% annualized, and margin is up 13%. Margin increased to 106.9 million in the second quarter versus 102.5 million in the first quarter. The margin is increasing from both the growth in the balance sheet and the repricing of our fixed rate loans and securities, along with maintaining the cost of liability.

Kirk Paul Pressley: We are very pleased with the progress the bank has made so far this year. I'm going to focus my comments today on Lynx Quarter because the trends are very meaningful and will highlight our momentum in both growing the balance sheet and earnings. Net income is up 17% annualized, and margin is up 13%. Margin increased to $106.9 million in the second quarter versus $102.5 million in the first. The margin is increasing from both the growth in the balance sheet and the repricing of our fixed rate loans and securities, along with maintaining the cost of liability.

Kirk Paul Pressley: I'm going to focus my comments today on linked quarter, because the trends are very meaningful and will highlight our momentum in both growing the balance sheet and earnings.

Net income was up 17% annualized and margin is up 13% margin increased to $106 9 million in the second quarter versus $102 5 million in the first quarter.

Kirk Paul Pressley: The margin is increasing from both the growth and the balance sheet and the re pricing of our fixed rate loans and securities along with maintaining the cost of liabilities.

Kirk Pressley: Both loans and deposits had strong growth during the second quarter, and the pipelines continue to grow. The net interest margin percentage is up 13 basis points from the first quarter to 2.79%. As the yield on interest-turning assets is up a strong 16 basis points while the rate paid on interest-bearing liabilities grew modestly. As we noted in the last few quarters, we see margin increasing throughout the year. We don't anticipate a significant increase in the cost of funds going forward, while we expect the yield on interest-earning assets to continue to increase as we grow loans and fix straight loans and investments repriced.

Kirk Paul Pressley: Both loans and deposits had strong growth during the second quarter, and the pipelines continue to grow. The net interest margin percentage is up 13 basis points from the first quarter to 2.79%. The yield on interest-earning assets is up a strong 16 basis points, while the rate paid on interest-bearing liabilities grew modestly.

Kirk Paul Pressley: Loans and deposits had strong growth during the second quarter and the pipelines continue to grow the net interest margin percentages up 13 basis points from the first quarter to 279%.

Kirk Paul Pressley: The yield on interest, earning assets is up a strong 16 basis points, while the rate paid on interest bearing liabilities grew modestly.

Kirk Paul Pressley: As we noted in the last few quarters, we see margin increasing throughout the year. We don't anticipate a significant increase in the cost of funds going forward, while we expect the yield on interest-earning assets to continue to increase as we grow loans and fixed-rate loans and investments reprice. However, opportunities to proactively reprice loans from covenant violations usually occur after taxes are filed and financial statements are received.

Speaker Change: As we noted in the last few quarters, we've seen margin increasing throughout the year, we don't anticipate a significant increase in the cost of funds going forward, while we expect the yield on interest earning assets to continue to increase as we grow loans and fixed rate loans and investments reprice.

Kirk Pressley: Opportunities to proactively repriced loans from covenant violations usually occur after taxes are filed and financial statements are received. This started in Q2, but should pick up steam in the third quarter. During the first quarter, we had $139 million of low rate securities mature at a rate of 2.5%. We had approximately $120 million of maturing security yielding 2.62% during the second quarter, and we'll have another $25 million yielding 2.93% in the third quarter. Reinvesting these proceeds and cash flows from mortgage-backed securities will improve the margin going forward. We did experience a minor increase in the cost of deposits.

Opportunities to proactively reprice loans from covenant violations, usually occur after taxes are filed and financial statements are received this started in Q2, but should pick up steam in the third quarter.

Kirk Paul Pressley: This started in Q2 but should pick up steam in the third quarter. During the first quarter, we had $139 million of low-rate securities mature at a rate of 2.2%. We had approximately $120 million of maturing securities yielding 2.62% during the second quarter, and we'll have another 25 million yielding 2.93% in the third. Reinvesting these proceeds and cash flows from mortgage-backed securities will improve the margin going forward. We did experience a minor increase in the cost of deposits.

Speaker Change: During the first quarter, we had $139 million of low rate securities mature at a rate of two 2% we had approximately $120 million of maturing securities yielding 262% during the second quarter, and we'll have another $25 million yielding to nine 3% in the third quarter.

Speaker Change: Reinvesting these proceeds and cash flows from mortgage backed securities we will improve the margin going forward.

Speaker Change: We did experienced a minor increase in the cost of deposits. This was largely tied to the strong deposit growth. We do expect modest increases in the cost of funds as we grow deposits in the second part of the year.

Kirk Paul Pressley: This was largely tied to the strong deposit growth. However, we do expect modest increases in the cost of funds as we grow deposits in the second part of the year. Core non-interest income expanded at a strong pace during the second quarter. When you exclude the infrequent BOLI death benefits of $1.2 million that we realized in Q1, our core non-interest income was up annualized link quarter by almost 70%, primarily due to strong mortgage fee income, but we also had nice growth in credit card income and deposits.

Kirk Pressley: This was largely tied to the strong deposit growth. We do expect modest increases in the cost of funds as well. We grow deposits in the second part of the year.

Kirk Pressley: Core non-interest income expanded at a strong pace during the second quarter. When you exclude the infrequent bolly death benefits of 1.2 million that we realized in Q1, our core non-interest income was up annualized link quarter by almost 70%. We primarily do the strong mortgage-free income, but we also had nice growth in credit card income and deposit fees. Mortgage-free income had a nice combination of a seasonally strong quarter, more favorable market conditions, and increased staffing levels. Credit cards spend with seasonally low in the first couple months of the year but has grown nicely since then, and we expect a good second half of the year as credit card accounts continue to grow and new corresponding banks are being added at a nice pace.

Speaker Change: Core noninterest income expanded at a strong pace during the second quarter. When you exclude the infrequent boldly death benefits of $1 2 million that we realized in Q1, our core noninterest income was up annualized linked quarter by almost 70%.

Speaker Change: Primarily due to strong mortgage fee income, but we also had nice growth in credit card income and deposit fees.

Kirk Paul Pressley: Mortgage fee income had a nice combination of a seasonally strong quarter, more favorable market conditions, and increased staffing. Credit card spend was seasonally low in the first couple months of the year but has grown nicely since then, and we expect a good second half of the year as credit card accounts continue to grow and new correspondent banks are being added at a nice pace.

Speaker Change: Mortgage fee income had a nice combination of a seasonally strong quarter more favorable market conditions and increased staffing levels.

