Good day, and thank you for standing by, and welcome to the Bank OZK Third Quarter 2023 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would like to introduce your host for today's call, Jay Staley, Director of Investor Relations and Corporate Development. You may begin. Good morning. I'm Jay Staley, Director of Investor Relations and Corporate Development for Bank OZK. Thank you for joining our call this morning and participating in our question-and-answer session. In today's Q&A session, we may make forward-looking statements about our expectations, estimates, and outlook for the future. Please refer to our earnings release, management comments, and other public filings for more information on the various factors and risks that may cause actual results or outcomes to vary from those projected in or implied by such forward-looking statements. Joining me on the call to take your questions are George Gleason, Chairman and CEO, Brannon Hamblen, President, Tim Hicks, Chief Financial Officer, and Cindy Wolfe, Chief Operating Officer. We will now open up the line for your questions. Let me now ask our operator, Justin, to remind our listeners how to queue in for questions. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster, and one moment for our first question. Our first question comes from Stephen Scouten from Piper Sandler Companies. Your line is now open. Hey, good morning, everyone. Great quarter here. I'm, I'm curious, it looks like in the management comments that you're guiding to pretty strong origination growth in the fourth quarter, and I'm wondering if you could give some comments there. I would assume that's occurring as some of your competitors maybe pull back from the space, and obviously, that's been a time when you guys have done really well. So I'm just curious to kind of if that's what's happening, today and kind of where you're seeing the pickup in originations category-wise. Brannon, you want to take that one? Be happy to, Steven. Great to talk to you. Thanks for the question. That is, in part, some of the explanation. It's been an interesting year, as we've seen generally a slowdown in the number of projects that we've seen. Now, that would differ from region to region. As we've said a number of times, through the year, the Southeast region has remained strong, certainly relative to other regions and even certain periods of time in the Southeast. So, we continue to see very good activity in that region, and over into Texas and the Southwest. But yes, despite the slowdown in the number of deals that are out there, there's also been a pullback from some of our competitors out there. You know, we have, as time gone on, continued to press down on leverage, try to expand on spread. So, and all the time, stay very true to our disciplined approach to origination, but with, in many cases, fewer competitors out there, we're able to still, you know, close a number of deals, great deals, with improved leverage and pricing metrics. So, you know, and in terms of the what continued theme would be multifamily and industrial. We're closing other types of loans. I think, you know, I've mentioned a couple of times over the last few quarters that our Atlanta office that covers the Miami market is seeing a lot of opportunity in condos in the Miami markets. So we'll see some opportunity there. But multifamily and industrial has been, for the most part, the big movers. We've had some good mixed use, in there as well. But those are where we're seeing a lot of opportunity. Great. And Brannon, appreciate that. You spoke to spread there. What are you, I know, and I know every credit is obviously different, but you know, what are you seeing on new loan spreads, kind of relative to the incremental funding costs? And I guess you would feel, based on that growth, that you're getting paid well and compensated well on this new loan production. Absolutely. You know, we've talked about how our spreads differ pretty materially, depending on, you know, the product type. But I would say that we're, you know, ranging from sort of midish threes to up into the fours, depending on the product type and where it is. Okay. And then just last thing for me, you know, obviously, the RESG loans are staying on the books for longer. I'd assume this has been driving some of the, what I see as conservatism around the loan loss reserve. But, but how do you guys kind of speak to that pushback, maybe from some market participants and say, like, "Are these loans staying around longer is a bad thing, not a good thing, even though you're earning more money? Well, George can weigh on this one as well. I think I would first point out that we've had more payoffs than we have had originations this year. So, you know, as you can see from the numbers we reported, it's not, you know, a significant increase, but they have been up every quarter, quarter-over-quarter. Evidence of other capital out there in the market. You know, they're paying off with refis, they're paying off with sellouts or sales of, you know, income properties from developer to new owner. And even have some situations that the borrower come into a lot of cash and just, you know, pay us off in that method. But, as you noted, we don't mind having the earning balances on our book and are getting paid well for those loans. So look, with rates doing what they've done, we've known we were going to have a slower repayment volume, but it has been a repayment volume continues to be. There's still people in the market with capital. So we're not surprised, and I would say, on the whole, pleased to see the payoffs continue to come in in the numbers that they do. Steven, let me- Thanks for the color. Sure. Let me clarify just for our listeners who don't price loans all the time. Brannon said that, you