Q3 2019 Earnings Call
Good day and welcome to the smartphone National third quarter, 29, King and cool.
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Thank you Francesca a good morning, thanks for joining us. This morning, we appreciate your interest in smart financial and Smartbike.
Joining me this morning are Billy Carol, our CEO , and President and Ron Grzebinski our CFO .
Before we start I'd like to ask Peter please refer to the disclaimer page in our non-GAAP forward looking statements page, but these are included our earnings release yesterday in our Investor deck. There was filed this morning.
A couple of highlights for our third quarter, we do feel like we had a strong very solid quarter. We've used the term internally last couple of days as a noisy spree quarter and a that's rare for us as you all know.
6 million in earnings for the Q3 is very solid for us and our away you hit our target of 1% and continues to progress North Our board has very pleased with the job barely in our executive management team is doing and I believe that Billy along with his finance team our risk tame lending team credit.
Team at our operations team are all hitting on all cylinders.
Oh, we're also very excited about the economic news and the outlook there were picking up and down laying out our markets are they all look very strong and feel very strong and we really feel we're poised to finished 29 change strong as we continue to execute our plan and without him what turned over to Billy and let him talk about a few specific comments really well.
Good. Thank you built and good morning, everyone on the call I'll open up a is I typically do with some anecdotal comments and then I'm going to try to Ron Kruszewski, our CFO and let Ron I'll walk through the deck in some some greater details. So what is Miller said, a really solid quarter.
For us here in Q3 consistency is a word we've been using quite a bit.
And we've had a strong focus on our team's efforts to build a consistent consistent already foundation for a company.
Before I jump into performance a couple of I just a couple of key items that I wanted to highlight you know from a from from third quarter. After the third consecutive year back was recognized as one of these Tennessee's top places to work we spend a great deal of time on building or culture, a in the company, while we're building a solid financial foundation.
And I think that sometimes is we focused so much on numbers.
If these key intangible often gets overlooked and I truly believe a we are one of the best companies in the southeast to work for these top of Acolytes continue to support that another order we received up over the last quarter was being named to Fortune magazine's list of 100 fastest growing company for 2019, a very impressive.
Group of companies on that last and it really nice to see are named among them. So just a couple of high watch there for us and totally odd and I think shot freight honors that our team I should be very proud of Oh go ahead, a jump into the DAC and I think that was posted a and everybody should have copies or access to that if you look at.
Page six upper deck I think this is up this is or a slide that we added last quarter and it continues to be a really nice summary of her story or looking at are positive net operating earnings growth trajectory. We continued focus on growing that darker blue bar, a in reducing our reliance on accretion income as well.
You said.
In past quarters, and and this graph tells the story a very successful luminary M&A integration or over the last 18 months.
The next slide in the deck is page seven which has some of their performance trends are a very nice operating earnings quarter is Miller said it $6 million, that's up 21% from your earlier getting some consistency in our our away reporting slightly north of there near term, 1% go a long with consistency in our plus.
10% orally.
I really liked the efficiency ratio trends that you see on that a bottom right graph. A this is a number that we really focus on this quarter coming in at 62.4% on our operating efficiency ratio I believe we still have some room to move that number down as we look into 2020, and making some really nice trends there.
Rod will dive deeper into the NIM in a moment, but that held up really well given the headwinds during the third quarter that that really all banks experienced a credit remains really strong no signs that cause us any pauls, our crediting monitors all the markets for signs of slowing and while we continue to be cautious.
We remain very bullish on the southeastern markets and we're in which we operate.
As we also noted in the earnings release solid loan growth for the quarter at 6.9% annualized in 6.7% year to date, so really right in our target ranges. We communicated so to summarize it was opening comments a quarter exactly as we would anticipate and communicate it we believe and in really do.
I believe can continue to build a great foundation for Smartfinancial, So I'm going to stop there and let Ron I'd take it in jump into the deck with additional comments, thanks belly and good morning, everyone. Let's start with slide eight our balance sheet trends all of our trains are showing continued stable growth since year end to that.
