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spk00: Greetings, and welcome to the Service First Bank Shares first 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. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Davis Mange, Director of Investor Relations.
spk05: Good afternoon, and welcome to our first quarter earnings call. We will have Tom Broughton, our CEO, Rodney Rushing, our Chief Operating Officer, Henry Abbott, our Chief Credit Officer, and Bud Foshee, our CFO, covering some highlights from the quarter, and 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. forward-looking statements speak only as of the date they are made, and Service First assumes no duty to update them. With that, I'll turn the call over to Tom.
spk06: Thank you, Davidson. Good afternoon, everybody. Thank you for joining us on the call. The year is off to a great start with the first quarter, as we'll review for you over the next few minutes. We have various reports from our various management people You know, we've always done well in times of stress in the banking industry. We did after the 08-09 recession, and we certainly did during the pandemic. The bank has experienced significant growth during those periods of time. And we do expect significant opportunities, again, during this time of a little bit of dislocation in the industry. So you ask, you know, why do we do well during times like this? For one thing, there's several reasons. First is our business model had changed in over 18 years since we opened 18 years ago. We are well capitalized. We're financially stable. We retain 75% of our net income to fund our growth and increase in capital. We do have an industry-leading efficiency ratio. We're highly profitable. We have very strong credit quality. Henry's going to talk about this in more detail in a few minutes. We don't have any broker deposits for federal home loan bank advances like many of our competitors. So in summary, our bank is built for times like this. And we'll demonstrate that to you during the course of the call this afternoon. I was going to talk a few minutes about our most recent expansions in our community banking offices, which are in, our newest ones were in Asheville, North Carolina, and Panama City in Tallahassee, Florida. All are doing quite well. They're off to a great start. We're also in the process of opening a new office in the Lake Norman area of the Piedmont in North Carolina, which will be another community banking office. And we are very pleased that the start these are off to. We're building it the right way with core customers that our bankers have had a relationship with for many years. Rodney's going to talk in a few minutes about our new corresponding office in Houston. that we opened last month, so that's certainly a plus. It became apparent to us in mid-2022 that the Fed tightening cycle would lead to a focus on deposit rather than the lending side of the bank. We do anticipate some economic slowdown based on recent events. Rodney Rushin is going to give a quick review of our deposit franchise. Rodney?
spk03: Thank you, Tom. You noted how we have had virtually no dependence on broker or wholesale deposits for fundings, and I wanted to provide some understanding and details of our deposit metrics and our bank's deposit base. From our beginnings, our model has always been to bank relationships and not just book transactions. Excluding correspondent banks, 25% of our deposits have a credit relationship with Service First. There are no industry concentrations outside of private households and correspondent banks. For example, commercial banking makes up 4.7% of our deposit base. Law firms were 3%, and real estate firms were 2%, and it goes down from there. As you can see, we're very granular with no concentrations. When it comes to correspondent banking, we have 340-plus correspondent relationships in 28 states, and just over 120 are settlement banks. Settlement banks are banks, downstream correspondent banks, whose daily cash letters are cleared with us or their Federal Reserve account fees are settled through us, working much like a corporate cash management account. As rates have risen, you will see a shift from compensating DDA balances, which are non-interest-bearing, into interest-bearing. But because we pay for settlement expenses with the DDA earnings, there is no effect on profitability. Because of the settlement relationship, we keep the fundings by sweeping into interest-bearing accounts, making these deposits very sticky. In fact, 65% of total correspondent fundings are with these settlement customers. This past month proved how stable these deposits and relationships are. As Tom mentioned, we opened our Texas correspondent office with the addition of Don Dickerson. Don and I worked together previously, and with over 40 years of experience in Texas banking, Don was the perfect choice to expand the Texas market with a large number of relationships developed over the last 40 years. We're looking forward to the growth that this market will provide, growth we should realize in the near future. I just wanted to highlight some of the details. More details are in the slide deck that we provided. about our stable conservative deposit base and where we have plans to grow. With that, I'll turn it over to our Chief Credit Officer, Henrietta.
