Q3 2024 Ameris Bancorp Earnings Call
Okay.
Speaker Change: Good day and welcome to the American Bancorp third quarter earnings Conference call.
Speaker Change: All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
Speaker Change: After todays presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: Almost all of your question. Please press Star then two please.
Speaker Change: Please note this event is being recorded.
I'd now like to turn the conference over to Nicole Stokes Chief Financial Officer. Please go ahead.
Nicole Stokes: Thank you Danielle and thank you to all who have joined our call today during the call we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our website at Amerisafe Dotcom I'm joined today by Palmer Proctor, our CEO and Dirk Strange our Chief Credit Officer Palmer will begin with some opening general comments.
Nicole Stokes: And then I'll discuss the details of our financial results before we open up for Q&A.
Nicole Stokes: But before we begin I'll remind you that our comments may include forward looking statements. These statements are subject to risks and uncertainties. The actual results could vary materially we list some of the factors that might cause results to differ in our press release and in our SEC filings, which are available on our website, we do not assume any obligation to us.
Nicole Stokes: Any forward looking statements as a result of new information early developments or otherwise except as required by law also during the call. We will discuss certain non-GAAP financial measures in reference to the company's performance you can see our reconciliation of these measures and GAAP financial measures in the appendix of our presentation and with that I'll turn it over.
Speaker Change: So I'm afraid.
Thank you Nicole and good morning, everyone I wanted to thank you all for taking the time to join our call today I'm very pleased with the top of class third quarter financial performance, we reported yesterday as well as our outstanding year to date metrics.
Speaker Change: Our fundamentals remained strong in the quarter as mirrors continues to be pure leader in most key metrics as you can see we remain focused on growing tangible book value per share as evidenced by our 19% annualized growth rate for the quarter over the last five years, our tangible book value has increased by a notable 85% or <unk>.
Speaker Change: <unk> ability remains strong with an above peer P. P and R. R O a right at 2% adjusted ROA of $1 43, and our return on tangible common equity of 15% in the quarter.
Speaker Change: Capital continues to grow with our TCE ratio now in the double digits at a healthy 10, 2%.
Speaker Change: Common equity tier one is also strong at over 12%. These strong capital levels give us a lot of optionality as we look forward to explore additional growth opportunities within our attractive southeastern footprint as well as increased capital returns, we improved our CRE concentration to capital ratio down to $2 seven.
Speaker Change: Which is a nice move down from our $2 95 peaked a couple of years ago, our allowance for credit losses was stable in the quarter, representing a healthy 160 coverage ratio.
Speaker Change: Our third quarter margin of $3 51 remained well above peer levels. This quarter with our net interest income continuing to increase the strong margin has benefited from our granular core deposit base and our DDA composition, which we were able to keep above 30% in the quarter another top of class level.
Speaker Change: We have a proven culture of expense control and were able to reduce our efficiency ratio to 54% from 55% last quarter.
Speaker Change: Also during the quarter, we executed our second MSR sale of the year. This time selling most of our Ginnie Mae MSR. This sale resulted in a pretax gain of over $5 million and helped to reduce our Ginnie Mae nonperforming loans, which fell over 90% in the quarter.
Speaker Change: Finally, our earning asset base, it's diversified among both geographies and product types and our average earning assets grew seven 6% annualized in the third quarter our.
Speaker Change: Our southeast footprint is strong which should allow us to enjoy continued growth when appropriate as well as positive operating leverage.
Speaker Change: These highlights along with our focus and discipline are what really what drives our optimism for the remainder of this year and into 2025.
Speaker Change: I also wanted to mention that several pockets of our franchise were impacted by the two recent south Eastern storm saline and Milton and I'm very proud of how our team responded before during and after the storm taking care of our franchisee in our customers' Fortunately for US most of our locations did not experience significant damage and went back.
Speaker Change: Open in short order. In addition, I was pleased that the Amira as foundation was able to commit funds to the American Red Cross to support recovery efforts and our impacted markets overall I'm very proud of our team in the third quarter performance, which remains industry, leading and above peer levels. The future's bright here at a merits when we.
