Q3 2023 Simmons First National Corp Earnings Call
Speaker 1: Good day and welcome to the Simmons First National Corporation third quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two.
Good day and welcome to the Simmons first National Corporation third quarter 2023 earnings Conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Speaker 1: I would now like to turn the conference over to Ed Billick. Please go ahead.
I'd now like to turn the conference over to Ed Belak. Please go ahead.
Speaker 2: Good morning and welcome to Simmons First National Corporations 3rd quarter 2023 earnings call. Joining me today are several members of our executive management team, including our executive chairman George MacRus, CEO Bob Feldman, and president and CFO Jay Braggdon.
Good morning, and welcome to Simmons first National Corporation third quarter 2023 earnings call. Joining me today are several members of our executive management team, including our executive Chairman, George Makris, CEO , Bob Fehlman, and President and CFO Jay Bogden.
Speaker 2: Before we begin the Q&A, I would like to remind you that our third quarter earnings materials, including the Press release and presentation deck, are available on our website at simminsbank.com under the Investor Relations tab.
Before we begin the Q&A I would like to remind you that our third quarter earnings materials, including the press release and presentation deck are available on our website at Simmons Bank Dot com under the Investor Relations tab.
Speaker 2: During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections, and outlook, including, among others, our outlook regarding future economic conditions, interest rates, lending into positive activity, credit quality, liquidity, and then interest margin.
During today's call, we will make forward looking statements about our future plans goals expectations estimates projections and outlook, including among others our outlook regarding future economic conditions interest rates lending into positive activity credit quality liquidity and then interest margin.
Speaker 2: These statements involve risks and uncertainties, and you should therefore not place undue reliance on any forward-looking statement, as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors.
These statements involve risks and uncertainties and you should therefore not place undue reliance on any forward looking statements as actual results could differ materially from those expressed in or implied by the forward looking statements due to a variety of factors.
Speaker 2: Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8K today. Our Form 10Q for the quarter ended March 31, 2023 and our Form 10K for the year ended December 31, 2022, including the risk factors contained in that form.
Additional information concerning some of these factors is contained in our earnings release and Investor presentation furnished with our form 8-K today, our Form 10-Q for the quarter ended March 31, 2023, and our Form 10-K for the year ended December 31 2022.
Including the risk factors contained in that Form 10-K.
These forward looking statements speak only as of the date. They are made and Simmons assumes no obligation to update or revise any forward looking statements or other information.
Finally in this presentation, we will discuss certain non-GAAP financial metrics, we believe provide useful information to investors additional disclosures regarding non-GAAP metrics, including the reconciliations of these non-GAAP metrics to GAAP are contained in our earnings release and Investor presentation, which are also included.
As exhibits to the form 8-K, we filed this morning with the SEC and.
Are also available on the Investor Relations page of our website Simmons Bank dotcom.
Operator, we are ready to begin the Q&A session.
Thank you.
We will now begin the question and answer session.
I ask a question you May press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Yeah.
Our first question comes from Brady Gailey with <unk>. Please go ahead.
Hey, Thank you good morning, guys.
Alrighty.
But maybe if we could just start with credit quality.
Credit was still pretty clean, but there was a little bit of noise.
The new 8 billion dollar commercial NPL and then the $10 million net charge off from the nursing the extended Carolina, maybe just a little extra color on what's happening with those two loans.
Hey, Barry its Jay Yeah, I'll I'll I'll jump in and let me, let me kind of step back for a moment and describe some of the work we've done and our feelings around credit and then I'll kind of honing in on the credits you've asked about but first I'd just say that we continue to feel very good about our overall credit picture you know we even.
To go back to Q2, we did a deep dive on our office portfolio.
No major changes coming out of that VITAS, and we continue to rotate through our portfolios are stressing for interest rates dressing for any other type of activity that we see on a macro level or on a micro level with our own customers.
And I'd say the results overall, when we look at you know any leading indicators or.
Or any other just our overall credit metrics continue to you know.
To feel good to us and we have confidence in the quality of the portfolio.
You know we've talked a lot in Q3 about the deep dive on the nursing and extended care portfolio. That's a that's a you know a sector that has had some difficulties going back to you know COVID-19 ramifications are inflationary pressures longer periods of time to reach stabilization.
N et cetera, it's not a huge portfolio for us it's about a $300 million portfolio.
But we wanted to get in there in the third quarter again, and kind of deep dive that portfolio.
Results of that bottom line at the end of the quarter, we have zero non performers in that portfolio, but we did go through the portfolio are identified one borrower one project in particular that was not cash flowing for all the reasons I mentioned earlier.
Uh huh.
And you know we work with the borrower are worked through some modifications that resulted in a 10 million dollar or so charge off for us on that credit that that that borrower that project is now cash flowing we feel very good about the modifications. We've made you know.
To that long and again overall as it relates to that portfolio and the broader portfolio I guess, one more metric I'd give you on the on the nursing and extended care piece. In particular are you know at the conclusion of that deep dive.
You know when we get the non 30, we've got about a 4.9% reserve level on that portfolio. So again feel like we were incredibly conservative.
<unk>, which is true to our form but very conservative in how we got in there and and address that portfolio and feel good about it you know outside of that credit when we look at other you know migrations within classifieds or or non performers theres really nothing significant that I would call.
All out Theres some theres some puts and takes in there. We've had good results in you you know working out some credits in there we've got a few flowing in but really nothing stands out other than just sort of normal course activity.
Alright, that's helpful.
And then moving on to expenses I know you guys have achieved the 50 million dollar.
Our cost reduction plan. So if you look at core expenses in the quarter. They were around $130 million. So should we now think of expenses.
It is flattish into the fourth quarter and into 'twenty 'twenty, four or will there be some creep, but how do we think about the forward expense run rate.
Yeah, I'll take another shot at that one as well Brady. So I'd say you know we outline a some accrual cleanups again here in the third quarter. So I do think you've got to adjust for that from a run rate perspective, I think it's fair to think of fourth quarter noninterest expense expense run rates kind of in that mid <unk> range.
You know, which which significantly exceeds you know what we had hoped to achieve through the better Bank initiative goals that we had outlined earlier in the year I think as we look into next year run rates you know that.
That's kind of a launching point. However, again you you know you won't have any of those sort of incentive run rate adjustments coming into those numbers and as we continue to say we're going to remain very focused on the expense discipline side of things, but we'll also continue to evaluate some some opportunities or investment opportunities we have.
