In This Article:
Participants
Charles Shaffer; Chairman of the Board, President, Chief Executive Officer; Seacoast Banking Corporation of Florida
Tracey Dexter; Chief Financial Officer, Executive Vice President; Seacoast Banking Corporation of Florida
Michael Young; Executive Vice President, Treasurer and Director of Investor Relations; Seacoast Banking Corporation of Florida
Russell Gunther; Analyst; Stephens
Woody Lay; Analyst; Keefe, Bruyette & Woods Inc
David Feaster; Analyst; Raymond James Financial Inc
David Bishop; Analyst; Hovde Group
Stephen Scouten; Analyst; Piper Sandler & Co
Presentation
Operator
Welcome to the Seacoast Banking Corporation's third quarter, 2024 earnings conference call. My name is Gail and I will be your operator. (Operator Instructions)
Before we begin, I've been asked to direct your attention to the statement at the end of the company's press release regarding forward-looking statements. Seacoast will be discussing issues that constitute forward-looking statements within the meaning of the Securities and Exchange Act and its comments today are intended to be covered within the meaning of that act. Please note that this conference is being recorded.
I'll now turn the call over to Chuck Schafer, Chairman and CEO of Sea Coast Bank. Mr. Schafer. You may begin.
Charles Shaffer
All right. Thank you. And good morning, everyone before we start, I want to express our sympathy for all those affected by the hurricanes.
Our hearts go out to all those who lost loved ones or experienced catastrophic losses. I also want to express my sincere appreciation for our associates who with unwavering resilience valiantly reacted to both hurricanes, securing our facilities while preparing their homes and families and quickly focusing on supporting our customers and communities before and after the storm.
I'm incredibly impressed and proud of our entire team. And Tracy will provide a few further thoughts on the hurricanes here shortly as we turn to the quarter, we will refer to the third quarter earnings slide deck which is at seacoastbanking.com. and I'm here today with Tracey Dexter, Chief Financial Officer; Michael Young, Treasurer and Director of Investor Relations; and James Stallings, Chief Credit Officer. The Seacoast team produced an excellent quarter. The results this quarter evidence the inflection and growth and the start of margin expansion that we expected to materialize in the second half of 2024.
We continue to see our investments in banker talent, marketing, and customer focused culture, paying off producing annualized loan growth of 7% and annualized customer deposit growth of 7%. And of note loan originations were up 22% quarter over quarter and commercial noninterest bearing demand deposits grew by $67 million .
Importantly, this quarter also generated annualized growth and tangible book value per share of 20% to $16.20. And additionally, net interest income, noninterest income, pretext pre provision earnings and the name excluding accretion on acquired loans, all improved sequentially, this quarter showcases the strength of the banking team.
We've been intently building over the last few years and while completing our acquisitions in late '22 and '23 we also recruited an exceptional commercial banking team, credit team, and retail banking talent with additions in all markets. This quarter, we continued this expansion with further investments in bankers in Fort Lauderdale Gainesville and Tampa.
And importantly, as we transformed our front line, we've also made all the necessary governance and enterprise risk investments to be a well-functioning compliant midsize bank. So, in summary, this quarter demonstrated several proof points of our operating strategy. First, organic growth was substantial compared to the industry driven by the investment in talented banking teams across the state over the last '24 months.
And secondly, we saw growth in net interest income and the core net interest margin which aligned with our previous guidance, expenses were well controlled and non-interest income was up over 30% from one year ago.
The combination of an expanding margin into 2025 with strong organic growth will support earnings improvements as we move into the coming year. In order to remind you, we are unwavering in our commitment to maintaining our conservative balance sheet principles. This commitment is the cornerstone of our strategy and a key factor in ensuring our long term success.
We remain steadfast in our mission to establish seacoast as the leading player in Florida. Now have to call Tracy to talk about our financial results.
Tracey Dexter
Thank you, Chuck. Good morning, everyone. Directing your attention to third quarter results beginning with slide four Seacoast reported net income of $30.7 million or $0.36 per share in the third quarter.