Speaker Change: The continued support of our customers teammates and shareholders I'll stop there and I'll turn it over to coal to discuss our financial results in more detail great. Thank you Connor for the third quarter. We are reporting net income of $99 $2 million or $1.44 per diluted share as Tom mentioned, we recorded a $5 2 million.
Speaker Change: The gain on the sale of a second portion of our MSR portfolio in the quarter and we also recorded about $150000 of hurricane related expenses.
Speaker Change: Putting these items, our adjusted net income with $95 2 million or $1 38 per diluted share you know to signs of our strong core performance. This quarter is our adjusted return on assets, which improved to a $1 43, and our adjusted return on tangible common equity improved to 15%.
We remain focused on growing shareholder value and we added $1 72 per share the tangible book value. This quarter, that's an annualized growth rate of about 19% to 21% to end the quarter with tangible book at $37 51 per share we didn't repurchase any stock this quarter, but the board did renew our buyback plan for another 100 million.
Speaker Change: Through October of 2025.
Speaker Change: Our interest income for the quarter increased $7 8 million over last quarter, while our interest expense only increased 5.7, allowing an increase in net interest income of about $2 1 million. However, as I mentioned last quarter, we had about $2 3 million of nonrecurring bond interest income in the second quarter. So can.
Speaker Change: <unk> that known anomaly our core net interest income actually grew about $4 4 million for the quarter or 8% growth linked quarter over quarter.
Speaker Change: We continue to maintain a strong margin at 351, you remember last quarter, we had that four basis points of one time margin expansion from the bond portfolio that I just mentioned that we did not expect to reoccur. This quarter. So we really only had three basis points of margin compression, which was right in line with our guidance on margin kind of bouncing up or down around.
Speaker Change: A few basis points, each quarter, but maintaining right around $3 50.
Speaker Change: Yeah, the three basis points of core margin compression was related to our funding mix this quarter and always only slightly impacted by our asset sensitivity.
During the quarter, we reported a $6 1 million provision for credit losses, maintaining our coverage ratio at 160 of loans and improving to 336% of portfolio N. P. L. Yeah, while I'm on credit let me mention that with the sale of our Ginnie Mae servicing asset our total nonperforming assets as a percentage of.
Speaker Change: Total asset.
Speaker Change: Trade from 74 basis points down to just 44 basis points and our charge offs improved again this quarter to just 15 basis points compared to 18 basis points last quarter.
Speaker Change: Adjusted noninterest income decreased $6 7 million this quarter, mostly in the mortgage division due to the decrease in production and a reduced gain on sale margin of $2 17, which was down from $2 45 last quarter.
We continue to focus on efficiency and our adjusted efficiency ratio improved down to 54 point to five in the third quarter total adjusted noninterest expense decreased $4 6 million in the quarter, mostly in the mortgage division related to the theory will come from the decreased production.
Speaker Change: On the balance sheet side, we ended the quarter with total assets of $26 4 billion compared with $25 2 billion at the end of the year.
Total, earning assets ended at $24 3 billion and our average earning assets increased seven 6% annualized from the second quarter to the third quarter well.
Speaker Change: Loans held for sale and portfolio allowance were fairly flat quarter over quarter. However, the average balance of portfolio loans during the quarter increased 203 million from last quarter.
Speaker Change: Much of the increase in two key balances were from the summer seasonality in our warehouse line. It does fluctuate day by day. So they happened in the quarter down about $85 million, but total loan production in the quarter was 509 million the highest we've seen in the past four quarters. Many of these loans will fund in future quarters and are at a blended.
Speaker Change: Rate of a little over 9%, which will be accretive over our current loan yields of about 6%.
Speaker Change: For the year to date period portfolio learned have increased $695 7 million or four 6% annualized and deposits have increased 1.17 billion or seven 6% annualized.
This success has improved our loan to deposit ratio and our noninterest bearing deposits still represent a healthy 30% of total deposits and our brokerage Cds, representing only 7% of total deposits. We continue to anticipate 2020 for loan and deposit growth in the mid single digits and expect that deposit growth will continue to be the governor.
Speaker Change: On loan growth.
And with that I'll wrap it up and turn the call back over to Danielle for any questions from the group.
