Stifel Financial Corporation

Good day and thank you for standing by. Welcome to the Stiefel Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's call is being recorded. If you require any further assistance, please press star 0. I'd now like to turn the call over to Mr. Joel Jeffrey, Head of Investor Relations. Please go ahead, sir.

Thank you, Operator. I'd like to welcome everyone to Stifel Financial's second quarter financial results conference call. I'm joined on the call today by our chairman and CEO, Ron Krzyzewski, our co-presidents, Victor Nisi and Jim Zemlack, and our CFO, Jim Marishan. Earlier this morning, we issued an earnings release and posted a slide deck and financial supplement to our website, which can be found on the investor relations page at www.stifel.com. I would note that some of the numbers that we state throughout our presentation are presented on a non-GAAP basis, and I would refer you to our reconciliation of GAAP to non-GAAP as disclosed in our press release. I would also remind listeners to refer to our earnings release, financial supplement, and our slide presentation for information on forward-looking statements and non-GAAP measures. This audio cast is copyrighted material of Stiefel Financial Corp. and may not be duplicated, reproduced, or rebroadcast without the consent of Stiefel Financial. I will now turn the call over to our chairman and CEO, Ron Krashevsky.

Thanks, Joel. To our guests, good morning, and thank you for taking the time to listen to our second quarter results. Let me start by saying our second quarter and first half results were good, particularly in light of the significant market headwinds. As widely reported and known, financial conditions in 2022 have been challenging, to say the least. The S&P 500 had its worst first half since 1970, down 21.4%. Bonds fared a little better as the Bloomberg U.S. Aggregate Bond Index declined 11%. The 10-year yield was approximately 3% at June 30th, more than double the year-end yield of 1.46%, while credit spreads have also widened significantly since the beginning of the year, with investment grade spread widening to 155 from 93 and high yield of 569 from 278. Economic measures of inflation hit 40-year highs. In addition, the Russian-Ukraine conflict, China lockdowns, and increasing risk of recession all contributed to the economic malaise while driving sentiment much lower. To address inflation, the Federal Reserve has become very hawkish. Remember, at the beginning of the year, the markets were pricing in three 25 basis point increases for all of 2022. Today, the markets are pricing the equivalent of 12 to 13 25 basis point rate hikes. Clearly, the actions of the Federal Reserve will continue to tighten economic conditions. Going forward, I expect increased volatility and more uncertainty. We will manage our business accordingly. Against this backdrop, we recorded our second highest net revenue in EPS for both the second quarter and first half of the year. Our second quarter revenue totaled a little more than $1.1 billion, a 1% substantial decline and a 4% decline from the second quarter of 2021. Earnings per share came in at $1.40. So while the market environment was difficult, we nevertheless generated pre-tax margins over 21%, pre-tax pre-provision income of $248 million, which was in line with the first quarter, and a return on tangible common equity of 22%. As I have stated on numerous occasions, Steeples is a diversified financial services company with balance across businesses. The second quarter just demonstrated this resiliency and the benefits of the investments we have made in our client-facing franchises. To illustrate, slide two provides a revenue break from the prior year quarter, depicting the $45 million decline in revenue. I would note that client facilitation revenue and NII both reflective of our increasing relevance to our clients and indicating the building of our franchise, increased nearly $100 million. Offsetting this was the decrease in revenues more closely tied to the difficult market conditions. One headwind worth noting is the $39 million decline in our trading gains, investments, and warrant valuations. Of this, $23 million is reflected in transactional revenue while another $15 million is recorded in other revenues. In addition, underwriting declined nearly 100 million as industry volumes remain muted given the ongoing market volatility. Said another way, we are pleased with our client engagement activities, both in wealth management and institutional. More and more, especially during times of stress and volatility, when good advice and execution skills matter most, clients are turning to steeple. The increasing confidence our clients have in us will far outlast the current difficult markets. The diversity and balance of our business model yield good earning results. I would note that our pre-tax, pre-provision income was essentially unchanged from the first quarter and down 9% from the prior year. Net income and earnings per share both declined 18% from the prior year, and the difference between the 9% decline and pre-tax, pre-provision is due to a $22 million increase in loan loss provision due to loan growth and last year's reserve relief. Additionally, there was an increase in the effective tax rate to 26.4% from 25%. Looking at segments, global wealth management revenue increased 10% to a record $698 million. These results were driven by the growth in our balance sheet and higher interest rates, as well as the addition of productive financial advisors. As you can see from the chart on the lower right of the slide, our pre-tax margins reached 35% in the quarter as we continue to benefit from increased net interest income contribution. Asset management revenue was up 12% from the last year. As I mentioned earlier, the equities markets declined further in the second quarter, with the S&P 500 falling 16%. The decline offset strong inflows of our fee-based assets end of the quarter at $141 billion in total client assets for $378 billion. On the next slide, we highlight our strong recruiting activity, client asset growth, and