Pre-tax pre provision earnings on an adjusted basis increased nearly 2 million quarter over quarter. Benefiting from growing revenue sources and well controlled expenses. Tangible book value per share increased 20% annualized to $16.20 loan production was strong with growth and balances of 6.6% on an annualized basis.
And the pipeline for future production remains robust growth in customer deposits was also strong. Total deposits grew 4.2% annualized which includes a decline in brokered deposits excluding brokered customer deposits grew 6.6% annualized and noninterest bearing accounts grew over 5% annualized on the net interest margin. Consistent with the guidance we provided last quarter, the margin excluding accretion of purchase discounts on acquired loans has begun to expand increasing three basis points during the quarter to 2.90%.
In addition, we saw 2% growth in net interest income consistent with our expectations. Non-interest income increased 7% from the prior quarter and 33% from the prior year quarter. With continued success in deepening customer relationships through services including wealth management, treasury management, and insurance.
And we continue to grow the team with additional investments in talent in key markets. Our capital position continues to be very strong. Coco's tier one capital ratio is 14.8% and the ratio of tangible common equity to tangible assets is 9.6%. Also notable if all health and maturity securities were presented at fair value, the TCE to TA ratio would still be over 9%.
Turning to slide 5 net interest income expanded by $2.3 million during the quarter With growth in loans and securities along with growing noninterest bearing deposits outpacing a three basis point increase in deposit costs.
Core net interest margin expanded three basis points to 2.90% in the securities portfolio yields increased six basis points to 3.75%. Benefiting from recent purchases loan yields excluding accretion also increase six basis points to 5.58%.
Accretion of purchase discounts on acquired loans was lower by $1 million compared to the prior quarter. The cost of deposits increased to 2.34%. But with exit rates in September beginning to more fully reflect rate declines.
Looking ahead to the fourth quarter, we expect continued expansion of net interest income and expect the core net interest margin to expand in a range of 5 basis points to '10 basis points driven by continued loan and deposit growth and declining deposit costs. Our expectations include 225 basis point rate cuts in the fourth quarter.
Moving to slide 6 noninterest income excluding securities activity increased $1.3 million in the third quarter to $23.5 million service charges increased with continued expansion of our commercial treasury management offerings and new customer acquisition wealth and insurance agency income continue to grow.
Other income was higher by $1.5 million including higher SB IC income and higher loan swap fees. Looking ahead we continue to focus on growing non-interest income and we expect fourth quarter non-interest income in a range from $22 million to $23 million.
Moving to slide, seven assets under management have increased 16% year-to-date to just under $2 billion and have increased at a compound annual growth rate of 26% in the last five years. Wealth management revenues year-to-date reached $11.1 million up 17% from the corresponding period in the prior year.
Moving to slide 8 non-interest expense for the quarter was $84.8 million. Consistent with the guidance we provided last quarter, recent expense reduction initiatives are benefiting nearly every category with the increase from the prior quarter, reflecting continued investments in revenue producing talent expenses are well controlled and the efficiency ratio improved to 59.8%.
Discipline around expenses will continue to be a focus. And in the fourth quarter, we expect core noninterest expense to again be between $84 million and $86 million. Turning to slide 9 loan out standings increased at an annualized rate of 6.6% and average loan yields excluding accretion on acquired loans increased six basis points to 5.58%.
The pipeline remains strong and looking forward, we expect mid-single digit loan growth in the coming quarter.
Turning to slide '10 portfolio diversification in terms of asset mix industry and loan type has been a critical element of the company's lending strategy. Exposure is broadly distributed and we continue to be vigilant in maintaining our disciplined conservative credit culture, nonowner occupied commercial real estate loans represent 35% of all loans and are distributed across industries and collateral types.
As we have for many years, we consistently manage our portfolio to keep construction and land development loans and commercial real estate loans. Well below regulatory guidance, these measures are significantly below the peer group at 34% and 227% of consolidated risk based capital respectively.