Speaker Change: Thank you well now begin the question and answer session to ask a question you May Press Star then one on just touch tone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: The first question comes from well Jones from K P. W. Please go ahead.
Speaker Change: Yeah, Hey, thanks, good morning, everyone.
Speaker Change: Good morning will.
Speaker Change: And you said Nicole wanted to start on the margin.
Speaker Change: No, we kind of talked last quarter, a little bit about how and plaster you were you know if.
Speaker Change: If you guys continue to see good growth that maybe you're willing to give a little bit on that percentage as long as you know the trade off was.
Speaker Change: Well see NII dollars grow and then we kind of saw that come through a little bit this quarter I'm. Just curious if you still carry that same kind of mindset is as we roll through the balance of the year and into early 2025, or if there's a point where you feel like you may need to get a little bit more of a sensitive on the margin.
Speaker Change: No I think that that's a great point and know our our guidance there really hasn't changed I mean, we feel like we have a strong healthy margins even at $3 51 is above peer and a healthy margin and we're very very proud of our of our deposit base and we will protect that deposit base and then we will also look to continue to grow that and when we see.
Speaker Change: About margin expansion, we're still right at just slightly asset sensitive or bad as neutral as we can be so any margin expansion that we come that we see coming in is going to come from growth in earning assets. So we continue to look for that growth in NII and focus on that which again, we had like human.
And about 8% linked quarter growth in NII, this quarter, which was strong.
Speaker Change: So even though we had a little bit of margin compression, we still continue to see that NII growth and that continues to be our focus.
Speaker Change: Yeah Yeah.
Speaker Change: That's helpful.
Speaker Change: Just while we're on the margin could you just remind us all what where you guys stand with the index or a higher beta deposits and then.
Speaker Change: Just maybe an early read on how how do you feel like deposit betas could trend as we start the season cycle.
Speaker Change: Yes, so we have very few less than 2% that are indexed deposits. However, we have a large portion that behaved like index deposits. So and the approach that we've taken is at those higher debate higher beta deposits on the way up or the higher beta deposits on the way down and we were very.
Speaker Change: Aggressive with reducing deposits the day after the fed moved them our operations team did a great job implementing all of those changes and we really so far knock on wood have not seen any you know I think I think the big outlier to be is that if we start seeing competitors not news and what we've seen so far is that our competitors moved as well. So we don't have a lot of <unk>.
Disruption from anybody not being able to move until we don't have any reason to believe that we wouldn't be able to continue that with fed cut to continue to have a strong data on the downside.
Speaker Change: Okay.
Speaker Change: Helpful. Thanks for that and then Paul maybe just one for you I know we have you know seemingly the capital conversation most every quarter and I certainly can appreciate you guys. You know, they're very thoughtful approach and prudent approach to all of them just preserving capital but.
Speaker Change: Tom This is really a pretty powerful earnings environment for our merits you guys were accrued capital at a nice clip.
Speaker Change: Every quarter is there a point in time, where.
Speaker Change: Yeah, I don't think aggressive is the right term, but basically you think more opportune it opportunistically about deploying some of your excess capital.
Speaker Change: Oh, absolutely I don't think that time is now, though I think to your point on being prudent and disciplined we remain in that camp for now I think until we get a little more clarity post election, and see how things shake out, but its a good problem to have right.
Speaker Change: So we're very pleased with where the capital of law. It gives us once again love that Optionality.
Speaker Change: <unk> talked about earlier so for now we're kind of in a capital building mode and then we'll see how what kind of clarity we have at the FERC here, but the nice thing is as we are in a position to capitalize on that theres several different fronts, if we choose to do so.
Speaker Change: So certainly a nice Madison dam for you guys. Thanks for the questions.
Speaker Change: Ben.
Speaker Change: The next question comes from Christopher Merrimack from Janney. Please go ahead.
Christopher Merrimack: Thanks, Good morning, I had a question on the reserve as it pertains to do you grow into the reserve from here or what the reserves still kind of grow with long growth and then obviously quarter to quarter may vary on charge offs and criticized trends.
