This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good morning and welcome to United Community Bank's third quarter 2023 earnings call. Hosting our call today are Chairman and Chief Executive Officer Lynn Harten, Chief Financial Officer Jefferson Harrelson, President and Chief Banking Officer Rich Bradshaw, and Chief Risk Officer Rob Edwards. United's presentation today includes references to operating earnings, pre-tax, pre-credit earnings, and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release as well as at the end of the investor presentation. Both are included on the website at UCBI.com. Copies of the third quarter's earnings release and investor presentation were filed this morning on Form 8K with the SEC, and a replay of this call will be available in the investor relations section of the company's website at UCBI.com. Please be aware that during this call, forward-looking statements may be made by representatives of United. Any forward-looking statements should be considered in light of risks and uncertainties described on pages 5 and 6 of the company's 2022 Form 10-K, as well as other information provided by the company in its filings with the SEC and included on its website. At this time, I'll turn the call over to Lynn Hartin.
spk05: Good morning, and thank you for joining our call today. As you would expect, we continue to see influences of the higher rate environment this quarter. On the positive side, we had strong deposit growth and excellent liquidity. Customer deposits grew $314 million, or 5% annualized this quarter, excluding the first Miami acquisition and the two branches we sold in Tennessee. We do continue to see movement into higher-yielding deposit products, with DDA as a percentage of total falling slightly to 30%, down from 31% last quarter. Our liquidity position continues to be very strong. During the quarter, we were able to fund organic loan growth of 5.4% annualized, while paying down over $400 million in broker deposits and still reaching over $750 million in cash equivalents at quarter end, all with essentially no short-term borrowings. Our loan-to-deposit ratio remained at 80%, providing ample liquidity to meet our customers' borrowing needs. Our margin continued to be impacted by rate competition and mixed change, but the rate of change has slowed. Our debt interest margin fell from 337 basis points last quarter to 324 basis points this quarter, a 13 basis point decline. Higher rates are also impacting some of our weaker customers from a credit perspective. As previously disclosed, we took a $19 million charge-off on an 8.7% share of a locally-based shared national credit. We also wrote down two memory care centers which have been on non-accrual by $3 million, reflecting expected market value for the properties. With the charges, our bank net charge-off ratio, excluding Navitas, was 49 basis points, up from 15 basis points last quarter. Our Navitas subsidiary had increased charge-offs this quarter due to higher losses coming from a relatively small exposure to the long-haul trucking segment. Navitas's annualized charge-off rate for the quarter was 1.62%. Excluding the long-haul segment, charge-offs in Navitas were approximately 88 basis points for the quarter. Taken together, our consolidated charge-off ratio for the quarter was 59 basis points up from 20 basis points last quarter. These losses are somewhat unique. The majority of our portfolio continues to perform well, and our local economies continue to be very strong. However, we know from history that the combination of rapid interest rate increases and tightening credit conditions can weaken credit performance, at least in some business segments. We're cautious in our lending and portfolio management strategies for this reason. In summary, our operating earnings this quarter were 45 cents per share, down 10 cents, or 18%, compared to last quarter. Our operating return on assets was 79 basis points for the quarter, and our pre-tax, pre-provision ROA was 144 basis points, down 21 basis points from last quarter. On the strategic front, we closed on First National Bank of South Miami July 1st, a deal we announced on February 13th of this year. Conversion is scheduled for this weekend, and we look forward to having their outstanding team fully integrated with the company. Now I'll ask Jefferson to provide more detail on our performance for the quarter.