spk10: Thank you, Rodney. The bank got off to a strong start in 2023 with continued strong credit quality. I'm pleased to say we ended 2022 with NPAs to total assets of 12 basis points. We were able to maintain that in the first quarter. With no major changes in NPAs, they continue to be near historic lows. Annualized charge-offs were five basis points, well below the same period prior year of 11 basis points and six basis points for the fourth quarter of 2022. At the end of the quarter, our ALLL's total loans was 1.28 versus 1.25 at the end of 2022. This was not associated with any one loan the rather conservative steps the bank took in the first quarter. I won't go through each of the bullet points, but you should have access to some additional information in the slide deck about our theory portfolio, and I can go over any questions you have during the Q&A section. Hitting the highlights, AD&C as a percent of total risk-based capital dropped from 100% at year end to 93% at the end of the first quarter. Total income producing commercial real estate also dropped for the quarter and is now 317% of risk-based capital. The vast majority of our commercial real estate projects are in the Sun Belt as we have only had a handful of projects where we followed our customers outside of the Southeast. Office space makes up roughly 3.5% of our total loan portfolio. The average loan size within our income-producing office bucket is $1.5 million. These loans are typically in suburban locations and are more traditional one or two-story office walk-ups. We have very minimal CBD office exposure. Comparable to our office exposure, the bank has never been a big single-family residential development lender, and our raw land and lot exposure is minimal. We have stressed and continued to look closely at our CRE portfolio to ensure we are appropriately managing the risks. We continue to be best in class within our peer group with our past due management. In the first quarter, service first switched to a new residential mortgage loan servicing company because of client issues with our prior vendor. We did see an increase in past due loans for the quarter, but they are still near historic lows and a major component of the increase in past dues was related to operational changes that caused delays within our residential mortgage portfolio. The majority of mortgage loans that were showing as past due have now been caught up. A lot of the issues were related to getting ACHs set up correctly and where and how to properly make payments with this change in servicing companies. Switching gears towards pricing, Of new loans that were originated in the first quarter, more than 80% were variable rate loans. We continue to push to increase the yield on both new and existing loans. We've also begun various repricing efforts on existing loans prior to their maturity. Through those efforts, we were able to reprice roughly $130 million in existing debt by an average of 1.4% in the first quarter. We also had over $70 million in fixed rate debt pay down early in the first quarter. These two items combined for roughly $200 million in positive movement within our fixed rate loan portfolio. In summary, very pleased with the results in the first quarter. We'll hand it over to Bud Foshee.
spk04: Thank you, Henry. Good afternoon. For earnings, we kicked off 2023 with strong earnings in the first quarter as we continued to build capital and liquidity. Deloaded earnings per share increased 7% compared to the first quarter of 2022 when adjusting for income on Triple P loans. Our investment portfolio, the portfolio is a small component of our balance sheet, 11% of total assets. The portfolio is managed for liquidity. The components of the portfolio are 45% pass-through mortgage-backed securities and 30% U.S. Treasury and agency, 1% municipal, and 24% bank and bank holding company sub-debt. We have never purchased a CMO. The average life of the total portfolio is 4.2 years. The average life for our peer group is 7.2 years. and that peer group is 33 banks with total assets greater than $10 billion. The average life of our treasury portfolio is 2.8 years, and the average life of the bank and bank holding company sub-debt is 2.4 years, and the average life of the bank and bank holding company sub-debt is based on the call date. We have the expertise to analyze bank and bank holding company sub-debt. liquidity. Excess funds were $732 million March of 2023. Our goal is to increase this to a $1 billion range. Total balance sheet liquidity in March of 2023 was $1.5 billion and total available liquidity was $8.4 billion. Margin average loan growth was $166 million for the first quarter Triple P fees and interest income were $29,000 in the first quarter of 2023 versus $4.9 million in the first quarter of 2022. NIM compression is the result of record rate increases. The Fed funds have increased by 475 basis points since December of 2021. we had four consecutive 75 basis point increases during the period from December 21 to March of 2023. The second largest Fed rate increase over a one-year time frame was from February 1994 to February 1995, and that increase was 300 basis points. Only one 75 basis point increase occurred during that cycle. We see deposit rates stabilizing and NIM improving as loans are repriced. The average rate for new loans in first quarter was 7.71%. Having a short maturity loan portfolio will improve the margin over time. Our non-interest income, credit card income continues to be impacted by our conversion in September of 2022. Organ fee income has been impacted by decreased volume and rate increases. We expect improvement in both areas over the course of 2023. For non-interest expenses, as a result of our market expansions, total salaries and benefits increased by $765,000. The investment write-down related to tax credits was $2.7 million in 2023, versus $2.5 million in 2022. Tax credits were $3.9 million in the first quarter of 2023, versus $3.3 million in the first quarter of 2022. Capital tier one leverage ratio was 9.91% at March of 23, versus 7.79% December 2021. The ratio was 9.11% after adjusting for the net unrealized losses of both the available for sale and held to maturity securities. That concludes my remarks. I will turn the program back to Tom. Thank you, Bud.
