Q3 2024 Cadence Bank Earnings Call
The disclosures regarding forward looking statements contained in those documents applied to our presentation today and now I'll turn to Dan for his opening comments.
Dan: Good morning, Thank you for joining us to discuss our third quarter 2024 financial results.
Dan: After I cover a few highlights and Valerie provides additional detail on our financials, our executive management team will be available for questions.
Dan: We are proud to report third quarter results that reflect continued positive momentum for our company GAAP.
Dan: GAAP net income was $134 1 million or <unk> 72 per diluted common share with adjusted net income from continuing operations for the third quarter of $135 6 million or <unk> 73 per diluted common share an increase of four.
Dan: Or 6% compared to the second quarter of 'twenty four.
Dan: From a balance sheet perspective, our deposit performance was a real highlight for the quarter our teams across the footprint. They have done a great job of retaining and expanding our deposits, resulting in significant growth in core customer deposits over at over 11% on an annualized basis, while holding deposit costs essentially flat up <unk>.
Dan: Two basis points in the quarter.
Dan: We also generated meaningful new loan commitments, although loans were flat for the quarter as payoff pressures offset the growth due to active capital markets activities, creating paydowns as companies sell or refinance and permanent markets.
Dan: Looking to the rest of the year. We are opportunistic we are optimistic that our new loan originations will outpace the payoff pressures as our loan pipeline remains robust and diverse and the economies in our footprint are performing very well.
Dan: Stabilized deposit cost and continued upward repricing of loans also drove fourth quarter, our fourth consecutive quarter of improvement in our net interest margin to 331% up four basis points from last year.
Dan: Importantly, credit quality continued to remain stable and in line with our expectations. Our net charge offs were consistent with the prior quarter and we maintained a solid allowance for credit losses at 138% of loans.
Dan: While we did see an increase in non accrual loans, primarily as a result of migration of a handful of previously criticized credits are criticized and classifieds level that remained relatively consistent as a percent of loans during the year and we are not seeing signs of concern or weakness.
Dan: We're also pleased with our continued performance and operating efficiency as reflected in our adjusted efficiency ratio of 57, 7% for the quarter as expected. Our total expenses did increase as a result of merit increases as well as a few items that benefited our second quarter expenses.
Dan: Valerie will dive into these details as well as our expectations more in just a moment.
Dan: Finally, we again took advantage of a market swings and repurchased just over 323000 shares of our stock our capital metrics remained strong including CET, one of 12, 3% and total capital of 14, 5% as of September 30.
Dan: And finally, our tangible book value per share increased by $1 60, while our tangible equity to tangible assets ratio ended the quarter at 828% I'll now turn the call over to Valerie for her comments. Thank you Dan. It is good to be here. This morning discussing another great quarter for cadence bank.
Valerie: As Dan mentioned, we reported adjusted EPS from continuing operations of <unk> 73 up 6% from the second quarter of 2024 and up 37% from the same quarter last year.
Valerie: <unk> items for the third quarter were minor only a <unk> <unk> net EPS impact and included a $1 2 million reduction of the FDIC special deposit assessment estimate and $2 9 million of securities losses, we adjusted certain portfolio positions.
Valerie: As Dan noted deposit growth with a real highlight for the quarter total deposit growth was approximately $985 million for the quarter or 10, 4% annualized.
Valerie: As laid out on slide four this included growth of core customer deposits of $1 4 billion offset by declines in public funds.
Valerie: Core customer growth consisted of approximately $775 million in interest bearing deposits and $600 million in noninterest bearing of which $435 million.
Valerie: In temporary inflows of customer balances at quarter end that slipped out the next day.
Valerie: Even excluding the impact of the temporary inflows, our noninterest bearing deposits as a percent of total deposits was stable in the quarter at 22, 7%.
Valerie: And the teams did an incredible job of retaining maturing time deposits and building customer balances.
Valerie: Loan balances were essentially flat for the quarter with net declines in non real estate C&I offsetting about a 2% overall loan growth in our other loan segments. As we ended the quarter with loan to deposit ratio of 86%.
Valerie: The impact of the balance sheet activity on our margin continued to be positive as we increased net interest income by $5 $1 million in the quarter to $361 million and our net interest margin increased compared to last quarter by four basis points to 331%.
Slide 10 details our steady improvement in net interest margin over the last year.
Here to the third quarter of last year, our net interest margin has increased 33 basis points and our net interest income has grown 10%.