spk07: Thank you, Lynn, and good morning to everyone. I am going to start my comments on page seven and go into some more details on deposits. As Lynn mentioned, our total deposit balances were up $606 million in the quarter, with the addition of First National Bank of South Miami driving the increase. In the quarter, we had very strong business and consumer deposit growth of $314 million, which more than funded our $241 million of loan growth. In addition to the strong deposit growth, we also had the proceeds of the sale of South Miami's $200 million securities book that allowed us to pay down $427 million of broker deposits and also offset the sale of two branches in Tennessee totaling $110 million in deposits that were outside our targeted footprint. We continue to see increased price competition in the third quarter that drove our cost of deposits up 39 basis points to 2.03% and took our cumulative total deposit beta to 38% since the fourth quarter of 2021. Moving to page eight, we also saw continued deposit mix change in the third quarter, albeit at a slower pace as our DDA percentage moved to 30% from 31% last quarter. Our deposit base is growing, diversified between industries and geographies, and very granular. Return to our loan portfolio on page nine, As I mentioned, we grew loans in the third quarter by $241 million, which is 5.4% annualized. On page 9, we also lay out that our loan portfolio is diversified and generally more granular and less commercial real estate heavy as compared to peers. Turning to page 10, where we highlight some of our strengths of our balance sheet, while our customer deposits grew faster than loans, The effect of paying down the $427 million in broker deposits pushed our loan-to-deposit ratio higher to 80%. But this leaves us with virtually no wholesale funding remaining, which is a positive for 2024. On the bottom of the page are charts of two of our capital ratios, our TCE ratio and our CET1 ratio. They were just down slightly in the quarter with the impact of South Miami, but remain just under 100 basis points higher than our peer medians. On page 11, we take a deeper look at capital and we show a tangible book value waterfall chart. Our regulatory ratios also remain above peers and mostly just slightly decreased with the investment into South Miami. Our leverage ratio increased 10 basis points with the delivering effect of paying down South Miami's securities book and paying down the brokered funds. Moving on to the margin on page 12, the margin decreased 13 basis points compared to last quarter. Our loan yield increased 17 basis points, similar to the increase of last quarter, with the new loans coming on in the mid-8% range, but our cost of total deposits was up 39 basis points to 2.03%. The main driver of the cost of total deposits increase was a tougher competitive environment in the form of higher deposit rates. But we also saw our balance sheet was more liquid than we had estimated, which cost us two basis points on the margin and offset other positive net mix changes. Moving to page 13, Non-interest income was down $4.4 million relative to last quarter, mostly due to the absence of one-timers I mentioned last quarter. Notable items in fee income included an MSR write-up of $1.1 million and $2.2 million in unrealized losses on equity investments that we do not expect to repeat regularly. on page 14 came in at $135.5 million, up $6.5 million. Excluding South Miami, we estimate that our core expenses were up just modestly. We are expecting $1.7 million in quarterly cost savings to begin to materialize in Q4 and to be fully extracted in the first half of 2024. When covered, the charge-off and credit trends well in his remarks, but I will talk on the allowance for credit losses on page 16. We set aside $30.3 million to cover $26.6 million in net charge-offs. In addition to that $3.7 million difference, we added another $3.7 million into the reserve with the South Miami PCV mark. Our allowance for credit losses as a percentage of loans remained essentially flat and our coverage of NPAs improved with the improvement of NPAs. With that, I'll pass it back to Lynn.
spk05: Thank you, Jefferson. And many thanks to the United team. I appreciate your focus on living our purpose, building our communities, and I look forward to continuing to succeed together. And now I'd like to open the floor for questions.
spk10: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star, then two. At this time, we will take our first question, which will come from Michael Rose with Raymond James. Please go ahead.
spk03: Hey, good morning, guys. Thanks for taking my questions. Maybe we could just start on credit quality and if we exclude the Mountain Express credit. you know, it looks like there were some moving pieces within charge-offs and MPAs and specifically wanted to touch on, you know, what's going on in home equity. So there was a recovery, but then MPAs were up. And then if you can just, I know you touched on it, but if you can just delve into Navitas, you know, as we move forward, just given some of the challenges, you know, this quarter. I think when you guys announced this, I'm going off memory here, but I think you talked about the business being kind of a, 70 to 80 basis point through the cycle lost content business obviously above that this quarter given some of the challenges that you referenced But just wanted to get some some updated, you know thoughts there and then you know What expectations might be for that business as we as we move forward?
spk06: Thanks Thanks, Michael. It's Rob Edwards I would just say, you know, we do expect while we do expect and Lynn made the comment the credit to tighten and THE CREDIT LOSSES ECONOMICALLY TO STRUGGLE IN THE FUTURE BECAUSE OF CREDIT TIGHTENING AND THE RAPIDLY INCREASING INTEREST RATES. WE'RE NOT REALLY SEEING ANYTHING TO SPEAK OF YET. AND SO, YOU KNOW, IF YOU SCALE EVERYTHING BACK, OUR LOSSES ARE DOWN, IF YOU INCLUDE NEVITAS, FROM 20 BASIS POINTS LAST QUARTER TO 17 BASIS POINTS THIS QUARTER. WE DID HAVE, YOU MENTIONED, A LARGE RECOVERY IN THE HOME EQUITY space. That was a single credit, kind of a unique circumstance from a credit that we had acquired, but not really seeing any drivers in the home equity space. It continues to perform well. Actually, 50% of our home equity business is first lien business, so it's a very strong portfolio. And as it relates to Navitas, I think When we purchased it, what I remember is sort of thinking of it as a 1% loss business. Clearly, we are above that 1% number. And I think our recent guidance has been in the 95 basis point range. And Lynn made the comment that they were at 88 basis points for the quarter if you take out this transportation portion of the portfolio. But the rest of the business outside of that long-haul trucking aspect of it seems to be performing so far within our expectations.