Speaker Change: Credit card spend was seasonally low in the first couple months of the year, but has grown nicely. Since then and we expect a good second half of the year as credit card accounts continue to grow and new correspondent banks are being added at a nice pace.

Kirk Pressley: Non-interest expenses are a little more challenging to explain because of the implementation of Accounting Standards Update 2023-02. This changed the amortization method to the proportional amortization method for historical and new market tax credits and moved the amortization of the investments from other non-interest expense to tax expense. This new amortization method, which now matches the Low Income Housing Tax Credit accounting for qualifying investments, will reduce the volatility of our non-interest expenses going forward and better represent our operating and tax expenses by showing the cost of the tax credits along with the benefit in tax expense. We adopted the new accounting standard in the first quarter, but we did not complete the analysis until the second quarter, and therefore reflected this in the second quarter financial statements.

Kirk Paul Pressley: Non-interest expenses are a little more challenging to explain because of the implementation of Accounting Standards Update 2023-02. This changed the amortization method to the proportional amortization method for historical and new market tax credit and moved the amortization of the investment from other non-interest expense to tax. This new amortization method, which now matches the low-income housing tax credit accounting for qualifying investors, will reduce the volatility of our non-interest expenses going forward and better represent our operating and tax expenses by showing the cost of the tax credits along with the benefit of the tax credits.

Speaker Change: Noninterest expenses are a little more challenging to explain because of the implementation of accounting standards update 2023 that show too.

This change the amortization method to the proportional amortization method for historical and new market tax credits and move the amortization of the investments from other noninterest expense to tax expense.

Speaker Change: This new amortization method, which now matches the low income housing tax credit accounting for qualifying investments will reduce the volatility of our noninterest expenses going forward and better represent our operating and tax expenses by showing the cost of the tax credits along with the benefit in tax expense.

Kirk Paul Pressley: We adopted the new accounting standard in the first quarter, but we did not complete the analysis until the second quarter and therefore reflected this in the second quarter financial statement. The new accounting reduced non-interest expenses by about $3.9 million in the second quarter from what they would have been under the previous accounting, but about one-half of which related to Q1. In discussing other components of non-interest expense, We continue to watch expenses closely, but our expenses have increased a little more than we expected at the beginning of the year as we continue to invest in producers and the staffing of new markets, along with ancillary costs.

Speaker Change: We adopted the new accounting standard in the first quarter, but we did not complete the analysis until the second quarter and therefore reflected this in the second quarter financial statements. The new accounting reduced noninterest expenses by about $3 9 million in the second quarter from what they would have been under the previous accounting.

Kirk Pressley: The new accounting reduced the non-interest expenses by about 3.9 million in the second quarter from what they would have been under the previous accounting, but about one half of which related to Q1. In discussing other components of non-interest expense, we continue to watch expenses closely, but our expenses have increased a little more than we expected at the beginning of the year. As one, we continue to invest in producers and the staffing up of the new markets, along with the ancillary costs. Two, we have experienced a significant rise in healthcare costs based on poor performance of our plan.

Speaker Change: About one half of which related to Q1.

In discussing other components of noninterest expense, we continue to watch expenses closely but our expenses have increased a little more than we expected at the beginning of the year as one we continue to invest in producers and the staffing up of the new markets along with the ancillary costs too we have experienced a significant rise in health.

Kirk Paul Pressley: Two, we experienced a significant rise in health care costs based on poor performance by our plan. At three, we increased the reserve for unfunded commitments by about $340,000 due primarily to the growth in the balances of the unfunded commitments and a small decrease in the utilization rate. 4.

Speaker Change: Their cost based on poor performance of our plan.

Kirk Pressley: Three, we increase the reserve for unfunded commitments by about $340,000 due primarily to the growth and the balances of the unfunded commitments and a small decrease in the utilization rates. Four, we continue to invest in our IT infrastructure, and five, we experienced higher commissions related to the strong mortgage activity discussed previously. We continue to invest for our long-term growth.

Speaker Change: Three we increased the reserve for unfunded commitments by about $340000 due primarily to the growth in the balances of the unfunded commitments and a small decrease in the utilization rates.

Kirk Paul Pressley: We have continued to invest in our IT infrastructure, and 5. We experienced higher commissions related to the strong mortgage activity discussed previously. We continue to invest in our long-term growth. As we discussed on previous calls, we opened a new location in Memphis earlier this year. That location was able to fully staff up quicker than we projected, which we are happy about, and it is fully operational. We have also been hiring for the new Auburn Opelika location that Tom discussed. Both of those locations come with compensation costs as well as other operational costs.

Speaker Change: Four we continued to invest in our it infrastructure and five we experienced higher commissions related to the strong mortgage activity discussed previously.

Speaker Change: We continue to invest for our long term growth as we discussed on previous calls we opened a new location in Memphis earlier. This year that location was able to fully staff up quicker than we projected which we're happy about and it is fully operational we have also been hiring for the new Auburn Opelika location that Tom discussed both.

Kirk Pressley: As we discussed on previous calls, we opened a new location in Memphis earlier this year. That location was able to fully staff up quicker than we projected, which we are happy about, and it is fully operational. We have also been hiring for the new Auburn of the like a location that Tom discussed. Both of those locations come with compensation costs, as well as other operational costs. As to the health plan, it is running about 500,000 more per quarter than we had projected, and we expect that to continue throughout the plan year. Our second quarter non-interest expenses would have been about $44.8 million if the new accounting had been adopted in the first quarter.

Speaker Change: Are those locations come with compensation costs as well as other operational costs.

Kirk Paul Pressley: As to the health plan, it is running about $500,000 more per quarter than we had projected, and we expect that to continue throughout the plan year. For example, our second quarter non-interest expenses would have been about $44.8 million if the new accounting had been adopted in the first quarter. Our current expectation is that non-interest expenses will grow at a much slower rate for the remainder of 2024. Income tax expenses under the new standard should be less volatile than in the past. The tax rate should be approximately 20% for the remainder of the year.

Speaker Change: As to the health plan. It is running about 500000 more per quarter than we had projected and we expect that to continue throughout the plan year.

Speaker Change: Our second quarter noninterest expenses would have been about $44 8 million if the new accounting had been adopted in the first quarter. Our current expectation is that noninterest expenses will grow at a much slower rate for the remainder of 2024.

