Q3 2026 ServisFirst Bancshares Inc Earnings Call

October 19, 2026

Speaker #1: Bill Sparacio.

Operator: Greetings. Welcome to the ServisFirst Bancshares third quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Mr. Davis Mange, Treasurer. Thank you. You may begin.

Operator: Greetings. Welcome to the ServisFirst Bancshares Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.

Speaker #2: Greetings. Welcome to the ServisFirst Bancshares Q3 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Speaker #2: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to Mr. Davis Mange, Treasurer.

Operator: I will now turn the conference over to Mr. Davis Mange, Treasurer. Thank you. You may begin.

Speaker #2: Thank you. You may begin.

Davis Mange: Good afternoon, and welcome to our third quarter earnings call. We will have Tom Broughton, our CEO, Jim Harper, our Chief Credit Officer, and David Sparacio, our CFO, covering some highlights from the quarter. Then we will take your questions. I will now cover our forward-looking statements disclosure. Some of the discussion in today's earnings call may include forward-looking statements. Actual results may differ from any projections shared today due to factors described in our most recent 10K and 10Q filings. Forward-looking statements speak only as of the date they are made. ServisFirst assumes no duty to update them. With that, I will turn the call over to Tom.

Speaker #3: Good afternoon, and welcome to our third quarter earnings call. We'll have Tom Broughton, our CEO; Jim Harper, our Chief Credit Officer; and David Sparacio, our CFO, covering some highlights from the quarter.

Speaker #3: Then we'll take your questions. I'll now cover our forward-looking statements disclosure. Some of the discussion in today's earnings call may include forward-looking statements. Actual results may differ from any projection shared today due to factors described in our most recent 10-K and 10-Q filings.

Davis Mange: I will now cover our forward-looking statements disclosure. Some of the discussion in today's earnings call may include forward-looking statements. Actual results may differ from any projections shared today due to factors described in our most recent 10K and 10Q filings. Forward-looking statements speak only as of the date they are made. ServisFirst assumes no duty to update them.

Speaker #3: Forward-looking statements speak only as of the date they are made. ServisFirst assumes no duty to update them. With that, I'll turn the call over to Tom.

Davis Mange: With that, I will turn the call over to Tom.

Tom Broughton: Thank you, Davis. Good afternoon, and thank you for joining our third quarter conference call. I will give you a few quick highlights of the quarter, followed by Jim Harper, our Chief Credit Officer, and then David Sparacio, our Chief Financial Officer. On the loan side, while the growth in the loan book was lower than we would like, we think it was a combination of unexpected payoffs and loans not closing as expected during the quarter. We did see some low fixed rate loans pay off in the quarter, which is always good for our EPS. So that is very much positive. We did see some good growth in C&I loans in the third quarter, which is very positive and like seeing that.

Speaker #4: Thank you, Davis. Good afternoon, and thank you for joining our third quarter conference call. I'll give you a few quick highlights of the quarter.

Speaker #4: Followed by Jim Harper, our Chief Credit Officer, and Davis Sparacio, our Chief Financial Officer. On the loan side, while the growth in the loan book was lower than we would like, we think it was a combination of unexpected payoffs and loans not closing as expected.

Tom Broughton: On the loan side, while the growth in the loan book was lower than we would like, we think it was a combination of unexpected payoffs and loans not closing as expected during the quarter. We did see some low fixed rate loans pay off in the quarter, which is always good for our EPS. So that is very much positive. We did see some good growth in C&I loans in the third quarter, which is very positive and like seeing that.

Speaker #4: During the quarter, we did see some low fixed-rate loans pay off, which is always good for our earnings per share. So that's very much a positive.

Speaker #4: We did see some good growth, and we'll see it in our loans in the third quarter, which is very positive and we'd like to see that.

Tom Broughton: On the loan pipeline, I went back and looked at the pipeline 3 months ago, and it was very solid and it was at record levels, but 40% of the total pipeline was over 90 days. In this quarter, the total pipeline less than 90 days is up 58% over last quarter. So we think that is a good indicator of future closings over the next few months. We do see that our Houston pipeline continues to build. We have a large, we are talking about it, large group of bankers out there. They are doing a great job and getting off to a good start. On the deposit side, we did allow some large municipal deposits to roll off in the quarter due to rate competition. The rate competition is primarily coming from GSIB banks rather than regional banks.

Tom Broughton: On the loan pipeline, I went back and looked at the pipeline three months ago, and it was very solid and it was at record levels, but 40% of the total pipeline was over 90 days. In this quarter, the total pipeline less than 90 days is up 58% over last quarter. So we think that is a good indicator of future closings over the next few months. We do see that our Houston pipeline continues to build. We have a large, we are talking about it, large group of bankers out there. They are doing a great job and getting off to a good start. On the deposit side, we did allow some large municipal deposits to roll off in the quarter due to rate competition. The rate competition is primarily coming from GSIB banks rather than regional banks.

Speaker #4: On the loan pipeline, I went back and looked at the pipeline three months ago, and it was very solid. It was at record levels, but 40% of the total pipeline was over 90 days.

Speaker #4: So, in this quarter, the total pipeline, less than 90 days, is up 58% over last quarter. We think that is a good indicator of future closings over the next few months.

Speaker #4: We do see that our Houston pipeline continues to build. We have a large we're talking about it's a large group of bankers out there.

Speaker #4: They're doing a great job getting off to a good start. On the deposit side, we did allow some large municipal deposits to roll off in the quarter.

Speaker #4: Due to rate competition, and the rate competition is primarily coming from GCO banks rather than regional banks, we couldn't compete at that rate and chose not to compete.

Tom Broughton: We couldn't compete at that rate and chose to not compete. We do have some deposit initiatives underway and expect good results in Q4. We have emphasized non-interest-bearing deposits, and we have seen good growth year-over-year of 12% in non-interest-bearing deposits. That's a positive for the bank. We did add six new bankers during the quarter, including two in Houston. As I mentioned, we have 22 bankers there now, and it's the largest startup in our history, even larger than when we started the Birmingham bank. It's very much a work in progress, but we're very optimistic about the future there. We do expect the startup losses to begin to decline over the next few quarters as they do have a solid loan and deposit pipeline. With that, I'll turn it over to Jim Harper for a credit update.

