Q1 2024 SmartFinancial Inc Earnings Call

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Operator: Ladies and gentlemen, the Smart Financial first quarter 2024 earnings release and conference call will begin shortly. If you would like to submit a question at any time, please press star one on your telephone keypad. Thank you.

Smart financial first quarter 2024 earnings release and conference call will begin shortly.

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Elliot: Hello and welcome to the Smart Financial first quarter 2024 earnings release and conference call. My name is Elliot, and I'll be your coordinator today. If you would like to ask a question during today's event, please press star followed by one on your telephone keypad. And I'd like to hand over to Nate Strall, Director of Strategy and Investor Relations. The floor is yours. Please go ahead.

Speaker Change: Hello, and welcome to the Smart financial first quarter 'twenty to 'twenty four earnings release and conference call. My name is and I'll be of COVID-19 today.

Speaker Change: If you would like to register your question George statements. Please press star followed by one on your telephone keypad.

Speaker Change: I'd now like to hand over to <unk> director of strategy and Investor Relations. The floor is yours. Please go ahead.

Speaker Change: Good morning, everyone and thank you for joining us for smart financials first quarter of 2024 earnings call. During today's call. We will reference the slides and press release that are available within the Investor Relations section of our website Smart Bank Dot Com, Billy Carroll, our President and Chief Executive Officer, who will begin our <unk>.

Nate Strall: Good morning, everyone, and thank you for joining us for Smart Financial's first quarter of 2024 earnings call. During today's call, we will reference the slides and press release that are available within the investor relations section of our website, smartbank.com. Billy Carroll, our President and Chief Executive Officer, will begin our call, followed by Ron Gorczynski, our CFO, who will provide some additional commentary.

Speaker Change: Followed by Ron Gorczynski, our CFO, who will provide some additional commentary we will be available to answer your questions at the end of the call.

Nate Strall: We will be available to answer your questions at the end of the call. Our comments may 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.

Speaker Change: This 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.

Ronald J. Gorczynski: 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.

Nate Strall: 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 April 22nd, 2024 with the SEC. Now, I'll turn it over to Billy Carroll to open our call.

Ronald J. Gorczynski: On 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 April 20 <unk>.

Ronald J. Gorczynski: 2024, with the SEC and now I'll turn it over to Billy Carroll to open our call.

William Young Carroll: Thanks, Nate and good morning, everyone, great to be with you and thank you for joining us today and thanks for your interest in SMB Kay.

William Young Carroll: Thanks, Nate. And good morning, everyone. Great to be with you.

William Young Carroll: And thank you for joining us today. And thanks for your interest in SNBK. We're changing the format a little this quarter, moving to just prepared comments from Ron and myself to streamline the first part of the call. We also have Miller, Rhett, and Nate here, and they'll be available for the Q&A.

William Young Carroll: We're changing the format a little this quarter moving to just prepared comments from Ron and myself to streamline the first part of the call. We also have Miller <unk>.

William Young Carroll: Made here and they'll be available for the Q&A portion. Thanks I'll.

William Young Carroll: They also did a great job of adding some new slides here and there. As you can see from the release, we had a nice start to the year. We had net income of $9.4 million for the quarter, or $0.55 per diluted share. On an operating basis, we came in at $8.4 million, or $0.49 per diluted share. The Delta was primarily a gain on the sale of a former branch facility in Destin, Florida that we sold once we had completed our move to a new office in a better location. We also had a little tailwind from some provisions. Jumping into the highlights, I'll be referring to the first few pages of our deck, pages three, four, and five.

William Young Carroll: Also did a great job of adding some new slides to our deck.

William Young Carroll: As you can see from the release, we had a nice start to the year, we had net income of $9 $4 million for the quarter or <unk> 55 per diluted share on an operating basis. We came in at $8 4 million or <unk> 49 per diluted share.

William Young Carroll: The Delta was primarily a gain on the sale of a former branch facility in Destin, Florida that we saw once we had completed their move to a new office in a better location. We also had a little tailwind from some provision release.

Speaker Change: Jumping into the highlights I'll be referring to the FERC few pages in our deck pages, three four and five.