I think our God.
Given previously you know it was what I would still standby today and well you know as we continue to evaluate the opportunities that are out there. There are other goals or initiatives that we want to lay out we would got them or announce them at a later date.
Okay and finally for me just on the net interest margin I know in the fourth quarter, we should have the benefit of the hedge gains starting to flow through but you know your NIM is still kind of slipping on a core basis.
A positive comment and maybe a little more NIM slippage, how should we think about the NIM next quarter and then into 'twenty four yeah.
Yeah, I think I think you just set it up perfectly you know I've talked about it historically, you're in past conversations kind of underlying NIM.
You know, meaning sort of the net interest margin absent the positive impact of the the swap there there'll continue to be some pressure there. Although I think that you know we see that pressure moderating for sure I think we are experiencing at this point sort of the natural lag effect at this point.
Quint.
With the fed kind of in the late innings. It seems on our interest rate hikes, we've got some lagging that'll occur over the fourth quarter and maybe end of the first quarter. A great example of that would just be CD maturities that'll take place in the border and so in the fourth quarter and in the.
First quarter. So we'll have some repricing there, but again I think the pressure on the cost side will slow down through the fourth quarter and the first quarter. You know bottom line result of all of that is as we move through.
You know through our through fourth quarter and first quarter I think NIM is kind of in a band what you saw in Q3, we're probably close to the band of where I think our overall net interest margin will be I think we'd probably inflicted here in the third and fourth quarter. You know and then as we move into move through next year subject to you know whatever.
Happens with the fed or in the market more broadly we're gonna have a lot more assets repricing deposit repricing and that's how I would think about the margin going forward here.
Okay, great. Thanks for all the color.
Great.
Our next question comes from David Feaster with Raymond James. Please go ahead.
Hey, good morning, everybody.
Morning, David Hey, David.
I was hoping maybe we could just touch on some of the trends that you're seeing on the core funding side, where we're obviously seeing some of the migration in your client utilization of excess cash.
Just curious maybe some of the underlying trends that you're seeing it and where are you seeing the most opportunity to drive core deposit growth.
How core deposit balances are trending early in the fourth quarter and maybe how new new deposit pricing is for both core deposits as well as your C DS.
Yeah David.
Jump in there on that one as well I would tell you that really it's kind of a continuation of the same trends. We've seen deposits were down for the quarter on a period end basis, but you know one thing I'd point out.
Is that both loans and deposits were up you know on an average basis for the quarter and.
We were really kind of flat on the brokered side, we were down on on the borrowing side. So we were able to see you know good ability to hold the line and again on an average basis, even kind of grow the core deposit book.
In the quarter, if the migration piece that you continue to see the experience and you know that has the higher cost associated with it. So continue to see that even into October I'd like to think that we're seeing and we saw it at different points in the third quarter that the trends would slow down and speed up so there's kind of some sputtering and how we think.
That migration and what we're observing in the portfolio, but you still see some pressure on an arby's and lower cost Avi transaction accounts.
We're not losing a lot of accounts at all it's really more just dollars migrating out of those lower cost buckets and primarily into <unk>.
<unk> promo type activity. So I think we will continue to experience that although to a slower degree again going forward I think the bigger the bigger factor well again, just kind of be repricing of lower cost Cds as those mature over the next three and six months.
And then just in terms of trying to drive core deposit growth.
You know look it's an incredibly competitive environment out there and we look market by market at price sensitivity.
On a daily basis, we look at our own fund flows we have done a great job targeting deposits that have flowed out and bringing those back in as well as just you know through our through our promo campaigns, whether it's on the money market or the or the CD side and continue to have good success there.
But you just always balancing between the front book and the back book as you evaluate.
Those opportunities you know and David I'd add on to that in addition of the migration from.
Noninterest bearing to interest bearing where all.
Also seeing lower balances per account.
You know the consumers have less cash in their pocket than they did a year ago and you continue to still feel some of that as Jay said, we haven't seen a decline in number of accounts our customers, but we have seen balances whether its migration because of rate or less balances in their account due to inflation and higher interest rates and all.
Operator: Good day, and welcome to the Simmons First National Corporation, 3rd quarter, 2023, Earnings Conference Call. All participants will be in listen in the mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.
All of that people have less cash in their accounts than they did six months ago a year ago.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded.
That's a good point.
Maybe on the other side of the coin is great and see the increase in the loans ready to close and the rate 843 basis points is a terrific I'm. Just curious what are you seeing that drove the uptick in that pipeline quarter over quarter, where are you seeing opportunities that they bring good risk adjusted returns at these higher rates.
Edward Bilek: I would now like to turn the conference over to you at Billick. Please go ahead.
Are there any segments or geographies that are presenting better returns. It just kind of how you think about.
Edward Bilek: Good morning, and welcome to Simmons First National Corporation's 3rd quarter, 2023, Earnings Call. Joining me today are several members of our Executive Management team, including our Executive Chairman, George Makris, CEO, Bob Fehlman, and President and CFO, Jay Brogdon. Before we begin the Q&A, I would like to remind you that our 3rd quarter earnings materials, including the Press release and presentation deck, are available on our website at SimmonsBank.com, under the Investor Relations tab.
<unk> loan growth going forward.
Yeah, I'd say that you know again one of them one of them mentioned loans were loans were up on an average basis for the quarter.
We mentioned in the slides when you look at sort of our loan balance waterfall on page 19, we talk about the fact that we had a handful of credits that we really worked throughout the quarter very focused efforts either because of.
Edward Bilek: During today's call, we will make forward-looking statements about our future plans, goals, expectations, estimates, projections, and outlook. Including, among others, our outlook regarding future economic conditions, interest rates, lending and deposit activity, credit quality, liquidity, and then interest margin. These statements involve a recent uncertainties, and you should therefore not place undue reliance on any forward-looking statement as actual results could differ materially from those expressed in or implied by the forward-looking statements due to a variety of factors.
Lower rates and or you know candidly risk ratings.
That we we didn't love, where we saw opportunities to get those.
Credits out of the bank and we're able to do that successfully right at the end of the quarter. So you know I want to I want to.
Emphasized that we are continuing to focus on growing loans on good risk adjusted returns basis, and we're seeing success with that and our pipeline is a great indication of that as you point out David you know in addition to the pipeline you know sort of inflicting this quarter and being up I would really draw your attention actually.
