Hello, everyone and welcome to the SmartFinancial Third Quarter 2023 Earnings Release and Conference Call. My name is Seb and I will be the operator for your call today. I will now hand the floor over to Nate Strall to begin. Please go ahead.

Thanks, Seb. Good morning, everyone, and thank you for joining us for SmartFinancial's third quarter 2023 earnings call. During today's call, we will reference the slides and press release that are available within the Investor Relations section on our website, smartbank.com. Chairman, Miller Welborn will begin the call followed by Billy Carroll, our President and Chief Executive Officer; Ron Gorczynski, Chief Financial Officer; and Rhett Jordan, Chief Credit Officer will also provide commentary. We will be available to answer your questions at the end of our 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 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, except as may be required by law. During the call, we will reference non-GAAP financial measures related to the company’s performance. You may see the reconciliation of these measures in the appendices of the earnings release and investor presentation filed on October 23, 2023, with the SEC. And now, I will turn it over to Chairman, Miller Welborn to open our call.

Thanks, Nate. The third quarter of this year has been another quarter of incredibly busy activity for SmartBank. I'm very proud of how our team has remained steadfast to our mission and our objectives for the company. It's not a secret that our industry has been challenged this year, but we see the challenges as positive opportunities. We've made a strong effort to improve every line of business that we operate, and I do sincerely believe we're poised for a bright future. Our markets remain very strong, and we're fortunate to be located in the southeastern United States where the economy remains robust. We are very proud of what we were able to accomplish for the quarter. Our entire SMBK team is focused, determined, and very clear of our goals. With that, I'm going to turn it over to Billy.

Thanks, Miller. And good morning, everyone. Great to be with you today. I'm going to jump right in this morning and discuss our third quarter highlights. You'll see most of these on Page 3 of our deck. All in all, a steady quarter for our company. I'll be discussing primarily non-GAAP operating metrics today. As Ron will provide some details shortly on a bond trade we did in September that had some impact on our GAAP numbers. We came in at $0.43 on operating EPS or $7.2 million in net income. We continue to grow both sides of the balance sheet with loans and deposits increasing right at 5% annualized. Our loan-to-deposit ratio is staying healthy, right around 80%, giving us nice flexibility on growth. Credit is strong with an NPA ratio of only 12 basis points, the same as prior quarter, with charge-offs continuing at a negligible number. Our credit quality continues to feel very solid. And a key number we focus on here, a tangible book value moved higher even with the bond trade, now at $21.95 excluding AOCI and $19.94 including it. As I stated, we did execute a well-timed transaction late in the quarter to reposition close to $160 million in available for sale securities. The loss taken on the trade will be earned back in a year, but accelerates our ability to reallocate assets. We like the timing and what the trade did for our forward-looking balance sheet. This, along with the large cash flows coming in early 2024, puts us in a very favorable spot related to cash positioning. Our operating income and margin were slightly below our forecast, driven primarily by heavier funding costs and some movement with balances from non-interest bearing to interest bearing. I do feel we've stabilized and while we'll continue to see some grind higher on deposits, I feel that delta will be covered by growth and asset yield resets. I believe the net interest income number has floored and we look forward to seeing that line move up from here. All in all, a good quarter where we helped serve, continued adding some outstanding new clients and positioned the company to move metrics north. I'll close with additional comments in a moment, but let me hand it over to Rhett to discuss the loan portfolio and credit and then to Ron to dive deeper into the numbers.

