Q3 2023 Renasant Corp Earnings Call

Good day and welcome <unk> Corporation, 2023 third quarter earnings conference call and webcast.

All participants will be in listen only mode. If you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

The turn the conference over to Kelly Hudson I'm Reticent Corporation. Please go ahead.

Thank you for joining us for Renaissance Corp's, 20th twenty-three quarterly webcast and conference call participating in this call today are members of Renaissance Executive management team before we begin. Please note that many of our comments. During this call will be forward looking statements, which involve risk and uncertainty there are many factors that could cause.

Cause actual results to differ materially from the anticipated results or other expectations expressed in the forward looking statements. Such factors include but are not limited to changes in the mix and cost of our funding sources interest rate fluctuation regulatory changes portfolio performance and other factors just.

Gotcha, and our recent filings with the Securities and Exchange Commission, including our recently saw the earnings release, which has been posted to our corporate site Www Dot Renaissance dotcom at the press releases link under the news and market data tap, we undertake no obligation and we specifically disclaim any obligation to update or revise.

These forward looking statements to reflect changed assumptions the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures.

Reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release and now I will turn the call over to our executive Vice Chairman and Chief Executive Officer, Mitch Waycaster. Thank you Kelly. Good morning, We appreciate you joining the call and your interest in Renaissance.

I am pleased with our quarterly results that show solid loan growth, good asset quality and increasing core deposits and expense control. The balance sheet has steadily strengthened in 'twenty two 'twenty three.

The markets in which we operate have remained generally rose yea and are benefiting from net in migration and the economic expansion, we are well positioned in some of the best markets in the South and we'll continue our efforts to add to this presence Renaissance solid financial footing.

<unk> should allow us to take advantage of opportunities that will emerge.

Finally, we are excited to now be a part of the New York Stock Exchange, which we believe provides greater visibility for our company and our shareholders I will now turn the call over to Kevin. Thanks, Mitch Our third quarter earnings were $42 $3 million or 75 cents per diluted share.

<unk> compared to $28 $6 million or 51 cents per diluted share in the second quarter. Our second quarter results included an after tax loss of $18 $1 million or 32 cents from the sale of a portion of our securities portfolio breaking.

Breaking down net interest income.

Loan interest income increased over $9 million on a linked quarter basis, driven by another quarter of solid loan growth coupled with a 15 basis point increase to our loan yields. However, while loan yields increased continued competitive pressures on deposit pricing impact of both our deposit mix and deposit costs this quarter, leading to a 19.5 million dollar inquiry.

And deposit interest expense on a linked quarter basis. These pricing pressures are market, driven and not unique to Renaissance and they underscore the importance of core funding in this rate environment.

We have an outstanding team that has worked diligently to preserve and even grow our core deposit base.

During the quarter, we grew core deposits $385 million on a linked quarter basis, which helped us reduce our reliance on wholesale funding and allowed us to pay down the S. H O be advances about $150 million and broker deposits by $323 million, respectively. During the quarter.

Our focus on growing core deposits and managing our funding costs is unchanged and will remain a top priority in the future.

Excluding the loss on the sale of securities in the second quarter noninterest income decreased $1.5 million quarter over quarter.

Our capital markets Treasury solutions wealth management and insurance lines of businesses continued to deliver solid results.

Income from our mortgage division declined $2.2 million from the second quarter volumes were impacted not only by seasonality, but also by the increase in rates and lack of housing inventory.

Interest rate lock volume declined $110 million quarter over quarter, and our gain on sale margin decreased 11 basis points.

Noninterest expenses decreased $1.5 million from the second quarter mortgage played a role in the decline along with modest savings in other areas are.

Our efficiency ratio was 63.7% for the quarter margin compression continues to put pressure on our efficiency, but managing this ratio down continues to be a goal of ours I will now turn the call over to Jim.

Thank you Kevin.

As we walk through the quarter's results I will reference slides from the earnings deck.

The balance sheet contracted modestly from June 30.

We experienced strong growth in deposits, excluding broker deposits, which together with utilizing some excess cash allowed us to pay down about $470 million of wholesale funding.

Loan growth in the second quarter was $237 million and represents an annual growth rate of 7.9%.

We continue to focus on our liquidity.

And as you can see on slides six and seven the company's core deposit base and overall liquidity position remains strong.

The deposit base is diverse and granular.

The average deposit account is $29000 and there are no material concentrations referencing slide eight all regulatory capital ratios are in excess of required minimums to be considered well capitalized and each of these ratios improved from the prior quarter. We also experienced a modest build in the tangible common.

Equity ratio and tangible book value per share.

Turning to asset quality, we record a credit loss provision of $5.3 million and a recovery of credit losses on unfunded commitments of $700000, which is recognized in noninterest expense.

Net charge offs were $1.9 million, which represents an annualized rate of six basis points and the ACL as a percentage of total loans held flat at 1.63% credit metrics are presented on page nine our criticized loans and nonperforming assets each improved quarter over quarter.