Speaker Change: First we continue to increase the tangible book value for our company moving up to $21 12 per share, including the impacts of ASC.

William Young Carroll: First, we continue to increase the tangible book value of our company, moving up to $21.12 per share, including the impacts of AOCI, and $22.73, excluding that impact. We had growth in loans and deposits at approximately 4% and 12%, respectively. Our history of strong credit continues with the metric ticking down from a low base last quarter even more to only 18 basis points in NPA. However, total revenue was back over $40 million, and net interest income continued to expand with the inflection point we saw at the end of last quarter. Non-interest expenses were steady at $28.6 million for the quarter.

Speaker Change: And $22 73, excluding that impact.

Speaker Change: We had growth in loans and deposits at approximately 4% and 12% respectively.

Speaker Change: Our history of strong credit continues with the metric ticking down from a low base last quarter, even more to only 18 basis points in NPA.

Speaker Change: Total revenue was back over $40 million and net interest income continued to expand with the inflection point, we saw at the end of last quarter.

Speaker Change: Noninterest expenses were steady at $28 6 million for the quarter, we maintained our strong liquidity position covering are uninsured deposits at one four times and our return metrics started their inflection as well as we had projected with operating ROA and ROE at six 9% and nine five.

William Young Carroll: We maintained our strong liquidity position, covering our uninsured deposits at 1.4 times, and our return metrics started their inflection as well, as we had projected with operating ROA and ROE at 0.69% and 9.5%, respectively, on our path back to 1% and 14% plus as we leveraged the market investments we made in 2022. Ron will dive into the numbers a little deeper, but a couple of high-level comments from me. On growth... We were pleased with the results.

Speaker Change: 5%, respectively on our path back to 1% and 14% plus as we leverage the market investments we made in 2022.

Speaker Change: Ron will dive into the numbers, a little deeper, but a couple of high level comments from me on growth.

Speaker Change: We were pleased with the results the deposit side grew faster than we had anticipated this quarter at $126 million. This drove our cost of deposits up a little 17 basis points with those net new dollars coming on at reasonable rates just higher than our overall current cost.

William Young Carroll: The deposit side grew faster than we had anticipated this quarter, at $126 million. This drove our cost of deposits up a little, 17 basis points, with those net new dollars coming on at reasonable rates, just higher than our overall current cost. I was pleased with maintaining the 21% non-interest-bearing component, as we all know that's getting tougher. On loans, we were up $34 million, a little below our forecast, primarily due to a couple of unanticipated payoffs for clients who sold assets, but production was healthy.

Speaker Change: Pleased with maintaining the 21% noninterest bearing component as we all know that's getting tougher.

Speaker Change: On loans, we were up $34 million, a little below our forecast primarily due to a couple of unanticipated payoffs where clients sold assets, but production was healthy yields on the loan side. We continued to grow up 10 basis points for the quarter. Our loan mix was almost identical to year end with our CRE.

Speaker Change: Concentration ratios edge edging down again, this quarter, giving us some dry powder there for the right opportunities.

William Young Carroll: [inaudible] I think it's important to note that our balance sheet pipelines look solid as well as forecasted for a couple of months. We are seeing clients continue to sell assets and businesses, which isn't a bad thing, but it could have some impacts on the timing of overall loan growth this year, as we saw this quarter. That said, I still think we can hold to our mid to high single digits on growth for the year on both sides of the balance. I do want to draw your attention to a couple of slides that Nate added this quarter that depict why we believe our story is one of the best values in the region. Slide seven.

Speaker Change: I think it's important to note that our balance sheet pipelines look solid as well as we forecast out a couple of months.

Speaker Change: We are seeing clients continue to sell assets and businesses, which isn't a bad thing, but it could have some impacts on tightening of overall loan growth. This year as we saw this quarter that said I still think we can hold to our mid to high single digits on growth for the year on both sides of the balance sheet.

Speaker Change: I didn't want to draw your attention to a couple of slides that need added this quarter that depict why we believe our story is one of the best values in the region slide seven.

Speaker Change: I think it's important to remind our stakeholders of what we've accomplished over the last few years with the best yet to come.

