Q3 2023 United Community Banks Inc Earnings Call

Speaker 1: Good morning, and welcome to United Community Bank's third quarter 2023 earnings call. Hosting our call today are Chairman and Chief Executive Officer, Lynn Harten, Chief Financial Officer, Jefferson Harrelson, President and Chief Banking Officer, Rich Bradshaw, and Chief Risk Officer, Rob Edwards. United's presentation today includes references to operating earnings, pre-tax, pre-credit earnings, and other non-GAAP financial information.

Good morning, and welcome to United Community Bank's third quarter 2023 earnings call hosting our call today, our chairman and Chief Executive Officer, Lynn Harton, Chief Financial Officer, Jefferson Harralson, President and Chief Banking Officer, Rich Bradshaw, and Chief Risk Officer, Rob Edwards.

United's presentation today includes references to operating earnings pretax pre credit earnings and other non-GAAP financial information for these non-GAAP financial measures United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release as well as at the end of the Investor presentation.

Speaker 1: For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release as well as at the end of the investor presentation.

Speaker 1: Both are included on the website at UCBI.com.

Both are included on the website at U C. B I dot com copies of the third quarter's earnings release and Investor presentation were filed this morning on form 8-K, with the SEC and a replay of this call will be available in the Investor Relations section of the company's website at U C. B I Dot com. Please be aware that during this call forward.

Speaker 1: Copies of the third quarter's earnings release and investor presentation were filed this morning on Form 8K with the SEC, and a replay of this call will be available in the Investor Relations section of the company's website at UCBI.com.

Speaker 1: Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on pages 5 and 6 of the company's 2022 Form 10-K , as well as other information provided by the company and its filings with the SEC and included on its website. At this time, I'll turn the call over to Lynn Harten.

Looking statements may be made by representatives of United any forward looking statements should be considered in light of risks and uncertainties described on pages five and six of the company's 2022 Form 10-K as well as other information provided by the company in its filings with the SEC and included on its website at.

At this time I'll turn the call over to Lynn Harton.

Good morning, and thank you for joining our call today.

Speaker 2: As you would expect, we continue to see influences of the higher rate environment this quarter. On the positive side, we had strong deposit growth and excellent liquidity.

As you would expect we continue to see influences of the higher rate environment This quarter.

On the positive side, we had strong deposit growth and excellent liquidity.

Speaker 2: Customer deposits grew $314 million, or 5% annualized this quarter, excluding the first Miami acquisition and the two branches we sold in Tennessee.

Customer deposits grew 314 million.

Or 5% annualized this quarter, excluding the first Miami acquisition and the two branches we sold in Tennessee.

Speaker 2: We do continue to see movement into higher yielding deposit products, with DDA as a percentage of total falling slightly to 30 percent, down from 31 percent last quarter. Our liquidity position can...

We do continue to see movement into higher yielding deposit products with DDA as a percentage of total falling slightly to 30% down from 31% last quarter.

Our liquidity position continues to be very strong.

Speaker 2: During the quarter, we were able to fund organic loan growth of 5.4% annualized, while paying down over $400 million in broker deposits and still reaching over $750 million in cash equivalents at quarter end, all with essentially no short-term borrowing.

During the quarter, we were able to fund organic loan growth of five 4% annualized.

While paying down over 400 million in broker deposits and still reaching over $750 million in cash equivalents at quarter end.

All with essentially no short term borrowings.

Speaker 2: Our loan to deposit ratio remains at 80% providing ample liquidity to meet our customers' borrowing needs.

Our loan to deposit ratio remains at 80%, providing ample liquidity to meet our customers borrowing needs.

Speaker 2: Our margin continued to be impacted by rate competition and mix change, but the rate of change has slowed. Our debt interest margin fell from 337 basis points last quarter to 324 basis points this quarter, a 13 basis point decline.

Our margin continues to be impacted by rate competition and mix change, but the rate of change has slowed our net interest margin fell from 337 basis points last quarter to 324 basis points. This quarter, a 13 basis point decline.

Speaker 2: Our rates are also impacting some of our weaker customers from a credit perspective.

Higher rates are also impacting some of our weaker customers from a credit perspective as.

Speaker 2: As previously disclosed, we took a $19 million charge off on an 8.7% share of a locally-based shared national credit.

As previously disclosed we took a $19 million charge off only eight 7% share of a locally based shared national credit.

Speaker 2: We also wrote down two memory care centers, which have been on a cruel, about $3 million, reflecting expected market value for the property.

We also wrote down to memory care centers, which have been on non accrual about $3 million, reflecting expected market value for the properties.

Speaker 2: With the charges, our bank net charge-off ratio, excluding Navidas, was 49 basis points, up from 15 basis points last quarter.

With the charges are bank net charge off ratio, excluding the betas was 49 basis points up from 15 basis points last quarter.

Speaker 2: Our Naveeta subsidiary had increased charge-offs this quarter due to higher losses coming from a relatively small exposure to the long-haul trucking segment.

Our Nevada subsidiary had increased charge offs this quarter due to higher losses coming from a relatively small exposure to the long haul trucking segment.

Speaker 2: Navidas' annualized charge-off rate for the quarter was 1.62%.

VITAS is annualized charge off rate for the quarter was 1.62%.

Speaker 2: Excluding the long-haul segment, charge-offs in the fetus were approximately 88 basis points for the quarter.

Excluding the long haul segment charge offs and the betas were approximately 88 basis points for the quarter.

Speaker 2: Taken together, our consolidated charge-off ratio for the quarter was 59 basis points, up from 20 basis points last quarter.

Taken together, our consolidated charge off ratio for the quarter was 59 basis points up from 20 basis points last quarter.

Speaker 2: These losses are somewhat unique. The majority of our portfolio continues to perform well, and our local economies continue to be very strong.

These losses are somewhat unique the majority of our portfolio continues to perform well and our local economies continue to be very strong.

Speaker 2: However, we know from history that the combination of rapid interest rate increases and tightening credit conditions can weaken credit performance, at least in some business segments. We're cautious in our lending and portfolio management strategies for this reason.

However, we know from history that the combination of rapid interest rate increases and tightening credit conditions can weaken credit performance at least in some business segments, we're cautious in our lending and portfolio management strategies for this reason.

Speaker 2: In summary, our operating earnings this quarter were 45 cents per share, down 10 cents or 18% compared to last quarter.

In summary, our operating earnings this quarter were 45 cents per share down 10 cents or 18% compared to last quarter.

Speaker 2: Our operating return on assets was 79 basis points for the quarter. And our pre-tax, pre-provision ROA was 144 basis points, down 21 basis points from last quarter.

Our operating return on assets was 79 basis points for the quarter.

And our pretax pre provision ROA was 144 basis points down 21 basis points from last quarter.

Speaker 2: On the strategic front, we closed on First National Bank of South Miami, July 1st, a deal we announced on February 13th of this year. Conversion is scheduled for this weekend, and we look forward to having their outstanding team fully integrated with the company.

On the strategic front, we closed on the first National Bank of South Miami July 1st a deal we announced on February 13th of this year conversion is scheduled for this weekend and we look forward to having their outstanding team fully integrated with the company.

Speaker 2: Now I'll ask Jefferson to provide more detail on our performance for the quarter.

Now I'll ask Jefferson to provide more detail on our performance for the quarter.

Thank you Lynn and good morning to everyone.

Speaker 1: I am going to start my comments on page 7 and go into some more details on deposit.

I am going to start my comments on page seven and go into some more details on deposits.

Speaker 3: As Lynn mentioned, our total deposit balances were up $606 million in the quarter, with the addition of First National Bank of South Miami driving the increase.

As Len mentioned, our total deposit balances were up $606 million in the quarter with the addition of first National Bank of South Miami driving the increase.

Speaker 3: In the quarter, we had very strong business and consumer deposit growth of $314 million, which more than funded our $241 million of loan growth.

In the quarter, we had very strong business and consumer deposit growth of $314 million, which more than funded our $241 million of loan growth.

Speaker 3: In addition to the strong deposit growth, we also had the proceeds of the sale of South Miami's $200 million securities book that allowed us to pay down $427 million of broker deposits, and also offset the sale of two branches in Tennessee totaling $110 million in deposits that were outside our targeted footprint.

In addition to the strong deposit growth. We also had the proceeds of the sale of South Miami 200 million dollar Securities book that allowed us to pay down $427 million of broker deposits.

And also offset the sale of two branches in Tennessee totaling $110 million in deposits.

We're outside our targeted footprint.

Speaker 3: We continue to see increased price competition in the third quarter that drove our cost of deposits of 39 basis points to 2.03% and took our cumulative total deposit beta to 38% since the fourth quarter of 2021.

We continue to see increased price competition in the third quarter that drove our cost of deposits up 39 basis points to two point or 3% and took our cumulative total deposit beta to 38% since the fourth quarter of 2021.

Speaker 3: Moving to page 8, we also saw continued deposit mix change in the third quarter, albeit at a slower pace as our DDA percentage moved to 30% from 31% last quarter.

Moving to page eight we also saw continued deposit mix change in the third quarter, albeit at a slower pace as our D. D. Eight percentage moved at 30%.

31% last quarter.

Speaker 3: or the positive base is growing, diversified between industries and geographies, and very granular.

Our deposit base is growing diversified between industries and geographies and very granular.

Speaker 3: We turned to our loan portfolio on page 9. As I mentioned, we grew loans in the third quarter by $241 million, which is 5.4% annual.

Return to our loan portfolio on page nine as I mentioned, we grew loans in the third quarter by $241 million, which is 5.4% annualized.

Speaker 3: On page 9, we also lay out that our loan portfolio is diversified and generally more granular and less commercial real estate heavy as compared to peers.

On page nine we also lay out that our loan portfolio. It is diversified and generally more granular and less commercial real estate heavy as compare to peers.