And past dues were relatively unchanged at 11 basis points of total loans.

The improvement in nonperforming loans from the second quarter is driven by the resolution of two previously disclosed credits.

Both were well collateralized and as anticipated resulted in no loss.

While pleased with the underlying strength of our portfolio, we remain cautious about credit in the current environment, our commitment to high underwriting standards remains and we attempt to identify potential problems early in order to mitigate loss to the bank moving on to profitability beginning on slide 10, excluding the after.

Tax laws and the self securities in the second quarter net income declined $4.4 million on a linked quarter basis pressure on our net interest income and declines in the mortgage division are the key drivers to the decrease however, as you can see on slide 11, we successfully offset the pressures on our revenue with savings on the <unk>.

Expense side, such that the adjusted efficiency ratio remained flat on a linked quarter basis.

Turning to slide 12, adjusted net interest margin, which excludes purchase accounting accretion and interest recoveries was 3.37%.

Down six basis points from Q2.

Although loan yields were up 15 basis points deposit pricing pressures more than offset the increase in yield.

The cost of total deposits increased 48 basis points to 1.98% for the quarter.

Competitive pressures are expected to persist and we believe funding cost will continue to increase in the short term Kevin touched on the highlights within noninterest income and expense.

The diversification within our revenue streams and expense control were positives in the quarter.

While the rate environment is a headwind we remain committed to improving operating leverage and managing the expense base remains a priority.

I will now turn the call back over to Mitch. Thank you Jim I am very proud of our team and the efforts made to produce the result, so far in 2023 I will now turn the call over to the operator for questions.

Thank you.

Ill begin the question and answer session.

Question, Mike First Star then one on your Touchtone phone.

Speakerphone, please pick up your handset before pressing the keys.

Withdraw your question. Please press Star then two.

At this time, we'll pause momentarily to assemble the roster.

First question would be for Michael Rose Raymond James. Please go ahead.

Hey, good morning, guys. Thanks for thanks for taking my questions.

I just wanted to start on on loans in the the outlook the growth has been.

Frankly, a little bit stronger than what we've seen from many of your peers and kind of across the the industry can you just remind us again kind of where you stand in construction fund option.

Why.

You know it has the growth just generally been.

So strong in your eyes, and maybe as we think about that.

Next year, just given maybe a more cautious economic backdrop.

You know what should we expect both from what your customers are telling you and then maybe just from your own.

Views around around credit and just being a little bit more cautious.

Hey, good morning, Michael.

Let me start with the backdrop I'll start with pipeline.

And then.

I'll ask.

Oh, specifically.

Correction.

Just beginning with pipeline and kind of put in perspective.

Where the moderation is.

Has continued the carve out then.

Wow.

Al.

Definitely touch on underwriting and pricing but.

Pipeline, we're beginning this quarter at $120 million 39.

Payers to 130 Bob.

Prior quarters, just as expected what we've seen throughout this year, we continue to see some moderation quarter to quarter that is driven by discipline in pricing.

Relative to our adult data fun incrementally that that next.

The extension of credit.

And of course underwriting and then I would say that by and.

With that said.

We operate in some very good.

Barbara and then Bob mentioned in the opening comments with the markets.

We continue to serve and grow relationships and that's evidenced by our growth.

Loans also in deposits this quarter.

Just going back to production actually production. This quarter was 404 million that's down slightly from four <unk> the prior quarter.

That produced and they added $238 million or roughly 8% of annualized right.

As I've mentioned on prior calls really the governor on that net is payoffs and what we saw this quarter.

We saw payoffs full bag.

More like we saw in the first 400 the issue we have 384 million that compares with Jordan.

Seven.

Q1 for you Bob in Q2, So Q2 was a little elevated that impacted our <unk>.

Our net.

<unk>, we had about 6% versus the aid.

<unk> this quarter.

Looking forward I would say.

Patients for this next quarter and is likely as we move into 'twenty forward. One thing that we do know when we look at our production we continue to see that from each of our markets or regions or business lines. They all continue to contribute.

Way to.

To give you an example of that.

That 400 million this prior quarter, 14%.

Tennessee, another 18% in Alabama, Florida, Panhandle, 19%, Georgia, Central Florida, 16% in Mississippi, and the remaining 33 sorry.

33% from the commercial and corporate business lines.

And again as I, usually mention each quarter equally important is the geographic distribution of that.

As the oil price and the size of the credit and just the granularity.

<unk> referred to earlier in his remarks, and again, we see that boat.

Positive and loans, but if you take the 404 and production in Q3.

26% of that talking about the granularity on tires and product 26% of that came from consumer one to four family short duration that we keep on our books another 28% when.

And we're very proud of this.

A lot of success in the past.

Small business business banking in that sense credits less than $2 5 million.

Another 13% and commercial credits greater than two.

Which would include C&I owner occupied commercial real estate, and then that remaining 33% at our corporate banking group.