Valerie: Even with the decline in so far in the third quarter. We continued to see increasing loan yields is only 29% of our loans are floating rate with about half of those being prime based.
Valerie: The combination of new fundings and variable loan repricing from renewables coming on at rates higher than the overall portfolio led to our yield on net loans, improving five basis points in the third quarter to $6, 64%.
Speaker Change: As Dan commented, our deposit costs have really stabilized even with the balanced growth increasing only two basis points to 255% for the third quarter.
Speaker Change: Additionally, average loans increased approximately $335 million linked quarter funded by securities cash flows, which further improved the mix of interest earning assets.
Speaker Change: The third quarter also benefited from a retirement of $139 million of sub debt at the end of the second quarter and we have another $215 million in sub debt with a 4% coupon that we plan to call in November.
Speaker Change: Additionally, we paid down 1 billion five of our Bts P borrowings with excess cash just earlier this month we.
Speaker Change: We expect to repay the remaining $2 billion of Bts P. During the fourth quarter, replacing it ideally with core deposits supplemented with wholesale sources as needed.
Speaker Change: Overall due to all of these factors, we expect continued improvement in our net interest margin in the near term even with the forward curve interest rate reduction expectations.
Speaker Change: Noninterest revenue highlighted on slide 12 was $88 8 million on unadjusted basis, increasing $3 2 million or three 7% in the third quarter as broad based fee growth was softened by a decline in mortgage banking revenue.
Speaker Change: The quarter's increase in deposit service charges of $1 1 million was primarily an account analysis fees and the increase in other noninterest revenue of $7 1 million, excluding the gain on sale of businesses in the second quarter.
Speaker Change: Included growth in credit related fees customer swap fees SBA income and other miscellaneous revenue really across the board. These.
Speaker Change: These increases were partially offset by a $5 million decline in mortgage banking revenue in the third quarter as changes in the rate environment combined with payoffs and Paydowns resulted in our mortgage servicing rights valuation adjustment of a negative $7 million.
Speaker Change: This was offset by mortgage production and servicing income of $8 2 million, reflecting growth of 3% compared to the prior year's quarter.
Speaker Change: Stepping back to a year over year perspective, total adjusted noninterest revenue had solid growth during the year up 10% compared to the same quarter in 2023.
Speaker Change: Moving on to expenses total adjusted noninterest expense was just over $260 million for the quarter up $9 2 million or three 7%, which was expected given the July 1st annual merit cycle as well as the tailwind for several items impacting second quarter expenses favorably.
Speaker Change: As laid out on slides 13, and 14 compensation costs increased $4 3 million compared to the second quarter on an adjusted basis that is due almost entirely to the merit cycle impact.
Speaker Change: Legal expense increased $2 $9 million in other miscellaneous expenses were up $3 9 million linked quarter with both increase is simply a result of those lower second quarter expenses that included legal fraud in operational loss recoveries as well as the benefits that were unique to the second quarter.
Speaker Change: On an overall basis, we continued to experience solid broad based expense management, resulting in a quarterly efficiency ratio of 57, 7% and our year over year reduction in quarterly adjusted expenses of one 5%.
Speaker Change: Given our strong expense management and our outlook for the remainder of the year. We are updating our full year 2024, adjusted expense guidance to a range of down 1% to 3% compared with the 2023 full year.
Speaker Change: While very pleased with the reduction in expenses. This year, we continue to invest in our growth teams and technology and expect a more normalized expense growth rate to resume for 2025.
Speaker Change: Turning to credit results are detailed on slides eight and nine net charge offs for the third quarter were $22 2 million or 26 basis points annualized down slightly from the 28 basis points for the second quarter.
Speaker Change: A portion of these charge offs were previously specifically reserved and we recorded a provision for credit losses for the third quarter of $12 million, bringing our ACL coverage to 138% at the end of the quarter.
Speaker Change: Non accrual loans increased by $56 million in the third quarter and as a reminder, $82 million or 30% of our $273 million in nonaccrual loans represent guaranteed portions of SBA and FHA credits, we don't expect collection issues with the guaranteed balances, but while they are in process. They do.
Speaker Change: <unk> negatively on our non accrual criticized and classified balances.
Speaker Change: Even so our classified and criticized loans as a percent of total loans has been relatively consistent through the year classified loans as a percent of total loans were flat at two 9% linked quarter and criticized loans increased slightly in the third quarter to 264% the trucks lower than the same quarter last year.
Speaker Change: Our capital detailed on slide 15 continues to build and remains strong supporting growth and the ability to be opportunistic.
