Bank OZK Q1 FY2022 Earnings Call

Good morning. I'm Jay Staley, Director of Investor Relations & 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 Credit and Administrative Officer; and Cindy Wolfe, Chief Banking Officer. We will now open up the lines for your questions. Let me now ask our operator Victor to remind our listeners how to queue in for questions.

Hi. Good morning.

Good morning, Timur. I want to highlight the Figure 8 and the management comments document indicating that we have approximately $230 million remaining in our 2016 vintage originations and $1.34 billion left from our 2017 originations. You're correct that typically, we would see the normal cadence of payoffs in 2022, with most repayments coming from the 2018 and 2019 vintages. However, there is still over $1.5 billion from 2016 and 2017 vintages that are likely paying off more slowly than expected due to COVID-related delays and construction progress on those projects. We continue to affirm our expectation for record repayments in 2022 within the RESG portfolio, surpassing last year's record levels. It’s worth noting that the first quarter saw lower repayments compared to any quarter last year. This reflects the variability in those repayments; there are numerous larger credits within the RESG portfolio. If we have multiple larger ones repay in a specific quarter, it can significantly impact the results, and this last quarter experienced modest repayments. Despite this, we remain confident that we will achieve a record level of repayments this year, exceeding last year's records.

Okay. Thanks for that. And then on the other side, on the origination front, maybe just talk through the status of the RESG pipeline. I know you had called out that you had originated a couple office, and I think there was one hotel loan in the first quarter. I’m just wondering, is most of the pipeline mixed use projects at this point? Or are you starting to see individual offices and hotel type construction starting to come back online?

Absolutely, Timur, thank you for your question. In our most recent quarter, we are observing a significant amount of multifamily lending, which remains the largest category in terms of the number of loans. However, we are also seeing several individual office deals and still maintaining our mixed-use projects. This continues to be a substantial part of our closings and what is currently in the pipeline. I wouldn't say there has been a major shift from what we've traditionally seen. We are still achieving a good diversity in our closings and what is anticipated in the upcoming pipeline. The team is doing an excellent job navigating a highly competitive environment to identify great projects across a very diverse market and achieving success across all the loan production offices.

Okay, great. And then just last one for me. Just looking at NII and net interest margin, can you quantify the dollar amount of fees that were booked this quarter compared to last quarter that are included in that number?

We typically don’t qualify it. What I would tell you is last quarter, we called out, I think, three categories of contributors to net interest income that we are about. I think we suggested about $19 million for Q4 above normal. Q1 was much more in line with what we would typically expect for a quarter. Now those numbers bounce around all over the place quarter-to-quarter. So, saying what's normal is a challenge. But it was a fairly typical quarter in line with our expectations.

And I guess how does that correlate with the expectation for accelerating paydown activity? Should we expect to see kind of fees, ancillary fees increase with that expectation for paydown activity? Or are we at more or less a normal level here and there's no visibility for future accelerated activity?

Yes, I'll address that. Let someone else ask the next question, Timur. Thank you. We have many payments, especially from longer-term loans that have fully amortized their fees over their lifespan. So, a loan that started in 2016, 2017, or even 2018 may have no remaining fee income since those fees have been recognized gradually throughout the loan's duration. A more recently originated loan will usually have some unrecognized fees or minimum interest. Whether accelerated or increased prepayments lead to unusual fee recognition depends on the age of that payment, which can vary from quarter to quarter. Therefore, I can't provide clear guidance on that. But thank you for your question.

Hey, good morning, everyone. Thanks for the time.

Hi, Stephen.

I guess one quick clarifying question. I noticed that the $664 million commitment loan on Slide 36, either maybe change commitment or left the bank. Can you give any color there on that shift?

Yes. I believe we discussed that the project includes 9 or 10 different buildings. The first of these buildings was completed and paid off its credit facility, leading to a significant reduction in that facility, lowering it from the $600 million amount. Tim, is that correct regarding the $500 million amount?

That's right.

Yes. So, it dropped it into another bucket. All of that was in line with expectations.

Perfect, which leads me to my next question. People often raise concerns about your stock and the concentration of risks in your loans. While the credit history does not support those concerns, I'm curious about how you can further instill confidence in your track record over time. Additionally, what prompted you to prioritize the stagflation weighting in the Moody's modeling? That seems to be a very conservative approach as well.