Speaker 3: Turning to page 10, where we highlight some of our strengths of our balance sheet, while our customer deposits grew faster than loans, the effect of paying down the $427 million in broker deposits pushed our loan-to-deposit ratio higher to 80%. But this leaves us with virtually no wholesale funding remaining, which is a positive for 2024.

Turning to page 10, where we highlight some of our strength of our balance sheet, while our customer deposits grew faster than loans the effect of paying down the 427 million in broker deposits.

Pushed our loan to deposit ratio higher to 80%.

This leaves us with virtually no wholesale funding remaining which is a positive for 'twenty 'twenty four.

Speaker 3: On the bottom of the page are charts of two of our capital ratios, our TCE ratio and our CET1 ratio. They were just down slightly in the quarter with the impact of South Miami, but remain just under 100 basis points higher than our peer median.

On the bottom of the page our charts of two of our capital ratios, our TCE ratio and our CET one ratio.

They were just down slightly in the quarter with the impact of South Miami, but remained just under 100 basis points higher than our peer medians.

Speaker 3: On page 11, we take a deeper look at capital and we show a tangible book value waterfall chart.

On page 11, we take a deeper look at capital and we show a tangible book value waterfall chart.

Speaker 3: Our regulatory ratios also remain above peer.

Our regulatory ratios also remain above peers and.

Speaker 3: and mostly just slightly decreased with the investment into South Miami.

And mostly just slightly decreased with the investment into South Miami.

Speaker 3: Our leverage ratio increased 10 basis points with the delivering effect of paying down South Miami's security book and paying down the broker fund.

Our leverage ratio increased 10 basis points with the Delevering effect of paying down South Miami's Securities book and paying down their brokered funds.

Speaker 3: Moving on to the margin on page 12, the margin decreased 13 basis points compared to last quarter.

Moving on to the margin on page 12.

Arjun decreased 13 basis points compared to last quarter.

Speaker 3: our low-yield increased 17 basis points similar to the increase of last quarter.

Our loan yield increased 17 basis points similar to the increase of last quarter.

Speaker 3: with the new owns coming on in the mid 8% range. But our cost of total deposits was up 39 basis points to 2.03%.

The new loans coming on in the mid 8% range, but our cost of total deposits was up 39 basis points to two point or 3%.

Speaker 3: The main driver of the cost of total deposits increase was a tougher competitive environment in the form of higher deposit rates.

The main driver of the cost of total deposits increase was a tougher competitive environment in the form of higher deposit rates.

Speaker 3: But we also saw our balance sheet was more liquid than we had estimated, which cost us two basis points on the margin and offset other positive net mix changes.

But we also saw our balance sheet was more liquid than we had estimated which cost us two basis points on the margin and offset other positive net next changes.

Speaker 3: Moving to page 13, non-interesting comes down $4.4 million relative to last quarter, mostly due to the absence of one-timers, I mentioned last quarter.

Moving to page 13, non interest income was down $4.4 million relative to last quarter, mostly due to the absence of one timers I mentioned last quarter.

Speaker 3: Notable items and fee income included and MSR right up of $1.1 million and $2.2 million in unrealized losses on equity investments that we do not expect to repeat regular.

Notable items in fee income included and MSR write up of $1.1 million.

And $2 $2 million in unrealized losses on equity investments that we do not expect to repeat regularly.

Speaker 3: Expenses on page 14 came in at 135.5 million dollars. Up six.

Expenses on page 14 came in at $135 $5 million.

$6 $5 million.

Speaker 3: Excluding South Miami, we estimate that our core expenses were up just modest.

Excluding south Miami, we estimate that our core expenses were up just modestly.

Speaker 3: We are expecting $1.7 million in quarterly cost savings to begin to materialize in Q4 and to be fully extracted in the first half of 2024.

We are expecting $1.7 million in quarterly cost savings to begin to materialize in Q4 and to be fully extracted in the first half of 'twenty 'twenty four.

Speaker 3: when covered the charge off and credit rent well in his remarks but i will talk on the a well-enched for credit losses on page six

When covered the charge off and credit trends well in his remarks, but I will talk on the allowance for credit losses on page 16.

Speaker 3: We set aside $3.3 million to cover $26.6 million in net charges.

We set aside $3.3 million.

To cover $26 $6 million and net charge offs.

Speaker 3: In addition to that $3.7 million difference, we added another $3.7 million into the reserve with the South Miami PCD mark.

In addition to that $3 7 million dollar difference, we added another $3 $7 million into the reserve with the South Miami P. C D Mark.

Speaker 3: Our allowance for crethylosses as a percentage of loans are mean essentially flat in our coverage of NPAs improved with the improvement of NPAs. With that,

Our allowance for credit losses, as a percentage of loans remained essentially flat and our coverage of M. P. A has improved with the improvement of N. P. S.

With that I'll pass it back to Lynn.

Speaker 2: Thank you, Jefferson. And many thanks to the United team. I appreciate your focus on living our purpose, building our communities, and I look forward to continuing to succeed together. And now I'd like to open the floor for questions.

Thank you Jefferson and many thanks to the United team I. Appreciate your focus on living our purpose building our communities and I look forward to continuing to succeed together and now I'd like to open the floor for questions.

We will now begin the question and answer session.

Speaker 4: To ask a question, you may press star, then 1 on your telephone keypad.

To ask a question you May press Star then one on your telephone keypad.

Speaker 4: If you're using a speaker phone, please pick up your hand set before pressing the keys. And to withdraw your question, please...

If youre using a speakerphone please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two.

Speaker 4: At this time, we will take our first question, which will come from Michael Rose with Raymond James. Please go ahead.

At this time, we will take our first question, which will come from Michael Rose with Raymond James. Please go ahead.

Speaker 5: Hey, good morning guys, thanks for taking my questions. Maybe we could just start on credit quality and if we exclude the mountain express credit.

Hey, good morning, guys. Thanks for taking my questions, maybe we could just start on on credit quality and if we exclude the amount.

The Mountain Express credit you know it looks like there was some some moving pieces between charge offs and an M. P. As in specifically wanted to touch on you know what's going on in home equity saw there was a recovery, but then MTA is we're up and then if you can just I know you touched on it but if you can just delve into davita.

Speaker 5: It looks like there were some moving pieces that then charge off and MPAs and specifically wanted to touch on. You know what's going on in home equity so there was a recovery, but then MPAs were up. And then if you can just finally touch on it, but if you can just delve into Naveedis.

Speaker 5: You know, as we move forward, just given some of the challenges, you know, this quarter, I think when you guys announced this, I want going off memory here, but I think you talked about the business being kind of a.

We move forward just given some of the challenges this quarter I think when you guys announced this I'm going off memory here, but I think you talked about the business being kind of a 70 to 80 basis point through the cycle loss content business, obviously above that this quarter given some of the challenges that you referenced but just wanted to get some some updated thoughts there and then.

Speaker 5: 70 to 80 basis point through the cycle loss content business. Obviously above that this quarter, given some of the challenges that you referenced, but just wanted to get some updated thoughts there and then what expectations might be for that business as we move forward. Thanks.

You know what expectations might be for that business as we are as we move forward. Thanks.

Speaker 6: Thanks Michael, it's Rob Edwards. I would just say, you know, we do expect, while we do expect, and Lynn made the comment, the credit to Titan.

Thanks, Michael its Rob Edwards I would just say you know we do expect while we do expect and then made the comment the credit to a tightened.

Speaker 6: And the credit loss is economically to struggle in the future because of credit tightening and the rapidly increasing interest rates.

And the credit losses economically to struggle in the future because of credit tightening and the rapidly increasing interest rates, where we're not really seeing anything to.

Unknown Executive: Good morning and welcome to United Community Banks' third quarter 2023 earnings call. Hosting our call today are Chairman and Chief Executive Officer Lynn Harton, Chief Financial Officer Jefferson Harralson, President and Chief Banking Officer Rich Bradshaw, and Chief Risk Officer Robert Edwards. United's presentation today includes references to operating earnings, pre-tax, pre-credit earnings, and other non-gap financial information. For these non-gap financial measures, United has provided a reconciliation to the corresponding gap financial measure in the financial highlights section of the earnings release as well as at the end of the investor presentation.

Speaker 6: We're not really seeing anything to speak of yet. And so, if you scale everything back, our losses are down. If you include Naveedis from 20 basis points last quarter to 17 basis points this quarter, we did have, you mentioned a large recovery in the home equity space. That was a single credit kind of a unique circumstance from a credit that we had acquired.

To speak of yet and so you know if you have your scale everything back our losses are down. If you include Novartis from 20 basis points last quarter, just 17 basis points this quarter.

We did have the you mentioned the large recovery in the home equity space that was a single credit a kind of a unique circumstance from a credit that we had acquired.

Speaker 6: And not really seeing any drivers in the home equity space, it continues to perform well. Actually 50% of our home equity business is first lean business. So it's very strong portfolio.

And not but not really seeing any drivers in the home equity space. It continues to perform well actually 50% of our home equity business is first lien business. So it was very strong portfolio.

Unknown Executive: Both are included on the website at UCBI.com. Copies of the third quarter earnings release and investor presentation were filed this morning on form 8K with the SEC, and a replay of this call will be available in the investor relations section of the company's website at UCBI.com. Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on pages 5 and 6 of the company's 2022 form 10K, as well as other reviews. There are other information provided by the company and its filings with the SEC and included on its website.

Speaker 6: And as it relates to Naveed, I think when we purchased it, what I remember is sort of thinking of it as a 1% loss business. Clearly we are above that 1% number. And I think our recent guidance has been in the 95 basis point range.

And as it relates and Davita as I I think when we purchased it what I what I remember is sort of thinking of it as a 1% loss business clearly we are above that 1% number and I think our recent guidance has been in the 95 basis point range and Lynn made the comment that they were at 88 basis points.

Speaker 6: Lynn made the comment that they were at 88 basis points for the quarter if you take out this

For the quarter, if you take out this transportation portion of the portfolio, but the rest of the business outside of that long haul trucking aspect of it seems to be performing so far within our expectations.