spk03: Okay, great. Maybe just as a follow-up question, you know, switching gears, obviously rates moved against you and every other bank, you know, this quarter. I know last quarter you kind of talked about expansion in the fourth quarter, at least on a core basis. you know, kind of moving forward. Is that kind of still the expectations? And again, sorry if I missed this, I hopped on late, but if you can talk about, you know, maybe some of the headwinds that you guys still face and then maybe some of the potential tailwinds, I assume, you know, not having any FHLB and, you know, hopefully getting to a peak or close to a peak and deposit pricing increases, you know, will certainly help. But we'd love, you know, some greater color. Thanks.
spk07: Yep. Thanks, Michael. Talking about the margin in the fourth quarter and some of the trends that we are seeing, I do think the margin will be down a little bit in the fourth quarter, but not by as much as it was in the third. We have some, you know, the positives are we're seeing a slowdown of the mix change with the GDA moving from 31% to 30%. We do get three basis points of benefit from paying down the brokered. mid-quarter here, which will be a bit of a positive. And what we were – I guess what happened this quarter, we really didn't raise rates this quarter, but what we saw was our existing customers moving to our promotional money market rates, choosing CDs, moving to more expensive CDs in some cases. So it was kind of an existing customer – because our new customers are coming on at reasonable rates. We're putting on new loans at high rates, but we're still getting customers seeking and finding higher rates within a bank, which we're actually happy about. In some cases, we're calling them and making sure they know about the rates that we have out there. But I do think what you're seeing is the loan yield should continue at a similar pace, moving higher, and the cost of funds is going to be moving higher.
spk03: at a slower pace so i think what you'll see is again slight compression in q4 and stabilization to hire next year very helpful and then maybe just one final one for me the revenue outlook you know for you and other banks obviously remains challenged in a higher for longer you know type environment i know you've talked previously about kind of a four-ish percent you know kind of expense you know, target as we move forward. But just wanted to see if, you know, there's any plans to maybe look to either formally or informally, you know, plan to reduce expenses. And, you know, is there a possibility under that scenario where you could experience positive operating levers next year? Thanks.
spk07: So, yes, I think so. We're in our budget process right now. We closed five branches. Rich can apply on that to some in July. We sold the two branches that we had mentioned before that has a cost savings and a revenue impact to it, obviously. There's certain segments of our business where we are actively cutting expenses, namely mortgage, like a lot of banks are. So, yes, we have many things that we're thinking about on the expense front and executing. And to give you a number – It's kind of hard to give a number right now because we are in the middle of our budget piece of it, but that 3% sounds like an okay target, but it's also an inflationary time period, and we're kind of going through the individual budgets now. So it might model higher than 3%, but I think we're going to shoot for that.
spk03: I completely understand. It's challenging out there. Appreciate all the comments. Thanks for taking my questions.
spk10: Our next question will come from Catherine Miller with KBW. Please go ahead.
spk00: Thanks. Good morning. I wanted just to ask about your loan growth outlook. You maintain a pretty steady growth pace, I feel like, over the past few quarters. Just curious how you're thinking about that into next year. And then also within that conversation, I noticed that Navita's growth slowed a little bit this quarter. Is that something that you plan to continue through next year as well?
spk08: Good morning, Catherine. This is Rich Bradshaw. How are you?
spk00: Morning, I'm great.
spk08: We're still looking at the mid-single-digit loan growth, but probably a little bit less than the pace in Q3, recognizing the higher interest rates and some of the stress out there. And we expect that to kind of continue into Q1. However, we are optimistic about the opportunity that some of the downsizing of banks are doing that's going to create real opportunities on the customer side. So we remain very optimistic about that.
