Greetings, and welcome to the QCR Holdings, Inc. Earnings Conference Call for the Third Quarter of 2022. Yesterday, after market close, the company distributed its third quarter earnings press release. If there is anyone on the call who has not received a copy, you may access it on the company's website, www.qcrh.com. With us today from management are Larry Helling, CEO; and Todd Gipple, President, COO and CFO. Management will provide a brief summary of the financial results, and then we'll open up the call to questions from analysts. Before we begin, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission. As part of these guidelines, any statements made during this call concerning the company's hopes, beliefs, expectations and predictions of the future, are forward-looking statements, and actual results could differ materially from those projected. Additional information on these factors is included in the company's SEC filings, which are available on the company's website. Additionally, management may refer to non-GAAP measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. As a reminder, this conference is being recorded and will be available for replay through November 3, 2022, starting this afternoon approximately one hour after the completion of this call. It will also be accessible on the company's website. At this time, I will now turn the call over to Mr. Larry Helling at QCR Holdings.

Thank you, operator. Welcome, ladies and gentlemen, and thank you for taking the time to join us today. I will start the call with a brief discussion regarding our third quarter performance. Todd will follow with additional details on our financial results for the quarter. We delivered another strong quarter of net income, driven by exceptional loan growth, improved credit quality, and carefully managed expenses. In addition, we strengthened our total risk-based capital ratio for the quarter with our previously announced 100 million subordinated debt issuance. This transaction increased our total risk-based capital ratio by 140 basis points. We posted core earnings of $28.9 million or $1.69 per share, generating a ROAA of 1.51% after adjusting for non-recurring items. Building on the momentum we generated in the first half of the year, we delivered robust lending activity again in the third quarter, with annualized loan growth of 14.5%. Our loan growth for the quarter was driven by strength in our traditional commercial lending, leasing, and specialty finance businesses. Our experienced lenders continue to generate exceptional levels of loan growth. Given our current pipelines, we are reaffirming our targeted loan growth of between 10% and 12% for the fourth quarter while continuing to be vigilant on maintaining our exceptional credit quality. Our loan growth was primarily funded by growth in our deposits, which grew by $120 million or 8.3% on an annualized basis. However, we did experience a shift in the composition of our deposits. Our non-interest-bearing demand deposits declined as the liquidity positions of our larger commercial and correspondent bank clients returned to more normal pre-pandemic levels. We were successful in moving some of the correspondent bank deposits on to our balance sheet during the third quarter. In addition, our time deposit portfolio grew, as some of our more rate-sensitive clients shifted to term deposits. This shift in mix within our overall funding has added some upward pressure on our deposit costs. During the quarter, we expanded our adjusted net interest margin by five basis points prior to the three basis-point diluted impact of our subordinated debt issuance, as the impact of multiple rate hikes on our asset-sensitive balance sheet drove interest-earning asset yields higher. The increased cost of deposits and the impact of our subordinated debt issuance limited the increase in NIM. Notably, our adjusted NIM is up 26 basis points year-over-year. Todd will go into more detail in his remarks. We did see a modest decline in non-interest income in the third quarter as a result of lower capital market revenues from swap fees. This was primarily due to the delays in client projects caused by ongoing supply chain disruptions, inflationary pressures, and higher interest rates. Despite the delays, the underlying economics for these projects remain strong. These housing developments utilize tax credits, which provide affordable housing primarily across select middle markets throughout the central US and the southeast. These are high-quality loans being made to experienced developers with low loan values. The industry has an excellent track record, with minimal historic default rates. Since our program's inception in 2018, we are proud to have helped finance over 250 projects consisting of nearly 13,000 affordable housing units. We remain optimistic about this line of business as the need for affordable housing has never been greater. As a result, we expect it to continue to be a significant and consistent contributor to our profitability going forward. Our asset quality improved during the quarter as non-performing loans declined by $6.3 million or 27%. We had manageable net charge-offs during the quarter and are comfortable with our reserves, which represent 1.51% of total loans and leases. We are mindful of recessionary concerns but remain cautiously optimistic about the relative economic resiliency of our markets. Additionally, our excellent asset quality and strong credit culture prepares us well to weather economic uncertainty. As we previously announced during the third quarter, we issued $100 million of new subordinated debt as a proactive move to bolster our capital position. We believe that we are well positioned for potential economic challenges that may occur. We have strong earnings, a solid capital position, excellent credit quality, and a prudent level of reserves, which will enable us to continue to deliver disciplined growth and attractive returns for our shareholders. With that, I will turn the call over to Todd to provide further information about our first quarter results.