Speaker Change: Chris That's a good question. This is Doug you know the reserve is gonna be model driven we're happy with the $1 60, we think that's all that bodes well for us into the future and you know we would all we would just let the models manage it from there on out along with our our indices that we have that influence our our model.
Speaker Change: And anything new on the on the C&I side in terms of trends on losses into next year would any of that different from what we've seen recently.
You know our C&I book is is very diversified not only loan product, but also a geography as well. So if you take $5 billion roughly in C&I, you've got equipment finance premium finance mortgage warehouse life insurance.
We've got a dog and then you know you you strip those out and then you get down to core C&I to answer your question.
Speaker Change: The $1 billion of course, CNI and we don't see much stress if any at all in that portfolio, maybe about 10 or 11 basis points of charge offs for the year.
Speaker Change: Sounds good thank you for that and Nicole just a quick data question as it pertains to both betas, how would those be similar on the way down and our rate easing cycle as we saw at the last two years.
Nicole Stokes: Yes, we don't have any reason to think that our loan betas are gonna be different and again you know our our mix. There is about 60 40.
Nicole Stokes: Fix variable, but we have a lot of or some fixed rate loans that behave like variable rate. So we ended up really can't kind of being more of a 50 50 split when you think about for example premium finance line they aren't fixed rate, but there are 10 months maturity, so they're going to behave like a variable, but when you think about behavior, it's gonna be more.
50 50 split.
Speaker Change: Got it great. Thank you all for taking US all questions. This morning.
Christopher Merrimack: Thank you Chris.
Speaker Change: The next question comes from Russell Gunther from Stephens. Please go ahead.
Speaker Change: Hey, good morning, guys.
Russell Gunther: I wanted to follow up Martin a bummer to follow up on the NIM discussion just to clarify it is the guy and I understand the NII versus name component addressed is the near term guide for the NIM unchanged in the 350 ish range or how should we think about the next couple of quarters with some additional cuts coming.
Speaker Change: Yeah, No I think the guide in general stays the same that we said well you know up or down a few basis points each quarter that bouncing around that $3 50. So maybe we did two or 348 jumped up to $3 53.
Speaker Change: Hanging around that $3 50, which is the same guidance that we've been saying because we're so close to asset asset sensitive neutral I'm worried where like I said less than 1%. So about every 25 basis point basis point is about one basis point of margin based on the model, but then every incremental gross is going to be margin accretive. So that's kind of what's drive.
Speaker Change: That margin guidance is knowing that growth is accretive to margin at this point, but we are at we still have some repricing asset sensitivity on the balance sheet.
Speaker Change: Perfect. Thanks for the clarification, and then switching gears to loan growth.
Speaker Change: I appreciate the comments you guys provided.
Speaker Change: The message the same there too in terms of diversified mid single digits and maybe just taking that as we look ahead into twenty-five balanced.
Speaker Change: Balancing some things like the potential for pay downs to pick up and in the past you've talked about maybe some gain on sale for Balboa. So just wondering how you're thinking about the volume outlook.
Speaker Change: Yeah, we still feel very confident in our guidance and when we started out the year. We're right in line with what we said obviously with the volatility in the markets you're going to have some quarters that are higher than others. As we saw last quarter, we saw the big.
Speaker Change: Growth in the warehouse lines, which we knew were going to pull back. So when you look at the growth. So we're right in line with the guidance, we feel comfortable with what we have guided to through the fourth quarter and then as you look into 2025.
Speaker Change: Where I feel like we're just so well positioned.
Speaker Change: Not only because of the diversification of the business lines, but also the markets that we operate in and if you look at this quarter for instance, and excluded the Ginnie Mae sale, which was a very positive for us. It moved a lot of the M. P A's and the warehouse cyclicality of the loan growth was about 3% annualized from the third quarter and then we feel like.
Speaker Change: Portable stay right in line with what we've guided all year and as you look into as we get more clarity into 2025, we just feel very confident about our ability.
Speaker Change: To capitalize on any growth opportunities that may exist out there if and when it's appropriate we have invested heavily in a lot of new hires as you're well aware of on the commercial front and through the treasury fronts throughout the year. So we're well positioned from a talent standpoint, and a lot of these growth markets to jump on that and accelerate that when when.
