Greetings and welcome to today's Cullen/Frost Bankers Inc., Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, A.B. Mendez, senior Vice President and Director of Investor Relations. Thank you. Please go ahead.

Thanks, Donna. This afternoon's conference call will be led by Phil Green, chairman and CEO and Jerry Salinas, Group executive Vice President and CFO. Before I turn the call over to Phil and Jerry, I need to take a moment to address the Safe Harbor provisions. Some of the remarks made today will constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 as amended. We intend such statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 as amended. Please see the last page of this morning's earnings press release for additional information about the risk factors associated with these forward-looking statements. If needed, a copy of the release is available on our website or by calling the Investor Relations Department at 210-220-5234. At this time, I'll turn the call over to Phil.

Thanks, A.B. Good afternoon, everyone and thanks for joining us. We are here to review the second quarter results and our Chief Financial Officer, Jerry Salinas, is going to provide some additional comments before we open it up to your questions. And in the second quarter, Cullen/Frost earned $160.4 million, or $2.47 per share, compared with earnings of $117.4 million, or $1.81 a share reported in the same quarter last year. That represents a 36.6% increase over last year's level. Our return on average assets and average common equity in the second quarter were 1.30% and 19.36% respectively. And that compares with a 0.92% and 13.88% for the same period last year. Once again, I'm proud of the solid performance turned in by our outstanding staff in this unusual economic environment. The continued rate increases by the Federal Reserve and their fight against inflation have had their intended effect by slowing some segments of the market. In addition, increasing rates continue to raise the opportunity costs for businesses holding cash in liquid deposits. These impacts are to be expected through the rate cycle and will continue to play themselves out during this period and Jerry will provide some great insight into their near-term effects. As we said last time during the second quarter, Cullen/Frost did not take on any federal home loan bank advances, participate in any special liquidity facility or government borrowing, access any brokered deposits or utilize any reciprocal insurance arrangements to build insured deposit percentages. But notwithstanding all that, we believe the most important thing for us to focus on at this time is that we are successfully executing our mission to grow and prosper building long-term relationships based on top-quality service, high ethical standards and safe sound assets. And I believe the results for this quarter…

Thank you, Phil. I wanted to start off first by talking a little bit about our Houston 1.0 expansion results. As a reminder, the last of those branches was opened in 2021. So, these branches are still in what I call the development stage. As Phil mentioned, we've been very pleased with the volumes we've been able to achieve. Looking at the second quarter, linked quarter annualized growth in average balances for these locations was 31% for deposits and 17% for loans. And for the second quarter, Houston 1.0 contributed $0.05 to our quarterly earnings per share. Now, moving to our net interest margin. our net interest margin percentage for the second quarter was 3.45%, down 2 basis points from the 3.47% reported last quarter. The decrease included some positives that were more than offset by some negatives. On the positive side, higher yields on loans and balances at the fed, combined with higher loan volumes were more than offset by higher cost of deposits and customer repos, and lower deposit levels at the fed compared to the first quarter. Looking at our investment portfolio, the total investment portfolio averaged $21.3 billion during the second quarter, down $466 million from the first quarter. During the quarter, we did not make any material investment purchases. During the quarter, we sold about $360 million in municipal securities as we took advantage of market dislocations, which allowed us to improve interest income going forward. we recognized a net gain of about $33,000 on those transactions. The net unrealized loss on the available-for-sale portfolio at the end of the quarter was $1.61 billion, an increase of $207 million from the $1.4 billion reported at the end of the first quarter. The net unrealized loss on the held-to-maturity portfolio at the end of the quarter…

All right. Thanks, Jerry. And now, we'll open it up for your questions.

Thank you. [Operator Instructions] Today's first question is coming from Brady Gailey of KBW. Please go ahead.

Hey, thanks. Good afternoon, guys.

Hey, Brady.

Hey, Brady.

So, your net interest margin has held in very well, especially relative to the industry, which saw NIM slippage by a decent amount this quarter for most of your peers. Do you expect the net interest margin to continue to hold in relatively well, or do you think that at some point, you will see some real downside there.

What I'd say, Brady, I thought that last quarter, I said it was going to be relatively stable. I think I'd stick with that, except that I would say that there's a downward bias. When I talked about the two basis-point decrease that we had between the first and the second quarter, all those positive and negatives are still kind of affecting us going forward. So, I'd say kind of stable. but again, with probably more towards a little bit negative bias. But I don't see it changing significantly, not based on anything I'm seeing.