Thank you, Larry. Good morning, everyone. Thanks for joining us today. I'll start with net interest income. Our net interest income on a tax equivalent basis, adjusted for acquisition-related accretion and PPP, was $64.1 million, an annualized increase of 20.8% from the second quarter. The increase was due to the linked-quarter growth in average earning assets of approximately 14% annualized, coupled with higher yields on those assets, with a beta of 33% for the quarter. Additionally, our loan yield expanded 54 basis points for a beta of 36%, partially offsetting the strong growth in earning assets and improved yields. We experienced higher interest expense as a result of higher deposit costs, a shift in the mix of our deposits, and the impact of our recent subordinated debt issuance. Our adjusted NIM improved by five basis points prior to the three basis-point dilutive impact of our subordinated debt issuance. As we know, NIM impact is typically nonlinear during periods of rapid rate increases. In the previous quarter, we saw the benefits of slower and lower deposit betas, as we posted a NIM increase of 17 basis points in the second quarter. However, those betas accelerated as we progressed through the third quarter and two additional Fed rate increases. For the first half of the year, our beta on total deposits was 8%. For the third quarter, our beta on total deposits moved to 31%, and for the full rate height cycle to date, our beta on total deposits is 20%, which is still below our beta from the last period of rising rates that ended in 2019, which was 30%. Part of the increased beta is a result of our shift in our deposit mix, which we expect to lesson as we move through the rate hike cycle. Our talented bankers are focused on growing well-priced core deposits to continue to fund our strong loan growth. Looking at our performance on a cycle-to-date basis, our adjusted NIM has expanded 26 basis points from the fourth quarter of 2021. With robust organic loan growth and solid NIM expansion for the year, our net interest income has also experienced significant growth, and we have achieved a NIM at or near the top of our peer group. Looking ahead, we project adjusted NIM expansion in the range of two to four basis points in the fourth quarter after the additional dilution from a full quarter of the subordinated debt issuance. Turning to our non-interest income, which was $21.1 million for the quarter, lower than the $22.8 million we generated in the second quarter. As Larry mentioned, our capital markets revenue was below our guidance range of $13 million to $15 million, and was $10.5 million for the quarter. Despite the project delays that our clients are experiencing, our pipeline remains strong. Capital markets revenue has averaged approximately $11 million per quarter for the last four quarters, and therefore, we expect this source of fee income to be in a range of $10 million to $12 million for the fourth quarter. Rounding out the discussion of non-interest income, we generated $3.5 million of wealth management revenue in the third quarter, consistent with the second quarter despite the market decline. Our wealth management team continues to generate meaningful new client relationships and is adding significant new assets under management, which is helping to offset the sharp decline in stock market valuations. Now turning to our expenses. Non-interest expense for the third quarter totaled $47.7 million compared to $54.2 million for the second quarter. The decrease from the prior quarter was primarily due to elevated expenses in the second quarter related to the Guaranty Bank acquisition, and lower incentive-based compensation this quarter. After adjusting both quarters for acquisition and post-acquisition related expenses, non-interest expenses were relatively static at $47.3 million and $47.4 million, respectively, and at the low end of our guidance of $47 million to $49 million. Looking ahead to the fourth quarter, we anticipate that our level of non-interest expense will again be in the range of $47 million to $49 million. As Larry noted, our overall asset quality continues to be quite strong. Non-performing assets improved by $6 million down to $18 million at the end of the third quarter, driven by paydowns on several. The ratio of NPAs total assets was 0.23% at the end of the third quarter, compared to 0.33% for the prior quarter. In addition, the company's criticized loans and classified loans to total loans and leases at the end of the third quarter improved to 2.35% and 1.29%, respectively, as compared to 2.37% and 1.43% from the prior quarter. We did not record our provision for credit losses in the third quarter as a result of continued improvements in overall credit quality. Our allowance for credit losses remained strong at 1.51% of total loans and leases. This allowance represents over five times our non-performing assets. As Larry mentioned, we strengthened our total risk-based capital ratio during the quarter, with our subordinated debt issuance and stronger earnings posting an improvement of 115 basis points to 14.55%, while our tangible common equity to tangible assets ratio declined to 7.68% at quarter end, compared to 8.11% at the end of June. This was largely the result of a decline in our AOCI and our share repurchase activity during the quarter. While AOCI and the share repurchases negatively impacted the company's tangible common equity, our strong earnings helped to offset this impact, which led to a slight increase in tangible book value per share. Finally, our effective tax rate for the quarter increased to 14.1% from 8.9% in the second quarter. The rate was higher due to a higher ratio of taxable earnings to tax-exempt revenue in the third quarter. We expect the effective tax rate to be in a range of 14% to 16% for the fourth quarter. With that added context on our third quarter financial results, let's open up the call for your questions.