Tim, you want to take the model weighting question?

Yes, I'm happy to. Stephen, that was clearly a conservative approach compared to our position at year-end when we used Moody's S3, which reflects a moderate recession scenario. There are certainly more variables now than what we experienced at year-end with the economy, and we outlined many of those in our management comments. We felt that this was the most suitable weighting to adopt. While it may be a bit more conservative than our competitors, we believe it's the right choice.

Okay, great. And then maybe just last thing for me. Kind of you have, I think, $325 million left in the share repurchase plan, but then obviously, growth opportunities look phenomenal and maybe there's some potential economic dislocation. I know you guys like to keep dry powder to be opportunistic. So, can you kind of give us just some high-level thoughts on how you think about that if you might slow the pace of repurchases based on what you're seeing or kind of what the mindset is today?

Yes, Stephen, this is Tim. I will take that one as well. Yes, you're right. We are halfway through our program. We’ve repurchased $325 million of our $650 million authorization. We have 2.5 quarters to go. There are many factors that we consider, with stock price being just one of them. Our views on future growth prospects also play a role. Given all of this, I would expect our activity to continue, but likely at a more moderated pace compared to last quarter, depending on various factors we assess.

Thank you. I would like to gain a clearer understanding of the prepay activity, Brannon. How much insight do you have regarding the likelihood of a prepay? I assume you are in regular communication about this. Can you share your thoughts on what to expect?

Absolutely, Brock. We are engaged in active discussions. Our team is consistently evaluating what the future may hold. As we’ve indicated numerous times, these situations can be unpredictable, both in size and timing. A loan moving from one day to the next can affect which quarter it is categorized in. Additionally, sponsors often fluctuate between whether they will sell or refinance. Mixed-use projects can present multiple options that complicate the timeline. Several factors can influence when these projects are executed. We strive to communicate effectively, but it’s common for us to have discussions with sponsors who believe they have a clear direction. In some cases, we attempt to shift that direction and find ways to keep the loan on the books a bit longer if it aligns with our risk/reward assessments. Various factors and conversations can change the timing of these repayments. Some loans are substantial and can significantly impact financial results if they shift from one quarter to another. While we are aware of these dynamics, we do not control the pace; we simply endeavor to accurately predict when these repayments will happen. Not all repayments are straightforward; there are partial repayments related to condominiums, and we have to project when certain milestones will occur. Large presales can affect these timelines and, consequently, large dollar amounts. This is some insight into the variability we are dealing with.

Yes, I believe the disruption in the fixed income markets and the widening of spreads is likely beneficial. Referring back to George's comment about the $1.5 billion in originations from 2016 and 2017, that amount is still present. What does that represent if we categorize it? Are these loans associated with projects that are progressing slower than anticipated, or have they transitioned from construction lines to a form of permanent financing? What’s included in that?

I would highlight a few points, starting with COVID. Some projects have experienced delays in completion and lease-up. I wouldn’t refer to any of these as permanent financing. Where it made sense, we extended some loans to retain strong earning assets for a bit longer. When it comes to selling or refinancing, sponsors aim to maximize returns on income-generating projects before proceeding with either transaction. There has been quite a bit of activity in this regard. However, our guidance for 2022 indicates that these situations are expected to lead to successful sales or refinances of those legacy loans this year.

Got it. Okay. Great stuff. Thank you.

Hey, good morning. Thanks for taking my questions. So, Marine and RV lending, obviously, enough swing here in the past two quarters. But is there anything out on the horizon that maybe gives you pause about growing that concentration maybe back closer to that kind of peak that you've laid out around 15% just given some broader macro concerns? Just trying to get an intermediate term view on how you guys see that business and that portfolio? Thanks.

Yes, Michael, this is George Gleason. I have no concerns about growing that portfolio back to 15%, considering the quality of the product we are originating and the excellent job our team is doing with underwriting and servicing those loans. However, I believe it's a long way off, and I'm not sure we have a clear path to return to 15% of our portfolio. Tim, what percentage are we at now, around 11%?

Yes, we are.

We are about 11%. We are really pleased to see that portfolio growing the last two quarters on an outstanding balance basis. I think we continue to grow it. I hope we do. I don’t know that it will grow every quarter, but I think it grows most of the quarters going forward. But getting enough growth while our aggregate portfolio is also growing to make that get to 12% or 13% would be really pleasing to me. I don’t have any near-term expectations that, that portfolio is going to get to 14% or 15% of our outstanding balances.