Edward Bilek: Additional information concerning some of these factors is contained in our earnings release and investor presentation furnished with our Form 8K today, our Form 10Q for the quarter-ended March 31st, 2023, and our Form 10K for the year ended December 31st, 2022, including the risk factors contained in that Form 10K.
He just even that ready to close portion of the pipeline is the portion that's up most significantly on a quarter over quarter basis are the rates that we're seeing and they're very attractive and I'd. Just say that you know it's a broad based effort I mean, we're seeing it you know.
Edward Bilek: These forward-looking statements speak only as of the date they are made, and Simmons assumes no obligation to update or revise any forward-looking statements or other information.
Edward Bilek: Finally, in this presentation, we will discuss certain non-GAAP financial metrics we believe provide useful information to investors, additional disclosures regarding non-GAAP metrics, including the reconciliations of these non-GAAP metrics to GAAP, our contain in our earnings release and investor presentation, which are also included as exhibits to the Form 8K we filed this morning with the SEC and are also available on the investor relations page of our website SimmonsMank.com.
All across the footprint I wouldn't really call out any geography is as particularly better than.
And then the other nor nor really any category, it's more opportunistic.
There are you know.
Situations in this environment, where I think incumbent banks are you you know for whatever reasons, having to do some.
Either something irrational or have their eye off the ball and we have had some really good opportunities.
Edward Bilek: Operator, we are ready to begin the Q&A session. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star-than-one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To draw your question, please press star-than-two. At this time, we will pause momentarily to assemble our roster.
With customers, where we've been maybe a secondary.
At her to come in and really.
Grow to a full relationship and bring some things in the pipeline that we're pretty excited about you know and David in addition to the pricing on the risk side is the push to bring that full relationship and you bring the deposits and you bring treasury management. It we've been pushing that for a long time, but really the focus today is one of those coming on is what are the.
The deposits what are the relationships and no concessions less theres a full relationship out there that brings the total profitability of that customer.
Brady Galey: Our first question comes from Brady Galey with KPW. Please go ahead. Hey, thank you. Good morning, guys. Good morning, Brady.
That's a really good point and maybe last one for me just just touching on capital priorities. You know regulatory capital is continuing to grow you've been active repurchasing stock I'm just curious how you're thinking about capital priorities and then you know just any thoughts on on monetizing.
James Brogdon: Maybe if we can just start with credit quality. Your credit was still pretty clean, but there was a little bit of noise. You had a new $8 billion commercial NPL and then the $10 million net charge off from the nursing extended care unit. Maybe just a little extra color on what's happening with those two loans.
Monetizing that swap is there any appetite to do that and utilize that capital for any type of balance sheet optimization of restructuring or anything.
James Brogdon: Hey, Brady, it's Jay, I'll jump in and let me kind of step back for a moment and describe some of the work we've done in our feelings around credit. And then I'll kind of, you know, home in on the credits you've asked about. But first I just say that we continue to feel very good about our overall credit picture. You know, if you can go back to Q2, we did a deep dive on our office portfolio, you know, no major changes coming out of that deep dive.
You know David I'd say right now we're still staying the course, we evaluate each quarter, whether we're going to be in stock buyback or not one thing. We have committed to is we wouldn't buy back more shares than our earnings less cash dividends. So we'll evaluate this quarter now saying will be in it and I'll say it will be out a bit but it would be a measured approach like we have it.
James Brogdon: And we continue to rotate through our portfolios, stressing for interest rates, stressing for any other type of activity that we see on a macro level or on a micro level with our own customers. And I'd say the results overall when we look at, you know, any leading indicators or any of just our overall credit metrics continue to, you know, continue to feel good to us and we have confidence in the quality of the portfolio.
We do continue with our capital, where we're comfortable especially the regulatory side right now I think a little bit of decline in TCE was expected with where the 10 year has moved other than that I think our TCE would've been up.
So we're comfortable in the range, we are and we think we're doing a balance approach on stock buyback again, we'll evaluate this quarter and determine where we are we all like to say I mean, given the environment, where bank stocks are traded we'd love to buy back as much as we can but we think the prudent amount today is really decided if youre in or not and if you are in.
James Brogdon: You know, we've talked a lot in Q3 about the deep dive on the nursing and extended care portfolio. That's a, that's a, you know, a sector that has had some difficulties going back to, you know, COVID ramifications, inflationary pressures, longer periods of time to reach stabilization, et cetera. It's not a huge portfolio for us. It's about a $300 million portfolio. But we wanted to get in there in the third quarter, again, and kind of deep dive that portfolio, you know, the result of that bottom line at the end of the quarter, we have zero non performers in that portfolio.
To do it in a balanced with again your earnings less your cash dividends, yes, David I'd just jump in on the you know on the swap and the analytics around that I mean that is also similar to what Bob described.
Analysis that we do all day everyday ongoing throughout every we'll continue to do that and if we think that we find something that's advantageous given the market dynamics, particularly as it relates to that swap then we would take advantage of it but you know I'd say, thus far we've been more than happy to have.
Sat path there.
Terrific. Thanks, everybody.
James Brogdon: But we did go through the portfolio, identify one borrower, one project in particular that was not cash flowing for all the reasons I mentioned earlier. And, you know, we worked with the borrower, worked through some modifications that, you know, resulted in a $10 million or so charge off for us on that credit. That, that, that borrower, that project is now cash flowing. We feel very good about the modifications we've made, you know, to that loan.
Our next question comes from Matt Olney with Stephens. Please go ahead.
Hey, Thanks, good morning, guys.
Matt.
On the credit front, you mentioned that deeper review of some extended care nursing as in the third quarter that followed the office deep dive into <unk> is it kind of look forward into four key when next year is there any kind of other deeper dive focused within any specific portfolio and then and then I guess part two of that.
James Brogdon: And again, overall, is it relates to that portfolio and the broader portfolio? I guess one more metric I'd give you on the, on the nursing and extended care piece in particular, you know, at the conclusion of that deep dive, you know, when we get the non 30, we've got about a 4.9% reserve level on that portfolio. So, again, feel like we were incredibly conservative, which is true to our form, but very conservative in how we got in there and, and addressed that portfolio and feel good about it.
It sounds like maybe as a result of what you looked at recently you. You you worked some credits out of the bank that just didn't line up with your with your process.