Thank you, Billy. SmartBank's loan portfolio continues to grow at a moderate pace, while maintaining a stable and diversified profile with continued strong credit performance. In the third quarter, we saw 5% quarter-over-quarter annualized organic loan growth spread evenly across the bank's geographies and across the different segments of the portfolio. The composition of the portfolio was effectively unchanged through this growth cycle, while recognizing a 13 basis point increase in average portfolio yield, which moved up to 5.52%. Our construction portfolio saw a slight decline in outstanding balances, down about $23 million quarter-over-quarter and representing 11% of total loans and 84% of total capital, a little below those same metrics for the second quarter. This was an expected swing as we've had several projects under construction moving to the completed stage, while new commercial construction starts were slower in the early part of 2023 than in the same period prior year. Our non-owner occupied non-construction CRE portfolio grew slightly in outstanding balances for the quarter, but held steady at 26% of total loans and the total CRE ratio came in at 285% of total capital, also right in line with the last period. Again, steady performance with diversified production results. Also holding steady were our overall credit performance metrics with NPAs, delinquency and classified asset ratios seeing very little change quarter-to-quarter. While we have a slight increase in total delinquent and non-accrual loan balances since year end 2022. The dollar amount has moved in conjunction with our overall capital growth and portfolio growth, and thus, our ratio to total loans and leases has held steady. Approximately 21% of those total outstandings are carried in our equipment finance subsidiary due to some slower activity in some of its smaller trucking clientele. Credit losses for the period were 0.04% with the year-to-date total being 0.06% through the third quarter. Loss risk within our classified and delinquency portfolio is expected to be very manageable in future periods, and our allowance is more than adequately positioned to address any realized loss as these assets are navigated through. Our markets continue to report solid housing metrics, continued population growth, and overall stable economic conditions that support small business stability, and we expect solid credit quality results to continue in upcoming periods. Our allowance did reflect a slight increase from 0.98% to 1% of total loans. But this minimal increase was due to how our CECL model monetized certain impacts of various input factors that occurred during the period. The recommended provision resulted from changes to certain components in the model, such as continued portfolio balance group movement in unfunded commitments, quarterly net charge-offs, lower unemployment rates, and changes in key management positions. The culmination of the adjustments in each of these factors resulted in the recommended provision that was realized for the period. Overall, loan demand continues to be good, while the loan portfolio continues to maintain stable, solid credit metrics and performance. Now I'll turn the call over to Ron to discuss deposit composition, liquidity, and other key financial measures.

Thanks, Rhett, and good morning, everyone. On Slide 9, we continue to see our overall deposit levels remain stable as we build our presence and gain new clients in our expansion market areas. We ended the quarter with a loan to deposit ratio of 80%, driven by deposit growth of $47 million, which exceeded our quarterly funding needs and further bolstered our liquidity position. However, we did experience some upward pricing pressure and mix shift, particularly during the first two months of the quarter, as clients reacted to the Fed rate hike and competitor solicitation. Our total deposit costs increased 31 basis points to 2.20% and were 2.28% for the month of September. Despite upward pricing pressure, our strategy of lagging market rate increases and adjusting rates only as needed for competitive purposes has afforded us some buffer relative to peers. Looking ahead, we do expect some additional cost migration as clients right-size operating accounts and look to maximize returns on idle cash. However, we believe this will occur at a much more muted pace as most of our price-sensitive clients have been addressed. On Slide 10, you'll see that we have updated our principal cash flow schedule to reflect the sale of almost $160 million securities at the end of September. The security sale was comprised primarily of U.S. Treasuries, approximately $100 million of which had maturities in Q1 of 2024 and the remainder of which had a weighted average maturity of 2.6 years. The total weighted average yield of these securities sold was 1.37%. Reinvested at current cash yields, the sale proceeds provide an additional $6.4 million of annual interest income which equates to an earn back just over one year. Aside from the enhanced liquidity benefits, the securities repositioning provides additional earnings momentum as we move into Q4. Further, our current yield on cash affords us the ability to be patient in our redeployment of the sale proceeds, whether it be methodically reinvesting in securities or preferably funding higher-yielding loan production, both of which would accelerate the earn back on this trade. As you'll see on Slide 11, even with the securities repositioned during the quarter, we still have approximately $208 million of securities, primarily comprised of held to maturity treasuries, maturing by year-end 2024. Combined with fixed-rate and adjustable-rate loans, we have over $460 million in assets maturing or repricing by year-end 2024 with a weighted average yield of 4.08%. While the interest rate environment remains challenging, we are optimistic about future profitability knowing this significant earnings catalyst is on the horizon. Our overall liquidity position on Slide 13, which includes cash and securities, remained unchanged at 22% of total assets. Net interest margin was 2.81%, representing a 12 basis point contraction for the quarter. As discussed earlier, our margin was negatively impacted by increased deposit pricing pressures and mix shifts experienced during the quarter. However, we are starting to experience a slowdown in the velocity of money movement and deposit repricing as we move into Q4. In addition, Q3 saw a weighted average cost of new deposit production of 3.59% and new commercial loan originations in the 7.5% to 8% range. These factors, combined with the enhanced yield on repositioned security proceeds, lead us to project margin stabilization into Q4. Lastly, looking ahead at the next few quarters, we expect operating revenue to remain stable in a range of $38 million to $39 million before returning to our previous $42 million plus run rate in the second half of 2024. We have details of our non-interest income and expenses on Slides 15 and 16. Operating non-interest income was in line with Q3 guidance at $7.5 million, primarily driven by ongoing focus to identify and capitalize on those income opportunities as they present themselves. Looking ahead, we anticipate non-interest income to continue to be in the mid $7 million range. Total operating expenses were $28.4 million. The slight escalation was primarily due to salary benefit expenses increases for incentives and commissions resulting from better than anticipated production and additional costs relating to the new self-insured health insurance program. While our efficiency ratio was at 74%, which is above our internal target, we recognized that it's primarily a function of the pressures of an abnormal rate environment rather than lack of expense control. Despite this, we continue to be extremely diligent on all expenditures while identifying opportunities to cut or delay expenses. Looking ahead to the fourth quarter, we project non-interest expenses in the $28.5 million to $29 million range and salary and benefit expenses in the range of $16.5 million to $17 million. And finishing off on Slide 17. We had minimal change to our capital ratios from the prior quarter, even with the loss associated with the securities repositioning. We remain in a strong, well-capitalized position and, most importantly, continue to execute on our primary mission to grow and defend tangible book value. With that said, I'll turn it back over to Billy.