Okay. And then I know in the past, you guys have talked about some of the financial impacts of expanding into a new market like Austin. I don't think they've moved the numbers a ton. But any guess on the financial impact of the Austin expansion over the next year or two?

Brady, we'll talk about that in January. We really would give some guidance and obviously, it's going to be primarily expense based at the beginning as you know. as we start putting those locations together, I don't expect for 2023 that they'll have a significant impact. So any impact, we'll start feeling next year and we'll kind of give some color at the beginning of the year.

Yes. I just might add, Brady, just that the scope of it's a little bit smaller just by its nature than Dallas or Houston. The expansions that we've had there. So, pound for pound, it'll be about the same, but the scope of it just a little small.

Okay. And then finally, for me, NPAs are up. They're still at a very low level. But I think I heard you mention two credits move into the NPA bucket. One was an $18 million office loan. What was the other NPA that went into that bucket this quarter?

Yes. it was in the pre-owned auto sale dealership, and the higher interest rates really impacted its carry costs and also the performance of some of the paper that it carries. And so we thought it was appropriate to recognize that. So, it wasn't real estate related, but it was in the automobiles area.

Okay. All right, great. Thank you, guys.

Thank you.

Thank you.

Thank you. The next question is coming from Steven Alexopoulos of JPMorgan. Please go ahead.

Hi, everybody.

Hey, Steven.

Hey, Steven.

I want to start. So, the non-interest-bearing deposits last quarter, you guys thought would come down in 2Q and then stabilize, and we're seeing continued outflows. I'm just curious what's taking customers so long to just reach that amount of operating cash that they need? I find it hard to believe with every move, they're, like, digging deeper and deeper. I would have thought it would pretty much be done by now.

I think, Steven, it's -- as I've said in my comments, I think the rate environment that we're in is so unique and so different, there's a lot more opportunities for them to invest that money. It's really impressive rates. So, even though I said that in my mind, a couple of hundred million is certainly better than the 500 million and 600 million decreases that we were seeing. But I do think that there continues to be volatility there. I think there's just too many options for them to utilize those funds, whether it's to pay off any debt that they might have or decide to invest it and investment could certainly be. And we've seen some dollars obviously flow into our off-balance sheet, either trust areas or treasury areas. So, I think, now I'm with you. I kind of thought most of it was gone, but I think in the environment, we're going to continue to see some pressure there. I think the upside for us is, as Phil mentioned, we really feel very positive about all the new relationships that we're bringing in. We see some pretty impressive deposit wins. and in some cases, those commercial wins take a little bit longer to get on the books and get them closed. But I think in the rate environment, we're just going to continue to be cautious. I think everybody's going to have to make the decision on how they want to invest those funds. And all we can really do is to continue to focus on growing the business and adding new customers.

Okay. And then on the balance sheets, you guys had good loan growth in the quarter, more or less funded with securities. If you just look at the movements on the asset side. as we think about the back half, jerry is maybe these non-interest-bearing outflows subside a bit, do you think we'll see net balance sheet growth in the second half or will you just continue to fund loan growth with other assets that run off?

I think that we're projecting some small growth on the funding side at this point. Nothing really material. Again, given the uncertainty that we've got on the commercial side, our projections really do have some growth, but it's not anything that I would say is significant.

Okay, thanks. And then final one. So Phil, I appreciate all of the line items that you ran through by market, in terms of customers that you guys are picking up, I'm curious. So, your service is consistently good, peers are consistently not as good. What is it about this environment that you're seeing in so many customers move banks? Thanks.

Yes. Mr. Steven, I think it's a couple of things primarily. when you look at our movement in terms of growth and new relationships, the expansion no doubt has a really big effect on that. and I think it's really paying off in terms of growing those relationships overall. we've also been spending more and focused more on marketing. I think we're doing a better job on marketing. and then reputationally and just to be honest, we've got a great reputation and reputation for great service. So, it's been pretty exciting as we've moved into some of these markets. In some cases, I was thinking about one we opened up and I think it's Dallas just recently. I think the closest Frost bank was 15 miles away and the growth has just been tremendous. So, I think it's really simple. I think we are investing in our business. We're growing our distribution in fantastic markets. We've got a great value proposition for service, and we're marketing and investing in marketing and technology. I think it's just all working together to win. And I apologize for giving so much granularity on that, but it just shows that that's really what we're focused on is new relationships. It's a part of our mission statement that's called out. And we're going to go through rate cycles up and down, and we're going to see movements of non-interest-bearing deposits out and all that stuff. That's going to happen. But if we just focus on growing the business, growing the relationships in great markets, we're going to do fine.

