Q3 2024 FB Financial Corp Earnings Call
Speaker Change: and Michael Mettee, Christopher Holmes Michael Mettee, Christopher Holmes
Unknown Executive: Good morning and welcome to the FB Financial Corporation's third quarter 2024 earnings conference call.
Nicole: Host Nicole today from FB Financial or Chris Holmes, President and Chief Executive Officer, and Michael Mettee, Chief Financial Officer.
Unknown Executive: Also joining the call for the question and answer session is Travis Edmondson, Chief Banking Officer. Please note, FB Financial's earnings release, supplemental financial information, and this morning's presentation are available on the investor relations page of the company's website at www.firstbankonline.com. And on the Securities and Exchange Commission's website at www.sec.gov.
Unknown Executive: Today's call is being recorded and will be available for replay on FB Financial's website approximately an hour after the conclusion of this call. At this time, all participants have been placed in a listen-only mode. The call will be open for questions after the presentation.
Unknown Executive: During this presentation, FB Financial may make comments which constitute forward-looking statements under the federal securities laws. Forward-looking statements are based on management, current expectations, and assumptions. In our subject to risk, uncertainties, and other factors that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond FB Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements.
Speaker Change: During this presentation that'd be financial they make comments, which constitute forward looking statements under the federal Securities laws forward looking statements are based on management's current expectations and assumptions and are subject to risks uncertainties and other factors that may cause actual results and performance or achievements.
Speaker Change: That's at the financial to differ materially from any results expressed or implied by such forward looking statements.
Speaker Change: Many of such factors are beyond FB financial's ability to control or predict and listeners are cautioned not to put undue reliance on such forward looking statements.
Unknown Executive: I'm more detailed description of these and other risks that may cause actual results to materially differ from expectations as contained in FB Financial's periodic and current reports filed with the SEC, including FB Financial's most recent Form 10-K. Except that's required by law, FB Financial explains any obligation to update or revise any forward-looking statements contained in this presentation, whether it's a result of new information, future events, or otherwise.
Speaker Change: A more detailed description of these and other risks that may cause actual results to materially differ from expectations is contained in FB financial's periodic and current reports filed with the SEC, including S. P. Financial's most recent Form 10-K.
Speaker Change: Except as required by law FB financial disclaims any obligation to update or revise any forward looking statements contained in this presentation, whether it was a result of new information future events or otherwise.
Unknown Executive: In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable gap financial measures and a reconciliation of the non-gap measures to comparable gap measures is available in FB Financial's earnings release, supplemental financial information, and this morning's presentation, which are available on the investor relations page of the company's website at www.firstbakeonline.com and on the SEC's website at www.sec.gov.
In addition, these remarks may include certain non-GAAP financial measures as defined by SEC regulation G.
Speaker Change: A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release supplemental financial information and this morning's presentation, which are available on the Investor Relations page of the company's website at www.
Speaker Change: First bake online dot com and on the Sec's website at Www Dot FCC Dot Gov.
Chris Holmes: I would now like to turn the presentation over to Chris Holmes, FB Financial's president and CEO. Alright, thank you. Good morning. Thanks for joining us this morning. We always appreciate your interest in FB Financial.
Speaker Change: I would now like to turn the presentation over to Chris Holmes.
Speaker Change: B Financial's President and CEO.
Chris Holmes: Alright. Thank you Juan good morning, Thank you for joining us. This morning, we always appreciate your interest in that'd be financial.
Chris Holmes: For the quarter, we reported earnings of 22 cents per share and adjusted earnings of 86 cents per share.
Chris Holmes: For the quarter, we reported earnings of 22 per share and adjusted earnings of 86 cents per share.
Chris Holmes: We have grown our tangible book value per share excluding the impact of Aoc I at a compound annual growth rate of 12.9% since our IPO.
Chris Holmes: The past number of quarters I've emphasized our operating foundation, our earnings momentum and the strength of our balance sheet and all of those trends continue.
Chris Holmes: We reported an adjusted return on average assets of 1.25% and adjusted earnings per share was up 2.4% from the prior quarter and up 21% year over year.