Okay, that’s helpful. Looking at Page 14 of the management comments regarding the floors and variable rate loans, there is certainly a strong likelihood that many of those loans could be moving off floors soon. Can you discuss how that interacts with your current loan-to-deposit ratio? Also, what are your updated thoughts on the liability side as those loans transition off the floor, especially in relation to the margin over the next couple of quarters? Thanks.

Yes, glad to do so. Obviously, even if rates weren't moving, this chart would be getting better each quarter as older loans that had higher floors paid off and were replaced with newer loans that have floor rates closer to where the formula rate for the loan is today. So, there's a recycling of this chart that occurs anyway. And obviously, with Fed having raised rates once and the prospect of significant and possibly even 50 or more basis point rate that’s coming. More and more of these loans are going to get off their floors and become actively variable in their pricing in the quarters ahead, it would seem, assuming the Fed goes through with its plan to raise rates, that’s going to become a much more significant percentage of them that will be actively variable much sooner. So that's helpful to our yield on our loan portfolio, both purchased and non-purchased loans because we have a large chunk of comparable rate loans in both the purchased and the non-purchased portfolio. So that should have a positive influence on loan yields going forward. The flip side of that and pushing the other direction is we've commented for at least a year now that the newly originated loans that we're originating are at tighter spreads than a lot of the older vintage loans that are paying off because market conditions have just gotten very competitive for the last year or two. So that fact that more newly originated loans have lower spreads than the old vintage loans that are paying off put some dampening effect on the increases in loan yields that are coming from upward movement in the variable rate lines. And then the other factor you mentioned is on the liability side and I think we alluded to the fact that we expect our cost of interest-bearing deposits to be going up in future quarters. We hit what we think is probably an inflection point in our cost of interest-bearing deposits in February. March was up, I believe, 1 basis point or two over February, which was down 1 basis point or 2 from January. So, we think we saw and nobody should be surprised that, that was an inflection point given the Fed rate scenarios out there. So, we do think we will see some increases in cost of interest-bearing deposits in the current quarter and future quarters based on the Fed's stated intention, the dot plot expectations for higher rates. So, our job is to manage all those in a good way where the positive impact on our variable rate loans more than offset the negative impact of our more competitive loan pricing environment we’ve been in for a couple of years and the fact the cost of interest-bearing deposits are going up. We’ve done a lot of work to make that happen. There's no assurance that, that happens, but we will continue to work hard to do it. And our deposit guys have done a really good job of shifting the mix and the composition and diversifying our deposit book which should help us manage that deposit beta more effectively. It's still going to go up, but more effectively on the deposit beta than what we’ve seen probably in more recent up rate environments for our bank. We’ve got a much more core-focused deposit scenario now than we did a few years ago. So that should be helpful to us.

I appreciate all the color, George. Thanks for taking my questions.

All right. Thank you, Michael.

Great. Thanks for taking my question. Just want to dig little bit more into the nuances of the variable rate loans with higher rates. Just help me appreciate the lag time between the LIBOR and the prime loans and how quickly these loans can reset? Is this a daily reset or a monthly reset or any kind of commentary you can give us on the nuances behind the resets? Thanks.

Brannon, the vast majority of our variable rate loans are in the RESG portfolio. It's the biggest chunk by far, so you want to take that question?

Absolutely. Thanks for the question, Matt. The vast majority of our RESG loans are resetting on a monthly basis, somewhere between the 1st and the 11th of the month. So, when we talk about those four graphs moving, they will be moving fairly quickly. And the vast majority of our loans are LIBOR-based or SOFR-based. Obviously, we are transitioning to SOFR as appropriate there. I think we have a couple that are prime-based, but no more than 2 or 3. So, I don’t know those percentages off the top of my head, but again, the vast majority are going to be the monthly resets.

Okay. That’s helpful. And then I guess on the RESG side, I think over the last few quarters, you’ve been highlighting that the New York market was going to stabilize and start to grow again. And it looks like we definitely saw that in the first quarter, pretty sizable increase versus kind of late last year. Any more commentary on what you're seeing in the New York market and what you're seeing that gives you the opportunity for even incremental growth from here? Thanks.