Okay, thanks. And I appreciate all the detail for what it's worth. Thanks for taking my questions.

All right, thank you.

Thank you. The next question is coming from Dave Rochester of Compass Point. Please go ahead.

Hey. good afternoon, guys.

Hey, Dave.

Just going back to your EPS outlook comment for ‘23, I know you mentioned the stable NIM with a downward bias, so that was helpful to hear. I was just wondering, how are you expecting that to translate into NII trends for the back half of the year at this point? Are you thinking stable-ish NIM and stable funding what you just mentioned would get you to stable-ish NII, or how are you thinking about that at this point as you look at your EPS outlook?

Yes. I guess, the thing that I would focus on is kind of where we ended the quarter on the deposit side. I mentioned to Steven that we're not projecting a whole lot of growth from there for the rest of the year. And so that obviously will have some impact on net interest income. So, I think that's really where the pressure is.

Okay. And then regarding deposit trends, you said earlier, it sounded like you're baking in marginal deposit growth or marginal funding growth, I guess, in the back half. Are you assuming that DDA continues to decline through that period as well? I know you mentioned that the runoff had subsided a bit, but is that the general expectation now you continue to have mixed shift through the end of the year?

Yes. and again, we're projecting growth. but I think that on an annualized basis, I think we're at 2% or something like that, that we're projecting. What's interesting is 1% of that is our legacy bank and 1% is coming from our expansion. So obviously, they're having an impact on our growth. But that aside, I think that gives you some perspective on the size of the deposit side that we're projecting. And I think the mix, I would expect that it probably will not change a whole lot. But if there is a movement, I would expect that the pressure continues to be more on the non-interest-bearing side than on the interest-bearing side. And on the interest-bearing side, I think we're starting to see some settlement there on rates. but with this rate hike, we'll actually obviously react to that. But I think you'll still see some movement of mix, but it appears everything's stabilizing, certainly a lot more than we saw just a quarter ago.

Yes. Okay. And then just given where we are in the rate cycle, have you guys been reducing asset sensitivity at all in the past quarter, or do you have any plans to do that in the back half of the year, just with swaps or anything else?

I think right now, we're really kind of sitting tight. We're obviously looking at a lot of opportunities and things that we can do. but at this point, I wouldn't envision that we're doing anything very drastic obviously, asset sensitivity is diminishing as the balances that we're holding at the fed are diminishing as we're seeing the decreases in non-interest-bearing deposits. but other than that, not doing anything actively.

Okay. And maybe, just one last one on expenses. I appreciated the reiterated guide there. It seems like just given where we are in the first half, you're looking for a pretty deep ramp up in the second half. Is that kind of what you guys are looking at, at this point? Is that likely to see that kind of a ramp up?

Yes. that's kind of what we're saying. We obviously review our projections monthly and talking to our lines of business, and everything that we're seeing certainly is pointing us in that direction.

Okay. Thanks, guys.

Thank you. The next question is coming from Manan Gosalia of Morgan Stanley. Please go ahead.

Hey, good afternoon. I wanted to ask about the liquidity and the cash balance in the quarter. I know the average was about $7 billion, which was, I think, sort of in line with where you had indicated balances were back in April. So, is it fair to say that you didn't utilize any of that through the quarter? And now that the environment has stabilized, do you plan to continue, or would you use cash to support loan growth and deposit outflow? Or just given where fed rates are, does it sort of make sense to keep cash at 5% and continue to let securities level come down?

Yes. that's really where we are right now. I think that's the sort of guidance we gave last quarter. And you heard me say we didn't make any investment purchases. I think at this point, any decrease that we've seen in the cash balances at the fed and I think we were at the end of the quarter, we were down to $6.3 billion, little under 16% of our deposit balances. So at this point, I think we're pretty comfortable with that. As you said, looking at the 540 that we're earning now, we're not looking to make any active moves on the investment portfolio at this point.

So can you remind us how much the securities portfolio, how much of that should mature every quarter for the next year or so?