increased loan portfolio. For the quarter, and as a foundation of our long-term growth strategy, we added 41 advisors, including 23 experienced advisors, who joined Stifel as their former choice, choosing us because of our advisor-friendly culture, expansive products, industry-leading, yet simple and fair compensation plan, and excellent technology. These new advisors brought trailing 12-month production of $24 million. Our recruiting pipeline remains strong, and we are encouraged by the traction we are gaining in the independent channel that added eight net advisors during the quarter. Our recurring revenue was more than 74% for the first half of the year. Although the percentage of recurring revenue benefited from slower transaction activity, we expected to remain elevated over historical levels as contributions from net interest income and asset management continue to grow. Lastly, we grew our loan portfolio by $1.4 billion during the quarter, up 8% sequentially. Total firm-wide assets on June 30th were $36 million $2.5 billion, up $2.5 billion year-to-date. Institutional revenue of $411 million illustrates the balance of our franchise against the difficult markets. Revenues declined from an exceptionally strong prior year. We continue to generate solid advisory revenue, down only slightly from last year and up 10% from the first quarter, and our client facilitation business performed well. As I previously mentioned, our transactional revenue was negatively impacted by changes in warrant valuations and a reduction in trading gains, totaling $23 million within the institutional segment. Excluding the valuation and trading results from both periods, our client flow business totaled $139 million, up about 8%. I will refer to this further when I discuss transactional revenue for both equities and fixed income. Market conditions weighed heavily on capital raising activity, especially in equities. Institutional has been and continues to be a growth business, albeit with some cyclicality. Despite the market headwinds, we are still on track to generate the second highest institutional revenue in our history. We've built a diversified business in this segment by consistently adding capacity and products, all to enhance our market relevance to clients. And we believe that we are well positioned for continued growth as the operating environment recovers. As you know, we look at our institutional business through the lens of equities and fixed income. Fixed income generated net revenue of $136 million in the quarter and posted record revenue for the first half of the year. Our equities business was down 56%, primarily due to an industry-wide capital-raising decline of over 75%. As I mentioned, the comparison of our transactional business is skewed by a quarter-over-quarter reduction in warrant marks and trading gains. I do view the warrant marks and trading as somewhat unusual and will exclude its impact as I discuss overall trends. Therefore, adjusted client equity transactional revenue totaled $52 million, essentially unchanged from the prior year. We are seeing fruits from our investments in electronic and algo trading, but these were essentially offset by weakness in our international businesses. Also, the lack of comparable equity underwriting is a factor in our equity transaction trading revenue. Adjusted fixed income client transactional revenue totaled $87 million, up 15%. This increase is primarily attributable to our addition of Binding Sparks, which has been a successful integration. I would note that Stifel does not engage in commodities and currency trading, which During the quarter, we believe was a primary driver of the fixed income results of some of the both bracket firms. On slide seven, we look at our investment banking business. For the quarter, we posted revenue of $271 million, which was down $105 million, or 28%. Simply, heightened volatility led clients to delay strategic actions and new issue activities. Nearly all of this decline was in capital raising, as advisory fees totaled $200 million, down slightly from a strong prior year quarter. The diversity of our advisory business continued as we generated strong contributions from financials, healthcare, technology, and gaming. Additionally, we are seeing solid production from Miller-Buckfire in restructuring and Eaton Partners in fund placement. In terms of underwriting, Our equity capital raising business declined 75% from the same period last year and was down 78% for the first half of the year. But frankly, a small consolation by our calculations, reflecting the investments we have made, people have gained market share. As I look forward, we are well positioned for the return of capital markets activity, which usually happens quickly when valuations stabilize with reduced volatility. Look, said another way, our first half equity underwriting results are much closer to zero than what our capabilities will generate in normal market conditions. Markets also impacted fixed income investment banking. Fixed income underwriting posted $40 million of revenue, a decline of 27% from last year. We look at this business through the lens of taxable issuance, generally high-grade and leveraged loans, and unique finance. Starting with municipal or public finance, Year-to-date industry new issue negotiated deal volume declined 27%, while our first half revenue declined 18%. For the quarter, steeple public finance revenue increased 10% sequentially. Given the industry slowdown, I am pleased with our market share, calculated on the number of negotiated transactions, which increased to an industry leading 15.2% from 12.5%. in the first half of last year. Widening credit spreads and the sharp rise in rates impacted our taxable issuance business, as we saw a 40% decline in the second quarter of 2021. Overall, our investment banking pipelines remain solid. Conversion of this backlog to revenue will largely be dependent on market conditions and corporate competence. That said, our client dialogue and engagement continues to be strong. And with that, let me turn the call over to our CFO, Jim Marish.