spk07: And this is Jefferson. I'll take the Navitas question. Navitas trends were pretty similar on the growth front, but you'll notice that we sold more loans this quarter. We kind of leaned into selling a little bit more. We have – our Navitas loans are 8% of total loans. We like that ratio. We've talked about keeping it below 10, but our target is the 8% range. So I think you'll see us selling – As long as the market is accommodative and amenable, we'll continue selling a higher number of loans each quarter.
spk00: What's your outlook for Navita's charge-off? How long do you feel, or do you think we'll see this kind of elevated level, just given the trucking part of it, for the next couple of quarters, or do you expect that to normalize back a little bit?
spk06: No, we're thinking the same way you're thinking in the next couple of quarters. We think definitely next quarter will be similar to this quarter, but then thinking it will begin to subside early next year.
spk00: Great. Thank you.
spk10: And our next question will come from Steven Scouten with Piper Sandler. Please go ahead.
spk04: Hey, good morning, everyone. Maybe if I could go back to the margin here briefly, I know Jefferson, you said a lot of it was kind of existing customers taking higher rates and transactional accounts and so forth. But I mean, I think you had said maybe five bits of downside last quarter and we saw closer to 15 and then maybe expected stabilization in 4Q and now it sounds like maybe 2024. So are there any other phenomenons that's pushing that out? I mean, the movement in loan yields look pretty good. I'm just trying to decipher if there's anything I'm not seeing other than that move you talked about with existing customers on deposit pricing.
spk07: Yeah, that's pretty much it. Now, we have been – the other phenomenon here is we are growing deposits at a pretty good pace, and when you're growing deposits, it's going to be at market rates. I feel like the faster growth of deposits also has a bit of a negative near-term impact on – the current margin, but the main drivers, as we study it and get into it, is existing customers moving to our more promotional rates, often with a call from our people to make sure they're in the best rates that the bank offers. We really haven't moved up rates. It's mostly the impact of existing customers moving into our promotional rates.
spk04: Okay. And I think you said last quarter securities restructuring wasn't really on the table. Has that view changed at all? Or, I mean, do you think about the math on any of the longer-dated mortgage backs at this point if we really are in kind of a higher-for-longer environment at this point?
spk07: We haven't – we run the math on it. We see the numbers. We have not seriously considered this right now. We do have the ability to do this with higher capital ratios that take a capital hit and reinvest that into higher investing securities, but it's not something that we have seriously considered as of yet.
spk08: Okay.
spk04: And then I guess maybe lastly for me, just high level, kind of any other, I know you said the Tennessee branches were kind of out of market. Any other branch footprint parsing that we would expect to see? And then kind of conversely, is M&A still more of a mid to late 24 potential endeavor or is activity changing there that might precipitate anything in your turn?
spk08: Yeah, Steven, this is Rich. I'll touch base first on the branch question. We're going through the budget process now. We continue to always evaluate this on profitability and what makes sense in place in the market. So that'll be, it happens, it seems to happen every year. So we'll continue on that process.
spk05: Yeah, and good morning. This is Len. On the M&A side, yeah, I still expect it to be slow, and the reasons for that really primarily because of the marks you take. It's really, in a normal environment, two things happen. One is you don't have these big marks. Number two, we always budget for pretty flat loan growth in an M&A transaction initially just because, you know, you have new policies, people are dealing with change. You might have a great franchise, but that's what we always shoot for. But it's just difficult for the teams coming on. And so in this environment, but, you know, typically then we can bring in our other products and all and kind of grow through that. And just honestly, in a slower loan growth environment, it's harder to grow through that. And then you've got the larger marks up front. So it's kind of a math question right now, and I think probably for – you know, mid-next year or something, it's going to be slow overall for traditional M&A.
spk04: Yep, that makes a lot of sense, Len. Thank you all for the call. I appreciate the time. Thanks to you.
spk10: Our next question will come from Christopher Maranac with Jannie. Please go ahead.
spk12: Thanks.
spk10: Good morning.
spk12: I wanted to ask if there is an internal limit on sort of the shared national credits and club deals and things of that nature. Just curious if that is going to change at all as a result of last quarter's experience.
spk06: Hey, Chris. It's Rob. We do have an internal limit. All the sub-segments of the portfolio have triggers and limits established. We are right now very low and quite a bit below the limit that we have established. And we really consider this one credit to be an outlier and not really representative of what we would expect from that portfolio.
spk12: Great. And, Rob, I guess just a general question about the reserve level. I mean, given the reserve, I mean, the charge-off comments that were made earlier, does this reserve level kind of cover that? Or would you see kind of gradually increasing reserves next year?
