Q2 2024 First Financial Bancorp Earnings Call

Yeah.

Operator: Thank you for standing by. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Financial Bancorp second quarter 2024 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise.

Operator: Thank you for standing by.

Ian: Thank you for standing by my name is Ian and I will be your conference operator today.

Ian: My name is Ian, and I will be your conference operator today.

Ian: At this time, I would like to welcome everyone to the First Financial Bancorp, Second Quarter 2024, Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise.

Speaker Change: At this time I would like to welcome everyone wanted to the first financial Bancorp second quarter 2024 earnings conference call and webcast.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Ian: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the question queue. Once again, that is star, followed by the number one. If you would like to withdraw your question, again, press star one. Thank you.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad to enter the question queue. Once again, that is a star followed by the number one. If you would like to withdraw your question, again, press star one. Thank you. I will now hand the call over to Scott Crawley, Controller. Scott, you may begin your conference.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad to enter the question queue. Once again that is star followed by the number one.

Speaker Change: If you'd like to withdraw your question again press Star one.

Scott Crawley: I will now have the call over to Scott Crawley, controller. Scott, you may begin your conference.

Speaker Change: I will now hand, the call over to Scott Crawley Controller, Scott you May begin your conference.

Scott T. Crawley: Thank you, Ian. Good morning, everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's second quarter and year-to-date financial results. Participating on today's call will be Archie Brown, President and Chief Executive Officer, Jamie Anderson, Chief Financial Officer, and Bill Harrod, Chief Credit Officer. Both the press release we issued yesterday and the accompanying slide presentation are available on our website at www.bankitfirst.com under the Investor Relations section.

Scott Crawley: Matt, thank you, Ian.

Scott T. Crawley: Thank you Ian good morning, everyone and thank you for joining us on today's conference call to discuss first financial Bancorp second quarter and year to date financial results.

Scott Crawley: Good morning, everyone. And thank you for joining us on today's conference call to discuss First Financial Bancorp, second quarter, and your today's financial result. Participating on today's call will be Archie Brown, President and Chief Executive Officer; Jamie Anderson, Chief Financial Officer; and Bill Herod, Chief Credit Officer. Both the press release we suggested today and the accompanying slide presentation are available on our website, www.bankitfirst.com, under the Investor Relations section. We will make reference to the slides contained in the accompanying presentation during today's call. Additionally, please refer to the four-looking savings disclosure contained in the second quarter of 2024 earnings release as well as RSEC filings for a full discussion of the company's risk factors.

Speaker Change: Participating on today's call will be Archie Brown, President and Chief Executive Officer, Jamie Anderson, Chief Financial Officer, and Bill Harrod, Chief Credit Officer.

Scott T. Crawley: Both the press release, we issued yesterday and the accompanying slide presentation are available on our website at www Dot banking first dot com under the Investor Relations section.

Scott T. Crawley: We'll make reference to the slides contained in the accompanying presentation during today's call. Additionally, please refer to the forward-looking savings disclosure contained in the second quarter 2024 earnings release, as well as our SEC filings, for a full discussion of the company's risk factors. The information we will provide today is accurate as of June 30th, 2024, and we will not be updating any forward-looking statements or reflecting facts or circumstances after this call. I'm now turning the call over to Archie Brown.

Scott T. Crawley: We will make reference to the slides contained in the accompanying presentation during today's call.

Scott T. Crawley: Additionally, please refer to the forward looking statements disclosure contained in the second quarter 2024 earnings release as well as our SEC filings for a full discussion of the Companys risk factors.

Scott Crawley: The information we will provide today is accurate as of June 30, 2024. We will not be updating any forward-looking savings like facts or circumstances after this call.

Scott T. Crawley: The information we will provide today is accurate as of June 32024, and we will not be updating any forward looking statements to reflect facts or circumstances. After this call.

Archie Brown: I'm now turning the call over to Archie Brown. Thank you, Scott. Good morning, everyone. And thank you for joining us for today's call. Yesterday afternoon, we announced our financial results for the second quarter. I'll provide some highlights on our recent performance and then turn the call over to Jamie to provide further information. We had an outstanding quarter. The Justice earnings for share was 65 cents in the second quarter, which resulted in a return on assets of 1.4 percent and a return on tangible common equity of 20.9 percent. Long growth was exceptionally strong, again, this quarter with balances increasing by 11 percent on an annualized basis.

Scott T. Crawley: I will turn the call over to Archie Brown.

Archie M. Brown: Thank you, Scott. Good morning, everyone, and thank you for joining us on today's call.

Archie M. Brown: Thank you Scott and good morning, everyone and thank you for joining us for today's call yesterday afternoon, We announced our financial results for the second quarter I'll.

Archie M. Brown: Yesterday afternoon, we announced our financial results for the second quarter. I'll provide some highlights on our recent performance and then turn the call over to Jamie to provide further information. It had an outstanding quarter. Adjusted earnings per share was 65 cents in the second quarter, which resulted in a return on assets of 1.4% and a return on tangible common equity of 20.9%. Long growth was exceptionally strong again this quarter, with balances increasing by 11% on an annualized basis.

Archie M. Brown: And this was a significant driver in the increase in net interest income; growth was broad-based and was led by commercial banks. Similarly, average deposits grew approximately 11% for the period, with interest-bearing deposits and a seasonal increase in public fund balances driving the increase. Our 4.1% net interest margin was unchanged in the first quarter and remains at or near the top of the peer group. Total adjusted revenue increased $14.4 million, or 7% compared to the previous quarter. Additionally, we posted record-adjusted non-interest income of $61.6 million.

Scott T. Crawley: I'll provide some highlights on our recent performance and then turn the call over to Jamie to provide further information.

James Michael Anderson: <unk> had an outstanding quarter adjusted earnings per share was <unk> 65 for the second quarter, which resulted in a return on assets of one 4% and return on tangible common equity of 29% loan growth was exceptionally strong again this quarter with balances increasing by 11% on an annualized basis.

Archie Brown: And this was a significant driver in the increase in net interest income. Growth was broad base and was led by commercial banking. Similarly, average deposits grew approximately 11 percent of the period, with interest bearing deposits and a seasonal increase in public fund balances driving the increase. Our 4.1 percent net interest margin was unchanged in the first quarter and remains at or near the top of the peer group. Total adjusted revenue increased 14.4 million or 7 percent compared to the link quarter. Additionally, we posted record adjusted non-interest income of $61.6 million. Growth in fee income was broad base for the period, with foreign exchange revenue growing more than 60 percent from the link quarter.

James Michael Anderson: This was a significant driver in the accretion net interest income.

James Michael Anderson: It was broad based and was led by commercial banking.

James Michael Anderson: Similarly average deposits grew approximately 11% for the period with interest bearing deposits and a seasonal increase in public fund balances driving the increase.

James Michael Anderson: Our four 1% net interest margin was unchanged from the first quarter and remains at or near the top of the peer group.

James Michael Anderson: Total adjusted revenue increased $14 4 million or 7% compared to the linked quarter, but.

James Michael Anderson: Additionally, we posted record adjusted noninterest income of $61 6 million.

Archie M. Brown: Growth in fee income was broad-based for the period, with foreign exchange revenue growing more than 60% from the linked quarter, leasing business income, mortgage banking, and Bancorp income all increasing by double-digit percentages, and wealth management income posting another record quarter. Adjusted expenses increased by 1.2% compared to the first quarter. The increase included a full quarter of Agile expenses, the impact of annual salary adjustments that occurred late in the first quarter, and variable compensation tied to our record fee income.

James Michael Anderson: Growth in fee income was broad based with a period with foreign exchange revenue growing more than 60% from the linked quarter leasing business income mortgage banking.

Archie Brown: Leasing business income, mortgage banking, and bank card income all increased by double-digit percentages, and wealth management income posted another record quarter. Adjusted expenses increased by 1.2 percent compared to the first quarter. The increase included a full quarter of agile expenses, the impact of annual salary adjustments that occurred late in the first quarter, and verbal compensation tied to our record fee income.

James Michael Anderson: And bank card income all increased by double digit percentages in wealth management income posted another record quarter.

James Michael Anderson: Adjusted expenses increased by one 2% compared to the first quarter. The increase included a full quarter of agile expenses the impact of annual salary adjustments that occurred late in the first quarter and variable compensation tied to our record fee income through.

Archie Brown: Through a workforce efficiency initiative, we have eliminated 90 full-time positions today, and this work will continue through the remainder of the year. I am pleased with the 23 basis point decline in that charge-offs to 15 basis points, which marks the third consecutive quarter that charge-offs have declined. We did experience some downward credit migrations during the period; however, this was not concentrated in any particular loan type, and not forming loans as a percentage of total assets was relatively flat compared to the prior quarter. Our ACL increased to 1.36% of total loans, and based on our outlook for long growth and credit quality, we would expect provision to decline to levels approximately to the first quarter in coming periods.

Archie M. Brown: Through our Workforce Efficiency Initiative, we have eliminated 90 full-time positions to date, and this work will continue through the remainder of the year. I am pleased with the 23 basis point decline in net charge-offs to 15 basis points, which marks the third consecutive quarter that charge-offs have declined. We did experience some downward credit migration during the period, however, this was not concentrated in any particular loan type, and not forming loans as a percentage of total assets was relatively flat compared to the prior quarter. Our ACL increased to 1.36% of total loans, and based on our outlook for loan growth and credit quality, we would expect provision to decline to levels approximately to the first quarter in coming periods.

James Michael Anderson: Our workforce efficiency initiative, we have eliminated 90 full time positions to date and this work will continue through the remainder of the year.

