SmartFinancial Inc
NYSE:SMBK
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SmartFinancial Inc
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Hello all, and welcome to SmartFinancial Third Quarter 2024 Earnings Release and Conference Call. My name is Ezra and I will be your coordinator today. [Operator Instructions]
I will now hand you over to your host, Nate Strall, Director of Strategy, to begin. Nate, please go ahead.
Thanks, Ezra. And good morning, everyone, and welcome to the SmartFinancial'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 Ronald Gorczynski, 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 except 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 GAAP and operating of $9.1 million for the quarter or $0.54 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 an outstanding earnings trajectory. Jumping into the highlights, I'll be referring to the first few pages in our deck, Pages 3, 4 and 5.
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 5, 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 in 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 fund relationship we felt and 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 costs tick down to 2.54%.
Our history of strong credit continues with the metrics holding very low at 26 basis points in NPAs, both NPAs and charge-offs were just slightly higher than the prior quarter but still extremely low. That movement continues 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 noninterest income quarter that Ron will talk about in a bit. Noninterest 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 5, highlighting the operating PPNR slide, the movement up has started after a couple of flattish quarters, 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 up 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 noninterest-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 advisers 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 and hand it over to Ron to dive into the details. Ron?
Thanks, Billy, and 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 desired 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 brokered funding. Our total deposits remained flat linked 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 nonbrokered production was 3.66%.
Total interest-bearing costs for the deposit portfolio decreased 3 basis points to 3.20% and were 3.08% for the month of September. Noninterest-bearing deposits to total deposits remained 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 matters 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 a favorable 7.40% weighted average yield on new loan originations, resulting in a total portfolio yield increase to 6.02%, which includes accretion and 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 liabilities sets at an 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 a 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 nonperforming loans to total loans at 0.26%. Operating noninterest income for the quarter reached $9.1 million, reflecting solid performance across all categories.
Notably, 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 noninterest income in the mid- to high $7 million range and noninterest expense in the range of $31 million to $31.5 million with salary and benefit expenses comprising $19 million 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 8.0% and total risk-based capital ratio decreased slightly by 5 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 7 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 going to 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 in the by-product of the work we've done this year on our sales and prospecting process. We're now leveraging the functionality of our nCino platform and utilizing the sales force front end to consistently create a stronger prospecting process for our sales team. And we're also leading on the price and profitability systems to cochair teams and the value of 4 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 to add 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 seems 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 are expecting margin is expanding back. Credit continues to be very sound, and we're seeing great new client growth and the sales energy as 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 their SmartFinancial, SmartBank 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.
[Operator Instructions] Our first question from Russell Gunther with Stephens.
My first question would be -- my first question would be on loan growth. So I appreciate all of the color as well as the expectations over the next couple of quarters from mid- to high single digits. You certainly outpunched that over the past 2.
So wondering if you could just share whether it's 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 of quarters?
Yes. I'll start, and then I'll ask Rhett to give a little color to, Russell.
Yes, for us, the growth has been really solid. We've had 2 back-to-back and really first quarter went bad. Really, we had 2 really back-to-back nice quarters. I think as we look -- I think you always anticipate we didn't -- we had some payoffs and paydowns this quarter. We were able to kind of get through that and still post a great growth quarter.
But I think we always try to anticipate some additional pay downs. If we don't get some paydowns, we could be a little bit higher. But I think just trying to be conservative in our projections and in our estimates and our guidance is where we like to stay. But as I've mentioned, the sales teams are doing a nice job and you might give some color on kind of what you're seeing in the pipeline as well as you look ahead in the next few months.
Yes. Billy, I think you're right on. I mean, our pipelines continue to stay relatively strong quarter-to-quarter even as we closed 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 in 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. Might 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 client. But we still feel optimistic about these projections.
That's a great 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, of, call it, 3.10% to 3.15%, and I 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 Fed cut projections are as well as how you'd expect the deposit beta to trend as rates reduce.
Yes. Ron, do you want to take that?