Curious what your thoughts are about you know the potential of seeing a similar events in the future where you proactively work out some sub performing credits out of the bank.
Yeah, Matt I'd say that we don't have any sector specific.
Specific portfolios that are due up in terms of the deep dive.
James Brogdon: You know, outside of that credit, when we look at other, you know, migrations within classifieds or, or non performers, there's really nothing significant that I would call out. There's some, there's some puts and takes in there. We've had good results in, you know, working out some credits in there. We've got a few flowing in, but that really nothing stands out other than just sort of normal horse activity.
Coming into the balance of the year here. This year, we will probably prioritize those going into next year and determine what if anything we'd want to dig into further I'd say the one maybe stefan weigh in just from from sector specific or or.
You know, we're looking at different buckets within the portfolio and just more broadly we do continue throughout the year and will continue to stress our our customers our borrowers.
Brady Galey: All right, that's helpful. And then moving on to expenses, you know, you guys have achieved the $50 million cost reduction plan. So if you look at core expenses in the quarter, they were around $130 million. So, should we now think of expenses, you know, as as flatish into the fourth quarter and into 2024? Will there be some creep? How do we think about the forward expense run rate?
Higher rates higher for longer rates et cetera.
And again, we've done that all through the year. This year and continue to feel good about the results of that we're not seeing any kind of broad based stress from that.
That's kind of kind of the flow of our loan review and where we sit right now around those portfolios.
As it relates to working out credits as you asked there at the end I think that's something we'll continue to be opportunistic around I mean, we're really doing that.
James Brogdon: Yeah, I'll take another shot at that one as well, Brady. So, I'd say, you know, we outline a, some accrual clean-ups again here in the third quarter. So, I do think you've got to adjust for that from a run rate perspective. I think, you know, it's fair to think of fourth quarter non-interest expense run rates kind of in that mid-130s range, you know, which significantly exceeds, you know, what we had hoped to achieve through.
Again, all across the portfolio. There is a number of factors that we think about again. One is you know just the rate that we have the loans that may be the biggest factor is the relationship that we have or the relationship opportunity that we believe we have you.
Now is the time, where as Bob mentioned while ago, we're very very focused on full relationships. The stuff, we're bringing into the pipeline is relationship heavy the stuff. We have on the books at this relationship light is getting a lot of scrutiny, particularly.
James Brogdon: The better bank initiative goals that we had outlined earlier in the year, I think as we look into next year run rates, you know, that's kind of the launching point. However, again, you, you know, you won't have any of those sort of incentive run rate adjustments coming into those numbers. And as we continue to say, we're going to remain very focused on the expense discipline side of things. But we'll also continue to evaluate some, you know, some opportunities or investment opportunities we have. So, I think our guide that we've given previously, you know, is what I'd still stand by today.
Particularly at renewal dates, but even if there are opportunities that we see to move those out we're willing to do that.
So I don't I don't think any of that really looks like necessarily big portfolio sales or anything like that as it relates broadly to the portfolio, but more opportunistic.
And more to kind of a granular level of analysis.
And then just a little bit of expansion on that $160 million payoff, but most of that happened right at the end of the quarter. So there was little impact.
Margin during.
During the quarter.
James Brogdon: And we'll, you know, as we continue to evaluate the opportunities that are out there, if there are other goals or initiatives that we want to lay out, we would got them or announce them at a later date. Okay. And finally, for me, just on the net interest margin, I know in the fourth quarter, we should have the benefit of the hedge gains starting to flow through. But, you know, your name is still kind of slipping on a core basis.
Most as we said some of those loans were lower right. So we're kind of glad to see them go off the books for the spread that we had on them and the risk wasn't worth it a few others had some elevated the risk rating was moving up wasn't in the nonperforming or cause concern area, but when you looked at it and the change we were glad to see those move.
<unk>, especially where their pricing was for the risk rating. So we'll continue to look for those opportunities and if we can help them out the door. If not you know we'll continue to work through but I agree with Jay we've done several deep dives and we haven't seen any other areas that we have that concern.
James Brogdon: So, you know, you have a positive coming and maybe a little more name slip is how should we think about the next quarter and into 24? Yeah, I think I think you just set it up perfectly. You know, I've talked about it historically or in past conversations kind of underlying them, you know, meaning sort of the net interest margin absent the positive impact of the swap. They'll continue to be some pressure there.
Okay. Thanks for the commentary and just as a follow up to that and kind of on Bob's point around some of the fixed asset repricing opportunity any more color you can give us there as some of these loans come up for renewal and you look to reprice those higher any kind of a color or any commentary on that.
James Brogdon: Although I think that, you know, we see that pressure moderating for sure. I think we are experiencing at this point sort of the natural lag effect at this point. With the Fed kind of in the late innings, it seems on interest rate hikes. We've got some lagging that will occur over the fourth quarter and maybe into the first quarter. A great example of that would just be CD materities that will take place in the quarter.
You know I'll mention a few things I'd point.
Every wants to slide 16 for some information around interest rate an interest rate sensitivity.
But you know I already mentioned in my remarks earlier on the funding side that I think Q4, and Q1 again subject to sort of the.
Moves in the market that would be unexpected I think Q4, and Q1 will be kind of the biggest periods of repricing that we have left to go here on the liability side.
James Brogdon: And so in the fourth quarter and in the first quarter. So we'll have some repricing there. But again, I think the pressure on the cost side will slow down through the fourth quarter and the first quarter. You know, bottom line result of all of that is as we move through, you know, through third or three fourth quarter and first quarter, I think NIMS kind of in a band. What you saw in Q3, we're probably close to the band of where I think our overall net interest margin will be.
But on a go forward basis continue to see a lot of really good opportunities both in terms of repricing and in terms of pipeline opportunity on the asset side.
And we gave you some statistics there on 16, one in particular that I'd call out we've got $1 billion in fixed rate next 12 months $1 billion in fixed rate loans at a weighted average rate of $5 78.
James Brogdon: I think we've probably inflicted here in the third and fourth quarter. And then as we move into, you know, move through next year, subject to, you know, whatever happens with the Fed or in the market more broadly, we're going to have a lot more assets repricing than deposits repricing. And that's how I would think about the margin going forward here.
Brady Galey: Okay. Thanks for all the color.
So I think there'll be quite a few good opportunities.
Some significant repricing.
And that portfolio or that portion of our portfolio and again, we see a lot more.
Community.