As an 18, our total assets increased 160 million loans increased 89 million and our deposits increased 76 million, we continue to build shareholder value with our consistent increases in our tangible book value.
During the quarter, we took an opportunity to some of our balance sheet liquidity to fund loans into paydowns or broker deposits.
Moving onto the next slide our earnings profile.
Our net interest income and total revenue increased over 12% and over 13% year over year, respectively.
Our non interest expenses went backing out merger related expenses increased at a rate of 5% and our diluted operating EPS increased almost 10% year over year.
To reiterate what Billy had indicated our consistent growth have been building blocks for increased profitability.
Going through the next few slides will go into the individual components.
Of GAAP and operating results keep in mind as we move forward through the slides, we had completed both the foothills and Tennessee Bankshare acquisitions.
Moving on to page 10, net interest income.
We have had steady increases in our average earning assets and liabilities as our company gross our margin for the current quarter was 3.91% three basis point decrease from the prior linked quarter, primarily due to lower loan yields as well as decreased investment yields loan yields when removing accretion have decreased one basis point to.
5.22% in comparison with the prior linked quarter of 5.23% during the current quarter, we experienced increased loan fees that assisted with partially offsetting to two fed rate decreases experienced during the quarter.
As we move forward loan accretion will have less of an impact on our loan yields and margin.
During the current quarter, we recorded loan accretion of 66, excuse me 26 basis points and the loan yield an increase from our scheduled accretion due to accelerated prepayments and pay downs.
Our schedule loan accretion going forward. It still estimated at 15 to 20 basis points, our margin less accretion was 3.68% for both second and third quarters of 2019.
Interest bearing deposit costs have decreased five basis points to 1.37% when compared to the prior linked quarter.
During the latter part of the third quarter, we substituted 45 million a broker deposits at a rate of 2%, what's an FHLB advance at a rate of 93 basis points.
Looking forward, we see much opportunity for potential rate savings in our deposit portfolio.
And our time deposit portfolio, consisting of broke deposits and retail deposits with approximately one third of these deposits maturing during the fourth quarter and we'll have the ability to replace these lower rates. We will continue to street strategically fonder wholesale deposits would short maturities.
Additionally, we are currently we are currently reviewing our opportunities within our exception pricing structure and now are in the process of coaching our associates to deploy our strategy during Q4, which is to reduce the exception pricing rates on ongoing basis.
Onto slide 11.
Our noninterest income continues to build momentum.
Operating noninterest income to average assets have increased to 37 basis points.
An increase of 180000 from the prior linked quarter.
We've had consistent growth in majority of our noninterest income components, our mortgage and wealth platform continued continues to build momentum.
Mortgage banking has experience our production levels for the current quarter as expected due to the favorable rate environment.
Moving on to page 12, you'll find our noninterest expenses.
We had a relatively quiet quarter with little merger related to restructuring expenses recorded.
During the current quarter operating expenses decreased by $378000. This decrease was primarily are primarily a result of the FDIC assessment credit that was recorded due to the over funding of the insurance Reserve and addition, a data processing credit from our core provider.
Taking into account our operating expenses remained flat.
Personnel expense increases are primarily related to increased commissions and incentive accruals as well as various talent upgrades.
Our efficiency, our operating efficiency ratio for this quarter was 62.4%.
We have consistently lowered our operating efficiency ratio over the past several quarters as we leverage our support structure for our growth Hey, Billy before we move forward you want to touch based on our current hiring yeah and I can't at all our Lou do this on maybe in a little bit more my closing comments, but hiring continues to be a big focus for us as we continue to be.
Well that organic strategy and.
As.
As you can see in the deck it in Rons comments.
We continue to really focus on on adding some step there. That's the reason you're seeing a little bit of of an increase in their compensation line, but for example, really when you look at third quarter. We ended up we ended up with the adding adding sit net six new revenue producers and at the same time, only adding that one non revenue producing.
I think that's the type of.