Sure. Yes. Yes, our 3.10%, 3.14% margin is -- excuse me, 3.15% margin is for fourth quarter. As we said last call, our trajectory is such that we're expecting margin expansion throughout 2025 with or without a rate cut. With that said, we're looking at our rates up beta. We probably were in the 45%, 50% range our goal will 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.
Our next question is from Brett Rabatin with Hovde Group.
I wanted to start on fee income. I want 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 2 items in 3Q? And then obviously, with the guidance in the fourth quarter, is -- were those kind of onetime nature transactions? Or just any thoughts on those businesses specifically going forward?
Yes. Brett, I'll start and then I'll hand it over to Ron maybe talk a little bit about kind of the onetime versus continual.
I think for us, and 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 continue to thoroughly add some talented financial advisers to our platform over the last couple of years and getting those folks kind of up on plan. We're seeing that consistency in our SmartBank Investments group continue to grow. We're doing a nice job in cross-selling that into our private banking pipeline now.
So it's nice to see that AUM grow, and we've moved to a more of a fee-based versus transactional base in that business over the last couple of years. So I think we feel good about that continuing as long as market obviously has been good. So that doesn't hurt as well. But overall, on 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 is a little more of a function of what rates and kind of what some of the 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.
Yes, sure. Right now, we did came down our noninterest 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 1 million plus Q4. We do have a pipeline, but not as strong as what we've seen in Q3.
So other than that, we don't see any other opportunities at this point that will really lead to a higher noninterest income as what we've seen in Q3.
Okay. That's helpful. And then just 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 if you've already lowered deposit rates, what you're seeing maybe competitively in some of your key markets?
Yes, I'll take that, and guys anybody can chime in. Yes, I think what we've seen -- and we do -- we feel very good about our ability to grow deposits. 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 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.
Obviously, we were in a position of strength at the beginning of the year with some -- 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 for us. We're going to continue to really try to balance it. We need to -- we want to grow the deposit side, but we also want to do it conscious of where the rate environments are.
So we're fortunately, yes, from a competitive standpoint, you're still seeing some one-offs and some outliers 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 our rates down. I think we can continue to do that if Fed cuts continue.
But from our 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 of the group's day-to-day.
Yes, we think we're finishing up on a deposit promo now. We took the opportunity to lower some of our high-tier deposits. And we didn't get much client pushback. Again, we are really still in market rates. Our reductions are roughly in line with Fed cuts. And we haven't really got much pushback on that. And again, the momentum of the sales team on where deposits are coming from, it's pretty positive.
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 and our producer incentive plans and those things. So that's the reason 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.
Our next question is from Steve Moss with Raymond James.
Starting on loan pricing here. Just kind of curious, we've had a fair amount of volatility in the 5-year and obviously, expectations around more Fed rate cuts. Curious as to where you're seeing new loans priced today and any color 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 on ongoing yields. Overall, we're doing a pretty good job of holding the right levels. Yes, 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 we price it on spread, the variable numbers are coming down a little bit. But overall, we think we continue to 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.
Yes, as I referenced for the quarter, originations were in the $7.40 range. But for September, we're probably 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 decrease in rates, but not looking at much at this point in time.
Okay. Great. Appreciate that. And then I guess my other question here, just curious, I know you guys talked a lot about building positive operating leverage and definitely see this quarter's results, you're showing momentum there.
Just curious as we head towards 2025, if you're thinking of any investments, hiring additional talent, just kind of your thought process around expenses here?
Ron, I mean, we -- again, I don't think we're trying to -- we're currently working through our final forecasting and budgeting for '25. But really not a lot, Steve. I think for us, we've messaged that we're just kind of -- we're hunkered down to make sure that we can drive the growth. We'll have some just the overall cost of just inflation and contract increases and things along those lines.
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 on the talent side of the house, if anything. But I think overall, I think we can hold these expense lines in a pretty reasonable range as we look into '25, again, 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 out -- when we look out in the latter part of '25 especially as you look, 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 will produce -- I look at as a percent of expense to net revenue we will be creating an 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 welcome.