Speaker #4: We do have some deposit initiatives underway and expect good results in the fourth quarter. We have emphasized non-interest-bearing deposits, and we have seen good growth year over year of 12% in non-interest-bearing deposits.

Speaker #4: So that's a positive for the bank. We did add six new bankers during the quarter, including two in Houston. As I mentioned, we have 22 bankers there now, and it's the largest startup in our history—even larger than when we started the Birmingham bank.

Speaker #4: So it's very much a work in progress, but we're very optimistic about the future there. We do expect the startup losses to begin to decline over the next few quarters, as they do have a solid loan and deposit pipeline.

Speaker #4: So with that, I'll turn it over to Jim Harper for a credit update.

Jim Harper: Good afternoon. As Tom mentioned, Q3 loan growth was muted relative to Q2 2026 performance, as we ended the quarter with just over $14.7 billion in outstanding loans versus just under $14.5 billion in loans at 30 June 2026. However, those figures did represent loan growth year to date of over $1 billion and produced an annualized growth rate of 10%. Anecdotally, loan activity does seem to have picked up in recent weeks, so early indications are that we're on pace to finish the year strong. On the topic of payoffs, we did experience higher payoffs in Q3 versus Q2.

Speaker #5: Good afternoon. As Tom mentioned, third quarter loan growth was muted relative to second quarter 2026 performance. We ended the quarter with just over $14.7 billion in outstanding loans, versus just under $14.5 billion in loans at 6/30/26.

Speaker #5: However, those figures did represent loan growth year-to-date of over $1 billion and produced an annualized growth rate of 10%. Anecdotally, loan activity does seem to have picked up in recent weeks.

Speaker #5: So, early indications are that we're on pace to finish the year strong. On the topic of payoffs, we did experience higher payoffs in the third quarter versus the second quarter.

Jim Harper: While we do our best to handicap expected payoff activity on a forward-looking basis, given the uneven nature of payoffs over the course of this year and the current rate environment, it continues to be challenging to pin down a reliable estimate of payoff activity. Turning to credit quality, while total non-performing assets increased slightly on a quarter-over-quarter basis, non-accrual loans decreased by approximately $9.6 million during the quarter to $161.8 million. The net decline in non-accruals was driven by the successful resolution of two problem credits during the quarter, as well as the movement of two loans into our OREO portfolio. Lastly, I'll address net charge-offs and provision activity for the quarter. Charge-offs totaled $7.7 million for Q3 and are $19.8 million year to date, equating to 21 basis points annualized.

Speaker #5: While we do our best to handicap expected payoff activity on a forward-looking basis, given the uneven nature of payoffs over the course of this year and the current rate environment, it continues to be challenging to pin down a reliable estimate of payoff activity.

Speaker #5: Turning to credit quality, while total non-performing assets increased slightly on a quarter-over-quarter basis, non-accrual loans decreased by approximately $9.6 million during the quarter, to $161.8 million.

Speaker #5: The net decline in non-approvals was driven by the successful resolution of two problem credits during the quarter, as well as the movement of two loans into our OREO portfolio.

Speaker #5: Lastly, I'll address net charge-offs and provision activity for the quarter. Charge-offs totaled $7.7 million for the third quarter and are $19.8 million year-to-date.

Speaker #5: Equating to 21 basis points annualized. Regarding provisions, we increased our allowance for loan losses by approximately $7.2 million, to $189 million as of the end of the quarter.

Jim Harper: Regarding provisions, we increased our allowance for loan losses by approximately $7.2 million to $189 million as of the end of the quarter, and that allowance increased slightly to 1.28% of loans, which was up two basis points from June and covers our non-accrual loans 118%, up from 107% last quarter. David's up next with an overview of our quarterly financial performance.

Speaker #5: And that allowance increased slightly to 1.28% of loans, which was up 2 basis points from June, and covers our non-accrual loans 118%, up from 107% last quarter.

Speaker #5: David's up next with an overview of our quarterly financial performance.

David Sparacio: Thank you, Jim, and good afternoon, everyone. Before I get into the numbers, a quick housekeeping note. We completed our two-for-one stock split during the quarter, so every per-share figure that I reference today, including prior periods, is adjusted for that split. The story of Q3 is consistent with what we have been telling you all year. We continue to increase our revenue through asset growth and a wider margin while holding a best-in-class efficiency ratio, and that combination continues to produce top-quartile returns. For Q3 2026, we reported net income of $87.3 million, or $0.80 per diluted share. That compares to $0.78 in Q2, up 2.6% on a linked-quarter basis. Last year's Q3 included a $7.8 million pre-tax loss on securities. Excluding that, adjusted diluted EPS from a year ago, $0.65.

Speaker #2: Thank you, Jim. And good afternoon, everyone. Before I get into the numbers, a quick housekeeping note: We completed our two-for-one stock split during the quarter, so every per-share figure that I reference today—including those from prior periods—is adjusted for that split.

Speaker #2: The story of the third quarter is consistent with what we have been telling you all year. We continue to increase our revenue through asset growth and a wider margin.

Speaker #2: While holding a best-in-class efficiency ratio, that combination continues to produce top-quartile returns. For the third quarter of 2026, we reported net income of $87.3 million, or $0.80 per diluted share.

Speaker #2: That compares to $0.78 in the second quarter, up 2.6% on a linked-quarter basis. Last year's third quarter included a $7.8 million pre-tax loss on securities.

Speaker #2: Excluding that, adjusted diluted EPS from a year ago was $0.65, so on an adjusted basis, we grew earnings per share 23%. For the first nine months of 2026, net income was $256 million, up 28% from adjusted EPS of $1.84 in 2025.

David Sparacio: On an adjusted basis, we grew earnings per share 23%. For the first nine months of 2026, net income was $256 million, up 28% from adjusted EPS of $1.84 in 2025. Pre-provision net revenue was $120.7 million, up 1.8% from Q2 and up 26% from an adjusted pre-provision net revenue a year ago. Net interest income was $159.8 million, up $4.2 million or 2.7% from Q2 and up $26.4 million or nearly 20% from a year ago. Net interest margin was 3.63%, unchanged from last quarter on a GAAP basis. But as you will recall, Q2 included a recovery of interest income from a payoff on a non-accrual relationship, which added about five basis points to margin. Excluding that recovery, our margin expanded about five basis points this quarter, and it is up 54 basis points from 3.09% a year ago.