William Young Carroll: I think it's important to remind our stakeholders of what we've accomplished over the last few years, with the best yet to come. There's some great information here on our company's journey from when Miller and I combined our banks into a $1 billion platform in 2015, from pulling those companies together and validating our model to then scaling the company with several years of successful acquisitions and organic growth to where we are now with a focus on generating operating income. As we've discussed on prior calls, recent rate increases have delayed returns coming back quickly after our seven de novo market expansions we made leading

Speaker Change: Great information here on our company's journey from when Miller and I combine their banks into the $1 billion platform in 2015 from pulling those companies together and validating our model and then scaling the company with several years of successful acquisitions and organic growth to where we are now with focus on generating operating <unk>.

Speaker Change: Average as we've discussed on prior calls recent rate increases have delayed returns popping back quickly after our seven de novo market expansions, we made leading into 2022, but the foundation is set and we are poised for continued performance enhancements.

William Young Carroll: But the foundation is set, and we're poised for continued performance. Another new slide, slide eight, shows why we're so bullish on our future. Taking a look graphically at our footprint, you'll see we're operating in arguably some of the country's best coverage. And the South's population growth numbers are strong, and we'll benefit from that moving forward. All said, a nice start to 2024. So let me go ahead and turn it over to Ron for this commentary, and then we'll open it up for some questions. Okay, Ron?

Speaker Change: Another new slide slide eight shows why we're so bullish on our future taking a look graphically at our footprint Youll see we are operating and arguably some of the country's best regions.

Speaker Change: And the SaaS population growth numbers are strong and will benefit from that moving forward as well all said a nice start to 2024. So let me go ahead and turn it over to Ron for his commentary and then we'll open it up for some questions Ron.

Ronald J. Gorczynski: Well, thanks, Bill, and good morning, everyone. During the first quarter, we experienced deposit growth of over 126 million, or almost 12% annualized, resulting in a loan to deposit ratio of 79%. Interest-bearing deposit costs increased 16 basis points to 3.16% and were 3.23% for the month of March. Our deposit growth was driven primarily by new relationship managers and boarding clients, coupled with new net deposit growth from our existing clients. While the growth is encouraging, it did come at an elevated cost.

Ronald J. Gorczynski: Thanks, Bill and good morning, everyone.

Ronald J. Gorczynski: During the first quarter, we experienced deposit growth of over $126 million or almost 12% annualized resulting in a loan to deposit ratio of 79%.

Ronald J. Gorczynski: Interest bearing deposit cost increased 16 basis points to three 6% and were three 3% for the month of March.

Ronald J. Gorczynski: Our deposit growth was driven primarily by new relationship managers boring clients, coupled with new net deposit growth from our existing clients.

Ronald J. Gorczynski: While the growth is encouraging it did come at an elevated cost for Q1, the weighted average cost of new deposit production was 379%.

Ronald J. Gorczynski: For Q1, the weighted average cost of new deposit production was 3.79%. However, we also saw new and existing non-interest-bearing deposit relationships expand, which resulted in non-interest-bearing deposits to remain above 20% of the total portfolio. We currently have 1.2 billion, or 36% of our interest-bearing deposits repricing immediately with any movement in the Fed funds rate, and 130 million CDs repricing during the second quarter. Late in the first quarter.

Ronald J. Gorczynski: However, we also saw new and existing noninterest bearing deposit relationships expand which resulted in noninterest bearing deposits to remain above 20% of the total portfolio.

Ronald J. Gorczynski: We currently have $1 2 billion or 36% of our interest bearing deposits repricing immediately with any movement in the fed funds rate and $130 million of Cds repricing during the second quarter.

Ronald J. Gorczynski: Late in the first quarter.

Ronald J. Gorczynski: 110 million securities yielding 1.5% matured, and over 80 million of these were redeployed into securities with a weighted average yield of 5.87%. Additionally, we have 61 million securities yielding 2.1% for churning in late May. These maturities, coupled with strong deposit growth, resulted in a significant liquidity build, with cash and cash equivalents totaling over 9.5% of total assets. While this is above our long-term cash position target, we are not rushing to deploy the excess liquidity given solid cash yields and the considerable lending opportunities we are seeing across our footprint.

