Earnings Call: Q2 2019

Jul 25, 2019

Good morning, and welcome to the Origin Bancorp, Incorporated Second Quarter 2019 Earnings Conference Call. All participants will be in listen only mode. Please note, this event is being recorded. I would now like to turn the conference over to Chris Riegelman, Investor Relations. Please go ahead. Good morning, and thank you for being with us. We issued our earnings press release yesterday afternoon, a copy of which is available on our website along with a slide presentation that we will refer to during today's call. Before we begin, I'd like to remind you that this presentation may include information about our management's views of our future performance, business and growth strategy, projected plans and objectives and various other matters that constitute forward looking statements under federal securities laws. Due to various risks and uncertainties, actual results may differ materially from historical results or any results implied or indicated by any forward looking statements. For a discussion of these risks and uncertainties, please refer to the forward looking statements section of our earnings release and the risk factors included in our most recent annual report on Form 10 ks filed with the SEC as well as any update set forth in other documents we periodically file with the SEC. Forward looking statements speak as of the date they are made and Origin undertakes no obligation to publicly update or revise any forward looking statements. If you're logged into our webcast, please also refer to slide 2 of the slide presentation, which includes our forward looking statement Safe Harbor statement. Those joined by phone, please note this live presentation is available on our website at www.origin.bank. All comments made during today's call are subject to the forward looking statements, safe harbors in our slide presentation and earnings release. Finally, in this presentation, we may discuss certain financial measures that are not calculated in accordance with U. S. GAAP. Please refer to the reconciliations of these non GAAP financial measures to their closest comparable GAAP metrics in our earnings release and slide presentation, which are available on our website at www.origin.bank. We believe that certain non GAAP financial measures can provide meaningful information to investors. However, these non GAAP financial measures are supplemental and should not be viewed as a substitute for operating results determined in accordance with GAAP nor are they necessarily comparable to non GAAP financial measures that may be presented by other companies. I'm joined this morning by Origin Bancorp's Chairman, President and CEO, Drake Mills our Chief Financial Officer, Steve Volley and Lance Hall, President of Origin Bank. After the presentation, we will be happy to address any questions you may have. At this time, I'll turn the call over to Greg. Thanks, Chris, and thanks for being on the call today. As we move into the second half of twenty nineteen, Origin Bancorp has much to be proud of. 2nd quarter growth in our loan portfolio was strong as well as overall growth in core deposits, particularly non interest bearing deposits. We also saw net interest income reach a historical quarterly high. We remain committed to creating long term value in our franchise by opening 2 full service branches in Dallas, Texas and Jackson, Mississippi. These new locations were a proactive step to better serve our communities and drive opportunity for new core deposit relationships. To support our asset growth, our bankers have continued to focus on building strong core relationships and growing core deposits. Given the competitive landscape in many of our markets, maintaining our historically low cost to deposits has been challenging. During the 2nd quarter, while our yield on loans held for investment remained stable, our rate on interest bearing deposits increased 13 basis points. We continue to evaluate our deposit product offerings and balance sheet funding mix alternatives to minimize our cost of funds while supporting our asset growth. Deposit growth was a main priority for us during the first half of the year and we will work with our bankers to effectively manage cost associated with building long term relationships within the markets we serve. Higher deposit costs in 2019 reflect competition in our geographic markets of Texas, Louisiana and Mississippi and our need to fund loan growth. Despite our rate challenges within the Q2, we believe the remainder of 2019 provides opportunity to stabilize our funding cost while being mindful of adding the right customer relationships as we move forward. Now Steve will discuss more details around the financial results of the quarter. Thanks, Drake. I'll start with Slide 4. We ended the quarter with just over $5,100,000,000 in total assets, up 5.1% from the linked quarter. This growth was primarily attributed to loans held for investments, which Lance will talk touch on later. Total deposits ended the quarter at 3 $900,000,000 down 1.1 percent from the linked quarter. During the quarter, we made a strategic decision to replace approximately $187,000,000 of broker deposits with short term advances from the Federal Home Loan Bank. We expect this change in funding costs to increase net interest income by approximately $450,000 annually. Net income for the quarter was $12,300,000 and diluted EPS was $0.52 