Speaker Change: I am pleased with the 23 basis point decline in net charge offs to 15 basis points, which marks the third consecutive quarter that charge offs have declined we did experienced some downward credit migration. During the period. However, this was not concentrated in any particular loan type and not forming loans as a percentage of total assets was relatively flat compared.

To the prior quarter.

Speaker Change: Sale increased to 136% of total loans and based on our outlook for loan growth and credit quality, we would expect provision to decline to levels approximated a first quarter in coming periods.

Jamie Anderson: With that, I'll now turn the color to Jamie to discuss these results in greater detail. After Jamie's discussion, I will wrap up with some additional forward-looking commentary and closing remarks.

Archie M. Brown: With that, I'll now turn the call over to Jamie to discuss these results in greater detail. After Jamie's discussion, I will wrap up with some additional forward-looking commentary and closing remarks. Jamie? Thank you.

Speaker Change: With that I'll now turn the call over to Jamie to discuss these results in greater detail. After Jamie's discussion I will wrap up with some additional forward looking commentary and closing remarks Jamie.

Jamie Anderson: Jamie, thank you, Archie.

James Michael Anderson: Thank you, Archie, and good morning everyone. Slides 4, 5, and 6 provide a summary of our most recent financial results. The second quarter was really strong, highlighted by exceptional earnings, a flat net interest margin, record fee income, and solid balance sheet growth. Our net interest margin remains very strong at $4.10.

Speaker Change: Thank you, Jamie and good morning, everyone.

Jamie Anderson: Good morning, everyone. It's like 4.5 and 6th provide a summary of our most recent financial results. The second quarter was really strong, highlighted by exceptional earnings, a flat net interest margin, record fee income, and solid balance sheet growth. Our net interest margin remains very strong at 4.10. This was unchanged from the linked quarter due to increases in both loan and investment yields, offsetting the pressure on the pod of costs. We were pleased that the increase in deposit costs moderated in comparison to prior quarters, and we expect this trend to hold; however, we expect slight margin contraction in the near term.

James Michael Anderson: Slide four five and six provide a summary of our most recent financial results. The second quarter was really strong highlighted by exceptional earnings.

James Michael Anderson: Flat net interest margin record fee income and solid balance sheet growth.

James Michael Anderson: Our net interest margin remains very strong at 410. This was unchanged from the linked quarter due to increases in both loan and investment yields offsetting the pressure on deposit costs.

James Michael Anderson: This was unchanged from the linked quarter due to increases in both loan and investment yields offsetting the pressure on deposit costs. We were pleased that the increase in deposit costs moderated in comparison to prior quarters, and we expect this trend to hold. However, we expect slight margin contraction in the near term.

James Michael Anderson: We were pleased that the increase in deposit costs moderated in comparison to prior quarters and we expect this trend to hold however, we expect slight margin contraction in the near term.

Jamie Anderson: Total loans grew 11% on an annualized basis, which exceeded our expectations. Loan growth was broad-based with larger increases in CNI, Summit, and Agile. Average deposit balances increased $350 million or 10.6% on an annualized basis and included a seasonal increase in public funds. Overall, the deposit mix continues to shift to higher-cost deposits. However, we maintain 22% of our total balances and non-intersparing accounts and are strategically focused on maintaining deposit balances.

James Michael Anderson: Total loans grew 11% on an annualized basis, which exceeded our expectations. Loan growth was broad-based, with larger increases in C&I, Summit, and Agile. The average deposit balance has increased $350 million or 10.6% on an annualized basis and includes a seasonal increase in public funds. Overall, the deposit mix continues to shift to higher, higher cost deposits. However, we maintain 22% of our total balances and non-interest bearing accounts and are strategically focused on maintaining deposit balances. Turning to the income statement, second quarter fee income was the highest in the company's history.

James Michael Anderson: Total loans grew 11% on an annualized basis, which exceeded our expectations.

James Michael Anderson: Loan growth was broad based with larger increases in C&I summit and agile.

James Michael Anderson: Average deposit balances increased $350 million or 10, 6% on an annualized basis and included a seasonal increase in public funds.

James Michael Anderson: Overall, the deposit mix continues to shift to higher some higher cost deposits. However, we maintained 22% of our total balances and noninterest bearing accounts and are strategically focused on maintaining deposit balances.

Jamie Anderson: Turning to the income statement, second quarter fee income was the highest in the company's history. Foreign exchange and leasing at solid quarters, and wealth management had their best revenue quarter ever. Non-interest expenses increased slightly from the linked quarter due to higher variable compensation. However, we are starting to recognize the impact from our efficiency efforts and expect to see further benefits in the coming periods. RACL coverage increased seven basis points during the quarter to 1.36% of total loans. This resulted in 16.4 million dollars of provision expense during the period, which was driven by loan growth and slight credit migration.

James Michael Anderson: Turning to the income statement second quarter fee income was the highest in the company's history.

James Michael Anderson: Foreign Exchange and Leasing at Solid Quarters and Wealth Management at their best revenue quarter ever. Non-interest expenses increased slightly from the linked quarter due to higher variable compensation. However, we are starting to recognize the impact of our efficiency efforts and expect to see further benefits in the coming period.

James Michael Anderson: Foreign exchange and leasing had solid quarters and wealth management had their best revenue quarter ever.

James Michael Anderson: Noninterest expenses increased slightly from the linked quarter due to higher variable compensation. However, we are starting to recognize the impact from our efficiency efforts and expect to see further benefits in the coming periods.

James Michael Anderson: Our ACL coverage increased 7 basis points during the quarter to 1.36% of total load. This resulted in $16.4 million of provision expense during the period, which was driven by loan growth and Slight Credit Migration. Overall, asset quality trends were mixed with significantly lower net charge-offs and an increase in classified assets. Annualized net charge-offs declined 23 basis points during the period, and NPAs as a percentage of assets were relatively flat at 35 basis points.

James Michael Anderson: Our ACL coverage increased seven basis points during the quarter to 136% of total loans.

James Michael Anderson: This resulted in $16 $4 million of provision expense during the period, which was driven by loan growth.

James Michael Anderson: And slight credit migration.

Jamie Anderson: Overall, asset quality trends were mixed, with significantly lower net charge-offs and an increase in classified assets. Annualized net charge-offs declined 23 basis points during the period, and NPAs as a percentage of assets were relatively flat at 35 basis points. From a capital standpoint, our regulatory ratios are in excess of both internal and regulatory targets. Tangible Book Value increased $0.44 or 3.5%, while our Tangible Common Equity Ratio was flat during the period. Additionally, our Board of Directors elected to increase our common dividend during the period. We have always been focused on delivering value to our shareholders, and this step is further proof of that commitment.

James Michael Anderson: Overall asset quality trends were mixed with significantly lower net charge offs and an increase in classified assets.

James Michael Anderson: Annualized net charge offs charge offs declined 23 basis points during the period and NPA is as a percentage of assets were relatively flat at 35 basis points.

James Michael Anderson: From a capital standpoint, our regulatory ratios are in excess of both internal and regulatory targets. Tangible book value increased 44 cents, or 3.5%, while our tangible common equity ratio was flat during the period. Additionally, our Board of Directors elected to increase our common dividend during the period. We have always been focused on delivering value to our shareholders, and this step is further proof of that commitment. Slide 7 reconciles our gap earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $61.7 million, or $0.65 per share, for the quarter.

James Michael Anderson: From a capital standpoint, our regulatory ratios are in excess of both internal and regulatory targets.

James Michael Anderson: Tangible book value increased 44, or three 5%, while our tangible common equity ratio was flat during the period.

Additionally, our board of directors elected to increase our common dividend during the period, we have always been focused on delivering value to our shareholders and this step is further proof of that commitment.

Jamie Anderson: Slide 7 reconciles our gap earnings to adjusted earnings, highlighting items that we believe are important to understanding our quarterly performance. Adjusted net income was $61.7 million or $0.65 cents per share for the quarter. Adjusted earnings exclude the impact of our efficiency initiatives, as well as acquisition, severance, and branch consolidation costs. As depicted on slide 8, these adjusted earnings equate to a return on average assets of 1.4%, a return on average tangible common equity of 21%, and pre-tax pre-provision RLA of 210 basis points. Turning to slide 9 and 10, net interest margin was unchanged from the linked quarter at 4.1%.

James Michael Anderson: Slide seven reconciles our GAAP earnings to adjusted earnings highlighting items that we believe are important to understanding our quarterly performance.

James Michael Anderson: Adjusted net income was $61 $7 million or <unk> 65 per share for the quarter adjusted earnings exclude the impact of our efficiency initiatives as well as acquisition severance and branch consolidation costs.

James Michael Anderson: Adjusted earnings exclude the impact of our efficiency initiative as well as acquisition, severance, and branch consolidation costs. As depicted on slide 8, these adjusted earnings equate to a return on average assets of 1.4%, a return on average tangible common equity of 21%, and a pre-tax pre-provision ROA of 210 basis points. Turning to slides 9 and 10, the net interest margin was unchanged from the linked quarter at 4.1%. However, loan yields increased 10 basis points during the period, and the yield on the investment portfolio increased 22 basis points.

James Michael Anderson: As depicted on slide eight these adjusted earnings equate to a return on average assets of one 4% our return on average tangible common equity of 21% and pre tax pre provision ROA of.

James Michael Anderson: 210 basis points.

James Michael Anderson: Turning to slides nine and 10 net interest margin was unchanged from the linked quarter at four 1% loan yields increased 10 basis points during the period and the yield on the investment portfolio increased 22 basis points.

