SmartFinancial, Inc.

Hello all and welcome to Smart Financial Third Quarter 2024 Earnings Release and Conference Call. My name is Ezra and I will be your coordinator today. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. I will now hand you over to your host, Nate Stroll, Director of Strategy, to begin. Nate, please go ahead.

Thanks, Debra. Thanks, Ezra. And good morning, everyone, and welcome to the Smart Financial's third quarter 2024 earnings conference call. During today's conference call, we will reference the slides and press release that is available in the investor relations section on our website, smartbank.com. Billy Carroll, our president and chief executive officer, will begin our call, followed by Ron Garzinski, our chief financial officer, who will provide some additional commentary. We will be able to answer your questions at the end of the call. Our comments include forward-looking statements. These statements are subject to risks and uncertainties, and the actual results could vary materially. We list the factors that might cause these results to differ materially in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward-looking statements because of new information, early developments, or otherwise, as they may be required by law. During the call, we will reference non-GAAP financial measures related to the company's performance. You will see the reconciliation of these measures in the appendices of the earnings release and investor presentation filed on October 21, 2024, with the SEC. And now, I'll turn it over to Billy Carroll, our President and Chief Executive Officer, to open our call. Billy?

Thanks, Nate, and good morning, everyone. Great to be with you, and thank you for joining us today and for your interest in SMBK. I'll open our call today with some commentary and hand it over to Ron to walk through the numbers in some greater detail. After our prepared comments, we'll open it up with Ron, Nate, Rhett, Miller, and myself available for Q&A. So let's jump right in. We really had a nice quarter and executed on what we've been messaging. We posted net income gap and operating of $9.1 million for the quarter, or 54 cents per diluted share. I'm proud of the way our team is performing, and I'm excited to watch us gain operating leverage as we've anticipated. We had a couple of pennies of boost from a tax strategy as well that we implemented, but even without that, we had outstanding earnings trajectory. Jumping into the highlights, I'll be referring to the first few pages in our deck, pages three, four, and five. First, and in my opinion, one of the most important metrics We continue to increase the tangible book value of our company, moving up to $22.67 per share, including the impacts of AOCI, and $23.69 excluding that impact. That's a 19% annualized quarter-over-quarter increase, including AOCI movement and 9% excluding it. Very nice tangible book growth. Looking at the graph on the lower right on page five, you'll see the value increase we continue to deliver for our shares. We again had a very solid loan growth quarter, over 16% annualized, and that's coming off an 11% annualized prior quarter. We saw continued growth and new relationships as well as an increase in funding online. On the deposit side of the balance sheet, we used the quarter to reposition some funding. We had an opportunity to exit a public funds relationship we felt had gotten a little larger and a little more costly than we had wanted. So we leveraged our strong liquidity position and utilized a wholesale funding ladder to fill the gap. Net of that account and wholesale adjustments, core growth was over 5%. So when we drill down on deposits, we had a very nice core growth quarter and continue to bring in some outstanding relationships. We also saw our overall cost tick down to 2.54%. Our history of strong credit continues with the metrics holding very low at 26 basis points and NPAs. Both NPAs and charge-offs were just slightly higher than the prior quarter, but still extremely low. That movement continued to be a few lingering fountain equipment credits we've worked through in our equipment finance subsidiary. That group continues to be a very profitable arm for us, and we anticipate those isolated items slowing soon. Total revenue came in at $44.1 million, and net interest income continued to expand with an inflection point we've discussed. We also had a stronger than expected non-interest income quarter that Ron will talk about in a bit. Non-interest expenses were just slightly up at 30.8 million. I still feel very good that we can hold our expense growth to very reasonable levels as we look forward. The operating leverage we've talked about on prior calls is starting to happen as we continue to grow the revenue line with minimal investments on the expense end. Looking at the chart on page five, highlighting the operating PPNR slide, The movement up has started after a couple of flattish quarters. We're looking forward and expecting to see that trend continue. So just a couple of additional high-level comments for me on growth. We're very pleased with the results. On the loan side, we were up $114 million, again, about 16% annualized for the quarter and over 10% annualized year-to-date. Our regional sales teams are doing a very nice job growing our clients. Yields on the loan side expanded with the full portfolio's average loan yield of 15 basis points to 5.95%, and our loan mix was almost identical to the second quarter. I mentioned the remixing of the deposit side. I really like the work we've done here, particularly this quarter, leveraging our position of strength to move out of larger, chunkier deposits to lower our overall cost and focus on replacing with more granularity. We pushed the loan-to-deposit ratio up to 86%, which is a nice spot for us. We also continued to hold our non-interest-bearing mix around 20%, not an easy feat in this environment. Our balance sheet pipelines feel very solid, and I'm still holding to our past guidance of mid to high single digits on growth as we look at a couple of quarters, even though we've been able to beat that so far this year. I also think we can pace deposits to organically fund this growth. Also, kudos to Ron and his finance team as well as their tax advisors on executing a nice strategy that should lower our go-forward tax rate. That should be a nice little tailwind added as well. So let me go ahead and hand it over to Ron to dive into the details. Ron?