We've managed our loan portfolio with diverse distribution across categories and retaining granularity to manage risk.
Moving on to credit topics on slide 11, the allowance for credit losses totalled $140.5 million or 1.38% of total loans compared to 1.41% in the prior quarter. The allowance for credit losses combined with the $142 million remaining unrecognized discount on acquired loans totalled $282 million or 2.8% of total loans that's available to cover potential losses providing substantial loss absorption capacity.
As we move into the fourth quarter, we're continuing to assess the potential impact of hurricane Milton on our customers and whether and to what extent that may result in future credit losses that may result in the need for a build in allowance in the fourth quarter. And based on our work to date, that may be in a range between $5 million and $10 million.
Moving to slide '12. Looking at quarterly trends in credit metrics, our credit metrics remain strong charge offs included the resolution of a small number of individually evaluated credits with previously established specific reserves and the continued runoff of isolated acquired portfolios. Non-performing loans represented 0.79% of total loans.
Additions to nonaccrual loans in the third quarter included a small number of credits delinquent on payments, but for which no loss is expected as collateral values are well in excess of the loan balances. The level of criticized classified loans to total loans remained flat at 2.59%.
Moving to slide '13 in the investment securities portfolio. The average yield on securities has benefited from purchases in recent quarters at higher yields. With the portfolio yield increasing during the third quarter to 3.75% changes in the rate environment positively impacted portfolio values. And as a result, the overall unrealized loss position improved by $83 million in October. We took advantage of favourable market conditions and have repositioned a portion of the available for sale portfolio.
We sold securities with proceeds of approximately $113 million yielding an average 2.8% resulting in a pre-tax loss of approximately $8 million. Impacting fourth quarter results, the proceeds were reinvested in agency mortgage backed securities with a book yield of approximately 5.4% for an estimated earn back of less than three years.
Turning to slide '14 in the deposit portfolio, total deposits increased by $127.5 million with an increase in customer deposits of nearly $196 million partially offset by a decline in brokered balances. The cost of deposits increased this quarter only three basis points to 2.34%. A slower pace of increase than in previous periods. Consistent with our expectations in September based on actions we've taken in the portfolio rates began to decline.
Looking forward to the fourth quarter. We expect continued growth in core deposits and a continued decline in deposit costs and we remain very encouraged about the continued activity and focus across the franchise on deposit gathering on slide. '15 CCO continues to benefit from a diverse deposit base. Customer transaction accounts represent 49% of total deposits which continues to highlight our long standing relationship focused approach.
Our customers are highly engaged and have a long history with us and low average balances reflect the granular relationship nature of our franchise. And finally, on slide16 our capital position continues to be very strong, and we're committed to maintaining our fortress balance sheet, tangible book value per share increased to $16.20.
And the ratio of tangible common equity to tangible assets remains exceptionally strong at 9.6%. Our risk based and tier one capital ratios are among the highest in the industry.
In summary, we remain steadfastly committed to driving shareholder value and our consistent disciplined expense management positions us well, as we continue to build Florida's leading regional bank. Chuck, I'll turn the call back to you.
Charles Shaffer
Thank you, Tracy and operator. We're ready for. Q&A
Question and Answer Session
Operator
(Operator Instructions) Russell Gunther, Stephens.
Russell Gunther
Hi, good morning, Guys.
Charles Shaffer
Good morning, Russell.
Russell Gunther
Well, good morning. I wanted to start with the margin. Appreciate all the colour that you guys shared, particularly the piece on where deposit costs were for September. Wondering first if you could talk to how the margin shook out in September as well, and then as we think about the guide for core expansion of 5 to '10 bits in 4Q, could you just help triangulate that to where you'd expect the reported margin to head as well?
Michael Young
Sure Russell, this is Michael. So maybe we'll, we'll start with the deposit cost side. A couple of questions kind of were embedded in there on the deposit cost. I think just from a high level perspective, if you zoom out over the whole cycle, we had about a 45% deposit beta on the way up. We would expect a similar level of performance on the way down and we have an acceleration of that beta, you know, later in the cycle. We also we still think we have a very strong deposit base.