Kirk Pressley: Our current expectation is that non-interest expenses will grow with a much slower rate for the remainder of 2024. Income tax expenses under the new standard should be less volatile than in the past. The tax rate should be approximately 20% for the remainder of the year. We are pleased with the 13% leaped quarter-annualized increase in our book value per share and our ability to maintain our strong capital ratios despite the annualized 15% loan growth. As to what we expect going forward, we continue to be optimistic about 2024. The yield on assets is expected to continue to grow, both dollar and percentage, and we think we can manage the increase in the cost of interest bearing liability to a much slower rate than the asset yield growth.

Speaker Change: Income tax expenses under the new standard should be less volatile than in the past the tax rate should be approximately 20% for the remainder of the year.

Kirk Paul Pressley: We are pleased with the 13% leaked quarterly annualized increase in our book value per share and our ability to maintain our strong capital ratios despite the annualized 15% loan growth. And so, what we expect going forward, we continue to be optimistic about 2024. The yield on assets is expected to continue to grow, both in dollars and in percentage, and we think we can manage the increase in the cost of interest-bearing liabilities at a much slower rate than the asset yield growth.

Speaker Change: We are pleased with the 13% linked quarter annualized increase in our book value per share and our ability to maintain our strong capital ratios. Despite the annualized 15% loan growth.

Speaker Change: And so what we expect going forward, we continue to be optimistic about 2024 yield on assets is expected to continue to grow both dollar and percentage and we think we can manage the increase in the cost of interest bearing liabilities to a much slower rate than the asset yield growth.

Kirk Pressley: We feel very good about the loan growth we experienced during the first half of the year, as well as our pipeline for the second half of the year. The positive growth lagged the loan growth during the first four months, but it is trending in the right direction. Our capital, liquidity, and contingent liquidity remain strong.

Kirk Paul Pressley: We feel very good about the loan growth we experienced during the first half of the year, as well as our pipeline for the second half of the year. Deposit growth lagged the loan growth during the first four months, but it is trending in the right direction. Our capital, liquidity, and contingent liquidity remain strong.

Speaker Change: We feel very good about the loan growth we experienced during the first half of the year as well as our pipeline for the second half of the year deposit growth lagged the loan growth during the first four months, but it is trending in the right direction, our capital liquidity and contingent liquidity remained strong in summary, we like how we're positioned.

Kirk Pressley: In summary, we like our work conditions.

Davis Mange: Let me turn it over to Davis.

Kirk Paul Pressley: In summary, we like how we're positioned. Let me turn it over to David. Thanks, Kirk.

Speaker Change: Let me turn it over to Davis.

Davis Mange: Thanks, Kirk.

Davis S. Mange: Thanks, Kirk. Let's open the lines for questions.

Davis: Thanks Kurt.

Unknown Executive: Let's open the lines for questions. Thank you. We will now be conducting a question and answer session. If you would like to ask the question, please press R1 on your telephone feedback. The confirmation to own what indicate your line is in the question field. You may press R2 if you would like to remove your questions from the field. So, if you participate using feature fitness, it may be necessary to pick up your handset before pressing the cards.

Davis: Open the lines for questions.

Davis: Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in the question. You may press star two if you would like to remove your question from the question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the button. One moment, please, lollipop. Thank you. Our first question comes from a line from Stephen Moss with Raymond Davis. Please proceed with your question.

Davis: We will now be conducting a question.

Speaker Change: If you would like to ask question.

Speaker Change: <unk> on your telephone.

Speaker Change: Okay.

Speaker Change: And the question.

Speaker Change: Thank you. Thank you. Thank you.

Speaker Change: Great.

Speaker Change: Okay.

Speaker Change: Thank you Chris.

Speaker Change: Thank you.

Speaker Change: Helpful.

Speaker Change: Alright.

Unknown Executive: One moment, please only pull for plastic.

Speaker Change: One moment please.

Speaker Change: Thank you.

Stephen Moss: Our first question comes from the line of Steven Moss with Rain and Dean. Please proceed with your questions. Good morning, or good afternoon, guys. We'll just maybe start off on the loan pipeline here. You guys talking about it being up quarter to quarter, just curious, is it broad based as like the loan growth we saw this quarter, or is it more concentrated in any particular type of loan classification and just kind of where you're seeing a geographic way as well?

Speaker Change: Next question comes from the line even work with Raymond James.

Speaker Change: With me with your question.

Stephen M. Moss: Good morning or good afternoon, guys. We'll just maybe start off on the loan pipeline here. You guys talking about it being up quarter over quarter, just curious, is it, you know, broad-based as like the loan growth we saw this quarter? Or is it more concentrated in any particular type of loan classification and just kind of where you're seeing it geographically as well?

Speaker Change: Yes, good morning, or good afternoon guys.

Speaker Change: Hey.

Speaker Change: <unk>.

Speaker Change: Well, just maybe start off on the loan pipeline here you guys talking about it being up quarter over quarter just curious.

Speaker Change: Is it.

Speaker Change: Broad based as like the loan growth we saw this quarter or is it more concentrated in any particular.

Speaker Change: Type of loan classification, and just kind of where youre seeing a geography geographically as well.

Tom Broughton: Yeah, Steve, it's broad based and it's all types, and of course we've been waiting for the C&I to come back, and we did see that this past quarter. We saw the, you know, for a long time we had a double negative. We had people taking money out of their money market and checking accounts and making capital expenditures instead of borrowing from us. So now that's a double hit.

Thomas Ashford Broughton: Yeah, Steve, it's broad-based, and there are all types. And, of course, we've been waiting for the C&I to come back. And we did see that this past quarter. We saw the You know, for a long time, we had the double negative. We had people taking money out of their Ben Dating accounts, and of course... We still see, obviously, there's a lot of CRE projects on. We think it's broad-based and it's not just... Any one state is in all of our, You know, and it's everything from maritime to... It's almost everything except, perhaps, for...

Speaker Change: Yes, Steve it's broad based and it's all types and of course, we've been waiting for them to come back and we did see that this past quarter, we saw the.

Speaker Change: You know for a long time, we had the.

That's a double negative we had people taking money out of there.

Speaker Change: Money market and checking accounts and making capital expenditures instead of borrowing from us So now [laughter].

Speaker Change: That's a double hit so now they are back borrowed money again for capital expenditure projects. So we feel good about.

Tom Broughton: So now they're back, you know, borrowed money again for Catholics, miniature projects. So we feel good about, you know, organic loan demand picking up with our existing customer basis, which we've been needing. And of course, you know, we still see obviously there's a lot of CRE projects are on permanent hold based on the higher interest rates. I think it's pretty obvious. So we think it's broad based, and it's not just in any one state; it is in all of our markets. When we, you know, it is everything from maritime to, you know, it's almost everything except perhaps assisted living, I would say.