Thanks, Billy. Good morning, everyone. I'll start by highlighting some key deposit results. As Billy had mentioned, during the quarter, the bank significantly reduces exposure to a larger public fund relationship. While this was a tough decision due to our desire to support municipalities where we do business, the account was highly interest rate sensitive and service quality intensive rather than fee driven. As a result, the bank made a strategic decision to minimize this relationship and pursue temporary, more cost effective broker funding. Our total deposits remain flat in the quarter at $4.3 billion, which includes $195 million of broker deposits added to offset the reduction from the previously mentioned relationship. Excluding this relationship impact, deposits grew over $50 million during the quarter, and the weighted average cost of non-broker production was 3.66%. Total interest-bearing costs for the deposit portfolio decreased three basis points to 3.20% and we're 3.08% for the month of September. Non-interest-bearing deposits to total deposits remain relatively in line with previous quarters at 20%. In the future, we anticipate replacing our temporary broker deposits with core deposits as client liquidity balances build and our relationship managers continue to win net new deposit business. Our net interest margin expanded quarter over quarter increasing 14 basis points to 3.11%. This expansion is attributable to several factors, including the previously mentioned deposit repositioning efforts and the favorable 7.40 weighted average yield on new loan originations, resulting in a total portfolio yield increase to 6.02%, which includes accretion of fees for the quarter. Looking ahead, we expect consistent margin expansion into 2025 primarily driven by new loan production, lower yielding fixed and adjustable rate loan amortization and maturities, and the bank's liability sensitive interest rate position. The bank's balance sheet is in a strong position for enhanced profitability in the event of any future Fed rate cuts. As a result of these factors and current market conditions, we anticipate a margin in the 3.1 to 3.15% range. Our quarterly provision expense for credit losses were elevated, primarily as a result of higher than forecasted loan growth and a slight increase in charge-offs stemming from our equipment finance division. Overall, the bank's asset quality remains very strong with non-performing loans to total loans at 0.26%. Operating non-interest income for the quarter reached $9.1 million, reflecting solid performance across all categories. The bank generated significantly higher income from customer swap transactions and investment services, which rose by 940,000 and 579,000, respectively. Operating expenses were 30.8 million, slightly elevated from our previous guidance. The increase was primarily attributable to increases in our performance-based incentive accruals and commissions and the hiring of several commercial sales team associates. Moving forward, We will continue our focus on expense control as part of our ongoing cost management efforts. Looking ahead to the fourth quarter, we are forecasting non-interest income in the mid to high $7 million range and non-interest expense in the range of $31 to $31.5 million, with salary and benefit expenses comprising $19 to $19.5 million as accruals for performance-based incentives fluctuate. Additionally, during the quarter, the bank established a newly formed real estate investment trust subsidiary to monitor and manage the performance of certain real estate loans and to create a more tax favorable structure. The REIT subsidiary will result in a lower effective tax rate during future periods by lowering the bank's state income tax expense. As a result, we anticipate a future corporate effective tax rate of approximately 20%. I'll conclude with capital. The company's consolidated TCE ratio increased 33 basis points to 80.0%, and total risk-based capital ratio decreased slightly by five basis points to 11.6%. Overall, we continue to be in a well-capitalized position with an optimistic credit and earnings outlook. With that said, I'll turn it back over to Billy.