I think for the rest of the year, I think we're at 720 million -- say 715, with really 250 million, a third of it, say a little bit more than a third on the last day of the month. So, the last part of ‘23, the second half of ‘23 is what I'd call a normal amount. As we look at ‘24, we're probably talking something in the neighborhood of $3 billion for the year.

Got it. Thank you.

Sure.

Thank you. The next question is coming from Peter Winter of D.A. Davidson. Please go ahead.

Thanks. I was curious, what's the outlook for the deposit beta? I think the original forecast was 32%. And then secondly, do you think that there'll be pressure on this deposit beta next year as we're in kind of a higher for longer rate environment and your interest rates on deposits are a little bit lower than peers?

Our cumulative beta through -- on interest bearing deposits through the second quarter was 37%, up from 33% in the first quarter. On total deposits, that translates to 23% at the end of the second quarter versus 20%. I would expect that we would go up to somewhere by the end of the year, say in the 39% given this last rate hike that we're dealing with. I think that's comparable to what we've looked at, what we've done historically, say the average of the last two cycles. but looking at 2024, not really in this environment, not expecting, Peter, that we'd have to do much. again, it'll be interesting to see where we're at come January and what our expectations are. But I don't envision we've kept up with deposit pricing and tried to be fair and obviously have gone out early to provide our customers with a fair deal. So, I don't expect that once if the fed has stopped hiking, I don't expect that we're going to have to do a lot of continuing to increase our betas, if you will, or increase our deposit rates after the hikes stop. So now, I don't really expect much change. We'll have to see obviously. we're going to want to make sure that we continue to be competitive with our peers. That's the one thing that we want to make sure. But at this point, if I had a crystal ball, I'm not seeing a lot of pressure there at this point.

Okay. And then I just want to ask a big picture, I'm just a little bit surprised that maybe, the deposit outlook is not a little bit stronger. I mean, I realized what the environment is like. but every quarter, you guys keep having this record new account growth both on the commercial bank, the consumer bank, the success with the branch build out expansion, and that's starting to take hold. I'm just wondering why the deposit outlook is just not a little bit stronger with all this growth.

Well, I think one thing, Peter is that we need to consider as we answer the question. and I'd say, from a broad perspective, I can't say exactly why. but one thing I can say is that we tend to have a lot more operational transactional accounts, demand deposit accounts, checking accounts than peers. And I think those are more susceptible to opportunities that Jerry's talked about. So, I think we've got to work our way through that. And then I think once we touch bottom, you'll get to see movement up. I'm confident that we're going to see a traction from these new relationships. One thing we saw early in the Houston expansion was that when we looked at our performance versus goal on deposits, we were better on relationships, but we were under our goal in commercial deposits as far as balance. And one thing that we learned was getting the relationship is one. but they've got to -- and this is on the commercial side, you've got to go through getting your customers to send their payments to a different place. There's just a lot of operational things that have to happen before you as a business see the full effect of being the primary checking account take place. And so I think that's part of it. But what we've seen is, as we've grown and relationships historically, we'll see more and more of that company's business go through there, and I'm confident we're going to see that.

Got it.

Remember, we don't count a relationship unless we get the primary checking account. We'll do business with people. We get different aspects of their business, but you don't get to count it as a relationship unless you get the primary checking account.

Got it. Thank you.

Thank you. The next question is coming from Brandon King of Truist securities. Please go ahead.

Hey, good afternoon. Thanks for taking my questions.

Hey, Brandon.

So, I wanted to talk about the $80 million office loan. Could you please provide us with some details as far as what potentially makes that loan or property different from the rest of your office CRE portfolio?