Speaker Change: Organic loan demand picking up with our existing customer base, which we've been mid <unk> and of course.

Speaker Change: We still see obviously there is a lot of CRE projects are on.

Speaker Change: Permanent whole based on the higher interest rates I think it's pretty obvious so.

Speaker Change: We think it's broad based and it's not just in any one state is in all of our markets.

Speaker Change: It's everything from maritime to.

Speaker Change: It's almost everything except perhaps assisted living.

Speaker Change: Right.

Speaker Change: Okay.

Stephen Moss: Okay, appreciate that. And in terms of just the margin here, you know, I see you guys getting, you know, booking new loans just over 8% here. Obviously, you know, funding costs relatively stable.

Kirk Paul Pressley: Appreciate that. And in terms of just the margin here, you know, I see you guys are getting, you know, booking new loans just over 8% here. Obviously, funding costs are relatively stable, a nice plus as assets reprice. Just curious how you guys are thinking about the cadence of that margin expansion after a pretty good step up two quarters in a row now.

Speaker Change: I appreciate that and in terms of just the margin here I see you guys getting.

Speaker Change: Booking new loans, just over 8% here.

Speaker Change: Obviously funding costs relatively stable a nice plus as assets re price just curious how you guys are thinking about the cadence of that margin expansion.

Tom Broughton: A nice plus is assets reprise. Just curious as how you guys are thinking about the cadence of that margin expansion after a pretty good step up two quarters in a row now.

Speaker Change: After a pretty good step up two quarters in a row now.

Kirk Paul Pressley: We don't really want to forecast the NIM percentage, as you would, I'm sure, understand. But what we think is you've got a lot of information on what's going on with the growth of the assets. And you've got some information at quarter end on where our cost of deposits is going. So they're moving up a little bit as we're growing at a really nice pace. But we expect this tailwind and margin to run for more than a few quarters.

Tom Broughton: We don't really want to forecast that the NIM percentage, as you would, I'm sure, understand. But what we think is you've got a lot of information on what's going on with the growth of the assets. And you've got some information on quarter end on where our cost of deposits are going. So they're moving up a little bit as we're growing at a really nice pace. But we expect this tailwind and margin to run for more than a few quarters.

Speaker Change: We don't really want to forecast the NIM percentage as you would I'm sure understand but what we think is you've got a lot of information on what's going on with the growth of the assets.

Speaker Change: And you've got some information on quarter end on where our cost of deposits are going so they're moving up a little bit as we're growing at a really nice pace.

Speaker Change: But we expect this tailwind in margin to run for more than a few quarters.

Speaker Change: Okay Fair.

Rodney Rushing: Okay, fair enough. And then in terms of just the, you know, correspondent banking business, just kind of curious, what are the business trends you guys are seeing in terms of adding customers and, you know, the associated fee income as well?

Unknown Executive: Okay, fair enough.

Speaker Change: Fair enough and then in terms of just the correspondent banking business just kind of curious what are the business trends you guys are seeing there.

Rodney Rushing: And then in terms of just the, you know, core spot of banking business, kind of curious, you know, what are the business trends you guys are seeing there. Edition of customers and, you know, associated income as well.

Speaker Change: Additionally customers in.

Speaker Change: The associated fee income as well.

Speaker Change: Yeah.

Rodney Rushing: Yes, and this is Rodney rushing it. We're seeing it, you know, mainly in some of our newer markets in Texas. We've got over 25 banks there now, and we've got a strong pipeline. We saw some change in course fund providers and stated Tennessee and Kentucky. We hired a new officer to help cover half that territory. We already had one in place. And so, you know, Tennessee, Kentucky, and Texas is where the majority of our new relationships are coming. Okay, great.

Rodney Rushing: Yes, this is Rodney Rushing. We're seeing it, you know, mainly in some of our newer markets in Texas. We've got over 25 banks there now, and we've got a strong pipeline. We saw some changes in correspondent providers in the states of Tennessee and Kentucky. We hired a new officer to help cover half that territory, although we already had one in place. And so, you know, Tennessee, Kentucky, and Texas are where the majority of our new relationships are coming from.

Speaker Change: Yes, this is rodney rushing it.

Speaker Change: We're seeing it.

Speaker Change: Mainly in some of our newer markets in Texas, We've got over 25 banks, there now and.

Speaker Change: We've got a strong pipeline we.

Speaker Change: We saw some change in correspondent providers in stages.

See in Kentucky.

Speaker Change: We hired a new officer.

Speaker Change: Asset territory, we already had one in place and so.

Speaker Change: Tennessee, Kentucky, and Texas is where the majority of our our new relationships are coming from.

Speaker Change: Okay great.

Stephen M. Moss: Great. I appreciate the color there, and I'll step back into the queue. Thank you.

Stephen Moss: I appreciate the color there, and I'll step back in the queue. Thank you, Steve. Thank you.

Speaker Change: I appreciate the color there and I'll step back in the queue.

David Jason Bishop: Thank you. Our next question comes from the line of Dave Bishop with Humphrey Group. Please proceed with your question.

Speaker Change: Thank you Steve.

Speaker Change: Thank you our.

Steve Bishop: Our next question becomes from the line of Steve Bishop to come to group. Please proceed with your question. Yeah, good evening, gentlemen. Hey, Dave. Hey, Tom, just curious. It looks like you know, not only growth, we've added on the commercial side, but also on, I think it's the other commercial rules; they may be non-unoccupied. Just curious, maybe where you're seeing strength, you know, what types of projects, you know, their pockets of growth and maybe, you know, new yields on that production, just curious where you're seeing the resilience and the theory market.

Speaker Change: Our next question comes from the line of.

Speaker Change: Hum.

With your question.

Speaker Change: Yes, good evening gentlemen.

Dave: Hey, Dave.

Dave: Hey, Tom just curious it looks like you know not only growth rebounded on the commercial side, but also on I think it's the other commercial real estate, maybe non owner occupied just curious maybe where you're seeing strength.

David Jason Bishop: Tom, just curious. It looks like, you know, not only growth rebounded on the commercial side, but also on, I think it's the other commercial real estate, maybe not in or occupied. Just curious, maybe where you're seeing strength, you know, what types of projects, their pockets of growth, and maybe you know, new yields in that production just care where you're seeing the resilience of the theory market. I'm all about it

Speaker Change: What types of projects are there pockets of growth and maybe.

Dave: New yields on that production, just curious where you're seeing the resilience of the <unk>.

Speaker Change: The CRE market.