Speaker 6: transportation portion of the portfolio, but the rest of the business outside of that long haul trucking aspect of it seems to be performing so far within our expectations.

Lynn Harton: At this time, I'll turn the call over to Lynn Harton. Good morning, and thank you for joining our call today. As you would expect, we continue to see influences of the higher rate environment this quarter. On the positive side, we had strong deposit growth and excellent liquidity. Customer deposits grew 314 million or 5% annualized this quarter, excluding the first Miami acquisition and the two branches we sold in Tennessee. We do continue to see movement into higher yielding deposit products, with DDA as a percentage of total falling slightly to 30% down from 31% last quarter.

Speaker 5: Okay, great. Maybe just as a follow up question, switching gears. Obviously rates move against you and every other bank. You know, this quarter, I know last quarter, you kind of talked about expansion.

Okay, Great maybe just as a follow up question switching gears.

Obviously rates moved against you in every other bank.

This quarter.

I know last quarter, you had kind of talked about expansion in.

Speaker 5: in the fourth quarter, at least on a core basis, kind of moving forward. Is that kind of still the expectations? Again, sorry if I missed this that hot ton light, but if you can talk about maybe some of the had winds that you guys feel faced, and then maybe some of the potential tail winds, I assume, not having any FHLB, and hopefully getting to a peak or close to a peak and deposit pricing increases will certainly help. But we love some greater color. Thanks.

In the fourth quarter at least on a on a core basis, you know kind of moving forward is that kind of still the expectations and against sorry, If I missed this I hopped on late but if you can talk about you know maybe some of the headwinds that you guys still face and then maybe some of the potential tail lines I assume you know not having any FH there'll be and hopefully.

Lynn Harton: Our liquidity position continues to be very strong. During the quarter, we were able to fund organic loan growth of 5.4% annualized, while paying down over 400 million in broker deposits, and still reaching over 750 million in cash equivalents at quarter end, all with essentially no short-term borrowings. Our loan to deposit ratio remained at 80%, providing ample liquidity to meet our customer's borrowing needs. Our margin continued to be impacted by rate competition and mixed change, but the rate of change has slowed.

Hopefully getting to a peak or close to a peak in deposit pricing increases will certainly help but would love some greater color. Thanks, yeah.

Speaker 3: Thanks Michael the talking about the margin in the fourth quarter and some of the trends that we are seeing

Thanks, Michael.

I'm talking about the margin in the fourth quarter and some of the trends that we are seeing.

Speaker 3: I do think the margin will be down a little bit in the fourth quarter, but not by as much as it was in the third. We have some.

I do think the margin will be down a little bit in the fourth quarter, but not by as much as it was in the third we have some some of the positives are we are seeing a slow down of the mix change with the G. D. A moving from 31% to up to 30.

Speaker 3: You know the positives are we are seeing a slow down of the mix change with the GTA moving from 31%

Lynn Harton: Our debt interest margin fell from 337 basis points last quarter to 324 basis points this quarter, a 13 basis point decline. Our rates are also impacting some of our weaker customers from a credit perspective. As previously disclosed, we took a $19 million charge off on the 8.7% share of a locally-based, shared national credit. We also wrote down two memory care centers which have been on a cruel, about $3 million, reflecting expected market value for the properties.

Speaker 3: to 30. We do get three basis points of benefit from paying down the brokerage.

We do get three three basis points of benefit from paying down the brokered.

Speaker 3: Mid quarter here, which is which will be a bit of a positive and what we were I guess what happened this quarter We really didn't raise rates

Mid quarter here, which is what you'll be a bit of a positive and what were you were well I guess what happened in this quarter, we really didn't raise rates are this quarter, but what we saw was our existing customers moving to our promotional money market rates choosing C. D's are moving too.

Speaker 3: uh... this quarter but what we saw was our existing customers moving to our promotional money market rates choosing cd

Speaker 3: moving to more expensive CDs in some cases. So it was kind of existing customer mix change because our new customers are coming on at reasonable rates, we're putting on new loans at high rates, but we're still getting customers seeking and finding higher rates.

A more expensive Cds in some cases, so it was kind of existing customer mix change because our new customers are coming on at reasonable rates, we're putting on new loans at higher rates, but we're still getting our customers seeking and finding higher rates within a bank, which we're actually we're happy about in some cases, where a call.

Lynn Harton: With the charges, our bank net charge off ratio, excluding Navitas, was 49 basis points, up from 15 basis points last quarter. Our Navitas subsidiary had increased charge off this quarter, due to higher losses coming from a relatively small exposure to the long haul trucking segment. Davidus' annualized charge-off rate for the quarter was 1.62 percent. Excluding the long-haul segment, charge-offs in the betas were approximately 88 basis points for the quarter. Taken together, our consolidated charge-off ratio for the quarter was 59 basis points up from 20 basis points last quarter.

Speaker 3: within a bank which we're actually we're happy about in some cases we're calling them and uh... and make sure they know about the rates that we have we have a

Bring them and and making sure they know about the rates that we have that we have out there.

Speaker 3: uh... by do think we're seeing is the in the loan yield you should continue at a similar pace moving higher in the cost of funds is going to be moving higher at a

But I do think what you're seeing is the you know the loan yield should continue at a similar pace moving higher and the cost of funds is gonna be moving higher.

At a slower pace. So I think what you'll see is again slight compression in Q4 and stabilization.

Speaker 3: So I think what you'll see is, again, slight compression and Q4 and stabilization to higher.

To higher next year.

Lynn Harton: These losses are somewhat unique, the majority of our portfolio continues to perform well, and our local economies continue to be very strong. However, we know from history that the combination of rapid interest rate increases and tightening credit conditions can weaken credit performance, at least in some business segments, where cautious in our lending and portfolio management strategies for this reason.

Speaker 5: Very helpful. And then maybe just one final one for me, the revenue outlook, you know, for you and other banks obviously remains challenged and a higher for longer.

Very helpful. And then maybe just one final one for me the revenue outlook you know for you and other banks, obviously remains challenged in a higher for longer.

Speaker 5: you know type environment, I know you've talked previously about kind of a four-ish percent, you know kind of expense.

Type environment I know you've talked previously about kind of a four ish percent kind of expense.

Speaker 5: you know, target as we move forward, but just wanted to see if, you know, there's any plans to maybe look to either formally or informally, you know, plan to reduce expenses and, you know, is there a possibility under that scenario where you could, you could experience positive operating levers, I share. Thanks.

Target.

As we move forward, but just wanted to see if.

If there was any plans to do.

Lynn Harton: In summary, our operating earnings this quarter were 45 cents per share, down 10 cents or 18 percent compared to last quarter. Our operating return on assets was 79 basis points for the quarter, and our pre-tax, pre-provision ROA was 144 basis points, down 21 basis points from last quarter.

So maybe look to either formally or informally you now plan to reduce expenses.

Is there a possibility under that scenario, where you could you could you could experience positive operating leverage next year. Thanks.

Speaker 3: So yes, I think so. We're in our budget process right now. We have, we close five branches. Rich can open on that to some in July . We sold the two branches that we had mentioned before that has a cost savings and a revenue impact to it, obviously. There's certain segments of our business where we are actively cutting expenses, namely mortgage, like a lot of banks are. So.

Yes, I think so or in our budget process right. Now we have we closed five branches our reps can opine on that to some end to end in July we sold the two branches that we had mentioned before that has a cost savings and a revenue impact a two it off obviously are there certain segments of our business.

Lynn Harton: On the strategic front, we closed on First National Bank of South Miami July 1st, a deal we announced on February 13th of this year. Conversion is scheduled for this weekend, and we look forward to having their outstanding team fully integrated with the company.

We are actively cutting expenses, namely a mortgage like a lot of banks are so.

Jefferson Harralson: Now, I'll ask Jefferson to provide more detail on our performance for the quarter.

Jefferson Harralson: Thank you, Lynn, and good morning to everyone. I am going to start my comments on page 7 and go into some more details on deposits. As Lynn mentioned, our total deposit balances were up $606 million in the quarter, with the addition of First National Bank of South Miami driving the increase. In the quarter, we had very strong business and consumer deposit growth of $314 million, which more than funded are $241 million of loan growth.

Speaker 3: So yes, we have many things that we're thinking about on the expense front and executing.

So yes, we have many things that we're thinking about on the expense front and are executing.

Speaker 3: And to give you a number, it's kind of hard to give a number right now because we are in the middle of our budget piece of it. But that 3% sounds like an okay target. But it's also an inflationary time period and we're kind of going through the individual budgets now. So my model hired in three, but I think we're going to shoot for that.

And to give you a number.

Kind of hard to give a number right now because we are in the middle of our budget piece of it but you know that.

At 3% it sounds like it okay target, but it's also an inflationary time period, and we're kind of getting going through the individual budgets now so.

My model higher than three but I think we're going to shoot for that.

Completely understand it's challenging out there I appreciate all the color thanks for taking my questions.

Jefferson Harralson: In addition to the strong deposit growth, we also had the proceeds of the sale of South Miami's $200 million securities book that allowed us to pay down $427 million of broker deposits, and also offset the sale of two branches in Tennessee, totaling $110 million in deposits that were outside our targeted footprint. We continued to see increased price competition in the third quarter that drove our cost of deposits of 39 basis points to 2.03 percent, and took our cumulative total deposit beta to 38 percent since the fourth quarter of 2021.

Speaker 4: Our next question will come from Catherine Meeler with KBW. Please go ahead.

Our next question will come from Catherine Mealor with K B W. Please go ahead.

Speaker 7: Thanks, Good morning. Why don't you just ask about your loan growth outlook. You've maintained a pretty steady growth pace. I feel like over the past few quarters, just curious how you're thinking about that until next year. And then also within that conversation, I noticed that Nisbita's growth total of this quarter is that something that you plan to continue through next year as well.

Thanks, Good morning wanted to ask about your loan growth outlook.

You maintain a pretty steady growth pace I feel like over the past few quarters, just curious how you're thinking about that into next year.