And we were very customer friendly during a liquidity tight environment and we think we'll be able to move, you know, pretty quickly on the way down. As a reminder, our deposits are mainly an exception tiers. So, we have the ability to flex those as we need. You saw the deposit costs in September that stepped down pretty materially. And we expect continued benefits into October from a full run rate of those reductions. So we would expect, you know, the margin expansion that Tracy guided to in the fourth quarter when you take into account the amount of deposit reductions there plus, you know, we do assume two additional rate cuts, although one in November one in December, the one in December obviously though not being that impactful for the quarter.
Russell Gunther
Thanks Michael and then maybe switching gears to loan growth, you know, really strong quarter. Pipelines look good, you know, appreciate thoughts on the coming quarter. How should we think about into 2025 given some of the highest mentioned you know, strength of your markets but also considering potential impact of pay downs.
Charles Shaffer
Yeah, and maybe Michael kind of follow up on the growth, but I'll just sort of reiterate what I had in the in my opening comments, you know, really proud of the team we're building. I think they're exceptionally strong. I think the growth you saw this quarter is the outcome of the investments and talent we've made over the last '24 months. And as you see kind of coming in here in the fourth quarter, the pipeline remains strong. So, you know, I think our guide here for Q4 is mid-single digits in the long run.
You know, we'd like to be a little north of that as we move into late in the next year, assuming the economy and everything plays out. But I think just generally a mid-single digit type guide is, is a way to think about at least over the next few quarters depending on the economy and rates and you know, how things play out here, but feel very good about the team. We have, feel very good about the, the volume we saw this quarter and expect a similar production quarter here coming into Q4, Michael. And then you add to that.
Michael Young
Yeah, just Russell, obviously, we have the two hurricanes, late September and in October. And you know, that, that probably impacts growth a little bit in Q4, which is why, you know, maybe a slight step down in the growth quarter to quarter plus a little higher maturities in Q4. But you know, we still see the momentum in the pipeline and, and the customer conversations just a slight probably lag at the beginning of the quarter here.
Russell Gunther
Got it. Okay, great. Thank you both and then just maybe tying it all together last one for me. So, you know, it sounds like we've got the expanding them, we've got growth inflecting higher. How are you guys thinking about an ROA target for '25?
Charles Shaffer
Yeah, we don't have anything out there, but obviously, you know, we want to be north of one as we move through time, and we're very keenly focused on profitability. I'd say, you know, as we look over the next coming quarters and then the next year, that is our primary objective right now, we've made a lot of really solid investments and talent around the company over the last 12, like I said earlier, 12, 24 months, but over the coming quarters you know, our goal right now is to drive profitability north and, and you know, more solidly deliver a better profitability profile. And so that is our objective coming into the year.
Russell Gunther
Got it. Thanks. Go ahead Michael.
Michael Young
Michael. I was just, I was just going to add on that. You know, if you look back historically, our net interest margin, you know, significantly higher than where we are today. I think with our, you know, kind of fixed rate balance sheet and low cost deposit franchise that we look to kind of re evidence, you'll see the margin expansion coming forward that will, you know, kind of get us back to profitability level that, that we're happy with.
Charles Shaffer
Yeah, I just one more just the moment. Yeah. Thank you, Russell. The momentum is strong and with the strong momentum and flexion and margin, you know that, that all sets up a good coming year.
Operator
\Woody Lay, KBW.
Woody Lay
Hey, good morning, guys. Well, I wanted to just touch on the small bond repositioning you announced for October I. Is this motivated by the pickup in loan growth and if we see the growth sustained from here, is there potential for some further restructuring?
Michael Young
Hey, Woody, this is Michael. You know, we did reinvest the proceeds of that restructure into new security. So, it's not necessarily something we did to fund loan growth. And we're seeing quite frankly strong deposit growth as well as you saw this quarter on a on a core customer basis. So it's not really a liquidity place so much as just our, our focus on kind of the math and the earn back.