Tom Broughton: I think I'm going to let Henry Abbott answer the question, Dave, but I can say in general, I think that, you know, a bank that has liquidity and deposit growth is attracting new customers these days because there are a lot of banks that, you know, in some cases, then come with money that doesn't have the liquidity, you know, that they've had in years past to make me loans. So I think, you know, part of when you say people say, we don't have any loan demands because they don't perhaps fund loan demands. So, you know, we're being a real picky about the people we loan money to, the type of projects. You know, of course, our number one priority is taking care of our existing clients.

Henry F. Abbott: I'm going to let Henry Abbott answer the question, Dave, but in general, I think that you know, a bank that has liquidity and deposit growth is attracting new customers these days because there are a lot of banks that. In some cases, the incumbent bank, Mike, that doesn't have the liquidity, you know, that they've had in years past to make new loans. So I think, you know, part of when you say people say we don't have any loan demand is because they can't pay out fund loan demand. So, you know, we're being real picky about

Speaker Change: I think I'm going to let Henry.

Speaker Change: Avid answer the question, Dave, but I can say in general I think.

Yeah.

Speaker Change: Banks that have liquidity and deposit growth is.

Speaker Change: Is attracting new customers. These days because there are a lot of biopsy.

Speaker Change: In some cases incumbent mind it doesn't have the liquidity.

Speaker Change: Now that they've had in years past.

Speaker Change: To make new loans. So I think part of when you cite people say, we don't have any low demand is because they don't they can't match fund loan demand.

Speaker Change: We're being real picky about the money.

Speaker Change: Money to the type of.

Speaker Change: <unk> of course, our number one priority is taking care of our existing clients that is always going to be our priority as our existed.

Tom Broughton: That is always going to be our priorities, our existing customers that we have had been with us a long time.

Speaker Change: And customers that we have had been with us a long time, but Henry can you add anything there.

Henry Abbott: But Henry, can you add anything there?

Stephen M. Moss: Page PAGE of NUMPAGES www.verbalink.com Specific on the non-under-occupied segment, where we saw some of the growth, as Tom mentioned, either for existing customers or new customers with significant equity put into projects, whether that's acquiring an existing project or building one. But multifamily and then warehouse are the primary drivers there.

Henry Abbott: Yeah, from a specific on the non-under-occupied segment, where we saw some of the growth, as Tom mentioned, these are for, you know, existing customers or new customers with significant equity put into project, you know, was that, you know, acquiring an existing project and work building one. But multi-family and then warehouse for work on the primary drivers there.

Speaker Change: Specific on the non owner occupied segment, and then where we saw some of the growth as Tom mentioned and easier for exists.

Speaker Change: Existing customers or new customers with significant equity put into project.

Speaker Change: Whether that acquiring an existing project.

Speaker Change: Building, one, but multifamily and then warehouse.

Speaker Change: Or where kind of the primary drivers there.

Speaker Change: Thank you.

Stephen Scouten: Our next question comes from the line of Steven Scouting with Piper Samher. Please proceed with your question. Hi, good afternoon, everyone. I appreciate the time here. I guess I did have one question, just maybe a clarifying question around some of the expense commentary. You gave that $44.8 million number, I guess, if the accounting change had been in effect for the previous court as well. So is that $44.8 million number? Is that the better run rate moving forward as we think about the go forward expense based start now? Exactly. Yes. Okay. And so then it will grow at a slower pace off of that number.

Stephen M. Moss: Our next question comes from the line of Stephen Scowden with Piper Sandler. Please proceed with your question.

Speaker Change: Our next question comes from the line.

Speaker Change: With Piper Sandler.

Speaker Change: Proceed with your question.

Stephen M. Moss: Hey, good afternoon, everyone. I appreciate the time spent here. I guess I had one question, just maybe a clarifying question around some of the expense commentary. You gave that $44.8 million number, I guess, if that accounting change had been in effect for the previous quarter as well. So is that $44.8 million number, is that the better run rate moving forward as we think about the go-forward expense-based start now? Okay, and so then it will grow at a slower pace off of that number. That's correct. And the tax rate should be around 20%.

Speaker Change: Hey, good afternoon, everyone.

Speaker Change: Appreciate the time here.

Speaker Change: I guess I did have one question just maybe a clarifying question around some of the expense commentary you gave that $44 $8 million number I guess if that.

Speaker Change: That accounting change had been in effect for the previous quarter as well. So is that $44 8 million number is that a better run rate moving forward as we think about the go forward expense base start now exactly yes.

Speaker Change: Okay, and so then it will grow at a slower pace off of that number is.

Kirk Pressley: That's correct. And the tax rate should be around 20% going forward. Perfect. Very helpful.

Speaker Change: That's correct, that's correct and the tax rate should be around 20% going forward.

Kirk Paul Pressley: Oh, perfect! Very helpful. And then it looked like, if I'm looking at these numbers correctly, it looked like on an end-of-period basis, maybe you saw a little bit more pressure on non-interest-bearing deposits this quarter. Was there anything... I guess to speak of there, I mean, obviously it's pretty stable on an average basis, but I'm just wondering if that's a trend we would likely see impact the average balances next quarter based on what you saw end of period.

Speaker Change: Perfect very helpful. Thank you.

Stephen Scouten: Thank you. And then it looked like, if I'm looking at these numbers correctly, it looked like on an end of period basis, maybe you saw a little bit more pressure on non-intersparing deposits this quarter. What's your anything? I guess the speaker there, I mean obviously it's pretty stable on an average basis, but I'm just wondering if that's a, you know, a trend we would likely see impact the average balance is next quarter based on what you saw in the period. But you would normally think that at the end of the first quarter to, but the average rate, the average bounces are almost spot on, so we don't see anything that really is overly concerning to us at this point that it's a new trend or anything like that if that's what you're asking.

Speaker Change: And then it looked like if im looking at these numbers correctly. It looks like on an end of period basis, maybe you saw a little bit more pressure on noninterest bearing deposits. This quarter was there anything.

Speaker Change: I guess to speak of there I mean, obviously, it's pretty stable on an average basis, but I'm just wondering if that's a trend we would likely see impact the average balances next quarter based on what you saw in the period.

Kirk Paul Pressley: Go ahead, Kirk. Yeah.

Speaker Change: Yeah go ahead, Kurt Yeah. So.

Kirk Paul Pressley: So, you hit the nail on the head with the average balance being just about the same. But it went down right at the end of the quarter. We think that's going to come back, but obviously we don't know for sure. There might be some housecleaning at the end of the quarter, but you would normally think that at the end of the first quarter too, but the average rate, and the average balances are almost spot on. So we don't see anything that is really overly concerning to us at this point, that it's a new trend or anything like that.