per share. These results were lower than the prior quarter and the same prior year quarter. The primary drivers were increased provision expense associated with our loan growth during the 2nd quarter and increased non interest expense during the quarter. The increased non interest expense was a primary contributor to our increased efficiency ratio during the quarter, which was 68.51% compared to 65.97% in the linked quarter. Net interest income for the quarter was $43,000,000 up over $900,000 from the linked quarter, primarily due to loan growth. As Drake mentioned earlier, our deposit cost increased during the quarter contributing to a 10 basis point decline in net interest margin for the linked quarter. During the Q2, we also increased our short term liquid asset positions to support current loan growth and our near term loan pipeline, which had a downward effect of 3 basis points on our margin during the quarter. Net interest income continues to be a primary source of net revenue accounting for 79% of net revenue during the quarter. Lance will now go into further detail about our loan growth, deposit trends and credit quality. Thanks, Steve. In the 1st 6 months of 2019, loans held for investment have grown $196,000,000 or just over 5%, with $146,000,000 in growth during the Q2 alone. Of the year to date growth, over $95,000,000 is attributed to construction and development and $69,100,000 to commercial and industrial loans. We expect to see continued strong growth in our Texas markets with ongoing benefit from our lift out teams. As we continue to experience strong loan growth, we are maintaining sound credit quality in our loan portfolio. During the quarter, our percentage of non performing loans to total loans improved 2 basis points from the prior quarter. Our annualized net charge off rate was 7 basis points and our past due percentage decreased from 99 basis points to 80 basis points from the linked quarter. Not only have we been successful in growing loans and maintaining a strong credit profile, we've also seen success on the deposit side. Steve mentioned earlier about our strategic decision to replace certain broker deposits with short term advances to lower our cost of funding. While our total deposits decreased $43,000,000 during the quarter, when adjusted for the broker deposits we replaced, our total deposits would have increased approximately $143,800,000 or 3.7 percent for the quarter. We've been successful increasing non interest bearing deposits this year by $52,000,000 or 5.5 percent, which is a testament to the relationships our bankers continue to build. Now I'll turn it back over to Drake. Thanks, Lance. As we have discussed over the past year, we believe it's in the best interest of all our stakeholders to have a mortgage business that is fully integrated into our bank in a community based retail mortgage banking model. Have taken a number of steps to achieve this goal, including our decision in the 2nd quarter to outsource our mortgage servicing function to one of the nation's largest independent mortgage servicers. The transfer of servicing should be complete in the Q4 of 2019 and We believe that it will result in additional ongoing efficiencies for Origin Bank as well as a positive experience for our mortgage customers. We have always been committed to the long term vision of Origin Bancorp as we continue to strive to increase our capital levels over time. We are committed to deploying capital through quality asset growth. We also believe in having other strategic tools to manage our capital levels for the benefit of our shareholders. Over the past several quarters, through periods of record earnings, our management team and Board have discussed those strategic tools and through those discussions, we have decided to increase our quarterly cash dividend as well as put in place a share buyback program. These actions will not change the fact that we are focused on growing organically and we'll continue working to do so by deploying internally generated capital. However, we believe these tools show our commitment to our shareholders. While we acknowledge the challenges we faced in the Q2 in relation to deposit pricing, margin pressures and the ever evolving competitive landscape within our markets, we are committed to continue to develop high quality multifaceted relationships. I remain optimistic about our ability to execute our strategic plan and look forward to what we will accomplish in the future. Thank you, and we'll now open the call for questions. We will now begin the question and answer session. The first question comes from Matt Olney with Stephens. Please go ahead. Hey, thanks. Good morning, guys. Hello, Matt. I want to start on operating expenses. Seemed pretty heavy this quarter versus at least expectations. Can you just walk us through some of these lines and help us appreciate where these lines are headed as we move into 3Q? I'm just trying to get a good run rate to know how to forecast operating expenses. Thanks. Yes, Matt, this is Drake. As we look at, as I mentioned earlier about continuing to build what we think is a franchise that will promote strong core deposit growth. We had and I'll go through this. I think the biggest addition to or the biggest expense item was really a swing in income. If you look at our LP investment income that typically would have been $400,000 We had an impairment on LP income. So really