And when we find opportunities where it's reasonable, you know, with kind of the rates moving higher here recently and less convexity in terms of what we would reinvest into it, made sense to go ahead and take the opportunity to do a small reposition on a select group of the book. So, we'll just keep doing that. If, if the opportunities present themselves and we'll stay away from it if you know, it doesn't make sense,
Woody Lay
Got it and then wanted to hit on a credible yield real quick. It, it was a little bit of a headwind in the third quarter. Just any, any kind of guide you could give for the next couple of quarters. Do you think the $9 million is a good run rate or, or does it take a further step down from here?
Tracey Dexter
Hey, this is Tracy. Yeah, that's, that's going to continue to be difficult to predict. But, you know, you might expect and if you look back over the last few quarters, you can see as we get further out from the periods of acquisition, that level of accretion starts to taper off. So, you know, I think it is, it's difficult to put a specific number on around time. That's obviously just uncertainty around timing over the next few years. But maybe the trend that you've seen in the last few quarters could be a good indication of where accretion goes in the next few quarters.
Charles Shaffer
If you think about the portfolio is burning off at a pretty stable rate at this point, given where rates are. And so, you know, you could just trend it out from where it's gone in the last few quarters. It probably gives you a good sense of where it's headed in the coming year
Michael Young
And, and maybe one other, sorry, this is Michael, one other thing to tack on there, what he just as you think about it in aggregate, we do have the CDI amortization as well that's headed down. So those will both be moving lower with time. So, the net impact is, is a little more marginal than just the purchase counting accretion by itself.
Woody Lay
Got it. I appreciate that colour. And then maybe just last for me shifting over to the non-interest bearing deposits. I mean, the growth was great to see in the quarter. It feels like trends are, are, are strong there. Do you, do you think balances can continue to march higher from here? Just given the new client on onboarding?
Charles Shaffer
Yeah, I mean, I was really encouraged about that myself and I do think it is 100% because of the new client onboarding. So, yeah, I think as we move through time, we can continue to move kind of the pace we have. It's a key focus of ours. And on the C&I side of the business, we're 100% focused on full relationships. So, when we're lending to these clients, we're expecting the client to move in basically the entire banking relationship and we're seeing that fairly consistently. So, I was encouraged to see that and expect that to continue.
Woody Lay
Great. Thanks for taking my questions.
Charles Shaffer
Thank you, Woody.
Operator
David Feaster, Raymond James.
David Feaster
Hey, good morning, everybody.
Charles Shaffer
[Hi], David.
David Feaster
I wanted to start on the organic growth side. I mean that it was great to see what we've been talking about for a while, come to fruition and it's also good to see the stability in the pipeline which again supports that this, this is sustainable. I'm just kind of curious how you think about the complexion of the pipeline. Obviously, growth in this quarter was driven by CRE I know we've had a notable focus on trying to drive C&I growth that obviously takes time to bring over relationships. But I'm just curious how do you think about the complexion of the pipeline and drivers of growth going forward? Do you still expect it to be CRE heavy near term and, and when do you think, we can start seeing more of C&I contribution?
Charles Shaffer
Yeah. And I would say David, it's somewhat, is dependent upon where fundings happened and what's termed at versus not. But if you were to look at the production in the quarter, it's about 50-50 CRE and C.&I, I think that probably continues in the coming quarters.
And that's about what our run rate has been. That's about kind of where things have been now for a while. So, I do think over time you can see if you look on our occupied CRE was up and not under Ocu CRE was up a little more as you mentioned, but I, I expect it to be pretty balanced as we move through the coming quarters. And you know that as I said is about 50-50.
David Feaster
Okay. Okay. And then maybe touching on, on the deposit front, I mean, you, you talked about, you know, starting to reprice deposits lower. I'm curious how, how's reception been with your, your clients so far and, and you know, as you think about trying to find, you know, that point where, where you can start, you know, where you could push deposit costs lower without losing a relationship or, or losing the deposits. Like how are those conversations going? And, and you know, where are you able to drive? Like what rates are on a blended basis? Are you able to drive new core deposit group today?