Well, and I think that's a great point, Miller. I think Steve, we are. I mean we're seeing, again -- we're selective. We're very selective in our recruit. I mean -- and we've always been that way, 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 act to Miller's point. We think we can continue to do that as we go forward. So we're going to continue to invest in key talent...
Quality versus Quantity.
Yes. And 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 -- look at them. And we've been able to do that here over the last couple of quarters.
Our next question is from Stephen Scouten with Piper Sandler.
On the event 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, do you want to kind of thoughts around that?
Exactly that. Probably 5% to 7%. That's a good goal, a good range for that.
Okay. 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? Just curious if that's a headwind at all to future growth.
Yes. 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 yes, 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 portion. But do 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?
Yes. I would say that we probably will see the metric tick up a little from where it is today. We do certainly focus to manage that within the Fed guidance, that's always been a target of ours. And some of the growth is just the timing of different projects. We do have -- we have some projects that we'll be completing funding and then either paying off as they sell it down or eventually transition out.
So 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 the opportunities we're seeing in space. It also adds to our ability to continue to be very staunch in our credit standards. I mean we're picking the best apples on the trees , so to speak, on the opportunities we're funding. So we feel very good about what we are putting.
Yes, that's really good color. And then just last thing for me. I know we've talked about in the past from past calls trying to reach towards a $50 million operating number for 3Q '25 in that range. Given the current environment, maybe where the Fed has moved, do you think there's any sort of timing impediment to getting to that number? Or do you still think that's an achievable path forward in the medium term?
Yes. I definitely think so. I think as we forecast, obviously, rates, if rates stay -- rates don't move down at all, and it might be -- 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 and then on a quarterly run rate basis. And still felt 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 yes, 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.
Our next question is from Christopher Marinac with Janney Montgomery Scott.
I wanted to get into, kind of, the net customer gains you've had this year because it clearly seems that you're picking up market share if you look cumulatively over the last 3, 4 quarters. And just kind of curious on how you see that and kind of how that can evolve the next year?
Yes. It's a great comment, Chris. And yes, we are. I think we're continuing to gain share in really all these zones. And a lot of it -- and I commented on it, it's just the sales side that we've really worked hard, the process that we put in place over the course of this year is really starting to take shape.
So we're going out and we're looking at every one of our markets, every one of our regions. We're identifying clients that we want to go target. Some of those sales cycles are longer. So yes, I mean we're working really hard on clients that we don't have in the pipeline today, but we feel very good about the ability to get them in the pipeline in '25.
And so I think you will continue to see our markets gain share and grow again. And Rhett alluded to this, I think it's really an important point too. And it's not just their 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, 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.
Yes. Christopher, I appreciate you mentioned that and calling that out because we have done a good job of client acquisition and working on clients on the sales side gets a lot of credit, but I want to give a thank you to the Op side, because the sales side couldn't do what they do with the scale they do it with that Ops supporting them tremendously. But it's a great team effort for sure.
Good. I appreciate it. And just a 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?
Yes, just a devastating situation in a number of our Upper East Tennessee counties. 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 in it. One of the reasons we had a small tick up in some past dues, because our payments were delayed with over the -- because of the 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.
I was talking with -- yesterday, I was talking with a foundation, that's a client of ours. It's doing a lot of work up in that area. They've been very public about their fundraising efforts, and they 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.
[Operator Instructions] Our next question is from Catherine Mealor with KBW.
I want to ask just a follow-up on the margin. You gave great -- your repricing schedule slide is really helpful. And so I feel like we can model the loan yields. On the deposit cost, I really appreciate your just kind of forward look into the cumulative beta 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 ] that move?
Ron, do you want to jump in on what we saw during that first cut and maybe some spot rate color.
We've managed to 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 their pricing. But right now, we expect to apply the same methodology going forward and just manage 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 guide there, spot rate thoughts at the end of September?
Yes. Our new production for September was 3.81%, but that did include broker deposits. So it's -- excuse me, it was 3.81% without brokered deposits. So I think as we ramp 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% beta to show up pretty quickly? Or how much of a lag do you feel like is in that?
No, we wil lshow pretty quick on that. They will not be alive with that 40%.
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.