Larger C&I commercial real estate ABL equipment finance factoring operation, we've been very pleased with all the say geographically it by five very granular our average loan size $250000, but the total company. We just simply continue to hit on.

Many different cylinders.

It is.

Evidence of our ability to prudently produce.

<unk> diversified portfolio.

Certainly while remaining disciplined in our pricing.

But with that said, we we remain optimistic about our ability going forward in this next quarter David.

Yes.

Construction.

Thank you good morning, Michael This is David at all our construction and development bucket gain moderately over the quarter with about 83%.

But they are welcome.

That led to about $35 million and change quarter over quarter if at.

Only about 15% of blah blah blah.

Is that kind of thing.

Let's say it is not all from where we would have seen shortly our construction and development bucket.

In fact that number.

Operator: The Renaissance Corporation, 2023, 3rd quarter earnings conference call and webcast. Operatives of pins will be in listen only mode. If you need assistance, please sign all conference measures by pressing the start key followed by zero. After today's presentation will be an opportunity to ask questions. Please note that this event is being recorded.

It's not out of line.

Okay.

I appreciate all the color great detail just as a separate follow up.

Kelly Hutcheson: Don't like the turn to conference over to Kelly Hutcheson, a Renaissance Corporation, please go ahead.

<unk> expenses were down a little bit Q on Q and you guys had kind of talked about flattish any specific efforts or things that you're working on I assume some of it has to do with you know mortgage.

Mitch Wakeaster: Thank you for joining us for Renaissance Corporation's 2023 quarterly webcast and conference call participating in this call today are members of Renaissance executive management team. Before we begin, please note that many of our comments during this call will be forward looking statements which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward looking statements. Such factors include, but are not limited to, changes in the mix and cost of our funding sources, interest rate fluctuation, regulatory changes, portfolio performance and other factors discussed in our recent fileings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to our corporate site www.renasant.com at the press releases link under the news and market data tab.

<unk> related revenue being down a little bit so incentive comp a little bit less but any anything that you guys are kind of working on the expense front I know you've kind of talked about migrating the efficiency ratio back towards 60%.

Just wanted to get an update there just given some of the revenue headwinds that are out there for the industry. Thanks.

Yeah, Hey, Hey, Martin Kevin.

So on the expenses.

Our focus really hasn't changed.

Mitch Wakeaster: We undertake no obligation and we specifically disclaim any obligation to update or revise forward looking statements to reflect change assumptions, the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-gap financial measures. A reconciliation of the non-gap measures to the most comparable gap measures can be found in our earnings release.

If you just look at these food categories. We saw the decrease you can see occupancy salaries employee benefits.

Both of which comprise collectively.

70, 75% of all our expenses, so that's where our focus is.

In Q2, we did you do have the seasonality revenue mortgage revenue was down so mortgage expenses, specifically mortgage commissions are down.

Mitch Wakeaster: And now I will turn the call over to our Executive Vice Chairman and Chief Executive Officer Mitch Wakeaster. Thank you, Kelly. Good morning. We appreciate you joining the call and your interest in Renaissance. I am pleased with our quarterly results that show solid loan growth, good asset quality and increase in court deposits and expense control. The balance sheet has steadily strengthened in 2023. The markets in which we operate have remained generally resilient and are benefiting from net in migration and economic expansion.

So good news.

One item is down $1 2 million for best motto mortgage.

About 300000 of that was expenses from the core bank.

The roughly 900000 of that is going to be attributable to mortgage but there's also a day count differential there.

If you add in the <unk> original compared to Q2.

Core salaries and food.

Our core bank reduced non mortgage salaries and employee benefits.

Gonna be down.

It's going to be down in the <unk>.

$1000 from Greenfield. So there's real there is real traction being made on our efforts to control, we can train and reduce expenses.

Mitch Wakeaster: We are well positioned in some of the best markets in the South and will continue our efforts to add to this presence. Renaissance solid financial footing should allow us to take advantage of opportunities that will emerge.

We looked out our focus is still going to be the same we don't have an analysis.

But we've announced multiple times that we were focusing on excuse me.

Mitch Wakeaster: Finally, we are excited to now be a part of the New York Stock Exchange, which we believe provides greater visibility for our company and our shareholders.

That in our numbers if you just look quarter over quarter, there is some seasonality seasonality to it.

But our focus has been on reducing.

Reduced the expenses when it comes to the efficiency ratio our attention is now focused on the revenue side.

Kevin: I will now turn the call over to Kevin. Thanks, Mitch. Our third quarter earnings were $42.3 million or 75 cents per diluted share compared to $28.6 million or 51 cents per diluted share in the second quarter.

But we will continue to have an ongoing effort to reduce expenses and again. We're just we'll just ask you to focus on salaries and employee benefits and occupancy equipment that is where our future.

Kevin: Our second quarter results included an after-tax loss of $18.1 million or 32 cents from the sale of a portion of our securities portfolio. Breaking down that interest income, loan interest income increased over $9 million on a week quarter basis, driven by another quarter of solid loan growth coupled with a 15 basis point increase to our loan yields. However, while loan yields increased continued competitive pressures on deposit pricing impact to both our deposit mix and deposit cost is quarter, leading to a $19.5 million increase in deposit interest expense on a leg quarter basis.