Thanks, Ron. I want to reiterate again the value proposition with our company, drawing your attention back to page seven of our deck. We've been on the road a lot in 24, reminding our investors and our stakeholders of what we've accomplished recently. We are seeing the inflection and the movement in our numbers, and we have clear vision of our return targets after absorbing the investments we've made. When you look at the franchise we're building, we're in arguably some of the most attractive markets in the country, and have put together a team that is moving this company forward in a great way. What I saw this quarter from our sales teams was really, really good and a byproduct of the work we've done this year. our sales and prospecting process we're now leveraging the functionality of our encino platform and utilizing the salesforce front end to consistently create a stronger prospecting process for our sales team and we're also leaning on the price and profitability systems to coach our teams and the value of full relationships the regional president structure we have and the accountability we're putting on those zones is really starting to bear fruit We are continuing to look at sales talent that fits our culture. We've added 15 new sales team members this year and have several currently in our talent pipeline. We're adding some outstanding regional bankers to our team, as I believe we continue to be one of the region's banks of choice for great bankers. I also want to mention the execution of our operations group. Our ops teams are doing some great work as they refine our back of the house and move to KPI-driven workflows and management. It's things like this that people don't see that will be paying big dividends for us as we look ahead. So to summarize, I love where we're sitting. We are executing, growing our revenue line and getting the operating leverage we're expecting. Margin is expanding back. Credit continues to be very sound and we're seeing great new client growth and the sales energy is outstanding. All said, a very nice quarter for our company as we continue to build a profitable and attractive franchise. I appreciate the work of our smart financial, smart bank team. and the efforts of our near 600 associates, this team is continuing to perform well and build a great culture as evidenced by our recent Great Place to Work certification. I'm very proud of what we have going on here at SMBK. So we'll stop there and open it up for questions.

Thank you very much. To ask a question, please press star followed by 1 on your telephone keypad now. When prepping to ask your question, please ensure your device is unmuted locally. If you change your mind, please press star followed by two. Got our first question from Russell Gunther with Stephens. Russell, your line is now open. Please go ahead.

Hi, good morning, guys. Good morning, Russell. Good morning. My first question would be on Lone Grove. So I appreciate all of the color. as well as the expectations over the next couple quarters for mid to high single digits. You've certainly outpunched that over the past two. So wondering if you could just share whether it's, you know, a sense of conservatism built into the near-term outlook. Are you expecting an acceleration or normalization of paydowns that might weigh? Just trying to piece together the outlook relative to what has been a much stronger result over the last couple quarters.

Yeah, I'll start, and then I'll ask Rhett to give a little color to Russell. Yeah, for us, the growth has been really solid. We've had two back-to-back, and really, first quarter wasn't bad, really. We had two really back-to-back nice quarters. I think as we look, I think you always anticipate we had some payoffs and paydowns this quarter. We were able to kind of get through that and still post a great growth. Andrew Sorensen- A quarter, but I you know I think we always try to anticipate some additional pay downs, you know if we don't get some pay downs. Andrew Sorensen- You know, we could be a little bit higher, but I think you know just trying to be conservative in our projections and. Andrew Sorensen- In our estimates and our guidance is where you know where we like to stay, but as I mentioned the sales teams are doing a nice job and you might get some color on kind of what you're seeing. in the pipeline as well as you look ahead in the next few months?

No, Billy, I think you're right on. I mean, our pipelines continue to stay relatively strong quarter to quarter. Even as we close what was in the pipeline, we're seeing consistent new activity rolling into the pipeline for future periods. So we're very optimistic that that trend will continue. I think a lot of that is just supported by just strong economics in the footprint we operate in. Our markets are continuing to do well. Our clients are continuing to do well. And so as we progress towards the end of the year, the first quarter, we still are seeing quite a bit of new opportunity requests coming through the different markets. It's very spread across our geography. We're not really concentrated in any particular segment of our footprint. All of our markets are seeing good, strong activity. And then on the payoff side, To Billy's point, we had a little higher volume of that earlier in the year than we've seen in really the past quarter. We have a few more coming in fourth quarter. It's always a possibility. We do have still a very robust real estate market in our footprint. So our clients are seeing opportunities to sell assets here and there. And so we do get payoffs from time to time, primarily from asset sales by our clients. But we still feel optimistic about these projections.

Lots of red color, guys. I really appreciate it. And then switching gears to the margin, another really good result this quarter. You laid out an expectation for the NIM, I believe, call it 310 to 315. And was just curious if that is a near-term fourth quarter projection, or does that extend into 2025? And with that, if you could just give us a sense of what your, you know, Fed cut projections are, as well as how you'd expect the deposit data to trend as rates reduce.