Yes, you're right. Several of the older loans we plan to pay off this year are from our New York portfolio, which has influenced our guidance. In the recently concluded quarter, we likely experienced more payoffs in New York than in any other market. New York also topped the charts in new originations both in terms of quantity and dollar volume, which is not surprising as we have always had faith in that market. There are numerous ways to evaluate it by product type. The residential market there has shown a strong recovery following the pandemic, and we continue to see robust activity in both the rental and for-sale sectors. We are pleased to work with reputable, experienced, and financially solid sponsors in the area. We remain focused on finding opportunities, which include condos, rentals, office projects, mixed-use developments, and the hotel sector, which is starting to show positive signs. We closed one hotel loan in that market this quarter. Overall, while several older loans are reaching maturity and being paid off, we are also identifying numerous opportunities to generate new loans.

Okay. Thanks for taking the questions.

Thank you.

Thanks, Matt.

Thank you.

Hi, Jennifer.

I'm curious about which portfolios you anticipate will be most at risk for higher loan losses as interest rates rise in the coming quarters.

Jennifer, I would tell you, we feel really good about our asset quality. Obviously, our past due ratios, nonperforming loan ratios, nonperforming asset ratios are all at very favorable levels as of March 31, and that’s consistent with where they've been for quite a while. And our net charge-off ratio in the first quarter was an unusually pleasing net recoveries number of minus 0.01%. And so, a one basis point net recovery for the quarter. So, we feel really good about asset quality. We stress test our loans when they're underwritten and approved based on their ability to stand interest rate stress in our loan structure and also their ability to withstand interest rate stress based on movement in where the permanent refinance market is for those loans. And also based on the cap rate stress, how far could cap rates move from where they are now, and we still have room to come out on that project. So, we don't underwrite loans that don't have a fair degree of resiliency in a changing rate environment, and we focus on that on every single loan. So, we feel cautiously optimistic about the quality of our portfolio and the ability of the vast majority of our loans to withstand reasonable amounts of interest rate stress. Now if rates go up hundreds of basis, 500 or 700 or 900 basis points, all bets are off in that kind of environment because the world will change dramatically. But when in the realm of rate increases that most folks are expecting, we think the portfolio performs pretty well.

Thanks, George.

Thanks. Good morning.

Hi, good morning.

One question on Figure 30, a trend that I noticed, I just thought was interesting. This is a small portfolio, but I was just curious your commentary. I noticed the loan-to-cost increased on the single-family lots and homes category. I’m just curious if you have any commentary on that.

I will take that, George. That’s actually being more reflective of the one substandard credit, Catherine. We don't have a lot of single-family homes, lots and homes on our book and a recent repayment that weighted that number down is the reason you're seeing that drift. So, I don’t recall how many we have left on our book, but that’s really reflecting fewer and more impact from the single substandard credit.

Got it. Okay. Is it mainly due to that one credit, or is there more to it?

I believe that's the main point. There are a couple of others, but that's the main focus.

I understand. That makes sense. Are you experiencing an increase in costs due to supply chain issues for these projects? How does that impact your assessment of these projects on a quarterly basis, and what risks might arise from those projects?

Certainly. There's no doubt that those challenges exist. One of the reasons we appreciate collaborating with the expertise our sponsors typically bring, along with the purchasing power of them and their highly skilled general contractors, is evident. While costs have been rising, many markets we operate in are also experiencing significant increases in rental rates and sale prices. If one side of this equation remained static, costs would become a bigger issue for us more quickly. However, both sides are evolving, which supports the ongoing development of these projects. We invest a lot of effort into monitoring and structuring deals that include solid subcontractor buyouts, even behind guaranteed maximum price contracts, ensuring our sponsors are meticulous in their planning. This creates a greater level of certainty regarding cost impacts on the projects we are finalizing now. As George mentioned, we pay close attention to the potential stress our projects might face before our loans encounter any real risk of repayment. This includes ensuring we have adequate contingencies in our loans or project financing, alongside highly capable contractors and sponsors who have substantial financial backing. Additionally, we are analyzing stress factors related to rental rates, vacancy rates, and interest rates from various perspectives to ensure we have a buffer that strengthens our position.