Jamie Anderson: Low yields increased 10 basis points during the period, and the yield on the investment portfolio increased 22 basis points. The increase in investment yields was driven by higher reinvestment rates as well as the full quarter benefit from the portfolio repositioning we executed in the first quarter. Funding costs increased 13 basis points during the period, which was significantly lower than in prior periods. Our cost of deposits increased 14 basis points compared to the linked quarter. However, as you can see on the bottom right chart, that pace of growth declined significantly by the end of the quarter.

James Michael Anderson: The increase in investment yields was driven by higher reinvestment rates, as well as the full quarter benefit from the portfolio repositioning we executed in the first quarter. Funding costs increased 13 basis points during the period, which was significantly lower than in prior periods. Our cost of deposits increased 14 basis points compared to the length of the quarter. However, as you can see on the bottom right chart, that pace of growth declined significantly by the end of the quarter.

James Michael Anderson: The increase in investment yields was driven by higher reinvestment rates as well as the full quarter benefit from the portfolio repositioning we executed in the first quarter.

James Michael Anderson: Funding costs increased 13 basis points during the period, which was significantly lower than in prior periods. Our cost of deposits increased 14 basis points compared to the linked quarter. However, as you can see on the bottom right chart that pace of growth declined significantly by the end of the quarter.

Jamie Anderson: Slide 11 details the bait is utilized in our net interest income modeling. The increase in deposit costs has moved our current beta of 2 percentage points to 45%, which matches our internal modeling. Going forward, we expect the housing cost increases to be a function of mix.

James Michael Anderson: Slide 11 details the betas utilized in our net interest income modeling. The increase in deposit costs has moved our current beta up two percentage points to 45%, which matches our internal modeling. Going forward, we expect deposit cost increases to be a function of the mix. Slide 12 outlines our various sources of liquidity and borrowing capacity. We continue to believe we have the flexibility required to manage the balance sheet through the expected economic environment.

James Michael Anderson: Slide 11 details the beta is utilized in our net interest income modeling the increase in deposit costs has moved our current beta up two percentage points to 45%, which matches our internal modeling.

James Michael Anderson: Going forward, we expect deposit cost increases to be a function of mix.

Jamie Anderson: Slide 12 outlines our various sources of liquidity and borrowing capacity. We continue to believe we have the flexibility required to manage the balance sheet through the expected economic environment. Slide 14 illustrates our current loan mix and balance changes compared to the linked quarter. As I mentioned before, loan balance has increased 11% on an annualized basis, with growth in almost every portfolio. As you can see on the right, the largest areas of growth for the quarter were in CNI, Summit, and Agile. We expect Agile's growth to moderate in the coming periods. That's historically the second quarter is the strongest quarter for originations.

James Michael Anderson: Slide 12 outlines our various sources of liquidity and borrowing capacity. We continue to believe we have the flexibility required to manage the balance sheet through the expected economic environment.

James Michael Anderson: Slide 14 illustrates our current loan mix and balance changes compared to the linked quarter. As I mentioned before, loan balances increased 11% on an annualized basis with growth in almost every portfolio. As you can see on the right, the largest areas of growth for the quarter were in C&I, Summit, and Agile. We expect Agile's growth to moderate in the coming period, as historically, the second quarter is the strongest quarter for origination.

James Michael Anderson: Slide 14 illustrates our current loan mix and balance changes compared to the linked quarter as I mentioned before loan balances increased 11% on an annualized basis with growth in almost every portfolio.

James Michael Anderson: As you can see on the right the largest areas of growth for the quarter were in C&I summit and agile.

James Michael Anderson: We expect agile as growth to moderate in the coming periods as historically the second quarter is the strongest quarter for originations.

Jamie Anderson: Slide 15 provides detail on our loan concentration by industry. We believe our loan portfolio remains sufficiently diversified to provide protection from deterioration in any particular industry. Slide 16 provides detail on our office portfolio. Similar to last quarter, about 4% of our total loan buff is concentrated in office space. And the overall portfolio performance metrics remain strong. No office relationships were downgraded to classified during the quarter, and our total non-accrual balance for this portfolio remains approximately $17 million.

James Michael Anderson: Slide 15 provides detail on our loan concentration by industry.

James Michael Anderson: We believe our loan portfolio remains sufficiently diversified to provide protection from deterioration in any particular industry.

James Michael Anderson: Slide 15 provides detail on our loan concentration by industry. We believe our loan portfolio remains sufficiently diversified to provide protection from deterioration in any particular industry. Slide 16 provides detail on our office portfolio. Similar to last quarter, about 4% of our total loan book is concentrated in office space. And the overall portfolio performance metrics remain strong. No office relationships were downgraded to classified during the quarter, and our total non-accrual balance for this portfolio remains approximately $17 million.

James Michael Anderson: Slide 16 provides detail on our office portfolio.

James Michael Anderson: Similar to last quarter about 4% of our total loan book is concentrated in office space and the overall portfolio performance metrics remained strong.

No office relationships were downgraded to classified during the quarter and our total non accrual balance for this portfolio remains approximately $17 million.

Jamie Anderson: Slide 17 shows our deposit mix as well as a progression of average deposits from the linked quarter. In total, average deposit balances increase $350 million during the quarter, driven primarily by a seasonal increase in public funds, as well as increases in retail CDs, money market accounts, and broker deposits. These increases offset modest declines in non-intersparing deposits and savings accounts. Similar to recent quarters, this was expected as a current interest rate environment has driven customers to higher cost deposit products.

James Michael Anderson: Slide 17 shows our deposit mix as well as a progression of average deposits from the linked quarter. In total, the average deposit balance increased $350 million during the quarter, driven primarily by a seasonal increase in public funds, as well as increases in retail CDs, money market accounts, and broker deposits. These increases offset modest declines in non-interest-bearing deposits and savings accounts. Similar to recent quarters, this was expected as the current interest rate environment has driven customers to higher-cost deposit products.

James Michael Anderson: Slide 17 shows our deposit mix as well as the progression of average deposits from the linked quarter.

James Michael Anderson: In total average deposit balances increased $350 million during the quarter, driven primarily by a seasonal increase in public funds as well as increases in retail Cds money market accounts and broker deposits. These.

James Michael Anderson: These increases offset modest declines in noninterest bearing deposits and savings accounts.

James Michael Anderson: Similar to recent quarters. This was expected as the current interest rate environment has driven customers to higher cost deposit products.

Jamie Anderson: Slide 18 illustrates trends in our average personal, business, and public fund deposits, as well as a comparison of our borrowing capacity to our uninsured deposit. On the bottom right of the slide, you can see our adjusted uninsured deposits were $3.2 billion. This equates to 23% of our total deposits. We remain comfortable with this concentration and believe our borrowing capacity provides sufficient flexibility to respond to any event that would stress our larger deposit balances.

James Michael Anderson: Slide 18 illustrates trends in our average personal, business, and public fund deposits as well as a comparison of our borrowing capacity to our uninsured deposits. At the bottom right of the slide, you can see our adjusted uninsured deposits for $3.2 billion. This equates to 23% of our total deposits. We remain comfortable with this concentration and believe our borrowing capacity provides sufficient flexibility to respond to any event that would stress our larger deposit balances.

James Michael Anderson: Slide 18 illustrates trends in our average personal business and public fund deposits as well as a comparison of our borrowing capacity to our uninsured deposits.

James Michael Anderson: On the bottom right of the slide you can see our adjusted uninsured deposits were $3 $2 billion. This equates to 23% of our total deposits.

James Michael Anderson: We remain comfortable with this concentration and believe our borrowing capacity provide sufficient flexibility to respond to any event that would stress our larger deposit balances.

Jamie Anderson: Slide 19 highlights our non-interest income for the quarter. Total fee income increased to $62 million during the quarter, which was the highest quarter in the history of the company. Panic Burn and Summit both had solid quarters, and wealth management posted its best revenue quarter ever. Additionally, mortgage, bank card, and deposit service charge income increased from first quarter levels.

James Michael Anderson: Slide 19 highlights our non-interest income for the quarter. Total fee income increased to $62 million during the quarter, which was the highest quarter in the history of the company. Bannock-Burnham Summit both had solid quarters, and wealth management posted its best revenue quarter ever.

James Michael Anderson: Slide 19 highlights our noninterest income for the quarter.

James Michael Anderson: Total fee income increased to $62 million during the quarter, which was the highest quarter in the history of the company.

James Michael Anderson: Bannockburn and summit, both had solid quarters in wealth management posted its best revenue quarter ever. Additionally, mortgage bank card and deposit service charge income increase from first quarter levels.

James Michael Anderson: Additionally, mortgage, bank card, and deposit service charge income increased from first quarter levels. Non-interest expense for the quarter is outlined on slide 20. Core expenses increased a modest $1.4 million during the period. This was driven by an increase in variable compensation tied to fee income, the full quarter impact from Agile, and annual salary adjustments. We have also started to recognize some of the expected benefits from our ongoing efficiency initiative. Turning now to slides 21 and 22.

Jamie Anderson: Non-interest expense for the quarter is outlined on Slide 20. Core expenses increased to modest $1.4 million during the period. This was driven by an increase in variable compensation, high to fee income, the full quarter impact from agile, and annual salary adjustments. We have also started to recognize some of the expected benefit from our ongoing efficiency initiative.

James Michael Anderson: Noninterest expense for the quarter as outlined on slide 20.

James Michael Anderson: Core expenses increased a modest $1 $4 million during the period. This was driven by an increase in variable compensation tied to fee income the full quarter impact from agile and annual salary adjustments.

James Michael Anderson: We have also started to recognize some of the expected benefit from our ongoing efficiency initiatives.