Speaker Change: Dan mentioned that this quarter as share repurchases year to date, we have repurchased one 2 million shares at a weighted average price of under $27.
Speaker Change: I commented earlier on our plans to call, our $215 million and subordinated debt in November.
Speaker Change: That is currently included in tier two capital so that will create a slight dip in tier two in the fourth quarter, but we anticipate that to be temporary and replaced in the near term through ongoing earnings growth.
Speaker Change: In closing it really was a positive quarter for our company and it was particularly pleasing to see the very strong deposit growth results. Both in terms of growth as well as in managing costs.
Speaker Change: Beyond that our net interest margin and fee businesses have continued to grow credit remains stable and in line with our expectations and our teams have just done a fantastic job in improving operating efficiency over the year, we are optimistic and working hard to continue this momentum throughout the remainder of 2024 and into 2025.
Speaker Change: Operator, we would like to open the call to questions. Please.
Speaker Change: Thank you we will now begin our question and answer session.
Speaker Change: Ask a question you May press star one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Speaker Change: As a courtesy.
Speaker Change: Please limit yourself to one question and one follow up.
Speaker Change: We will now pause momentarily to assemble our roster.
Speaker Change: Today's first question comes from Manav Gupta with Morgan Stanley. Please go ahead.
Manav Gupta: Hey, good morning, all.
Speaker Change: Good morning.
Manav Gupta: I wanted to go through some of the puts and takes on NIM in the near term versus the medium term. So maybe to start on the asset side can.
Manav Gupta: Can you talk about how we should think about the net impact of.
Manav Gupta: The floating rate loans re pricing in the near term.
Manav Gupta: Plus it looks like you have some variable rate loans that you have coming due at a higher rate over the next one to 12 months.
Manav Gupta: How should we think about that and then finally the fixed rate loan piece that you have repricing over the next CCAR.
Because it seems like you've got a nice uptick in loan yields again this quarter despite rates not being up.
Speaker Change: Yes, I'm happy to take that and I would just point you all vacation to we did have a correction on that slide 11 that has a repricing maturity et cetera.
Manav Gupta: David Slide deck that was posted this morning.
Manav Gupta: That details out related categories.
Speaker Change: Right.
Speaker Change: And you're exactly right our loan yield does continue to tick up.
Speaker Change: Even in spite of having 27% floating rate securities and that again is because the overall portfolio at 641, we're putting on the new loans at rates higher than that we also have loans that are variable rate or fixed rate that are that are re pricing for renewing coming back in at.
Higher yields and so when you take a look.
Speaker Change: You mentioned that coming on three months to 12 months, the weighted average rate of loans.
Speaker Change: Or is that or to reprice over the next three to 12 months is 634, we're putting on loans higher than that today and so it's not incremental bump that we believe will continue to support loan yields increasing modestly as we look forward over the coming quarters.
Speaker Change: Got it so you're saying, even the variable rate loans repriced at a slightly higher rate than.
Speaker Change: Then what they are on the books at today.
Speaker Change: Yes, absolutely because they'll come on and effectively they are yielding the right today, but when they come on for repricing, it's market pricing.
Speaker Change: <unk> got it on your own.
Speaker Change: February is going to reset this is going to reset further out than that instantly.
Speaker Change: Understood.
Then maybe on the liability side you know you noted that you paid down some <unk> you have more BD FTE payments coming up how should we think about.
Speaker Change: Deposit betas on the downside.
Speaker Change: Given your comments that you would eventually you want to replace that Bts P with core deposits.
Speaker Change: Yeah. So.
As you likely noticed that we have deposit cost increase of two basis points this quarter and of course the rate declines and it did come in a quarter were light in the quarter. So I would expect that this quarter is actually our in deposit costs.
Speaker Change: We're working aggressively to be able to bring those deposit costs down and still continue to have the growth in deposits that we saw this quarter.
Speaker Change: That is on some of the exception prices et cetera that we're working hard on that the other factor that I think is important to note is.
Speaker Change: We have we.
Speaker Change: We had over almost 1 billion or $3 billion, rather in time deposits that renewed this quarter. We've got another three and a half three 6 billion that renew next quarter their headquarters of Ford.
Speaker Change: Fourth quarter. Thank you again for being a quarter in and they are actually at just shy of 5% and some of those will reprice at a lower rate.
Speaker Change: Depending on the term if they come online and the new AD and so there is a little bit of tailwind for the repricing of some of that CD book that is coming up over the next three to six months.
Speaker Change: Got it.