And then also within that conversation and then is that Davita grasp at all that this quarter is that something that you plan to continue through next year as well.

Speaker 8: Morning Catherine, this is Rich Bradshaw. How are you? Morning, I'm great.

Good morning, Catherine This is a rich Bradshaw how are you Oh great.

Speaker 8: We're still looking at the mid-single digit loan growth, but probably a little bit less than the pace in Q3. You know, recognizing higher interest rates and some of the stress out there. And we expect that to kind of continue into Q1. However, we are optimistic about the opportunity that some of the downsizing of banks are doing, that's going to create real opportunities on the customer side. So we're very optimistic about that.

The we're still looking at a mid single digit loan growth, but probably a little bit less than the pace in Q3.

Jefferson Harralson: Moving to page 8, we also saw continued deposit mix change in the third quarter, albeit at a sore pace as our DDA percentage moved at 30 percent from 31 percent last quarter. Our deposit base is growing, diversified between industries and geographies, and very granular.

Recognizing the higher interest rates and some of the stress out there and we expect that to kind of continue into Q1. However, we are optimistic about the opportunity that some of the downsizing of banks are doing that's going to create real opportunities on the customer side. So we remain very optimistic about that.

Speaker 3: And this is Jeopardy! And I'll take the Navitas question. Navitas trends were pretty similar on the growth front, but you'll notice that we sold more loans this quarter. We kind of leaned into selling a little bit more. We have...

And this is Jeff I'll take the question. If you just trends were pretty similar on the growth front, but you'll notice that we sold more loans. This quarter, we kind of leaned into selling a little bit more we have.

Jefferson Harralson: We turned to our loan portfolio on page 9. As I mentioned, we grew loans in the third quarter by $241 million, which is 5.4 percent annualized. On page 9, we also lay out that our loan portfolio is diversified, and generally more granular and less commercial real estate heavy as compared to peers. Turning to page 10, where we highlight some of our strengths of our balance sheet, while our customer deposits grew faster than loans, the effect of paying down the 427 million broker deposits pushed our loan to deposit ratio higher to 80%.

Speaker 3: Our Navita Sones are 8% of total loans. We like that ratio. We've talked about keeping it below 10, but our target is the 8% range. So I think you'll see us selling.

Our Nevada phones are 8% of total loans, we like that a ratio we've talked about keeping that below 10, but our target is is the 8% range. So I think you'll see us selling.

Speaker 3: Continu- as always the market is a accommodative and a minimal will continue selling a higher number loan to each quarter.

Container it that's all.

That market is accommodative and minimal well continue selling a higher number of loans each quarter.

Okay.

Jefferson Harralson: But this leaves us with virtually no host self funding remaining, which is a positive for 2024. Our TCE ratio and our CET-1 ratio, they were just down slightly in the quarter with the impact of South Miami, but remain just under 100 basis points higher than our peer mediums. On page 11, we take a deeper look at capital and we show a tangible book value waterfall chart. Our regulatory ratios also remain above peers, and mostly just slightly decreased with the investment into South Miami. Our leverage ratio increased 10 basis points with the delivering effect of paying down South Miami's securities book and paying down the broker funds.

What's your outlook for Davita as charge offs.

Speaker 6: How long do you feel our D-Cyclecy is kind of elevated level just given the trucking part of it? Do you think the next couple of quarters are D-Cyclecy? That's it. Can normalize back a little bit. No, we're thinking the same way you're thinking. Next couple of quarters, we think definitely next quarter will be similar to this quarter, but then thinking it will begin to subside early next year.

How long do you feel or do you think we'll see this kind of elevated level just given that the trucking.

Part of it is for the next couple of quarters or do you expect that to get.

Can normalize back a little bit.

No. We're thinking the same way you were thinking in next couple of quarters. We think definitely next quarter will be similar to this quarter, but then I'm thinking it will begin to subside early next year.

Okay.

Alright, great. Thank you.

Speaker 4: And our next question will come from Steven Scouten with Piper Sandler. Please go ahead.

And our next question will come from Stephen Scouten with Piper Sandler. Please go ahead.

Speaker 5: Hey, good morning, everyone. Maybe if I could go back to the margin here briefly, I know the episode used to be a lot of it was kind of existing customers.

Hey, good morning, everyone, maybe if I could go back to the to the margin here briefly I know Jackson, you said a lot of it was kind of existing customers.

Speaker 5: taking higher rates and then...

Taking higher rates in.

Jefferson Harralson: Moving on to the margin on page 12, the margin decreased 13 basis points compared to last quarter. Our loan yield increased 17 basis points similar to the increase of last quarter, with the new loans coming on in the mid 8% range, but our cost of total deposits was up 39 basis points to 2.03%. The main driver of the cost of total deposits increase was a tougher competitive environment in the form of higher deposit rates. But we also saw our balance sheet was more liquid than we had estimated, which cost us 2 basis points on the margin and offset other positive net mix changes.

Speaker 3: transactional counts and so forth. But I mean, I think you said maybe five bits to downside. Last quarter and we saw a close to 15 and then maybe expected stabilization in 4Q. And now it sounds like maybe 2024. So is there any other phenomenon that's pushing that out? I mean, the moving and low yields look pretty good. I'm just trying to decipher if there's anything I'm not seeing other than that. Than that move you talked about with existing customers on deposit prices. Yeah, that's pretty much it. Now we have been...

Transactional accounts and so forth, but I mean, I think you had said maybe five bit the downside last quarter and we saw closer to 15, and then maybe expected stabilization in <unk> and now it sounds like maybe 2024. So is there are there any other phenomenon, that's pushing that out I mean, the aluminum loan yields look pretty good I'm just trying to decipher if there's anything I'm not.

And other than that then that move you talked about with existing customers on deposit pricing, yeah, that's pretty that's pretty much. It now we have been.

Speaker 3: The other phenomenon here is we are growing to podets at a pretty good pace and when you're growing to podets it's going to be at market rates. So I feel like...

The other phenomenon here as we are growing deposits at a pretty good pace and when youre drawing deposits, it's going to be at market rates I feel like.

Speaker 3: The faster growth of the pod is also has a kind of a bit of a negative near-term impact on the current margin, but the main drivers, as we study it and get into it, is the existing customers moving to our more promotional rates, often with a call from our own, are people to make sure they're in the best rates of the bank's offers, the bank's offers. We really haven't.

The faster growth of deposits also has a kind of it.

A bit of a negative near term impact on the margin, but the main drivers as we study it and get into it is the as existing customers moving to our more promotional rates often what they call from our own or our people to make sure. They are in the best rates of the bank's offers.

Jefferson Harralson: Moving to page 13, non-interesting income was down 4.4 million dollars relative to the last quarter, mostly due to the absence of one-timers I mentioned last quarter. Notable items and fee income included an MSR right up of 1.1 million dollars and 2.2 million dollars in unrealized losses on equity investments that we do not expect to repeat regularly.

The bank has offered so we really haven't.

Speaker 3: you know moved up rates it's mostly it's mostly the impact of the victim customers moving into our promotional rates.

You know moved up rates, it's mostly it's mostly the impact of existing customers.

Jefferson Harralson: Expenses on page 14 came in at 135.5 million dollars up 6.5 million dollars. Excluding South Miami, we estimate that our core expenses were up just modestly. We are expecting 1.7 million dollars in quarterly cost savings to begin to materialize in Q4 and to be fully extracted in the first half of 2024.

Moving into our promotional rates.

Speaker 5: Okay. And I think you said last quarter, security's restructuring wasn't really on the table. But that do you change at all? Or do you think about the math on any the longer dated mortgage back at this point, if we really are in kind of a higher for longer environment at this point?

Okay.

I think you said last quarter securities restructuring wasn't really on the table that'd be changed at all or I mean, do you think about the math on any of the longer dated mortgage backs at this point. If we really are in kind of a higher for longer environment at this point.

Speaker 3: You know, we haven't, we run the math on it. We see the numbers. We have not seriously considered this right now. We do have the ability to do this with the high, with higher capital ratios that take a capital hit and reinvest that into higher investing securities, but it's not something that we have seriously considered as of yet.

Yeah, we haven't we run the math on it and we see the numbers they have not seriously considered that's right now we do have the ability to do this with a high with higher capital ratios that take a capital hit and.

Jefferson Harralson: When covered the charge-off and credit trends well in his remarks, but I will talk on the balance for credit losses on page 16. We set aside $30.3 million to cover $26.6 million in net charge-offs. In addition to that $3.7 million difference, we added another $3.7 million into the reserve with the South Miami PCD Mark. Our balance for credit losses as a percentage of loans are mean essentially flat in our coverage of NPAs improved with the improvement of NPAs.

Reinvest that into higher investing securities, but it's not something that we have.

Seriously considered as of yet.

Speaker 5: Okay, and then I guess maybe lastly for me, just high level kind of any other, and then you said the Tennessee branches were kind of out of market, any other...

Okay.

I guess, maybe the last thing for me just high level kind of any other I know you said, the Tennessee branches were kind of out of market any other.

Speaker 5: Branch footprint, the parsing that we would expect to see and then kind of conversely, is M&A still more of a mid to late 24 potential endeavor or there is activity changing there that might precipitate anything in your term.

Branch footprint parsing that we would expect to see and then kind of Conversely.

Is M&A still more of a mid to late 'twenty four potential endeavor or is activity changing there that might precipitate anything near term.

Lynn Harton: With that, I'll pass it back to Lynn. Thank you Jefferson, and many thanks to the United team. I appreciate your focus on living our purpose, building our communities, and I look forward to continuing to succeed together.

Speaker 8: Steven, this is Rich. I'll touch base first on the branch question. We're going through the budget process now. We continue to always evaluate this on profitability and what makes sense in place in the market. So it seems to happen every year. So we'll continue on that process.