Chris Holmes: While adjusted pre tax pre provision net revenue increased by two 7% from the prior quarter and 20% year over year.
Chris Holmes: Our adjusted efficiency ratio ratio remained roughly flat with the prior quarter at 58, 4%.
Chris Holmes: We have very strong capital ratios with tangible common equity to tangible assets of 10, 4%.
E T. One ratio of 12, 7% and a total risk based capital ratio of 15, 1%.
Chris Holmes: Following a further $120 million decline in construction loans outstanding this quarter, our construction and development concentration ratio is now at 69%.
Chris Holmes: Our commercial real estate concentration ratio is 245%.
Chris Holmes: Our current focus is on deploying excess capital grow earnings per share and create long term shareholder value.
Chris Holmes: Our first priority.
Chris Holmes: First priority for developing capital will always be organic growth. This quarter, we saw seven 2% annualized loan growth.
Chris Holmes: 0.4% annualized non brokered deposit growth.
Chris Holmes: We anticipate mid single digit growth in the fourth quarter due to some seasonality and we're aiming for low double digit loan and deposit growth in 2025.
Chris Holmes: Bigger challenge there being on the deposit side with customer deposit growth.
Chris Holmes: We're confident in the strength of our local economies, which continue to benefit from strong demographic Cannes corporate investment and corporate relocations, and we're well positioned to capitalize on those economic trends.
Chris Holmes: This quarter we.
Chris Holmes: We added.
Chris Holmes: An additional six senior revenue producers, bringing our total hires in 'twenty 'twenty four 'twenty.
Chris Holmes: We have also brought on 16 additional revenue producers in our wealth management mortgage group so far this year.
Chris Holmes: As part of those hires we expanded into Tuscaloosa, Alabama, and the third quarter and we're excited at the way that new team has hit the ground running.
Chris Holmes: As a conservative live around $13 billion asset bank with a younger management team a local authority model and located in some of the south most attractive markets. We have a compelling story to talent in both our existing and contiguous markets.
And we'll continue to expand as we find the right cultural fits.
Chris Holmes: Our second priority for capital deployment is bank acquisitions, we remain interested in combination opportunities that align culturally geographically and financially.
Chris Holmes: Our third priority is capital deployment is continued marginal improvement in earnings through balance sheet optimization.
Chris Holmes: And his team continue to execute on additive transactions, we had a securities trade this quarter as we sold $319 million of securities at a pretax loss of $40 million and reinvested those proceeds at a 3% higher rate than their previous yield so to summarize I am proud of the team for <unk>.
Chris Holmes: Levering another strong quarter of profitability, we're well positioned to continue growing earnings per share and improving on that profitability.
Chris Holmes: Now.
Speaker Change: I will let Mike will go into our financial results in some more detail.
Mike: Thank you, Chris and good morning, everyone I'll first take a minute to walk through this quarter's core earnings we reported net interest income of $106 million reported noninterest income was a negative 16, and a half million adjusting for the $40 1 million loss on our securities trade and a 299.
Mike: Our loss on the sale of other real estate and other assets core noninterest income was 24 million of which $12 1 million came from the banking area.
Mike: We reported noninterest expense of $76 2 million $63 3 million of which came from banking.
Mike: Altogether adjusted pre provision net revenue earnings were $53 8 million.
Mike: Going into more detail on the margin net interest margin was down a couple of basis points at 3.55% on a larger earning asset base, which led to an increase in net interest income of $3 4 million from the prior quarter.
Mike: Yeah in our loans held for investment was flat at six 7%.
Mike: Hold on average, earning assets increased by four basis points from the prior quarter, primarily as a result of our 39 basis point increase in yield on securities during the quarter.
Mike: We completed our securities trade in late August and so we had one month of impact baked into our results this quarter.
Mike: On the liability side cost of non brokered interest bearing deposits increased by four basis points during the quarter from $3 four 9% to 353%.
Mike: Cost of total interest bearing deposits increased from 3.52% to 3.58%.