Speaker Change: Right.
Speaker Change: I appreciate it Palmer. Thank you both for taking my questions.
The next question comes from Manuel Novice from D. A Davidson. Please go ahead.
Manuel Novice: Hey, Oh.
Manuel Novice: Our mortgage in.
Manuel Novice: In the past you've had up to about 150 more important than prior years.
Manuel Novice: Is there any capacity constraints.
Manuel Novice: If we do get a 200 basis point decline are another 150 basis point decline in the fed funds rate.
Manuel Novice: And kind of how you're thinking about mortgage next year initially.
Speaker Change: Yeah, you know, it's it's kind of looking through a crystal ball at this point I think we had all anticipated.
Speaker Change: More of a tailwind from the decline in rates earlier, but that has not correlate into into the 10 year, having a whole lot of movement other than moving up.
Speaker Change: All I can tell you is is with the infrastructure, we have in place and more importantly, the when I say infrastructure I'm talking about systems technology.
Speaker Change: We are going to be able to capitalize on that I don't feel there are any constraints to answer your question specifically in regards to a surge in activity.
Speaker Change: We've got the systems in place the talent in place more importantly, the relationships in place to to capitalize on that we run a very efficient model as you notice in the mortgage operation and keep in mind too we would probably see that same type of if there were an increase we'd see the same lift in in the warehouse activity too.
So that remains a tailwind for us, but I think in looking through my Crystal ball now I, probably see that occurring if we're fortunate as an industry or in the second quarter next year into second quarter next year than we would in the first quarter just given on where we're the long bond is right now.
Speaker Change: So, we'll just have to wait and see what happens with the election, and what kind of economic clarity, we get going forward, but that's certainly when you look at banks and look at tailwind.
Speaker Change: And I like to use that term that could certainly be a huge incremental lift for us in terms of income.
Speaker Change: That that makes a lot of sense I appreciate that.
Speaker Change: Is I understand the NIM guide.
Speaker Change: And that 350 ish range.
Speaker Change: We get.
Speaker Change: Get to the end of rate cuts by middle of next year.
Speaker Change: Hypothetical and work out a little bit steeper curve.
Speaker Change: Talk about what you could see happen to your NIM and growth prospects.
Speaker Change: Yeah, no if we get and again this is really crystal ball I shouldn't go guide three quarters out, but if we get to the middle of next year and then the rates have come down the curve has normalized I think we're gonna have to really big positive one is gonna be or potential tailwind for mortgage if rates come down.
Speaker Change: That's gonna be a big tailwind to our noninterest income and then on the margin side. If we if the economy hits the soft landing and everything works out we any growth that we anticipate putting on is coming in as margin accretive. So even though the model shows. This is neutral neutral the more growth we have the more upside we had for them for margin.
Speaker Change: Expansion from growth, but again margin expansion at this point, it's going to come from growth in NII and growth in earning assets and not necessarily from the behavior of the balance of the current balance sheet.
Speaker Change: Okay. That's that's helpful and I understand it's somewhat of a hypothetical and we've been waiting for a steeper yield curve for a while.
Speaker Change: Yes.
Speaker Change: Can I switch over just the deposit growth kind of more near term what are kind of the drivers that really benefited this quarter commercial versus retail and.
Speaker Change: And kind of what's driving the near term to kind of really keep keep ahead of loan growth right now and just kind of could you talk through some of whats working on it.
Speaker Change: Sure. So I think Theres a couple of things different is that you know we are a relationship bank and we've been focused that way for a long time.
Speaker Change: And if you go back to two or three years ago. When everybody was slump with deposits. We started thinking about Halloween Gregg upon it and we started making all of our you know getting our employees and our what were loan officers to now be bankers and really kind of changing the mindset, there and and so we have had.
Speaker Change: Core organic deposit growth in the.
Speaker Change: Quarter after quarter and that comes from our organic strategies in our core strategies that we have going on within the within the relationship side of building relationships.
Speaker Change: And when you look at the number of accounts. We're growing you can see that in our investor presentation and that we continue to grow the number of accounts and the way you do that is by new relationships and new customers and we've been focused on that we have a few I mean I can't give all the secret sauce here, but we do have a few strategies that have been very successful for us.