Our first question comes from Damon DelMonte with KBW. Please go ahead.

Hey, good morning, guys. Hope everybody's doing well today. Just wanted to - quick question on credit. Obviously, things continue to be really strong. You have a healthy reserve. How should we think about provisioning going forward, just given a continued favorable outlook for loan growth and then just kind of growing concerns about softness throughout the broader economy?

Yes. Thanks, Damon. First, I'd say, there certainly are no signs of credit deterioration at this juncture, and I think the whole sector thinks there'll be some softness sometime during next year, but certainly, it's not showing up in any of our measurements so far. So, as you know, we run toward the very high end of our peer group from a reserve standpoint. So, certainly, for the fourth quarter, we'd expect minimal to no provision in the fourth quarter. As we go into next year, we'll probably try and give you a little more guidance on that end when we do the fourth quarter earnings.

Okay, fair enough. And the charge-offs you incurred this quarter, could you just elaborate on that a little bit?

Yes. It’s nice when the charge-off is small, as it gets your attention. They’re just a couple of clean-ups, and they were very modest. Most of the reduction in our NPAs came from payoffs of a couple of non-accruals. And so, they were just two isolated deals that we decided we thought we should clean up, and hopefully in one of the future quarters, we'll talk about some recoveries on a couple of those.

Okay, great. And then with regards to the margin outlook, Todd, I think you said a couple of basis points of expansion, two to four basis points in the fourth quarter. As you look at your balance sheet and you look at the impact of rising deposit and funding costs, do you think the margin kind of peaks here in the fourth quarter, or do you think there's still opportunity to see expansion going into ‘23?

Yes. Thanks for the question, Damon. We don't believe that Q4 will be the last quarter of margin expansion. We did guide to that two to four basis points of continued margin expansion. Again, that's five to seven really of core margin net of three basis points for the full quarter of this sub debt. We still remain solidly asset-sensitive. We're about $900 million in net RSAs, around $2.4 billion RSAs, $1.5 billion of RSLs. Certainly, here in the third quarter, the deposit beta lag that we experienced up to the third quarter caught up with our clients a bit and snapped back. We expect that to moderate a bit in Q4. I guess I would say Q2, the deposit betas were soft. Q3, they were pretty hard. Q4, we expect those to kind of be in the middle of that range. So, that's why we're expecting some expansion in Q4. We don't think we've peaked yet by the end of the year because of that net RSAs. So, we expect to continue to see some expansion. Another thing, just a good point of reference here, our Q3 new loan rates coming on at an average of 5.13%. In Q2, that was a 4.05%. So, new loans are coming on at better rates. So, while we're getting some lift in the floating rate loans, our new loan production has also lifted a bit.

Got it. And can you just remind us of the balance of your rate-sensitive deposits that you have, the ones that reprice immediately?