Charles Shaffer
Yeah. And I'll let Michael take the second part of that question around the sort of new deposits coming on. But just in terms of client reaction, we really didn't see any pushback at all. It's gone pretty well. The clients accepted it and we've seen the competition move down. So, you know, that's, that's been kind of the good news and that was the thing that, you know, we had to watch carefully is where is the competition go.
And as Michael mentioned earlier, as we went through the prior year, you know, obviously coming on the back side of the banking crisis in mid early '23 with the bank failures, we were very client friendly and you know, we moved things up pretty rapidly there and we wanted to protect client relationships and maintain liquidity in the, in the balance sheet and maintain our core deposit franchise.
You know, as you know, over our history, we continue to maintain a very customer focused, non-transactional funding base. And so, we, we protected that and as rates come down on the other side, I think it gives us a lot of ability to move rates down. So as the market moves, we're going to move.
And so, you know, I think that is a bit of benefit to our balance sheet, you know, given that, you know, kind of hurt us on the way up the heavy level of fixed rate in the loan book, it'll help us on the way down. And I think we'll have a little more flexibility than probably a lot of others on the deposit side. So I think that's a benefit we see out ahead for us and then Michael, I don't know if you want to take the one on what the new add on rate for deposits was.
Michael Young
Yeah, David, a new add on rate on a blended basis. You know, we were kind of in the low three, generally across the quarter. We've pretty typically been around 200 basis points below fed funds through the cycle. So, you know, rates had lower, we would expect to be adding on at you know, incrementally lower rates.
David Feaster
Okay. And then last one for me, just kind of maybe a high level question for y'all. I just wanted to get your thoughts on the Florida economy, especially post hurricanes, right? I mean, you talked about it, I mean, these storms could be catastrophic, right? Insurance costs have already been an issue in the state. I'm curious, you know, you gotta imagine that premiums are probably going to continue to increase.
Maybe some insurers leave the state. I'm curious how do you think about how does that impact the four economy, especially the coastal ones and, and impacts on CRE from these trends? Just, you know, curious how you think about some of the impacts on the, on the broader economy. From this,
Charles Shaffer
It's a great question, really hard to answer David. You know, I think our initial reaction is we've been through a lot of hurricanes in the state and things are always challenging at the outset, but we work our way through it and I, I think the state will work their way through this.
You know, the insurance premiums are certainly an issue here. You know, we started to see, you know, we kind of look back over the last couple of years, we saw a big run up, then we got some tort reform. We saw insurance premiums start to stabilize and arguably start to come down a little bit as insurance companies started to re-enter the market. My hope is that continues to happen.
I think in terms of the storm impact, I think it was you know, focused on the Tampa Saint Pete kind of west coast markets and particularly the barrier islands. But when you get beyond that, the rest of the state, I think is pretty much 100% backup of business. So, I think the impact will be limited and I know the state goes through these things, we always come out the other side, okay. And so, I still feel very confident in the economy, very confident in Florida. And yes, we probably will see insurance premiums continue to be a bit of a challenge.
David Feaster
Okay. That's helpful. Appreciate you all.
Charles Shaffer
Appreciate Dave.
Operator
(Operator Instructions) David Bishop, Hovde Group.
David Bishop
Good morning, Chuck.
Charles Shaffer
Hi David.
David Bishop
Hey, a question. You know, we've had a lot of your peers talk about a lot of headwinds from, from loan payoffs this quarter. Maybe there's some clarity or taking some profits off the table to, to maybe reinvest in new projects. Just curious how payoffs and pay off this quarter versus the recent trends,
Charles Shaffer
Michael. You want to take that one? I think you got to pay off.