know, our spreads typically in the RESG portfolio, I think he said, were ranging in kind of the mid-300s up into the 400s, and that reference is to a spread over SOFR, 30-day term SOFR, is what we use as the predominant index. So, that's a spread over SOFR, and I wanted to clarify that. We just talk about it as spread all the time, but, you know, there are a lot of different indexes, and we're referencing spread over 30-day term SOFR. And, you know, a point that Brannon made is that our leverage points are coming down. Probably over the last two years, you know, our loan-to-value, loan-to-cost ratios, quarter to quarter to quarter, have had a generally downtrend, not every quarter, but we're probably down five to... somewhere between 5% and 10% points on leverage now versus what was originated two years ago. So, that's very favorable for credit quality. And, and I would just echo what Brannon said, we're thrilled to death to, have loans stay on the books longer, you know, and, and a lot of times, sponsors are quick to exit our loan to go to a keep or permanent loan solution. Sponsors are being very reticent about trying to figure out where their best exit is refinance-wise, so that's keeping the loans on our books and our higher yield construction loans longer. Our leverage points are low, so we're very happy to have those loans on the books for an extended period of time. Yep. Makes sense to me. Appreciate the color, and congrats on all the success again. Thank you. Thank you. One moment for our next question. Our next question comes from Manan Gosalia from Morgan Stanley. Your line is now open. Hey, good morning. So maybe just as a follow-up to that question, as we think about growth in funded balances over the next few quarters, you know, I think this quarter you had about a $1.4 billion increase. Is that a good run rate to consider as we go through 2024? You know, I don't know that we're willing to lock in on that guidance, Manan. We expect good growth over the next year, but we're not giving specific guidance on that for the year yet or for the quarter. We'll probably in our January call give some specific growth guidance on the total loan expected growth in 2024. We expect it to be a nice growth year, but I'm not ready to lock in on a number yet. All right. Fair enough. And then, just on credit, you know, it feels like a good quarter on credit. You know, as we compare the properties that were reappraised this quarter versus last quarter, you had much less LTV migration into some of the high LTVs. Was there something fundamentally different about the properties reappraised this quarter versus last? No, it's just the normal cycle of what was due for maturity, extension, renewal, reappraisal, and there was nothing unique about that. You know, Brannon and his teams at RESG continue to do an excellent job of getting pay downs on a lot of these loans where we would have had an upward migration in the loan-to-value based on a reappraisal as part of an extension process. We continue to get quite a few pay downs from sponsors on those, that they bring the loan-to-values back out of closer to the loan-to-value at the time of underwriting. That just reflects the strength of the sponsors and the quality of the assets. ... Got it. And anything different you're seeing on the credit side? Some of your peers have been increasing their NPLs on commercial real estate and also their criticized assets. You know, I know your business is different, but I was just wondering if you're seeing anything different in the areas where you're operating? No, I'm not, and I'll let Brannon address that. But you know, the reality is that the quality of our sponsorship, the quality of our new construction projects, combined with the low leverage loan-to-value, loan-to-cost metrics on these projects has you know contributed to the excellent performance of our portfolio so far during this cycle. We continue to think that those are fundamental ingredients, great sponsorship, great state-of-the-art new assets, low loan-to-value, low loan-to-cost, that will continue to help our portfolio perform very well on a relative basis to the industry going forward. Great. Thank you. Thank you. One moment for our next question. Our next question comes from Timur Braziler from Wells Fargo Securities. Your line is now open. Hi, good morning. I have a three-part question, following up on Steven's question, just on loans staying on longer within the RESG. I guess, can you, A, put a number around just how much longer these loans are sticking on balance sheet versus a, quote, unquote, "normal time?" B, is there a contractual limit for how long these loans can stay in construction status? And then, C, how much of a cliff or a headwind to growth should we expect as the refi market reengages and pay downs normalize, whether that's in 2025 or 2026, whenever that might be? You know, the length of duration that a loan will stay in construction status because they're waiting for a better exit or trying to time the markets for an exit, it's hard to predict, and it varies quite a lot from loan to loan. Brannon shared some statistics with me earlier, which I'm gonna, I can't recall them, but on exactly where loans have paid off recently and how many of them have refied, how many of them have sold, and so forth, so sold the properties and so forth. So I'll let him share that, and that may answer that part of your question or give you a little color on it. It won't answer it, but it will kind of explain that situation. You know, you're accurate in that payoffs that extend today, you know, the things that would have been a normal cycle don't get paid off this quarter because the sponsor is going to wait to what they hope will be a better exit execution to a permanent loan, you know, a quarter