Sure. That's pretty close to that 1.5. We really have very few other RSLs other than those very high betas.

Got it. Okay, great, that's all I had for now. Thank you.

Our next question comes from Daniel Tamayo with Raymond James. Please go ahead.

Thank you. Good morning, guys. I guess maybe just following up on the margin, not to beat a dead horse here, but I know most folks are guiding to deposit betas going up in the fourth quarter as depositors demand higher rates. And certainly, you had more pressure than I think a lot of banks in the third quarter, but what gives you confidence that those deposit betas will moderate from the third quarter levels here in the fourth quarter?

Sure, Danny, great question. I will tell you, our deposit base reacts more quickly than most, given their significantly-sized commercial deposits for the most part. So, we tend to react a little bit more harshly more quickly, and that really showed up in - here in the third quarter. We have really, we believe, experienced most of the mix shift now. Our non-interest-bearing is down around 20%, down from 24%, and that 20% is really more historical norm. So, that impact on the compression or the high beta in Q3, we think that's about done, that mix shift component. And right now, we're looking for that 31% beta on non-index deposits that we saw in Q3. We're expecting that to be more in the 20s in Q4, more in a 20% to 25% beta range. I know that's a bit counterintuitive compared to what some of our peers are guiding to. I will just tell you, ours showed up a little more early and fairly significantly here in Q3, but we think that's going to moderate a bit. We think we're through some of the worst of it. In our opening comments, I mentioned non-linear. I think that's really the case, particularly for our deposit base. It's a little choppy with respect to deposit betas, and we're expecting that harshest part of it is what we saw here in Q3. Hope that color helps you a little bit with that.

Yes, it does. Thanks, Todd. And I guess a little bit of a follow-up, but somewhat unrelated, just on the deposit side, I mean, you reiterated the 10% to 12% loan growth guidance. You've got the loan deposit ratio now up over 100%. A lot of competition certainly for deposits out there. How do you feel about being able to maintain that loan deposit ratio in that range, or are you comfortable going higher, or do you plan to utilize more wholesale funding going forward?

Sure. Great question. Thanks for asking that one. So, yes, we're over 100% on loan to deposit. First, I'm going to talk about that ratio and then talk to you about where we expect to go. We will historically have a higher loan to deposit ratio than our peers because of the numerator. Our percentage of loans total assets is about 10% higher than most of the peer group, where 78% of our total assets are loans. So, the L in the loan to deposit ratio is higher for us. So, we typically will hover more in the 90s to 100%, even in normal times. We would like to see this be around 95%, and we think we can get there. We elevated a bit over 100% here in Q3, but our goal would be to be in the 95% to 98% range over a longer period of time. Deposit competition is fierce. Pricing is fierce. We have great bankers all around the company, and we're going to work very hard to fund it with core deposits. So, that's a little bit about the ratio and the result that we tend to show, and then a little bit more about what our expectations are going forward.

Danny, I'll add that, I was just at an all-employees meeting in our Cedar Rapids location this morning, and we talked about having record new account openings in retail in the month of August. And we're having record wealth management new account openings. So, certainly, the underpinnings long-term are great from adding new clients and new relationships, but certainly, the short term's been exacerbated by the interest rate environment.

Understood. Yes. No, thanks for that color. And then finally, just shifting gears here over to the non-interest income side and specifically on the swap fees, continued pressure there or headwinds from the supply chain issues, and then obviously from higher rates, as you called out. But with the guidance now for that $10 million to $12 million range in the fourth quarter, down from what it was, not earlier this year, but in prior years, should we think about that as the new guidance range in future years, or do you think you can get that back up to historical levels in 2023 and beyond?