What the type of hiring that you and we anticipate going forward. We believe we will see more and more of that air team is continuing to work hard on recruiting.
And growing that revenue producer line, so that as plus is driving some of the increased compensation expense.
Thanks, Bill page 13.
We give details on our deposits on the bar chart to the right you'll see that our composition has changed slightly when compared to the prior quarters with an internal emphasis of increasing noninterest bearing demand accounts, which experienced an 8.7% annualized growth during the current quarter.
Our cost of interest bearing deposits for the current quarter decreased by five basis points when compared to the prior quarter and our total cost of deposits decreased seven basis points during the same period.
As previously mentioned, we are we replaced 2500 broker deposits with alternative bake that you'll be funny to take advantage of reduce costs.
Page 14.
Our loan portfolio experienced a 31.8 million dollar increase for the current quarter or 6.9% annualized.
Our loan production continues to be ahead of internal projections, we experienced late quarter growth and we will benefit from this during the fourth quarter.
We anticipate having a mid single digit growth for the remainder of the fourth quarter and our loan to deposit ratio was at 93%.
Our CRT ratios as seen on the lower left side have been consistent over the past five quarters, we continue to benefit from the superior credit quality. Our team is booking that brings us to slide 15 asset quality.
As Billy had mentioned we have continued to benefit from our strong asset quality, we're still performing better than our peers. Our nonperforming assets. The total assets was a 20 basis points a much lower level down to 65 basis points that our peers are that are being presented by our peers.
At quarter end, our nonperforming assets totaled 4.7 million.
Our allowance for loan losses to loans had increased slightly to 53 basis points largely from our acquired portfolio decreasing over time and being replaced by organic loan subject to a reserve.
Remaining fair value discounts totaled 16.9 at quarter end.
For the current quarter, we had a minimal charge offs again, our credit quality has been steady consistent no signs of deterioration.
And with all that I just back over to build.
Thanks, Ron.
I think you see from the deck and Rons comments the work and team is doing is really starting to pay off consistency as I said earlier as a key focus.
No. We feel we can continue to drive solid organic growth, particularly with several great hires on the sale side as I alluded to just a second ago during the last couple of quarters.
Those two new team members it takes a quarter due to build a pipeline and as I sit down and look where their team and really anticipate air or pipeline moving forward I feel very optimistic on there. There's no doubt we're seeing some headwinds out there in competition is extremely tough is as I know most banks, we're seeing today, we're seeing.
Some credit stretch and in some of the areas and pricing is a struggle no doubt, but that said I feel we are in a position to hold their own with any competitor in any of our markets I comes down to people and again, we're building a great team.
To run this company added close my comments I like to refer to slide 16 of our deck. It's a nice summary, slide other initiatives for the year.
We continue to check those boxes are now having completed.
Our operational restructuring that happened over the last couple of quarters Retooling of Air Finance Group now led by Ron. This is making this is helping us make some great strides.
And in those internal efficiencies that we've been talking about kind of a bank wide or charts for up to make all the departments more effective.
And then a core data processing decision that was finalized during Q3 that will allow us to believe what we believe to yield some really nice upside as we look into 2020 and forward with their data processing arrangement.
The two ongoing areas that we will I think we'll probably always be ongoing for us, but we lead them on this chart to keep is focused on those two key areas of growth organic and M&A on the organic side, Greg Davis and their greg's, our chief lending officer and his regional presidents continue to do a really nice job and identify.
In recruiting candidates to your team and on the M&A front Miller I continue to evaluate opportunities that fit our company. We remain very confident we can continue to execute on both of those strategic objectives moving forward. So yes, I'll stop there and we'll open it up for questions.
Well now begin the question answer session to ask a question. It May press Star then one.
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If were at any time your question, it's been addressed and you would like to listen to your question. Please press Star then.
First question is from fewer thoughts at KBW. Please go ahead.
Hi, guys good morning.
Good morning Stuart.
Congrats on a nice quarter and I guess my first question I'm, just thinking on the margin Ron.