Speaker Change: Sure.
Speaker Change: Yes, Thank you and just to clarify in terms of the deposit betas and the downside.
What do you think.
Speaker Change: You should get over the next couple of quarters.
Yeah.
Speaker Change: This is the rates just started coming back down so we're kind of in that new cycle of reporting deposit betas I'm not sure. We're ready to talk about a specific number there rather than we are working hard to be as aggressive as we can to.
To bring those down while retaining deposits so a little more on that I think as we kind of in the coming quarters.
Speaker Change: I appreciate it thank you.
Speaker Change: The next question comes from Brett Robinson with Heartbeat Group. Please go ahead.
Brett Robinson: Hey, good morning, everyone.
Brett Robinson: I wanted to ask first just on Dan I know you mentioned the strong loan pipeline can you guys talk about the level of commitments may be linked quarter, and then maybe just gross versus net for <unk> in terms of actual production.
Gross versus net so yes, so we saw new loans coming on in the quarter.
Seven ish.
It was pretty close to where we were in <unk>.
Speaker Change: The pipelines are both Christian believer bolstered Roger.
Speaker Change: The team is busy we are running hard and I think we're winning a lot of business. We just keep it on the balance sheet becomes it gets paid off two best failure.
Speaker Change: Yes so.
Speaker Change: A couple of segments energy being the primary one where we've had more churn than normal midstream specifically.
Speaker Change: And in the quarter alone, we had almost $200 million of the kind of refinances pay downs and.
That has lot to do with the M&A market and.
Speaker Change: Bond market activity slowed some.
Speaker Change: But our origination activity is not so so with dan's pointed to as pipeline activity in that space specifically.
Speaker Change: Has been robust we just haven't kept up with the pay downs, but I think over a period of quarters, we will and we will catch up more broadly and just general corporate C&I, specifically and we saw some of the same as more M&A activity driven that has created payoffs of our existing borrower, but pipelines are filling back up is just given.
Speaker Change: In any given quarter it might be up or down at the end of last quarter. It was flat.
Speaker Change: Okay.
Speaker Change: It's helpful.
Speaker Change: Yeah. That's helpful and then just on.
Speaker Change: On the guidance for total adjusted revenue.
Speaker Change: And when you think about the margin being a little butter going forward I was surprised.
Speaker Change: I totally.
Speaker Change: Totally agree with the change in the.
Speaker Change: And the expense guidance, but I was a little surprised you didn't tweak higher maybe the total adjusted revenue number higher.
Speaker Change: If the margin is going to expand in the fourth quarter.
Speaker Change: Is there anything that would.
Speaker Change: Not have that 5% to 8%.
Speaker Change: On the higher end of that range fee income is there some other component that I am missing on that.
Speaker Change: Well I think I think that's certainly a possibility.
Speaker Change: I tend to still be a little bit conservative I would say.
Speaker Change: <unk>.
Speaker Change: On where we may end up with deposit costs.
Speaker Change: There's a lot of competition out there in deposits, but but I do think that all else being equal if we continue to see the trends that we're seeing.
Speaker Change: In the higher end range of that is.
Speaker Change: To be unexpected.
Speaker Change: Oh, I'm, sorry, Valerie the hiring is not to be unexpected.
Speaker Change: Yes, I think thats a reasonable assumption.
Speaker Change: Okay.
Speaker Change: Great Fair enough. Thanks for all the color.
Brett Robinson: Thank you Brett.
Speaker Change: The next question is from Catherine Mealor with <unk>. Please go ahead.
Catherine Mealor: Great quarter good morning.
Catherine Mealor: I wanted to ask you mentioned that you think expense growth should.
Catherine Mealor: Normalized next year, we can.
Catherine Mealor: Hey, Big range around what normalized means is there any way to to narrow that kind of conversation maybe talk about it.
Catherine Mealor: Relative to revenue growth for what kind of level do you think is an appropriate level of expense growth.
Catherine Mealor: Yeah.
It's hard to know what normalized we agree with that statement.
Catherine Mealor: I think we look at what the inflation is doing to us.
Catherine Mealor: Continuing to invest in our franchise, we're continuing to invest in our people.
Catherine Mealor: Looking at the inflation rates.
We have a number today.
Catherine Mealor: No I think thats.
Catherine Mealor: Perfect.
And we'll be updating our.
Catherine Mealor: Expectations for the overall income statement as we report next quarter as we look into 2025.
Catherine Mealor: Durable and then.
Catherine Mealor: Don't anticipate the declines that we saw this year.