Yes. We'll be a little cautious on guiding into 2023 at this point. Certainly, we think that's a reasonable expectation for the fourth quarter, and it will depend. Over time, the Fed will get what it wants, which will slow down inventory. The price of materials and the supply chain stuff has started to get a little bit better. But then at the same time, then interest rates climbed, which really kind of offset it and maintain the kind of pressure on getting capital stacks put together. So, it'll certainly depend on what the interest rate environment is and the cost of building new facilities. What I would say is, there is no shortage of demand for the product. The people who need affordable housing, that is at record levels. And so, these projects that we have in our books are performing spectacularly. It's really about the challenge of getting capital stacks put together to make these work, which is kind of what the Fed increases in rates is all about, not just in this space, but everywhere is there's going to be some slowness until we kind of get through the curve and they get their slowdown accomplished. So, longer term, I think there is potential. When that will be will depend on that combination of factors between cost of getting projects done and the cost of financing them.

That's helpful. Thanks for answering my questions. That's all I have.

Our next question comes from Brian Martin with Janney Montgomery. Please go ahead.

Hey, good morning, guys. I'm going to ask a question here or two, just - but I don't - if you covered it, I apologize. I joined a little bit late. But just the - Todd, I think you talked about the migration in the deposits. Just wondering, I guess, maybe you said this, but is your sense that kind of where the deposit mix is today is kind of where it should stay, kind of pre-pandemic, or did I maybe not hear what you were saying properly? Just kind of wondering if you still expect some migration given the change in rates we've seen on the deposit side prospectively.

Sure. No, Brian, it's always good to be clear about mix. And I would say that the mix shift that we experienced in Q3 we think is the high point of that shift. We're at roughly 20% non-interest bearing, which is more our historical norm. We've been floating around 24, 25, 26. With all the excess liquidity in the market, it’s now at 20. We expect it to really be pretty static at that level. So, that part of the mix shift we think is over. Certainly, there will continue to be pressure on non-rate sensitive clients waking up and deciding they’re rate-sensitive. So, there's going to continue to be pressure on some of the mix change, some of the pricing. But I guess what we're really saying is we think the worst of that is behind us in terms of our deposit base. Our deposit base, as you know, is much chunkier, much bigger, typical deposits, a lot of commercial in there, a lot of rate sensitivity around that. So, it reacted more quickly than most, but we think the majority of that headwind is behind us.

Got you. Okay, that's helpful. And just the other easy ones, just from a buyback standpoint, did you cover that or can you just give any thoughts on how you're thinking about the buyback from here?

Yes, I'll take a swing at that one, Brian. We slowed down a bit in the past quarter. Just as - seemed like the prudent thing to hold onto a little bit more capital, given the, I guess, expected recession that we think could happen next year. So, but as you know, we're approaching a top third of our peer group from a capital ratio standpoint when you look at total risk base. So, we probably are at the point in the next few quarters where we will have the alternative available to us to buy back more aggressively, barring major economic downturns, which we certainly are not seeing today. But we just thought it was prudent to position ourselves in the upper 14s and close to 15 on capital for total risk base. We think that bodes well for our company and for our shareholders long term, because it feels like we're going to be in a spot sometime in the next year where having lots of capital will be the right answer.

Got you. Okay. No, that's helpful. And maybe just the last one or two is just the - do you have kind of what the monthly margin was for the month of September? Just kind of - just trying to understand how much you'd already seen kind of by the end of the quarter, what the dynamics had been.

Sure, Brian. Yes, we think the majority of the pressure on deposit betas were really spread fairly evenly through the quarter. It wasn't like that pressure on beta was ramping up right at the end. So, I think that's another reason we're providing some guidance for Q4 for some continued expansion is it's not like that was ramping up. It was pretty consistent throughout the quarter.

Got you. Okay. That's helpful, Todd. And then just the last one, have you guys - the loan growth or just the pipelines, I mean, loan growth has been really strong for quite some time now. Just kind of curious your take and as you look out over the coming quarters, and I'm not looking for much from your outlook and if you're going to give that more on ’23. But just, are you getting the sense that the customers are pulling back some, or I guess are they still kind of optimistic that you think some type of growth like we've been seeing is sustainable? Just trying to get a feel for what you're hearing from your customers.