Thanks, Ron, and good morning, everyone. I'll start by addressing net interest income. NII was up 25% sequentially to $195 million and came at the midpoint of our guidance. The growth was driven by a 44 basis point increase in our bank NIM to 288 basis points and a 6% increase in our interest earning assets as we continue to grow our loan portfolio and our securities holdings. Given the timing of the 50 and 75 basis point rate increases in the second quarter, we anticipate the bulk of the upside to NII from these hikes to occur in the third quarter. As such, we project net interest income in the third quarter in a range of $235 to $245 million and a bank NIM of 320 to 330 basis points. I'll touch on our overall updated full-year guidance at the end of my time. Moving on to the next slide, I'll quickly review the bank's loan and investment portfolios. We ended the quarter with total net loans of $19.2 billion, which was up approximately $1.4 billion from the prior quarter. Our commercial portfolio increased by $730 million, with particular strength in fund banking and industrial sectors. On the consumer side, our mortgage portfolio increased by $600 million, while our securities-based loan portfolio was relatively flat. Moving to the investment portfolio, Total investments increased by $600 million sequentially. This was driven by a $570 million increase in CLOs. Turning to credit metrics, the credit loss provision totaled $12 million due to loan growth, and the allowance to total loans ratio remained at 75 basis points. Our non-performing assets as a percentage of total assets were at 10 basis points, indicating continued strength in our credit metrics. Moving on to capital and liquidity. Our risk-based and leveraged capital ratios remain strong at 18% and 11.2% respectively. The modest decreases in our capital ratios were the result of loan growth. During the second quarter, we repurchased $31 million of shares and our book value and tangible book value per share increased by 2% and 3% respectively. I would also note that we have 10.3 million shares remaining on our repurchase authorization. As you can see from the chart in the lower left of the slide, we have a long history of growing our funding base through multiple cycles. Our utilized and available funding has increased by more than $15 billion in the past five and a half years, and we continue to have substantial funding capabilities for our bank. Our total available and utilized funding totaled more than $40 billion and was similar to levels in the first quarter. I would note that overall client cash sweep deposit balances declined by $1.7 billion during the quarter to approximately $27 billion. The decline was driven by the seasonal nature of tax payments and deployment of yield-seeking cash, and it was consistent with historical seasonal trends. Further, we continue to see strength in advisor recruiting, and our wealth management clients currently hold an additional $6.3 billion in money market fund balances. We also continue to build our deposit capabilities at the bank. Since quarter end, we have grown an additional $600 million through our smart rate deposit program, which now is $1.5 billion in deposits. On the next slide, we go through expenses. Our comp to revenue ratio of 58.1% was down 140 basis points from both comparable periods as we were benefiting from the increased NII contribution to our revenue mix. Despite the meaningful decrease in our comp ratio, we continue to accrue compensation expense conservatively early in the year. Non-compensation operating expenses excluding the credit loss provision and expenses related to investment banking transactions, totaled approximately $208 million and represented 18.8% of our net revenue. This was above our full-year guidance, primarily due to a pickup in expenses tied to business development combined with lower institutional revenues. The effective tax rate during the quarter came in at 26%, which was the high end of our guidance and was driven by a lack of any discrete tax benefits during the quarter and the operating contribution from foreign subs. Finally, our average fully diluted share count came in below our guidance due to declines in our share price and our repurchase activity. Absent any assumption for additional share repurchases and assuming a stable stock price, we'd expect the third quarter fully diluted share count to be 117.3 million shares. Before I turn the presentation back to Ron, I wanted to provide an update on our forward guidance. We are lowering our revenue expectations for 2022 to a range that equates to a 5% variance above or below 2021's net revenue. The reduction in our expectations is primarily the result of continued headwinds in our institutional business, as well as weaker-than-expected equity markets. Comparing our updated assumptions to those in our initial guidance, it's easy to see the impact the market is having on our business. At the beginning of the year, we had expected a modest pullback in investment banking from our record results in 2021. Our advisory pipelines were at record levels, but we had already begun to see a slowdown in capital raising activity. Despite strong advisory results in the first half, the underwriting market was essentially closed. In terms of transactional revenue, we anticipated it to be relatively flat. However, transactional revenue is down 8% so far this year, primarily due to the impact of lower capital markets activity and marks on our trading books. That said, we expect transactional revenue to improve in the back half of the year, as our commission business has been resilient, and we expect the market impact on our trading book to be less pronounced. The magnitude of the market sell-off has also impacted our forecast for asset management revenue. Recall that we anticipated a market correction in the first quarter, with the S&P 500 being up mid to high single digits at year end. With the S&P down 20% so far this year, our expectations for asset management revenue have also been lowered. One benefit from the impact of inflation on the economy is the increased pace at which the Federal Reserve has raised short-term interest rates. For the full year, we were raising our guidance for net interest income to $825 million to $925 million based on the faster than expected increase in the Fed funds rate. This assumes additional Federal Reserve rate increases of 175 basis points and would project a year-end Fed funds target rate range of 3.25% to 3.5%. I would point out, based on this forecast and growing our balance sheet to the midpoint of our guidance, we would exit 2022 with an annual run rate, NII, of approximately $1.2 billion. We often get a number of questions related to deposit betas, cash sorting, and asset mix, and how it impacts our NII forecast. I would reiterate that all of those assumptions are incorporated into the quarterly and full year forecast noted above. A higher revenue contribution from NII will have a positive impact on our comp ratio, which we continue to expect to come in at 56 to 58%. So, while we now see lower revenue than initially forecasted, 2022 is still on track to be one of the strongest years in our history. And with that, I'll turn the call back over to Ron.