that swing represented about $0.03 of an increase in, let's say, expense item or lack of income. We also, as we've talked about in earlier quarters, we created a performance checking product that we promoted heavily, which represents, I would say, a penny of additional costs that we have that we'll cut after basically going into this quarter. But what that created for us was about 60,000,000 dollars of additional deposits that we think the weighted average rate on that is somewhere around the $180,000,000 to $190,000,000 range. So we believe that investment or that expense item has been very good for us in the creation of not only the $60,000,000 in deposits, but the acquisition of customer relationships that we've been able to cross sell and create other fee income opportunities. We also had about a 0.01 dollars increase in data processing and it has to do with a conversion of communication lines. 1 of the vendors involved in that conversion overcharged us and it was something that we caught down the road. That overcharge and which will be refunded represents about a $0.01 So if you look at those increases, that represents $0.05 basically of the increase that we saw in the quarter. We think that the quarter for us is a high quarter from an expense standpoint, probably the highest quarter we'll see. Certainly working to because of the mortgage process we're going through, the RIF we're going through, we think we can continue to be somewhere, let's say, what we similar to what we were maybe Q1 with a little increase from the Q1. And Drake, that's great color. And I want to drill down on the mortgage piece some more. I mean, I guess the mortgage revenue was around $3,200,000 in 2Q. How much of that was production versus servicing? And then once we move to the MSR outsourcing in the 4th quarter, can you walk through kind of what the impact or where we're going to see that in the financials? Okay. Matt, if I could just for a second, Walt, let me do a year over year comparison because as I've talked a lot each quarter, we've worked hard to get mortgage integrated into the community bank model. For instance, in Q2 18, dollars 2,300,000 of revenue, Q2 twenty nineteen, dollars 3,300,000 basically. And that was all that was origination. And out of that origination, 70% was new origination, 30% was refinanced. So we're not seeing even though we are getting a bump in refinance, it's not driving the increase in production. It is we've done an excellent job of cutting mortgage loan officers that weren't producing and adding back. So we actually are working with fewer mortgage loan losses than we did, but getting better production. Non interest expense for the mortgage side, Q2 2018, dollars 4,200,000 this quarter was $3,500,000 a 14% decrease. So contribution income and this is what we've been working on to get this thing to breakeven and we see some profitability coming. We had mortgage contribution income of a loss of 1 point $7,000,000 This quarter we're basically breakeven, so we made a lot of progress there. MSR value through that, we're seeing significant change in our hedging. A year ago, we lost $300,000 this quarter. We had a positive $207,000 impact. So we continue to see improvement, but we've reduced the amount of our servicing from our MSR asset value from $26,000,000 to $21,000,000 during that process. So to take that into the next couple of quarters, we think once we get the conversion, which will be in October, November to our mortgage servicer, we will see about $1,000,000 reduction in expense, an annual reduction in expense because of that program. That does not include the reduction in the people, the risk that we'll have in October once we let those people go. And then we'll have a slight spike because we will pay severance. But we see a $1,500,000 total reduction in expense just to move in from the servicing side. Okay, got it. That's helpful, Drake. And then I guess my last question is going to be on capital. I noted the dividend increase, the share buyback authorization. You've talked about M and A now for a while. I'm just kind of curious as far as the update. Does this signal anything as far as M and A? Just any more color on the buyback authorization? It doesn't signal anything on M and A. We still are active and certainly have some opportunities that are in tow that we're working on that, that I think can be good for us. What I do think that and Matt, I'll go back to our Q3 2018 conference call when I think you asked the question and I said that the Board and management was working on the buyback program just to have the tool available. At that point, we felt it was too quick off the IPO to really have that program in place, but certainly was something that we thought we had. Well, as the rate environment has changed a number of different things, we want to have the opportunity to take advantage. And as we see potential private equity continue to exit, we just want to be in place to take advantage of it if indeed it's there. But from a capital impact standpoint, we are running models for both the $40,000,000 buyback and of course that's a 3 year program. So we want to have that in place. And the dividend, we feel at this point that that's something we've had retail shareholders that's been with us for a number of years. That dividend of $0.035 has been in place, Matt, for probably the last 20 years. When we ran our capital model, we saw that we