But more normalized with inflation and with continuing to obviously invest in our teams and technologies.
Catherine Mealor: Great.
Catherine Mealor: So it's fair to assume as we move into next year. If your if your margin is expanding maybe at a moderate pace, but still expanding and the origination volume you're seeing continues to drive loan growth.
Mortgage rebounds, and all that.
Speaker Change: It's fair to assume that we should be in an environment in 2025, where revenue growth is faster than expense growth is that fair.
Catherine Mealor: Hi.
Speaker Change: That's fair.
Catherine Mealor: Okay.
Great. Thanks to the clarity I appreciate it great quarter guys.
Speaker Change: Hey, Thanks for the new slide two.
Catherine Mealor: Yes, thanks to the new slide to Valerie.
Catherine Mealor: I was panicking over the variable rate loan declining Sir thank you for everybody.
Catherine Mealor: Okay.
Speaker Change: Thanks, Mike.
Catherine Mealor: Okay.
Speaker Change: The next question is from Michael Rose with Raymond James. Please go ahead.
Michael Rose: Hey, good morning, guys. Thanks for taking my questions, maybe just following up on the expense question we've heard.
Michael Rose: More and more banks talking about kind of leaning in on hiring efforts in order to kind of drive.
Some some additional loan growth next year can.
Michael Rose: Can you just talk about maybe your hiring pipelines and if you'd expect that to be kind of a greater contributor.
Michael Rose: To kind of normalized expense growth next year, I would think about it and what that impact might be thanks.
Michael Rose: Yes, Michael I appreciate it but I think the question is what is normalized.
Michael Rose: So many years.
Michael Rose: Normal.
Michael Rose: What's normalized is the question for everyone and we certainly are hiring people we've got.
Michael Rose: They've either off the ground in a couple of markets we draw on the ground in Fort worth into struck US we're excited about.
Michael Rose: We continue to look for we think we've got.
People in the pipeline to.
Michael Rose: Come on board gears on their future.
Michael Rose: Theres anything outsized I think.
Michael Rose: Recall that global investing in our franchise.
Michael Rose: Or anything that we would call officers are we gonna harvests big team of people that are going to do something that's not been our normal process. We haven't seen that opportunity present itself that doesn't mean in the middle of next year that doesn't come out but right now that's not what we're looking for we're not talking about.
Michael Rose: The budgeting numbers as we go forward.
Michael Rose: Normalized for us is going to be inflation on.
Michael Rose: Most things.
To continue to invest in technology, and we're going to continue to invest in our people.
Michael Rose: Helpful.
Michael Rose: And maybe just as my follow up obviously a nice.
Speaker Change: Build in capital this quarter you guys bought back some some shares.
Earned back on the buyback those getting up a little bit higher after the recent move in kind of all bank stocks, which has been nice to see but can you just kind of outline your kind of near term buyback appetite and then how should we think about.
Speaker Change: The prospects of M&A as we move forward, especially once we get past the election.
Speaker Change: Well, that's two different questions. So Bob back we've been we've been consistent all year long with the buybacks you've seen US do the same thing three quarters in a row. So the market has picked up in some way.
Speaker Change: In fact every.
Speaker Change: We've taken advantage of that.
Speaker Change: That is in place.
We've got a annual process that we rolled through our buyback program.
Speaker Change: We continue to play.
Speaker Change: Salary of the same rules that we play in.
Speaker Change: So anything there.
Speaker Change: On the M&A front, there continues to be conversations I think we continue to be one that we'd like to see expansion footprint.
Speaker Change: Continue to see more opportunities or we continue to see more announcements.
Speaker Change: Footprint expansion.
Speaker Change: It's less attractive to us we would like to grow within the footprint and you've heard me talk for a while we would like to grow in the markets where all revenue.
Speaker Change: No particular order, we'd like to get bigger in Tampa, Orlando, and Nashville, and Atlanta, and Houston Dallas Austin.
Speaker Change: And so I don't know.
Speaker Change: We can go on and all of them.
Speaker Change: With the markets that we serve today, we would like to be bigger within those markets and so that's where we're focused and we're having conversations I don't know that anything that comes about immediately but we want to be in the game and we think today from a where we're trading capital was where we sit from a comparable number.
Speaker Change: We're sitting in a really good spot to be able to execute.
Speaker Change: Alright, Thats a good list of markets. There. So I think you'll have lots of opportunity. Thanks, guys for taking my questions.
Speaker Change: Thank you.