Okay. well, in the case of this one particular asset, it's one that lost a major tenant and it was one that is a newer relationship for us. and that it came on right before COVID, it came over, I think it was in January of 2020. And so there's not that same type of history. A good reputational group, but not the same kind of history thus. And as they lost that tenant and then their debt service coverage numbers suffered as a result, we felt like they needed to right-size it to a certain extent, they didn't agree with it. And they were willing to do a smaller amount. So, it's been restructured and it'll perform for the next year, but not to the level that we think it should. And so we've got that on a non-accrual and it was basically you just had a disagreement between the parties on what they should do as far as right-sizing the project. in terms of the asset itself, it is an office building loan, but we booked it at the amount of the underlying real estate. And it is a tremendous piece of real estate in a very dynamic area of Houston. And so I'm not concerned about valuation losses of any significance, but because of where we are and because it does cash flow to the place that we feel it needs to be, we put it on non-accrual. And as far as what's different, I mean, look, rates are higher and we've got a tremendous amount of projects and they're not all going to be perfect. And you could end up, I think we talked before, maybe as I recall, you could have a property that is an industrial property with a Fortune 500 credit tenant, long-term lease and underwritten before COVID or the current increases in rates. That looks great, right. But at the present value of that lease stream today is less. And so equity suffers in the project, those types of things. And they've got to get worked out and we'll just see how they work out. Do we think there'll be significant impact on loss? No. but we're watching credits that look like that. You might have a senior housing property that is kind of a different deal. I mean again, this is a lending business. There are all kinds of things that happen. It's a risk business, but there are lots of properties that are being impacted. And the main thing that we're doing is we're relying on the underwriting that we did going in and the people that are backing it up, the vast majority of which have been long-term customers. So, we're going to see some dislocation here and there. Sure, we are. but do things look good today on a historical basis? And are we happy with the underwriting that we've done over time? I am. And we'll just see how it goes out over the cycle.

Got it. Very helpful. My follow-up question is on the share repurchases in the quarter. Just kind of what led to that decision and kind of what kind of appetite do you have for the rest of the year?

We really just -- at the price, like I said, we were at $96, and we just thought it was a deal that we really couldn't pass up. Obviously, we didn't spend all of it. We just thought, given where the price was, we thought it was a great value for us and we took advantage of that. At this point, we'll be opportunistic if something like that happens. Again, we may take advantage, but at this point, nothing planned.

Jerry's a great example of those people using those demand deposit balance.

Thanks for taking my questions.

Yes, Brandon.

Thank you. The next question is coming from Broderick Preston of UBS. Please go ahead.

Hey. good afternoon, everyone.

Hey, Brody.

I was hoping to follow up just on the securities question. I just wanted to confirm what you said, that it was $750 million was that through the rest of the year with the large chunk on 1231? And then 3 billion next year. Am I hearing that correctly?

Yes, sir. You got it exactly.

All right, great. Do you happen to know what the yield on the securities that's rolling off is?

I can tell you something right off the top of my head. We bought $1 billion we've talked about this. We bought $1 billion in treasury securities two years ago, I guess, a year and a half now when there was conversation about Russia invading Ukraine, and we made that purchase as a defensive posture, obviously I wouldn't have made it today. We did that at 1%. So, that first $250 million comes off at the end of the year and it's at 1%, 102, I think is. And then the next 750 of those proceeds come in within the first few weeks of January, again, at that same 102%.

Got it. Okay. And I think you said earlier that you weren't being too aggressive on new purchases, but in terms of adding to the size of the book. But is it safe to assume that you would look to replace that $3.75 billion over the next 18 months? Would you just look to kind of replace that, or are you trying to move the size of the securities portfolio lower?

Yes. I think all things being equal. and by that, again, we're talking about deposits a lot today, and assuming that we've reached some sort of stabilization and start to grow, I think the quick response would be, yes, we would look to replace it. But I think until we get to that point in time, we'll have to see what else is going on, on the balance sheet and make our decision at that point. But obviously, that could be a great positive or will be a great positive impact to NIM and to net interest income in ‘24 just even if we kept it at the fed.

Got it. Is there any bias towards any type of security? I know you have a lot of the community bonds in Texas. I just didn't know if you would look to kind of replace treasury with treasury, if it was anything more complex than that.

Yes. I think we would really evaluate at that point with our investment committee what made, what we saw the most value. So, we don't have anything that we'd say, oh, we're necessarily going to replace a treasury with a treasury. We're going to see where we think there's most value in the market.

Okay, got it. That's all I have for questions. Thank you very much.

Thank you.

[Operator Instructions] The next question is coming from Jon Arfstrom of RBC Capital Markets. Please go ahead.

Thanks. Good afternoon.

Hey, Jon.

Hey, just a few random ones here. on the credit question, Phil or Jerry, what should we expect on non-performers? I know these two kind of feel like random and very different credit, but what do you guys see in terms of stress in the portfolio? And maybe, it's obvious, but do we just expect it to continue to rise?