or a year from now, or 18 months from now. When a market sentiment develops that's broad-based, that it's time to exit, yes, we will have a lot of payoffs at that point in time. Our RESG teams, our asset-based lending teams, our equipment structured finance teams, our commercial banking teams are all keenly aware that we've got to build our business and diversify our business and be in a position to originate volumes that will replace those assets when we get that wave of payoffs. So we're building our infrastructure, and that goes back to one of the comments I made in our last conference call, that we're working really hard to add quality team members from banks that are cutting back on origination staff and other sorts of staff. We're building the quality of our team, and we've got some really good things that we're very positive about in the works on that, that you know, I think will help us continue to grow our balance sheet and grow our loan balances, even when we get some pretty chunky waves of payoffs in the future. So we're looking a year, two years, three years into the future on what those volumes are and planning accordingly. We always do look into the future and plan, and that's why our portfolio and our performance metrics right now are doing so well. Two years ago, you know, we were... And three years ago, and four years ago, we were planning for an environment where rates escalated and economic conditions changed. We're doing that with our variable rate loans, with our floors on our loans, with our low loan-to-value type structuring on credit, and all that is paying off now. As we're going through this part of the cycle, we're looking forward in one, two, three, four years to future iterations and changes in the balance sheet and preparing now to continue to have a nice, steady trajectory in those periods of time. ... Great. Thank you for that color. Let me fill in those stats, stats for you, George. Yeah, yeah. You know, I sort of alluded to it earlier, earlier before, but, you know, we've had year-to-date 53 loan repayments. If I got my count right, of that 53, we've had, I believe, 32 that were paid off with a third party, you know, refinance. We had one that we actually had a land loan out, and the borrower was ready to move forward with a vertical construction loan. So we essentially paid off our land loan and moved into a new construction loan there. And then we had 15 that sold, that were either, you know, condo sellouts, so they sell out as the condos contracts were closed over time. But we had a number of those that completed their loan repayment and then a few industrial properties that sold, you know, complete building sale. And then, as I said, we have had just a pure cash repayment by a sponsor that had a lot of cash on hand. And then we had four projects that the sponsor decided not to move forward on the vertical construction and so paid off the moderate balance that would have been outstanding, nominal balance that would have been outstanding at closing. So, I would just say in terms of, you know, how long they're staying on, look, it's, you look back over time, there have been times where our average age has been longer than it is today, and there have been times when it's been a bit shorter. But, it all makes complete sense in terms of the environment that we're in. As George alluded to, you know, when you're locking one down for a while, you sure want to try to get it lower than the rates are today. And, so it's playing out really as we expected it to. And we're very happy, as we said, to be making the return while they're on our balance sheet. Great. Thanks for the color. And then just one follow-up on the credit side. You mentioned just now, land loans and conversations around going vertical. Maybe just provide some commentary as to what you're seeing in the land portfolio and some of the updated conversations you're having with sponsors about their decision to go vertical. You know, there's a mix there. We gave you some pretty good color, I think, on the land portfolio and the appraisal stats that we included in our comments in terms of, you know, we had, I think, four different land appraisals that were completed that showed stable to declining LTVs at the end of the day. And, you know, as we've noted in the past, a significant portion of our land portfolio is, as you said, initial shorter-term land loan, with the thought that the sponsor, you know, once they have plans drawn up and costs sort of circled, would move forward. And we are, as I said, seeing some of those move forward. I also mentioned, you know, we had four that did not move forward. We're still in a period where, just like with refinances, moving forward with a construction loan in today's rate environment and some of the economic uncertainty certainly makes one think two, three, four times before moving forward. We're seeing some of those decisions say, you know what? We're going to wait. The deal's just not got enough room in it for us to want to move forward. At the same time, we're seeing a number that are going to move forward. That's whether that's, you know, land loan situations that we have that move vertical or, you know, or outside our portfolio. I think there's some... You can deduct some information from, you know, our thoughts about originations in Q4. So, again, it depends on the market. It depends. It all comes down to the return that one can make and versus the cost that it takes to develop. And there's more room in certain markets and product types than there are in others. So it's a mixed bag there. Great. Thanks for taking my questions. Thank you. One moment for our next question. Our next question comes from Catherine Mealor from KBW. Your line is now open. Thanks. Good morning. Good morning. I just