You hit it on the head with the average balance was just about the same it went down right at the right at the end of the quarter.

Speaker Change: We think that's going to come back, but obviously, we don't we don't know for sure it might be some housecleaning at the end of the quarter, but you would normally think that at the end of the first quarter two but.

Speaker Change: The average rate the average balances are almost spot on so we don't see anything that really is overly concerning to us at this point that that's a new trend or anything like that if that's what you're asking.

Unknown Executive: Yep. Yep. Okay. Very helpful. Very helpful. And maybe just a couple other things for me. One, from a new hire perspective, what would you expect? Unknown Executive, Kirk Pressley, Graham Dick, Rodney Rushing, Unknown Executive, Kirk Pressley, Unknown Executive, Kirk Pressley, www.servisfirstbancs.com

Stephen Scouten: Yep, yep, okay, very helpful, very helpful. And maybe just a couple other things for me. One, from a new hire perspective, what would you expect kind of a cadence to that to be moving forward? I think you said you had 14 new bankers in the quarter, 20 overall FTE ads. You know, should we expect that similar cadence throughout the rest of the year, or those opportunities maybe not as prevalent, and or is it not the time you want to be investing in those given the market opportunities that are up. You know I'll answer like this: we don't have anything really, you know, today in the pipeline, but I've learned that can change, you know, in the morning, right? I mean, so.

Speaker Change: Yes, yes, okay very helpful very helpful.

Speaker Change: And maybe just a couple other things for me one from from a new hire perspective.

Speaker Change: What would you expect kind of the cadence of that to be moving forward. I think you said you had 14, new bankers in the quarter 'twenty overall FTE adds.

Speaker Change: Should we expect a similar cadence throughout the rest of the year or are those opportunities.

Speaker Change #100: Maybe not as prevalent and or is it is it is it not the time and you want to be investing in those given the market opportunities that arise.

Unknown Executive: You know, I'll answer it like this. We don't really have anything really, you know, today in the pipeline, but I've learned that can change, you know, in the morning, right?

Speaker Change #101: I'll answer it like this we don't have any thing really and you know today in the pipeline.

Speaker Change #101: That can change.

Speaker Change #102: In the morning, right I mean, so and if we found the right team and the right market.

Unknown Executive: I mean, if we find the right team in the right market, we will hire them all, you know, as far as we can see. You know, we think it's in the long-term best interest of the shareholders, not in the short-term best interest of the shareholders. So we're going to make a long-term decision with really good people that we can add. Our thought is that the team that has the best people usually wins. It's not the head coach putting in brilliant plays; it's just having the best players. So that's what we want: the best players.

Tom Broughton: And if we find the right team in the right market, we will hire them all. You know, as far as we can see, you know, we think it's in the long-term best interest of the shareholders, not in the short-term best interest of the shareholders. So we're going to make a long-term decision with really good people that we can add. I would, you know, I thought is the team that has the best people that usually wins. You know it's not, it's not the head coach is up, but the ingredient plays is just having the best players. So that's what we want, is the best players.

Speaker Change #102: It will we will hire them all.

Speaker Change #103: As far as we can say, we think it's in the long term best interest of the shareholders not in the short term best interests of the shareholders. So we're gonna Michael long term decision.

Speaker Change #103: With really good people that we can add.

Speaker Change #104: I've thought is is the team that has the best people usually wins.

Speaker Change #105: It's not it's not the head count.

But they are bringing in place it's just having the best players. So that's what we want is the best players.

Tom Broughton: Yep, I totally agree. I totally agree. Okay, and then just last thing for me from a loan to deposit perspective, I mean you've made a lot of progress year for year. There is this kind of where we should expect you to try to run the bank even forward in this kind of, I don't know, mid 90s. London deposit ratio. Yeah, I think that's probably right, and as you know from past conversations, you know we view a lot of the correspond and almost like deposits that aren't showing up in deposits, especially the settlement accounts. So we will feel pretty comfortable running in the mid 90s.

Speaker Change #105: Yes totally agree I totally agree.

Unknown Executive: Yep, I totally agree. I totally agree. Okay, and then just last thing for me, from a loan to deposit perspective, I mean, you've made a lot of progress year over year there. Is this kind of where we should expect you to try to run the bank moving forward at this kind of, I don't know, mid-90s loan to deposit ratio percentage?

Speaker Change #105: Okay, and then just last thing for me from a loan to deposit perspective, I mean, you've made a lot of progress here.

Speaker Change #106: Every year. There is this kind of where we should expect you to try to run the bank moving forward in this kind of I don't know mid nineties loan to deposit ratio percentage.

Unknown Executive: Yeah, I think that's probably right. And as you know from past conversations, we view a lot of the correspondent accounts almost like deposits that aren't showing up in deposits, especially the settlement accounts. So we will feel pretty comfortable running in the middle. Got it. Makes sense. Super helpful.

Speaker Change #107: Yes, I think thats, probably right and as you know from past conversations we view a lot of the correspondent almost like deposits that aren't showing up in deposits, especially the settlement accounts. So we feel pretty comfortable running in the mid nineties.

Stephen Scouten: Yeah, it makes sense.

Speaker Change #108: Got it makes sense Super helpful guys I appreciate it and congrats on a really good quarter.

Stephen M. Moss: Super helpful guys, I appreciate it, and congrats on a really good quarter.

Stephen Scouten: People are helpful guys. Appreciate it and congrats on a really good core. Thank you.

Speaker Change #107: Thank you.

Speaker Change #107: Okay.

Unknown Executive: Our next question comes to mind of the business with Housing Group. Please proceed with your question. Yeah, thanks guys. Just had a couple quick follow-ups. Appreciate the color in terms of the CD's rolling off. Next quarter, just curious what you're seeing, maybe the blended rate or new offering rate on CDs or new CD money coming into door, how that compares to maybe the average cost. What? Very show.

David Jason Bishop: Our next question comes to mind about Dave Bishop with Huggie Group. Please proceed with your question. Yeah, thanks, guys. Just had a question

Our next question comes from the line.

Hum.

Speaker Change #109: Please proceed with your question.

Unknown Executive: [inaudible]

David Jason Bishop: Yeah, thanks guys. Just had a couple quick follow-ups. Appreciate the color in terms of the CDs rolling off next quarter. Just curious what you're seeing maybe the blended rate or new offering rates on CDs or new CD money coming in, how that compares to maybe the average cost.

Speaker Change #110: Yes. Thanks, guys just had a couple of quick follow ups.