Thanks, Jim. In short, the diversity of our business resulted in another strong start to the year as our first half net revenue and EPS are the second highest in our history. Look, market conditions are volatile and difficult to predict, and as such, we will remain both cautious and opportunistic. As a base case for the second half of the year, we are assuming an operating environment similar to the first half. That said, we anticipate an increase in revenues as compared to the first six months. as the substantial growth in our net interest income will provide a meaningful offset to the impact that the current market could have on our more cyclical businesses. Overall, Steeple is well positioned for continued growth as our capital levels remain robust, and as we have done throughout our history, we will use periods of market dislocation to reinvest in our business for future growth. With that said, I'd like to thank all my partners at Stifel for their efforts in building our franchise into the world's top organization that has capabilities to weather market downturns and generate continued growth. With that, operator, please open the line for questions.

Thank you, sir. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, please press star 2. Please stand by while we compile the Q&A roster.

And our first question will come from the line of Devin Ryan with JMP Securities. Great. Good morning, everyone.

Hey, Devin.

Good morning. Hey. So first question just on the outlook for the back half of the year. So when we think about investment banking, there's a lot of uncertainty, I think, in terms of just completion of backlog. But Can you just help us think about in your expectations what the backlog looks like today relative to starting the year? And then we're hearing a lot from other firms about elongation of processes, deals taking a long time to close, but not a lot about deals breaking yet. Are you guys seeing deals break and so therefore expectations are lower because of that or just any other flavor around some of the puts and takes for more on the investment banking side in the back half of the year?

Well, you know, I would echo the elongation comments, all right? We're definitely talking, we're engaging with clients. The, you know, the advice is that it's a difficult market to execute transactions, especially capital markets. You know, it's very difficult to finance a merger in the leveraged loan markets today. And what we're seeing is a pause, especially on the capital raising side due to volatility in the markets. And as it relates to the second half of the year, you know, we're assuming just for a base case that I'm not going to pick the point that that changes. I do know, Devin, that when it does change, it changes fast. I can point to a number of instances where you know, you have to be ready to be ready, as bankers like to say, because the markets can change fast. But in terms of what we're thinking about, we're just thinking that it'll be similar to the first half, where we had no, basically, equity capital markets revenue. So that's how we're thinking about it. But the clients... are engaged and will, this is a market where deals will get done.