You mentioned that there were some higher loan fees this quarter that helped to offset the core Borneo compression quantify that for US just in terms of you know how much that added too.
Total O'neil.
Yes, the the fees, we had 100, let's say on average for about 100 $150000 increased loan fees, primarily due to some prepayments to pay downs so that.
So it was 150000 it.
Our run rate.
Our run rate has been very consistent and this this anomaly again was it 150 how's that.
Okay, Oh intrusive.
I'm sorry, the accretion was down.
128000, so net net they kind of all offset each other also when you look at that.
Okay.
Hunter for decay in terms of basis points. You do you have that in front of yours, I mean, I can run that math.
Wonderful.
Yes, I don't it's probably going to be about three three basis points, Oh, I'm, sorry, it's going to be yeah, it's going to be about three or four basis points on alone.
Okay.
Got it.
And really good job on the deposit side this quarter it looked like.
Money markets.
We're down about 20 basis points I'm just curious what your.
Seen in terms of <unk>.
Moving forward with your Cds repricing in fourth quarter.
You know how much lower can really we see.
Deposit cost trend in the coming quarters.
We're.
What kind of did the back of the envelope math and with this.
I think with the CD repricing, we're probably looking at three four basis points.
Around that area again, the guidance is tough to the market competition. We're seeing is starting to get some relief because everyone starting to lower rates now third quarter was.
Everyone kind of ignored really all the rate decreases fourth quarter, I think were and better position the lower rate. So I think three three to four basis point range should be attainable.
Stuart it's really at the deposit core deposit downside guidance, so tough because it's so market specific and you know you're still getting a lot of competition out there were internally, we're doing a really nice job of pushing this down getting some of the exception pricing down.
But but a lot of that is more negotiations versus versus just kind of what we look at from a rate she's got really market driven and so as Ron said, it's really kind of tough, but we do think there is some room and our core EHR core funding base to pushes down, especially with some of the Cds the role in all this coming quarter.
Some of your peers have disclosed display monthly.
Deposit pricing.
Just given some color on where the pause it stood at the.
At the end of September .
And how that differs from say July and August .
[laughter] Joy in August we really are.
We've made most of our movements in the wholesale arena.
We had as we indicated last quarter, we had a brokered money market funds that had a a higher rate and normal and so I think you know the rates that we're looking at for average probably aren't all that different from where we wound up at that during September .
So going forward again, we'll we'll be starting at that base, because I think our interest our interest bearing demand our our savings are pretty much.
We didnt, we didn't differed from that from from September to be most for the most part again, our biggest challenge our biggest opportunity will be for the time deposits and taking these money market savings accounts that does that are exception pricing bucket and working those down over the next several months.
Got it I appreciate the color I'm, sorry, just one follow up Ron I know its everyone's favorite question, but Cecil.
I think you guys file as a small reporting company and last week.
The fast be delayed that was finalized so.
In terms of when you point employment or you kind of pointing on the the way at this point and I want to we'd expect to receive more color there.
Yeah, we we were as everyone else we were on track of I've, having an implemented we did take a pause we even though our our guidance. We're allowed to do to 2023 I do believe we will implement earlier Oh, we're going to sit back this year to see how everyone else Digest. This.
Take advantage of everyone else's woes and reporting.
Yes, it looking told it reports on this so.
I don't know the exact date, but it won't be next year, how is that okay. So that said, we should take it out of 2020.
Oh, Yes, Oh, you're definitely 2020 were not implementing a during 2020, okay got it less billion dollar tell me otherwise, but I don't think I think we're not say back sabbatical or take advantage of a little bit of good fortune steward of coming in under the revenue guidance.
Awesome. Thanks for the color guys and congrats on nice work.
Thank you.
The next question is from Peter.
Please go ahead.
Hey, good morning good.
More administrator.
Just maybe on loan growth guys. It sounds like you know you kind of reiterating that mid single digit kind of outlook here sounded like you were a little bit optimistic on the economic backdrop there.