Speaker #2: Pre-provision net revenue was $120.7 million, up 1.8% from the second quarter and up 26% from adjusted pre-provision net revenue a year ago.

Speaker #2: Net interest income was $159.8 million, up $4.2 million, or 2.7% from the second quarter, and up $26.4 million, or nearly 20%, from a year ago.

Speaker #2: Net interest margin was 3.63%, unchanged from last quarter on a GAAP basis. But as you'll recall, the second quarter included a recovery of interest income from a payoff on a non-accrual relationship, which added about 5 basis points to margin.

Speaker #2: Excluding that recovery, our margin expanded about 5 basis points this quarter, and it is up 54 basis points from 3.09% a year ago. On the asset side, total loan yields were 6.24% compared to 6.23% last quarter.

David Sparacio: On the asset side, total loan yields were 6.24%, compared to 6.23% last quarter. Investment yields were 3.85%, up from 3.82% last quarter and 3.60% a year ago. Securities portfolio was $1.56 billion at quarter end, down nearly $290 million from a year ago. As we continue to deploy portfolio cash flows into loans. As we have mentioned in the past, we continue to have low fixed rate loans repricing in the next 12 months. We currently have about $1.5 billion of loans with a weighted average yield of 5.08%. Plus, we have a normal cash flow and covenant violation flow that allow us to gain yield in our loan portfolio. Additionally, we are restructuring some securities and other non-lending assets in Q4 to improve the margin in future periods. So we expect to continue our margin expansion into 2027.

Speaker #2: Investment yields were 3.85%, up from 3.82% last quarter and 3.60% a year ago. The securities portfolio was $1.56 billion at quarter end, down nearly $290 million from a year ago.

Speaker #2: As we continue to deploy portfolio cash flows into loans, as we have mentioned in the past, we continue to have low fixed-rate loans repricing in the next 12 months.

Speaker #2: We currently have about $1.5 billion of loans with a weighted average yield of 5.08%. Plus, we have a normal cash flow and covenant violation flow that allow us to gain yield in our loan portfolio.

Speaker #2: Additionally, we are restructuring some securities and other non-lending assets in the fourth quarter to improve the margin in future periods. So we expect to continue our margin expansion into 2027.

David Sparacio: On the funding side, despite the increase in benchmark rates, our average cost of interest-bearing deposits was flat at 2.80% and is down 61 basis points from a year ago. We were also encouraged to see average interest-bearing checking balances grow by about $378 million in the quarter at a cost of 1.58%. Our average rate on federal funds purchased, which is primarily our correspondent banking funding, was 3.78%, compared to 3.74% last quarter and 4.46% a year ago. On non-interest income, we came in at $13.1 million for the quarter, which was up from $12.9 million in Q2 and up 23% from $10.6 million on an adjusted basis a year ago. Bank-owned life insurance income was the biggest driver at $4.3 million, up 81% year over year and 5% linked quarter, reflecting the policies we added over the past year.

Speaker #2: On the funding side, despite the increase in benchmark rates, our average cost of interest-bearing deposits was flat at 2.80%, and is down 61 basis points from a year ago.

Speaker #2: We were also encouraged to see average interest-bearing checking balances grow by about 378 million dollars in the quarter at a cost of 1.58%. Our average rate on federal funds purchased - which is primarily our correspondent banking funding - was 3.78% compared to 3.74% last quarter and 4.46% a year ago.

Speaker #2: On non-interest income, we came in at $13.1 million for the quarter, which was up from $12.9 million in the second quarter, and up 23% from $10.6 million on an adjusted basis a year ago.

Speaker #2: Bank-owned life insurance income was the biggest driver at $4.3 million, up 81% year over year and 5% linked quarter, reflecting the policies we added over the past year.

David Sparacio: Service charges on deposit accounts was $3.4 million, up 4% year over year and 3% linked quarter, and credit card income held steady at $2.4 million for the quarter. Non-interest expense was $52.2 million for the year, up 4.5% on a linked quarter basis and 8.8% year over year, or $4.2 million. Of this year over year increase, 40% of that is the full impact of the Houston market. The remaining expense increase of $2.4 million is composed of mostly non-recurring expenses experienced during the quarter. This expense growth rate is a fraction of our revenue growth, which grew 20% year over year. Our efficiency ratio is 30.20%, compared to 29.65% last quarter and 35.22% a year ago, or 33.31% adjusted. Our effective tax rate for the quarter was 17.20%, compared to 19.94% last quarter and 16.81% a year ago.

Speaker #2: Service charges on deposit accounts were $3.4 million, up 4% year over year and 3% linked quarter, and credit card income held steady at $2.4 million for the quarter.

Speaker #2: Non-interest expense was $52.2 million for the year, up 4.5% on a linked quarter basis and 8.8% year over year, or $4.2 million.

Speaker #2: Of this year over year increase, 40% of that is the full impact of the Houston market. The remaining expense increase of 2.4 million dollars is composed of mostly non-recurring expenses experienced during the quarter.

Speaker #2: This expense growth rate is a fraction of our revenue growth, which grew 20% year over year. Our efficiency ratio is 30.20% compared to 29.65% last quarter, and 35.22% a year ago, or 33.31% adjusted.

Speaker #2: Our effective tax rate for the quarter was 17.20%, compared to 19.94% last quarter and 16.81% a year ago. The linked quarter decline reflects investment tax credits we purchased during the quarter.

David Sparacio: The linked quarter decline reflects investment tax credits we purchased during the quarter. These continue to give us a meaningful benefit and we will keep evaluating similar opportunities. Turning to the balance sheet, as Jim mentioned, our ended loans were $14.7 billion, up $259 million from the Q2, or 7.1% annualized, and up $1.43 billion or 10.7% from a year ago. Average loans grew $320 million or 8.9% annualized. Over the past year, growth has been balanced between C&I loans up 15% and investor real estate up about 16%. Capital continued to build. Stockholders' equity passed $2 billion for the first time at $2.04 billion. Common Equity Tier 1 capital to risk-weighted assets was 11.98% on a preliminary basis, up 49 basis points from 11.49% a year ago. Total risk-based capital was 13.26%.

Speaker #2: These continue to give us a meaningful benefit, and we will keep evaluating similar opportunities. Turning to the balance sheet, as Jim mentioned, our ending loans were $14.7 million, up $259 million from the second quarter, or 7.1% annualized, and up $1.43 billion, or 10.7%, from a year ago.