Yes. Brian, the Fed certainly is intent on slowing things down a bit, and where we're seeing it most would be in just new construction just because of material costs and inflation and higher interest rates making the capital stack work. We've noticed it most because of the fee income business from our swap portfolio, but it's true in other sectors of the business where the developers are just slowing down a bit. The offset to that a bit is our normal C&I clients are performing really well, and are probably more inclined to do plan expansions, buying another company, looking for ways to grow their presence because their operating metrics have been really strong. So, that's part of the offset and probably why we think we can do what we've done historically, which has been the 8% to 10%. We've done that for a couple of decades now.

Our next question comes from Nathan Race with Piper Sandler. Please go ahead.

Yes. Hi, guys. Good morning. Thanks for taking the question. Just going back to the margin discussion, curious based on kind of the weight average rate of loan production in the third quarter and more recently, relative to maybe the spot rate on deposits at the end of September, is the growth that you're seeing relative to kind of what you’re paying on deposits these days? Is that margin-accretive generally speaking?

Yes. Generally speaking, on the margin, the net new on both sides of the balance sheet, it is accretive. And again, I think that's why we're optimistic that we're not done growing margin.

Okay, great. And then maybe just turning to capital, you guys remained active on the buybacks this quarter. Is that a component that you guys expect to continue to utilize within your capital management toolbox, at least in the fourth quarter? I imagine within the context that you guys are still focused on integrating GFED, albeit it's probably in its middle late innings at this point. So, just trying to get an update in terms of kind of how you guys are thinking about managing excess capital, just given that profitability is going to remain pretty strong going forward.

Yes. Nate, first of all, just a comment on the GFED integration. I'd say it's gone really well. We've passed the system conversions. And while I've been around lots of these in my career, these went about as well as I've seen any of them go. So, kudos to our team for helping pull off the system and stuff, and there'll still be some speed bumps between now and the end of the year, but we're past the power curve on the system conversion. Secondly, on capital, we're getting close to where we kind of targeted. As you know, we were really aggressive in the buyback in the second quarter, a little less aggressive last quarter. We're getting capital levels now - because of our low dividend we can accrue capital pretty quickly. And so, we're probably likely to be approaching 15% at some point over the next year or so, just because that seems like the prudent place to be of total risk-based capital between us and the next recession. And so, that should allow us to do some stock buyback, but probably not at the same level as we did in the second quarter.

Okay. Got it. Switching gears a little bit, and I got on a little late, so I apologize if this was touched on, but just in terms of kind of future deposit growth expectations and the sources of that, are you guys expecting just some continued share gains across your footprint to be the main driver there? Or do you guys intend to maybe tap some of the off-balance sheet deposits from the correspondent platform to support what looks like still pretty strong loan growth expectations into the fourth quarter?

Sure, Nate. Happy to cover that. Yes, we do expect to continue to fund our loan growth predominantly with core deposit growth. We have shifted some of the correspondent deposits that were off-balance sheet on balance sheet. We consider those core. Those are 200 very good clients of ours. We're really focused, at all of our charters, on growing core deposits. And so, I don't really see much of a need to go off balance sheet. We have worked very, very hard over the last three to five years to wean ourselves almost entirely off wholesale funding. We have a little bit of it today, but we really want to pull that loan to deposit ratio back into the upper 90s from the 102.

Okay, great. And just maybe one last housekeeping question just on the accretion impact going forward, is the step down that we saw relative to GFED something that we should extrapolate out in future quarters going forward?

Nate, so glad you asked the question. That's a bit of a big number. And so, just to recap what's happened and give you a little bit of guidance going forward, so we saw a pretty significant impact of accretion in the first quarter of the transaction, which would have been Q2 at $1.7 million. That was really the base accretion plus some early payoffs and restructurings. It was roughly $1 million here in Q3, which was really predominantly just the base accretion amount. We expect that to float up to around 1.5 to 2 here in the fourth quarter. We know already that we've had some restructurings and some payoffs to add to the base accretion. And then maybe think of it more like $1 million per quarter base in 2023, with some fluctuation to add to that occasionally when we see some payoffs or some paydowns on those acquired loans. So, the $1 million this quarter was pretty much base. We're going to float up here in Q4 with some known payoffs, but $1 million per quarter, pretty solid amount for 2023. Probably sometimes we'll have some payoffs on top of that during 2023. That help?