could increase that to $0.095 not have any impact to any degree on really the levered the ratio we are considered or concerned most about and that's our total risk based capital ratio because we can pay that increase that dividend and with earnings continue to see an increase in total risk based capital. So we don't think at this point this has any this is signaling that we're not in the M and A business or anything else. That's job 1 for me and it's a priority. And I think that's probably one of the best steps we can take to solve some of the funding increase in funding costs and also give us a position to continue that process of M and A. Okay. Thanks for the color. I'll hop back in the queue. Okay. Thank you, Matt. The next question comes from Woody Lay with KBW. Please go ahead. Good morning, guys. Hello, Woody. So looking at loan growth, it was strong this quarter at 14% linked quarter annualized and this came after a quarter you all lowered guidance down to 10%. Going forward, does that 10% guidance still feel right to you all? Yes. The 10% guidance at this point, the pipeline supports that, Woody. What we are concentrating on and we'll talk a little bit about this, I'm sure during the call, is asset yield. We were fortunate if you look at asset yield for the quarter that asset yield not including mortgages held for sale increased one basis point. So we are very, very focused on asset yields and the pricing. So we believe that if we continue to focus on quality, asset yield and increasing asset yield at least holding that stable that we could see a slight decrease in growth in loans, let's say to 8%. So we're modeling both ways. Our pipelines are full and it certainly supports that 10%, but we're going to be aggressive with the pricing. And in our last forecast meeting, we felt that that could bump that down to 8%. But with deposit growth still remaining strong and core deposit growth really getting a good ratchet up right now, we think that that could be 8% to 10%, but we're going to be aggressive with this pricing. Okay. That makes sense. And then looking on the other side of that, it's clear that one of your biggest focuses is on maintaining the deposit costs. Do you believe that going forward, we could reach an inflection point where deposit costs could actually compress from here? Or do you think it will sort of still see some deposit pricing competition, which will fall increases to it? Yes. Hey, Woody, this is Lance. Thanks. That's obviously been the primary focus for us inside the bank. I spent a lot of time the past couple of weeks with our President on creating a plan because you're right. I mean, driving our investment in our core deposit franchise is our number one factor. And you look at that both from a margin perspective and from an expense perspective. And we have hired 3 deposit gathered professionals in Dallas, Fort Worth. We hired a new treasury management professional in Mississippi. Obviously, the branches is all about driving this core deposit franchise. That being said, we really sort of dissected and tiered our interest bearing portfolio, met with all the presidents, have met with bankers. We feel we have a real opportunity to smartly drive down some deposit costs in those areas, while at the same time been able to drive double digit deposit growth. So yes, we feel like obviously our incremental costs are still high. I feel like our deposit pricing has peaked and we feel like we have a really smart plan on being able to manage that effectively. Okay. And then last for me. It sounds like loans and deposits should grow pretty evenly. But looking at the loan to deposit ratio excluding the warehouse, it was up to around 98% for the quarter. Is there sort of a ceiling level you all feel comfortable growing that up to? Yes. We're at that level and really feel like that's going to continue that's actually going to head back the other direction because there's a couple of factors involved in that and we'll let Lance talk about deposit growth in markets and we are still waiting to see the Louisiana deposits kick in. I won't answer this with that. But we have what we run a daily liquidity model. We feel very comfortable with the liquidity where it is and continue to feel that with the efforts that Lance mentioned about deposit gathers and the process and the progress we're making there that we'll see that loan deposit ratio continue to or start headed back in direction. Lance, you want to talk real quickly about what we're doing in Louisiana and what we feel the impact will be. Yes. So if and Steve will talk about the strategic decision to replace the Raymond James money market with Federal Home Loan Bank borrowings. But if you normalize the Raymond James deposit reduction, Woody, basically we're on track to do about 16% in deposit growth for the year and 10% in loan growth. So you kind of see where our focus is driving deposits at a faster rate of loans so that we build a little cushion in that loan to deposit ratio. As Drake said, all of the growth in our deposits in the 1st 6 months has really been in Texas and Mississippi. Not a normal run for us. Louisiana is always our most stable deposit driver. I have no concerns that that's not going to kick in and continue to be the same. We still project 5% deposit growth in Louisiana like we traditionally do and obviously we do it in Louisiana in a cheaper way. So one of the effects on NIM for