wanted to switch over to the funding side of the conversation and just ask about how you're thinking about funding growth, you know, as we look through 2024. You have really nice CD growth. Of course, that's coming at a higher cost. How do you think about kind of the—if, let's say, Fed Funds stay stable from where we are today, where do you think ultimately the blended kind of cost of funding peaks for you as you continue to reprice, you know, at a 5%-5.5% pace, as you grow CDs? Well, Catherine, you know, what I would tell you is our guys are doing a great job on the deposit front, and we're growing deposits nicely. As almost all banks are experiencing or the vast majority, you know, these higher rates available on CDs or other alternative investments for customers are- ... sucking money out of, you know, non-interest bearing and lower interest bearing time and savings or, non-time and, savings and money market accounts. So that trend is an industry trend. We're experiencing that. You know, we are, as you mentioned, having great success growing CD deposits. We expect that that will continue, and that will put some upward pressure on our deposit costs. As we've talked about, you know, since the April call last year, as the Fed has raised rates, deposit costs will go up, and because CDs, you know, have staggered maturities, the impacts of last quarter's Fed increases, or if there are Fed increases this quarter, those will be felt, you know, three or four quarters down the road when CDs issued in that time frame roll over and get repriced in connection with that last quarter increase or whatever. So there's an upward trajectory there. We know it. That's why we've said that, you know, we will give back some of this very nice expansion that has occurred over four or five of the last six quarters in our net interest margin, and core spreads expanded broadly as loans reprice faster than deposits, you know, last quarter, and we gave some of that back, as we said, would happen. We would expect that would continue to happen. So, you know, I don't know exactly what the Fed's going to do. I don't think the Fed knows exactly what they're going to do. And, it's hard to know exactly where that goes, but the trend is up for deposit pricing because we're rolling over CDs now that, you know, were priced two, three, four quarters ago, and their market rates are higher now than they were then. So I think our guys are doing a great job of funding our balance sheet and doing it in what is a very cost-effective way, particularly considering how much we are growing our balance sheet. So we feel super good about that. And, Cindy, Ottie Kerley, Drew Harper, the other guys on the deposit team, the guys in the retail branches, there are, you know, 12, 1,500 people in those retail branches. They are doing wonderful work for us, and we're real pleased with it. You've been one of the few banks that's been able to continue to grow NII, you know, since your, your NIM has really held in better, and then also you've grown so much. But I assume that, we've talked about this in past calls, that won't select potentially this year, just as the NIM falls just from, you know, deposit costs catching up. Still better than the industry, but, you know, the inflection should be in the next few quarters. But could you argue that with the higher, the better origination volume you're seeing and the better growth, that we we could still see another few quarters of actual dollar NII growth? You know, it remains to be seen. We said in the last quarter's conference call, I think Tim talked about this, and I did, that, you know, it was going to be a quarter in the third quarter where we were going to give back some of our net interest margin, and we were going to have to offset that with growth and average earning assets, and that it was a horse race. And I think was the way I characterized it, as whether or not we would be able to achieve positive growth in the net interest income. I think we were up about $10 million in net interest income this quarter over the third, the second quarter of this year. So the growth horse outran the net interest margin shrinking horse, and we put up record net interest income. It's going to be a toss-up, probably quarter to quarter to quarter in the coming quarters, to see which horse wins that race and if we can continue to improve it, if it goes up a little bit, or if it goes down a little bit or stays the same. I don't know. I can't handicap that right now, but, you know, it's not clear, but we're working really hard to do the best we can do to maintain as much margin as possible, book as much growth as we can book that meets our quality standards and pricing standards, and, hopefully, keep the same horse winning in future quarters. But I can't predict that outcome right now. If you don't mind, just one clarifying question on the credit comment earlier. On criticized and watchlist loans, you did not see any change to that this quarter. Is that correct? Tim, do you have that slide? I don't have those specific numbers, Catherine, but no, no significant increase that we haven't already talked about. Obviously, in our management comments, we talked about the one loan at RESG, the hotel loan, that did have a small charge-off of $3.7 million. That loan did go from performing to non-performing, but that was already a substandard loan. It was just substandard accrual going to substandard nonaccrual. So no, no other significant movement into risk rating classifications. Okay, great. Thanks for the clarification. Thank you. One moment for our next question. Our next question comes from Matt Olney from Stephens. Your line is now open. Hey, thanks. Good morning. Want to ask more about loan floors within the RESG portfolio. I think on the past calls, you've