Jamie Anderson: Turning now to slides 21 and 22, our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $173 million and $16.4 million in total provision expense during the period. This resulted in an ACL that was 1.36% of total loans, which was a seven basis point increase from the first quarter. Provision expense was driven by loan growth and credit migration. Net charge-offs declined 23 basis points to 15 basis points, and our NPAs to total assets held steady at 35 basis points. Another credit trends classified asset balances increased to 1.07% of total assets, and primarily due to the downgrade of four relationships.

James Michael Anderson: Our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $173 million and $16.4 million in total provision expense during the period. This resulted in an ACL that was 1.36% of total loans, which was a seven basis point increase from the first quarter. Provision expense was driven by loan growth and credit migration. Net charge-offs declined 23 basis points to 15 basis points, and our NPAs to total assets held steady at 35 basis points. On other credit trends, classified asset balances increased to 1.07% of total assets, primarily due to the downgrade of four relationships. These downgrades were not concentrated in any loan or collateral type.

James Michael Anderson: Turning now to slides 21, and 'twenty two our ACL model resulted in a total allowance, which includes both funded and unfunded reserves of $173 million and $16 4 million and total provision expense during the period.

James Michael Anderson: This resulted in an ACL that was 136% of total loans, which was a seven basis point increase from the first quarter.

Provision expense was driven by loan growth and credit migration net.

James Michael Anderson: Net charge offs declined 23 basis points to 15 basis points and our NPA to total assets held steady at 35 basis points.

Speaker Change: And other credit trends classified asset balances increase.

Speaker Change: 1.07% of total assets.

Speaker Change: Primarily due to the downgrade of four relationships.

Jamie Anderson: These downgrades were not concentrated in any loan or collateral type. Our ACL coverage increased, and we continue to believe we have modeled conservatively to build a reserve that reflects the loss as we expect from our portfolio. We anticipate our ACL coverage will remain relatively flat, or increase slightly in future periods as our model responds to changes in the macroeconomic environment.

Speaker Change: These downgrades were not concentrated in any loan or collateral type.

James Michael Anderson: Our ACL coverage increased, and we continue to believe we have modeled conservatively to build a reserve that reflects the losses we expect from our portfolio. We anticipate our ACL coverage will remain relatively flat or increase slightly in future periods as our model responds to changes in the macroeconomic environment. Finally, as shown on slides 23, 24 and 25, regulatory capital ratios remain in excess of regulatory minimums and internal targets. During the second quarter, tangible book value per share increased 3.5%, and the TCE ratio was flat due to balance sheet growth. Absent the impact of AOCI, the TCE ratio would have been 9.13% compared to 7.23% as reported.

Speaker Change: Our ACL coverage increased and we continue to believe we have modeled conservatively to build a reserve that reflects the losses, we expect from our portfolio we.

We anticipate our ACL coverage will remain relatively flat or increased slightly in future periods as our motto responds to changes in the macroeconomic environment.

Jamie Anderson: Finally is shown on slides 23, 24, and 25. Regulatory capital ratios remain in excess of regulatory minimums and internal targets. During the second quarter, tangible book value per share increased 3.5%, and the TCE ratio was flat due to balance sheet growth. Ascent, the impact from AOCI, the TCE ratio would have been 9.13% compared to 7.23% as reported. Sites 24 demonstrates that our capital ratios would remain in excess of regulatory targets, including the unrealized losses in the securities portfolio. Our total shareholder return remains strong, with 36% of our earnings returned to our shareholders during the period through the common dividend.

Speaker Change: Finally, as shown on slides 23, 24% and 25% regulatory capital ratios remain in excess of regulatory minimums and internal targets.

Speaker Change: During the second quarter tangible book value per share increased three 5% and the TCE ratio was flat due to balance sheet growth.

Speaker Change: Absent the impact from a OCI the TCE ratio would've been nine 3% compared to seven 3% as reported.

James Michael Anderson: Slide 24 demonstrates that our capital ratios would remain in excess of regulatory targets, including the unrealized losses in the securities portfolio. However, our total shareholder return remains strong, with 36% of our earnings returned to our shareholders during the period through the common dividend. As I mentioned earlier, we were very pleased that the board elected to increase the common dividend, demonstrating our commitment to provide an attractive return to our shareholders. We will continue to evaluate various capital actions as the year progresses.

Speaker Change: Slide 24 demonstrates that our capital ratios would remain in excess of regulatory targets, including the unrealized losses in our securities portfolio.

Speaker Change: Our total shareholder return remains strong with 36% of our earnings returned to our shareholders during the period through the common dividend.

Archie Brown: As I mentioned earlier, we were very pleased at the board elected to increase the common dividend, demonstrating our commitment to provide and attract a return to our shareholders. We will continue to evaluate various capital actions as the year progresses.

Speaker Change: As I mentioned earlier, we were very pleased that the board elected to increase the common dividend demonstrating our commitment to provide an attractive return to our shareholders.

Speaker Change: We will continue to evaluate various capital actions as the year progresses, I will now turn it back over to Archie for some comments on our outlook Archie Thank you Jamie.

James Michael Anderson: I'll now turn it back over to Archie for some comments on our outlet. Archie. Thank you, Jamie.

Archie Brown: I'll now turn it back over to Archie for some comments on our outlook. Archie, thank you, Jamie.

Archie M. Brown: Before we end our prepared remarks, I want to comment on our forward-looking guidance, which can be found on slide 26. Long pipelines continue to be healthy, though we expect a modest increase in payoff trends and seasonally low production in our agile business unit to contribute to overall loan growth in the low single digits on an analyzed basis over the near term. For securities, we expect the portfolio to remain stable. Deposit growth has been steady, and we expect it to grow more modestly over the next quarter as seasonal public funds move out.

Archie Brown: Before we end our prepared remarks, I want to comment on our forward-looking guidance, which can be found on slide 26. Long pipelines continue to be healthy, though we expect a modest increase in payoff trends and seasonally low production in our agile business unit to contribute to overall loan growth and the low single digits on an analyzed basis over the near term. For securities, we expect the portfolio to remain stable. The positive growth has been steady, and we expect to grow more modestly over the next quarter as seasonal public funds move out. Our net interest margin continues to remain strong and resilient, and we expect it to be between 4% and 4.05%.

Archie M. Brown: Before we end our prepared remarks, I want to comment on our forward looking guidance, which can be found on slide 26.

Archie M. Brown: Loan pipelines continued to be healthy, though we expect a modest increase in payoff trends and seasonally low production and our agile business unit two.

Speaker Change: To contribute to overall loan growth in the low single digits on an annualized basis over the near term for.

For security as we expect the portfolio to remain stable.

Speaker Change: Deposit growth has been steady and we expect to grow more modestly over the next quarter as seasonal public funds move out.

Archie M. Brown: Our net interest margin continues to remain strong and resilient, and we expect it to be between 4% and 4.05% for the next quarter. This assumes a 25 basis point rate cut by the Fed in September. We expect our credit costs to decline slightly in the back half of the year, while ACL coverage as a percentage of loans is expected to be stable to slightly increasing. For the full year, we expect net charge-offs to be approximately 25 to 30 basis points.

Speaker Change: Our net interest margin continues to remain strong and resilient and we expect it to be between 4% and four 5% for the next quarter. This assumes a 25 basis point rate cut by the fed in September we.

Archie Brown: For the next quarter, this assumes the 25 basis point rate cut by the Fed in September. We expect our credit costs to decline slightly in the back half of the year, while ACL coverage as a percentage of loans is expected to be stable to slightly increasing. For the full year, we expect net charge-offs to be approximately 25 to 30 basis points. The income is expected to be between $58 and $60 million, which includes $13 to $15 million for foreign exchange and $16 to $18 million for the leasing business. Non-interest expense is expected to be between $122 and $124 million and remains stable, excluding the leasing business.

Speaker Change: We expect our credit cost to decline slightly in the back half of the year, while ACL coverage as a percentage of loans is expected to be stable to slightly increasing.

Speaker Change: For the full year, we expect net charge offs to be approximately 25 to 30 basis points.

Archie M. Brown: The income is expected to be between $58 and $60 million, which includes $13 to $15 million for foreign exchange and $16 to $18 million for the leasing business. Non-interest expense is expected to be between $122 and $124 million and remain stable, excluding the leasing business. Finally, we're pleased to announce that our Board of Directors approved a $0.01 increase in the common dividend to $0.24. The 4.3% dividend increase results in a dividend payout ratio within our target range of 35 to 40% of net income and increases our already attractive yield. I'm encouraged by our operating performance through the first half of 2024 and look forward to continued success for the full year. We'll now open up the call to questions.

Speaker Change: Fee income is expected to be between $58 million to $60 million, which includes $13 million to $15 million for foreign exchange and $16 million to $18 million for the leasing business noninterest expense is expected to be between 122 and $124 million and remained stable excluding the leasing business.

Archie Brown: Finally, we're pleased to announce that our board of directors approved a one-cent increase to this common dividend to $0.24. The 4.3% dividend increase results in a dividend payout ratio within our target range of 35 to 40% of net income and increases our already attractive yield. I've encouraged with our operating performance through the first half of 2024 and looked forward to continue success for the full year.

Speaker Change: Finally, we're pleased to announce that our board of directors approved a one cent increase to the common dividend to <unk> 24.

The four 3% dividend increase results in a dividend payout ratio within our target range of 35% to 40% of net income and increases our already attractive yield.

Speaker Change: I am encouraged with our operating performance through the first half of 2024 and look forward to continued success for the full year.

Operator: We'll now open up the call for questions.