When we think about the hiring activity that you guys have had and Tony 19, <unk>. If if if the economy remains favorable do you think that we could see kind of a an uptick here in loan growth getting maybe to a high single digit pacing 2020, or you know what are the puts and takes there.
Yeah.
I think we could I think our guidance is still with Ron said kind of the mid to high number because I do think there is still some you've still got this you guys got a geopolitical backdrop and there were some uncertainty out there in the markets, but but we're really kind of where supplementing that with a lot of new team member.
It was and those folks being able to move some portfolios over so you know for US I think net net we still we still feel very good about their ability to growth.
You know if you get a little bit economic tailwind and yes, I think we could we could hit the higher end of the range, but but for US just trying to stay a little bit conservative on our on our forecasting we're probably thinking more and more in that 6% give or take lives. So macro driven in Washington, driven markets are strong.
Great.
And just maybe on expenses you know the FDIC credit this quarter and also the data processing credit the you mentioned.
So it sounds like kind of <unk>.
Taking those out you know you probably had kind of flattish expenses this quarter.
We continue to hire so so maybe thinking you know stable to slightly higher from here I know you know the first half of your with it was a ton of investments. So just wanted to get your your thoughts there.
Yeah, I think so and Ron can can chime in stable to slightly higher is really kind of where we're looking at.
Kind of that non interest expense line I think we're in a spot where we and I've said this before I don't think we have to make a lot of investments outside sales team additions that we want to add I.
I think the I think there overall expense run rate should be fairly stable moving forward Ronny I don't I don't see anything that's going to.
On the expense line will will will creep up everything else should be should be well maintain so yeah slightly slightly up slightly grade, but nothing significant.
Great. Thanks, so much.
Thanks.
Your next question is from Kevin Fitzsimmons.
Hey, Davidson. Please go ahead.
[noise] pick out thanks.
Good morning, Kevin.
I was just there's there's a lot of different variables and you've talked about.
On the yield side and the funding cost side. If we if you just kind of look out the next quarter two and.
However, you want to do it from reported margin or core margin and then we have a rate cut.
Have a few rate cuts in now and possibly more can you just kind of give us some.
Guide posts on a sensitivity for that margin I know, there's still headwinds for the biases downwards, but just wondering what.
But what kind of range.
Of impact to bake in here.
You're looking at kind of what I would call core NIM, Kevin just yet.
Thanks accretion core now run I think you said, we do a minute where we came I think I think to finish off the year up our NIM should be around 385 390.
Without accretion.
Without accretion 360, 365 range somewhere in there.
Okay, and the accretion you would.
Assumed that too slowly.
You know diminish right the pace of that quarterly going forward.
Yeah, we probably you know the 15 20 basis points that you know looking at our scheduled accretion work, we probably got a good strong 18 months left of that still left and then it didn't really drops down not going forward. So so the next year, we'll still have a well still maintain that flow unless prepayment.
And you know pay downs occur then we start losing that the bucket, but that's where we're at.
Got it Okay, just one follow up.
About M&A now I know you guys have been very active in the past and there's obviously less discussion about it going forward, but that you're looking at opportunities what is it a combination of maybe the the pricing multiple is lower today, you're focused on organic growth.
Maybe the right targets aren't out there can you just give us a little sense on.
Is it more deliberate or is that a byproduct of environmental issues that you're not has actually been internet recently.
I think it's more of a deliberate approach that we've said for several quarters. Now you know we had to build a certain kind of platform or certain size platform and M&A was really first on the growth side inorganic was second we've really clip that to be organic burst and M&A second yeah. We've always been very disciplined I think we'll continue to be.
Even more disciplined going forward, we look golly been we're building more calls that we ever have so it's it's busy looking.
But you know, it's we can be very picky now it and it's getting a couple of criteria is got to have strong deposit franchise, a short earn back minimal dilution in market or improved market density. So we oh, yeah, we're looking but 10 found right. One yeah, yeah, I'll I'll add on Kevin I think Miller dry that might you know it's it's.