Ronald J. Gorczynski: $110 million of securities, yielding one 5% matured and over $80 million of this was redeployed into securities with a weighted average yield of 587%.

Ronald J. Gorczynski: Additionally, we have 61 million of securities, yielding two 1% maturing in late May.

Ronald J. Gorczynski: These maturities coupled with strong deposit growth resulted in significant liquidity build with cash and cash equivalents totaling over nine 5% of total assets.

Ronald J. Gorczynski: While this is above our long term cash position target, we are not rushing to deploy the excess liquidity given solid cash yields and the considerable lending opportunities we are seeing across our footprint.

Ronald J. Gorczynski: Moving forward, we do intend to selectively purchase securities as part of our overall balance sheet management process, but right now, it's paying to be patient. Our quarterly net interest margin remained flat at 2.85%, a result of several factors.

Ronald J. Gorczynski: Moving forward, we do intend to selectively purchase securities as part of our overall balance sheet management process, but right now it's paying to be patient.

Ronald J. Gorczynski: Our quarterly net interest margin remained flat at $2, 85% a result of several factors as discussed.

Ronald J. Gorczynski: As discussed previously, deposit growth came in stronger than forecasted, while loan growth was muted due to a handful of large, unexpected loan payoffs. While payoffs are not optimal in the short term, we are encouraged by the fact that loan growth, excluding payoffs, would have been well above our mid-single-digit growth guideline. Weighted average yields on new loan originations were at 8%, and contractual yields expanded by 10 basis points to 5.71%.

Ronald J. Gorczynski: Previously deposit growth came in stronger than forecasted while loan growth was muted due to a handful of large unexpected loan payoffs.

Ronald J. Gorczynski: While payoffs are not optimal in the short term we are encouraged by the fact that loan growth excluding payoffs would have been well above our mid single digit growth guidance.

Ronald J. Gorczynski: Weighted average yields on new loan originations were at 8% and contractual yields expanded by 10 basis points to 571%.

Ronald J. Gorczynski: Looking ahead, 43% of our loan portfolio is variable rate, with $884 million repricing in the next three months, and we have over $90 million of fixed rate loans, yielding 5.54%, returning ratably over 2024. While the variables influencing margin are difficult to forecast, we do believe we've passed an inflection point in our margin compression. Looking ahead to Q2 and the second half of 2024, we anticipate modest margin expansion, pushing operating revenue to a returning $42 million plus quarterly run rate.

Ronald J. Gorczynski: Looking ahead, 43% of our loan portfolio is variable rate with $884 million repricing in the next three months and we have over $90 million of fixed rate loans, yielding five 5%, 4% maturing ratably over 2024.

Ronald J. Gorczynski: While the variables influencing margin are difficult to forecast, we do believe we've passed an inflection point in our margin compression.

Ronald J. Gorczynski: Looking ahead to Q2 in the second half of 2024, we anticipate March modest margin expansion pushing operating revenue to a returning $42 million plus quarterly run rate.

This quarter also saw a slight shift in our interest rate sensitivity profile, given the uncertainty around the economic environment and the potential for higher for longer interest rates, we strategically moved our interest rate sensitivity from a liability sensitive to a more neutral position.

Ronald J. Gorczynski: This quarter also saw a slight shift in our interest rate sensitivity profile. Given the uncertainty around the economic environment and the potential for higher interest rates for longer, we strategically moved our interest rate sensitivity from a liability-sensitive to a more neutral position. We accomplished this through the purchase of floating-to-fixed-rate securities, short-term C-day maturity extensions, and by holding a larger-than-usual cash position. Importantly, this position can be quickly and dynamically adapted to whatever interest rate environment unfolds.

Ronald J. Gorczynski: We accomplished this through the purchase of floating to fixed rate securities.

Ronald J. Gorczynski: Short term CD maturity extensions and by holding a larger than usual cash position.