Thanks, Ron. As you can see with our trends, we are positioned well in playing offense. With the stabilization we've discussed and more clarity on the rate forecast, we are diligently focusing on building the revenue number back after absorbing these rate increases. I remain confident in our ability to execute on that front. My outlook on loans is still fairly bullish as we are continuing to see nice pipelines. We are lending and feel that we can continue this same mid-single digit pace. With that, deposits need to be growing at the same pace, and I feel we can fund that growth internally as well. As Ron discussed, we are continuing our internal focus on efficiency and expense control, and I do believe expense growth should be fairly well contained. We are looking to add revenue producers within existing markets. In due field, we can make some of those additions in the coming quarters, but any expense growth there should be offset by increased revenues. Miller and I spent several days on the road again this quarter, continuing our market roundtables and meeting with clients and prospects throughout our footprint. The bank's momentum in these markets is outstanding and continues to gain steam. I see tremendous opportunity for our company as there are a number of changes happening in our industry. We've chosen a path to continue to do what we've done successfully in the past, investing with an eye on long-term revenue and EPS growth. Again, overall, I felt a good quarter where we helped serve, held credit, grew loans and deposits, grew tangible book value, and set us up as we look forward. As these rates settle, our loan balances grow and reprice, plus our ability to utilize the outsized cash flows coming in early next year, our company is positioned very well. I'll close with a huge shout out to our 600 plus outstanding associates that we have in this company. These team members continue to build a phenomenal culture and it's greatly appreciated. I'm going to stop there and open it up for questions.

Thank you. Our first question today comes from Thomas Wendler at Stephens Inc. Please go ahead.

Hey, good morning, everyone. Just thinking about the $106 million security sale and then the $184 million of securities maturing by Q2 2024. With these increased cash balances that you guys are likely to see, could we see loan growth maybe over that mid-single digit range?

I believe it's possible to grow loans at whatever pace we can find them. It really depends on identifying the right opportunities in this environment. We've had success in this area and have the capacity to continue. We'll keep working hard to find good credits to add to our portfolio, but I still expect a mid-single digit forecast going forward.

Okay. No, I appreciate that color. And then just kind of staying on that with all of these earning assets kind of repricing coming up through Q2 2024. NII has kind of had floored from here. How are you thinking about NIM moving forward?

Yes, at this point, Thomas, our margin has been difficult to forecast, as many others. This quarter, we did experience higher betas and modeled. It increased to 39% from 32% from the prior linked quarter. We were projecting 36%. As we move forward, we do expect some compression, but some of our repricing will minimize that effect. We're just going to say our NIM is stabilized and we're projecting like results for Q4. We do see our NIM getting better throughout 2024 as we get to the second half. But right now, we're just going to say we're going to be stable for a while.

Thanks, Thomas.

The next question comes from Stephen Scouten at Piper Sandler. Please go ahead.

Good morning, everyone. Thank you. I have a question regarding the securities repositioning. I'm curious about the dynamics at play. It seems that a portion of that trade was set to mature in the first quarter. What drove that decision, considering the short duration, or was the actual loss primarily related to the longer-dated part of the trade?

You may start, Ron, would you like to proceed?

Well, I'll start now. I think we wanted the ability to re-price as many assets as we can earlier. So that really facilitated the thought of the trade. We were on course to let these mature naturally, but given the modeling and the earn back and we thought it was a pretty good move on our part to go ahead and just recognize this loss and to get their earnings to keep our name stabilized.