spk06: You know, in summary, we see in a record deposit pipeline The slide deck that we filed this afternoon should give you a lot more information about the bank, and we think it's all very positive. One thing we're excited about, we opened 23% more accounts in the first quarter than we did in the first quarter of last year, so we're very pleased at the improvement there. We think we're close to the other side of this Fed tightening cycle. We're certainly going to be vigilant on credit quality because we do expect to a slowdown and we'll certainly be watching to make sure we're doing everything correctly to manage our loan portfolio and manage our assets properly. In summary, we do like where we are today. Our simple business model is paying dividends and we'll be happy to answer any questions you might have.
spk00: Ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment, please, while we call for questions. And our first question comes from the line of Brad Millsaps with Piper Sandler. Please proceed.
spk02: Hey, good afternoon.
spk06: Good afternoon, Brian.
spk02: Tom, maybe I wanted to start on loan growth. I think this is the first quarter, maybe outside of the pandemic, where you didn't grow loans. Just kind of curious, last quarter you talked about high single-digit loan growth and double-digit deposit growth. I know a lot has changed. Just kind of curious how you would sort of think about those numbers as we sit here today.
spk06: We had a fair number of payoffs. Some of them were unexpected, Brad, but a lot of them were very pleasant surprises because they were low fixed rates that paid off during the quarter. That was a win-win for us and our customers. I can detail it for you, but it's a pretty substantial amount of payoffs. We started trying to slow the loan train down in the middle of 2022 when we realized the Fed tightening was going to give the industry issues. You know, treasuries are leading the way on rates going up and they were going up in lockstep with Fed rate increases. It was a concern to us and we started slowing it down a bit and the result has showed up in this finally in this first quarter. So we feel like we'll start growing loans again Probably in the back half of the year, you'll see some increased loan growth, Brad. But part of it was unexpected with loan paydowns on fixed rate loans. Again, not an unpleasant surprise, a very pleasant surprise. And part of it was because we started slowing things down in the middle of last summer. So that's a longer answer than you wanted, probably, Brad.
spk02: Yeah, I know construction's been a big area of growth for you guys. Obviously, those tend to be some of the higher-yielding assets as well. Would you expect to see a kind of similar decline? I mean, obviously, you want those projects to finish up and move off your books, but would that sort of downward trajectory kind of continue in your mind as you pick up growth in other areas?
spk06: We have a pretty good, fairly robust pipeline of construction loans, so they're probably increase in construction loans on a monthly basis of around $20 million a month. I think, Henry, is the last number we computed. Would that be roughly correct?
spk10: I think it's more than that. I think maybe closer to $70 million a month, maybe $200 million a quarter in new funded construction loans.
spk06: But net of payoffs is about $20 million a month or so. It's still positive there, and we like those projects. Brad, we're not concerned about any of those projects in any way, but I'll stop there to see what your other questions are.
spk02: No, that's helpful. Maybe just kind of switching gears a second to Bud. I think I heard your comments that you expect the NIM to improve from here as loans reprice. Are you expecting improvement as soon as the second quarter? It just seems like you know, that could be a challenge, you know, with if, if the feds continue to move rates up, you know, you guys are, you know, sitting right around a hundred percent loan deposit ratio. Also wanted to kind of square that with your comments around building that liquidity book back up to a billion dollars. You're just trying to understand, you know, all the moving parts on how you, on how you get there and kind of how you think about the NEM.
spk04: Sure. Yeah. If, and it looks like if the feds going to, increased rates at the May meeting, that's definitely going to impact us for the second quarter. So if that happens, I think it would, it might take until the third quarter before you start seeing some gradual improvement. We're just, you know, you just got, you got about $9 billion in either a total of floating rate deposits and touch funds purchased on the asset side. uh, between loans and fed funds, you're looking at about 5 billion. So, you know, we'll just, that keeps increasing. It's, it's, it's going to hurt for a while or you'll, you'll have a little, you'll have some compression, put it that way. That needs to stop for what you really say. It's going to be improved.