Michael Young
Yeah, David, this is Michael. Honestly, it was actually, it was a positive for us. We, we saw lower levels of payoffs this quarter. I think again, if you kind of zoom back out, you know, we, we were a little more cautious in late '22 and mid '23 and had less construction funding and things that were maturing. So, I think that's just all equal, a little less of a headwind for us and then just having stability kind of post the M&A environment. I think you're just seeing lower levels of pay off and we're able to achieve greater levels of net growth. So, you know, it wasn't really much of an issue for us in the quarter.
David Bishop
Got it then as you look ahead, anything from a larger payoff or not really.
Michael Young
No, I think we're seeing more stability in the book. You know, obviously lower rates, you could see higher prepayment speeds across the portfolio, but we're, we haven't seen that yet, at least with just a 50 basis point cut. And then we do have a little higher as we talked about earlier, a little higher level of maturities in the fourth quarter, which is why we're, you know, kind of thinking the net growth between the hurricane and that could be a, you know, more mid-single digit levels as opposed to where we were this quarter, but nothing else that's really idiosyncratic to call out.
David Bishop
Got it. And then I wasn't sure if I heard correctly, during the preamble, the, the uptick on accrual loans, I hear that you guys are well reserved or not expecting much in the way of lost content given appraised value.
Charles Shaffer
Yeah, we don't. Yeah, go at Tracey.
Tracey Dexter
We, we did see a little bit of an uplift in non-performing loans this quarter, really a handful of loans and those have sufficient collateral, no loss is expected there.
Charles Shaffer
Yeah, those were already, they were already graded in the crack classified assets and just moved to MPL. They're just going through the natural cycle.
David Bishop
Okay. Got it. And then Chuck, you, you noted as well. It's been pretty, pretty stellar growth on the wealth management side of the business. Just curious that I don't know if there's a way to ring frame it in terms of like new, new account growth, you know, versus you know, sort of market appreciation. And is this an area where you could dip your toe in and look to acquire additional RAS or really add more aggressively in that, that front? Thanks.
Charles Shaffer
Yeah, we, we, it's a business we really like, you know, the return on capital and the wealth management business is exceptionally strong, you know, and as we bank, wealth management clients and both on the bank side and the wealth side, they tend to be, you know, clients for life. And so, we, we think very highly, the business is a business. We're very focused on you. We looked at wealth management acquisition opportunities, we will look at them over time.
We've not done one to date, but it is something that we could do if something was unique that that came along. But we really like the business as we, we've talked about in the past and we think it's a really solid business for us. And I, I think our business is deeply interconnected to our commercial banking franchise. And we see very often when our commercial banking clients liquidate companies. We oftentimes get the opportunity to manage the assets and help those families out. So, it's a phenomenal business for us. We, we love the business and it's something we'll continue to focus on.
David Bishop
Great. Thank you for the call.
Operator
Stephen Scouten, Piper Sandler.
Stephen Scouten
Hey, good morning, everyone. Appreciate the time. Curious Chuck, you talked about getting back to that 1% ROA in time. I assume that would primarily be driven by kind of loan growth, balance sheet mix and improving them. Is that, is that fair to say? Or would you think there's like another driving force there that's worth, that's worth noting as well. That'd be more impactful.
Charles Shaffer
Yeah, I think at a very high level, you know, our expense base is well invested in, you know, I think we've got the team to drive growth over time and when you kind of sort of, I think that we, we've got a lot of those investments made and then you look at kind of the growth that we've seen in our focus on non-interest income, the investments in commercial bankers, investments and treasury management, talent investments in wealth. You know, what you're seeing is, you know, the operating leverage start to pull through.
And so when you think about the coming year, the combination of, you know, decent to strong organic growth combined with potential for margin expansion, particularly as rates come down. When you kind of put the two of those together, you know, it starts to really drive some profitability improvement. And, you know, and you can see that in the model. And so, you know, we've got a really great team that's really focused on growth and they're consistently onboarding new clients. And so, it gives me some confidence that that in combination with getting past the margin headwinds that we've been faced over the last year or so, you know, it really starts to set us up to see, you know, solid profitability improvement.