spk06: So we have increased the reserve by $40 million this year, and we did increase the reserve by about $50 million last year. Really, the reserve is driven by asset quality in general, portfolio mix, loan growth, and now sort of the economic forecast. And more recently, it's been about the economic forecast. You know, given the last two years, I could see the allowance growing, and my personal opinion would be with sort of projecting moderate to low loan growth, that it would probably be more likely be the economic forecasting and economic experience that ends up driving growth, if there is any.
spk12: Got it. And then just last question on credit is just related to kind of the combined substandard and special mention. I know it's hard to compare with past cycles because the company is so radically different in terms of your portfolio and scale. But is the criticized numbers combined, you know, could those elevate next year? Or would you kind of think about managing those more stable?
spk06: So, you know, if I look and if you look back on the chart, you know, it was 4.1 at the beginning of 2020. If you combine the two numbers, you're at 4.1% of the loan portfolio. And right now we're at 2.9. So I would expect the numbers to increase. It sort of feels like we're at a low spot at the moment. I would call it more of a normalization than anything else.
spk12: Sure, that's helpful. Thank you very much for the background. I appreciate it.
spk10: And our next question will come from Russell Gunther with Stevens. Please go ahead.
spk11: Hey, good morning, guys. Just to follow up, I appreciate the commentary on the VEDAS losses and how you'd expect that to trend. So as we think about that normalizing in the beginning of next year, and potential credit migration in the core bank. How are you guys thinking about aggregate charge-offs, an appropriate range in 24?
spk06: So I think what we have said previously is that we would see ourselves as a 30 basis point loss rate through the cycle type of experience. And so that sort of is how I think of it if things normalize. if i take out this outlier you know we were at 20 basis points uh last quarter and 17 basis points this quarter and that's with the navitas sort of uh higher losses from the transportation sector included so but but that's what we've said in the past is sort of a 30 basis point business okay so no change to the outlook there got it and then uh just to follow up on
spk11: to margin conversation. Jefferson, appreciate the high-level commentary. Could you just share a bit about what you're anticipating in there from a continued remix perspective out of non-interest-bearing, and then how you guys would expect the loan-to-deposit ratio to trend from here? Do you want to actively manage around 80%? Could that drift higher? Just some updated thoughts. Thank you.
spk07: So the mix change elements should be generally in our favor, I believe, for at least the first half of the year where you have the securities portfolio continuing to shrink and the loans continuing to grow modestly. So you should have a positive mix change on the asset side. The DDA piece is a little tougher. We have been seeing a slowdown there, and it's given me encouragement that we could continue to see a slowdown. especially if rates don't rise a lot more from here. That said, we're currently modeling a 27% number in some of the forecasts that we are making, but our most recent results have been better than that, encouraging that maybe it could be better than that. But we also are seeing, again, this trend towards our customers moving into higher-rate products. And I feel like you had another part of that question that I may not have. Oh, the loan-to-deposit ratio. So I would think that loan-to-deposit ratio could inch a little higher. We have a good funding base. We are going to be, I think, using the strength of our balance sheet and some of the deposit growth that we've been seeing, and we've been seeing good deposit growth, and we're encouraged by what we're seeing here in October. I think it can have us be a little more conservative in the rates that we are putting out there into the next few months and to next year. So I think if we can manage this exactly how we want to, you would see the deposit growth slow down a little bit, the loan to deposit ratio inch a little bit better, and for us to have a better cost of funds experience.
spk11: Okay. Really helpful. Thank you. And then just lastly, on the loan growth outlook, which I believe you guys are saying mid-single digits, How do you think about the contribution via asset class in any particular geographies of strength there?
spk08: This is Rich. We'll see it, I think, change a little bit of the mix, a little bit away from CRE into CNI. We've got several different initiatives that we're working through. Our biggest geography contributor this past quarter was North Carolina. And they led the bank in CNI. So we're leveraging their experience across the footprint. And so that's how I kind of think about that.
spk07: Talk about Tennessee and some of that.
spk08: Yes. And in Tennessee, it's a good story for us. You know, we put our new state president there, Kelly Key. And over the last three months, we've hired 20 commercial professionals. And already, not pipelines, but closings, those have paid really good dividends. It's going to take a little bit more time to turn that ship, but I think we're going to start seeing the very positive results of that, if not first quarter, certainly second quarter next year.