In terms of asset repricing over the quarters to come than we do risk in terms of the liability side.
David Feaster: Our next question comes from David Feaster with Raymond Jane. Please go ahead. Hey, good morning, everybody. Good morning, David. Hey, David.
Okay.
Okay. Thanks for that and then just following up on that you you mentioned the billion dollars of fixed rate loans and any color on the new and renewed loan pricing more and more recently.
David Feaster: Um, I was hoping maybe we could just touch on some of the trends that you're seeing on the core funding side. We're obviously seeing some of the migration and you quite utilization of excess cash. But I'm just curious, maybe some of the underlying trends that you're seeing and where you're seeing the most opportunity to drive core to deposit growth, how core deposit balances are trending early in the fourth quarter, and maybe how new deposit pricing is for both core deposits as well as your CDs.
It's really similar to what Youre seeing in the pipeline statistic. There. So our renewal rates are just right on top of our pipeline opportunity rates.
Got it.
Okay. That's helpful guys. Thank you very much.
Thanks, Matt.
Our next question comes from Graham <expletive> with Piper Sandler. Please go ahead.
James Brogdon: Yeah, David. I'll jump in there on that one as well. I tell you that really it's kind of continuation of the same trends we've seen. Deposits were down for the quarter on a period end basis, but one thing I point out is that both loans and deposits were up on an average basis for the quarter. And we were really kind of flat on the broker side. We were down on the borrowing side.
Hey, guys. Good morning, good morning, good morning.
I just I just wanted to circle back quickly to then make I make sure I heard that correctly it.
It sounds like it's going to be sort of range bound for here was that ex the swap impact or is that inclusive of that swap impact here in <unk>. It's inclusive in the fourth quarter I think basically the way to look at it Graham is you know the.
Pressure, we'll see on that underlying NIM, particularly around again CD repricing in maturities in the fourth quarter and first quarter are as <unk>.
James Brogdon: So we were able to see good ability to hold the line. And again, on an average basis, even kind of grow the core deposit book in the quarter, if the migration piece that you continue to see the experience and that, you know, that has the higher cost associated with it. So continue to see that even in October. I'd like to think that we're seeing and we saw it at different points in the third quarter that, you know, the trends would flow down and speed up.
Well as some level of likely migration, we think that migration slowing within the portfolio, but I think those factors will probably drive that underlying NIM down a bit.
And largely be offset with the benefit of the swap. So I think really I see that inflection point.
Being kind of real time, Q3, Q4, Q1, when I look at the overall NIM I think I think we'll be kind of in the band that you saw us in Q3 over the next six or so months.
James Brogdon: So there's kind of some sputtering and how we think about that migration and what we're observing in the portfolio, but you still see some pressure on NIBs and lower cost IB transaction accounts. You know, not we're not losing a lot of accounts at all. It's really more just dollars migrating out of those lower cost buckets and primarily into, you know, CD promo type activity. So I think we'll continue to experience that, although to a slower degree, again, going forward.
Okay, Great that's very helpful.
And then I just I had just a couple more on the the increase in and modified loans to about 34 million was that all due to that I guess the nursing home credit you said you modified that at all or is that just a couple of loans in there that drove that increase.
You know I'm not 100% sure of the answer to that Graham, but I think I'm sure. The majority of it would have been related to the one that I've mentioned.
James Brogdon: I think the bigger, you know, the bigger factor. Well, again, just kind of be repricing the lower cost CDs as those mature over the next three and six months. And then just in terms of trying to drive core deposit growth, you know, look, it's an incredibly competitive environment out there and we look market by market at price sensitivity, you know, on a daily basis. We look at our own fund flows. We have done a great job targeting deposits that have flowed out and bringing those back in as well as just, you know, through our through our promo campaigns.
Okay.
Alright, and then I guess just lastly.
As it relates to the securities portfolio I saw it was 104 hundred 180 million of maturities per quarter right.
And that means across 2024 is the same into 2025 or is there any difference in the maturity schedule as we look out to that year.
You know I think it's probably going to be similar but again you got me there I don't have a great answer to that I haven't looked too far past 2024, and those but I'm not nothing comes to my mind Graham that would make me think it would be dramatically different.
James Brogdon: Whether it's on the money market or the, or the CD side and continue to have, you know, good success there, but you're just always balancing between the front book and the back book. As you evaluate, you know, those opportunities, you know, and David, I'd add on to that in addition of the migration from, you know, non interest bearing to interest bearing. You know, we're also seeing lower balances per account, you know, the consumers have less cash in their pocket than they did a year ago.
Okay. That's perfect no problem at all all right guys I appreciate it. Thank you. Thank.
Thank you.
Our next question comes from Gary Tenner with da Davidson. Please go ahead.
Thanks, Good morning.
Good morning, Hey.
Just following up on that question, a little bit in terms of balance sheet management.
You're a few quarters in a row of runoff in the portfolio just as obviously, there's some pressure on the funding side et cetera, with with rates, where they are is there any change to the to.
James Brogdon: And you continue to still feel some of that. And as Jay said, we haven't seen a decline in number of accounts, our customers. But we have seen balances, whether it's migration because of rate or less balances in their account due to inflation and higher interest rates. And all of that people have less cash in their accounts than they did a six months ago a year ago. That's a good point. Maybe on the other side of the coin, it is great to see the increase in the loans ready to close, and the rate 843 basis points is terrific.
So the thought process around how to.
How do you utilize the runoff from that portfolio.
Or should we just assume that that runoff continues and then the flip side of that is you mentioned the repricing of maturities of the Cds.
You know in addition to the to the retail Cds, you've got about $1 3 billion of brokerage Cds that mature here in the fourth quarter as well should we assume that those just roll.
James Brogdon: I'm just curious, what are you seeing that drove the uptick in that pipeline quarter recorder? Where are you seeing opportunities that bring good risk of just returns at these higher rates, learning segments or geographies that are presenting better returns and just kind of how you think about loan growth going forward? Yeah, I'd say that, you know, again, want to mention loans were up on an average basis for the quarter. We mentioned in the slides, when you look at sort of our loan balance waterfall on page 19, you know, we talked about the fact that we had a handful of credits that we really worked throughout the quarter, very focused efforts either because of lower rates and or candidly risk ratings.
Yeah, I don't want to go back to the first part of your question there and make sure I understand when you were talking about runoff in the portfolio youre, referring to the securities portfolio correct.