Yeah, and I've said this before I think over the last couple of years, it's probably been a little more of an acquisition when a organic once the focus I do think that is shifted this year.
To up to a probably inorganic when a acquisition wouldn't be still like like the opportunities.
To grow the company the via acquisitions.
And bill and I feel very strongly that we'll have some opportunities on that front, but we just got to make sure. It aligns with every everything we need we got a team that is very good that integration and I think that's a that's a key that.
Lot of plants do M&A few of them do what I would call really well and have really strong integration teams and we've got one that loves doing them. So its a.
Hopefully a hopefully we'll come out of the mistakes will find so.
Okay, great guys. Thank you.
Thank you.
The next question from Tyler Stafford with Stephens. Please go ahead.
Hey, good morning, guys.
Not in our [noise], Hey, nice quarter I wanted to start on its on some of the funding dynamics you mentioned the money markets being exception price how much total money markets are exception priced and what is that kind of average cost right now.
I would say, we're probably in that 275 300 million range and were prior looking around plus or minus 2%.
Okay and then.
Your I guess, you're kind of new Onboarded money market right right. Now did you talk about where new fundings coming on the books today.
<unk>.
Oh, I'm, sorry for the broker deposits or for just regular money that just struggling money markets.
Once it oneseventy, okay, plus or minus probably probably Roger 170 is good average got it.
And they can you just speak to some of the.
I guess geographical growth or the loan growth you're there are pockets of strength, you're seeing and then.
Just in terms of new loan pricing, what you're seeing from it from a price spread perspective as well.
Yeah, I'll I'll touch on that from a from a growth standpoint, it's really you know all of our markets really shown.
Really solid growth news, we break it down we kind of break our markets into.
The upper East Tennessee.
Southern Tennessee, which is the Chattanooga region kind of North East, Tennessee is is there not dilemma say and around and then jump in there or Alabama presence and then our coastal presence and so you're really when you look at all of those.
All the markets have had a really really solid.
Production and really nice.
Gross added to that to the franchise. This year. So really it's not just coming out of one region, it's very balanced and and nicely diversified.
From a new production standpoint, you know I alluded to this and the comments you mean the loan pricing it's up men. It is.
It's a challenge I think you know I'm kind of the the when you looking at a five year fixed top right. If you just look at a five year fixed right I think we're looking at those for for solid credits I still think we're kind of getting up into those into those kind of mid to high for worse on a lot of on a lot of them. We are working center.
Then that on on some deals, especially relationship deals where you're getting some core funding along with that so really kind of enough you know enough kind of the mid boards is where we're putting in mid to high afterwards, new production.
And then from a spread standpoint, if you look an add on a flight you're probably somewhere in the 275 ish range all them on a on a on a margin.
Got it okay. Thanks for that Billy.
I I hopped on a bit later I apologize you addressed this in your prepared comments, but did you quantify how much savings you'd expect to realize from the core data processing decision.
Right that's up next year.
Yes, we didnt, we didn't quantify it there's obviously, there's a variable component to that in the contract really is the contract probably as much as kind of near term gain on on savings. It's really allows us to scale with a with a better cost as well, but but what Ron I'm kind of look.
We've got a measured in anticipation of you know a question on it today, we're saying from our core data processing pace, that's probably somewhere around a 15% give or take a savings to our core data processing run right, but really we think the key benefit is going to be scalability add up at a at a better price as we.
Look to grow and acquire moving forward.
Questions.
The loan fees of 150000, what was that the.
Nominally increase quarter over quarter or is that what the total loan fees were this quarter.
No. It was there was the increase it was <unk> four basis points hundred 53000 extra are our run rates prior around the seven 750000, a quarter, we've got up into the nine 900000 for the quarter. Okay. So that's just that's just the differential that I, we're not expecting to get next quarter.
Sure.
Understood. Okay. Thanks, Ron I appreciate all the details nice quarter.
Thank you.
The next question is from Daniel.