Mike: We made some changes with our wholesale funding composition as we increase broker deposits by 369 million, while paying off 179 million of borrowings, including $130 million from the bank term funding program.
Mike: For the month of September our contractual yield on loans held for investment was $6 six 8%.
Mike: $6 six 2% for the quarter and Youll on new commitments in September were coming in around seven 8%.
Mike: About half of our loan portfolio remains floating rate with 2 billion of those variable rate loans, having repriced immediately with the recent move in rates and 2 billion of loans that were repriced by the end of the fourth quarter.
Mike: Of our $4 8 billion in fixed rate loans, we have $150 million maturing over the remainder of 'twenty 'twenty four with a yield of 6.69% in.
In 2025, we have 459 million maturing with a yield of 583%.
Mike: For the month of September cost of interest bearing deposits was 3.55% versus 3.58% for the quarter and cost of non brokered interest bearing deposits was 3.49% versus 353 for the quarter.
Mike: As I've noted previously we now have a significant amount of index deposits reprice immediately with the change in the fed funds target rate.
Balances stood at $2 $7 billion as of the end of the third quarter.
Mike: For the fourth quarter, we expect margin to be in the $3 50 to $3 60 range. Following september's 50 basis point rate cut and expect to stay relatively flat around that range with future measured interest rate cuts.
Mike: Okay.
Mike: Moving to adjusted noninterest income of $12 1 million core banking noninterest income was again stronger than expected driven by investment services income or.
Mike: Our baseline expectation in a given quarter it may be slightly higher now $11 million to $12 million.
Mike: Mortgage had another profitable quarter with a total pre tax contribution of 575000.
Mike: We expect mortgage to continue to perform in this range for the balance of the year and are focused in a continuing improvement of our efficiency in this business in 2025.
Mike: We continue to focus on managing our expenses and core banking expense was $63 3 million for the quarter as compared to $61 3 million in the second quarter at $63 9 million in the third quarter of 2023.
Mike: He added relationship managers and increased our accrual for short term incentive compensation.
Mike: We expect banking expenses of 63 to 65 million in the fourth quarter, leading to total bank expenses for the year of $248 million and $250 million.
Mike: For 2025, we would expect 4% to 5% expense growth for the company, excluding any large team lift out opportunities.
Mike: On the allowance for credit loss in credit quality.
Mike: Credit quality remains sound this quarter as we experienced 30 basis points of charge offs, our nonperforming loans to loans held for investment did tick up and at that 0.96%.
Mike: The increase was driven by two commercial credits, which we expect minimal if any loss content and some softness in our consumer loans, specifically mortgage and it's manufactured housing lives.
Mike: These consumers are generally more affected by upticks in unemployment and inflation and we've seen some impact of that in our portfolio as it appears to be returning to pre COVID-19 levels.
Mike: Speaking to the allowance our allowance for credit loss to loans held for investment was at 1.65% at the end of the quarter as our outlook on the economy remained roughly the same as the prior period.
Mike: On capital and as Chris mentioned, we have developed very strong capital ratios with TCE to tangible assets of 10, 4% and.
Mike: Common equity tier one ratio of 12, 7%.
Mike: We continue to focus on the best ways to deploy that capital to deliver consistent long term growth in earnings and tangible book value.
Speaker Change: I'll now turn the call back over to Chris.
Chris Holmes: Alright, Thank you Michael.
Chris Holmes: And just.
Chris Holmes: Just a couple of things in conclusion here first I want to say, we usually start this call at eight o'clock in the morning, when we release we.
Chris Holmes: We started at 10 am this morning, because we had two members of our board of directors that were inducted into the Tennessee Healthcare Hall of Fame.
Chris Holmes: This morning at a ceremony one of those.
Chris Holmes: Right Doctor right person, who is the deputy CEO and Chief Health System Officer at Vanderbilt University Medical Center. The other one of those Milton Johnson, who is the former chairman and CEO of HCA healthcare. So congratulations to both of those guys and that's the reason, but we started a little later than the normal.