Yes. So then I would say that obviously there are some very attractive rates out there from an investment securities point of view.
But our strategy will continue to be to the extent we have what we believe are good risk adjusted returns in the loan portfolio.
And cash flows coming off of our balance sheet sufficient to invest in that that's where our investment priority would be would be on the loan side. So.
That's what our experience has been so far and that's what I think are generally our strategy would be here.
James Brogdon: We didn't love where we saw opportunities to get those credits out of the bank and were able to do that successfully right at the end of the quarter. I want to emphasize that we are continuing to focus on growing loans on a good risk adjusted returns basis and we're seeing success with that. And our pipeline is a great indication of that as you point out David, you know, in addition to the pipeline, you know, sort of inflecting this quarter and being up, I'd really draw your attention actually just even to that rate of close portion of the pipeline is the portion that's up most significantly on a quarter over quarter basis, the rates that we're seeing in there are very attractive.
In the intermediate future so.
That's a long way of saying to your question that I think that you could expect continued securities portfolio run off.
And reinvestment into the loan portfolio. If there are any we've talked a lot about balance sheet optimization continues to be a theme. If there are opportunities to you.
Shrink the balance sheet a bit either through.
And we saw again some opportunities to do this in the third quarter, but opportunities too.
We reduced the levels of other borrowings our brokers, we will absolutely do that and replace it with core funding even if that funding is on the core CD side.
Or higher rate money market side.
James Brogdon: And I just say there, you know, it's a broad-based effort. I mean, we're seeing it, you know, all across the footprint, I wouldn't really call out any geography as particularly better than the other, nor really any category. It's more opportunistic. There are, you know, situations in this environment where I think incumbent banks are, you know, for whatever reasons. Having to do some either something irrational or have their eye off the ball and, you know, we have had some really good opportunities with customers where we've been maybe a secondary provider to come in and really grow to the full relationship and bring some things into the pipeline that we're pretty excited about.
But to the extent that there are shortfalls there are needs for any of that wholesale borrowing we're happy to do it, particularly if it's cheaper and less expensive and that's kind of how we try to play around those funding.
Sources that are out there is really just purely to try to take advantage of the opportunities at the lowest cost that are out there. So as we see those repricing both on the core CD book.
And the brokered CD book, I think you'd see more of the same there over the coming months.
Okay, I appreciate that and I apologize if I missed it in your presentation, but could you tell us the deposit spot rates I don't I don't think I caught them as I was going through.
You know I don't have the deposit spot rates, we don't have those published in there, but you know I would say on the promo side Youre seeing.
James Brogdon: You know, and David, in addition to the pricing on the wrist side is the push to bring that full relationship in. You bring the deposits in, you bring treasury management in. You know, we've been pushing that for a long time, but really the focus today is when loans come and on is what are the deposits, what are the relationships, and no concessions unless there's, you know, a full relationship out there. That brings to that total profitability of that customer. That's a really good point.
<unk> handles for the most part.
And you know in our CD promo campaigns.
Again, very delicate balance that we're working through in terms of trying to balance our front book and our back book all across the all across the portfolio and that's how we think about both our standard rates spot rates as well as any promos and the markets that we are.
Seeking to penetrate with those promotional opportunities.
Robert Fehlman: And maybe last one for me, just just touching on capital priorities, you know, regulatory capital is continuing to grow. You've been active, repurchasing stock. I'm just curious how you think about capital priorities and then, you know, just any thoughts on, on, you know, monetizing the swap. Is there any appetite to do that and utilize that capital for any type of balance sheet optimization or restructuring or anything? You know, David, I'd say right now, you know, we're still staying the course.
Yeah.
Okay. Thank you.
Okay.
Our next question comes from Matt Olney with Stephens. Please go ahead.
Yeah, guys apologize if you've mentioned this but as far as the loan growth outlook from here like you mentioned lots of puts and takes from the pay downs on the way, but are improving loan pipeline, what would you point us towards or with respect to the loan growth over the next few quarters is that is that a mid single digit loan growth.
Robert Fehlman: We evaluate each for whether we're going to be in stock by back or not. One thing we have committed to is we wouldn't buy back more shares than our earnings less cash dividends. So we'll evaluate this quarter, not saying we'll be in it, not saying we'll be out of it, but it would be a measured approach like we have if we do continue in it. Our capital we're comfortable, especially the regulatory side right now.
Still still reasonable.
I think that the mid single digit with our outlook for the year this year.
When we were above that early in the year and we're kind of stepping into that as we balance it in the back part of the year. This year I think it would be that.
Robert Fehlman: I think a little bit of decline in TCE was expected with where the tenure has moved. Other than that, I think our TCE would have been up. So we're comfortable in the range we are and we think we're doing a balance approach on stock by back. Again, we'll evaluate this quarter and determine where we are. We all like to say, I mean, given the environment where bank stocks are trading, we'd love to buy back as much as we can, but we think the prudent amount today is really to decide if you're in or not and if you're in to do it in a balanced with again, your earnings less, your cash dividends.
That would be.
Perhaps more in the range, but on the optimistic side of the range as I look over the coming quarters here I think that in light of our focus on relationship banking in light of our focus on working out either lower cost or lower risk rating credits, where we find opportunities et cetera, you're going to see a much lower kind of sing.
<unk> digit expectation and loan growth going forward, then even kind of that mid single digit number and Matt I'd say given the macro environment. We're all going through right now we feel very comfortable with low to mid single digit in this environment.
James Brogdon: David, I just jump in on the swap and the analytics around that. That is also similar to what Bob described. Analysis that we do all day every day ongoing throughout every quarter will continue to do that. If we think that we find something that's advantageous, given the market dynamics, particularly as it relates to that swap, then we would take advantage of it.
Right.
Yep. Okay. That's helpful. And then just to clarify I think in the past you had given some commentary around that.
Deposit betas for the cycle any any I know the cycle is getting a little bit more extended than we initially thought but any updated thoughts around around deposit betas from here.
Yeah, I mean I think we're.
James Brogdon: But I'd say thus far we've been more than happy to have SAP out there.
Probably cumulative mid Forty's is that what we have there will be four yeah. So we're sort of mid Forty's I mean.
Unknown Executive: Terrific.
Unknown Executive: Thank you, everybody.
When I look at <unk>.
Cds maturing in particular over the next few months when I look at.