Speaker Change: On the deposit gathering side now one thing that we havent necessarily talked about is we have the cyclicality that comes in at the ended the year. So we have we banks several large public entities. So we will have an influx of deposits at the end of the year. So every year, our balance sheet looks a little bulging I'm you know five to 600 million.
Speaker Change: Public funds and some AG money that comes in so when you really take that out of the year.
Speaker Change: If you adjust that and kind of where we are in December to September we've had very significant strong core deposit growth for the year and that comes from those just core banking strategies.
Speaker Change: And the other thing Thats encouraging always for US is the growth in relationship units that Nicole was talking about and that's coming in two fronts. One when you look at the retail side of the company, they're doing an excellent job of opening up new accounts and granted those are smaller balances, but with those balances and those relationships comes fee income and other.
Speaker Change: <unk>. So we've seen a lot of growth through the retail sector and then on top of that the investments we made in treasury over the last two or three years have really started to pay off two so we're very encouraged by what we're seeing and the trends we're seeing on the deposit front and that does remain the governor for us in terms of our loan growth too as you well know.
Yeah, that's great color I appreciate it I'll step back into the queue.
Speaker Change: And then the next question comes from David Feaster from Raymond James. Please go ahead.
Speaker Change: Hey, good morning, everybody good morning, David Good morning.
David Feaster: I wanted to follow up kind of on the deposit side I mean, you touched the odd being pretty aggressive repricing deposit slower competition is helping that as well you're there they're repricing stuff lower I'm. Just curious how is reception been with your clients. Thus far how do you find that pressure points that where clients are going to accept a lower rate with.
David Feaster: Out, leaving and maybe where are you able to drive you know new court like what what blended rate are you able to drive core deposit growth today.
Speaker Change: Sure. So I'll start with kind of the core deposit growth for the for the for the month of September which is a pretty good judge for us or blended coming on rate of new production was right under 3% and that was split does the C. DS we're a little bit high.
Speaker Change: About four and a quarter four in a quarter and 430 money markets came in between three and 325 mm.
Speaker Change: Now in savings, obviously were pretty low so that kind of came in at a blended rate right between 275, and 3% when you take all deposit growth, including the noninterest bearing growth. So again, you know a 3% kind of coming on rate and I think your other question was how do you know how do we know the pressure point in and how how.
Speaker Change: Fast and furious can be cut.
Speaker Change: And so I think some of that has to do with communication I think I've talked about this maybe before in calls that we have very good communication and we have weekly pricing meeting. So we really can kind of keep our finger on the pulse of what's going on in the market and we have conversations there about if we do see any competitors and we can also talk there about pricing exceptions.
Speaker Change: That our leaders are seeing in itself, we've cut a little bit too far or we haven't got enough. We can get that just through open communication with our market leaders in that that seems to be working very well.
Speaker Change: But the biggest thing for US David as you know we are big on the human touch side of things. So when you look at the commercial bank or even the retail side, that's where I think our folks do an exceptional job of staying in front of their customers to the point, where you always want to have the option to increase.
Speaker Change: Increase that rate and not have them just quietly go away and pull money out so staying in front of the clients on a regular basis has always been part of our culture and DNA and I think that relationship community bank kind of high touch feel.
Speaker Change: It's really what's kept us close in to Nicole's point, we monitor it to see if we're starting to see any swings from one way or the other but the real key to it is just staying on top of your customer base, which kudos to the team out there for doing that on a regular basis.
Speaker Change: Yeah, that's great.
Speaker Change: And I just wanted to touch on on premium finance for a second I mean, that's that's been a pretty nice growth vehicle, obviously profitability in that segment has been really solid seems a nice operating leverage I'm just kind of curious you know as you scale large I'm curious what are you seeing in that vertical and the pipeline. There just you know how do you think about premium finance.
Speaker Change: Probably.
Speaker Change: Yeah, I know that that's probably one of the bright spots. When you look at the different verticals that are out there not just for us, but anybody that knows what they're doing in this space.
Speaker Change: From a credit standpoint are there no problems in that space. If you do it right, it's more execution risk as you well know.