spk11: That's great. Thank you, guys. That's it for me. Thanks, Russell.
spk10: Our next question will come from Brandon King with Truist. Please go ahead.
spk09: Hey, good morning.
spk10: Morning, Brandon.
spk09: So, Jefferson, could you quantify what the spot cost of deposits was at the end of the quarter? And then what is the new rate for new relationships and new deposit customers?
spk07: Yes, so the spot cost of deposits was the average quarter was 202, and the spot was probably five basis points higher than that for the Well, I call that for not exactly SPI, but for the month of September on average. And new deposit relationships came in. I want to have two numbers floating in my head here. Let's talk offline. I'll get you the actual number. I don't want to say the wrong number. I do have that number, but I don't have it. I have two numbers that are in my head right now, so I want to make sure I get you the right one.
spk01: Okay.
spk07: It's probably worth doing it. Hang on one second, Brandon.
spk08: It's probably worth noting we had Deposit Pricing Committee this past Monday, and we had all the state presidents on, and surveying them each individually, their exception pricing requests are certainly down. So it is, we do see a little calming of the water here.
spk09: Good, good. And then when you think about cumulative deposit data, I know before I think you talked about 38%, but what are your thoughts are now just given that rates would essentially be higher for longer.
spk07: That's a great question. We are doing our budget right now, and we don't have a 24 forecast for our margin out there right now or our cost of funds. So let's stay in touch on this one. And I do think what you're going to see, I'll give you a shorter term outlook. I do think that our loan yields will be up a similar amount as last quarter. So call that 18 basis points. And then with the margin guidance that I gave you of being down maybe half as much as last quarter, you can back into a cost of deposit increase that we're thinking about this quarter. So I think it is continuing to go faster than loans. And then we'll get into budget season and talk about what our 24... forecast is next quarter.
spk09: Okay. Makes sense. And just not to beat a dead horse, but following up on the VDIS and the expectations for losses to kind of ease next year, just want to get more of a sense of what gives you confidence that losses will ease and maybe is it just more of a function of that trucking segment just kind of running off?
spk06: Yeah, I think that's exactly the way I would describe it, Brandon, is that the trucking segment is – I think if you add all the different trucking aspects of it together, I think it's 10% of the total portfolio. And then this specific piece where we're experiencing the highest stress level is much smaller than that. So probably 3%. So it's just such a small portion of the overall book. And we're continuing to see consistent performance of the remainder of the book evidenced by the 88 basis points of performance in the third quarter.
spk10: Our next question will come from David Bishop with Hufti Group. Please go ahead.
spk02: Yeah, good morning. Thanks for taking my question. Hey, Jefferson, I think I heard you mention that you guys were operating with a little bit higher elevated liquidity in the last quarter. Maybe, you know, where do you think you see some of that cash being deployed here in the near term? Obviously, you paid off a lot of some of the short-term borrowings. Just curious where you see the opportunity to deploy that is.
spk07: Yeah, with the inverted yield curve, I'm not seeing a ton of opportunity there. We are most likely to hold it in cash or roll short treasuries with that cash. Got it.
spk02: And then final question, you know, there's a lot to unpack on that. Obviously, you know, given the merger on the operating expense and fee income side, just curious maybe from a dollar perspective where you might see those normalizing here in the fourth quarter.
spk07: All right, so I did not completely hear a piece of that question. I know it's an expense-related question, but I didn't totally hear what you said there. Apologies, David.
spk02: Oh, sure. Yeah, just with the impact of First Miami being fully layered in this next quarter, where you might see operating expenses of P-income normalizing on the dollar basis in the fourth quarter and near term?
spk07: Yeah, I would expect expenses to be down on an absolute basis in the fourth quarter. As we get the cost savings, we want to share the cost savings from South Miami this quarter. And fees, I think, should be, you know, we weighed up the two non-operating items, so the base is about a million dollars higher than what you see here. We are seeing good underlying growth in our wealth management and our treasury management businesses. Mortgage is a bit of a wild card. But I think you should see net growth off of that slightly higher base with the two adjustments that we laid out for you.
spk10: Perfect. Thank you for that, Colin. And this concludes our question and answer session. I'd like to turn the conference back over to Lynn Harten for any closing remarks.
spk05: Great. Well, thank you all once again for joining the call, and we'll be glad to follow up with any additional questions. Just reach out, and we will talk to you soon. Thank you.
spk10: The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect.
Disclaimer