talked about the mix of RESG loans is an important dynamic because the new originations have more significant level of loan floors than the older vintages. Any updated thoughts or color you can provide with respect to RESG and loan floors? Well, every quarter when we have older loans pay off, and we've talked about that volume, you know, those floors typically are much lower than the floors on newly originated loans. So, you know, our favored, desired scenario is that the Fed is at or within a quarter of the end of their tightening cycle, and that they stay at these rates for two years, or longer. Because if the Fed does that, then we get a chance to recycle the vast majority of RESG loans from lower floors to higher floors, which will be very helpful to us in a down rate environment. So every time we hear the market beginning to embrace the concept that the Fed's mantra of higher for longer is likely to be reality, it brings a smile to my face because that's our best scenario for profitability. Okay, appreciate the commentary. And, I guess, switching over to the capital, I guess with the growth this year, you've been able to deploy some of the excess capital. I think you estimated that CET1 ratio is around 10.7%. Would love to get some updated thoughts around capital thresholds and, and what's the lower band you'd be comfortable operating in in the current environment? And, I guess, specifically, would you be comfortable allowing that CET1 ratio to drop below 10%? Tim, you're the capital czar. Matt, thanks for the question. Yeah, I mean, as you noticed, during the quarter, we had significant loan growth, a ROA in excess of 2%, and, that allowed us to capitalize, the vast majority of that growth. We did have a small decline in CET1 ratio, but still feel like we have very strong levels, of capital. We've seen a significant increase, in unfunded over the past year, significant increase in funded, that has used some of our, some of our capital through organic, loan growth. But, you know, I, I don't see the pace of, of decline being the same pace that we've had over the past year, and, would anticipate, that our, our, our growth in earnings would help capitalize, whatever growth we have on the balance sheet. So you've not seen us go below 10% in CET1. And so, you know, if we have a quarter or two of further declines and work our way back up over time, that would be generally my thought at this point. And then, Tim, I guess the second part to that would be around the stock buyback. Obviously, no activity in the third quarter, but I think we're now at these valuations where you were more active in the first part of the year. So any updated thoughts around the buyback from here? Thanks. Yeah, I mean, you saw in our comments, we're focused on loan growth, and we'll continue to be focused on our organic growth. We continue to deliver for the last four quarters; we've had a return on tangible common equity of over 17%. Our tangible book value per share has increased year-over-year at 14.5%. So, you know, if you go back to 2021, 2022, 2023, I think we've done a really good job of managing our capital. In 2021, we've took advantage of the low rates and issued a lot of really low rate capital at that point. Over the coming years, when we had slower growth, we used that capital to buy back our stock. I think we ended up buying back nearly 13% of our shares outstanding, when we started the program. And then now this year, we've had a lot of great organic loan growth, and so we pulled back on the share repurchases. So, you know, I think we've managed the capital levels, the share repurchase, just how we wanted to, and we've got good prospects for meaningful growth going forward and want to be, you know, focused on that as opposed to focused on share repurchases. However, we do expect to, sometime in 2024, still have another authorization when values of our stock are very compelling, we would continue to be active at the right price. Yeah.... Okay. Thanks for taking my questions, guys. Thank you. One moment for our next question. Our next question comes from Brian Martin from Janney Montgomery Scott, LLC. Your line is now open. Hey, good morning. Morning. Say, just one back to the margin. I think you guys, George, you talked about the dollars of NII and, you know, kind of the outlook there. Just as far as the, you know, commentary in the past about, you know, once the Fed does stop, that the margin, you know, in, in past cycles has kind of taken a quarter or two to kind of reach that inflection point of that trough. Is, is that still how you're kind of thinking things play out here based on kind of the, the pricing you're seeing on the new, new originations that, you know, maybe the margin bottoms here over the next couple quarters and then can, can stabilize thereafter? Is that still, you know, the, the right way to think about it? Brian, what I would tell you in that regard, if we get just to a flat Fed environment, you know, say in 2024, and there's no Fed moves either way, our CD issuance is laddered throughout, you know, every quarter when we issue new CDs. It's a very laddered book, but there's a small chunk in the seven-month timeframe and a really big chunk in the 13-month timeframe. So the 13-month CDs will basically mean that when the Fed is done and market rates have stabilized, you'll still see that final tail of our deposit book repricing 13 months after the last Fed move. So it's really probably a four-quarter phenomenon to get to. If the Fed is stopped, it's probably four quarters of rising deposit costs to get to a point where deposit costs are stabilized and full effects are in there. Gotcha. Okay. That makes sense. And then as far as where we exited on the cost of interest-bearing deposits for the month of September, would