Matthew Olney: Our next question comes from Matt Olney with Stevens. Please go ahead. Hey, thanks for the morning, guys. On the credit front, you mentioned that deeper review of some extended care, nursing in the third quarter that followed the Office deep dive in 2Q. As you look forward in the 4Q in next year, is there any other deeper dive focused within any specific portfolio? And then I guess part two of that, it sounds like maybe as a result of what you looked at recently, you work some credits out of the bank that you didn't line up with your process. Curious what your thoughts are about, the potential to see in similar events in the future where you proactively work out some sort of performing credits out of the bank. Thanks.
The tougher one to predict which is just the level of migration over the next handful of months I'd say that there's a good chance that creeps into the end of the fifties.
As we look forward, but that's again all of it like everything else matters very much subject to what does the fed do from here, but that'd be my best Handicap as I sit here today.
Yep, Okay. Thanks, guys.
Yes, Thanks, Matt.
This concludes our question and answer session I would like to turn the conference back over to George Makris for any closing remarks.
Well, thanks to all of you for joining US today. This is hard for me to say, but I think the real key.
For the next year or so is going to be patient.
James Brogdon: Yeah, Matt, I'd say that we don't have any sector-specific portfolios that are due up in terms of the deep dive coming into the balance of the year here this year. We'll probably prioritize those going into next year and determine what, if anything, we'd want to dig into further. I'd say the one maybe stepping away from sector-specific or we're looking at different buckets within the portfolio and just more broadly, we do continue throughout the year and we'll continue to stress our customers, our borrowers at higher rates, higher for longer rates, etc.
Which I have very little.
But there are still so many external factors affecting the banking industry today that we really can't guess what that needs to be.
And our focus needs to be on good fundamental management of the bike I'm really pleased with the results of our better Bank initiative optimistic that theres more benefit to come.
You can see that in our repricing opportunities in our securities portfolio and our fixed rate loan portfolio, we have some upside potential but we're excited about and most importantly, we are still in business. We have a lot of capacity left.
James Brogdon: And again, we've done that all through the year this year, continue to feel good about the results of that. We're not seeing any kind of broad-based stress from that, but that's kind of the flow of our loan review and where we sit right now around those portfolios. As it relates to working out credits, as you asked there at the end, I think that's something we'll continue to be opportunistic around. I mean, we're really doing that.
To help our customers grow in the market as I see that opportunity. So I'm very optimistic about what 2024 holes for our bank.
And we appreciate your support and your participation today have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
James Brogdon: Again, all across the portfolio, there's a number of factors that we think about. Again, one is just the rate that we have belongs at. Maybe the biggest factor is the relationship that we have or the relationship opportunity that we believe we have. Now's the time where, as Bob mentioned, a while ago, we're very, very focused on full relationships. The stuff we're bringing into the pipeline is relationship heavy. The stuff we have on the books, if it's relationship light, is getting a lot of scrutiny, particularly at renewal dates, but even if there are opportunities that we see to move those out, we're willing to do that.
James Brogdon: So I don't think any of that really looks like necessarily big portfolio sales or anything like that as it relates broadly to the portfolio, but more opportunistic and more to kind of a granular level of analysis.
Robert Fehlman: Just a little bit of expansion on that $160 million payoff. Most of that happened right at the end of the quarter, so there was little impact to margin during the quarter. Most, as we said, some of those loans were lower rate, so we were kind of glad to see them go off the books for the spread that we had on them and the risk wasn't worth it. A few others had some elevated, the risk rating was moving up.
Robert Fehlman: Wasn't in the non-performing or concern area, but when you looked at it in the change, we were glad to see those move, especially where their pricing was for the risk rating. So we'll continue to look for those opportunities, and if we can help them out the door, if not, we'll continue to work through them. But I agree, Jay, we've done several deep dives, and we haven't seen any other areas that we have.., at Concern. Okay, thanks for the commentary.
Matthew Olney: And just as I follow up to that, and kind of on Bob's point around some of the fixed asset repricing opportunity. Any more color you can give us there as some of these loans come up renewal, and you look to repriced those higher any kind of color or any comment around that. You know, I'll mention a few things and I'd point, you know, every one of the slides 16 for some information around it, great and interesting sensitivity.
Matthew Olney: But, you know, I already mentioned in my remarks earlier on the funding side that I think Q4 and Q1, again subject to sort of the moves in the market that would be unexpected. I think Q4 and Q1 will be kind of the biggest periods of repricing. We'll have to go here on the liability side. But on a go forward basis continue to see a lot of really good opportunities, both in terms of repricing and in terms of pipeline opportunity on the asset side.
Matthew Olney: And we give you some statistics there on 16. One in particular that I call out, you know, we've got a billion dollars in fixed rate next 12 months, billion dollars in fixed rate loans at a weighted average rate of 578. So I think there'll be, you know, quite a few good opportunities to have some significant repricing in that portfolio or that portion of our portfolio. And again, we see a lot more opportunity in terms of asset repricing over the quarters to come than we do risk in terms of the liability side.
Matthew Olney: Okay, thanks for that. And Jay's on up on that. You mentioned a billion dollars at the fixed rate loans in any color on the new and renewed loan pricing more recently. It's really similar to what you're seeing in the pipeline statistic there. So our renewal rates are just right on top of our pop line opportunity rates. Got it. Okay, that's helpful guys. Thank you very much. Thanks ma'am.
Graham Dick: Our next question comes from Graham Dick with Piper Sandler. Please go ahead. Hey guys, morning. Good morning.
Graham Dick: I just wanted to circle back quickly to then make sure I heard that correctly. Sounds like it's going to be sort of range bound for here. Was that ex the swap impact or is that inclusive of that swap impact here in 4Q? It's inclusive in the fourth quarter. I think basically the way to look at it Graham is, you know, the pressure we'll see on that underlying them particularly around again CD repricing and maturities in the fourth quarter and first quarter.
Graham Dick: As well as, you know, some level of likely migration. We think that migration is slowing within the portfolio, but I think those factors will probably drive that underlying them down a bit. You know, and largely be offset with the benefit of the swap. So I think really I see that inflection point, you know, being kind of real time Q3 Q4 Q1 when I look at the overall. I think I think we'll be kind of in the band that you saw us in in Q3 over the next six or so months. Okay, great. That's very helpful.
Graham Dick: And then I just added just a couple more.