Yeah, Ron, you want to take that?

Sure, yes. Yeah, our 310, 314 margin is, excuse me, 315 margin is for fourth quarter. You know, as we said last call, you know, our trajectory is such that we're expecting margin expansion throughout 2025 with or without a rate cut. You know, with that said, we're looking at, you know, our rates up beta. We probably were in the 45, 50% range. Our goal was we'll probably see the same on the downward side. Well, at this point, we're modeling near 40% beta. on the way down. We're not giving 2025 guidance. There's still a lot of variables and bouncing items, but we still feel very strong of our trajectory going forward.

I appreciate it, guys. That's it for me. Thank you for taking my question.

Thank you, Russell. Thanks, Russell.

Our next question is from Brett Rebiton. with Hofda Group. Brett, your line is now open. Please go ahead.

Hey, good morning, everyone. Wanted to start on fee income. Hey, guys. Wanted to start on fee income and just obviously really good quarter on swaps and investment product this quarter. Any thoughts on just the strength of those two items in 3Q and then Brett KenCairn, Obviously, with the with the guidance in the fourth quarter, you know, is is where those kind of one time nature transactions are just any thoughts on those businesses specifically going forward.

James Meeker, If right i'll start and i'll hand it over to Ron maybe talk a little bit about kind of the. James Meeker, One time versus versus continual you know I think you know for us and we've. We've talked about it on some prior calls, but from the investment side, I'll start there. The investment side has been really good. We've continued to really add some talented financial advisors to our platform over the last couple of years and getting those folks kind of up on playing. We're seeing that consistency in our smart bank investments group. uh continue to grow we're doing it we're doing a nice job and across selling that into a private banking pipeline now so it's it's nice to see that that AUM grow and and we've moved to a to a a more of a fee base versus transactional base in that business over the last couple of years so so I think you know I think we feel good about that continuing as long as Mark in Market obviously has been good so that that that doesn't hurt as well But overall, the investment side, we continue to be bullish on. We think there's some consistency in that number as we move forward. I'll let Ron talk a little bit about swaps. He works primarily with the capital market. That one's a little more of a function of what rates and kind of what some of the curves are doing as to lengthening some of these terms to get some attractive fixed rates. But Ron, do you want to talk about that and maybe thoughts around Thoughts around that swap fee and what that might look like looking ahead.

Yeah, sure. Right now, we did tame down our non-interest income projection. We did have an excellent third quarter. Swaps for Q3, we had a lot of opportunities due to our loan originations, and the shape of the inverted yield curve led us to place more swaps. we won't be doing a million plus Q4. We do have a pipeline, but not as strong as what we've seen in Q3. So other than that, you know, we don't see any other opportunities at this point that will really lead to a higher non-interest income as what we've seen in Q3. Okay.

Um, that's helpful. And then just, um, on deposits, can you guys, maybe you talked about growing core deposits to replace some brokered CDs. Can you maybe just talk about initiatives on the deposit front and just, um, if you've already lowered deposit rates, you know, what you're seeing maybe competitively in some of your key markets.

Yeah. Um, I'll take that and guys, anybody can, can, can chime in. Yeah. I think what we've seen and we do, we feel very good about our ability to grow deposits as I've As I commented earlier, we really had a nice core deposit growth quarter. It was masked a little bit by just some of the mix shift that we did. And so, you know, as we've really started working our teams, our sales teams are doing a nice job of bringing in both sides of the balance sheet. Now, obviously, we were in a position of strength at the beginning of the year with some, you know, with a little bit of a stronger liquidity position. We've been able to leverage that a little bit in 24. So kind of looking ahead, David Dismukes, M.D.: : For us, you know we're going to we're going to continue to really try to balance, we need to we want to grow. David Dismukes, M.D.: : The deposit side, but we also want to do it conscious of where the right environments are so you know we're fortunately get from a competitive standpoint you're still seeing some somewhat awesome some outliers do some. David Dismukes, M.D.: : Do some do some above market pricing, but for the most part, it feels like. that a lot of that is settling down in some of the markets. So we've been able to push air rates down. I think we can continue to do that if Fed cuts continue. But from air standpoint, I think we're just going to really try to strike this right balance of getting the growth and doing it at the right rate levels. But Ron, any thoughts you've got around that? You're working on the deposit pricing groups day to day.