Ronald J. Gorczynski: Fortunately disposition can be quickly and dynamically adapted to whatever interest rate environment unfolds longer term, we do anticipate moving back to a more liability sensitive position through the strategic deployment of cash.

William Young Carroll: Longer term, we do anticipate moving back to a more liability-sensitive position through the strategic deployment of cash. However, operating non-interest income was lower than forecasted at $7 million, adjusting for a $1.35 million one-time gain on the sale of a former branch building, as Billy had previously mentioned. The decline in non-interest income is primarily attributable to slower than anticipated capital markets revenue and reduced quarterly interchange fees, both of which we feel will normalize in the coming quarter.

Ronald J. Gorczynski: Operating noninterest income was lower than forecasted at $7 million adjusting for 135 million one time gain on the sale of a former branch building as Billy I previously mentioned.

Ronald J. Gorczynski: The decline in noninterest income is primarily attributable to slower than anticipated capital markets revenue and reduce quarterly interchange fees, both of which we feel will normalize in the coming quarters.

William Young Carroll: Our operating expenses were in line with previously provided guidance, with no material deviations to note. Non-interest income growth and expense containment continue to be primary objectives as we focus on fully leveraging the infrastructure investments we made over the last few years. Looking ahead to the second quarter, we are forecasting non-interest income in the mid-$7 million range and non-interest expense of approximately $29.7 million, with salary and benefit expenses comprising $17.3 million.

Ronald J. Gorczynski: Our operating expenses were in line with previously provided guidance with no material deviations to note.

Ronald J. Gorczynski: Noninterest income growth and expense containment continue to be primary objectives as we focus on fully leveraging the infrastructure investments we've made over the last few years.

Ronald J. Gorczynski: Looking ahead to the second quarter, we are forecasting noninterest income in the mid $7 million range and non interest expense of approximately $29 7 million range, which salary and benefit expenses comprising $17 3 million.

Ronald J. Gorczynski: I'll conclude with a quick comment on capital capital grew $7 million over the quarter with our consolidated TCE ratio ending at seven 4%.

William Young Carroll: I'll conclude with a quick comment on capital. Capital grew $7 million over the quarter, with our consolidated TCE ratio ending at 7.4%. We are in a well-capitalized position with a very strong future credit outlook. Consequently, this quarter, we anticipate resuming our share repurchase program as we believe our stock has reached a market price well below its intrinsic value. With that said, I'll turn it back over to Billy.

Ronald J. Gorczynski: We are in a well capitalized position with a very strong future credit outlook. Consequently in this quarter, we anticipate resuming our share repurchase program as we believe our stock is reached a market price well below to transit value with that said I'll turn it back over to Billy.

William Young Carroll: Thanks, Ron.

William Young Carroll: Thanks, Ron. I like where we are positioned and continue to feel very good about what we'll accomplish in the near term. As you've heard, the key for us is continuing to gain operating leverage. That's the focus of our team.

William Young Carroll: I like where we're positioned and continue to feel very good about what we'll accomplish in the near term as you've heard the key for US is continuing to gain operating leverage that's the focus of our team.

William Young Carroll: We have upgraded the two market president positions that were open in our Gulf Coast region and added new revenue producers in Chattanooga, Cookville, Destin, Tallahassee, Huntsville, Auburn, and Dothan in recent weeks. Given the current rate outlook, we're positioned to handle higher rates for longer in the environment if that's where we stay. While we perform better and rates go down, as Ron alluded to, we can handle just about

William Young Carroll: We have upgraded the two market president positions that were opened in our Gulf Coast region and added new revenue producers in Chattanooga cookbook desktop Tallahassee, Huntsville, Auburn and dosing in recent weeks.

William Young Carroll: Given the current rate outlook, we're positioned to handle higher for longer.

William Young Carroll: In the environment, if that's where we stay.

William Young Carroll: While we performed better in rates down as Ron alluded to.

William Young Carroll: We can handle just about any rate trajectory, while maybe a little more challenging in some areas. We can still push our return targets in a higher rate environment so to summarize.