Graham Dick: On the increase in modified loans to about 34 million was that all due to that, I guess, nursing home credit, you said you modified, or was that just a couple of loans in there, I guess they drove that increase. You know, I'm not 100% sure of the answer to that, Graham, but I think I'm sure the majority of it would have been related to the one that I've mentioned.
Graham Dick: Okay. All right, and then I guess just lastly, as it relates to the securities portfolio, I saw as 140, 180 million of securities per quarter. I assume that means across 2024. Is it the same into 2025, or is there any difference in the maturity schedule as we look out to that year? You know, I think it's probably going to be similar, but again, you got me there. I don't have a great answer to that. I hadn't looked too far past 2024 in those, but I'm not. Nothing comes to my mind, Graham, that would make me think it'd be dramatically different.
Graham Dick: Okay, that's perfect. No problem at all.
Unknown Executive: All right, guys, I appreciate it. Thank you.
Gary Turner: Next question comes from Gary Turner with PA Davidson. Please go ahead. Thanks for morning. Hey, just following up on that question a little bit in terms of balance sheet management. Obviously, a few quarters in a row of runoff in the portfolio, just as obviously there's some pressure on the funding side, et cetera. With rates where they are, is there any change to the thought process around how to, you know, how to utilize the runoff from that portfolio, or should we just assume that that runoff continues?
Gary Turner: And then the flipside of that is you mentioned the repricing and maturities of the CDs, you know, in addition to the retail CDs, you've got about 1.3 billion of brokerage CDs that mature here in the fourth quarter as well. Should we see that those just roll? Yeah, and I want to go back to the first part of your question there and make sure I understand when you're talking about runoff in the portfolio, you're referring to the securities portfolio?
Gary Turner: Correct. Yeah. So then I'd say that obviously there's some very attractive rates out there from an investment securities point of view, but our strategy will continue to be to the extent we have what we believe are good risk-adjusted returns in the loan portfolio and cash flows coming off of our balance sheet sufficient to invest in that. That's where our investment priority would be, would be on the loan side. So that's what our experience has been so far, you know, and that's what I think are generally our strategy would be here into the intermediate future.
Robert Fehlman: So that's a long way of saying to your question that I think that you could expect continued securities portfolio runoff and reinvestment into the loan portfolio. If there are any, you know, we've talked a lot about balance sheet optimization, that continues to be a theme if there are opportunities to, you know, shrink the balance sheet a bit either through, and we saw that again some opportunities to do this in the third quarter, but opportunities to, you know, reduce the levels of other borrowings or brokerage will absolutely do that and replace it with core funding, even if that funding is on the core seed east side or higher rate money market side.
Robert Fehlman: But to the extent that there are shortfalls there or needs for any of that wholesale borrowing, we're happy to do it, particularly if it's cheaper and less expensive and that's kind of how we try to play it around those funding sources that are out there is really just purely to try to, you know, take advantage of the opportunities at the lowest cost that are out there. So as we see those reprising both on the core CD book and the brokerage CD book, I think you'd see more of the same there over the coming months.
Robert Fehlman: Okay, I appreciate that. And I apologize if I missed it and it's in your presentation, but can you tell us the deposit spy rates? I don't think I caught them as I was going through. You know, I don't have the deposit spot rates. We don't have those published in there, but, you know, I'd say on the promo side, you know, you're seeing five handles for the most part in, you know, in our CD top promo campaigns.
Robert Fehlman: Again, very delicate balance that we're working through in terms of trying to balance our front book and our back book all across the all across the portfolio. And that's how we think about both our standard rate spot rates as well as any promos and the markets that we are, you know, seeking to penetrate with those promotional opportunities. Okay, thank you.
Matthew Olney: Our next question comes from Matt Olney with Stevens, please go ahead. Yeah, guys, I apologize if you mention this, but as far as the loan growth, Alex from here, you mentioned lots of puts and takes from the paydowns on the way, but improving loan pipeline. What would you point us towards or with respect to the loan growth of the next few quarters? Is that is that a mid single digit loan growth still still reasonable?
Matthew Olney: I think that, you know, the mid single digit with our outlook for the year this year, you know, and we were above that early in the year and we're kind of, you know, stepping into that as we balance it in the back part of the year this year. I think it'd be a, you know, that would be perhaps more in the range, but on the optimistic side of the range is I look over the coming quarters here.
Matthew Olney: I think that and light of our focus on relationship banking and light of our focus on working out either lower cost or lower risk rating credits where we find opportunities, etc. You're going to see a much lower kind of single digit expectation and loan growth going forward than even kind of that mid single digit number. And Matt, I'd say given the macro environment we're all going through right now, we feel very comfortable with low to mid single digit in this environment. Agreed.
Matthew Olney: Yep, okay, that's helpful. And then just to clarify, I think in the past, you've given some commentary around the positives for the cycle any any. I know the cycle is getting a little bit more exciting here than we initially thought, but any update thoughts around the positives from here? Yeah, I mean, I think, you know, we're probably cumulative mid 40s. Is that what we have there? Yeah, so we're sort of mid 40s.
Matthew Olney: I mean, when I look at, you know, CDs maturing in particular over the next few months, when I look at it, you know, the tougher one to predict, which is just the level of migration over the next handful of months, you know, I'd say that there's a good chance that creeps into the 50s. As we look forward, but that's again, all of it, like everything else, Matt is, you know, very much subject to what does the Fed do from here, but that'd be my best handicap, as I sit here today. Yep, okay. Thanks, guys. Yeah, thanks, Matt.
Unknown Executive: This concludes our question and answer session.
George Makris: I would like to turn the conference back over to George Magress for any closing remarks. Well, thanks to all of you for joining us today. This is hard for me to say, but I think the real key for the next year or so is going to be patients of which I have varied little.
George Makris: But there are still so many external factors affecting the banking industry today that we really can't guess what that needs to be. And our focus needs to be on good fundamental management of the bank. I'm really pleased with the results of our better bank initiative, optimistic that there's more benefit to come. You can see that in our repricing opportunities and our securities portfolio and our fixed rate loan portfolio, we have some upside potential that we're excited about.
George Makris: And most importantly, we're still in business. We have a lot of capacity left to help our customers grow in the market as they see that opportunity. So I'm very optimistic about what 2024 holds for our bank and we appreciate your support and your participation today.
Unknown Executive: Have a great day.
Operator: The conference is now concluded.
Operator: Thank you for attending today's presentation.
Operator: You may now disconnect.