you have that or... I don't have it, but I have someone here that probably has it. Cindy, do you have that? Yes, I do. September was 3.67, compared to 3.48 for the quarter. Okay, 367 versus 348. Okay, perfect. Thanks, Cindy. And then, maybe just one or two others. Just on the expenses in the quarter, I think you saw a decline and talked about kind of the guide for the full year. But just thinking about, you know, the decline in the quarter and just how you're thinking about, you know, the investments you're making and kind of outlining in the management comments. I mean, the rate of expense growth as we look into next year, should we expect to see some moderation in that expense growth given the investments you've made this year, you know, albeit that you still expect, you know, kind of continued growth going forward, you know, in the investments? Tim, please. Yeah, Brian, yeah, if you look through the expense lines, you would see some pretty significant increases in salary and benefits. You'd see significant increases in the FDIC insurance, given the rate increase on one line that impacted the entire industry, and then, of course, our growth in deposits. Our advertising has certainly been elevated. You know, so those have generated a bigger growth rate this year-over-year compared to what I would expect next year for thinking year-over-year. However, you know, we-- On expenses, what we focus on is how do we grow our bank? How do we invest in growing our bank, invest in our people? You know, we are super focused on expenses, but we're more focused on ways to grow our bank. And we try to do that in the most efficient way possible. But we've got good prospects for growth. George has talked about good prospects for adding new teams throughout the coming quarters. So that's really our focus. But on the rate of increase year-over-year, I don't expect 2024 to be at the same rate of increase that we had in 2023. Gotcha. Okay, that's- I would comment that the fact that third quarter non-interest expense was a few $100,000 below second quarter, that's a countertrend anomaly. I would expect, and Tim, you can comment on this, I would expect non-interest expense to generally go up every quarter going forward. Yes, I would agree with that being an anomaly. We're growing. Yes. Gotcha. Okay, nope, I saw that. And then, how about just on the RESG front, kind of you talked about the payoffs, you know, still being somewhat muted here. I mean, is it likely that we see a, you know, I guess, some pickup next year? I mean, you know, talking about how long the loans are on the books and the payoff cycle, I mean, should we expect the, you know, some of the payoffs that don't occur this year to spill into next year? Is that, you know, the right way to be thinking about this? Certainly, it's correct to think that some of the payoffs that might, in a more typical interest rate dynamic, would have paid off this year, will pay off next year or the year after. You know, I would expect somewhat of an increase in the payoff volume next year. That's going to depend on market conditions, interest rate conditions, and so forth. But I would expect to see somewhat of an improving trend, and—an improving trend, I guess, is—I probably shouldn't have used improving because if you want payoffs, it's an improvement. If you're enjoying the tremendous earnings we're generating off of them, it's not an improvement. You know, every time we have a payoff in this environment, we have very mixed emotions about it. It's nice to see that guys are still able to migrate to the secondary market or sell out projects when they want to migrate to the secondary market or sell them out. We also hate losing that spread income. So it's, you know, there's pluses and minuses both ways. Gotcha. And then maybe just the last one on RESG. With the fundings, your fundings have steadily picked up each quarter this year, given, you know, I guess, the strong originations in 2022. I guess, is the current, I guess, year-to-date type of level, a kind of a sustainable level, given that record originations in 2022 and what's going to continue to fund up here? And, you know, I think as we look into 2024, you know, maybe not at the pace we're at in the third quarter, but kind of on a year-to-date blended basis. Yeah, obviously, the record origination volume that was exceptional performance by our RESG team in 2022 is leading to significant fundings in 2023, and that fund up of that big chunk of the portfolio will continue in 2024. And, you know, I would cite you to the cadence, kind of the payoff funding cadence chart that we've included in our management comments for years now, that, you know, gives you a visual picture of what's funded out of that 2022 book. And, you know, as we've said a lot of times, these loans tend to fund in the one, mostly in the one to two years after originations and pay off in three and four years after originations. Gotcha. Okay, thanks for taking the questions, and, and the next quarter. Thank you very much. Thank you. If you would like to ask a question, that is star one one. Again, if you would like to ask a question, that is star one one. One moment for our next question. Our next question comes from Brody Preston from UBS. Your line is now open. Hey, good morning, everyone. Morning. I wanted to start maybe just a question for Cindy, just on the, just on the deposit costs. Have you guys had to increase your, you know, your new offering rates at all during the quarter? And if so, could you kind of give us an indication as to how much? Sure. We increased slightly during the quarter, from our 13-month went from 550- To- Five sixty. Yeah. That was as a result of a little bit of movement in the competitive space. Brody, that, that is, APY that you report to the customer. The