Speaker #2: Average loans grew $320 million, or 8.9% annualized. Over the past year, growth has been balanced between CNI loans, up 15%, and investor real estate, up about 16%.

Speaker #2: Capital continued to build. Stockholders' equity passed $2 billion for the first time at $2.04 billion. Common equity Tier 1 capital to risk-weighted assets was 11.98% on a preliminary basis.

Speaker #2: Up 49 basis points from 11.49% a year ago. Total risk-based capital was 13.26%; our Tier 1 leverage ratio was 11.11%, and tangible common equity to tangible assets rose to 11.05%, up 33 basis points on a linked quarter and nearly 100 basis points year over year.

David Sparacio: Our Tier 1 leverage ratio was 11.11%, and tangible common equity to tangible assets rose to 11.05%, up 33 basis points on a linked quarter and nearly 100 basis points year over year. Tangible book value per share was $18.51, up 14.4% year over year. On liquidity, we ended the quarter with $1.19 billion in cash and cash equivalents, along with $1.56 billion in securities. We continue to have no FHLB advances and no broker deposits. Our funding remains core and relationship driven. To sum up the Q3, earnings per share grew 33% year over year. Our core margin expanded again. Loans grew more than 10%. Our efficiency ratio stayed around 30%. Credit metrics improved and book value per share is up 14%. We are generating capital faster than we are using it, which gives us real flexibility as we head into the Q4.

Speaker #2: Tangible book value per share was $18.51, up 14.4% year-over-year. On liquidity, we ended the quarter with $1.19 billion in cash and cash equivalents, along with $1.56 billion in securities.

Speaker #2: We continue to have no FHLB advances and no brokered deposits. Our funding remains core and relationship-driven. To sum up the third quarter, earnings per share grew 33% year over year.

Speaker #2: Our core margin expanded again, loans grew more than 10%, our efficiency ratio stayed around 30%, credit metrics improved, and book value per share is up 14%.

Speaker #2: We are generating capital faster than we are using it, which gives us real flexibility as we head into the fourth quarter. And with our newly approved share repurchase plan, we expect to deploy some of that excess capital in a value-added way.

David Sparacio: With our newly approved share repurchase plan, we expect to deploy some of that excess capital in a value-added way. With that, we will now take your questions.

Speaker #2: With that, we will now take your questions.

Operator: Excellent. We will now be conducting a question and answer section. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We will now poll for questions. Our first question is from Stephen Scouten of Piper Sandler. You may proceed with your question.

Speaker #1: Excellent. We will now be conducting a question-and-answer section. If you would like to ask a question, please press *1 on your telephone keypad.

Speaker #1: A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We will now open the floor for questions.

Speaker #1: Our first question is from Stephen Scouton of Piper Sandler. You may proceed with your question.

Stephen Scouten: Yeah, good afternoon. Thanks. Maybe if I could start on the margin. I know, David, you said it feels like you have additional upside into 2027, and it looks like the margin was maybe 3.68% in the final month, so up another 5 basis points. Just kind of wondering, magnitude of change, if you still think we are kind of in this 4 to 5 basis points a quarter range, or if with the potential for another December hike, if any of that math changes with you guys being slightly liability sensitive and kind of any underlying assumptions within that would be great.

Speaker #3: Good afternoon. Thanks. Maybe if I could start on the margin. I know, David, you said it feels like you have additional upside into '27, and it looks like the margin was maybe 3.68 in the final month.

Speaker #3: So, up another 5 basis points. Just kind of wondering about the magnitude of change—if you still think we're kind of in this 4 to 5 basis points a quarter range, or if we've got the potential for another December hike, and if any of that math changes.

Speaker #3: Would you guys be in slightly liability-sensitive, and any underlying assumptions within that would be great.

David Sparacio: No, Stephen, this is David. I still expect it in that 5 to 7 basis point increase range. I mentioned it, we still have about $1.5 billion of low fixed rate loans repricing. The average rate on those is about 5.08%. Our going-on rate or the average rate for renewals and new loans was 6.59% in the quarter. So we still have some room to grow there. The more important piece of it, I think, is deposit cost. We were able to be selective on deposit cost as the Fed raised rates this quarter. We were able to tamp down any increases in our deposit costs, and we expect to do the same thing for any future hikes. Tom mentioned in his comments about the expense of municipal deposits that we let walk away because we were being outbid by a GSIB.

Speaker #2: Yeah, no, Stephen. This is David, and I still expect it in that 5 to 7 basis point increase range. I mentioned it. We still have about 1.5 billion dollars of fixed rate, low fixed rate loans repricing.

Speaker #2: The average rate on those is about 5.08%. Our going-on rate, or the average rate for renewals and new loans, was 6.59% in the quarter.

Speaker #2: So we still have some room to grow there. The more important piece of it, I think, is deposit cost. We were able to be selective on deposit cost as the Fed raised rates this quarter.

Speaker #2: And so we were able to tamp down any increases in our deposit cost, and we expect to do the same thing for any future hikes.

Speaker #2: Tom mentioned in his comments about the expensive municipal deposits that we let walk away because we were being outbid by a GSIB. And so it's going to be it's going to be opportunistic pricing on deposits, and it's going to be discipline on the asset side.

David Sparacio: It is going to be opportunistic pricing on deposits, and it is going to be discipline on the asset side as we get those repricing opportunities in front of us. I do not expect anything. We still, 53% of our loan book is variable rate. We are going to have some upside potential in existing variable rate loans as well that get a higher yield as well as the Fed is raising rates. I mean, you throw all that in, and we still have room for expansion. It is just going to be at a slower pace than what we saw earlier in this year. But the point is, it is still expansion at the end of the day.

Speaker #2: As we get those repricing opportunities in front of us. And so, yeah, I don’t expect anything—I mean, we still have 53% of our loan book in variable rate.

Speaker #2: And so we're going to have some upside potential in existing variable rate loans as well, that get a higher yield as the Fed is raising rates.

Speaker #2: So, I mean, you throw all that in, and we still have room for expansion. It's just going to be at a slower pace than what we saw earlier this year.

Speaker #2: But the point is, it's still expansion at the end of the day.