Catherine, I would add a couple of points or just to emphasize a couple of points and Brannon alluded to this, but I think it deserves a little more emphasis. Obviously, as Brannon said, we are in an environment where costs are moving up on almost every project, if not every project. And our sophisticated sponsorship is, by and large, very sensitive to that. So, there is a greater percentage of these contracts and subcontracts that are bought out or then we would have seen in a very stable environment. So, the sponsors are de-risking that by getting firm contracts with contractors and subcontractors at a higher percentage of the total project cost than they were before. So that's tending to take some of the variability out. And then the second thing is all of our construction loans have a completion guarantee that shifts the risk of cost overruns on that project to our guarantor behind the sponsor on that. So, if there are cost overruns beyond what's budgeted and allowed for with contingencies and project, the completion guarantors have got to write a check to balance that budget as soon as that out-of-balance condition is identified and bring that project into a completion in the context of your loan. So those completion guarantee structures are very important and more important now in a rising cost environment than they've ever been.

And have you had to actively used some of these completion guarantees recently? Or it's more just a ...

I wouldn’t say we've had to actively use the guarantees, but we have had sponsors on a vast number of projects actively voluntarily writing checks. I mean we've not had to call on the guarantee and say you've got a guarantee to do this, they know it's their obligations. So as costs have escalated beyond what were budgeted in the loan, we’ve had a lot of sponsors writing checks voluntarily to cover those costs because they know it's their obligation.

Great. And then any change at all in condo presales levels? Or is that still as strong as it's been?

That depends on the markets you're in. In Miami, it's 30% to 50%. On the West Coast of Florida, it tends to be 20% to 30%. In New York, it tends to be nothing. So, it very much depends on the market you're in. I don't think there have been any changes in presale practices or requirements in the last year or two. Is that accurate, Brannon?

That's absolutely accurate, George.

All right. Thank you.

Hey, good morning.

Good morning.

Just George, could you discuss the impact on deposits and the improvement? As you consider the deposit betas from the work you've done, can you explain how you view the behavior of deposit betas now compared to before, considering the different deposit mix?

The main objective of enhancing our deposit portfolio is to make it more diversified and focused on core areas. Cindy Wolfe, Carmen McClennon, and Ottie Kerley have been instrumental in this effort. Their primary goal has been to develop, improve, and diversify our deposit book. If our strategies succeed as anticipated, we expect to see lower deposit betas in this cycle compared to the previous one. It's challenging to predict how rates will change, as we are uncertain whether the Fed will increase rates by 25, 50, or 75 basis points at the next meeting. However, we believe we have laid the groundwork for better deposit betas than those seen before, and we hope our improvements will be evident. Regardless of the outcomes this cycle, we will strive to continue enhancing our deposit base monthly, with the aim of making it less costly and less sensitive to rate changes as rates rise. This is an ongoing process.

Sure, could you provide some commentary on the outlook for ABL and equipment finance? Both are expected to be significant contributors moving forward. Additionally, Community Banking had a strong quarter excluding the PPP impacts, so I'm curious about the factors driving that performance and the outlook in that sector.

We have discussed for several years the importance of diversifying our asset generation to enhance the strong performance of our CRE Real Estate Specialties Group portfolio. We are seeing positive movement in this area, with a couple of quarters showing growth in our indirect business, which we expect to continue in the upcoming quarters. We have confidence in the teams we assembled for asset-based lending and equipment finance, as they have successfully closed several transactions and are managing promising pipelines. Our focus is on significantly advancing our consumer small business, commercial lending, and community bank operations. We have seen positive early signs in the first quarter and have solid pipelines going into Q2 for these areas. Our government-guaranteed lending business, primarily involving SBA loans, has been occupied with processing PPP loans for our customers over the past few years. As we near the completion of that process, we can refocus on our core mission of originating more 7A and 504 loans in our community banking markets, which include Arkansas, Texas, Florida, Georgia, and North Carolina. We are cautiously optimistic about our ability to generate growth from many of these portfolios, though not all will show growth every quarter. This diversification aligns with our long-term goal of building a more varied asset book within our bank, while we allow our RESG and community bank commercial real estate units to continue producing strong loans. We anticipate growth in these areas, which will contribute to greater diversification in the long term.

That's really helpful. I have one more question regarding the expense outlook. It seems that things looked a bit better this quarter, but it still appears there is pressure on the expense line, Tim?