Yeah, we've, I think we're finishing up on a deposit promo now. You know, we took the opportunity to lower some of our high tier deposits and we didn't get much client pushback. Again, we are, we are really still in market rates. Our, our, our, our reductions are roughly in line with Fed cuts and we haven't really got much pushback on that. And again, the momentum of, of the sales team on the, on where deposits are coming from is pretty positive.

Yeah.

Well, and Brett, I'll add too, I think that's one of the things, and we've been talking about it a lot as we're starting to do our forecasting for 25 is continue to focus on that and put more emphasis on that in our producer and Senate plans and those things. So that's really, we continue to feel very optimistic. Our team members, the bankers that we've hired, understand selling both sides of the balance sheet. And I'm really pleased with how that's going and kind of what that outlook appears to be.

Okay, great. Appreciate all the color.

Thanks, Brent.

Our next question is from Steve Moss with Raymond James. Steve, your line is now open. Please go ahead.

Good morning, guys. Morning. Starting here on morning, you know, start on loan pricing here. Just kind of curious. We've had, you know, a fair amount of volatility in the five year and obviously, you know, expectations around more Fed rate cuts. Curious as to, you know, where you're seeing new loans priced today and any call you can give there.

I'll start, and then, guys, just any anecdotal color you can give. Obviously, with the cut, we've seen a little bit of reduction in ongoing yields. Overall, we're doing a pretty good job of holding the right levels. I think, obviously, competition is going to impact that. The Fed cut had a little bit of an impact. So we're seeing, especially the variable rates and pricing on spread, the variable numbers are coming down a little bit. But overall, you know, we think we can continue to hold, you know, hold reasonable levels. Ron, I don't know if you've got any color on kind of what you're seeing kind of going on here just in the last few weeks, but a little bit lower, I think, but overall still pretty solid.

Yeah, for, you know, as I referenced, you know, for the quarter, originations were in the 7.40 range. But for September, for prior, 10 basis points less. So we'll probably see that. I do believe for probably the remainder of the quarter, we should probably see above 7% range. So we'll see a little bit of decreasing rates, but not looking at much at this point in time.

Okay, great. Appreciate that. And then, you know, I guess my other question here, just curious, I know you guys talk a lot about building positive operating leverage and definitely seeing this course results. You're showing momentum there. You know, just curious as you head towards 2025, if you're thinking of any investments or an additional talent, just kind of your thought process around expenses here.

You know, and Ron, I mean, we, again, you know, I think we're trying to, you know, we're currently working through our final forecasting and budgeting for 25, but really not a lot, Steve. I think for us, you know, we've messaged, you know, that we're just kind of, you know, we're hunkered down to make sure that we can drive the growth. You know, we'll have some, just the overall cost of, you know, just inflation and know contract increases and things along those lines uh so but that we think that should be pretty minimal i think the increases that we'll see going into 25 will be probably more um you know on the talent side of the house if if anything uh but but i think overall yeah i think we can hold these expense lines in a pretty reasonable range as we look into 25 again allowing allowing the balance sheet time to kind of reset with rates get this new production on, let some of the lower rate stuff that's on there roll off and amortize down. So when you look at, when we look out, you know, in the latter part of 25, especially as we start to kind of glimpse into 26 now, we feel really good about where we can go with this operating leverage. I don't know, Ron, any additional color there?

No, you said it all. We've You know, we will produce, you know, I look at it as a percent of expense to net revenue. We will be creating that operating leverage throughout 25 and going forward. So, operationally, we're in great shape. So, as you said, just our ability to execute.

Good quality bankers are always being recruited and welcomed.

Well, and I think that is – and I think that's a great point, Miller. I think – and we are. I mean, we're saying, again, you know, we're selective. we're very selective in our recruiting. I mean, and, and we, we've always been that way and, and we're going to continue to be that way, but we're always looking for great opportunities to bring in folks that fit our culture. We've been able to find some of that this year. We asked to Miller's point, we think we can continue to do that as we go forward. So, you know, we're going to continue to invest in, in, in, in key talent, quality, quality, key talent. And you know, we've never been, ones that go out and just add tons of people. But if we can find good folks, we're going to look to Adam. And we've been able to do that here over the last couple of quarters.

OK, great. I really appreciate all the color and a nice quarter.