this quarter is that in Mississippi, you've had 14% deposit growth year to date, Dallas Fort Worth 16, Houston 16. Those are coming in at a higher cost blended than our projected because of the lack of Louisiana. We had about $65,000,000 in public fund runoff in our Louisiana that obviously will swing back in. It's a little higher number than we're used to. And then we've had about $50,000,000 in reductions in some of our commercial portfolios and talking to the bankers, absolutely not customer loss, just some timing around some of those commercial accounts. So I still project Louisiana to do 5% or 6% deposit growth as we budgeted. And then obviously, that will significantly drive down sort of the blended expense for the group and we figure at the end of the year that's going to be normalized and healthy for us. The next question comes from William Wallace with Raymond James. Please go ahead. Thank you. Good morning, guys. Good morning, Wally. Troy, if I could back up to some of the commentary you had around expense. First, you mentioned the LPL impairment. That's in the fee that's booked in fee income, right? Correct. So how much was that impairment? It was basically a penny. Okay. About $0.03 I'm sorry, Wally. Hey, Wally, this is Steve. The swing quarter to quarter was $819,000 pretax. Okay. Okay, thank you. All right. And then Drake, you said that your targeting expense run rate you think will be closer to the Q1, slightly higher than the Q1, I believe is what you said. Does that include the 1.5 $1,000,000 of annual savings once the servicing agreement is transferred to the 3rd party or is that exclamation of that? No, that's not going to kick into the Q1 really of 2020. So that wasn't and I want to back up on that because I'm sitting here kind of running a little bit. I do think it's going to be higher than the Q1. I'm trying to look at there is not a doubt that the Q2 is going to be and even in our internal budgets, it was the Q2 was the highest quarter because of the branches that we made decision. I want to highlight the fact that we made those decisions on those branches, which I still think from a long term perspective is the right decision. During a period of time, we were 2 quarters ago, 3 quarters ago, we're looking at increasing interest rates. But for our expansion and what we're doing there, I believe that the second quarter is certainly a high quarter with probably a reduction around Hey, Wally, this is Steve. I know there's a lot of numbers going back and forth. So if you look at total, we had $35,000,000 in the Q1 and we had $37,000,000 in the Q2. Dollars 37,000,000 is going to be a high point for us. But if you look at both them, I would say it's slower than the second, but not as low as the first. If I was going to model conservatively, I would say 37 straight across next two quarters and just slightly lower for some of those items that we talked We don't plan any expansions. We don't plan any other large one time items. We don't have any large items in the budget whatsoever. If anything happens that comes out of that, that would be something that we don't have expectations for today. Okay. But $37,000,000 is basically where you were in the Q2? Yes. So it's going to be slightly less than that, but not as low as 35%. Okay. Okay. And I guess what I'm looking at is loan growth where we are from a provision standpoint. And from a credit quality perspective, what potentially could be there. So I'm going to back up from what I said a little bit. That's what I was looking at right at this point and say that we're probably going to have a run rate that's slightly less than that. And I would say $0.01 to $0.02 lower. Okay. And what on the servicing agreement, would that go into a 3rd party? What kind of revenue comes out once that's completed? No revenue comes out whatsoever. Matter of fact, we may have a little bit more revenue because we hope that the 3rd party does a better job on delinquencies and foreclosures and recovery. But there's no we will give them a little bit of revenue, but we think net net is going to be about the same. The real saving is going to be real saving is going to be on the cost to service a loan. It's also going to be great for the customer because they're going to have a better platform. They're going to have better communications. So if you're looking at purely on a cost basis, it's going to be the cost of the service loan is going to be much lower. Okay. That's great. Okay. And then if I could maybe just ask a direct question on net interest margin. You've made some changes on the deposit side by replacing some brokered deposits, etcetera. If the Fed cuts next week, with the changes that you've made, what is the impact to net interest margin if it cuts 25 basis points in your opinion? Yes. At this point, we see 4 to 6 basis points reduction in asset yield. We have we know exactly what we have to do to reduce the amount we have to reduce non interest bearing deposits to offset that. Those plans are in place and ready to pull the trigger. And we feel that we have a very good opportunity to neutralize that 4 to 6 basis point reduction in asset yield. 