Yeah. Steven this is rich I'll touch base first on the branch question, we're going through the budget process now we continue to always evaluate this on profitability and what makes sense in place in the market. So that'll be it happens as it seems to happen every year. So I will continue on that process.

Unknown Executive: And now I'd like to open the floor for questions. We will now begin the question and answer session. To ask a question, you may press star than one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two.

Speaker 2: yeah and uh... the more this is land on the on the emanate side y'all i still expect it to be slow in the reasons for that really uh... primarily because of the marks you take it's really

Yeah. Good morning. This is land on that on the M&A side, Yeah, I still expect it to be slow and the reasons for that really are primarily because of the marks you take its really.

Speaker 2: in a normal environment two things happen one is you don't have these big marks number two we always budget for pretty flat loan growth in an m&a transaction initially just because you know you have new policies people dealing with change you might have a great franchise but uh... and that's what we always shoot for but but it's just difficult for the teams coming on

Michael Rose: At this time, we will take our first question, which will come from Michael Rose with Raymond James. Please go ahead. Hey, good morning guys. Thanks for taking my questions. Maybe we could just start on credit quality. And if we exclude the non-expressed credit, it looks like there were some moving pieces within charge-offs and MPAs and specifically wanted to touch on what's going on in home equity. So there was a recovery, but then MPAs were up.

In a normal environment two things happen. One is you don't have these big marks number two we always budget for pretty flat loan growth in a M&A transaction. Initially just because you know you have new policies you people dealing with change you might you know I have a great franchise, but I mean, that's what we always shoot for.

But but it's just difficult for the teams coming on and so in this environment, but you know typically then we can bring in our other products and all and kind of grow through that and just honestly in a slower loan growth environment is harder to grow through that and then you've got the larger marks upfront. So it's.

Speaker 2: And so in this environment, but typically then we can bring in our other products and all and kind of grow through that. And just honestly in a slower, low growth environment is harder to grow through that. And then you've got the larger marks up front. So it's kind of a math question right now, and not I think probably for...

Michael Rose: And then if you can just finally touch on it, but if you can just delve into Naveedis, as we move forward, just given some of the challenges, the score. I think when you guys announced this, I won't go off memory here, but I think you talked about the business being kind of a 70 to 80 basis point through the cycle loss content business. Obviously above that, this quarter, given some of the challenges, the reference, but just wanted to get some updated, you know, foster there.

A math question right now and not I think probably for you know mid next year or something that it's going to be slow overall for for traditional M&A.

Speaker 2: you know, mid next year or something, it's gonna be slow overall for traditional M&A.

Speaker 9: Yep, that makes a lot of sense, Lynn. Thank you all for the color. Appreciate the time.

Yep that makes a lot of influence. Thank you all for the color appreciate the time.

Michael Rose: And then, you know, what expectations might be for that business as we as we move forward. Thanks. Thanks, Michael. It's Rob Edwards. I would just say, you know, we do expect, while we do expect, and Lynn made the comment, the credit to Titan, and the credit losses economically to struggle in the future because of credit tightening and the rapidly increasing interest rates, we're not really seeing anything to speak of yet. And so, you know, if you scale everything back, our losses are down.

Thanks to you.

Speaker 4: Our next question will come from Christopher Maranac with Janie. Please go ahead.

Our next question will come from Christopher Merrimack with Janney. Please go ahead.

Speaker 3: Thanks, good morning. I wanted to ask if there is an internal limit on sort of disheard national credits and club deals and things of that nature, just curious kind of if that is gonna change at all as a result of last quarter's experience.

Thanks, Good morning wanted to ask if there is an internal limit on sort of the shared national credits and club deals and things of that nature. Just curious kind of if if that is going to change at all as a result of last quarter's experience.

Speaker 6: Hey Chris, it's Rob. We do have an internal limit. All the sub-segment of the portfolio have triggers and limits established. We are right now very low and quite a bit below the limit that we have established. And we really consider this one credit to be an outlier and not really representative of what we would expect from that portfolio.

Hey, Chris it's Rob.

We do have an internal limit all the sub six sub segments of the portfolio have triggers and limits established.

Michael Rose: If you include Naveedis from 20 basis points last quarter to 17 basis points this quarter, we did have the, you mentioned a large recovery in the home equity space that was a single credit, kind of a unique circumstance from a credit that we had acquired. And not really seeing any drivers in the home equity space, it continues to perform well. Actually, 50% of our home equity business is first lean business, so it's very strong portfolio.

We are right now very low end.

And quite a bit below the limit that we have established and we really consider this one credit to be an outlier and not really representative of.

What we would expect from that portfolio.

Speaker 1: Great and Rob, I guess just a general question about the reserve level. I mean given that the charge of comments that were made earlier, does this reserve level kind of cover that? And would you see kind of gradually increasing reserves next year?

Great and Rob I guess, just a general question about the reserve level I mean, given that the reserve army that charge off comments that were made earlier that does this.

Is there a level kind of cover that or would you see kind of gradually increasing reserves next year.

Michael Rose: And as it relates to Naveedis, I think when we purchased it, what I remember is sort of thinking of it as a 1% loss business. Clearly, we are above that 1% number. And I think our recent guidance has been in the 95 basis point range. And Lynn made the comment that they were at 88 basis points for the quarter. If you take out this transportation portion of the portfolio. But the rest of the business outside of that long haul trucking aspect of it seems to be performing so far within our expectations.

Speaker 6: So we have increased the reserve by $40 million this year and we did increase the reserve by about $50 million last year.

[noise].

So we have increased the reserve by $40 million this year and we did increase the reserve by about $50 million last year.

Rob Edwards: Okay, great.

Speaker 6: really the reserve is driven by asset quality in general.

Really they are you know the reserve is driven by asset quality in general portfolio mix loan growth and now that sort of the economic forecast and our more recently, it's been about the economic forecast and so you know given the last two years.

Speaker 6: portfolio mix loan growth and now this or the economic forecast and uh... more recently it's been about the economic forecast and so uh... you know given the last two years i could see uh... the allowance growing uh... and i'd like my personal opinion would be with sort of projecting uh... moderate

Ears, I could see the allowance growing and I my personal opinion would be with sort of projecting moderate to low loan growth that it would probably be more likely be the economic forecasting and economic experience that ends up driving.

Michael Rose: Maybe just as a follow-up question, you know, switching gears. Obviously, rates move against you and every other bank, you know, this quarter. I know last quarter, you kind of talked about expansion in the fourth quarter, at least on a four basis, you know, kind of moving forward. Is that kind of still the expectations? And again, sorry if I missed this, I've done life. But if you can talk about, you know, maybe some of the headwinds that you guys feel faced, and then maybe some of the potential tailwinds, I assume, you know, not having any FHLB and, you know, hopefully getting to a peak or close to a peak and deposit pricing increases, you know, will certainly help.

Speaker 6: to low loan growth that it would probably be more likely be the economic forecasting and economic experience that ends up driving

Both if there is any.

Speaker 2: Got it. And the last question I'll credit is just related to kind of the combined substandard and special mention. I know it's hard to compare with past cycles because the company is so radically different in terms of your portfolio and scale. But is the criticized numbers combined? Could those elevate next year or would you kind of think about Managing those more stable?

Got it and then just last question I'll credit is just related to kind of a combined sub standard and special mention I know its hard to compare with past cycles of the company. So radically different in terms of your portfolio and scale, but is the criticized numbers combined could those elevate next year or would you kind of think about managing those more.

Speaker 6: So, you know, if I look, and if you look back on the chart, you know, it was 4.1 at the beginning of 2020. If you combine the two numbers, you're at 4.1 percent of the loan portfolio. And right now, we're at 2.9. So, I would expect the numbers to increase. It sort of feels like we're at a low spot at the moment. I would call it more of a normalization than anything else.

Table.

So.

Michael Rose: But we love some greater colleagues. Thanks. Thanks, Michael. The talking about the margin in the fourth quarter and some of the trends that we are seeing. I do think the margin will be down a little bit in the fourth quarter, but not by as much as it was in the third. We have some, you know, the positives are we were seeing a slow down of the mix change with the GDA moving from 31% to 30.

If I look at it and if you look back on the chart.

It was 4.1 at the beginning of 'twenty 'twenty. If you combine the two numbers you're at four 1% of the loan portfolio and right now we're at 2.9 so.

I would expect the numbers to increase it sort of feels like we're at a low spot at the moment I would call it more of a normalization than anything else.

Speaker 3: Sure, that's helpful. Thank you very much for the background. I appreciate it.

Sure. That's helpful. Thank you very much for that background I appreciate it.

Michael Rose: We do get three, three basis points of benefit from paying down the broker mid quarter here, which is, which will be a bit of a positive. And what we were, I guess what happened in this quarter, we really didn't raise rates. This quarter, but what we saw was our existing customers moving to our promotional money market rates, choosing CDs, moving to more expensive CDs in some cases. So it was kind of existing customer mix change, because our new customers are coming on at reasonable rates, we're putting on new loans at high rates, but we're still getting customers seeking and finding higher rates within a bank.

Yeah.

Speaker 4: And our next question will come from Russell Gunther with Stevens. Please go ahead.

And our next question will come from Russell Gunther with Stephens. Please go ahead.

Speaker 4: Hey, good morning guys. Just to follow up, I appreciate the commentary on the Vitas losses and how you'd expect that to trend. So let's be thinking about that normalizing in the beginning and next year and potential credit migration in the core bank. How are you guys thinking about aggregate charge offs on appropriate range in 24?

Hey, good morning, guys.

Follow up I appreciate the commentary on the VITAS losses, and how you'd expect that to trend. So as we think.

Think about that normalizing in the beginning of next year.

And you know potential credit migration in the core bank. How are you guys thinking about aggregate charge offs.

Unappropriate range in 'twenty four.

Speaker 6: So I think what we have said previously is that we would see ourselves as a 30 basis point loss rate through the cycle type of experience. And so that's sort of is how I think of it if things normalize. Now, if I take out this outlier, you know, we were at 20 basis points last quarter and 17 basis points this quarter. And that's with the Navitas sort of.