Speaker Change: We will now open up the call for questions.

Operator: At this time, I would like to remind everybody that, in order to ask a question, please press star, followed by the number one on your telephone's keypad. We'll pause for just a moment to compile the Q&A roster.

Operator: At this time, I would like to remind everybody that in order to ask a question, please press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Chris McGratty with KBW. Your line is open.

Speaker Change: At this time I would like to remind everybody that in order to ask a question. Please press star followed by the number one on your telephone keypad.

Speaker Change: Pause for just a moment to compile the Q&A roster.

Speaker Change: Okay.

Christopher McGratty: Our first question comes from the line of Chris McGratty with KBW; your line. And it's opened.

Our first question comes from the line of Chris Mcgratty with K B W. Your line is open.

Jamie Anderson: Good morning. Jamie, maybe start with the margin question. Obviously, I'll perform expectations this quarter. Your slides show a cumulative beta of 45 on the deposit, 70 on the loan. How are you thinking about NIMM if the forward curve plays out? I think I know you have a September cut, but I know the markets expecting more next year. How you know, obviously we were at that sensitive benefit from the increase in rates over the past, you know, six, eight quarters.

Christopher Edward McGratty: Hi, good morning.

Christopher Edward McGratty: Jamie, maybe start with a margin question, obviously outperform expectations this quarter. Your slides show a cumulative beta of 45 on the deposit, and 70 on the loan.

Christopher Edward McGratty: Jamie Jamie maybe start with the margin question.

Speaker Change: You, obviously outperformed expectations this quarter.

Christopher Edward McGratty: Your slides show a cumulative beta of 45 on the deposit 70 on alone how are you thinking about NIM. If the forward curve plays out I think I know you have a September cut, but I know the market's depth expecting more next year, how do we think about margin into next year.

James Michael Anderson: How are you thinking about NIM if the forward curve plays out? I know you have a September cut, but I know the market's expecting more next year. How do we think about margin in the next quarter? Yeah, so

James Michael Anderson: Yeah, so, obviously, we were asset sensitive and benefited from the increase in rates over the past, you know, six, eight quarters, but when we look at it, and we look at rate cuts, you know, what kind of methodical, you know, 25 basis point rate cuts by the Fed, I mean, the first couple, we think that we're going to have some difficulty reducing deposit costs significantly. I mean, we'll get some relief on some of the more rate-sensitive categories.

Speaker Change: Yeah. So.

Speaker Change: Obviously, we were asset sensitive benefited from the increase in rates over the past.

Speaker Change: Ah.

Speaker Change: <unk>.

Speaker Change: Six to eight quarters, but.

Jamie Anderson: But, so when we look at it and we look at rate cuts, you know, what kind of a methodical, you know, 25 basis point rate cuts by the Fed. I mean, the first couple, we think that we're going to have some difficulty reducing the deposit cost significantly. I mean, we'll get some relief on some of the more rate-sensitive categories. So we think that the first cut or two impacts the margin a little bit more significantly than the ones going forward. So the first couple of rate, 25 basis point rate cuts, we think we get about an eight, nine basis point decline in the margin and then going forward from that, we're going to get like a five or six basis point decline in the margin in the subsequent cuts.

Speaker Change: So when we look at it and we look at rate cuts you know what kind of a methodical.

Speaker Change: 25 basis point rate cuts by the fed and in the first couple we think that we.

Speaker Change: We're going to have.

Speaker Change: Some difficulty reducing deposit costs significantly I mean, we will get some relief on some of the more rate sensitive categories. So we think that the first.

James Michael Anderson: So we think that the first cut or two impacts the margin a little bit more significantly than the ones going forward. So the first couple of 25 basis point rate cuts, we think we get about an eight, nine basis point decline in the margin. And then going forward from that, we're going to get like a five or six basis point decline in the margin on the subsequent cuts. We just think the first couple of cuts; it's going to be difficult to get the full impact on the deposit side.

Speaker Change: Cut or two impacts the margin a little bit more significantly than the ones going forward. So the first couple of rate 25 basis point rate cuts, we think we get about a nine basis point.

Speaker Change: A decline in the margin and then going forward from that.

Speaker Change: We're going to get like a five or six basis point decline in the margin.

Speaker Change: And the and the subsequent cuts we this thing the first couple of times, it's going to be difficult to get the full impact on the.

Jamie Anderson: We just think the first couple of cuts, it's going to be difficult to get the full impact on the deposit side.

Speaker Change: On the deposit side.

James Michael Anderson: And also, I mean, I would tell you, our strategy at this point is, just given the fact that we've seen some outsized loan growth and the acquisition of agile as well. Over the past two or three quarters, we've been leaning more towards being a little more aggressive on the deposit side and bringing in deposit balances and trying to match that loan growth with deposit growth, even if it's in some of the higher cost buckets.

Jamie Anderson: And also, I mean, I would tell you our strategy at this point is that just given the fact that we've seen some outside loan growth, the acquisition of Agile as well over the past two or three quarters, we've been leaning more towards being a little more aggressive on the deposit side and bringing in deposit balances and having a, and trying to match off that loan growth with deposit growth, even if it's in some of the higher cost buckets.

Speaker Change: And also I mean, I would tell you our strategy at this point is that.

Speaker Change: Just given the fact that we've seen.

Speaker Change: Some of the outsized loan growth the acquisition of agile as well over the past two or three quarters, we've been leaning more towards being a little more aggressive on the deposit side and bringing in.

Speaker Change: Bringing in deposit balances and having a and trying to match off that.

Speaker Change: That loan growth with.

Speaker Change: With deposit growth, even if it's in the <unk>.

Speaker Change: Some of the higher cost buckets.

Speaker Change: Okay.

unknown: That's great. Thanks for that.

Speaker Change: That's great thanks for that.

James Michael Anderson: Great. Thanks for that.

Archie Brown: And, and Archie, maybe a question on capital. You've got, you know, really good capital generation; your CET-1 ratio is pretty solid.

Mark: Mark maybe a question on capital you've got.

Archie M. Brown: And Archie, maybe a question on capital. You've got, you know, really good capital generation. Your CET1 ratio is pretty solid. How are you thinking about potentially using your excess capital and your multiple into 25?

Speaker Change: Really good capital generation your CET one ratios.

Speaker Change: Pretty solid.

Archie Brown: How are you thinking about using potentially using your access capital and your multiple into 25th? Yeah, Chris, primarily I'd say funding the company's growth internally would be first and foremost. Certainly, we just did the dividend increase, but it's those kinds of things.

Speaker Change: How are you thinking about using potentially using your excess capital and your multiple into 'twenty.

Archie M. Brown: Chris, primarily, I'd say funding the company's growth internally would be first and foremost, certainly we just did the dividend increase. But it's those kind of things I don't, I don't think we see a buyback in the near term. And part of this is that we're focused on growing our tangible value, continuing to increase it.

Mark: Yes, Chris primarily I'd say funding the company's growth internally would be first and foremost certainly we just did the dividend.

Speaker Change: Increase.

Speaker Change: But it's those kind of things I don't I don't think we see a buyback in the near term.

Archie Brown: I don't, I don't think we see a buy back in the near term. And part of this is we're focused on growing our tangible value, continuing increases.

Speaker Change: And part of this is we're focused on growing our tangible book value continue to increase it.

Archie Brown: And in terms of traditional bank M&A versus a C income deal, or are you seeing, I think there's a deal this morning, are you seeing more opportunities to grow that way as well? Yeah, Chris, on the, let's maybe talk about bank M&A first. Some conversations happening early stages. I don't, I don't see anything in the near term that would come, but you know, I think there's a little bit more interest in... Scott Crawley, just because of where we are in the cycle and I think especially with some expectations that Rachel Stark to come down and maybe we're approaching a soft landing.

Archie M. Brown: And in terms of traditional bank M&A versus a fee income deal, are you seeing I think there's a deal this morning? Are you seeing more opportunities to grow that way as well?

Speaker Change: And in terms of traditional bank M&A versus a fee income.

Speaker Change: <unk> seen I think there is a deal. This morning are you seeing more opportunities.

Speaker Change: To grow that way as well.

Archie M. Brown: Yeah, Chris, on the list, maybe talk about Bank M&A first. Some conversations are happening in the early stages. I don't I don't see anything in the near term that would come, but you know, I think there's a little bit more interest in discussion just because of where we are in the cycle. And I think, especially with some expectations that rates will start to come down, and you may be approaching a soft landing on the non-bank side. I don't really think we're pursuing any other acquisitions at this time.

Speaker Change: Yeah, Chris on the let's maybe talk about bank M&A first some conversations happening early stages I don't I don't see anything in the near term that would come but I think theres a little bit more interesting.

Speaker Change: Discussions just because of where we are in the cycle.

Speaker Change: Especially with some expectations that.

Speaker Change: The rates will start to come down and maybe we're approaching a soft landing on the non bank side I don't really think we're pursuing any any other acquisitions at this time.

Archie Brown: On the non-bank side, I don't really think we're pursuing any other acquisitions at this time. Okay, and then finally, could you just remind us of your parameters when you look at it even done once in the main source deal, five or six years ago? Well, I mean, they can change over time. I certainly tell you deposit franchises are a lot more important today than they would have been several years ago, but we like in market. We like more density areas, markets, more metro kind of focused areas in our footprint or I would say adjacent to our footprint.

Archie M. Brown: Okay, and then finally, could you just remind us your parameters when you look at it? You haven't done one since the main source deal, you know, five or six years ago.

Speaker Change: Okay, and then finally could you just remind us your parameters when you when you look at it even done one since the main source deal five or six years now.