4 to 6 basis point in asset yield. Are you saying the decline in asset yields would drive NIM down 4 to 6 basis points and you've got a direct plan to offset that pressure on the funding side? Are you saying the yields go down 4 basis points to 6 basis points, so the net interest margin would go down accordingly? Yes. And we know like I said, I know exactly what we what the cost reduction is we have to have and that's what we've been working on the last few days with our presidents to put that in place in the markets and it's actually very achievable without fear of running off deposit cost primarily coming from the money market side and some of the variable costs we have in our interest bearing deposits. So those plans are in place ready for the trigger to be pulled. If they do make the quarter reduction, we think we can offset that 4 to 6 basis points. Okay. So you think that you can flip a switch on the deposit side? Yes. We have a plan in place already, everything from the back office operations. We have all the great sorry, as Lance had mentioned before, all the presidents went through the various deposit programs. And on August 31, if the rates drop, then August I mean, July 31, when the rates drop, August 1, we will put that plan in place and we're all ready to go. Okay. Now Wally, I want to make sure that we're saying the same thing. You said what would the impact of a quarter decrease have an effect of us, right? On NIM. On NIM, right. Because I'm not representing to you that at this point NIM is going to be flat. I'm just going to say we think we can offset the impact of the reduction in asset yield on a quarter point decrease. Okay. I want to make sure we're talking the same. So, yes, I'm confused now. So I'm sorry, but you can offset it, but you're not saying NIM will be flat. If you can offset it, that would mean NIM would be flat, right? If I offset the quarter decrease, the impact of a quarter decrease, I can neutralize the impact of that quarter decrease. We still feel that we'll have some NIM pressure. Okay. We do feel that we have a topping out of our deposit cost. But the plans that we have in place is to really offset the decrease in a quarter point of interest rate decrease. Okay. I see what you're saying. So what is the continued pressure that you anticipate in the 3rd quarter just from what you saw in the 2nd quarter? Well, the range would probably be somewhere 3 to 6 basis points and that's depending on a lot of factors. Okay. Understood. Yes. Yes. We're super, super aggressive, Wally, trying to minimize this. But what we've focused on this past week is a plan to neutralize the decrease in interest rates. Okay. And I will say that when we Wally, when I think about where we are with everything, I mean, obviously, we're focused on running this business the best way and I look at it as kind of near term headwinds for a company building long term value. But the reality of it is we know that the deposit cost battle is going to be an influence on us being able to be successful for the balance of the year. So like I said, every aspect of this organization is focused on that. Okay, understood. Appreciate that. And I'm really sorry to monopolize time, but I've actually gotten several emails while we were talking to go back to expenses. It feels it seems like there's just some confusion around whether or not the run rate is going to be flattish to where it was in the Q2 or going down in front near to where it was in the Q1. So I'm sorry to back up here, but could you just Okay. Let me make this point then, because I have the tendency to get aggressive with where I think expense rate is going to be. The CFO sitting here saying, yes, I will run, take a $37,000,000 run rate, certainly going to work to do better than that. So to break the confusion, I think it's going to be slightly less than what we saw in the second quarter. Okay. And I don't mean to confuse anyone because I am again where everyone's focused on deposit costs, I'm focused on expenses. Right. So I guess where the confusion is coming from as you highlighted the vendor overcharging you and some other one time ish type costs in the second quarter that presumably were going away. Are those being replaced partially replaced with continued investment in the franchise? Is that what we're thinking? No. We have some severance cost on our risk that we're going to be dealing with this one time. So what I think they're concerned about around the table is that as we continue to do things to reduce the expense of the organization, we're going to have some one time cost the next quarter or 2. Okay. So let's talk about it from that perspective because I think most investors and analysts will look at severance costs as one time and we're trying to figure out what's a core go forward expense run rate basis that we should be thinking about in our models to think of as a base line absent of the noise that's coming from things like severance and whatever term lease terminations or whatever you might have. So could we approach it from a basis of what might this expense base look like once we get past all the noise associated with things around the servicing contracts going to a 3rd party, RIFs, etcetera? I'm going to give you a range of about very close to 36 $1,000,000 even give or take things here. So it's not as high as a $37,000,000 it's not as low as a $35,300,000 but I would be surprised if it's not very, very, very low 36. Okay. And this is after you've got the saves and everything around the servicing? No. That is with the next 2 quarters. And then you get another $400,000,000 or so coming in the Q1 of 'twenty. That would come in the Q1 of 2020. However, Q1 2020, if