spk02: Right. Right. And maybe final question to me, it looked like your first quarter expenses were up, you know, about 10% year over year. I know there's a few adjustments in there. Um, Is that kind of how we should think about, you know, a growth rate in 23 or, you know, I know your incentives are tied to typically loan growth. I know more so deposit growth this year. But just kind of wanted to think about kind of how to think about expense growth. It did look like professional fees were maybe a little heavier this quarter. Anything to back out of there that you think is worth noting?
spk04: Let me think. Professional fees. I don't remember anything unusual. Let me – I'll look at it and email you after the call. I'll email everybody. I'll go back and look at it. I don't have anything highlighted, but let me go back and look at that. Are you comparing it to the quarter?
spk02: Both. But then I was just looking at the total expenses in totality up about 10%.
spk04: The quarter was down because we had a credit – We ran through a bunch of commitments, but I'll look at everything just to make sure there's nothing.
spk02: Yeah, I was more looking at 1Q23 versus 1Q22 up about 10% year-over-year. Is that kind of the growth rate to kind of think about, you know, as you think about 23 versus 22? Sure.
spk04: I wish I had more detail in front of me because I know we've had market expansion and different markets. Let me look at it, and I'll send something out on that just to make sure I give you a good answer.
spk02: Okay. Okay. Thanks. I'll hop back in the queue.
spk00: Our next question comes from the line of Kevin Fitzsimmons with DA Davidson. Please proceed.
spk08: Hey, good afternoon, guys. Good afternoon, Kevin. I appreciate the detail on the correspondent deposits, and maybe I want to ask this in maybe a very top-level sort of way. Like, it's obviously a good business to be in. You guys wouldn't be in it if it wasn't. But with what is going on right now in terms of the pressure on deposits and the mix shift within deposits that's going on, is the correspondent network helping you in this near term or is it really exacerbate this pressure and make it, make it, uh, more challenging for you just that in that your, your, your client banks are probably dealing with the same thing and maybe, you know, therefore you guys reflect some of that on your balance sheet.
spk06: Just trying to deposit, deposit beta Kevin or from what respect interest rate sensitivity. I mean, what, what do you mean?
spk08: Um, I guess just the, the, The pressure on mix shift that's going on and, you know, mainly on that, on mix shift and the pressure to grow deposits in general, I guess.
spk03: Well, this is Rodney Rushing. Let me answer it this way and then you can see if I've answered your question. It has been business as usual on the deposit side. What I tried to explain in my comments was we are in the correspondent banking business for the relationship, and we find the clearing, the settlement relationship, what is beneficial to us in the downstream bank. We act as an intermediary between the small community bank and the Fed. And because of that, we get their settlement account, and they keep compensating balance there. It sweeps into Fed funds. And that makes those relationships very sticky. Out of 340 plus relationships, this past month we may have had less than 10 that moved any material amount of money from us. It was just a small amount. So those relationships are very sticky. We have looked to, you know, best place to grow that In Alabama, Georgia, Tennessee, we have probably the vast majority of the correspondent relationships we're going to get. In Alabama, we have 90-something banks, and we have 60-plus correspondent accounts in state Alabama. That same ratio is true in Georgia, Tennessee. So that's why we look to grow in Texas. Texas was a big correspondent market for me when I was at Compass. And we expect with Don Dickerson, it's going to be an area of growth for the Correspondent Division through the rest of this year and next year.
spk06: Now, as Rodney said on the call, his money shift from non-interest-bearing DDA to interest-bearing deposits or to Fed funds purchased, there's no effect on profitability of the bank whatsoever. There's no deterioration in our profitability. If its rates start falling and it moves back to the non-submarine DDA accounts, it will not improve our profitability. It'll be the same. It'll just show more money in non-submarine DDA.
spk03: That's right. And the simple fact that we pay their Fed bills with those DDA earnings. So you'll see, of course, when expenses go up, when we bring on more settlement accounts, and in rising rates, if they have to keep less money with us, then that money, as Tom said, shifts into interest-bearing accounts, but it doesn't affect profitability. What the settlement relationship does for us is it makes it a true relationship between us and the downstream bank, instead of a relationship that is a transaction where we're just buying liquidity from it.
spk06: I know I'm not answering your question, Kevin, but Rodney, why don't you mention that during the time, that couple of weeks when there was a little stress in the industry, that when correspondence wanted to test, wanted to borrow money, some of our competitors didn't take care of them.