Speaker Change: The next question comes from Ben <unk> with Citi. Please go ahead.
Speaker Change: Hey, good morning, Hey, good morning Bill.
Speaker Change: I'm curious if we could kind of just talk through about loan yields a little bit more here I know you've kind of answered it originally so so.
Speaker Change: So we just had a 50 basis point cut.
Speaker Change: Markets projecting a few more here over the next six months just kind of curious how responses of loan yields and the most recent fixie because everything pricing and kind of going forward any sort of color you can give a little bit more granular on kind of.
Speaker Change: New new loan yield rates or anything to that extent.
Speaker Change: So those are all about.
Speaker Change: The chart on page 11.
Speaker Change: Break it out that way on purpose the floating rate that shows both $9 billion $9 1 billion.
Speaker Change: 27% of the portfolio of 806.
Speaker Change: Virtually instant change within 30 day change.
Speaker Change: Yes, yes, yes within 30 days right, because it's both prime and LIBOR and a bumper crop.
Speaker Change: Yes.
Speaker Change: That's going to happen very shortly.
Speaker Change: $1 billion is going to change very quickly the variable rate structure is what's behind it.
Speaker Change: Hello Beth.
Speaker Change: Could change in the next quarter some of it to changed a couple of years out. So that's a much longer variable rate reset process in the fixed rates at $8 7 billion in fixed rate some of that's going to mature in this quarter and get repriced also so so some of it mostly or all of the floating rate stuff will reprice this quarter if rates change and some of the other three.
There will be price. So that's why we're breaking it out the way, we're showing it to you that way.
Speaker Change: And if you look back at this past quarter that new loans came on at around a 770 75 level.
Speaker Change: But what we're seeing come in and remember the rate change was late in the quarter and so a lot of that was before the rich.
Speaker Change: That's a fact, yes, the spreads have been pretty wide, but I would expect by Brian comment a little bit.
Speaker Change: Some of the rate reduction.
Got it okay.
Speaker Change: Yes, yes.
Speaker Change: A lot of color I appreciate that and then.
Speaker Change: On fee income.
Speaker Change: So I guess, the MSR is accounting and you haven't really no insight into that until someone wanted to counting tells you what it's going to be but then the tobacco securities gains.
Speaker Change: You kind of get to the let's call. It 95.
Speaker Change: $96 million is that a fair run rate like kind of backing into here is course or excuse me as other sustainable is 96, a good kind of starting point for next year as a base or is there something that we might be missing here behind the scenes.
Yeah, I mean, we had a good solid performance, let me have you set aside the MSR.
Speaker Change: But I will say.
Speaker Change: Rates do come down and we expect that mortgage revenue to actually pick up.
Speaker Change: On the production side of things and the ability to sell those into the markets and drive.
Non interest income so I would expect that's one variable that's really going to be rate dependent.
Speaker Change: Included in other NII, but a little elevated this quarter compared to the prior quarters I mentioned.
Speaker Change: With other items kind of.
Miscellaneous positive move in a variety of categories.
Speaker Change: It can bounce around a little bit quarter to quarter I mean it could.
Speaker Change: Bounce around $5 million.
Speaker Change: Or more simply because there is some fair valuation that a purpose within those numbers some of our investments we have some other funded investments that get fair value quarter to quarter. So it can impact that and that's a little harder to predict.
Speaker Change: But other than that we felt really good about our noninterest income.
Speaker Change: The various sources of both teams are doing well like I said that the interest rates on the mortgage.
Speaker Change: We anticipate that that should see some uptick as we look forward.
Speaker Change: Mortgage team is queued up for success as we look at one of the things we've invested this year since the mortgage changes.
Speaker Change: Good job of making sure that we've got great produce result, the ground.
Speaker Change: We're ready to roll rates.
Speaker Change: <unk> opens for them, we're going to be able to harvest. Some order drove up there on the wealth management side. The team is doing a fantastic job there.
Speaker Change: We're currently.
So if theres a change in valuation that we would be impacted there, but right now things look really good on both of those lines of business.
Speaker Change: Gotcha, Okay sounds good I appreciate the color. Thanks.
Speaker Change: Thanks Bill.
Speaker Change: Thank you. The next question comes from Matt Olney with Stephens.
Speaker Change: Please go ahead.
Matt Olney: Hi, Thanks, Good morning, guys.
Matt Olney: Want to go back to the expected pay down the bank term funding program in the fourth quarter.
Matt Olney: It sounds like a portion of this is going to be from just holding lower levels of overnight liquidity.