That's where the majority of our expansion model.

I appreciate the color and I'll step back thanks for taking my questions.

Thank you Mike.

Thank you next question will be from Catherine malware of K B W. Please go ahead.

Thanks, Good morning.

Good morning Curt.

I wanted to ask on the margin and just see what you see with your outlook for the margin.

And your next quarter and into next year and really maybe a big picture just thought for the margin is how do you think about where the where and kind of when the margins should bottom.

Kevin: These pricing pressures are market driven and not unique to Renaissance and they underscore the importance of core funding in this rate environment. We have an outstanding team that has worked diligently to preserve and even grow our core deposit base. During the quarter we grew core deposits $385 million on a link quarter basis, which helped us reduce our reliance on wholesale funding and allowed us to pay down the FHLB advances by $150 million and broker deposits by $323 million respectively during the quarter. Our focus on growing core deposits and managing our funding calls is unchanged and will remain a top priority in the future.

How youre thinking about NII growth.

Sure.

Good morning, Catherine This is James.

Yeah.

Morning, So as you know we only.

That margin or auto profitability.

Performance metrics are we going to start with the balance sheet I do want to see it in a number but I think we're very proud of how we've grown deposits here in the last.

A couple of quarters I think.

And core deposits in Q3 was about 11% annualized and so the balance sheet remains a focus and certainly nobody's purpose with sharp and by the events in early March and.

Kevin: Excluding the loss on the sell of securities in the second quarter, non-interesting income decreased $1.5 million, quarter of a quarter. Our capital markets, treasury solutions, wealth management and insurance lines of businesses continue to deliver solid results. Income from our mortgage division declined $2.2 million from the second quarter. Volumes were impacted not only by seasonality but also by the increase in rates and lack of housing inventory. Interest rate lock volume declined $110 million, quarter of a quarter, and our gain on sale margin decreased 11 basis points.

We like others leaned in and the wholesale funding and since that.

We've tried to.

You know what he used our reliance on wholesale.

<unk>.

And that remains a goal on federal home loan Bank went down the other night and that won't that will not.

Because we've got a very attractive rate of another nine of about 70 basis points and now the focus remains.

Kevin: Non-interest expenses decreased $1.5 million from the second quarter. Mortgage played a role in the decline along with modest savings in other areas. Our efficiency ratio was 63.7% for the quarter. Margin compression continues to put pressure on our efficiency but managing this ratio down continues to be a goal of ours.

Hello.

Some broker deposits I think we would use that in one of our $300 million in the quarter and our goal is over the next few quarters to get that down to essentially zero.

I would say that as a backdrop the margin because the balance sheet to start with a focus there.

As we think about margin.

Jim: I will now turn the calls over to Jim. Thank you, Kevin. As we walk through the quarter's results, our reference slides from the earnings deck.

And looking for a couple of economies, we do see continued pressures on the margin.

I think as we look at Q4.

Jim: The balance sheet contracted modestly from June 30. We experienced strong growth in deposits, excluding broker deposits, which together with utilizing some excess cash, allowed us to pay down about $470 million of wholesale funding. Lung growth in the second quarter was $237 million and represents an annual growth rate of 7.9%. We continue to focus on our liquidity. As you can see on slides 6 and 7, the company's quarter-posit base and overall liquidity position remains strong.

My expectation is that the margin will continue to compress.

Probably a bit more than we saw in Q2 and Q3, but less than the compression that we saw Q1 to Q2.

Terms of margin NII will sort of follow that.

Trend I guess and it certainly will help a bit but I think NII.

Directionally will fall.

We're seeing the margin.

As it relates to.

Looking forward in 'twenty four we see some we see some really encouraging signs Kathryn.

It remains uncertain.

Jim: The deposit base is diverse and granular. The average deposit account is $29,000 and there are no material concentrations. Referencing slide 8, all regulatory capital ratios are an excess of required minimums to be considered well capitalized and each of these ratios improved from the prior quarter. We also experienced a modest bill and a tangible common equity ratio and tangible book value per share. Turning to asset quality, we record a credit loss provision of $5.3 million and a recovery of credit losses on unfunded commitments of $700,000, which is recognized in non-interest expense.

Oh environment as you know, so sort of predicting where things might bottom the tough thing, but one of the things that we were struck by our quarter was the moderation.

Decline.

We did see a decline in noninterest bearing balances in the quarter, but it was meaningfully lessen that bottoms out.

Q1 to Q2, so things like that give us hope that we'll.

We'll see.

Some stabilization in 'twenty four but.

And I guess uncertain, but to call when that might be.

Great.

And loan repricing, that's I think that's.