Yes, and I'll add that we timed this around the last Federal Reserve move. Given the market conditions, we believed that rates would remain elevated, making it a good time for this decision. In hindsight, that proved to be accurate. Additionally, most of that would have matured by early next year, so it didn’t pose much risk for us.

Okay. Got it. That makes sense. And then obviously, I know you kind of spoke to the fact that it's more interest rate driven, the efficiency ratio, than it is really expense driven. But I'm sure you're not really content with, I think, 60 basis point ROA this quarter. So what are the clearest levers you feel like you can pull to kind of move earnings back to a level you might start to be more comfortable with in the maybe near to medium term?

Yes, it all comes down to revenue growth, as Ron mentioned, and there are always opportunities to trim expenses. We are constantly working on that. We have managed to handle some attrition regarding salaries and are always looking to renegotiate contracts whenever possible. However, the focus is primarily on revenue growth. If you review our historical numbers, particularly with net interest income, we found ourselves more reliant on margins. The recent squeeze in net interest income has affected our metrics. As we have noted, our main goal is to restore that revenue line. We have strong sales teams, and growth has been solid; we believe it will continue. With adjustments in asset yields and ongoing growth, we expect to see that net interest income increase again, and we aim to return our return on assets to the levels we experienced just a few quarters ago.

Got it. Makes sense. And then maybe along that growth front, I guess it's been maybe right about two years since you guys brought on a number of teams back in 2021. And I'm just kind of wondering as you look back on those teams now, maybe some of those regions, Gulf Coast maybe in particular, how are you seeing them continue to contribute to the overall growth of the franchise?

They have been significant contributors to our franchise's growth. When we look at all the teams we added to the bank a couple of years ago, it's clear that our current inefficiencies are partly related to this. Adding six new markets within just six months was a substantial undertaking for us. However, we successfully ramped up all those teams, and now all those markets are turning a profit. Some of that growth was initially impacted by the higher rate increases, which limited our ability to shift balances, but we've managed to grow strong balances organically across all those markets. Everyone on those teams has been excellent contributors to our company, along with many of our established markets. As I mentioned earlier, I feel confident in our position. We have a dedicated sales team that is working hard every day and driving continued growth. While the rate increase has somewhat delayed our anticipated profitability, it is still on the horizon.

Got it. Yes, that's really helpful color, Billy. Thank you so much, guys. Appreciate the time.

Thanks, Stephen.

Our next question is from Will Jones at KBW. Please go ahead.

Hey, great. Good morning, guys.

Good morning, Will.

I was somewhat surprised to hear that the revenue outlook remains largely unchanged, projected between $38 million and $39 million over the upcoming quarters. It seems we've discussed the asset repricing opportunity extensively, and the net interest margin appears to be stabilizing, with a potential gradual increase through 2024. This would lead me to believe that revenues might show some positive growth heading into next year. I'm curious if you could clarify what might be behind this more conservative revenue forecast.

I'll start with this, and Rhett can add his thoughts. This is Ron. Most of the muted response is coming from our deposit betas. We anticipated not increasing as quickly, but based on what we're seeing, our beta is about 3% higher than expected. So, it really reflects the rise in our deposit costs.

Yes. I understand your comment about a few quarters. I believe we are facing a couple of quarters where we will experience some stability, even though we might see more pressure on deposits this quarter. We can counter that with the asset yield reset and some growth, leading to stabilization. The first quarter is usually softer due to fewer days, so I anticipate these next couple of quarters to be somewhat sluggish. However, we expect to see a nice pickup after that.

Okay, that's super helpful. I know last quarter we kind of talked about maybe deposit beta's peaking in the 38% to 40% range, but if we just forecast the 3% higher that we're talking about here maybe deposit beta's end in the 45% realm. Is that the right way to think about it?

I would estimate that we are looking at a range of low to mid-40s, possibly peaking at mid-40s at this point. While we have likely underestimated our deposit betas in the past, I anticipate that they will rise slightly. However, our asset repricing will help offset some of these impacts going forward. For the fourth quarter, this is the first time we expect the growth in interest income to surpass the growth in deposit expense, marking a significant change from previous quarters. This outlook depends heavily on future actions taken by the Fed.

I appreciate that information. Regarding credit, it continues to look impressively clean. The provision has been quite low over the last few quarters, and you're content with the reserve at the 1% level. Will the approach to the provision remain consistent until there’s a shift in credit conditions or an increase in loan growth, or what should we expect regarding the provision going forward?