So I think what we have said previously is that we would see ourselves as a 30 basis point loss rate through the cycle type of experience and so that's sort of is how I think of it if things normalize now if I take out. This outlier you know we were at 20 basis points.

Michael Rose: Which we're actually we're happy about in some cases, we're calling them and making sure they know about the rates that we have that we have out there. I do think what you're seeing is the the loan yield should continue at a similar pace moving higher and the cost of funds is going to be moving higher at a slower pace. So I think what you'll see is again slight compression and Q4 and stabilization to higher next year.

Last quarter, and 17 basis points this quarter and that's with the Davita is sort of higher losses from the transportation sector included so.

Speaker 6: higher losses from the transportation sector included. So, but that's what we've said in the past is sort of a 30 basis point business.

But that's what we've said in the past is sort of a 30 basis point business.

Speaker 10: So no change to the outlook there, I got it. And then just to follow up on the margin conversation, Jefferson appreciate the high level commentary, could you just share a bit about what you're anticipating in there from a continued remixed perspective at a non-intersparing and then how you guys would expect the loan to the positive ratio to transfer here. Do you want to actively manage around 80% because that drift higher, just to update it up.

Okay.

Michael Rose: Very helpful and then maybe just one final one for me, the revenue outlook for you and other banks obviously remains challenged in a higher for longer type environment. I know you've talked previously about kind of a 4% kind of expense target as we move forward, but just wanted to see if there's any plans to maybe look to either formally or informally. You know plan to reduce expenses and you know is there a possibility under that scenario where you could you could you could experience positive operating levers that share thanks.

No change to the outlook there got it and then just a follow up on the margin conversation Jefferson I appreciate that.

High level commentary could you just share a bit about what youre anticipating in there from a continued remix perspective out of noninterest bearing and then how you guys would expect the loan to deposit ratio to trend from here or do you want to.

Actively managed around 80% could that drift higher just some updated thoughts. Thank you yes.

Speaker 3: Yes, so the, so the mix change elements should be generally in our favor, I believe, for at least for the first half of the year where you have the security portfolio continuing to shrink and the loans continuing to grow modestly. So you should have a positive mix change on the at the time.

Yeah. So the so the mix change elements should be generally in our favor I believe for at least for the first half of the year, where you have the securities portfolio, continuing to shrink and the loans continuing to grow modestly. So you should have a positive mix change on the asset side.

Michael Rose: So yes, I think so we're in our budget process right now. We have we close five branches, ribs can open on that to some in in July. We sold the two branches that we had mentioned before that has a cost savings and a revenue impact to it obviously. There's certain segments of our business where we are actively cutting expenses, namely mortgage like a lot of banks are. So so yes, we have many things that we're thinking about on the expense front and and executing.

Speaker 3: The DDA piece is a little tougher. We have been seeing a slowdown there and it's given me encouragement that we could continue to see a slowdown.

The DDA piece is a little tougher we have been seeing a slow down there and it's giving me encouragement that we could continue to see a slowdown.

Speaker 3: especially if race don't rise a lot more from here. That said, we're currently, you know, modeling a 27% number and some of the forecasts that we are making, but it's the most recent results have been better than that and encouraging that maybe it could be better than that, but we also are seeing that again, this trend towards our customers moving.

Especially if rates don't rise a lot more from here.

That said, we're currently modeling a 27% number and some of the forecast that that we are making but it's the or our most recent results have been better than that and encouraging that maybe it could be.

Michael Rose: And to give you a number is kind of hard to give a number right now because we are in the middle of our budget piece of it, but you know that that 3% sounds like an okay target, but it's also an inflationary time period and we're kind of going through the individual budgets now. So my model higher than three, but I think we're going to shoot for that. Completely understands it's challenging out there appreciate all the colors.

Better than that but we also are seeing that again this trend towards.

Or are customers moving into higher rate products and.

Speaker 3: And I feel like you have another part of that question that made, oh, the low end deposit ratio. So, yeah, I would think that low end deposit ratio could inch a little higher. You know, we have a good funding base. We are gonna be, I think using the strength of our balance sheet and some of the deposit growth that we've been seeing and we've been seeing good deposit growth and we're encouraged by what we're seeing here in October that I think you have us be a little more.

And I feel like you had another part of that question that may not have all the loan to deposit ratio. So yeah, I would take that loan to deposit ratio could inch a little higher.

We have a good funding base, we're gonna be Oh.

I think using the strength of our balance sheet and some of the deposit growth that we've been seeing and we've been seeing good deposit growth and we're encouraged by what we're seeing here in October that they can have us be a little more.

Michael Rose: Thanks for taking my question.

Catherine Mealor: Our next question will come from Catherine Mealor with KBW. Please go ahead. Thanks Good morning. I want you to ask about your loan gross outlook. You maintain a pretty steady growth pace. I feel like over the past few quarters. Just curious how you're thinking about that into next year.

Speaker 3: conservative and the rates that we are putting out there into the next uh... few months and to the next year so i think um... if we can manage this exactly how we want to you would see the deposit growth flow down a little bit the loan of deposit ratio inch a little bit better and for us to have a better uh... cost of funds experience

The conservative and the rates that we are putting out there until the next.

A few months into next year, So I think.

If we can manage this exactly how we want to you would see the deposit growth slow down a little bit of a loan to deposit ratio and you're a little bit better and for us to have a better cost.

Rich Bradshaw: And then also within that conversation, I noticed that Nazita's gross total of this quarter is that something that you plan to continue through next year as well. Good morning, Catherine. This is Rich Bradshaw, how are you? Good morning. I'm great. We're still looking at the mid single digit loan growth, but probably a little bit less than the pace in Q3. Recognizing higher interest rates and some of the stress out there. And we expect that to kind of continue into Q1. However, we are optimistic about the opportunity that some of the downsizing of banks are doing. That's going to create real opportunities on the customer side. So we're very optimistic about that.

Cost of funds experience.

Speaker 10: Really helpful. Thank you. And then just lastly on the loan growth outlook, which I believe you guys are saying mid single digit.

Okay.

Really helpful. Thank you and then just lastly on the loan growth outlook, which I believe you guys are saying mid single digits.

Speaker 10: How do you think about the contribution via asset class in any particular geography?

How do you think about the contribution the asset class in any particular.

Geographies are of strengths there.

Speaker 8: This is Rich. We'll see it, I think, change a little bit of the mix, a little bit away from CRE into C&I. We've got several different initiatives that we're working through. Our biggest geography contributor this past quarter is North Carolina, and they led the bank in C&I. So we've leveraging their experience across the footprint. And so that's how I kind of think about this.

So this is a rich where I'll see it I think changed a little bit of the mix a little bit away from CRE into C&I. We've got several different initiatives that we're working through our biggest geography a contributor this past quarter was North Carolina and they lead the bank in C&I. So we've we've leveraged.

Jefferson Harralson: And this is Jeff percent.

Jefferson Harralson: I'll take the Navitas question. Navitas trends were pretty similar on the growth front, but you'll notice that we sold more loans this quarter. We kind of leaned into selling a little bit more. We have our Navitas loans are 8% of total loans. We like that ratio. We've talked about keeping it below 10. But our target is. It is the 8% range. So I think you'll see us selling. Continue as always, the market is accommodative and minimal will continue selling a higher number loan, each quarter.

Their experience across the footprint and so that's how I kind of think about that.

Speaker 8: like about tenisee and from the yes uh... and uh... in tenisee it's uh... the good story for us you know we put our new uh... state president there kelly kee in over the last three months

Talking about Tennessee, and some of them, yeah, yes, and and Tennessee It's.

A good story for US you know, we put our new state President there Kelly key and over the last three months, we've hired a 20 commercial professionals.

Speaker 8: we've hired uh... twenty commercial professionals and uh... already not pipelines but closing for those of paid really good dividends it's gonna take a little bit more time to turn that ship but i think we're gonna start seeing the very positive results of that first quarter certainly second quarter next year

And already not pipelines, but closings would those have paid really good dividends, it's going to take a little bit more time to turn that ship, but I think we're going to start seeing the very positive results of that if not first quarter certainly second quarter next year.

Catherine Mealor: What's your outlook for Navitas charge off? How long do you feel or do you think we'll see this kind of elevated level just given the trucking part of it for the next couple of quarters or do you expect that to normalize back a little bit? No, we're thinking the same way you're thinking next couple of quarters. We think definitely next quarter will be similar to this quarter, but then thinking it will begin to subside early next year. Okay, great.

Catherine Mealor: Thank you.

Speaker 10: That's great. Thank you guys. That's it for me. Thanks for watching.

That's great. Thank you guys. That's it for me Thanks Russell.

Speaker 4: Our next question will come from Brandon King with truest. Please go ahead. Hey.

Our next question will come from Brandon King with Truest. Please go ahead.

Hey, good morning, good morning, Brandon.

Speaker 11: So, so, Jefferson, could you quantify what the spot cost of the process was at the end of the quarter and then what is the new rate for new relationships and new deposit customers?

So Jefferson could you quantify what the spot cost of deposits was at the ended the quarter and then what is the new rate for it for new relationships new deposit customers.

Yeah. So this.

Steven Scouten: And our next question will come from Steven Scouting with Piper Sandler. Please go ahead. Hey, good morning, everyone. Maybe if I could go back to the margin here briefly, I know Jeff sent a lot of it was kind of existing customers. Taking higher rates and transactional counts and so forth. But I mean, I think you said maybe five bits to downside last quarter and we saw closer to 15 and then maybe expected stabilization for Q and now it sounds like maybe 2024.

Speaker 3: The average quarter was 202 and the spot was probably five basis points higher than that.

Cost of deposits was.

First quarter was 202 in a spot was probably five basis points higher than that.

For the block.

Speaker 3: Well, I call that for the exactly spot, but for the month of September .

So I called out for the not exactly spot, but for the month of September .