spk03: We had a number of banks that called and wanted to test their line with us, and they did. David Jordan is here in the room with us that manages our correspondence operations, and And during that, we learned that they tried to test their lines or draw on their other upstream lines from other correspondence, and they were not able to do so. And that was telling.
spk08: Yeah, I guess one follow-up on that I was going to ask was, what's going on in the environment and the focus on deposits and particularly on uninsured deposits, does it make it, is it a better, like not better, but I guess is it an easier service to sell in an environment like this for them to have you as a, your correspondent network as a resource?
spk03: You know, I don't know if it's easier, you know, and to my knowledge, a bank has not lost money to another bank in Fed funds. So in that counterparty relationship, where one bank is selling another bank overnight funds, I don't know, maybe somebody could correct me, but I don't know of a case where a bank has lost money. Now, you know, with that, there is prudency. And the only deposits we lost over that couple of weeks were some downstream community banks who, you know, we're their primary correspondent. It may be a small $200 million bank in Alabama that has $20 million in capital, and they look up and they've got $15 million sold to us in Fed Funds. They called and said, Rodney, we looked at our amount of funds we're selling you. We're going to move some of that to the Fed, so I'm going to leave eight with you and move seven to the Fed. Sure, go ahead. And that happened less than 10 or 12 times in that two-week period, and that was the only thing. stress we saw in that deposit base. The rest of it was business as usual. And I don't, you know, it's all about relationships, and that's why hiring Don in Texas is so important to us. I hope that answers your question.
spk08: Yeah, no, that's great. Thank you. Thanks, Rodney. And one, just I guess a follow-on to Brad's question, so trying to bridge the the comment about things stabilizing and getting better, but then, you know, is it, I guess the way I would want to ask it, whether the Fed moves or not, when we look at the link quarter decline in the margin and, more importantly, decline in dollars of NII, is it fair to say, you know, maybe we're not at the bottom because there could be some incremental pressure, but the size of the pressure link quarter is not going to be This is probably the high point, is that fair to say?
spk06: We think we're close to a bottom. And, you know, with our short loan and securities portfolio, our margin will start moving up. You know, it'll take a couple three-quarters, but we'll start seeing some pretty good improvement once the Fed achieves their peak rate. Bud, I don't know if you can answer anything. add anything to that.
spk04: No, I think that's, yeah, we're just, it's kind of what you see on the Fed side.
spk08: Hey, and one last housekeeping thing more from me. I noticed the restructuring in the TDR section seemed like it was blanked out for the first quarter of 23. Is that due to that, is that just an omission or was that due to that change in servicer that you referenced? I was just, just, was confused about that.
spk10: Yeah, that was, that was due to an accounting change and that is something that we no longer, you know, have to report, but there were no material changes within those categories. It was just something we, we don't, we don't have to report anymore under new guidance.
spk08: Okay. Okay. All right. Thanks very much guys. Thank you.
spk00: Our next question comes from the line of Steve Moss with Raymond James. Please proceed.
spk08: Good afternoon. Hi, Steve.
spk07: Maybe just following up on the margin here, curious to, you know, see, you know, where are loans pricing these days and, you know, any color you can give on that front as we think about the repricing aspect of your loan portfolio going forward here.
spk06: Sorry, bud. I'm telling you what the pricing was in the first quarter.
spk04: For the first quarter, new loan production was at 7.71. 80% floating. Yeah, we were at, I think, 78% variable rate in the first quarter. So that's definitely improving. We're definitely putting on more variable rate loans. It's just a slow process. Yeah, I mean, that's going to take a while to improve the margin over time, just
spk06: You know, what surprised me is how quickly we're seeing payoffs and paydowns on floating rate loans. I mean, Henry mentioned $200 million in the first quarter. Already in the second quarter, and what's already closed this quarter and in process is like $85 million in fixed rate loans either paying off or paying down. So it's moving much more quickly. You don't notice it when rates are flat. You certainly notice it when rates have gone up as much as they have. We see the potential improvement in margin that really is very hard for you to quantify in your model. And of course, the natural cash flow on fixed rate loans is substantial as well. It's like over a billion dollars a year, natural pay down.
spk07: Right. That's helpful. And then in terms of just, you know, on the deposit side, just curious on your interest-bearing deposit, if by any chance you have a spot rate at quarter end, just kind of get a feel for where things shook out.
spk04: Yeah, let's see. The cost of toll deposits at the end of the quarter was $2.31 million. Interest-bearing DDAs was 3.12, and total interest-bearing deposits 3.08. Did all that?