Speaker Change #110: The color in terms of the Cds rolling off.

Speaker Change #110: Next quarter, just curious what youre seeing maybe the blended rate of our new offering right.

Speaker Change #111: On Cds for new CD money coming into door, how that compares to maybe the average cost.

Speaker Change #111: Hi.

Speaker Change #111: Okay.

Speaker Change #111: Yeah.

Unknown Executive: I'd like to give you a really firm answer long term, but we really play with that a lot based on the need and the markets and what they're asking for and what the competition is doing.

Tom Broughton: I'd like to give you a really firm answer long term, but we really play with that a lot based on the need and the markets and what they're asking for and what the competition is doing. So I can't give you a firm answer of where that's going to be six weeks from now. Well, I would say that we've seen CD rate pressures moderate over the last more than several weeks. I would say it's been the last couple of months. We've seen less active people. We look at the different markets, what the CD all forage artists.

Speaker Change #111: I'd like to give you a really firm answer long term.

Speaker Change #111: But we are.

Speaker Change #112: We really play with that a lot based on the need in the markets and what they are asking for and what the competition is doing so I can't give you a firm answer of where that's going to be six weeks from now.

Unknown Executive: Well, I would say that we've seen CD rate pressures moderate over the last several weeks. More than several weeks, I would say it's been the last couple of months. We look at the different markets, what the CD offerings are. In many cases, this is a defensive product for us, not an offensive product. Again, we've never advertised a rate since we were founded 19 years ago. Not in emails, not in print, not in any form. We've never advertised, and we're not sure why.

Speaker Change #112: I would say that we've seen.

Speaker Change #112: CD rate pressures moderate over the last.

Speaker Change #112: More than several weeks I would say it's been the last couple of months, we've seen less active.

Speaker Change #113: People, if we look at the different markets, what the CD offerings artists in many cases this a defensive product for us not in office products. We again, we've never advertised right. Since we were founded 19 years ago.

Tom Broughton: In many cases, this is a defensive product for us, not an offensive product for we again.

Tom Broughton: We've never advertised a rate since we were founded 19 years ago, not in emails, not in print, not in any form. We've never advertised rates at all because that's not how you win the game. So I just think we have a defensive product out there, and I think it's moderating down. I'll be surprised if we don't see continued price moderation in CD market data. And, as a reminder, that's less than 10% of our interest-faring liabilities. Yeah.

Speaker Change #114: Not in <unk> not in France, not not in any form we've never advertised.

Unknown Executive: That's not how you, you know, that's not how you win. So, I just think, you know, we have a defensive product out there in price, and I think it's moderating down. I'll be surprised if we don't see continued price moderation.

Speaker Change #114: Rates at all.

Speaker Change #114: Hi.

Speaker Change #114: Hi, you win.

Speaker Change #114: How do you win the game. So I just think we are.

Speaker Change #114: We have a defensive product out there and I think as moderating down.

Speaker Change #114: I'll be surprised if we don't see continued price moderation.

Hey, D market and as a reminder, that's less than 10% of our interest bearing liabilities.

Unknown Executive: And as a reminder, that's less than 10% of our interest-bearing liabilities.

Unknown Executive: Yeah, just curious in terms of maybe the markets where you're seeing, you know, rate pressures, lottery, are you seeing sort of these TV specials or offerings, you know? Dip below the 5% range, you know, Roach, the four and a half, a high 4% range. Just curious, more like the four and a half.

Speaker Change #114: Yes.

Unknown Executive: Just curious in terms of maybe the markets where you're seeing rate pressures moderate. Are you seeing some of these CD specials or offerings, you know, dip below the 5% range, you know, broach the 4.5 for high 4% range. Just curious. Go like the 4.5. Something like that. Got it.

Speaker Change #114: Just curious in terms of maybe the markets where you're seeing.

Speaker Change #116: Rate pressures moderate are you seeing sort of the CD specials or offerings.

Speaker Change #116: Dipped below the 5% range.

Speaker Change #114: Bruce.

Speaker Change #117: $4 five for high 4% range, just curious goldilocks before and I asked.

Unknown Executive: More like the four-and-a-half.

Speaker Change #114: Something like that.

David Jason Bishop: Got it. And then one final question, just curious about loan repricings over the rest of the year. Just curious how much of the loan portfolio we should expect to maybe return or reprice over the second half of the year. Thanks.

Speaker Change #115: Got it and then one final question just curious on loan re pricings over the rest of the year just curious how much of the loan portfolio, we should expect maybe.

Unknown Executive: And then one final question. Just curious on loan reprisings over the rest of the year. Just curious how much of the loan portfolio we should expect to maybe return a reprice over the second half of the year.

Speaker Change #119: Turning to reprice over the second half of the year.

Unknown Executive: Thanks. When you're talking about reprisings, you know, we usually define reprisings as opportunities to reprice a loan that hasn't matured. Is that what you're asking, or are you talking about total maturities and of fixed rates? Well, these total maturities, including the fixed rate, correct? Okay. We think we run around $2 billion a year, so about $1 billion. Now, some of that is dependent on what we call reprisings, which are also the opportunity to go in. And when we get the financials, if there's some football from the loan covenant, we get to re-address the rate on the loan.

Unknown Executive: Well, when you're talking about repricings, you know, we usually define repricings as opportunities to reprice a loan that hasn't matured. Is that what you're asking? Are you talking about total maturities and fixed rates?

Speaker Change #121: Well when you're when you're talking about re pricings, we usually defined re pricings as opportunities to reprice alone that hasnt matured is that what youre asking were you talking about total maturities in fixed rate.

Unknown Executive: All these total maturities, including the fixed rate, correct? Okay.

Speaker Change #120: Probably told them maturities, including the fixed rate correct. Okay. Okay.

Unknown Executive: We think we run around $2 billion a year, so about a billion dollars. Now, some of that is dependent on what we call repricings, which are also the opportunity to go in, and when we get the financials, if there's some footfall from the loan covenant, we get to readjust the rate on the loan. And that picks up really in earnest in the third quarter. We've had about $190 million of those through the first half of the year, and really it starts picking up in earnest in the third quarter, but, in general, probably in that billion range.

Speaker Change #118: We think we run around $2 billion a year, so about $1 billion now some of that is dependent on what we call re pricing, which are also the opportunity to go in and when we get the financials if theres some football on our loan covenant, we get to readdress the.

Unknown Executive: And then when you say starts and ends, are those loans with covenants or false? Just curious. I'm not sure if I am.

Speaker Change #118: The rate on the loan.