They're just being delayed. Yep. Appreciate that. Yeah.

I was just trying to get a sense of the conservatism or not baked into that outlook, but I think you guys hit on that. So thank you. Then just to follow up for Jim, you gave a lot of details on the industry's income and expectations and kind of the exit rate on the year. So that's all helpful. And then you also touched on cash sorting. Can you maybe just help us with like how much more you expect and what history would suggest in terms of additional cash sorting from here? So if any other detail you can give us in terms of what's baked into your customer cash expectations kind of exiting the year would be helpful.

Let me jump in on that, then I'll let Jim get to this. I think this is an important point, Devin. And I'm going to speak to cash sorting a little bit. You know, in June, I forget the exact time, there was, you know, a significant increase in the two-year and in muni rates. And what happened and where it is today is the yield curve became very steep from Fed funds effective to the two-year. And then of course the yield curve inverts. And so in the deposit environment, it's what I would expect. Cash yielding products, there's a big difference between the money market rates and the cash sweep deposits and laddering a two-year treasury. And that is – so what we're seeing is what we would expect, especially in an advisor-led business, to that. Now, what's going to happen, and is going to happen today, is that that steepness at yield curve is going to flatten pretty quick. You know, today, 50 to 75 basis points of that steepness will go away. It will happen in September. And then that environment will lead to a more conducive environment for deposits. So I think that's been lost a little bit in what's been going on is effectively the steepness from Fed funds effective to the two-year.

And maybe on top of that rate dynamic, a couple of things. Obviously, there's always some seasonal outflows related to tax payments. I think you've heard a number of competitors discuss similar type trends during the quarter. And I think as we sit here and think long-term, and one of the things we put on that chart is just our long-term growth in deposits. And that's going to continue to be driven by financial advisor recruiting, which remains strong. I'll also say we'll highlight the smart rate deposit program where we're capturing more of that yield-seeking cash and keeping that on our balance sheet. And then, again, we're growing our capabilities with venture and fund banking. And kind of going back to smart rate, I think we're going to be able to compete against some of that $6-plus billion in the money funds. And I think that is a key area for us to kind of combat some of the things in the near term that Ron talked about.

Yep, that's great color, guys. Thanks so much. I'll leave it there. Thanks, Devin. All right, your next question will come from the line of Steven Schubach with Wolf Research. Hi, good morning. Hey, Steven.

So one of the questions I just wanted to unpack is around the, or topics I wanted to unpack is around the NII guidance. Jim, I believe you noted you're contemplating Fed funds of, 325 to 350, certainly helpful to hear the exit rate for the year. It does support some pretty strong momentum at the bank. But the curve is actually reflecting cuts in 2023. That's certainly something that started to garner increased attention. I just wanted to understand, because you do tend to have a lot of short-end sensitivity, whether you're taking any actions to protect the margins if the Fed reverses course, maybe adding some fixed-rate MBS, just to add some duration in lieu of CLO products, which you've had greater appetite for historically?

No, that makes sense what you're talking about. You know, I would highlight that we did add over $600 million of mortgage product. All that's adjustable rate mortgage during the quarter. And so, you know, we've had conversations talking about, you know, the environment for 2023. We can see, obviously, what Fed Fund Future are looking at. The thing I would say at that point, I think if you're looking at an environment where we're seeing rate cuts, The dynamic Ron talked about in terms of cash sorting probably goes away. And you think about the starting point of where our asset yields are at today, we would be able to generate a sufficient return. We're talking about 320 to 330 basis point NIM in the third quarter. So you think about our ability to generate, meet our return hurdles at lower rates than that. I would view that more as just an opportunity to grow NII at that point as we'd see more cash deposits coming in.

Helpful caller. And maybe just for my follow-up on the non-comps, they did come in a little bit higher than we were anticipating. You did note that the ratio in the quarter was running above what you had guided to at least for the full year. Some of that could certainly be seasonal. It was encouraging to hear the comp ratio guidance for the full year was unchanged. I was hoping you could just help frame how we should be thinking about the cadence for dollar non-comps. You cited the elevated biz dev in the corridor. Certainly we're seeing some normalization in T&E, but just trying to frame how we should think about the non-comp trajectory in the back half year.