William Young Carroll: While maybe a little more challenging in some areas, we can still push our return targets in a higher rate environment. So to summarize, we are executing and gaining leverage on large investments we made a couple of years ago. We are taking advantage of cash flows coming off the investment portfolio, and that, coupled with projected growth, will lead to margin expansion throughout 2024. Our credit quality is outstanding, and with clarity on credit and regional growth expectations, we are back adding revenue producers as we start the year.

William Young Carroll: We are executing and gaining leverage on blurted large investments. We made a couple of years ago. We are taking advantage of cash flows coming off the investment portfolio and that coupled with projected growth will lead to margin expansion throughout 2024, our credit quality is outstanding and with clarity on credit and regional growth expectations, we are back adding.

William Young Carroll: Revenue producers as we start the year, we continue to be an employer of choice for many bankers in our region and as Ron had mentioned, we're jumping back and repurchasing shares given our current valuation as soon as possible. There is no better investment we can make I. Appreciate the work of our smart financial Smart Bank team and the efforts of our near 600 associates.

William Young Carroll: We continue to be an employer of choice for many bankers in our region, and as Ron mentioned, we're jumping back into repurchasing shares, given our current valuation, as soon as possible. There's no better investment we can make. I appreciate the work of our SmartFinancial and SmartBank team and the efforts of our near 600 associates. This team continues to perform well, and we're building a great culture. We'll stop there and open it up for questions.

William Young Carroll: This team continued to perform well and we're building a great culture, we will stop there and open it up for questions.

Speaker Change: Thank you.

Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. The first question comes from Will Jones with KBW. Your line is open, please go ahead.

Speaker Change: To ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: I would like to withdraw your question. Please press star followed by <unk>.

Speaker Change: When preparing to ask a question. Please ensure your devices and muted locally.

Speaker Change: Our first question comes from will Jones with <unk>. Your line is open. Please go ahead.

Will Jones: Hey, great good morning, guys.

Will Jones: Hey, great morning, guys. Hey, Will. Good morning, Will.

Will Jones: Hey, good morning will.

Will Jones: Hey, Serana, I was hoping you could just walk us back through that bond redeployment that you saw all the cash flows that came through this quarter. I think I heard you say you reinvested 80 million of that at a little over, you know, five and three quarters. And then you just hold the rest in cash. Is that right?

Will Jones: So Ron I was hoping you could just.

Will Jones: Walk us back through that bond redeployment that you saw all the cash flows that came through this quarter I think I heard you say you reinvested $80 million of that at a little over.

Speaker Change: Five and three quarters and then you just hold the rest in cash is that right.

Speaker Change: Yes.

Ronald J. Gorczynski: Yes, we did over $80 million. It's 5.87% yield. We deployed it. The majority of it went to mortgage-backed securities and swap mortgage-backed securities. We saw the value in that during the quarter, and the rest went to some agencies and a little bit of corporate. But yes, $80 million of it, we did redeploy to the later part of the quarter.

Speaker Change: We did over $80 million its 587% yield.

Speaker Change: We deployed a majority of it went to mortgage backed securities and swap mortgage backed securities.

Speaker Change: We saw the value in that during the quarter and the rest are some agencies and a little bit of corporate but yes, so $80 million, but we did redeploy to the later part of the quarter.

Speaker Change: Got you Okay. So we'll see a majority of that benefit roll through into the second quarter end.

Ronald J. Gorczynski: Gosh, okay, so we'll see a majority of that benefit roll through into the second quarter. And, and what was the yield previously?

Speaker Change: What was the yield previously on that $80 million.

Ronald J. Gorczynski: The $80 million was one point, oh, excuse me, of what's maturing. I'm sorry, we, we, we, we, we invested in the 5.87%. 1.51%.

Speaker Change: The $80 million was one Oh excuse me of what's maturing.

Speaker Change: I'm sorry.

Speaker Change: Yes.

Randy: Randy it's 7%.

Randy: At 1.15%.

Randy: Okay got it that's helpful.

Will Jones: Okay, I got it. That's helpful.