Jon, I think realistically, it will. Some of these -- we're watching a lot of credits and we've got good eyes on everything. If rates stay up and higher for longer, I think we'll see some more non-performers and in real estate. But do I think there's much loss there? No, I don't. And we might get lucky and avoid some of them. But there are just some properties that are under stress, and I'm a Frost Banker. and so I'm going to take a conservative view. And I think non-performers will increase, but they're so low right now. it's really hard for us to expect them to be at the same level going through a cycle like this indefinitely. So, I mean, I'm not trying to paint a bleak picture, I'm just trying to be realistic. And we're going to have to be patient as we work with these customers, the main thing you want to see is people doing the right thing that you've banked and working with you on restructuring deals, doing their part to contribute to make it right. And we've got some deals that we're seeing that they're going to need that and we're having conversations with that and I'm expecting everyone to perform the way they should. and I think it'll be fine. But realistically, not everyone is going to do what you want them to do. And I don't have any specific expectations there except I've just been in this business a long time and some of that's going to happen. That to me, is not the big worry right now. Look, and I don't want you to think we don't have all eyes on credit we do I mean. But to me, that's going to work its way out. I've got faith in the underwriting and the relationships that we've been doing for the last few years. Again, it doesn't matter what you do today. Really, what matters is what you've done over the last few years. And I've got a lot of faith in that. The thing that I want to see us continuing to do is win competitively. We are winning competitively. And I'm really excited about the opportunity in Austin. I think it's got every chance to be as good as we've seen in other places and we'll see. But that's what we're focused on is growing the business and winning competitively. Will we see some non-performers increase? I bet we will.

Okay. Yes. It kind of reminds me of energy seven years or eight years ago in some ways. Jerry, for you, the Houston 1.0, you talked about $0.05 EPS impact. So, call it 2% of EPS, maybe, crude math, but 4% of footings, how long does it take Houston 1.0 to reach, like corporate wide profitability and returns?

Let me see if I can grab my -- put my hands on some of that information. What was interesting is that Phil and I really haven't talked about this. but for the quarter, it was interesting that how well Houston paid that, now at this point, they're starting to pay for more of the expansion. It's kind of what we had been talking about when all this started was the plan was to make 1.0 profitable. So that it could start paying for some of those. And I'd say what we said was it takes about 27 months to break even is kind of what we kind of project. So at this point, I think that Houston 2.0 is probably a couple of years away just from the standpoint that remember early on, it's all expense loaded. And so at this point, it's still going to be a couple of years before Houston 2.0 is contributing, okay. It's not the size of 1.0, but we've got some of that same expense front loading.

Okay. And just on 1.0 for it to reach call it, similar returns and profitability profile of the rest of the company. Is that a year away?

Yes. I think that's probably right. We'd kind of have to take a little bit closer look at it, sharpen our pencil. but I don't think it's too far from that. Again, I don't have in front of me what their projections are for the rest of the year. but like we said, they had a 30% linked-quarter growth on deposits. With that sort of a growth horizon, that we wouldn't be too far. But I have to be honest, I don't have that sort of a projection in front of me and happy to be able to talk about it at some future point when we get together.

Jon, it's an interesting question. Just kind of overall, as we look at these branches and we perform it out, we tend to use, when we began all this, a five-year horizon for the branch to kind of reach maturity. and that was I guess that would be similar profitability to what we were overall. But honestly, it's also true. We don't talk a lot about it, but it's also true that in years six through 10, I think we've seen really more growth than we see in that first five years. As those things mature, we see some really significant growth. So, I think ultimately, these locations end up with better profitability than the total profitability of the company, just because they're more efficient and more focused on a book of business in a defined market, in a defined structure. So, I think that we're not at five years for all of them and it'll take a little bit even for 1.0 to get there. and then certainly 2.0 is going to take some time before all of those are five year mature, but don't count out continued growth in those markets from the expansion year six through 10. Historically, as we looked at those 40 branches that we had done before we started the expansion, some of the growth in year six through 10 was really significant.

Yes. that's really where the power is.

Yes. Okay. So, we're just kind of just getting there.

I think so.

Okay. All right. I could go on and on with questions, but I'll just leave it there. I appreciate it, guys.

Thanks, Jon.

Thanks, Jon.

Thank you. At this time, I'd like to turn the floor back over to Mr. Green for closing comments.

All right. as always, we appreciate all of your interest and we thank you for your questions. And we'll now be adjourned.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and enjoy the rest of your day.