Yes, I believe that's probably the most accurate outlook at the moment. It's somewhat like the phrase steady as she goes. I think that describes the situation well. As we mentioned, the seasonal model and various influencing factors can cause slight fluctuations from one period to the next. However, as Billy pointed out, we expect a single-digit loan growth profile and don't observe any significant credit weaknesses in the near future. So, I feel this is a positive outlook.

Yes. Okay, great. And then lastly for me, there was a bit of excitement earlier in this year on bank M&A, and we're still hearing chatter that conversations are fairly active and we might just be right on the cusp of seeing any kind of real deal activity materialize, but could you just give us a refresher on where you stand on M&A, maybe from the perspective of both upstream and downstream partners?

The only update I can provide is similar to what we've shared in the past few quarters. There are many discussions happening, and we've noticed a few deals being announced, including some smaller transactions and potentially one or two larger mergers and acquisitions. However, until we have more clarity regarding credit conditions and insights from the Federal Reserve, it's difficult to anticipate any significant developments. We are actively engaged in conversations with both upstream and downstream partners and value those relationships. Our team, including Billy and me, really enjoys these meetings. That's all I can share for now.

Yes. And I'll add, Miller, just that M&A, as Miller alluded to, with valuations kind of with the industry kind of suppressed, it makes it a little more challenging on the acquisition front. But I think to your point, I think a lot of banks are sitting down and looking at it strategically, what are their options and where do they want to go? I feel very good about us and our environment in a standalone, but also obviously we're going to look advantageously at opportunities. And so, if we see something that fits, we'll continue to explore it. But really like kind of where we're positioned and kind of what our optionality is sitting on today.

We love letting Nate run these models. He's a model geek. Yeah, it's really, it's really, Will, just getting back to shareholder focus. And I think we are totally focused on the shareholder and what makes the most sense for them and love focusing on that.

Yes. That makes sense. That's helpful. Thanks for the questions, guys.

Thank you.

Our next question comes from Kevin Fitzsimmons at D.A. Davidson. Please go ahead.

Good morning, everyone. I wanted to follow up on the margin. It seems like you're indicating that it will continue to be somewhat challenging in the upcoming quarters, but it's stabilizing. The primary challenges have been the rising cost of deposits and the DDA remix. Ron, you mentioned earlier that these issues might be slowing down and provided some figures for September. Can you elaborate on what gives you confidence that these headwinds are easing and share any insights coming out of the quarter on this matter? Thank you.

We observed a noticeable shift in Q3. In September, we began to see significantly less repricing activity both in conversation and from a balance perspective. We've modeled our deposit beta slowing down as we progress. The non-interest bearing mix has improved, and we believe it has stabilized. Q2 had an unusually high amount of funds, which contributed to this change. Looking ahead, we believe we can maintain our non-interest bearing balances. While we may see a slight increase, we expect that our investments will mitigate some of the fluctuations and there is considerably less discussion regarding deposits at this time. This captures what we're seeing and hearing in our early October numbers.

Got it. Billy, you mentioned that you remain optimistic about loan growth. Could you share some insights on how your customers and local economies are managing and what the overall sentiment is like? Some banks are saying they will significantly restrict loan growth, focusing instead on maintaining strong balance sheets and only working with existing customers until the economic outlook improves. I recognize that the Southeast has certain advantages, while other regions may not. I'm just interested in your perspective on this and whether your outlook has improved or stayed the same over the past three months. Thanks.

I still feel positive about our outlook for both the economy and loan growth. While there are challenges, including the impact of rate increases, we are focused on onboarding new clients, many of whom have been long-time customers. Our team members have deep relationships with these clients, in some cases spanning decades, which gives us confidence as we continue to add to our portfolio. Although the environment remains tough, we are cautiously optimistic about our position and the new clients we are bringing on board. We aim to maintain our momentum, operating at a steady pace rather than going all out, and we believe we can keep this up.

Okay, great. And one last question. I know maybe this quarter with the securities loss it might not have been priority number one to do, but like with your current capital levels and with your outlook you've outlined and the stock trading where it is, would you guys entertain stepping into buybacks or do you want to get those capital ratios higher before you would do that? Thanks.

Yeah, it's definitely an option depending on share price, but as you alluded to in the prior comment, Kevin, we're going to continue to watch the markets, make sure that the balance sheet stays where we expect it to stay. We've got some powder, not a ton, in those capital numbers. So I think we'll watch that. Obviously, we can if we feel like we need to. If stock price gets to a point that we feel like that's the right move, we'll do it. But I think it's more of a balance today, kind of watching growth aspects and what's going on with the economy in conjunction with that.