Chris Holmes: And I just want to say I'm proud of our entire team, including the board or the results this quarter and we look forward to building on that momentum.
Chris Holmes: And we will open it up for Q&A.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone you are using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Okay.
Speaker Change: And your first question comes from Russell Gunther with Stephens. Please go ahead.
Russell Gunther: Hey, good morning, guys.
Speaker Change: Good morning Russell.
Russell Gunther: Just a big picture question to start you know just looking at the press release, you guys mentioned.
Russell Gunther: The optimism for 25, given the current momentum and also the expected future rate decreases. So just big picture can you walk us through how lower rates are an earnings growth catalyst for F. B K.
Speaker Change: Yeah. So.
Speaker Change: A couple of things you know we are a relatively well matched between the asset side of our balance sheet liability side of our balance sheet and we have oh.
Speaker Change: About half of our loan portfolio is fixed.
Speaker Change: The remainder variable and.
Speaker Change: About $2 7 billion of our deposits are indexed.
Speaker Change: Oh, so they move immediately.
Speaker Change: And frankly.
We only have 17% of our deposits that are in Cds or fixed term and so.
Speaker Change: We think we have a lot of variability there and we can execute.
Speaker Change: Execute as rates move and as long as rates move gradually that we think we're in actually a good shape to maintain margin.
Speaker Change: Perhaps look for some areas to expand margin and so.
Speaker Change: So and then with our <unk>.
Speaker Change: With our economies.
Speaker Change: That has frankly.
Speaker Change: Never totally lost momentum they have certainly the momentum is.
Speaker Change: Less than it would've been two or three years ago, but they should continue to be quite good and so we think there is.
Speaker Change: The demand there.
Speaker Change: We think with other just other activities that great disruption in the markets.
Speaker Change: And so the fact that we've got a stable team that's been together for a long time, we think that not only 25, but we look out over the next two or three year time horizon and we're very optimistic.
Speaker Change: From a man so that's kind of a macro picture.
Speaker Change: I appreciate that.
Speaker Change: So I was looking for thank you and then just perhaps a little more specific on the margin guidance. So the $3 50 to 360 in four Q and then kind of flat from there can you.
Speaker Change: It sounds like Thats, what sort of a measured pace of cuts.
Speaker Change: Can you walk us through what you guys are thinking about for deposit betas on the way down you mentioned the amount of index, which is a healthy amount.
Speaker Change: But what are you guys assuming.
Speaker Change: From a deposit beta perspective on the way down and sort of when you get there can you retrace the updated score it's a win.
Speaker Change: Yeah, I'll start out I'm expecting 100% Michael in Travis Yeah.
I'm just I'm just kidding.
Russell Gunther: Yeah, I'll take that Russell.
Speaker Change: Yeah.
Speaker Change: Yeah, So first off good morning.
Speaker Change: It really really actually proud of the team and the work that was done on the first 50 basis point rate cut.
Speaker Change: Quite frankly I.
Speaker Change: We expect in 'twenty, five and that was kind of what we've set the team up for and when it was 50. They responded well and the goal would be right. Yes. It was 60% on the way up it would be 60% ish on the way down.
Speaker Change: That's what the goal is positive momentum.
Speaker Change: After the first rate cut as you know and everybody on the call knows our markets tend to behave a little bit differently because of some of the growth characteristics that Chris mentioned, so we may see a little bit less than that but a part of the reason we did some broker deposits in the third quarter.
Speaker Change: <unk> was to be prepared for optionality in the balance sheet right. So if we.
Speaker Change: We see higher cost deposits that can't move lower we can we can manage some of those differently. If they if they have to leave that gives us opportunities and so really a lot of that was about kind of pre funding any higher cost deposit runoff in creating optionality for the company. So we think we can.
Speaker Change: Execute on on Betas, just like we did on the way up and so far the team has responded really well.
Speaker Change: Great I appreciate it. Thank you both for taking my questions.
Speaker Change: Thanks Ross.
Speaker Change: The next question comes from.
Speaker Change: Linda Miller with a B W who leads go ahead.