Archie M. Brown: Well, I mean, you know, they can change over time. I certainly tell you deposit franchises are a lot more important today than they would have been, you know, several years ago, but we like the type of market we like. We like more dense areas in the market, you know, more metro kind of focused areas in our footprint, or I would say adjacent to our footprint.

Speaker Change: Well I mean that can change over time, certainly tell you deposit franchises are a lot more important today than they would have been several years ago, but we.

Speaker Change: We like end market, we like.

Speaker Change: We like.

Speaker Change: More density areas markets more metro kind of focus areas in our footprint or.

Speaker Change: I would say adjacent to our footprint.

unknown: Great, thank you.

Great. Thank you.

Speaker Change: Yep.

Terence McEvoy: Your next question comes from the line of Terry McEvoy with Stephen's Inc. Your line is open.

Speaker Change: Your next question comes from the line of Terry Mcevoy with Stephens, Inc. Your line is open.

Operator: Your next question comes from the line of Terry McEvoy with Stevens Inc. Your line is open.

Terence McEvoy: Hi, thanks.

Terence James McEvoy: Hi, Thanks, good morning, everybody.

Jamie Anderson: Good morning, everybody. Maybe you have a question for you. I'm just back on the margin. You said kind of sensitivity to the deposit mix over the near term.

Speaker Change: Terrific question for you.

Terence James McEvoy: Back on the margin you said kind of sensitivity to the deposit mix over the near term just wondering what your thoughts are on the noninterest bearing balances over the course of the year and B any early insight into the third quarter and whether you've done the loan growth with higher costing deposits.

Jamie Anderson: I'm just wondering about your thoughts on the non-interest bearing balances over the course of the year and maybe any early insight into the third quarter and what do you fund the long growth with higher costing deposits? Yeah, I think, I mean, if you look at the chart and the deck in terms of deposit costs, I mean, we really started to see that the pressure on the deposit costs aside significantly in the last couple of months of the quarter. We saw maybe two or three basis points in those months. So we're really starting to see both the from a cons perspective and the momentum that we were seeing from a mixed shift, both of those subside pretty significantly.

James Michael Anderson: Yeah, I think, I mean, if you look at the chart and the deck in terms of deposit costs, I mean, we really started to see that the pressure on deposit costs slid significantly in the last couple of months of the quarter. We saw, you know, maybe two or three basis points in those months. So we're really starting to see both the cost perspective and the momentum that we were seeing from a mixed shift both of those subside pretty significantly. So we think we're, you know, at or near.

Speaker Change: Yeah I think.

Speaker Change: If you look at the.

Speaker Change: The chart in the deck in terms of deposit costs I mean, we really started to see.

Speaker Change: That the pressure on deposit costs subside.

Speaker Change: Significantly in the last couple of months of the quarter.

Speaker Change: So maybe two or three basis points in those months. So we're really starting to see both the.

Speaker Change: From a cost perspective and and the.

Speaker Change: Momentum that we're seeing from a.

Speaker Change: Mix shift both of those subside pretty significantly. So we think we are at or near the bottom in terms of noninterest.

Jamie Anderson: So we think we're at or near the bottom in terms of non-interest-bearing balances and especially the percentage of non-interest-bearing the total deposit somewhere in that load. As we are projecting that those were going to drop somewhere in the low 20s and were at 22% now. So I think that we fit the bottom there or close to it, but going forward, yes.

Speaker Change: Noninterest bearing balances and especially the the percentage of noninterest bearing to total deposit somewhere in that load.

Speaker Change: First as we are projecting that those were going to.

Speaker Change: Drops somewhere in the low Twenty's and we're at 22% now so I think.

Speaker Change: That we've hit the bottom there or close to it.

Speaker Change: But.

Speaker Change: Going forward, yes, I mean, we are we are looking to and you can see the outlook our deposit for the back half of the year our loan our loan growth projections are.

Jamie Anderson: I mean, we are looking to, and you can see the outlook, our deposit for the back half of the year. Our loan growth projections are soft and from, you know, from what we were seeing in the first half, which were relatively strong. So we are looking to fund that growth going forward here, especially over the next two, three quarters from the deposit side and not the borrowing side. But understanding that some of that might be, you know, the mix of that might be a little bit on the higher cost side and, you know, in cities and money market accounts.

Speaker Change: Soften from from what we were saying in the first half which were relatively strong. So we are looking to fund that growth going forward here, especially over the next two to three quarters from.

Speaker Change: From the deposit side and not the borrowing side, but but understanding that some of that might be the mix of that might be a little bit on the.

Speaker Change: On the higher cost side, and the Cds and money market accounts.

unknown: Perfect.

James Michael Anderson: Perfect. Thanks for that, Jamie. And as a follow-up, just the transportation sector keeps coming up this earnings season when discussing credit. Any comments on your transportation C&I portfolio or within Summit and whether you're seeing any stress there or just just taking a step back from any segments within C&I you're monitoring and keeping a close eye on? Yeah.

Speaker Change: Perfect. Thanks for that Jamie and as a follow up just the transportation sector keeps coming up this earning season when discussing credit any comments on your transportation C&I portfolio or within summit and whether you're seeing any stress. There just just taking a step back.

Jamie Anderson: Thanks for that, Jamie. And as a follow-up, just the transportation sector keeps coming up this earnings season when discussing credit. Any comments on your transportation, C&I portfolio or within Summit and whether you see any stress there or just taking a step back, any segments within C&I or monitoring and keeping your close eye on.

Speaker Change: Many segments within C&I, you're monitoring and keeping a close eye on.

William Harrod: Yeah, we are watching the transportation sector very closely, as most of our most banks are. This was some of the challenges that they've been facing here too for. We haven't had any material issues, and overall we feel pretty good about the book, but there is some stress, especially in some of the smaller and some of the larger trucking companies out there, but our exposure is manageable.

James Michael Anderson: Yeah, we are watching the transportation sector pretty closely, as most of our banks are just with some of the challenges that they've been facing heretofore. You know, we haven't had any material issues. And overall, we feel pretty good about the book. But there is some stress, especially in some of the smaller and some of the larger trucking companies out there, but our exposure is manageable.

Speaker Change: Yes.

Speaker Change: We are watching the transportation sector very closely.

Speaker Change: As most of our most banks are just with some of the challenges that they've been facing here to fore.

Speaker Change: We haven't had any material.

Speaker Change: Issues and overall, we feel pretty good about the book.

Speaker Change: But there is some stress, especially in some of the smaller than some of the larger.

Speaker Change: Trucking companies out there, but our exposure is manageable.

Speaker Change: Yes.

Speaker Change: Okay.

unknown: Thanks for taking my questions. Thanks, Terry.

Operator: Thanks for taking my questions.

Speaker Change: Thanks for taking my questions.

Jerry: Thanks, Jerry Thanks Terry.

Daniel Tamayo: Your next question comes from the line of Daniel Tamayo with Raymond James. Your line is open.

Speaker Change: Your next question comes from the line of Daniel Tamayo with Raymond James Your line is open.

Daniel Tamayo: Your next question comes from the line of Daniel Tamayo with Raymond James. Your line is open.

Daniel Tamayo: Hey, good morning, guys. I know you talked a little bit about this. I apologize if this question has been asked. But the long growth guidance down, you know, you mentioned seasonally strong Agile in the second quarter. So I get that part, but anything else that's driving that, I mean, is it more of a normalization?

Daniel Tamayo: Hey, good morning, guys. Thanks for my questions. I know you talked a little bit about this, so I apologize if this question has been asked already. I jumped on late.

Daniel Tamayo: Hey, good morning, guys.

Daniel Tamayo: But anyway my questions.

Archie M. Brown: But the loan growth guidance down, I heard you mention seasonally strong and agile in the second quarter. So I get that part, but anything else that's driving that? I mean, is it more of a normalization? I'm just curious, I guess, on the commercial side, how pipelines look and how we should think about loan growth over the next several quarters. I know it's not official guidance, but if you take a step back and think about what opportunities you might have over the next several quarters, it might be helpful. Yeah, Danny, this is Archie.

Speaker Change: I know you talked a little bit about this.

Speaker Change: I apologize if this question's been asked I jumped on late but.

Speaker Change: But the loan growth.

Speaker Change: Guidance down.

Speaker Change: You mentioned seasonally strong.

Speaker Change: While in the second quarter, so I get that part but.

Speaker Change: Anything else, that's driving that I mean is it more of a normalization.

Daniel Tamayo: Just curious, kind of, I guess, on the commercial side, you know, how pipelines look and how we should think about, you know, long growth of the next several quarters.

Speaker Change: Just curious kind of I guess on the commercial side.

Speaker Change: How pipelines look in.

Speaker Change: How we should think about.

Speaker Change: Loan growth over the next several quarters.

Daniel Tamayo: And it's not the official guidance, but kind of if you take a step back and think about what opportunities for you might be over the next several quarters to be helpful.

Speaker Change: The official guidance, but kind of a few.

Speaker Change: Take a step back and think about what.

Speaker Change: Opportunities for you might be over over the next several quarters ago.

Archie Brown: Yeah, Danny, this is Archie.

Archie M. Brown: Yes, Danny this Archie.

Archie Brown: We've had a couple of really strong quarters in long growth, and it's been a combination of some decent production, but also much lower than normal pay off activity, especially in our commercial real estate portfolio. So that's buoyed at some, as we look forward, pipelines, I would say soft and some in the mid part of the second quarter; they seem to be strengthening back now. But that, you know, that'll create a little bit of building that back back into production in the back half. So that that's a piece we mentioned agile will, they're big part of the years early to mid part.