actual rate's probably more like, went from, like, 5.30-something to 5.40-something, high 5.30s to high 5.40s on the actual rate. Got it. Okay, cool. Thanks for that. And then maybe one for Tim. I just wanted to better understand the loan yields. The beta slowed quite a bit on a quarterly basis this quarter, and so I wanted to ask, what, what drove that? Was it kind of new production coming in at lower yields, or did, does any of the RESG stuff have rate caps? No rate caps. That, you know, some of the RESG loans have rate caps as a part of their structure, where a third party is the counterparty. We are not the counterparty, so we benefit in all of the rate increases, so nothing, nothing capped on our yields there. Brody, I'd have to go back and look at what SOFR did in Q2 compared to what SOFR did in Q3, if that had any impact. But, you know, generally speaking, you know, it was a little bit lower increase quarter-over-quarter than we've seen in other quarters. But there's nothing, nothing capped from an RESG perspective. Certainly had, you know, payoff volume has been, you know, at the subdued level that we've talked about. Sometimes that generates minimum interest or other fees that are associated with that. You know, that was probably at the lower end of a normal range, but still within a normal range. That may have contributed to it a little bit. Yeah, I think the biggest factor is just the slowing rate of Federal Reserve rate increases. Right. You know, our loan yields are variable rate, and they mostly adjust either daily or monthly. So as the Fed has slowed the rate of increases, the rate of increase in our loan yields has moved proportionally. ... Got it. I wanted to move back to RESG. I really appreciate you guys giving us those stats on the refis and, you know, on the pay downs and all that stuff. I want to ask, you know, Brannon, did you take a look back as to how that compared to kind of, you know, year-to-date trends from prior periods? You know, how that mix kind of looked between paid, like, straight payoffs versus, you know, third-party exits or anything like that? You know, Brody, I would be guessing if I told you that. You know, the guess would be probably more refis, but you know, I don't know what the pure mix was. We started paying a little bit more attention to that recently. I think we got a question last quarter, and we're all incredibly curious here. So, you know, did have those stats ready for you, but I'd be stepping out there too far to tell you, you know, how much I think that's different. But I felt, you know, I felt like, you know, roughly, well, over 50% of the payoffs coming from refi was a pretty positive result in today's world. Got it. Okay. Could I ask you to speak maybe to the land loan in OREO? I'm sorry if somebody asked you this already. I didn't—I thought I didn't hear anybody ask you about it. The one that's the big one, you know, that, that's in there, and I think you got it under a sale kind of process. You know, I know you got to be sensitive to kind of that process at this point from a confidentiality perspective, but you noted it was subject to standard due diligence. So I was wondering if you had a sense for how far into the due diligence process you actually are at this point. Yeah, let me address that. You know, we've got at September 30, we had a total of six pieces of foreclosed real estate. They're in five different states, and we were very pleased to have gotten three of those, and it just so happened it was the three largest of those six under contract. So 99% of our OREO balances are under contract for sale. As you mentioned, Brody, all of those are subject to, you know, standard due diligence and closing conditions and requirements, as is always the case. Each of those three contracts would clear our book value. Each of them is scheduled to close sometime before March 31, 2024. You know, we'll see what happens. Sometimes contracts close, sometimes they don't close, but typically, people don't go to the time, trouble, and legal expense to put them under contract unless they intend to close them. So we're very pleased about that and the fact that all of them, you know, clear our book balance, and it's the vast majority of our OREO is a good thing. These contracts all have various provisions about confidentiality in them, as is customary in these contracts, so we're going to limit our commentary on it to that general comment at this time. Got it. I appreciate that detail. And then I did want to also ask, just, you know, getting the quarterly appraisal data is very helpful. And, you know, I just kind of tried to quickly aggregate it last night. And I guess when I looked at it, it was about 50 projects that you've reappraised year to date, at least that you've disclosed, and that's like $4.7 billion. So either way you cut it, that's about, like, 14%-15% of your commitments, you know, either from a number or a dollar perspective. Is that kind of normally, you know, what we should expect you to be on a pace to reappraise 20% per year? Yeah, I mean, you know, it's going to depend on what loans are maturing and coming up for extension, either as of right extension, because our as of right extension provisions usually have a loan-to-value requirement in them, and, or what are coming up for extension that don't have an as of right when we're going to get an appraisal. Or what's a loan that is getting some attention on our part that we feel like we need to reappraise. So, you know, there are a variety of reasons you get an extension, get an appraisal, but that's, you know, there's nothing unusual. Let me say it that way: there's nothing unusual about volume. It's just the normal way we would do that. Now, if you factor in the, you know, the originations over the last, 12 