Stephen Scouten: Okay. That's really helpful. Thank you. It sounds like the pipelines are building, loan demand is good. I guess Houston is still in relatively early stages. If we have continued strong loan growth, how much of an impediment is the loan-to-deposit ratio where it sits today, and could deposit growth be a constraint on loan growth if it can't match the robust loan growth you guys have been delivering?

Speaker #3: Okay, that's really helpful. Thank you. And then it sounds like the pipelines are building; loan demand is good. I guess Houston is still in relatively early stages.

Speaker #3: So, if we have continued strong loan growth, how much of an impediment is the loan-to-deposit ratio where it sits today? And could deposit growth be a constraint on loan growth if it can't match the robust loan growth you guys have been delivering?

Tom Broughton: Given a choice, this is Tom, of course, Stephen. Given a choice, we always prefer to need deposits rather than need loans because we can find the deposits, but you can't just go find the loans, as you well know. You've got to have the loan demand. If we can have the loan demand, we'll come up with ways to match off with deposits. This is typically the time of year we have really good deposit growth in Q4. We anticipate that again, and our deposit pipeline is good. We're optimistic on that front. We've always found a way to grow deposits.

Speaker #4: Given a choice, this is Tom, of course, Steve. Given a choice, we always prefer to need deposits rather than need loans, because we can find the deposits.

Speaker #4: But you can't just go find the loans. As you well know, it's just—they just don't—you've got to have the loan demand. And so, given if we can have the loan demand, we'll come up with ways to match off with deposits.

Speaker #4: This is typically the time of year when we have really good deposit growth in the fourth quarter, so we anticipate that again. Our deposit pipeline is good.

Speaker #4: So we're optimistic on that front. We've always found a way to grow deposits.

Stephen Scouten: Yeah. No, that's fair. I think, Tom, you mentioned some deposit initiatives underway. Anything specific there that you could comment on? Just give us an idea of where you might look to drive deposit growth here.

Speaker #3: Yeah, that's fair. And I think, Tom, you mentioned some deposit initiatives underway. Anything specific there that you could comment on? Just give us an idea of where you might look to drive deposit growth here.

Tom Broughton: Well, we do it individually by region, and each region has their own unique goals and ways to grow deposits. That is something we work all 12 regions on, or 13, including correspondence. We feel like we have some good initiatives underway, and you got to go to where you find deposits, first of all. Where's the money?

Speaker #4: No. Well, we do it individually by region, and each region has its own unique goals and ways to grow deposits. So, that is something we work on with all 12 regions—or 13, including Correspondence.

Speaker #4: So, we feel like we have some good initiatives underway, and you've got to go to where you find deposits, first of all. Where's the money?

Stephen Scouten: Absolutely.

Speaker #4: So.

Tom Broughton: There's no doubt.

Speaker #3: Absolutely, no doubt. Okay, well, thank you for the time. I'll step back and let someone else ask a few questions. Thank you, guys.

Stephen Scouten: Well, thank you for the time. I'll step back and let someone else ask a few questions. Thank you, guys.

Tom Broughton: Thank you, Stephen.

Speaker #4: Thank you, Steven.

Operator: Thank you. Our next question is from David Bishop of the Hovde Group. You may proceed with your question.

Speaker #1: Thank you. Our next question is from David Bishop of the HUVD Group. You may proceed with your question.

David Bishop: Yeah. Thanks. Good evening, gentlemen. Hey, during the preamble, it sounded like Tom or David mentioned that maybe you're contemplating some restructurings either in the securities portfolio or non-earning assets. Maybe what you're thinking along the lines there and how large this could be as a percent of the portfolio. Thanks.

Speaker #2: Yeah. Thanks. Good

Speaker #5: Evening, gentlemen. Hey, during the preamble, it sounded like Tom or David mentioned that maybe you're contemplating some restructurings, either in the securities portfolio or non-earning assets. Maybe you could share what you're thinking along those lines, and how large this could be as a percent of the portfolio?

Speaker #5: Thanks.

David Sparacio: Yeah, absolutely, David. This is David again. You'll notice in the financials we had a small securities gain. We had some Treasuries that were maturing in Q4. Just in light of the interest rate environment and what was available in Q3, we decided to accelerate those and swap those out. We did that in Q3. We'll continue. We got some smaller subsets of securities that are maturing in Q4, so we'll be opportunistic on those as well. The big thing is, in July, the Treasury had a ruling on exchanges on bank-owned life insurance, on BOLI. We have about $465 million in assets in BOLI. We have some pretty low yields on policies that were put on the books in 2011, 2012, 2013.

Speaker #2: Yeah, absolutely, David. This is David again. You'll notice in the financials, we had a small securities gain. We had some treasuries that were maturing in the fourth quarter.

Speaker #2: And just in light of the interest rate environment and what was available in the third quarter, we decided to accelerate those and swap those out.

Speaker #2: And so we did that in the third quarter. We'll continue. We've got some smaller subsets of securities that are maturing in the fourth quarter.

Speaker #2: So we'll be opportunistic on those as well. But the big thing is, in July, the Treasury had a ruling on exchanges on bank-owned life insurance, on BOLI.

Speaker #2: And so, we have about $465 million in assets in BOLI. That's because we have some pretty low yields on policies that were put on the books in 2011, 2012, and 2013.

David Sparacio: We have an opportunity now with that favorable ruling from the Treasury to structure a deal where we can improve those yields and do some swap outs on those. That's the part that we're looking at as we move into Q4.

Speaker #2: And so, we have an opportunity now, with that favorable ruling from the Treasury, to structure a deal where we can improve those yields and do some swap outs on those.

Speaker #2: So that's the part that we're looking at as we move into the fourth quarter.

Tom Broughton: We're not contemplating any restructuring where we would take security losses, David, if that's your question.

Speaker #4: But we're not contemplating any restructuring where we would take security losses, David, if that's your question.

David Bishop: Got it. It is more of a function on better yield on the BOLI policies. Is that correct?

Speaker #3: Yeah. That sounds like more of a function of better yield on the BOLI policies. Is that correct?

David Sparacio: That is correct. Yes.

Speaker #2: That is correct. Yes.

David Bishop: Got it. Then I think, David, you mentioned there was some noise in operating expenses this quarter, probably looked like other expenses that were non-recurring. Any way to size those up from a dollar perspective and perhaps what those pertain to? Thanks.

Speaker #3: Got it. Got it. And then I think, David, you mentioned there was some noise in operating expenses this quarter. It probably looked like other expenses that were non-recurring.