Archie M. Brown: Yeah, we've had a couple of really strong quarters in loan growth. And it's been a combination of some, you know, decent production, but also much lower than normal payoff activity, especially in our commercial real estate portfolio. So that's buoyed to some extent. As we look forward, pipelines, I would say, softened some in the mid part of the second quarter. They seem to be strengthening back now, but that will create a little bit of a build-up to get that back into production in the back half. So that's another piece.

Danny: Yes, we've had a couple of really strong quarters and loan growth and it's been a combination of some decent production.

Speaker Change: <unk>, but also much lower than normal payoff activity, especially in our commercial real estate portfolio.

Speaker Change: So thats buoyed it some as we look as we look forward pipelines I would say soft in some in the mid part of the second quarter they seem to be strengthening back now.

Speaker Change: But that that will create a little bit of building that back back into production in the back half. So that's a piece we mentioned agile.

Archie M. Brown: We mentioned Agile. Well, their big part of the year is the early to mid part, so that'll flatten out for most of the back half of the year. And we are anticipating more payoffs. Commercial real estate, we're starting to see some late in the quarter. We'll see more in Q3. In our Oak Street unit, we've got a few large payoffs that we're expecting to come in the back half of the year. So that payoff activity is just a little bit stronger when combined with Agile.

Speaker Change: They are big.

Speaker Change: Part of the year as of early to mid part so that will flatten out for most of the back half of the year and we are anticipating more payoffs of commercial real estate, we're starting to see we start to see some late in the quarter. We will see more Q3, our Oak Street unit. We've got a few large payoffs that were expecting to come in the back half of the year, so that payoff activity, just a little bit stronger.

Archie Brown: So that'll flatten out for most of the back half of the year. And we are, it's been a more pay off commercial real estate. We start to see some late in the quarter. We'll see more Q3 are Oak Street unit. We've got a few large payoffs that we're expecting to come in the back half of the year. So that pay off activity just a little bit stronger combined with agile. And I would say on the CRE site still that production is a little bit lower than it has typically been. And you can imagine just the market with rates where they are; the market's a little softer.

Speaker Change: Combined with agile and I would say on the CRE side still that production is a little bit lower than it has typically been and you can imagine.

Archie M. Brown: And I would say on the CRE side, still, that production is a little bit lower than it has typically been, just, you know, the market with rates where they are, the market's a little softer, and we're probably a little bit more selective there in the current environment.

Speaker Change: Just the.

Speaker Change: The market with rates, where they are the markets will softer and we're probably a little bit.

Archie Brown: And we're probably a little bit more selected there in the current environment.

Speaker Change: More selective there in the current environment.

Okay.

unknown: Okay, thanks Archie.

Archie M. Brown: Okay. Thanks, Archie. And then... And then maybe on the expense side, you guys have done a really good job of managing expenses despite this good revenue growth and balance sheet growth. I'm just curious where you've been able to, you know, pull out the FTEs or identify cost savings opportunities in this environment, and, you know, just... As you've been going through that, just curious how that's been going, if you've had any issues or identified any kind of areas that you need to invest in as you think about continued growth over the next few years.

Speaker Change: Okay. Thanks, and then.

Daniel Tamayo: And then. And then maybe on the expense side, you guys have done a really good job of managing expenses despite this good revenue growth and balance. I'm just curious where you've been able to pull out the FTEs or identify cost savings opportunities in this environment.

Speaker Change: And then maybe on the expense side you guys have done a really good job of.

Speaker Change: Managing expenses despite this.

Speaker Change: Good revenue growth and balance sheet growth I'm, just curious where you've been able to.

Speaker Change: Pull out the ftes or identify cost savings opportunities.

Speaker Change: In this environment.

Archie Brown: Just as you've been going through that, just curious how that's been going, if you've had any issues or identified any kind of areas that you need to invest as you think about continued growth of your experience. Yeah, Danny, we've talked a little about this in both quarters, so it's maybe a good question for us to talk a little bit more about it. First, we view this good expense control and management as part of what we need to always be doing. But if you think about what's happened in recent years, the industry, but certainly us, have invested heavily in great technologies and tools, and we believe have created a significant amount of capacity in the system.

Speaker Change: Just.

Speaker Change: As you've been going through that just curious how that's been going if you've had any issues.

Speaker Change: Identified any kind of areas that you need to invest as you think about continued growth over the next few years.

Archie M. Brown: Yeah, Danny, we've talked a little bit about this in both quarters, so it's a good question for us to talk a little bit more about it. You know, we view that good expense control and management is just part of part of what we need to always be doing. But if you think about what's happened in recent years, the industry, but certainly us, have invested heavily in great technologies and tools, and we believe we have created a significant amount of capacity in the system.

Speaker Change: Danny.

Speaker Change: We've talked to a little bit about this in both quarters.

Speaker Change: Maybe a good question for us to talk a bit more about it.

Speaker Change: First we.

Speaker Change: We view this as good expense control and management as part of part of what we need to always be doing but if you think about what's happened in recent years the industry, but certainly also have invested heavily in great technologies and tools.

Speaker Change: And we believe have created a significant amount of capacity in the system.

Archie M. Brown: So we embarked on, we did some late last year, some, I guess I'd call them beta testing in an area or two to really do, we call it, almost like a desk-to-desk review of all our production areas and support areas. We started with a group or two, kind of a proof of concept on what we were trying to do. And we identified excess capacity that we could take out of the system. And now we're going through a methodical review throughout the whole company.

Archie Brown: So we embarked; we did some late last year, I guess I call them beta testing in an area or two. To really do, we call it almost like desk to desk review of all our production areas in support areas. We started in a group or two, kind of proof of concept on what we were trying to do, and we identified access capacity that we could take out of the system, and now we're going through a methodical review throughout the whole company. It's more of been in the support areas at this point, but before we're done, which we hope will be through this work by the end of the year, we'll have touched all or most of the company. To date, we're about 35 to 40% through the work, and I'm not sure that the same numbers will hold up through the rest of the process because we'll get into some areas that we think don't have as much capacity. But we're going to keep doing that work in each quarter as we go through it. We'll update certainly all of you and all of the other stakeholders on the progress that we're making.

Speaker Change: So we embarked we did some.

Speaker Change: Late last year, some I guess I'd call them beta testing in an area or two to really do kind of we call. It almost like desk desk to des review of all our production areas and support areas. We started in a group or two.

Speaker Change: <unk>.

Speaker Change: Proof of concept on what we were trying to do and we identified excess capacity.

Speaker Change: That we could take out of the system and now we're going through a methodical review throughout the whole company. It's more have been in the support areas at this point, but before we're done which we hope will be through this work by the end of the year, we will have touched.

Archie M. Brown: It's mostly in the support areas at this point, but before we're done, which we hope will be through this work by the end of the year, we'll have touched all or most of the company. To date, we're about 35 to 40% through the work. And I'm not sure that the same numbers will hold up through the rest of the process because we'll get into some areas that we think don't have as much capacity, but we're going to keep doing that work, and each quarter, as we go through it, we'll certainly update all of you and all of the other stakeholders on the progress.

Speaker Change: All or most of the company.

Speaker Change: To date, we're about 35% to 40% through the work.

Speaker Change: And I'm not sure that the same numbers will hold up through the rest of the process because we will get into some areas that we think don't have as much capacity, but we're going to keep doing that work in each quarter as we go through it we will update to certainly all of you.

Speaker Change: All of the other.

Speaker Change: Stakeholders on the progress that we're making.

James Michael Anderson: And Danny, just to jump in as well, this is Jamie. What that has also allowed us to do is, you know, we were able to essentially absorb the expenses with Agile through that, and the expense base didn't go up a lot, and also use those savings to invest in other areas that will help us grow in the future. So the office in Cleveland... To Jamie's point, we have opened a couple offices, commercial banking offices, added

Jamie Anderson: And Danny, just to jump in as well to Jamie, what that has also allowed us to do is we were able to essentially absorb the expenses with agile through that, and the expense base didn't go up a lot, and also use those savings to invest in other areas that will help us grow in the future. The Jamie's point, we have opened a couple of offices, commercial banking offices, added a few other salespeople in our wealth group, and still been able to keep it a little in the expenses.

Danny: And Danny just to jump in as well as Jamie I mean, what that has also allowed us to do is we were able to essentially absorb the expenses with agile through that and the expense base didn't go up a lot and also use those savings to invest in other areas that we.

Lee: Will help us grow in the future. So yes, so Lee office in Cleveland Jamie's point, we have opened a couple offices commercial banking offices added a few other salespeople in our wealth group and still been able to keep a lid on the expenses.

unknown: Yep, now I, it's certainly showing through, so I appreciate all that color. Thanks. Thanks, Danny.

Daniel Tamayo: Yep, no, it's certainly showing through, so I appreciate all that color. Thanks. Thanks, Fannie.

Danny: Yes.

Speaker Change: Certainly showing through so I appreciate all that color. Thanks.

Danny: Thanks Danny.

John Arthstrom: As a reminder to ask a question, please press star, followed by the number one on your telephone keypad. Our next question comes from the line of John Arthstrom with RBC.

Operator: As a reminder, to ask a question, please press star followed by number one on your telephone keypad. Our next question comes from the line of John Arfstrom with RBC. Your line is open. Good morning, guys.

Speaker Change: As a reminder to ask a question. Please press star followed the number one on your telephone keypad.

Speaker Change: Our next question comes from the line of John Armstrong with RBC. Your line is open.

John Arthstrom: Your line is open. Good morning, guys.

John Armstrong: Good morning, guys Hey.