Thank you. Thanks, Steve.

Thank you. Our next question is from Steven Scouten with Piper Sandler. Steven, your line is now open. Please go ahead.

Hey, good morning, everyone. On the expense side, just moving forward, you talked about a lot of any potential expense growth would come from new hires, which obviously should produce revenue as well. Is it fair to think about expense growth similar to the last couple of years, like 6%, 7% range? Again, I know you're not trying to give guidance, but is that just kind of a fair ballpark of what the franchise should trend towards over the long term?

Ron, you want to share your thoughts around that? Exactly that. Probably 5% to 7%. That's a good goal, a good range for that.

Okay. Great. Great. And then on the CRE concentration, I think if I was looking at that correctly, maybe up to 288%. Does that limit potential CRE growth from here at all, or does it make you push into other verticals more so than you would have up to this point? I'm just curious if that's a headwind at all to future growth.

Yeah, we've taken the advantage to add some good real estate loans to the portfolio over the last couple of quarters. And we see that. I'll let Rhett give some color there, Stephen. But yeah, overall, I don't view it as a headwind. Obviously, when we're doing that, and we have, we're going to continue to do it. We want to make sure that it's not transactional real estate, that it's full relationship type of CRE lending, which we've been able to do. And again, making sure it's priced accordingly. But Rhett, you want to give any color kind of on CRE growth? I think we anticipate having a little bit more of that. And we see a little bit in the pipeline. Do you want to give any feedback?

Yeah, I would say that we probably will see the metric pick up a little from where it is here today. We do certainly focus to manage that within the a target of ours. And, you know, some of the growth is just the timing of different projects. We do have, you know, we have some projects that will be completing funding and then either paying off as they sell it down or potentially transition out. So, you know, we are, I would say, maybe a little bit of backfilling there, knowing some of the projects that will transition out of the buckets in the near term. But I do think we'll still continue to see activity. The other upside there is because of the opportunities that we're seeing in space, it also adds our ability to continue to be very staunch in our credit standards. I mean, we're picking the best apples on the tree, so to speak, on the opportunities we're funding. So we feel very good about what we are doing. Great point.

Yeah, that's really good, Keller. Thank you for that. And then just last thing for me, I know we've talked David Dismukes, M.D.: : About in the past and past calls trying to reach towards a $50 million operating number for three to 25 in that range. David Dismukes, M.D.: : Given the current environment, maybe you know where the Fed is moved, do you think there's any sort of timing impediment to getting to that number, you still think that's an achievable path forward in the in the medium term.

David Dismukes, M.D.: : yeah Oh, I definitely think so, I think we forecast obviously right, you know right say. rates don't move down at all, then it might put a little bit of a headwind there. But really, no, that $50 million revenue number that we kind of said publicly is something we're still shooting for for the end of next year on a quarterly run rate basis. And still feel very good about that. I mean, obviously, we've got to continue to execute on leveraging this balance sheet and growing loans, growing deposits. But, yeah, no, I don't think there's anything that we're seeing right now that causes us to want to change the target dates on that.

Perfect. Thanks, Billy. Appreciate all the time today. Yeah, thanks, Stephen. Thanks, Stephen.

Our next question is from Christopher Marinak with Janie Montgomery Scott. Christopher, your line is now open. Please go ahead.

Thanks very much. And thanks for for hosting us all this morning. I wanted to get into kind of the the net customer gains you've had this year because it clearly seems you're picking up market share if you look cumulatively the last three or four quarters and just kind of curious on how you see that and kind of how that can evolve the next year.

Yeah, it's a it's a great, great comment, Chris. And yeah, we are I think we're continuing to gain share in really of all these zones and a lot of it i i i commented on it uh it's just you know the the sales side uh that we've really worked hard the process uh that we put in place over the course of this year is is really starting to take shape so you know we're going out and and we're looking at every one of our markets every one of our regions we're identifying you know, the clients that we want to go target that some of those, some of those sales cycles are longer. Uh, so yeah, I mean, we're working, we're working really hard on, on, on clients that we're, we don't have the pipeline today, but we feel very good about the ability to get them in the pipeline and 25. And so, um, you know, I, I think you will continue to see our, our markets gain share, uh, and grow, uh, again, And Rhett alluded to this, I think it's really an important point too, and it's not just our new stuff. We've got a lot of newer markets that we've added over the last couple of years and made some big investments in those markets. And those markets are really performing extremely well, but our legacy markets are also continuing to perform well. I think just as we're continuing to build this franchise, build our brand in these markets, you know, especially with the size that we are now, I think we can operate from a position of strength in a number of these situations, and it's really been good for us, and I do think we can continue to gain share.