you just look at and say a normal non interest expense run rate would be 3% to 5%. Yes. Got you. We'll have inflationary pressures, risk, COLAs, etcetera. Okay. Thank you. That helps me. I think I have more clarity on that and hopefully the investors do too. And I thank you for so much time. I'll step out and let somebody answer that. So Wally, I apologize for the confusion. Like I said, I'm focused on doing what we say we are. And this has been as when you look at the Q2, a lot of things just fell in between interest rate pressures in our opening of our offices and severance and a number of different things. So we'll get on track. Yes. Thank you. Thanks for all the time and the clarity. I appreciate it. I'll hop out. Thank you, Wallace. The next question is a follow-up from Matt Olney with Stephens. Please go ahead. Yes. So going back to the question around the margin and the impact from the Fed, can you just disclose to us what within your loan book, what percent of those loans are variable? And then within that, what percent is going to be LIBOR versus another index like prime? Yes, 58% of our loans are variable and about 52%, fifty 3 percent of those are LIBOR based. And that's and Matt, we've been feeling that pressure now for quite some time. Right. So Matt, in dollars, I think it's about $995,000,000 that are prime based, about $1,200,000,000 that are LIBOR based. Okay. That's helpful. And then on the other side of the liability side, what can you give us an idea of what portion of your liabilities are going to be indexed to something that will also be a very high beta that could help offset some of the headwinds on the loan side? Sure. The broker deposits that we have, they are tied to an index and our public funds are tied to index. The public funds are about 300,000,000 dollars and the broker deposits are also somewhere around 130. I think the last Matt, the last time I looked at that, it was about $500,000,000 total. Okay. So $500,000,000 on the liability side. On the earning asset side, we're closer to $2,000,000,000 when I add in the prime and the LIBOR loans. And what about on the CD side? I'm showing the average cost was, I guess, $2.13 in the second quarter. Can you talk around kind of what your newer rates are that you're posting right now? And how much more pressure are we going to see on that 2.13 average time deposit cost? Yes. Matt, and before I turn it over to Lance, because Lance has done a lot of work in this area, I will say if there is any benefit to us as an asset sensitive institution of rates going down is to reset the customer mind set that rates are going down. So again, that's why we looked at exactly what it was going to take in the reduction of expense or cost on the interest bearing side to offset that quarter. So Lance? Yes. Matt, as I mentioned, I do think that the rates that we drove in the Q2 would peak out and start to reduce. I mean, obviously, we have really, really focused on our money market accounts and how we're going to reduce that. At the same time though, we've got a plan on CDs to start incrementally pulling those pricing back on new offerings, but at the same time making sure that we're growing core deposits. Okay. So said another way, it sounds like you expect the deposit average deposit cost to move down in the Q3, even if you do grow the dollar amount of deposits. Am I interpreting that correctly? Pardon me. This is the conference operator. The speakers presenters line appears to have disconnected. I'm going to Did you want me to repeat the question or did you get all that? Yes, I got it. I think I was saying that. I'm sorry, not sure what happened there. We definitely feel like the deposit rates have peaked in the Q2 and we'll begin to start pulling those back down both from the money market perspective and from new time deposits. So we feel confident in our ability to do that. And Matt, to get a little more specific, I know you've asked for what does the rate forward look like. We're going to have to manage this from the standpoint of customer expectations and what length of time they this is going to change what they look far from a maturity standpoint and we'll be reducing those rates, I think, accordingly based on what the Fed does. Okay. Got it. That's all for me. Thank you, guys. This concludes our question and answer session. I would like to turn the conference back over to Drake Mills for any closing remarks. Okay. Just appreciate everyone's attendance on this call. I do want to reinforce the fact that there are many positive things going on with this organization right now. We do feel comfortable about our growth projections We'll continue. The acquisition of these teams that we have in place has certainly allowed us to focus on deposit growth and deposit acquisitions. But we will continue to build this organization with customer acquisitions that do create profitability across all lines of bank. What I mean by that is we're not doing outdoing loan transactions just for the sake of loan. It's full relationships that we're working on. We're having a lot of success around there. But as I mentioned, this is near term headwinds for a company that's built long term value. I certainly appreciate the time, the confidence that you have in the company and I look forward to seeing each of you as we continue to be on the road. So thank you very much for your opportunity. The conference has now concluded.