Matt Olney: I think that overnight liquidity levels have been between two $3 billion for most of this year, but it was below $2 billion last year. So Chuck I. Appreciate if we should be assuming lower levels of overnight liquidity.
Matt Olney: Next year once we see the full impact of this.
Matt Olney: Pay down.
Speaker Change: Yes, I think thats, a barrel assumption because we were actually earning dollars bump holding what was out there when we were earning moral cast and we were paying for it.
Speaker Change: And I think that's a fair assumption on your part.
Speaker Change: Yes, exactly right that failure side that we paid down in October with purely with excess cash.
Speaker Change: And so depending on where deposits go over the rest of the quarter it'll be there.
Speaker Change: The rest of it on deposits are funded by some wholesale funding bench.
Speaker Change: I expect that well.
Speaker Change: Yes.
Speaker Change: Normalized.
Speaker Change: Is that where in a couple of times, our cash levels maybe.
Speaker Change: Five ish million.
Speaker Change: <unk>.
Speaker Change: Within that range.
Speaker Change: Okay perfect. Thanks, and then on the credit side I think you mentioned the nonaccrual uptick.
Speaker Change: With just from a handful of credits that were previously identified.
Speaker Change: Any more color on industry or just general commentary on kind of what was what migrated.
Speaker Change: It's just the javits just generic normal flow I think when Youre looking back at the criticized number it's been up one quarter down the quarter over quarter. During the quarter were basically where we were a year ago.
Speaker Change: Really.
Speaker Change: No that's well said exactly criticized as being kind of flat normal migration of loans that were identified that we've been working through team's done a great job of working out of credits I think you see that in the.
Speaker Change: <unk> already numbers on the net charge offs numbers.
Speaker Change: Normal flow no industry specific.
Speaker Change: Systematic or system.
Speaker Change: Issues.
Speaker Change: One of our efficiency.
Speaker Change: It's hard to define.
Speaker Change: Rex weaknesses concerns any general area, it's business as normal.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Next question comes from Gary Tenner with D. A Davidson. Please go ahead hi, Gary.
Gary: Hey, Thanks, good morning.
So you had mentioned that.
Speaker Change: We're working diligently obviously on the deposit side, but it's still pretty competitive out. There can you talk about what you were able to do in terms of deposit rates. Following the September rate cut.
Speaker Change: And what type of kind of receptivity.
Speaker Change: Pushback, you've experienced some customer selling.
Speaker Change: It was probably too early to answer that.
Speaker Change: These because thats happened three weeks ago.
<unk> was pretty aggressive in making sure that we made the changes that David the rates dropped so we've reset our CD rates, Chris Chris drives that process for us.
Speaker Change: We looked at our exception pricing the team has been doing a fantastic job all year long of hand to hand combat subscription pricing.
Speaker Change: A process that we have within our bank.
Speaker Change: And we made we made sure that everybody was focused on that we spent weeks coming into the drugs are being prepared and we've moved Chris any feedback you've heard in the last couple of weeks.
Speaker Change: It's still competitive out there most banks dropped yet.
Speaker Change: Different different amounts we took.
Speaker Change: Theoretically they dropped the fed dropped 50, we were looking at 50 across a number of our products as they dropped some banks dropped a little bit less than that I think we need some more so I think we're right in the middle of the pack, we're competing we call it hand to hand combat with our clients I think we've got the tools to retain the deposits and still grow deposits.
Speaker Change: <unk> that we have out there Dan is right I think it needs to settle down and let the rates have been bouncing a bit around and we're seeing our competition adjust they're adjusting rate and also terms of competing on the term everybody just kind of ran through the short side now you are seeing some folks.
Speaker Change: Stuff out a little bit farther on the term because that's attractive to the client from a deposit acquisition perspective. So we're on top of all of that and watching it ready to compete we're measuring in the field on both new production, what's moved coming in the door and then we're also measuring on retention of that team is doing a really good job of retention.
Speaker Change: Great I appreciate that and then just a follow up I don't think I saw it in the deck were heard in the prepared remarks, but do you have as your jumping off point kind of a September 30 interest bearing.
Speaker Change: Thats about right.
Speaker Change: Okay.
Speaker Change: One more time.
Speaker Change: For <unk>, what do you guys have.
Speaker Change: Interest bearing deposit spot rate as of September 30.
Speaker Change: Okay.
Hello.
Speaker Change: Yeah, I don't think that way.
Speaker Change: But that we have and obviously for the quarter.