Speaker 3: on average and new deposit relationships came in. I want to get, I want to have two numbers floating in my head here. Let's talk offline. I'll get to the actual number. I don't want to say the wrong number. Wow, I do have that number, but I don't have it. I have two numbers that are in my head right now. So I want to make sure I get you the right one. Okay. It's probably working.

On average and new deposit relationships came in and I wanted to get I want to have.

I have two numbers floating in my head here, let's talk offline I'll get you. The actual number I don't want to say the wrong number.

Oh, Wow I do have that number but I don't have it.

I have two numbers that are in my head right now so I want to make sure I get you the right one.

Steven Scouten: So is there any other phenomena pushing that out? I mean, the moving and loan yields look pretty good. I'm just trying to decide for presenting. I'm not seeing other than that than that move you talked about with existing customers on deposit. Yeah, that's pretty that's pretty much it. Now we have been grow the other phenomenon here is we are growing to pod is at a pretty good pace. And when you're growing to pod is going to be at market rates, I feel like the faster growth of the pod is also has a kind of a bit of a negative near term impact on the current margin.

Yes.

Yeah.

Speaker 8: hang on one second brando uh... probably noting we had to pause the pricing committee this past monday we all the state presidents on surveying them each individually their exception price request are certainly down so it is we do see a little calming of the water

Hang on one second brand and it's probably worth noting we had deposit pricing committee. This past Monday, we had all of the state presidents on and surveying them. Each individually they're exception pricing requests are certainly down. So it is we do see a little calming of the water here.

Speaker 11: Good, good. And then when you think about accumulative deposit beta, and number four, I think he talks about 38%. But what are your thoughts on now, just given that rates would, you know, since we'd be higher for long.

Good good.

And then when you think about cumulative deposit beta.

I think he talked about 38 per se, but what are your thoughts are now.

Steven Scouten: But the main drivers as we study it and get into it is the existing customers, you know, moving to our more promotional rates, you know, often what they call from our own. And our people to make sure they're in the best rates of the banks offers the bank is offers we really haven't, and moved up rates. It's mostly the impact of existing customers moving into our promotional rates. Okay, and I think you said last quarter, security is your structure and wasn't really on the table.

Just given that you know rates would be.

The higher for longer.

Speaker 3: That's a great question. And we are doing our budget right now, and I want to talk, we don't have a 24 forecast for our margin out there right now, or our cost of funds, so let's stay in touch on this one. And I do think, what you're gonna see, I'll give you a shorter term outlook, I do think.

Yep Yep.

That's a great question.

Unless.

We are doing our budget right now and I want to talk about we don't have a 24 forecast.

For our margin out there right now or our cost of funds. So let's stay in touch on this one and I do think what you're going to see I'll give you a shorter term.

Outlook I do think.

Speaker 3: that are loan yields will be up a similar amount as last quarter. So call that 18 basis points. And then with the margin guidance, I gave you of being down maybe half as much as last quarter, you can back into a cost of deposit increase that we're thinking about this quarter.

That our loan yields will be up a similar amount as last quarter. So call that about 18 basis points and then with the margin guidance that I gave you.

Steven Scouten: Has that been changed at all, or do you think about the math on any of the longer dated mortgage back at this point, if we really are in kind of a higher, for longer environment at this point? You know, we run the math on it. We see the numbers. We have not. Like seriously, considered this right now. We do have the ability to do this with the high, with higher capital ratios that take a capital hit and reinvest that into higher investing securities, but it's not something that we have seriously considered as of yet.

Of being down maybe half as much as the last quarter you can back into a cost of deposit increase that we're thinking about this quarter.

Speaker 3: So I think it is continuing to grow faster than loans. And then we'll get into budget season and talk about what our 24 forecast is next quarter.

So I think it is growing it is continuing to grow faster than loans and then.

We'll get into budget season, and talk about what our 24 forecast as next quarter.

Speaker 11: Okay. Make sense. And just not to be the dead horse, but following up on the Venus and the expectations for losses to kind of ease next year. Just want to get more of a sense of what gives you confidence that losses will ease. And maybe it's just more of a function of that trucking segment just kind of running off.

Okay.

Makes sense and just not to beat a dead horse, but following up on the Vita and the expectations for losses to kind of E. Next year, just wanted to do it more of a sense of what gives you confidence that losses.

Rich Bradshaw: Okay, and then I guess maybe lastly to me, just high level kind of any other, I think to the Tennessee branches, we're kind of out of market any other branch footprint parsing that we would expect to see and then kind of conversely, is M&A still more of a mid-delay 24 potential endeavor or there is activity changing there that might precipitate anything in your turn? Yes, Stephen, this is Rich. I'll touch base first on the branch question.

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Maybe is it just more of a function of that trucking segment, just kind of running off.

Speaker 6: Yeah, I think that's exactly the way I would describe it, Brandon, is that the trucking segment is...

Yeah, I think I think that's exactly the way I would describe it Brandon is that the trucking segment is.

Speaker 6: I think if you add all the different trucking aspects of it together, I think it's 10% of the total portfolio. And then this specific piece where we're experiencing the highest stress level is much smaller than that, is probably 3%. So it's just such a small portion of the overall book, and we're continuing to see consistent performance of the remainder of the book evidenced by the 88 basis points of performance in the third quarter.

I think if you add all the different trucking aspects of it together I think it's 10% of the total portfolio and then the specific piece, where we're experiencing the highest stress level is.

Rich Bradshaw: We're going through the budget process. Now we continue to always evaluate this on profitability and what makes sense at place in the market. So that will be, it happens, it seems to happen every year. So we'll continue on that process.

So much smaller than that so probably 3%. So it was just such a small portion of the overall book and we're continuing to see consistent performance of the remainder of the book evidenced by the 88 basis points of our performance in the third quarter.

Lynn Harton: Yeah, and good morning, this is Lynn on the M&A side. Yeah, I'm still expected to be slow and the reasons for that really, primarily because of the marks you take, it's really in a normal environment, two things happen. One is you don't have these big marks. Number two, we always budget for pretty flat loan growth in an M&A transaction initially just because you have new policies, people are dealing with change. You might have a great franchise, but I mean that's what we always shoot for, but it's just difficult for the teams coming on.

Yeah.

Yeah.

Speaker 4: Our next question will come from a David Bishop with Healthy Group. Please go ahead.

Our next question will come from David Bishop with Hefty Group. Please go ahead.

Speaker 3: Yeah, good morning. Thanks for taking my question. Hey, Jefferson, I think I heard you mentioned that you guys were operating with a little bit higher elevated the question.

Yeah. Good morning, Thanks for taking my question.

Jefferson I think I heard you mentioned that you guys for.

Operating with a little bit higher elevated liquidity.

Last quarter maybe.

Speaker 1: You know, where you think you see some of that cash being deployed here on the near term, but obviously you paid off a lot of the short term barring. Just curious where you see the opportunity to deploy that.

You know where do you think you see some of that cash being deployed here in the near term. Obviously you paid awful lot of out of the short term borrowings just curious where you see the opportunity to deploy that.

Lynn Harton: And so in this environment, but typically then we can bring in our other products and all and kind of grow through that. And just honestly, in a slower loan growth environment, it's harder to grow through that. And then you've got the larger marks up front. So it's kind of a math question right now, and I think probably for mid next year or something, it's going to be slow overall for traditional M&A. Yep, that makes a lot of sense, Lynn.

Speaker 3: Yeah, with the inverted yoke curve, I'm not seeing a ton of opportunities there. We are most likely to hold in cash or roll short treasuries with that cash.

Yeah with the inverted yield curve I don't I'm not seeing a ton.

Of opportunity there.

We are.

Most likely to hold it in cash or roll short treasuries with with that cash.

Speaker 3: Got it. And then thought of question, you know, there's lots of attack on them. Obviously, you know, given the merger on the operating expense and see and come side, just curious maybe from a dollar perspective where you might see those normalizing gear in the fourth quarter.

Got it and then final question you know there was lots of attack on that.

Obviously, you know given the merger on the operating expense on the income side, just curious maybe from a dollar perspective, where you might see those normalizing here.

Unknown Executive: Thank you all for the call. I appreciate your time. Next to you.

Christopher Marinac: Our next question will come from Christopher Maranac with Jenny. Please go ahead. Thanks.

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Speaker 3: I did not completely hear a piece of that question. Can you, I know it's an expensive related question, but I didn't totally hear what you said there. Apologies, David.

Alright, so I did not completely here a piece of that question can you I know, it's an expense related question I know I didn't totally hear what you said there apologies David.

Rob Edwards: Good morning. I wanted to ask if there is an internal limit on sort of disheard national credits and club deals and things of that nature. Just curious if that is going to change at all as a result of last quarter's experience. Hey Chris, it's Rob. We do have an internal limit. All the sub segments of the portfolio have triggers and limits established. We are right now very low and quite a bit below the limit that we have established and we really consider this one credit to be an outlier and not really representative of what we would expect from that portfolio.

Speaker 3: Oh sure, yeah, just with the impact of first Miami being fully layered in this next quarter, where you might see operating expenses of V income normalizing on the dollar basis in the fourth quarter near term. Yeah, I would expect expenses to be down on an absolute basis in the fourth quarter. As we get the cost savings, we want to share the cost savings from.

Oh sure Yeah, just with the you know the impact of first Miami being fully layered in this next quarter, where you might see operating expenses or fee income normalizing on a dollar basis in the fourth quarter and near term.

I would expect expenses to be down on an absolute basis in the fourth quarter as we get the cost savings we have a lion's share of the cost savings from.

Speaker 3: South Miami this quarter. And fees I think should be, you know, we wait up a two non-operating item. So the base is about a million dollars higher than what you see here. We are seeing good underlying growth in our wealth management and our treasure management businesses.

South Miami this quarter and fees I think should be.

We laid out the two nonoperating items. So the debate is about a million dollars higher than what you see here we.