Speaker #3: Is there any way to size those up from a dollar perspective, and perhaps clarify what those pertain to? Thanks.

David Sparacio: Yeah. David, I would focus on the efficiency ratio, right? We ticked up above 30% this quarter when we had been sub 30% for a couple of quarters. In a normalized environment, I would say we would stay below 30%. We were probably about $2 million over our expense run rate that I would expect due to those one-time non-recurring costs. If you model that out, I think that gets you somewhere around $50 million, $51 million a quarter is what I expect our run rate to be.

Speaker #2: Yeah, David, I mean, I would focus on the efficiency ratio, right? I mean, we ticked up above 30% this quarter, when we had been sub-30% for a couple of quarters.

Speaker #2: In a normalized environment, I would say we would stay below 30%. We were probably about $2 million over our expense run rate that I would expect, due to those one-time, non-recurring costs.

Speaker #2: And so if you model that out, I think that gets you somewhere around $50 to $51 million a quarter, which is what I expect our run rate to be.

Speaker #6: to be.

Tom Broughton: But so it was just a catchall, David, just a bunch of stuff. We repo'd a yacht, going to be for sale pretty soon, anybody interested. And we never owned the yacht, but it will be our first one. So we had some expenses to get the yacht back in the States and get it operational. It was a fairly expensive proposition. But anyway, we had some other ORE type expenses and some NPA expenses. So we just went ahead and took all those and expensed everything rather than capitalizing them, David.

Speaker #7: But so it was just a catch-all, David, just, you know, a bunch of stuff. I mean, we had—we repoed a yacht; it's going to be for sale soon, if anybody is interested.

Speaker #7: And, um, we never owned a yacht, but it'll be our first one. So, you know, we had some expenses to get the yacht back in the States and get it operational.

Speaker #7: It's fairly expensive for the proposition. So, um, but anyway, we had some other ORE-type expenses and some NPA expenses, so we just went ahead and took all those and expensed everything rather than capitalizing them, David.

David Bishop: Got it. Appreciate the color. I will drop off and hop back in the queue. Thanks.

Speaker #7: Got it. I appreciate the color. I'll drop off and hop back in the queue. Thanks.

Tom Broughton: Thank you.

Speaker #8: Thank you.

Operator: Thank you. Our next question is from Steve Moss of Raymond James. Please proceed with your question.

Speaker #7: Thank you. Our next question is from Steve Moss of Raymond James. Please proceed with your question.

Steve Moss: Hey, good afternoon, guys.

Speaker #8: Hey, good afternoon, guys.

Tom Broughton: Thanks, Steve.

Speaker #7: Hey, Steve. Tom, when we were talking a couple weeks ago, spreads were pretty tight here for new loans. I'm just kind of curious,

Steve Moss: Tom, when we were talking a couple of weeks ago, spreads were pretty tight here for new loans. Just kind of curious, have you seen spreads improve enough to maybe be more optimistic on lending? Or just kind of curious on your thoughts in terms of loan pricing here going forward.

Speaker #9: you know, have you seen spreads improve enough to, you know, maybe be more optimistic on lending? Or just kind of curious on your thoughts in terms of loan pricing here going forward.

Tom Broughton: That is a really good question. When I talk to other bankers, which we talk to other bankers all the time, actually, we have 400 correspondent banks, are competitors being more rational? I think I would say definitely yes on the. Because when customers ask us for a fixed rate loan quote, I think it blows them back a little bit when we tell them, "Okay, here is the curve today, and here is your five-year rate." They do not like that. They immediately would opt for today for a floating rate. I think other banks are doing the same thing. So we are seeing a lot less. That is the good part of higher rates. I think you get a little bit rationalized, a little bit better competition than we saw. I do not know, Rodney, do you.

Speaker #7: That's a really good question. And, you know, when I thought to other bankers, which we talk to other bankers all the time. Actually, we have 400 correspondent banks.

Speaker #7: And, you know, are people being more rational, or are competitors being more rational? And I think I would say definitely yes on that— because when customers ask us for a fixed-rate loan quote, they— I think, you know, it blows them back a little bit when we tell them, you know, okay, here's the curve today and here's your 5-year rate.

Speaker #7: And they don't like that. They, they immediately would opt today for a floating rate. So, and I think other banks are doing the same thing.

Speaker #7: So we're seeing a lot less, you know, that's the, that's the, the, the good part of higher rates is I think you get you know, a little bit rationalized, a little bit better competition than we saw.

Speaker #7: And I don't know, Rodney, do you Yeah, and it's, it's market to, you know, region to region, market to market. But I, I think here in Birmingham, you know, we had a number of new banks come into our market 2, 3, 4 years ago.

Rodney Rushing: Yeah. It is region to region, market to market. But I think here in Birmingham, we had a number of new banks come into our market 2, 3, 4 years ago that were doing some irrational things, and that seems to have gone by the wayside for the last 6 months.

Speaker #7: They were doing some irrational things, and that seems to have gone by the wayside for the last six months, certainly here in Birmingham. Yeah, I think that's true.

Rodney Rushing: Certainly here in Birmingham.

Tom Broughton: Yeah, I think that is true. I think there is an upside to higher interest rates, Steve. Of course, will there be demand destruction? Who knows the answer to that question. I think rates were already high enough that it made a lot of projects uneconomical to start. I do not think it is another 25 or 50 basis points. Another 100 basis points would be a whole another matter, right? I am optimistic that we will see continued, a little bit more rational competition out there than what we have seen over the last 6 months. You should not be having intense loan and deposit competition at exactly the same time, should you? That seems highly irrational, but that is what we have seen to an extent.

Speaker #7: So, I think there is an upside to higher interest rates, Steve. Of course, you know, will there be demand destruction?

Speaker #7: Who knows the answer to that? I think rates were already high enough that they— it made a lot of projects uneconomical to start. So I don't think it's, you know, another 25 or 50 basis points.

Speaker #7: Now, another 100 basis points would be a whole other matter, right? So, I'm optimistic that we'll continue to see a little bit more rational competition out there than what we've seen in the past.

Speaker #7: You know, over the last six months—I mean, you shouldn’t be having intense loan and deposit competition at exactly the same time, should you?

Speaker #7: That, you know, seems highly irrational, but that's what we've seen—to an extent. So, you know, maybe people are going to figure out that if they're going to compete on deposits, they need to have higher loan yields too.