Well, first of all, I'll let Jim get into it. We do provide guidance in non-comp as a percentage of net revenue. So the first thing that happens, you get to the high end of the range when your revenue comes in lower. And a lot of that is being driven on a ratio basis versus an absolute basis. Now, that said, we've said that, you know, our T&E and our conferences and those expenses we're going to increase. But some of it is the fact that, you know, our institutional business has been muted in this timeframe. So, that's driving that ratio higher. The same reason that comp ratio is coming lower because we're driving higher NII.

Yeah, you know, I mean, maybe a little color to what Ron just mentioned. If we would have hit the, you know, original midpoint of our revenue guidance, we'd be at, you know, a 16.5 adjusted non-comp ratio. That would be right in the middle of our original guidance. So in terms of absolute dollars, we're right where we thought we would be. It's just more of a function of the revenue shortfall.

Okay. Very helpful. Thanks for taking my questions. You're welcome.

All right. And once again, that is star one if you'd like to ask a question. The next question will come from the line of Alex Blostein with Goldman Sachs.

Hello, Alex.

Hey, good morning, everybody. Thanks for the question as well. I wanted to go back to some of the funding dynamics at the bank. So it looks like you guys will exhaust the third-party bank sweep fairly quickly here. I think there's less than $2 billion left. And, Jim, I know you talked about money market funds and the smart deposit program that's meant to be more competitive with money market fund yields. But I guess with industry money fund yields now kind of north of 1%, probably approaching 2% by the end of the year, should we be thinking about deposit costs on these incremental deposits sort of beyond what you could move from third-party bank sweep coming in closer to these active money market fund rates?

Yeah, so if you think about our deposit rate thus far in this rate cycle, it's been about 25%. We've talked about a 25% to 50% deposit data. And when you look at smart rate today, you know, before today's movement, it's going to be, you know, it's at 1.25%. So it's already in that, baked into that math. But I think what we're saying is we still have the capability to go above 50% composite data on future rate hikes and still meet those NII guides based upon what we've done thus far. And so I think we have some flexibility there to be more aggressive and still, you know, hit our NII targets for the year.

Yeah, and I would say, I think, Alex, you're right. embedded in your question is a good question, one that we look at, and that is ultimately what's your cost of funds going to be, all right? I mean, that's really what we're talking about. And we're comfortable. First of all, I'm comfortable with our ability to source funding. We've been doing this a long time, and, you know, we did this when the bank was half its size. So we will be able to fund the bank. I'll go back to the dynamic, which we saw before, which is the steepness of the yield curve, which has some, you know, cash seeking deposits at the high end. And we're, it's not just at Staple, that's across the industry, in my opinion. And that will begin to taper today with an increase in Fed funds effective and again in September. So, we're confident in our forecast. certainly through the end of the year with our growth and our deposit, our cost of funds effectively factors in what we're doing with smart rates.

Got it. And then on the asset side of the balance sheet, just another quick follow up. As you think about the appetite for loans versus securities in this point in the credit cycle, kind of obviously heard your comments for the back half of the year. But as you think in a little bit further than that, should we be expecting a similar pace of loan growth or that's likely to moderate as we kind of progress through slower periods of economic growth?

You know, I think what we said before is we still feel confident in our $4 to $6 billion growth target for the year, which we said is predominantly going to be loans. Now, that being said, there's a number of verticals on the various different loan channels that we've been pretty good at generating balances with. That said, we still see attractive opportunities in CLOs, and so that would be somewhat of a mixture of that. But if I look forward to the third quarter and into the fourth, I would say it's predominantly going to be loan growth.

And in terms of asset class, you know, we've always sold a lot more mortgages than we keep on balance sheet. And there's some, alluding to the previous question, there's some opportunities for us for very short-term nature in our, where we, you know, where we have, where we move with the yield curve in that short term. So, you know, we certainly have a lot of opportunities Looking forward past this year, it's going to really depend on economic conditions and the market and whether or not there's a recession looming, all the things that will shape our views as we go forward. But overall, I would say that we're going to continue to grow our balance sheet into the future.

Yep, all makes sense. Thank you, guys.

And there are no further questions at this time, so I'd like to turn the call back over to Mr. Ron Kaczewski.

Thank you, Operator. Everyone, I hope everyone is enjoying their summer. It's certainly been hot here in the Midwest, and I look forward to catching up with everyone on our third quarter earnings call. So have a great rest of the summer, and Look forward to catching up again. Thank you. And that does conclude today's conference. We thank everyone again for their participation.