Jim: Net charge offs were $1.9 million, which represents an annualized rate of 6 basis points and the ACL as a percentage of total loans held flat at 1.63%. Credit metrics are presented on page 9. Our criticized loans and non-performing assets each improved quarter of a quarter and past dues were relatively unchanged at 11 basis points of total loans. The improvement in non-performing loans from the second quarter is driven by the resolution of two previously-dissuosed credits. Both were well-collateralized and as anticipated resulted in no loss.

The tailwind that we're all looking for for 24, if we think about.

Women bottoms and when we start to see how much of that increase we can figure out 24 is there any.

Can you kind of talk about it.

Maybe the amount of loans fixed rate loans that you know we're gonna be repricing.

The next year, and what kind of upside that tier.

To your margin.

So a couple of things I think in terms of fixed rate loans and the repricing opportunity that we've got about 200 million and Q4 that we priced that as loans are roughly carrying like a five 4% or $5 45 rate.

Jim: While pleased with the underlying strength of our portfolio, we remain cautious about credit in the current environment. Our commitment to high-underrunning standards remains, and we attempt to identify potential problems early in order to mitigate loss to the bank.

And then.

24 think it was a little over $600 million in loans and a slightly lower right like 525 30. So there is some repricing opportunity there.

The other thing may be helpful. Katherine I think in prior calls we've talked about.

Jim: Moving on to profitability beginning on slide 10, excluding the tax laws and the self-securities in the second quarter, net income declined $4.4 million on a link quarter basis. Pressure on our net interest income and declines in the mortgage division are the key drivers to the decrease. However, as you can see on slide 11, we successfully offset the pressures on our revenue with savings on the expense side, such that the adjusted efficiency ratio remained flat on a link quarter basis.

So you're sort of giving you a monthly.

Look.

Not just a quarter a little bit of monthly book. So I would tell you that if you look at Bloom.

Pricing.

Quarter, New England, there was a 27% for the month it was 834.

But the.

The other side of that is what we just talked about in terms of the pressures on interest bearing deposits for the quarter.

198 for the month.

Of September to 10, so you can see those pressures still persist but.

Jim: Turning to slide 12, adjusted net interest margin, which excludes purchase accounting accretion and interest recoveries, was 3.37%, downed six basis points from Q2. Although loan yields were up 15 basis points, deposit pricing pressures more than offset the increase in yield. The cost of total deposits increase 48 basis points to 1.98% for the quarter. Competitive pressures are expected to persist, and we believe funding costs will continue to increase in the short-term. Kevin touched on the highlights within non-interest income and expense. The diversification within our revenue streams and expense control were positives in the quarter. While the right environment is a headwind, we remain committed to improving operating leverage, and managing the expense base remains a priority.

Again, there are certainly some repricing opportunities in 'twenty Borden and we'd love to capitalize on those.

Great and maybe just one on margin.

Question, and then I'll back out as the.

I think in the past you've talked about a 50% interest bearing deposit beta over the cycle is that still about where you are targeting or you think you'll see.

Yes.

We've tried to be conservative and every time, we try to be conservative I think we still not not hit the market exactly Catherine but right now we're modeling a terminal beta in the mid sixes on interest bearing deposits.

Okay, but that would be.

He would probably hit that more like mid 24 versus next quarter.

I think that's a reasonable that's a reasonable guess yes.

Mitch Wakeaster: I will now turn the call back over to Mitch. Thank you, Jim.

Okay, Alright, great. Thank you.

Thank you Ted.

Mitch Wakeaster: I am very proud of our team, and the efforts made to produce the result so far in 2023.

Operator: I will now turn the call over to the operator for questions. Thank you. I'll begin the question in the Azure session. I ask the question, may press the other one on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. Would draw your question, please press star then two. Just time will pause momentarily to assemble the roster.

Thank you next question will be from.

Hey, Bishop the Hubby group. Please go ahead.

Yes, good morning wanted to.

Stick with that.

The funding topic real quick.

Specifically just curious what is your level absolute level of broker deposits were and maybe the cost and maturity schedule over the next couple of quarters.

Michael Rose: First question, V from Michael Rose. Raymond James, please go ahead. Hey, good morning, guys. Thanks for taking my questions. I just want to start on loans and the outlook. The growth has been, frankly, a little bit stronger than what we've seen from many of your peers across the industry.

Good morning, David This is Jim So I think at quarter end, we have around 750 million call. It in brokered deposits.

And in Q4, I think we've got.

Mitch Wakeaster: Can you just remind us, again, where you stand in construction fund-ups and why it has the growth just generally been so strong in your eyes and maybe as we think about next year, just giving maybe a more cautious economic backdrop, what should we expect, both from what your customers are telling you, and maybe just from your own views around credit and just being a little bit more cautious. Thanks. You're good. Good morning, Michael.

Maturing deposits of around $300 million and brokered and I want to say that's pairing.

The average rate.

At the $525 30.

Within the next three quarters I would say the vast majority of that 750.

We will have the ability and sue.

To pay off so.

We're putting on new deposits at call. It 11, or so we definitely benefit from that plus the greater benefit as we see it in certainly.