Yeah, Christopher, I appreciate you mentioning that and calling that out, because we have done a good job of client acquisition and working on clients, and the sales side gets a lot of credit, but I want to Give a thank you to the ops side because the sales side couldn't do what they do at the scale they do it without ops support and supporting them tremendously. But it's a great team effort for sure.

Good. Thanks for expanding on that, guys. I appreciate it. And just to follow up about the hurricane last month or in late September, what can you see from your Eastern franchise? What type of influx of new business and insurance proceeds can that have? And do you see that being a slight benefit in the future?

You know, just a devastating situation in a number of our Upper East Tennessee counties. You know, we don't have offices in a number of those, but we've got clients in a number of those. And so we're kind of seeing a little bit more of the impacts on the periphery. So from our standpoint, we don't anticipate any direct impact. I thought we actually had probably a little bit of direct impact I know we had some payments that got delayed. That's one of the reasons we had a small tick up in some past days because your payments were delayed because of mail issues over quarter end. But I think for us, I think a lot of it is just going to be just trying to figure out how to support some of those efforts up there. Yesterday, I was talking with a foundation that's a client of ours that's doing a lot of work. up in that area, they've been very public about their fundraising efforts. And they've put together some great fundraising partners over the last few weeks. And so a lot of us is just going to be just trying to help facilitate some of that. So from our standpoint, from a balance sheet standpoint, probably just a little bit of near-term deposit growth with some of that funding. But fortunately, that money should be going right back out and helping these folks in need.

Sounds good, Billy. Thanks again. Yeah, thank you, Chris.

Just as a reminder, to ask a question, please press star followed by 1 on your telephone keypad now. Our next question is from Catherine Miller with KBW. Catherine, your line is now open. Please go ahead.

Thanks. Good morning. Good morning, Catherine. I wanted to ask just a follow-up on the margin. You have great, your repricing schedule slide is really helpful. And so I feel like we can model the loan yields on the deposit costs. I really appreciate your just kind of forward look into the cumulative data being about 40% over the cycle. But any kind of near-term commentary you can give us on deposit costs, maybe where spot rates were at the end of the quarter and what you're seeing in specific kind of deposit categories with the first 50-bit move?

Ron, you want to jump in on what we saw during that first cut and maybe some spot rate color?

Yeah, we've managed to, you know, being, let's take a step back. Our deposits are 24% of our deposit base is indexed to an indice. The remaining another 14% is kind of an internal indice. So we have about 40% of our deposits that will move with the rate movements, and we're able to achieve that without, we didn't get really any pushback on that whatsoever. We expect to continue that as we go forward. Again, a lot of this is market-driven, Catherine, and we have to pay attention to our competitors and how they're pricing. But right now, we expect to apply the same methodology going forward and just manage, you know, and monitor our customer accounts, making sure the outflows aren't leaving because of rate. Other than that, I think we're in a good shape going forward with our, if there are rate cuts to keep our deposit portfolio steady. Spot rate, you said a spot rate guide there, spot rate thoughts at the end of September? Yeah, our new production for September was 3.81%, but that did include broker deposits. So it's, It's, excuse me, it was 3.81% without broker deposits. So I think because we ran some promos near the end of September from the relationship exit. So I don't have any spot rate going forward, but we are seeing the deposit rates going down accordingly. Okay.

And just given the amount you have indexed, would it be fair to model that 40% data to show up pretty quickly or how much of a lag do you feel like?

No, we will show pretty quickly. There will not be a lot with that 40%.

Great. All right. That's all I got. Appreciate it. Great quarter, guys.

Thank you, Catherine. Thanks, Catherine.

Thank you very much. That ends our Q&A session. We do not have any more questions, so I will hand back to Miller for any closing remarks.

Thanks, Ezra. We appreciate each of you investors, analysts, and associates for your continued support. We look forward to finishing 24 strong, and feel free to reach out to any of us if you have any further questions or comments. Have a great day.

Thank you very much, Miller, and thank you, everyone, for joining. That concludes today's call. You may now disconnect your lines.