Yes, Brian, you are correct. We were very pleased with the way the team managed expenses this quarter, although I don’t think that level is sustainable. Our headcount was down in Q1, but we have seen some positive trends in the last few weeks and are moving in the right direction. My expectation for Q2 is in the $112 million to $114 million range.

Answer That's for non-interest expense.

Non-interest expense. We were at $110 million in Q4, we were $110 million in Q3. So that’s a couple of $1 million more than where we were in those two quarters. And then going forward, I would expect probably another couple of million, $2 million to $3 million per quarter increase over that number that I just gave you for Q2. And most of that will come in the salary and expense line item and will be dependent on the level and pace that we are able to hire folks. So that’s current expectations right now around those ranges.

Perfect. Okay. Thanks for taking the questions, guys, and Congrats on a nice quarter.

Thank you.

Hi. Thanks for the follow-up. Just one more on the securities book, quite a decent amount of cash flow expected both in the second quarter and then the remainder of the year. Balances dipped a little bit in the first quarter. I'm just wondering what security strategy looks like in the context of the rest of the balance sheet composition and growth.

Well, that’s a great question. And first, I would tell you that we are feeling very good about our decision over the last couple of years to keep things really short. And the fact that over the next three quarters, second, third and fourth quarters of this year, we expect to get a little over 20% of our securities back in cash. And either be able to use that for other purposes or reinvested at higher yields is helpful, and we expect strong cash flows over the next couple of years. So that helps us address that depreciation in that portfolio in a pretty quick manner. So, we're pleased about that. At the same time, with rates moving upward and having moved upward as quickly as they had and it became pretty evident that we were going to see continued moves upward in rates as the first quarter began to unfold, we pretty much went to the sidelines and elect to not buy much in the way of new securities. And I think the guys running that portfolio have a very big decision to make as to when we are far enough up in rate that it's time to step in and buy a few more securities to replace some of this runoff and when it's time to extend duration a little bit. I don't think they think we are there on either point at this time today. So, they'll continue to monitor that. They've done a very good job managing that portfolio for years. I think they will continue to do so. But clearly, it's not our view that it's a time to buy today. So, we will continue to monitor it.

Okay, thank you.

Yes, thanks. Just a follow-up on fee revenue. I see you called out the $1.8 million gain on the sale of the branch deal. Is there anything else worth calling out that’s unusual? I'm looking specifically at the gain on sale of other assets that have been $1 million over the last few quarters, but it was close to 7 this quarter. I didn't know if there's anything else in that line. Thanks.

The branch sale was part of that. Our special assets team did an excellent job liquidating some of our OREO pieces that we had at very low value, achieving a strong sales price. We mentioned in our prepared remarks that we had an elevated level of gains on the sale of other assets, including the branch sale. However, even excluding the branch sale, the gains were still elevated. We anticipate that this line item will normalize, aligning more with the subdued quarters we've experienced over the past year or two. We have recorded branch sales in several of those quarters as we've sold off branches that didn't align with our long-term strategy. The primary contributor to the gains on sale line is the gains from the sale of foreclosed assets, which were unusually good in the recently concluded quarter.

Okay. That's helpful, George. And then I guess, going back to the discussion around deposits and deposit betas, how much of your deposits are contractually indexed or very similar to index that would have a very high beta? And any color on maybe how this would compare to last cycle in that 2015, 2018 timeframe?

What I would tell you, Matt, is last cycle, our largest 10 depositors accounted for high teens, close to 20%. I don't know that we ever hit 20%, but 18% or 19% of our deposit base. Several of those, if not a majority of those, were contractually indexed, which meant they had essentially 100% beta. That top 10 concentration list now is somewhere less than 8%, 7% and change, I think, of our total book. And I don't think any of those are contractually indexed. Or if they are, it's a small number of them that are contractually indexed. So, we've made a very conscious decision to get away from the big concentrated 100 beta index deposits and try to control that deposit beta much more effectively going forward than we did in the last cycle.

Okay, thank you.

Thank you.

Our next question will come from the line of Timothy Braziler from Wells Fargo. Your line is open.

All right. Thank you, Victor. There being no further questions at this time, that concludes our call. We thank you guys for joining us today and look forward to talking with you in about 90 days. Have a great quarter. Thank you. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have good day.