Linda Miller: Thanks, Good morning.
Linda Miller: Good morning Heather.
Linda Miller: One follow up just within the margin just to add many question as we think about bond yields.
Linda Miller: Fourth quarter fully reflects the restructuring you did where did you end the quarter after.
Linda Miller: For the whole portfolio.
Speaker Change: As little North of four Kathryn.
Linda Miller: So you can be right in that range in the fourth quarter.
Speaker Change: Okay perfect.
O'neill you gave us we see now first it's floating university extreme repricing.
Speaker Change: Hum.
Lot of moving parts within that U S. It just kind of curious your thoughts on it.
One Neil maybe just over the next couple of quarters, how how much of a downside risk you see to that.
Speaker Change: Any commentary on what has happened so far with new loan production just given the rate.
Speaker Change: James.
Speaker Change: Yeah and all.
Speaker Change: I'll start and then I'll, let Travis talk about kind of market conditions. So one of the things you see in our loan yield has been relatively flat right as we had $120 million in construction balances that moved to the permanent or left the bank in the quarter and so those tend to be higher yielding loans and we have some of that is coming off in the.
Speaker Change: The fourth quarter, which is why you have such a higher yield on that book that it's coming down so new originations funding up type business was around 780 <unk> in.
Speaker Change: In the third quarter and quite frankly, I know we've talked about this before you are our customer base. The market has responded very well to higher rates, we'd been north debate.
Speaker Change: For the better part of.
Speaker Change: 18 months and still haven't right around that number in the third quarter. So try the same thing on market No I don't think the market has moved to drastically on fixed rate pricing I think that 7.5% to 8% depending on the credit quality is still still much in line with the market.
Speaker Change: Okay great.
Speaker Change: A follow up on credit we saw one of your peers are so they're manufactured housing block just any commentary from you on your bulk lots any kind of credit concerns you're seeing.
Speaker Change: And manufactured housing.
Speaker Change: Yeah I'll start Michael So we did we did see that we knew that our book, while the team well yes.
Speaker Change: Where.
Speaker Change: So I guess, we've been in the business since 2005.
Speaker Change: And the highest charge offs, we've ever seen in that business about 91 basis points.
Speaker Change: On that on the retail piece the chattel piece, we're reserved at about 5%.
Speaker Change: And that's for kind of some of these unknown reasons coming out of Covid government stimulus inflation.
Speaker Change: Pretty thoughtful in how we're approaching that.
Speaker Change: And any concerns about that that being said, we've seen an uptick in past days, but we haven't seen a whole lot of losses materialize.
Speaker Change: Probably running.
Speaker Change: 30 basis points or so in charge offs.
Speaker Change: So pretty pretty normalized to a pre COVID-19 for us.
Speaker Change: And we still like the business like a lot actually.
Speaker Change: And I think we can do really good things there. So yes, I would just add this catherine.
Like Mark said, we are familiar with that that that team in that book and that's the old reliant team.
Speaker Change: And sue.
Speaker Change: If you look at our charge off history.
Speaker Change: Since 2019, we had one year, where we had 53 basis points of charge offs.
Speaker Change: The rest of those would have been but somewhere between 16 basis points.
Speaker Change: And about 33 basis points and so that's that's a five year history.
Speaker Change: And I think that's kind of different than what they had experienced so theres. Some differences I think in the in the methodology and the book there I would say I would say this we're watching past dues in that in the portfolio carefully.
Speaker Change: Because we expected if you go back to 'twenty.
Speaker Change: 2021 'twenty two.
Speaker Change: So you had so much stimulus money that it is the past dues were really abnormally low.
Speaker Change: And the charge offs were abnormally no if you compare it to our previous history and say we've seen the past dues returned to us.
Speaker Change: With two of the level that we saw in 2018 2019.
Speaker Change: And so I.
Speaker Change: I would say say this thing that we watch going forward is it should it should level off here. If it continued to go up from here.
Then we may readjust, but it should level off here, but at this point, it's just returned to what we consider to be normal.