Speaker Change: Just bearing deposits of $3 <unk>.
Speaker Change: That's not a spot rate, but obviously to chris's point that.
Speaker Change: Thanks, a lot it's round or that could.
Speaker Change: That would be dropped fairly significantly actually gave that range for now.
Speaker Change: Yes.
Speaker Change: Okay fair enough. Thank you.
Speaker Change: Thanks, Gary.
Speaker Change: Thank you. The next question is from Jon <unk> with RBC capital markets. Please go ahead.
Speaker Change: Good morning, Good morning, Joe.
Speaker Change: Most of my questions have been handled but I wanted to go back to loan growth.
Speaker Change: A little bit.
Speaker Change: Yes.
Speaker Change: I hear you on energy, but that general C&I.
Speaker Change: It's really been under pressure.
Speaker Change: Do you have any more color on that as to why that's happening.
Speaker Change: What could change that I know, Chris you said.
Speaker Change: Maybe that changes on a couple of quarters, but any more color on that.
Yes, I think when you talk to the team they feel like they are pedaling really hard about <unk> growth.
Speaker Change: But I think the team when we were talking about it kind of get to the end of the quarter job. We actually thought that we had a likelihood that we would see some fundings that see some growth of that category well before the end of the quarter.
Speaker Change: Materialized.
Speaker Change: Yes, so Jon we've got our pipelines are great. We had some awarded transactions that we've got.
Speaker Change: We were hoping would close at the end of the quarter, they didn't and they're pushing we're still.
Speaker Change: In a good position all knows some of the payoff activity is coming from kind of sponsor backed owned companies.
Speaker Change: The benefit we get from that is a lot of them are going to.
Speaker Change: Private credit lenders, where we're keeping deposits.
Speaker Change: Our corporate teams were able to have net for deposit growth.
Speaker Change: And a lot of it is because.
Speaker Change: Yes, where we lost in loans, we kept treasury and depository accounts that they no longer have a revolver and now they overfund working capital accounts, we'll take that trade from an earnings standpoint, but from a real loan growth. It's a fantastic pipeline that we see across the entire market spectrum.
Speaker Change: And across various product groups as well that are specialized so I feel good about where we're going to end the year at just the payout pressure was real.
Speaker Change: I don't think that will necessarily slow, but I think the pipeline will prove up.
Speaker Change: Thank you John.
Speaker Change: That does help.
Speaker Change: Got it.
Speaker Change: Again, I ask you just a couple of quarters ago.
Speaker Change: At the time, you maybe preferred higher for longer run rates do you have an opinion today, Dan Rollins Crystal ball is there.
Speaker Change: You'd like to see.
Speaker Change: Helpful.
Speaker Change: Stability is the key at this point.
Speaker Change: Slower moves as better stability.
Speaker Change: Really pretty neutral.
Speaker Change: Looking at the change in the curves between.
Speaker Change: September and October I mean, its negligible on what were you anticipating looking forward simply.
Speaker Change: Because of the way our balance sheet is positioned to Dan's point.
Speaker Change: Rates are moving.
Speaker Change: <unk> at 25 basis point increments, that's a lot easier for customers to digest.
Speaker Change: And it's a lot easier to try to capture more of that data as we go forward. So if we have a preference.
Speaker Change: <unk> certainly be there.
Speaker Change: There are a little slower pace and what theyre going to do.
Speaker Change: Okay. Okay, alright, thank you for the help I appreciate it.
Speaker Change: Thanks, Doug.
Speaker Change: Thank you.
Speaker Change: Seeing no further queues in the line. This concludes our question and answer session.
Speaker Change: I'd now like to turn the call back over to management for any closing remarks, alright. Thanks again, everybody for joining us this morning.
Speaker Change: I'm sure you can sense, the excitement and the optimism that our team shares regarding both our results. We've discussed this morning as well as the path.
Speaker Change: We think we're firing on all cylinders, our bankers have done a tremendous job of protecting and growing our core deposit relationships as well as managing inactive loan pipelines. Our fee businesses are reported key success as well as including our mortgage and wealth management teams and our administrative and operations teams are continuing to strive daily to improve our processes and efficiency and support our frontline.
Speaker Change: But it really is an exciting time at a rewarding time to be on the cadence team. Thanks for your time today. We appreciate you joining us and we look forward to seeing you on the road Russo.
The conference has now concluded thank you for your participation.
Speaker Change: May now disconnect your lines and have a great day.
Speaker Change: Okay.
Speaker Change: [music].