Jamie Anderson: Hey, John. On Chris McGratt's question about the margin coming down, afraid to come down, can you talk about how you expect the fee businesses to perform if short rates come down? Do you think that will have any kind of an impact on maybe some improvement there? John, maybe slightly, we think if, you know, Bannockburn has shown in multiple rate environments at this point that they can generate income with their clients. So we think they'll continue to perform effectively. Leasing volumes are strong. We'll continue to see the leasing income side grow, I think in even a different rate environment.

Josh: Hey, Josh.

John Armstrong:

Jon Glenn Arfstrom: on Chris McGratty's question about the margin coming down, if rates come down, can you talk about how you expect the feed businesses to perform if short rates come down? Do you think that will have any kind of an impact on maybe some improvement there?

Speaker Change: On Christmas <unk> question about.

John Armstrong: The margin coming down if rates come down can you can you talk about how you expect the fee businesses to perform shortly.

Speaker Change: Short rates come down do you think that will hubs.

Speaker Change: I have an impact on maybe some improvement there.

Speaker Change: John.

Speaker Change: Yes, maybe slightly up.

James Michael Anderson: Yeah, maybe slightly. We think, you know, BannockBurn has shown in multiple rate environments to this point that they can generate income with their clients. So we think they'll continue to perform effectively because leasing volumes are strong. We'll continue to see the leasing income side grow, I think, in even, you know, a different rate environment, maybe even more. And then on the mortgage side, it's really going to depend on what happens more in the 10-year part of the curve, but we would expect a little bit of an increase maybe on the mortgage side.

Speaker Change: We think.

Speaker Change: <unk> burn as shown in multiple.

Speaker Change: Rate environment. This point that they can generate.

Speaker Change: Come with their clients.

Speaker Change: So we think they'll continue to perform effectively.

Speaker Change: Leasing volumes were strong we will continue to see the leasing income side grow I think and even at a different rate environment, maybe even more.

Jamie Anderson: Maybe even more. And then on the mortgage side, it's really going to depend on probably what happens more in the junior part of the curve, but we would expect a little bit of an increase, maybe on the mortgage side. You know, if the markets hold up, wealth is going to continue. We've put a lot of investment in our wealth group, and we think they're going to continue to just incrementally make improvements as we go forward.

Speaker Change: And then on the mortgage side, it's really going depend on probably what happens more in the senior part of the curve, but we would expect a little bit of increase maybe on the mortgage side.

James Michael Anderson: You know, if the markets hold up, wealth is going to continue. We put a lot of investment in our wealth group, and we think they're going to continue to just incrementally make improvements as we go forward. So those are the big areas.

Speaker Change: If the markets hold up wealth is going to continue we've put a lot of.

Speaker Change: Investment in our wealth group and we think Theyre going to continue to just incrementally make improvements as we go forward.

Jamie Anderson: I think those are the big areas. You touched on leasing. It's obviously been very strong. It feels like it's a little bit different than the commercial outlook.

Speaker Change: So those are the big areas, yes, okay.

James Michael Anderson: You touched on leasing. It's obviously been very strong. It feels like it's a little bit different than the commercial outlook. Can you could you just talk a little bit about the pipelines and leasing and what you're seeing there? Is it market activity or market share? What is it?

Speaker Change: You touched on leasing.

Speaker Change: It's obviously been very strong.

Speaker Change: It feels like it's a little bit different than the commercial outlook can you can you just.

Jamie Anderson: Can you just talk a little bit about the pipelines and leasing and what you're seeing there? Is it market activity or market share or what is it? Well, they're on a more of a national platform, and they've got salespeople throughout the country and other connections that you know how they do business. So we do get a lens into maybe things more broadly, and things are pretty healthy, especially in I would say larger companies, and they tend to do a lot of business and larger companies. So pipelines are good. If anything, we're probably restraining the ability to originate there a little bit in the environment where we're focused more on funding.

Speaker Change: Talk a little bit about the pipelines are facing and what youre seeing there is it market activity or market share or what is it.

James Michael Anderson: Well, you know, they're on more of a national platform, and they've got salespeople throughout the country and other connections that you know how they do business. So we do get a lens into maybe things more broadly, and things are pretty healthy, especially in, I would say, larger companies, and they tend to do a lot of business with larger companies. So pipelines are good.

Speaker Change: Well they are there on a more of a national platform.

Speaker Change: And they've got salespeople throughout the country.

Speaker Change: And other connections.

Speaker Change: But how they do business.

Speaker Change: So we do get a lens into maybe things more broadly in <unk>.

Pretty healthy, especially in I would say larger larger companies. They tend to do a lot of business a larger company. So our pipelines are good and if anything we're probably restraining the ability to originate there a little bit in the environment, where we're focused more on funding.

James Michael Anderson: If anything, we're probably restraining the ability to originate there a little bit in the environment where we're focused more on funding. We do also, if you just look back last year, we've had a couple of year ends now with them, and they will see that their strongest amount of origination activity occurs in the back part of the year, especially in that fourth quarter. So, that will pick up; I think we said low single-digit growth in the near term. Not sure what the fourth quarter looks like, but they'll certainly have a strong fourth quarter.

unknown: We do also, if you just look back last year, we've had a couple of years now with them. They will see their strongest amount of regeneration activity occurs in the back party, especially in that fourth quarter. So that will pick up that. I think we said low single-digit growth in the near term. Not sure what fourth quarter looks like, but they'll certainly have a strong quarter. Okay. Good.

Speaker Change: We do also if you just look back last year, we've had a couple of your inch now with them they will see.

Speaker Change: They're strongest amount of origination activity occurs in the back part of your especially in that fourth quarter. So that will pick up that will.

Speaker Change: We said low single digit growth in the near term.

Speaker Change: Not sure what fourth quarter looks like but they will certainly have a strong fourth quarter.

William R. Harrod: Okay, good. That helps. And then, Bill, can you talk a little bit more about the downgrades? And we probably know what the themes are, but any other themes? And then, should we expect the classified increases to continue for the next few quarters? Thanks.

Speaker Change: Okay. Good that helps.

unknown: That helps.

William Harrod: And then Bill, can you just talk a little bit more about the downgrades and that we probably know what the themes are, but any any themes? And then should we expect the classified increases to continue for the next few quarters? Thanks. Yep. So the downward credit migration in the classified bucket was driven by two multi-family and two C and I credits. The first multi-family deal is currently under L.O.I. The other experience has experienced conversion and stabilization delays. The two C and I credits are both longtime customers, 20 plus years, that are just navigating through some shifts in the respective markets.

Speaker Change: And then Bill can you just talk a little bit more about the downgrades, we probably know what the themes are but any any themes in that.

Speaker Change: Should we expect to classified increases to continue for the next few quarters. Thanks.

William R. Harrod: Yeah, so the downward credit migration in the classified bucket was driven by two multifamily and two C&I credits. The first multifamily deal is currently under LOI. The other has experienced conversion and stabilization delays. The two C&I credits are both longtime customers, 20 plus years, that are just navigating through some shifts in their respective markets, and you know we think there's reasonable solutions for all of them and as we we look out we do expect our class size to remain stable looking at our special mentions for the quarter they were down a little flat and so that kind of you know that's kind of what we're looking at at this point you know kind of stable.

Speaker Change: Yes.

William R. Harrod: So the downward credit migration in the classified bucket was driven by two multifamily two C&I credits. The first multifamily deal is currently under LOI.

William R. Harrod: The other is experience has experienced conversion and stabilization delays.

William R. Harrod: The two C&I credits.

William R. Harrod: Our both longtime customers 20 plus years.

William R. Harrod: That are just navigating through some shifts in the respective markets.

William R. Harrod: And we think theres reasonable solutions for all of them and as we look out we do expect our classifieds. It remained stable looking at our special mention for the quarter. They were down a little flat and so that kind of that's kind of what we're looking at at this point.

William Harrod: And you know, we think there's reasonable solutions for all of them. And as we look out, we do expect our class sizes remain stable. Looking at our special mentions for the quarter, they were down a little flat. And so that kind of, you know, that's kind of what we're looking at at this point, you know, kind of safe. Yeah. Okay. All right. Thanks, guys. Appreciate it. Thanks, John.

William R. Harrod:

William R. Harrod: Savings.

Speaker Change: Okay Alright.

Jon Glenn Arfstrom: All right, thanks guys. I appreciate it.

Speaker Change: Alright, Thanks, guys I appreciate it.

Jon Glenn Arfstrom: Thanks, John. Thanks, John.

Speaker Change: Thanks, John and thanks, John.

Archie Brown: There are no further questions at this time.

Archie M. Brown: There are no further questions at this time. I would like to turn the call back over to Brown for some closing remarks.

Speaker Change: There are no further questions at this time I would like to turn the call back over to Brown for some closing remarks.

Archie Brown: I would like to turn a call back over to Brown for some closing remarks. I want to thank everybody for joining today and hearing our story for the quarter. We look forward to talking with you again next quarter. Have a great Friday, great weekend.

Archie M. Brown: I want to thank everybody for joining us today and hearing our story for the quarter. We look forward to talking with you again next quarter. Have a great Friday, and a great weekend. Bye now.

Brown: I want to thank everybody for joining today and hearing our story for the quarter. We look forward to talking with you again next quarter have a great Friday, great weekend Bye now.

Operator: Bye now.

Operator: This concludes today's conference call. You may doubt it's connect.

Operator: This concludes today's conference call. You may now disconnect. Have a good day.

Speaker Change: This concludes today's conference call you may now disconnect.

Operator: Have a good day. All right.

Right.

Speaker Change: Okay.