spk07: Great. I got all that. And then in terms of just going back to or just thinking about, you know, credit overall, you know, still remains pristine, kind of just any updated thoughts as to, you know, how you're thinking about the reserve ratio and, you know, credit costs going forward here.
spk06: You know, we keep as much in the reserve as we can keep in the reserve. You know, there's a council that is keep, Steve. That's, you know, and it's 1.28% is the most we've ever had in our reserve. Going into the 08-09 recession, we had 1.05% or so in the loan loss reserve. So we're, You know, we feel like we're in much better shape than the loan loss reserve today than we were at that time. So, you know, Cecil obviously helps a little bit, but, you know, we feel good about where we are. And we feel really good, you know, we filed that deck that you probably hadn't had time to look at, but, you know, it details our office billing exposure and, you know, AD&C exposure. You know, remember... You know, when the pandemic hit, everybody's worried to death about the industry's retail exposure and how much the banks were going to lose on retail. And, you know, that turned into a non-event. I mean, yeah, some banks lost some money on big malls, but, you know, they had earnings and it just sort of got handled. So I think it will this time, too. We don't have any of that exposure. But I think it's just, you know, some of this is just CNBC headlines they like to put out. different loan exposures out there, but I don't know any banks that have a lot of office building exposure, but maybe there are some that are.
spk07: Right. I appreciate that, Culler. That's pretty much everything for me, so thanks for all the call here today.
spk06: Thank you, Steve. Thank you.
spk00: Our next question comes from the line of David Bishop with HubD Group.
spk09: Please proceed. Good evening, gentlemen. A quick question. Most of my questions have been answered. I think in the preamble, I think it was maybe Rodney or Bud, you mentioned that you've been able to be opportunistic in maybe repricing or refinancing certain, I think it was variable rate loans. Is that done with a view of getting ahead of potential cash flow pressures on these loans repricing or Just curious what the impetus was for some of the repricing there. Maybe the nature of the loans repriced, and was that sort of a credit-driven decision?
spk06: No, no. Those were all fixed-rate loans, and, you know, we're talking about an average rate of, Henry, would it be 4%, something like that? Yeah. You know, so those are the loans. And it's just surprising to us how often somebody will need something to redo a And it's not necessarily a credit issue or a default issue. They might need to borrow some more money. They might not finish the construction on time of a loan that has a fixed rate on it. So we're seeing repricing opportunities. And again, you can't capture it in your model except for when we have a commercial loan portfolio that has an average maturity of three and a half years, we're going to have a lot of repricing opportunities on fixed rate loans. Yeah, we have a few more fixed rate loans than we'd like to have today in this environment. But, you know, for one thing, when rates start coming down, those fixed rate loans might not look as bad as they do today. But in any event, we are seeing repricing opportunities on a lot of loans. Again, like I say, in just, what, 17 days of this quarter, over $80 million is in the process of being repriced or paid off. We've had a couple of companies. Companies are always constantly selling, or people are selling assets. They might have, you know, a mini firm on a... a multifamily project that's going to anybody with any sense is going to any of our developers in any sense are going to the Fannie and Freddie and doing permanent financing as quickly as they can, paying us off. So that's certainly in their best interest.
spk09: Got it. And then as we think about the Texas expansion into Houston, I assume you expect to see some of that flow into the the balance sheet this year. Just curious if any of that shows up in the current deposit pipeline you mentioned in the slide deck.
spk06: It's not in there. We don't have any of that. No, we don't have anything in this pipeline yet, right?
spk03: No, we don't. It's not in the pipeline and we anticipate our growth coming. He's already opened two or three accounts with new banks. We probably had 10 total Texas accounts before Don came on board. So he's out meeting those current customers. So I would expect in the third and fourth quarter looking for growth from that Texas market.
spk06: How many banks are in Texas?
spk03: There's over 400 community banks in Texas. The numbers, a lot of charters in Houston, Dallas market. San Antonio, Austin, and, you know, again, the state of Alabama, we're down to 90-something home bank charters.
spk06: They say everything's bigger in Texas, and that's true. More banks, bigger banks, bigger deposits.
spk09: Got it. Appreciate the color.
spk06: Thank you, Dave. I think we have no more questions in the queue. If y'all need any further information, I know Bud's going to get out some expense management answers to you and look forward. If y'all have any further questions, please let us know. Thanks for joining us today.
spk00: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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