Okay. Great. Thank you.

Thanks Kevin.

Our next question comes from Steve Moss at Raymond James. Please go ahead.

Good morning. I’m sorry if I missed it, but could you share what the deposit costs were for September?

Yes. New deposit production was in the 360 range. New deposit production. Is that what you are looking for? Are you looking for what the deposit cost were…

Yes. Deposit cost for the month of September.

Our total deposit cost for the month of September was 2.28% for the portfolio.

Great. Billy, following up on the loan pipeline, I'm curious if the mix is starting to shift towards more commercial and industrial and less commercial real estate going forward, considering the current interest rates. Also, does the construction portfolio continue to decline given the rate situation?

Yes. And I'm going to let Rhett take that first, Steve, then I'll add some anecdotal color.

Yeah, Steve, I would say that is indeed the case. We're certainly seeing a bigger pool in our pipeline in the C&I segment to your point. Construction has begun to, I guess, sneak back in here and there with specific projects, mostly owner-occupied related. But we are beginning to see some borrowers begin to go ahead and pull the trigger on projects that they may have delayed a little while. But C&I has certainly become a much larger component of our pipeline. And I would also say that correlates back to what we talked about a few times with regard to our newer market expansion teams having come from a much broader C&I portfolio. That's their client base. That's who they're calling on. So that's what's driving a lot of that…

That was a focus even before rates moved, maybe more C&I.

Rhett addressed it well, Steve. We will see that continuing. We will keep exploring opportunities, and we have identified a few that we feel confident about regarding the sponsors and guarantor positions. Our focus is definitely shifting more towards commercial and industrial.

Yes, and maybe just the other thing in terms of just the moving rates here, especially the last 70 bps in the last month or so. Just curious, as loans are coming up for renewal, are you seeing increasing borrower stress or kind of how are those debt service coverage ratios looking now that rates are moving even higher?

Yes. I'm going to let Rhett jump in. I don't think we've seen a lot of stress. Rhett, would you like to address that?

We've been looking at that really the entire year and just kind of forward looking at upcoming maturities and current information we have on projects and borrowers. And certainly in some instances, with rates moving at the pace they did, the coverages are down from where they were perhaps at the time that it was originated, but nothing to the point that it's causing significant challenges for the borrower in being able to generate adequate cash flow to the projects to service the expected repricing. We still feel very good about our portfolio's ability to absorb these rate increases when the repricings occur. We have seen some market moves in the revenue side for some of those projects that's allowing that as well. So we still feel pretty optimistic about the ability for the CRE portfolio to absorb that.

Okay, great. Thanks. I appreciate all the color here.

Thanks, Steve.

The next question comes from Feddie Strickland from Janney Montgomery Scott. Please go ahead.

Hey, good morning, guys.

Good morning, Feddie.

Just wanted to go back to the expense guide. Ron, I think you said it was $28.5 million to $29 million for the fourth quarter. Correct me if I'm wrong there. But as we think into 2024, is there anything that would cause a significant change from that level or is it just sort of a steady, modest growth rate given some of Billy’s comments on the cost of new hires being more or less offset over time?

Exactly that, Feddie. It's for the most part, it's going to be the normal wage increase cycle. We do have small issues along the way, but we're probably looking at normal 5% to 7% increase in that for 2024. Again, we're not done with our 2024 modeling, but that's probably what would be expected. Majority of that's going to be in salaries.

Got it. That makes sense. My other question is about what to expect regarding the overall growth trajectory of earning assets and general asset growth, considering the upcoming maturities in loans and securities. I'm trying to understand whether these maturities will be reinvested into new loans and securities or if you might continue to pay down some of the existing borrowings on the liability side.

Yes, Feddie. Depending on our loan growth, we anticipate that it will affect our loan production. Thankfully, we do not have any borrowings to pay down. Therefore, if we find ourselves with excess cash, we could either invest it in securities, which are becoming more favorable in terms of rates, or we could be more cautious with our deposit pricing moving forward. We will have several options available to us.

Understood. Thanks for taking my questions, guys.

Thank you.

We have no further questions on the call, so I will turn back to Miller Welborn for closing remarks.

Thanks Seb. And thanks again to each of you for joining us today. As always, please feel free to reach out to any of us directly if you have any additional questions. And I hope each of you have a great week. Thanks. Goodbye.

This concludes today's conference call. Thank you all very much for joining. You may now disconnect your lines.