Mitch Wakeaster: Let me start with the backdrop. I'll start with pipeline, you know, the production, and then I'll ask David the public specifically about construction, who you mentioned just beginning with pipeline kind of put in perspective where the moderation is continuing the curve both in pipeline and production out definitely touch on I'm dividing and pricing but pipeline we're beginning this quarter at 120 million in the 30 day pipeline that compares to 135 million the prior quarter.

We certainly want that income statement benefit, but what we really like is just having a balance sheet that here at some point in next few quarters has virtually no aligns and alternative funding sources.

In fact, the biggest strictly core funded bank.

Got it and then from a funding perspective.

I appreciate the slide in cash and securities to total assets dropped to about 17% do you think thats, reaching a floor is there a near term target for that.

I think we're pretty close David maybe maybe there's another $100 million or so in there that we would use to fund help fund loan growth, but we're pretty close to where we want to be.

Mitch Wakeaster: So just as expected what we've seen throughout this year we continue to see some moderation quarter to quarter that is driven by discipline and pricing relative to our ability to fund incrementally that that next extension of credit I would and of course underwriting and then I would say the band with that said we operate in some very good. David Vibrant and as I mentioned in the opening comments resilient markets we continue to serve and grow relationships and that's evidence fire growth and loans also in deposits this quarter just going back to production actually production this quarter was 404 million that's found slightly from 413 the prior quarter that produced a net of 238 million of roughly 8% and annualized growth and as as I've mentioned on prior calls really the governor on that net is payoffs and what we saw this quarter we saw payoffs full back more like we saw in the first quarter of this year we have 384 million that compares to 370 Q1 but 455 in Q2.

In terms of that cash level.

Got it and then turning to credit quality. It looks like there was maybe some migration from the loans 90 day past dues and non accruals, maybe talk about maybe some of that.

The quote unquote mix shift that occurred from a credit quality.

This quarter.

Hi, Good morning, Davis debated as a quarter or those where we didn't have loans that were 90 day past due last four that migrated and therefore is the identification of new loans.

Primarily comprised of just really.

The two credits that made up that that change one was a senior housing project things out of the hole we believe.

That were very good loan to value position all of that asset by virtue of taking that asset markets available or really good asset position.

All of the mortgage property is that what you're saying with Morgan properties. Those values are still holding so we believe we're in a good value.

So it was primarily related to those those two properties.

Got it I appreciate the color. Thanks.

Thank you David.

Mitch Wakeaster: Q2 was a little elevated that impacted our net performance in Q2 we had about 6% versus 8% this quarter looking forward and I would say expectations for this next quarter and as likely as we move into 24 one thing that we do know when we look at our production we continue to see that from each of our markets our regions our business lines they all continue to contribute in a meaningful way to give you an example of that that 400 million this this prior quarter 14% came from Tennessee another 18% from Alabama the Florida pine handle 19% from the Georgia Central Florida 16% from the Mississippi and the remaining 33% from 33% from the commercial and corporate business lines and and again as I usually mentioned each quarter equally important as the geographic distribution of those is the long types and the size of the credit and just the granularity that Jim referred to earlier in his remarks and again we see that vote on the positive and loans but if you take the 404 and production in Q3 26% of that talking about the granularity and types and product 26% of that came from consumer one to four family short duration that we keep on our books another 28% when we're very proud of this and we've had a lot of success here in the past it's in small business and business banking and that's credit is less than 2.5 million the another 13% in commercial credit is greater than 2.5 which would include CNI on our occupied commercial real estate and then that remaining 33% in our corporate banking group larger CNI commercial real estate ADL equipment finance factory operation within very pleased with all the say geographically and by five very granular average one size $250,000 for the total company we just simply continue to hit on many different cylinders and it's it's an evidence thing of our ability to but certainly while remaining discipline in our pricing and undividing, but with that said, we remain optimistic about our ability to go and forward in this next quarter.

Thank you Ken if you'd like to ask a question. Please press Star then one.

Next question is from.

Jordan <unk> of Stephens. Please go ahead.

Hey, good morning, guys How're you doing.

Hum.

I just wanted to ask about capital.

And kind of what you guys preferences.

Capital continues to build and you have the buyback program in place and just kind of what is your appetite for any share repurchases going forward.

More in Jordan This is Jim so.

As you noted we did a program that just expired and the board renewed our repurchase program.

As you know there was no activity in Q3.

I would say this that the.

As our cap ratio as do build it gives us more flexibility.

With regard to how we might utilize that capital.

Share repurchases are constant topic of conversation, but I would say that generally we're not leaning in that direction, we don't take it off the table.

As always something that we think about potential use and our expectation is that we'll have other opportunities that we think that.

Very possible in the coming quarters that it feels like there's a lot going on in the industry and we think that that could present some opportunities for the company.

And so maintaining and growing that capital in the near term.

It's something that we like because it we like the flexibility that that gives us.

Perfect and then maybe just kind of a follow up to that you said other opportunities.