Yes, no, that's helpful. I'm sorry, is that $1 million per quarter for 2023, not 2024?

Oh, I'm sorry, 2023. Yes.

Okay, great. Yes, perfect.

Thank you.

Awesome. Great. Well, I appreciate all the color and you guys taking the questions.

Our next question comes from Jeff Rulis with D.A. Davidson. Please go ahead.

Thanks. Good morning. Wanted to circle back on the NPA, the paydowns. Sounds like you got a little more aggressive or things came to a head to kind of deal with those upfront and reduce non-performers. I just wanted to get a sense if that was anything - if that was timing based or if it was sort of a dedicated effort to clean some things up. And if so, are there - is there any sort of lumpier credits in there that you think you could chase down in the short term to continue that trend?

Yes, Jeff, I'll just to kind of put us all on the same page, just a little bit of history. Last quarter, we had a little tick-up, or in the prior quarter, we had a tick-up because of two things. Number one, two credits of decent size that we put on the NPA list and then the acquisition of the GFED portfolio. And so, it was kind of a combination of both of those that ticked our portfolio NPAs up just a bit. And we’ve made good progress on just four or five credits. The largest one that was an NPA went from several million to almost paid off in a quarter. And so, really good work by our team on getting that paid down substantially. And then on several smaller credits, low seven figure balances, we just had two, three, four of those that we just have been working on and we've gotten those worked out of the bank. So, really good progress. There aren't many large deals left in there. So, there's one that's probably a moderate seven figure number that we could be out of by the end of the year we expect with no loss. It may take into the first quarter to get out of that, but as you know, these take some time. So, we're continuing to chip away, trying to use what's still a really good credit environment to make ourselves pristine before we expect some kind of downturn to impact that credit quality.

Okay. Thanks, Larry. And then just we got the guide on expenses kind of flat linked-quarter, I guess within the range. Given kind of the merger kind of integration largely complete, and I guess if we go into ‘23, if maybe growth moderates some, any expectations for kind of expense growth off that base exiting Q4?

Yes, Jeff, thanks for asking about expenses. We hadn't really talked about those. So, yes, we're maintaining that guide of 47 to 49 here for Q4. I think you're very well versed with our 965 philosophy and our 5% expectations around expense growth. So, we certainly will see some growth in expenses next year. In keeping with 965, we would expect those to be no more than five. We will see some cost savings from now having the conversion and integration behind us in southwest Missouri with Guaranty Bank. So, we'd like to think that that will help offset some of that expense pressure. But I think you can count on us to show some pretty well-managed expense creep. We tend to focus pretty closely on that, as you know. So, we don't really expect to see any big jump there.

Thanks, Todd. Maybe a last housekeeping. You referenced the tax rate of 14 to 16 in Q4. So, similar question, just kind of roll forward into ‘23. Do you think you look like you’re mid double-digit versus high teens in ’23, if we were to guess?

Yes, correct, Jeff. It would be a little more modest than historical. A lot of our light-tech portfolio is tax-exempt and that's grown and the rate is growing. And so, our tax benefit from that part of our portfolio is getting stronger. So, somewhere in the middle teens versus the upper teens would be a good thing to use for ‘23.

Sounds good. Thank you.

Our next question comes from Daniel Tamayo with Raymond James. Please go ahead.

Hey, guys, just a quick clarification follow-up here on the margin. Just wanted to make sure that I'm understanding this correctly. The two to four basis point NIM guidance that you talked about was before - the adjusted NIM was before the accretion numbers that you talked about. Is that correct?

Correct, Danny. Yes. That would be the core NIM not affected by accounting - acquisition accounting accretion. Yep. That would be on top of that for NII dollars.

Got it. Okay, that's all I had. Thanks, guys.

Thanks for clarifying that.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Larry Helling for any closing remarks.

Thanks to all of you for joining our call today. Have a great day. We look forward to speaking with you all again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.