Speaker Change: Okay, great very helpful. Thank you.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: Our next question comes from Steve Moss with Raymond James. Please go ahead.
Speaker Change: Good morning.
Maybe just start on the <unk>.
Steve Moss: Good morning, Chris maybe just start off on the loan growth here, maybe just a little more color on what were the drivers of C&I loan growth this quarter.
Speaker Change: And.
Speaker Change: Maybe take that a step further just how you think about you know are definitely more constructive on the loan growth outlook going forward where.
Speaker Change: Where do you see those drivers are in the upcoming year.
Yeah.
So I'll, let you comment, but I will make make this kind of overriding comment is the good and the good news from my perspective as we.
Speaker Change: We don't see a single drivers that are major.
Speaker Change: We see it broad based as opposed to being.
Speaker Change: You're a single or double large credits, we did have a couple of nice wins in there.
Oh, one of which we won from I'll call. It a very very large.
Speaker Change: Regional.
Speaker Change: Actually both of them the ones that I'm thinking that the two that were actually noteworthy, but still get not over oversized would've been.
Speaker Change: Business that moved over from two different large regionals.
Speaker Change: And then the rest of it I'd say it is very much I'll call. It community Bank App Sina Travis would you add.
Speaker Change: Anything to that yeah, I would agree I mean, I think some of the new revenue producers we hard in late 'twenty three in early 'twenty four starting to hit the ground and in bringing over some of their more established.
Speaker Change: Clients and there's not one particular industry or area, it's really broad based both geographically and industry.
Speaker Change: And we're seeing a lot to Chris's point, we're seeing a lot of just core.
Speaker Change: Smaller top C&I growth that brings over the full relationship.
Speaker Change: Okay, Great and just in terms of your commercial real estate and construction concentrations are way down from where they were 12 or 18 months ago.
Speaker Change: Curious to your kind of is this.
Speaker Change: Do you think this is the bottom for the decline in those ratios and just how do we think about those portfolios.
Yes, we were.
Speaker Change: I would characterize it as comfortable as it's very comfortable where they are and when we evaluate our entire risk profile backup from a macro standpoint for a minute and say we when we just did.
Speaker Change: Evaluate the risk profile of the company.
Speaker Change: Look at the risk that we take them on and off balance sheet, we actually feel pretty good with if you look at capital level. If you look at overall all credit and then you look at various concentrations not just those to publicise those two but we have others we actually.
Speaker Change: Our great confidence in our risk profile at the current time add liquidity to that.
Speaker Change: And so we think we've got room to.
Speaker Change: Within our policy, we have room to even grow those a little bit not a lot from there, but we would have room to even grow those little bit thats, not saying that that's really in the cards for us we'd liked them frankly about where they are.
Speaker Change: We run close to $2 50 on CRE.
Really good geographies and so that's that's a factor.
Speaker Change: Well once we're under 70% on a construction concentration.
Given our geography.
Speaker Change: And our credit history, we feel pretty good about those and so I would say youll see them keeping that same relative range.
Speaker Change: I wouldn't exactly call it a bottom, but youll see it in that relative range.
Speaker Change: Okay.
Speaker Change: I appreciate that and then just.
Speaker Change: In terms of capital deployment, you know obviously organic growth is first you know I hear you on M&A being second just kind of curious.
Speaker Change: Chris if discussions have picked up here in the last couple of months or has there been any change in your opinion with activity there.
Speaker Change: Oh.
Speaker Change: Uh huh.
Chris Holmes: I never know Steve exactly how to answer this question because.
Speaker Change: Those conversations are.
Chris Holmes: Or just kind of a part of what to do.
Chris Holmes: And when you're in a consolidating industry, where in a consolidating industry and so.
Chris Holmes: I guess I would say maybe the <unk>.
Chris Holmes: Intensity of some of those conversations or the the the direct.
Chris Holmes: So the nature of some of those conversations maybe has picked up a little bit.
Chris Holmes: Would indicate that there are.