quarters, that's another 25% of the portfolio. So what that tells you is something, you know, 40%-50% of the portfolio has a fresh appraisal within the last 12 months on it, which is probably pretty typical. Got it. Okay. I appreciate that. Suffice to say, though, based on the stats we can see, George, it's, you know, about 15% has been reappraised so far, you know, on our end, and the average change in the loan-to-value is a little less than 3%. Yeah. I guess- And again, I would point out that that average change of 3% is after substantial pay down. You know, we get an appraisal if the loan-to-value is materially different than what it was at origination or doesn't meet the as of right extension requirements. Our sponsors, in many cases, are coming to the table with paydowns on those loans to reduce them back in line with our extension criteria or requirements. So, the 3%'s a really good number, but it, it's a result of appraisals plus paydowns, and that are reducing those balances to back to a lower loan-to-value. Got it. Last one for me was just, you know, there's been—obviously, everybody knows there's been a big shift in the interest rate, you know, environment. I wanted to ask you kind of, you know, just given that 2021, you know, was a, was a big origination year, you know, and rates were, rates were, you know, still at zero. How do you guys... I guess, how did—what would you assume kind of cap rates? Like, anything you can kind of give us on how cap rates were when you kind of underwrote these projects? Like, what the assumed, like, exit cap rate was, how you kind of stressed that in your underwriting, you know, and, you know, I guess how that compares to, you know, the current environment today, I think would be helpful. Yeah. We, you know, we stress debt service coverage in 100 basis point increments, up 500 basis points, using our loan and the projected performance of the project. And projected performance of the project, we use the sponsor's projections and run that right beside ours. So we're looking at it under what the sponsors' expectations are versus our underwriting expectations up 100, 200, 300, 400, 500 basis points. We look at exit refinance market conditions, you know, what the current secondary market, permanent market refinance is for those up 100, 200, 300, 400, and 500 basis points. And then we look at cap rates and take current cap rates for that property type and stress those up 100, 200, 300, 400, 500 basis points. So, you know, we underwrite for a lot of interest rate stress, and that certainly, you know, is what we have seen with the Fed moving the Fed funds target rate 525 basis points from the zero lower bound. So you know our methodologies there, you know, have been very sound and very helpful, and very appropriate for the environment and which we find ourselves. So that's... I think that focus on how you can stress these loans and, you know, the solution is, if you really like a project and it doesn't stress well enough, you just got to get the leverage down to where it does stress. That's one of the reasons we have so much equity in our projects and our leverage is so low, is we are stressing these projects for significant market risk, including interest rate risk, and that's played out. Now, on cap rates, the interesting thing is, you know, cap rates have come up, but cap rates on, you know, property types such as apartments and industrial and life sciences, have not moved nearly in tandem with the Fed's move. So you, you know, the magnitude of changes in cap rates over this period, where the Fed has moved 500 basis points, is 525 basis points, has been less than 525 basis points. It's interesting to us if, you know, we see further movement in those cap rates going forward, and they ultimately catch up with the Fed. I think that's really gonna be a product of, are we permanently in a 5.25-5.5 Fed funds target rate environment? Is, or, you know, is the 10-year gonna permanently readjust to a high fours, low fives sort of situation? We've had a fundamental shift, and if we're in that environment two, three, four years from now, then we'll see cap rates fully catch up with that. Right now, the cap rates seem to reflect the sentiment that at some point, rates are going to come lower to some degree from where they are now. That's you know, providing some degree of support for property valuations. George, what did you just say about the cap rates? You know, you said you stressed them up 300-400 basis points. Does that, does that mean that even in that scenario, when you underwrite that loan, when you stress the cap rates to that degree, does the loan still perform and pay off when you kind of get to that left tail type event? Yes. On the cap rate stress, yeah, I, as best I can remember, I don't think we have closed a loan that wouldn't tolerate 500 basis points of cap rate stress and still cover our loan. Where there may have been a handful of exceptions to that in the 300-something loans in the RESG portfolio, but, you know, the vast majority of them can tolerate that kind of stress on the cap rates. Got it. I appreciate that. I lied. I'll sneak in one more. Do you happen to know what the reserve on the office portfolio is at this point? No. No, no. Nobody here knows that, broken out specifically. Got it. Awesome. Well, thank you very much for taking my questions, everyone. I appreciate it. Have a great rest of the day. Bye. Thank you. At this time, I see no further questions. I'll turn the call back over to Chairman and CEO, George Gleason, for closing remarks. All right. Thank you, guys. We appreciate you joining the call. Thanks for the good questions. We look forward to talking with you in about 90 days. Have a great rest of the quarter. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.