Do you wait.

The capital use between.

Organic growth and M&A.

I think as we think about growth organic growth is certainly preferred and that's really how we've largely grown the company over the last few years.

Saw the numbers this quarter, we had really good growth and it was very diverse and across all geographies.

It's pretty much Atlanta.

We've done the last few quarters, so that's the preference and that's the priority.

But as <unk> said in the past we yeah, we remain open to looking at external growth.

M&A growth and of course it does.

Some smaller non bank.

Acquisitions over the last 12.

12 months or so.

We believe that as you look forward in the banking industry, we think that bears well.

The likelihood and then yeah.

And so that we could see more depository opportunities.

Okay.

David: David, do you want to comment specifically on instructions? Yes, sir. Thank you.

On the right terms that can be attractive for our shareholders.

Michael Rose: Good morning, Michael, this David. At all, our construction and development bucket changed moderately over the quarter. It went about 53% to 54% and it led to about 35 million in change. [inaudible] I appreciate the color. I'll step back. Thanks for taking my questions. Thank you, Martin. Thank you.

Perfect. Okay. Thank you for taking my questions.

Jordan.

Thank you. This concludes the question and answer session I would like to turn the conference back over to Mitch Waycaster closing remarks.

Well, thank you Nick and thank each of you for joining the call today.

Closing, our Riverside obtaining wishes for Sally Pope Davis, the very best in her upcoming retirement, we next plan to participate in the Piper Sandler Conference on November 15, and 16.

Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Alright Gregory.

Okay.

Utah.

Catherine Mealor: Next question will be from Catherine Mealor of KBW. Please go ahead. Thanks. Good morning. Good morning, Kevin. I wanted to ask on the margin and just see what you think with your outlook for the margin into the next quarter and in the next year. And really maybe a big picture just thought for the margin is how do you think about where the where and kind of potentially when the margin should bottom. And also how you're thinking about NII growth as we move into next year. Thanks. Good morning, Catherine. This is Jim. So morning.

Jim: So as you know, we think about margin or other profitability performance metric to really start with a balance sheet. I do want to see it the numbers, but I think we're very proud of how we've grown the positive here in the last couple of quarters. I think our growth and in court of poverty and Q3 was about 11% annualized. And so the balance sheet remains a focus and certainly everybody's focus was sharpened by the events knowing more action.

Jim: And we like others leaned into into wholesale funding and since that we tried to, you know, reduce our lines on the wholesale sources. And that remains a goal on federal home of bank will down the hundred made and that will not only lower because we've got a very attractive rate of that under main of about 70 basis points. And now the focus remains to to low with that low on some burger to bodice.

Jim: I think we reduced that a little bit of our 309 in the quarter and our goal is of a next few quarters to get that down to essentially zero. So I say that as a backdrop to margin because the balance sheet, the start of the focus there. And then as we think about margin. And looking for a couple of comments, reduce the continued pressures on the margin. I think as we look at Q4.

Jim: My expectation is that the margin will continue to compress and probably a bit more than we saw Q2 to Q3, but less than the compression that we saw Q1 to Q2 in terms of margin. And I will sort of follow that. You know, trend, I guess, and it certainly grows will help a bit, but I think I direction will follow what we see in the margin. As it relates to, you know, looking forward to 24, we see some, we see some really encouraging science Catherine.

Jim: You know, it remains uncertain and also environment as you know. So sort of predicting where things might bottom the tough thing, but you know, one of the things that we were struck by in our quarter was the moderation and I be decline. So we did see a decline and not just bring about this in the quarter, but it was, you know, meaningfully less than the line we saw from Q1 to Q2.

Jim: So things like that give us hope that we'll see some stabilization in 24, but you know, remains to, I guess, uncertainty to call on that might be great, on loan repricing. That's I think the tailwind that we're all looking for for 24 if we think about, you know, when men bottoms and when we start to say how much of an increase we can see throughout 24. Is there any, can you kind of talk about, you know, maybe the amount of loans that you fix right loans that you know are going to be repricing over the next year and what kind of upside that might plan for your margin.

Jim: So, a couple of things. I think in terms of fixed rate loans and the repricing opportunity there, we've got about 200 million in Q4 that will repriced next. Those loans are roughly carrying like a 540 or 545 rate. And then for the 24, I think it's a little over 600 million and loans in a slightly lower way by 525 or 530. So, there's some repricing opportunity there. Another thing may be helpful, Catherine, we, I think in fire calls, we talked about, you know, sort of giving you a monthly look, not just a quarter, but a monthly look.

Jim: So, I would tell you that if you look at loan repricing for the quarter of New England, it was 827 and for the month it was 834. But, you know, the other side of that is what we just talked about in terms of the pressures, intersting deposits for the quarter or 198 and for the month of September or 210. So, you can see those pressures still persist, but again, there are certainly some repricing opportunities in 24 and we've got the capital laws on those.