Chris Holmes: These out there that probably have a little more intense than they had a year or two ago, and so I would say that but in terms of the volume or they are.
Chris Holmes: The ones that we speak with.
Maybe a little bit of increase there.
Chris Holmes: And part of that is on airport because you know what.
Chris Holmes: Geography continues to grow we mentioned one in the Tuscaloosa sits in our geography continues to be intense.
Chris Holmes: To grow and so we.
Chris Holmes: Perhaps a little more intentional and reaching out further geographically than we have been crazy.
Awesome I appreciate all the color there. Thank you.
Chris Holmes: Sure.
Speaker Change: Our next question is a follow up from Russell Gunther with Stephens. Please go ahead.
Russell Gunther: Hey, Thanks for the follow up guys on the asset quality commentary I. Appreciate the color that you guys gave.
Russell Gunther: Last quarter, you mentioned, you were seeing more inflows and outflows into the adversely classified loan buckets. So one wondering if that was still the case again in <unk> and.
Russell Gunther: Two as you guys contemplate further rate cuts how do you anticipate the inflow and outflow of puts and takes.
Russell Gunther: Yeah, Hey, this is Travis.
Speaker Change: We still see a constant flow of both in and out it's still business as usual you know it takes time to work these things through through the process of getting them either upgraded or we're back on track or even out of the bank, but we're still seeing a lot of activities on the outflows just you'll see it was not as robust in the third quarter, we still have <unk>.
Speaker Change: Several that we're we're working through and we're really close.
Speaker Change: Getting them either upgraded or out of the bank.
Speaker Change: We obviously Michael referenced to two big inflows on the commercial side. We did have two loans. The total combined they totaled around 2 million that was that was the big influx, we feel good about them, even even though theyre adversely classified and we have to keep a close eye on them, but from a collateral standpoint into guarantor support standpoint.
Speaker Change: We feel pretty confident that we will have very little if any losses on those so.
Speaker Change: Yes, okay.
Speaker Change: And one thing from from where they are reviewing those lists.
Speaker Change: A lot over the last.
And that that is.
Speaker Change: It seems to be something that's a little different.
Speaker Change: Unfortunately, that's still start from 2008 2009, the number of members some of that but.
Speaker Change: And maybe this is a change in the.
Speaker Change: The underwriting.
Speaker Change:
Speaker Change: Of course, I was at a different institution at that time, but the.
Speaker Change: You you do encounter some issues and you have to work through those issues, but just doesn't seem like the losses are there.
Speaker Change: And so it takes a little bit of time to work through some of these.
Speaker Change: But.
Speaker Change: The loss content doesn't seem to be.
Speaker Change: Even when there is loss code did it doesn't seem to be the same magnitude. So it's just a little bit of commentary.
Speaker Change: Yeah, and then I guess your second.
Speaker Change: Yes sure.
Speaker Change: Your second question on the rate change impact I don't think it's going to have a material impact that the issues. We're seeing are the one off issues that have nothing to do with the elevated rates just it's a partner dispute or something like that is what we're experiencing so without within our portfolio I guess it it's going to ultimately help our bar.
Speaker Change: But I don't think it's meaningful either way on our asset quality.
I appreciate all the color guys. That's really helpful. Thanks for the follow up.
Speaker Change: Sure. Thanks Ross.
Unknown Executive: That concludes our question and answer session.
This concludes our question and answer session I would like to turn the conference back over to Chris Holmes for any closing remarks.
Chris Holmes: I would like to turn the conference back over to Chris Holmes for any closing remarks. Okay. Well, thank you all very much for joining. We always appreciate your support, and we look forward to moving into the final quarter of the year and making that a good one. All right. Everybody, have a great day. Thank you.
Speaker Change: Okay.
Chris Holmes: Thank you all very much for joining we always appreciate your support and and.
Speaker Change: And we look forward to.
Chris Holmes: Moving into the final quarter of the year end.
Chris Holmes: In making that a good alright, everybody have a great day. Thank you.
Unknown Executive: The conference is now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Unknown Executive: You may now disconnect. Have a great day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Yeah.