Speaker Change: The yields are pretty good on that I think we can probably do a better job on garnering additional deposits, which were heavily focused on from some of these premium finance clients that we have so we're heavily focused on that but that that is a line of business that I think when you look at volatility in the markets in terms of different verticals that one has been pretty stable for us.
Speaker Change: And got a good provider. So we feel very bullish about the opportunity to maintain and grow that that particular sector.
Speaker Change: Okay.
Speaker Change: That's helpful. And then just last one for me I mean.
Speaker Change: You know I appreciate all the guidance on the margin I don't want to beat a dead horse here, but I mean, you know looking at it I mean, given the commentary that we just talked about on the on the funding side and then kind of where your repricing or are you putting on new loans and new originations. Obviously, you know the floating rate side could be a headwind, but it actually seems like there.
Speaker Change: Some pretty healthy tailwind on the margin front I mean, I guess at what point do you think we could start seeing margin expand 'cause it get just given some of those repricing dynamics. It feels like maybe in the middle of next year, we could actually start seeing margin expand as is that a fair characterization or am I think.
Oh.
Speaker Change: Well I hope you're right and I think the thing to think about it is where you're starting with your margin and when you look at where we are relative to a lot of our peers. We're already at a high point relative to a lot of our peers. So I would tell you that if we can stay where we are incrementally garner additional margin.
Speaker Change: That would just be icing on the cake, but I'm hopeful to your point that if we have a soft landing and we see some.
Speaker Change: Development out there opportunities for additional growth are we to your point it should be additional tailwind for a company like ours, because our coming on rates on the loans are certainly improving and then the cost of the deposits are going down so conceptually youre right and I hope that everything plays out that way, but.
Speaker Change: We're starting from a position of strength.
Speaker Change: And so are our focus is to maintain that and then grow it incrementally and I think if if the stars align in terms of the economy, we will be able to do that.
Speaker Change: Okay, alright, thanks, everybody.
David Feaster: Thanks, David.
Speaker Change: The next question comes from Brandon King from <unk> Securities. Please go ahead.
Speaker Change: Hey, good morning.
Speaker Change: Morning.
Brandon King: Nicole on the margin guide for three D. What deposit beta are you assuming to get to that number.
Speaker Change: And we are assuming the same deposit betas than we had modeled going up to about a 55 data and we're hoping that we can beat that.
Speaker Change: Okay, and that's initially that's not no lag effects.
Speaker Change: That's right.
Speaker Change: Okay.
Speaker Change: And.
Speaker Change: Mortgage gain on sale margins declined in the quarter are you expecting that to bounce back up next quarter or is it just a good run rate to go up going forward.
Speaker Change: No I think youll see that bounce back next quarter a lot of that as you know just has to do with timing.
Speaker Change: And so we are we expect that to go back up next quarter.
Speaker Change: Okay.
Speaker Change: Levels near second quarter levels is that fair to say.
Speaker Change: Yeah, we we've kind of guided that that would be between.
Speaker Change: Two to $52 75 on the high end, so we would expect to see it start bouncing back towards that.
Speaker Change: Okay. Thank you for that and then lastly, Palmer in your remarks, you mentioned no T fees, plus 10% now and you mentioned taking advantage of growth opportunities in our footprint.
Is it fair to assume moving into 'twenty 'twenty fall that youre potentially more open to M&A.
No I don't think it's fair to assume that I think what you have to assume is what what the market environment looks like when we get to 2020 five but what you can assume is it with the Optionality. We've created you know first and foremost our focus is always going to be organic.
Speaker Change: But having that excess capital that does allow us to kind of look at things from an M&A front, if the right opportunity came along but it would have to be something very special for us because we're pretty disciplined in that regard and we want things that help raise the boat not weighted down so.
Speaker Change: That's certainly an option, but our focus remains primarily on organic growth.
Speaker Change: Alright, thanks for taking my questions.
Thank you.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Palmer Proctor for closing remarks.
Great. Thank you very much and we appreciate your participation in today's call and we look forward to sharing our results with you next quarter, we remain committed to top of class results and we thank you again for your time and interest in the Maris.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.