George Gleason: It remains to be seen. We said in the last quarter’s conference call, I think Tim talked about this, and I did, that it was 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 in average earning assets. And that it was a horse race. And I think it was the way I characterized it as whether or not we would be able to achieve positive growth in net interest income. I think we were up about $10 million in net interest income this quarter over the third — over 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 it goes down a little bit or it stays the same. I don’t know, I can’t handicap that right now, but 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 keep the — hopefully keep the same horse running in future quarter but I can’t predict that outcome right now.
Catherine Mealor: If you don’t mind just one clarifying question on the credit comment earlier. On criticized and watch list loans, you did not see any change to that this quarter. Is that correct?
George Gleason: Tim, do you have that?
Tim Hicks: I don’t have those specific numbers, Catherine, but 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 other significant movement into risk rating classifications.
Catherine Mealor: Okay. Great. Thanks for the clarification.
Operator: And thank you. And one moment for our next question. And our next question comes from Matt Olney from Stephens. Your line is now open.
Matt Olney: Hey, thanks. Good morning. I want to ask more about loan floors within the RESG portfolio. I think on the past calls, you talked about the mix of resi 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 resi and loan floors?
George Gleason: Well, every quarter when we have older loans pay off, and we’ve talked about that volume. Those floors typically are much lower than the floors on newly originated loans. So 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, 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.
Matt Olney: 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 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%?
George Gleason: Tim? [indiscernible].
Tim Hicks: Matt, thanks for the question. Yeah. I mean as you noticed during the quarter, we had significant loan growth, an 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 capital through organic loan growth. But I don’t see the pace of decline being the same pace that we’ve had over the past year. And would anticipate that 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 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.
Matt Olney: And then, Tim, I guess, the second part of that would be around the stock buyback. Obviously, no activity in the third quarter, but I think we’re now with these valuations where you were more active in the first part of the year. So any updated thoughts around the buyback from here? Thanks.
Tim Hicks: Yeah. I mean you saw in our comments, we are 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 if you go back to 2021, 2022, 2023, I think we’ve done a really good job of managing our capital. In 2021, we 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 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 focused on that as opposed to focus on share repurchases. However, we do expect 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.
George Gleason: Yeah.
Matt Olney: Okay. Thanks for taking my questions, guys.
Operator: And thank you. And one moment for our next question. And our next question comes from Brian Martin from Janney Montgomery Scott LLC. Your line is now open.
Brian Martin: Hey, good morning.
George Gleason: Good morning.