Catherine Mealor: Okay, maybe just one margin of question, and then I'll back out of the, you guys, I think in the past, you've talked about a 50% interest bearing deposit rate over the cycle, is that still about where you're targeting or you think you'll see. You know, we, we, we try to be conservative, every time we try to be conservative, I think we still not, not hit the market badly, Catherine, but right now we're modeling a terminal beta in the midfits. Okay, that would be, you would probably hit that more like mid 24 versus next quarter. I think that's a reasonable, that's a reasonable gas, yes. Okay, great, great, I forgot, thank you. Thank you, Ted.

Dave Bishop: Thank you, next question will be from Dave Bishop of the Hubby Group, please go ahead. Good morning, wanted to stick with that. Does the funding topic real quick, specifically just curious what, what's your level, absolute level of broker deposits were and maybe the cost of maturity sales over the next couple quarters. Good morning, Dave, this is Jim, so I think it caught around we're around 750 million, call it and broker deposits and in Q4, I think we've got matured deposits that were around 300 million and broker, and I want to say that's carrying an average rate of like, call it the 525530.

Dave Bishop: And within the next three quarters, I would say roughly, the vast majority that 750 will have the ability to pay off. So, you know, we're putting on new deposits that cost a lot of four, so we definitely benefit from that plus the greater benefit is we say we certainly, we certainly want that income statement benefit, but what we really like is just, you know, having a balance sheet that here at some point, the next few quarters has virtually no aligns an alternative funding sources and we're strictly we're back to being a strictly corporate, and Bank. Got it.

Jim: Then from a funding perspective, appreciate the slide and cash and securities to Zolaq about 17%. Do you think that's reaching a floor? Is there a near-term target for that? I think we're pretty close, David. Maybe there's another $109,000 or so in there that we would use to fund, help fund a long growth, but we're pretty close to where we want to be in terms of that cash level. Got it.

David: Then turning to credit quality, it looks like there was maybe some migration from the loans, 90-day pass-do, and to not accrual, maybe talk about maybe some of the quote-unquote makeshift that occurred from the credit quality front this floor. Here, back in the morning, David, this is David. As a quarter, for those four of us, we didn't have loans that were 90-day pass-do, last four of that migrate, and those four of us, the identification of new loans.

David: It was primarily the prize of just really two credits that made up that that chain one was a senior house and credit. King is under for full. We believe that we're a very good low-to-value position on that asset by virtue of taking that asset market for sale and looking for a really good asset position. We don't know what the mortgage property is, but we're seeing what mortgage properties. Those values are still holding, so we believe we're in good value position on that too. So it was primarily related to those two properties.

Dave Bishop: Got it. Appreciate the color. Thanks. Thank you, David. Thank you. Again, if you'd like to ask a question, please press Starer than one.

Jordan Gent: Next question is from Jordan Gent of Stevens. Please go ahead.

Jim: Hey, good morning, guys. How are you doing? I just wanted to ask about capital and kind of what your guy's preference is. You know, capital continues to build, and you have the buyback program in place. And you kind of, what is your appetite for any sharey purchases going forward? More in Jordan, this is Jim. So as you noted, we did. We are a program that just expired in the board. We're new, we've purchased programs.

Jim: As you know, there was no activity in Q3. And I would say this that as our capricious due building, it gives us more flexibility with regard to how we might utilize that capital and sharey purchases or a constant topic of conversation. But I would say that generally we're not leaning in that direction. We don't take it off the table. And it's always something that we think about to introduce. And our expectation is that we'll have other opportunities, at least we think that's very possible.

Jim: And the common quarters that feels like there's a lot going on in the industry. And we think that that could present some opportunities for the company. And so, you know, maintain and go on that capital in their term. It's something that we like because we like the flexibility.

Jim: Perfect, and then maybe just kind of a follow up to that. You said other opportunities. How do you weigh a capital use between organic growth and M&A? I think as we think about growth, organic growth is certainly preferred, and that's really how we largely grown the company over the last few years. As you saw the numbers this quarter, we had really good growth, and it was very diverse, and across all the charted face, there was pretty much a level of what we've done the last few quarters.

Jim: That's the preference, and that's the priority. But as Mitch said in the past, we may open to looking at external growth and M&A growth. Of course, we've done some smaller non-bank acquisitions over the last 12 months or so, and we believe that as you look forward in the banking industry, we think that there's well and likely good, and then a year ahead of so that we could see more depository opportunities, and we've made open of those, and feel like from the white terms, there's going to be attractive for virtual owners.

Jordan Gent: Perfect, okay. Thank you for taking my questions. Thank you.

Mitch Wakeaster: This concludes question and session. I'd like to turn to conference back over to make waycasters close their remarks. But thank you, Nick, and thank each of you for joining the call today in closing our RIVISOP team wishes for Sally Pope Davis to very best in her upcoming retirement. We next plan to participate in the Piper Sandler Conference on November 15 and 16. Thank you for attending today's presentation. You may now disconnect. Hey, Gregory, at 3477, I'm sure you do tell us.