Rob Edwards: Great, and Rob, I guess just a general question about the reserve level. I mean, given that the reserve, I mean, the charge-off comments that were made earlier, does this reserve level kind of cover that, and would you see kind of gradually increasing reserves next year? So we have increased the reserve by $40 million this year, and we did increase the reserve by about $50 million last year. Really, the reserve is driven by asset quality in general, portfolio mix, loan growth, and now this, or the economic forecast, and more recently, it's been about the economic forecast.

We are seeing good underlying growth in our wealth management and our Treasury management business is.

Speaker 3: Mortgage is a bit of a wild card, but I think you should see Net growth off of that slightly higher base with the two adjustments that we laid out for you

Mortgage is a bit of a wildcard.

But I think you should see.

Net growth off of that a slightly higher base with the two adjustments that we laid out for you.

Perfect. Thank you for that color.

Speaker 4: And this concludes our question and answer session. I'd like to turn the conference back over to Lynn Harton for any closing remarks.

And this concludes our question and answer session I'd like to turn the conference back over to Lynn Harton for any closing remarks.

Rob Edwards: And so, given the last two years, I could see the allowance growing, and my personal opinion would be with sort of projecting moderate to low loan growth, that it would probably be more likely be the economic forecasting and economic experience that ends up driving growth if there is any. Got it.

Speaker 2: Great, well thank you all once again for joining the call and we'll glad to follow up with any additional questions just reach out and we will talk to you soon. Thank you.

Great well. Thank you all once again for joining the call and we'll be glad to follow up with any additional questions just reach out and we will talk to you soon thank you.

Speaker 4: The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your line.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.

Rob Edwards: And then just last question, I'll credit, is just related to kind of the combined substandard and special mention. I know it's hard to compare with past cycles because the company is so radically different in terms of your portfolio and scale, but is the criticized numbers combined? Could those elevate next year, or would you kind of think about managing those more stable? So, if I look, and if you look back on the chart, it was 4.1 at the beginning of 2020.

Rob Edwards: If you combine the two numbers, you're at 4.1 percent of the loan portfolio. And right now, we're at 2.9. So, I would expect the numbers to increase. It sort of feels like we're at a low spot at the moment. I would call it more of a normalization than anything else. Sure, that's helpful.

Rob Edwards: Thank you very much for the background. I appreciate it.

Russell Gunther: And our next question will come from Russell Gunther with Stevens. Please go ahead. Hey, good morning, guys. Just to follow up, I appreciate the commentary on the Vedas losses and how you'd expect that to trend. So, as we think about that normalizing in the beginning and next year, and potential credit migration in the core bank, how are you guys thinking about aggregate chargeoffs on appropriate ranges in 24? So, I think what we have said previously is that we would see ourselves as a 30 basis point loss rate through the cycle type of experience.

Russell Gunther: And so, that sort of is how I think of it if things normalize now. If I take out this outlier, we were at 20 basis points last quarter and 17 basis points this quarter. And that's with the Vedas sort of higher losses from the transportation sector included. But that's what we've said in the past is sort of a 30 basis point business.

Jefferson Harralson: Okay. So, no change to the outlook there. I got it. And then just to follow up on the margin conversation, Jefferson, I appreciate the high level commentary. Could you just share a bit about what you're anticipating in there from a continued remixed perspective at a non-intersparing. And then how you guys would expect the loan to the positive ratio to trend prepared. You want to actively manage around 80% because that drift higher.

Jefferson Harralson: Just to update it up. Thank you. Yeah, so the so the mix change elements should be generally in our favor I believe for at least for the first half of the year where you have the security portfolio continuing to shrink and the loans continuing to grow modestly. So you should have a positive mix change on the at the time. The the DDA piece is a little tougher. We have been seeing a slow down there and it's given me encouragement that we could continue to see a slow down, especially if race don't ride a lot more from here.

Jefferson Harralson: That said, we're currently, you know, modeling a 27% number in some of the forecast that that we are making. But it's the most recent results have been better than that and encouraging that maybe it could be better than that. But we also are seeing that again, this trend towards our customers moving into higher rate products. And I feel like you have another part of that question that made not only the positive ratio.

Jefferson Harralson: So I would think that loaned a positive ratio could inch a little higher. You know, we have a good funding base. We are going to be I think using the strength of our balance sheet and some of the positive growth that we've been seeing and we've been seeing good deposit growth and we're encouraged by what we're seeing here in October. That thinking have us be a little more conservative in the rates that we are putting out there into the next few months and to next year.

Jefferson Harralson: So I think if we can manage this exactly how we want to, you would see the deposit growth flow down a little bit the loaned deposit ratio, inch a little bit better and for us to have a better cost of funds experience.

Rich Bradshaw: Okay. Really helpful. Thank you. And then just lastly on the loan growth outlook, which I believe you guys are saying mid single digits. How do you think about the contribution via asset class in any particular geographies of strengths there? This is Rich. We'll see it, I think, change a little bit of the mix a little bit away from CRE into CNI. We've got several different initiatives that we're working through. Our biggest geography contributor this past quarter is North Carolina.

Rich Bradshaw: And they led the bank and CNI. So we've leveraging their experience across the footprint. And so that's how I kind of think about that. Talk about Tennessee and some of that. Yes. And in Tennessee, it's a good story for us. You know, we put our new state president there, Kelly Key. And over the last three months, we've hired 20 commercial professionals and already not pipelines but closings with those have paid really good dividends. It's going to take a little bit more time to turn that ship. But I think we're going to start seeing the very positive results of that.

Rich Bradshaw: If not, first quarter, certainly second quarter next year. That's great. Thank you guys.

Russell Gunther: That's it for me. Thanks Russell.

Brandon King: Our next question will come from Brandon King with truest. Please go ahead. Hey, good morning. Morning, Brandon. So Jameson, could you quantify what the spot cost of the process was at the end of the quarter? And then what is the new rate for new relationships and new deposits? customers. Yes, so the spot cost of deposits was, the average quarter was 202 and the spot was probably five basis points higher than that for the, what I call that not exactly spot, but for the month of September.

Brandon King: On average, and new deposit relationships came in, I want to get, I want to have two numbers floating in my head here, let's talk offline, I'll get to the actual number, I don't want to say the wrong number. Wow, I do have that number, but I don't have it, I have two numbers that are in my head right now, so I want to make sure I get you the right one. Okay, that's probably where you hang on one second, Brandon.

Brandon King: It's probably where, noting we had deposit pricing committee this past Monday, we had all the state presidents on and surveying them each individually, their exception pricing request are certainly down, so it is we do see a little comment of the water here. Good, good. And then when you think about accumulative deposit beta, number four, I think he talks about 38%, but what are your thoughts are now just giving that, you know, rates would, you know, since you be higher for longer.

Brandon King: Yeah, yeah, that's a great question. And we are doing our budget right now, and I want to talk, we don't have a 24 forecast for our margin out there right now, or our cost of funds, so let's stay in touch on this one, and I do think, what you're going to see, I'll give you a shorter term, outlook, I do think that our loan yields will be up a similar amount as last quarter, so call that 18 basis points, and then with the margin guidance, I gave you of being, you know, down maybe half as much as the last quarter, you can back into a cost of deposit to increase that we're thinking about this quarter.

Brandon King: So I think it is continuing to grow faster than loans, and then we'll get into budget season and talk about what our 24 forecast is next quarter. Okay, make sense, and just not to be the dead horse, but following up on the Venus and the expectations for losses to kind of ease next year. Just want to get more of a sense of what gives you confidence that losses will ease, and maybe is it just more of a function of that trucking segment just kind of running off?

Brandon King: Yeah, I think, I think that's exactly the way I would describe it, Brandon, is that the trucking segment is, I think if you add all the different trucking aspects of it together, I think it's 10% of the total portfolio, and then this specific piece where we're experiencing the highest-stress level is much smaller than that, so probably 3%. So it's just such a small portion of the overall book, and we're continuing to see consistent performance of the remainder of the book evidenced by the 88 basis points of performance in the third quarter.

Jefferson Harralson: Our next question will come from a David Bishop with Hubdy Group. Please go ahead. Yeah, good morning, thanks for taking my question. Hey, Jefferson, I think I heard you mentioned that you guys were operating with a little bit higher elevated liquidity, the last quarter, maybe, you know, where you think you see some of that cash being deployed here in the near term, but obviously you paid off a lot of the short-term borrowings, just curious where you see the opportunity to deploy that is. Yeah, with the inverted yoke curve, I'm not seeing a ton of opportunities there. We are most likely to hold in cash or roll short treasuries with that cash.

Jefferson Harralson: Got it, and then a final question, you know, there's lots of impact on that, obviously, you know, given the merger on the operating expense of the income side, just curious maybe from a dollar perspective, where you might see those normalizing gear in the fourth quarter. All right, so I did not completely hear a piece of that question. Can you, I know it's an expense-related question, but I didn't totally hear what you said there.

Jefferson Harralson: Apologies, David. Oh, sure. Yeah, just with the, you know, the impact of first Miami being fully layered in this next quarter, where you might see operating expenses of the income normalizing on the dollar basis in the fourth quarter near term. Yeah, I would expect expenses to be down on an absolute basis in the fourth quarter. As we get the cost savings, we want to share the cost savings from South Miami this quarter.

Jefferson Harralson: And fees, I think, should be, you know, we wait up a two non-operating item. So the base is about a million dollars higher than what you see here. We are seeing good underlying growth in our wealth management and our treasury management businesses. Mortgage is a bit of a wild card, but I think you should see net growth off of that slightly higher base with the two adjustments that we laid out for you. Perfect. Thank you for that color.

Unknown Executive: And this concludes our question and answer session.

Lynn Harton: I'd like to turn the conference back over to Lynn Hartton for any closing remarks. Great. Well, thank you all once again for joining the call and we'll glad to follow up with any additional questions. Just reach out and we will talk to you soon. Thank you.

Unknown Executive: The conference has now concluded.

Unknown Executive: Thank you very much for attending today's presentation. You may now disconnect your line.