Raymond James Please go ahead.
Good morning, guys.
Loren and I think Dan.
Maybe if you could give us a little bit of color in terms of the new hires which markets are there going to be serving and or these hires from larger financial institutions are similar size institutions to yourself.
Yes, good question.
It's a rare focus the in the last quarter, we've really put more emphasis.
In our markets that were brought to us out of that one of the acquisitions. The southern acquisition from last year said that the majority of what we've added over the last quarter has been in Murfreesboro.
Tenancy in Huntsville, Alabama to really really just outstanding markets. They can yield some nice upside.
We believe so we put focused on there. We've also added a couple of folks in east, Tennessee, one in a in a in northeastern and one in southeast or actually the southeast have actually this quarter.
But.
Really really not production are the ones that we've hired in Huntsville and in Murfreesboro have come out of a mix they've come out of a several about half and half half out of what I would say or larger regional I taught by and then the other half out of.
Mid sized to larger community banks. So it's been a nice mix, we still are able to look to recruit.
It's really kind of.
Really no real specialist area, a good generalist with but but for the majority of it they've had a little bit strong cnf focus.
And are there working through a noncompete right now or can they kind of hit the ground ready.
Thank you hit the ground running everybody that we've added.
Can hit the ground running as I said it takes you know what we see it typically takes about two quarters takes about six months to get that pipeline go into where we start seeing production hit the balance sheet.
But but everybody is off and running pretty quickly so.
Then excited to see what we've been able to add just here in the near term with those new hires.
Great and then just one quick admin question, how should we be thinking about the tax rate here in Q4.
I would say 24, and a half 2025 by somewhere in between.
Tempting for 2020 then.
Our expectation yeah, I'd things I don't think we're going out for not having too many drastic changes in that area. So yes.
Hi, good probably 25, probably 25 square that will cover it.
Great.
Alright, thanks, guys good quarter.
Thanks.
The next question is from Sandy say, Glenn Janney Montgomery Scott. Please go ahead.
Hey, guys. Just a quick clarification question you gave some margin guidance on Q4 in response to Kevin's question, then I've got three to five threeninety.
How many rate cuts you guys modeling into that.
[noise], probably I would say well I'm anticipating one.
But.
We really didnt this past quarter, we were able to accommodate the two rate cuts.
And I would say, even though it's one solid I think the low end would probably accommodate the too.
That makes sense, so if we know absolutely.
Yes, it's a 50 basis point won't states. It will arrange it was just womble blue definitely at the higher range.
Gotcha.
And then one other quick follow up I'm, just what do you guys here and overall from your borrowers in your markets any change in sentiment from the prior quarter any areas that you're worried about just I guess general customer sentiment.
Yes, really really fatty nada not a lot of change I think it out I alluded to it I think just kind of the the political environment 2020 election.
You start to have a little bit of conversation around that but overall most of the most of the clients that we talked to continue to be very bullish I mean gosh I mean, when you go to have yeah, you talked to our air Air industries, and Chattanooga, or Tuscaloosa, and Panhandle hanging in a very bullish.
You know you look tourism tourism that that upper east, Tennessee and out of the coastal region has been absolutely off the charts of this year businesses business has really been good there.
No you guys. We got you talked to some folks and Alabama, you've got some kind of mobileiron folks that have talked about maybe a little bit at some some tariff impact on that but none of it is really I would say that the negative kind of competitor that is really very very small the majority of EHR clients sale.
Very good about where they're going to finish up 2009 states probably cautiously optimistic for 2020.
Perfect. That's it for me. Thanks does that in my question and not congrats on great quarter.
Thanks, Dave appreciate it.
Again I should have a question. Please press star then one.
This concludes our question and answer session I would like to turn the conference back over to me.
For any closing remarks.
Thanks, Francesca and thank you all for joining US today. We appreciate your interest in US your time invested in and US today and also your investment Smartfinancial have a great day. Thanks.
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Conference call has now concluded. Thank you for attending today's presentation you may now disconnect.
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