Tom Broughton: People, maybe they are going to figure it out that if they are going to compete on deposits, they need to have higher loan yields. That is what I tell our people internally is, "Okay, well, if you got to pay up for deposits, you are going to have to charge more for loans in your region so that we have an adequate margin within each region.

Speaker #7: And that's what I tell our people internally is, okay, well, if you have to pay up for deposits, you're going to have to charge more for loans in your region.

Speaker #7: So that we have an adequate margin within each region.

Steve Moss: Right. No, I hear you there. Okay. Then, maybe just kind of thinking about just onto credit here. With regard to the reserve, up about 2 basis points quarter over quarter. Just kind of curious, were there any specific reserves for some credits this quarter that maybe drove that reserve higher? Any update you can provide on the roughly $100 million relationship?

Speaker #9: Right. No, I hear you there. Okay. And then, you know, maybe just kind of thinking about credit here. With regard to the reserve—you know, up about 2 basis points quarter over quarter.

Speaker #9: Just kind of curious—were there any specific reserves for some credits this quarter that maybe drove that reserve higher? And any update you can provide on the roughly $100 million relationship?

Jim Harper: So with regard to specific credits that may have moved the needle over the quarter, quite frankly, we had one notable

Jim Harper: So with regard to specific credits that may have moved the needle over the quarter, quite frankly, we had one notable credit action that was unexpected that we had to address, but even it didn't come close to a basis point of movement. So it was actually across the board and more portfolio-based than it was specifically impaired assets. Yeah.

Speaker #7: So, with regard to specific credits that may have moved the needle over the quarter, quite frankly, we had one notable credit action that was unexpected and that we had to address, but even it didn't come close to a basis point of movement.

Jim Harper: credit action that was unexpected that we had to address, but even it didn't come close to a basis point of movement. So it was actually across the board and more portfolio-based than it was specifically impaired assets. Yeah.

Speaker #7: So it was actually across the board and more portfolio-based than it was, you know, specifically impaired assets. Yeah.

Steve Moss: Okay. Got you. In terms of the large credit, just any update you guys have there?

Speaker #9: Okay, gotcha. And in terms of the large credit, is there any update you guys have there?

Speaker #8: Large credits—you know, we took—

Jim Harper: Large credits.

Jim Harper: Large credits. Yeah. Yeah. We took a charge of just over $7 million this quarter that represents the first true charge-off we've taken with respect to that portfolio of large multifamily properties. We're continuing to work through an orderly liquidation process with those eight credits and are working with a broker to identify potential sales opportunities to get those marketed and liquidated. So far so good. We'll hope to execute this in an orderly fashion over the next two to four quarters.

Steve Moss: Yeah.

Speaker #7: Yeah, we took a charge of just over $7 million this quarter. That represents the first true charge-off we've taken with respect to that portfolio of large multifamily properties.

Jim Harper: Yeah. We took a charge of just over $7 million this quarter that represents the first true charge-off we've taken with respect to that portfolio of large multifamily properties. We're continuing to work through an orderly liquidation process with those eight credits and are working with a broker to identify potential sales opportunities to get those marketed and liquidated. So far so good. We'll hope to execute this in an orderly fashion over the next two to four quarters.

Speaker #7: We're continuing to work through an orderly liquidation process with those eight credits and are working with a broker to identify potential sales opportunities to, you know, get those marketed and liquidated.

Speaker #7: And so, so far so good. We'll hope to execute this in an orderly fashion over the next, you know, two to four quarters.

Speaker #7: So

Speaker #9: Okay, got you. And then on the share repurchase announcement here for 2 million shares, I'm curious about your appetite to repurchase shares and just how you're thinking about buying back stock.

Steve Moss: Okay. Got you. On the share repurchase announcement here for 2 million shares, curious on your appetite to repurchase shares and just how you're thinking about buying back stock.

Tom Broughton: That's a real good question, Steve. Once you execute, it's done, right? We can't remarket those shares. I'm sure we could figure out how to remarket those shares. But once we repurchase and spend the money, we've never done this before. We're going to be very careful about how we do it and when we do it. I'm not sure that as insiders, I'm not sure we know. We have a present value analysis, but I'm not sure we all know exactly what the future holds and what back stock prices will do over the next year. At any event, we're going to be reasonably cautious, would be my answer to you, Steve, and try to make good decisions for the shareholders.

Speaker #7: That's a really good question, Steve. You know, once you execute, it's done, right? I mean, you can't, we can't remarket those shares. You know, we can't, I'm sure.

Speaker #7: We could figure out how to remarket those shares, but once we repurchase and spend the money, we're going to be—we've never done this before.

Speaker #7: We're gonna be very careful about how we do it and when we do it. And, you know, I'm not sure, that as insiders, I'm not sure we've, We know, you know, we have a present value analysis, but I'm not sure we all know exactly what the future holds and what, backstop prices will do, you know, over the next year.

Speaker #7: But in any event, we're going to be reasonably cautious, would be my answer to you, Steve, and try to, you know, make good decisions for the shareholders.

Steve Moss: Maybe put it this way, given where the loan pipeline is and just the economic activity you are seeing in all your markets and Texas expansion, are you just a little more hesitant to deploy that capital near term combined with moving rates, or to buy back stock near term?

Speaker #9: Maybe put it this way: given where the loan pipeline is and the economic activity you're seeing in all your markets, including the Texas expansion, are you just a little more hesitant to deploy that capital near-term, combined with moving rates, or?

Speaker #7: To buy back stocks near-term? Yeah, given, you know, not from a liquidity standpoint, but just from a capital standpoint. We want to make sure that we always have adequate capital to be able to fund our growth, and that's clearly the number one goal and is clearly the number one thing that's in the shareholders' best interest to create value.

Tom Broughton: Yeah. Not from a liquidity standpoint, but just from a capital standpoint, we want to ensure that we always have adequate capital to be able to fund our growth, and that is clearly the number one goal, and clearly is the number one thing that is in the shareholders' best interest to create value. Anything we could do to create value, it involves expansion, right? Organic growth. So you are absolutely right. We have got to keep that as our main focus all the time.

Speaker #7: You know, anything we could do to create value involves expansion, right? Organic growth. So, you're absolutely right, we've got to keep that as our main focus.