Stephen Scouten
Yeah. Okay. That's super helpful. That's great to hear. And then I guess as I think about the margin expansion, and you guys talked about kind of kind of trends continuing to improve there and return maybe closer to the historical levels if I look at the core name and I don't know if that's how you guys think about it, but it was in the like 306 range back in one Q '22 before we started the rate hike cycle. Is that kind of where you would think you could get back to or is there anything that's changed around the balance sheet that would allow that core name to, to be above that level or how can you kind of frame up the, the potential for the core and the core earnings power from that perspective?
Michael Young
Hey, Steven, it's Michael. You know, we're not going to give any guidance for 2025 on where we think that's going to get to obviously, I think everyone's expectations around the number of fed cuts is going to be sort of a determining factor as we move through next year, as well as kind of the shape of the old curve. So with those caveats out there, you know, I think we do expect margin expansion, you know, per rate cut, you know, maybe 2 basis points to 4 basis points could be a little better, it could be a little worse depending on the shape of the curve, etcetera. But we expect that to come through.
And so, you know, if you think about the moving pieces in the next year, between now and the end of next year, we've got $450 million of securities cash flow at about a 3.3% rate that's going to reprice up into a higher rate environment. We got another $750 million plus of fixed rate cash flows off the loan book that are going to reprice from you around, you know, kind of high fours into the current environment.
Those provide some pretty steady tailwinds regardless of what happens with, with rates. And the number of cuts and then the cuts themselves are just very additive given our fixed rate nature of our loan book and, and the adjustable rates even on our loan book, don't reprice really until 26, 27. So we've got pretty stable asset yields with, you know, improving deposit costs that I think are going to drive the margin expansion. So, we feel comfortable with the direction and, and pace of that going forward in the next year. But the number of cuts will have some output, you know, impact in terms of where that goes and how high and how quickly.
Stephen Scouten
Yeah. Yeah, that's extremely helpful. Color Michael. And just to clarify when you talk about the '24 BPS per, rate cut. Are you thinking about that on a core basis or on a GAAP basis?
Michael Young
Yeah, core basis. I think that's what we can manage the GAAP basis around accretion will depend on just the pace of repayments there. So really talking about the core and you know, I do think given, given our sort of friendliness with clients early on their deposit rates, I think there's more opportunity to move a little more quickly on the front end. But that will obviously start to, you know, decelerate a little bit on the back end of kind of the rate cycle. So just like we saw on the way up.
Stephen Scouten
Yes makes sense. And then last thing for me, just you guys obviously have created a ton of excess shareholder value since 2014 by M&A the environment has not really been maybe set up for that in the, in the last year or so, but with rates coming down, are you seeing a pickup at all in conversations or do you think there's a greater likelihood of something manifest manifesting here in the, in the near medium term and, and kind of continuing that path?
Charles Shaffer
It just kind of give you, I don't think anything's really changed in terms of the level of conversations. There's certainly conversations out there. We have relationships throughout the state that we continue to chat with. You know, we'll be disciplined. I know it's going to have to make sense from a back perspective and it's going to have to make a lot of sense from a return perspective because I think our organic story is so strong. So will be really thoughtful if we do anything. But you know, there are conversations happening.
Stephen Scouten
Got it., Very good. Thanks, Chuck. Thanks Michael and Tracy. I appreciate the time.
Operator
Thanks Steve with no further questions. This concludes our Q&A session. I would now like to turn the conference back over to Chuck Shaffer for closing remarks.
Charles Shaffer
All right. Well, thank you all for joining us this morning. And just again to reiterate my great appreciation for our associates that work so hard to get us through the two hurricanes. It was a lot of work and it's a lot over a few weeks and you all did a phenomenal job, both getting the bank prepared and taking care of our clients. So just thank you to all our [CCO] associates for that and I appreciate everybody joining the call. Thank you. That will wrap us up.
Operator
This concludes today's conference call. You may now disconnect.