Tom Broughton: And that picks up really in earnest in the third quarter. We've had about 190 million of those through the first half of the year. And really, it starts in earnest in the third quarter, but in general, probably in that billion range. And then, when you say it starts in earnest, are those loans with covenant defaults? Just curious if I'm not sure if I understood it. Yeah, it could be a covenant default. It could be, and usually they're small ones, but we don't think they use as indications of real credit deterioration. But usually there's something when you get the financials and the tax returns, which started in the second quarter and picks up in the third quarter.

Speaker Change #118: And that picks up really in earnest in the third quarter, we've had about about $190 million of those through the first half of the year and really it starts in earnest in the third quarter, but in general probably probably in that billion range.

Speaker Change #122: And then when you say starts with owners that are those loans, but.

Speaker Change #122: Covenant defaults just curious.

Speaker Change #122: Sure if I understood it yeah.

Unknown Executive: Yeah, it could be a covenant default, it could be, and usually they're small ones, so we don't view these as indications of real credit deterioration, but usually there's something when you get the financials and the tax returns, which started in the second quarter and picks up in the third quarter, where we're going to dig through all of them. And if we get an opportunity to reprice a low-rate, fixed-rate loan, we'll take that opportunity in most cases, depending, of course, on the client. Henry, how many different ways are there to have a loan repricing opportunity? Is it 20 or 30?

Speaker Change #123: Yes, it could be it could be a covenant default it could be and usually they are small ones and we don't think view these as indications of real credit.

Speaker Change #124: Teary ration, but usually there is something when you when you get the financials and the tax returns, which started in the second quarter and picks up in the third quarter, where we're going to dig through all of them and if we get an opportunity to reprice, a a low rate fixed rate loan, we'll take that opportunity in most cases, depending of course on the <unk>.

Tom Broughton: We're going to dig through all of them. And if we get an opportunity to reprise a low rate fixed-rate loan, we'll take that opportunity, in most cases, depending, of course, on the client. How many different ways are there to have a loan reprise in opportunity? How many is it? 20 or 30? It's a big number. It's a big number, and one of it might be the lack of collection of financials, so you were supposed to get them. And they still haven't gotten them, so now we've used that as a repressing event. If they were past you, that's an opportunity.

Speaker Change #125: Client Henry how many.

Speaker Change #126: How many different ways are there to have a loan repricing opportunity I mean is it 20 or authority. Yes. It is a big number it's a big number and part of it might be the lack of collection of financials. So you were supposed to get them.

Unknown Executive: It's a big number, and part of it might be the lack of collection of financials. So you're supposed to get them. Hey, still haven't got them, so now we... If they were past due, that's an opportunity. I mean, there are just a lot of things.

Speaker Change #127: And they still haven't gotten them. So so now we use that as a repricing event.

Unknown Executive: If they didn't pay the real estate taxes in a timely manner, that could be an opportunity. I've really been amazed at all the different ways that people have a contract violation that's really, and in many cases, they say they have a draw period on a loan and they don't pay it in time, so they have to come back in to us. We can, you know, agree with them. Certainly, we work with our borrowers.

Speaker Change #128: Past dues or if they were fast Gee, that's an opportunity I mean, there's just a lot of things that impact the real estate taxes in a timely manner that could be an opportunity.

Tom Broughton: I mean, there's just a lot of things. They didn't pay the real estate taxes in a timely manner. That could be an opportunity. I've really been amazed at all the different ways that people have a contract violation that's really. In many cases, they say they have a draw period on the loan. They don't do it in time, so they have to come back in to us, and we can agree with them. Certainly, we work with our borrowers where we're going to work with them all the time. But there's a lot of opportunities that more so than I ever dreamed possible.

Speaker Change #128: Really been amazed at all the different ways that.

Speaker Change #128: They have a contract.

Speaker Change #128: Violation that has really and in many cases, they say they have a.

Speaker Change #128: A draw period one alone.

Speaker Change #129: They don't do it in time, so they have to come back into us and we can have great with them certainly we work with our borrowers where we don't we're going to work with them all the time.

Unknown Executive: We're going to work with them all the time, so, but there are a lot of opportunities, more so than I ever dreamed possible. We saw rates go up, you know, start going up over the last 18 months or so.

Speaker Change #129: So there's a lot of opportunities that more so than I ever dreamed possible.

Henry Abbott: When we saw race go up, start going up over the last 18 months or so. With that, I know it's not supposed to be that, but any materials change in the classified, criticized trends quarter to quarter. And major changes. We say more positive results than negative results, and I remember we write, I mean, a balance. Yes, generally, you know, a table across the category.

Speaker Change #129: We saw rates go up.

Speaker Change #129: They.

Speaker Change #129: Start going up over the last.

Speaker Change #129: 18 months or so.

David Jason Bishop: With that, and I know it's not disclosed yet, but any materials change in the classified criticized trends quarter over quarter?

Speaker Change #129: With that I know.

Speaker Change #129: It's not disclose that as of yet but.

Speaker Change #129: Any material change in the classified criticized trends quarter over quarter.

Speaker Change #129: And major changes.

Henry F. Abbott: We'll say more. There are way more positive results than negative results, Henry, I mean, right? on Ballot. Yes, just generally, you know, kind of stay.

Speaker Change #129: We say more.

Speaker Change #129: It's really more positive results in negative results right I mean.

Speaker Change #129: <unk>.

Henry F. Abbott: Yes, generally, and stable across across those guys. Great, thank you.

Speaker Change #129: Yes generally yes.

Speaker Change #129: Okay stable across across those categories.

Unknown Executive: Thank you.

Speaker Change #129: Great. Thank you.

Thanks.

Unknown Executive: Thank you, Doug.

Speaker Change #130: Thank you Dave.

Unknown Executive: Thank you. There are no further questions at this time.

Speaker Change #131: Thank you.

Operator: Thank you. There are no further questions at this time. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Speaker Change #132: There are no further questions at this time.

Unknown Executive: This concludes today's teleconference.

Speaker Change #132: Okay.

Unknown Executive: You may disconnect your mind at this time. Thank you for your participation. Thank you. .

Speaker Change #133: You may disconnect your lines.

Speaker Change #134: Thank you for your partner.

Speaker Change #134: Thank you.

Speaker Change #134: [music].

Speaker Change #134: Hum.

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Speaker Change #134: Mhm mhm.

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Speaker Change #134: Hello.

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Uh-huh.

Hum.

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Speaker Change #134: Hum.

Speaker Change #134:

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Speaker Change #134: Uh huh.

[music].

Speaker Change #134: Okay.

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