Steve Moss: Okay. No, great. I appreciate all the color here. Thank you very much, guys.

Speaker #9: Okay, no, great. I appreciate all the color here. Thank you very much, guys.

Tom Broughton: Thank you, everybody. Thank you for your questions and.

Speaker #7: Thank you, everybody. Thank you for your questions and—oh.

Jim Harper: There's another question.

Tom Broughton: Oh.

Operator: We do have one question left. Our next question is from David Bishop of the Hovde Group. Please proceed with your question.

Speaker #8: We do have one question left. Our next question is from David Bishop of the Havde Group. Please proceed with your question.

David Bishop: Sorry to keep you a little longer, Tom, but staying on that topic of expansion, just curious in terms of maybe an update in terms of the dollar volume of maybe outstandings in Texas in terms of loans and deposits, and maybe what you're seeing in terms of pricing in that state relative to some of your other regions.

Speaker #7: Sorry to keep you a little longer, Tom, but staying on that topic of expansion, just curious in terms of maybe an update in terms of the dollar volume of outstandings in Texas in terms of loans and deposits, and maybe what you're seeing in terms of pricing in that state relative to some of your other regions.

Tom Broughton: Yeah, we found that the pricing is stronger in Texas than we've seen. The loans and deposits are larger. Everything's bigger in Texas, as they say. We're optimistic that they'll continue to You lead with credit and the deposits follow, but they are certainly focused on generating net deposit relationships as well as lending relationships. So we expect they probably have $200 million in the pipeline for the remainder of the year, and I would anticipate them trying to get to break even by the first or second quarter of next year in terms of the fairly sizable overhead that we have. We're optimistic. There's a lot of stuff in the hopper. They're doing a great job. The team's doing a great job of making contact and seeing prospects.

Speaker #7: Yeah, we found that the pricing is stronger in Texas than we've seen. You know, the credits, the loans, and deposits are larger. Everything's bigger in Texas, as they say.

Speaker #7: Um, And we're optimistic that they'll, you know, continue to— you know, you lead with credit and the deposits follow, but they are certainly focused on generating you know, net deposit relationships as well as lending relationships.

Speaker #7: So, you know, we expect You know. Probably, probably have $200 million in, you know, in the pipeline for the remainder of the year. And I would anticipate them trying to get to, you know, break even by the first or second quarter of next year.

Speaker #7: In terms of, you know, the, you know, fairly sizable overhead that we have. And so we're optimistic. There's a lot of A lot of— there's a lot of stuff in the hopper.

Speaker #7: They're doing a great job. The team's doing a great job of making contact and seeing prospects. And I think with all the mergers in the market out there, I think that certainly makes it a target-rich environment for a good, stable, growing bank.

Tom Broughton: I think with all the mergers in the market out there, I think that certainly makes it a target-rich environment for a good, stable, growing bank. So we're optimistic on that front, Dave.

Speaker #7: So, we're optimistic on that front, Dave. Yeah, and I'm curious—you've noted the good C&I growth this quarter, and I think the bankers you hired out of Woodforest were mostly C&I. Is Texas driving the bulk of the C&I growth you're seeing lately, or is that spread out across the broader footprint of the company?

David Bishop: Yeah. Curious, you've noted the good C&I growth this quarter. I think the bankers you hired out of Woodforest were mostly C&I. Is Texas driving the bulk of the C&I growth you're seeing lately, or is that spread out across the broader footprint of the company?

Jim Harper: Interestingly, I'd say that they've originated more real estate activity than they ever would've imagined so far. So actually been pretty evenly split out of Texas so far from real estate and C&I. So we had some C&I growth in other regions, too, over the quarter, which was good to see.

Speaker #7: Interestingly, I'd say that they've originated more real estate activity than they ever would have imagined so far. So it's actually been pretty evenly split out of Texas so far between real estate and C&I.

Speaker #7: So we, we had some C&I growth in other regions too, uh, over the quarter, which was good to see. The first thing they, you know, ran across were commercial real estate opportunities because that, you know, you talk to developers, oh yeah, you know, I've got a need, immediate need, and that's the things that you You know, that's why bankers like to book CRE deals because they're, they're more immediate, right?

Tom Broughton: The first thing they ran across were commercial real estate opportunities. Because you talk to developers, "Oh, yeah, I've got a need, immediate need." That's why bankers like to book CRE deals, because they're more immediate. C&I takes longer, takes a good bit longer. But we do see a lot of C&I opportunities coming our way, including some energy credits that are strong credits with very good pricing on them.

Speaker #7: So C&I takes longer, takes a good bit longer, but we do see a lot of C&I opportunities. Coming our way, including some energy credits, and with— that are strong credits with, with very good pricing on them.

David Bishop: Got it. Appreciate that color. I guess my final question, Tom Broughton, just circling back to the share repurchase level. Just curious or remind us, are there any sort of enumerated targeted capital levels that lets you sleep better at night that sort of factor into that decision? Thanks.

Speaker #7: Got it. Appreciate that color. And I guess my final question, Tom, just circling back to the share repurchase level: Just curious, or remind us, are there any sort of enumerated targeted capital levels that you know, that let you sleep better at night, uh, that sort of factor into that decision?

Speaker #7: Thanks. I think we—the thought was that we could, unless we see extraordinary, you know, organic growth opportunities, over time maybe repurchase some stock and, and our capital not decline.

Tom Broughton: I think the thought was that unless we see extraordinary organic growth opportunities, we can, over time, maybe repurchase some stock and our capital not decline as a percent of assets for our CET1. So we feel confident we can do both and certainly we want to be in the top tier of capitalized banks, well-capitalized banks, and we are, and we want to stay that way. So we think that contributes to our position as one of the more recognized banks in our peer group.

Speaker #7: Um, as a percent of, as a percent of assets for our CTE1. So we feel confident we can do both and don't want to certainly We want to be in the top tier of capitalized banks, well-capitalized banks, and we are and we want to stay that way.

Speaker #7: So that's—we think that contributes to, you know, our position as one of the more recognized banks in our peer group.

David Bishop: Got it. Appreciate the color.

Speaker #7: Got it. Appreciate the color. Thank you. Well, thank you, everybody, for joining us today. Have a good evening.

Tom Broughton: Well, thank you, everybody, for joining us today. Have a good evening.

Operator: Thank you. That concludes our question and answer and our call. You may disconnect your lines at this time.

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