Ronald J. Gorczynski: So then, as we just think about, you know, the margin expansion you expect moving forward, obviously, we'll have the tailwinds of this bond rate, you know, redeployment, you'll have, you know, another big slug of bond maturities next quarter. And it feels like deposit costs are starting to moderate, at least, or do you feel like, you know, we could see a peak in deposit costs next quarter? Or is that really, you know, maybe more of a second half of the year event? Well,

Randy: So then as we just think about the margin expansion you expect moving forward. Obviously, you will have the tailwind of this bond rate redeployment youll have another big slug of bond maturities next quarter.

Randy: And it feels like deposit costs are starting to moderate at least do you feel like we could see a peak in deposit costs next quarter or is that really maybe more of a second half of the year event.

Speaker Change: Well I think we will.

Ronald J. Gorczynski: Well, I think we'll, you know, I'll order in totality. We are, we are optimistic about the expansion for Q2 and beyond. You know, we will have funding pressures, but, as you mentioned, it's at a much more muted pace. You know, for the last two quarters, we have had interest-earning assets, income growth, outpacing our funding cost growth. As you mentioned, the cash flows from the securities maturing and the redeployment, and our future maturing securities all lead to a continued trend. We're projecting about 3 to 5 basis points of margin expansion for the quarter. So let's just say the 290 range, plus or minus.

Speaker Change: In totality we.

We are optimistic on the expansion for Q2 and beyond.

Speaker Change: We will have funding pressures, but as you mentioned, it's a much more muted pace.

Speaker Change: For the last few quarters, we have had interest earning assets income growth outpacing our funding cost growth.

Speaker Change: As you mentioned the cash flows from the securities maturing into redeployment and our future maturing securities all leads to a continued trend.

Speaker Change: We're projecting about three to five basis point of margin expansion for the quarter. So, let's just say $2 90 range plus or minus.

Okay, Great. That's Super helpful. And then lastly for me.

Will Jones: Okay, great. That's super helpful.

William Young Carroll: And lastly, for me, you guys obviously saw a really, really nice deposit growth this quarter. Billy, I was hoping you could just walk us through, you know, what kind of drivers there are. And what went right for you guys in the quarter? And, you know, obviously, this is a challenging level to continue growing at, but the outlook still feels pretty positive. Just walk us through where your positive momentum is on the deposit side.

Speaker Change: Obviously, you saw a really nice deposit growth this quarter Bill I was hoping you could just walk us through what kind of where some of the drivers there and what went right for you guys in the quarter end.

Bill: Obviously this is a.

Bill: Challenging level to continue growing up but the the outlook still feels pretty positive just walk us through where you are positive momentum is on the deposit side.

Bill: Yeah.

William Young Carroll: Yeah, well, we were pleased. Again, a little more growth than we had anticipated in the quarter, and I think a lot of it is just, you know, the work that our teams continue to do. We talk about the great teams that we've got throughout our company, and so a lot of it was new business. It was new to us.

Bill: Well, we were we replace again a little a little.

Bill: A little more growth than we had anticipated in the quarter and then I got a lot of it is just the work that our teams continue to do we talk about.

Bill: The great teams that we've got throughout our company and so a lot of it was was.

Bill: Was new business it was new to US business, we picked up a couple of really nice large corporate accounts in there we had a we had some growth in some existing accounts.

William Young Carroll: We picked up a couple of really nice, large corporate accounts in there. We had some growth in some existing accounts. We picked up a little bit of that was public funds. We picked up a nice new public fund account at a very reasonable rate during the quarter. So it's just a good mix, really, at the end of the day.

Bill: We had picked up picked up a little bit of that was a little bit of that was public funds we picked up.

Bill: A nice new public fund accounts.

Bill: At a very reasonable rate during the quarter.

Bill: It was just a good mix really at the end of the day and I think it goes to.

William Young Carroll: And I think it goes to, and you're right, I think it goes to the optimism that we have in our company, the work that our relationship managers are doing out there in the field. And just there are a lot of positives about being able to continue to grow, not just on the deposit side but the loan side. Ron alluded to it. You know, it's, you know, it's, you know, the dollars are coming in at a higher rate. So I think the cost of deposits is going to continue to kind of edge higher.

Speaker Change: And you're right I think it goes to the optimism that we have in our company.

Speaker Change: The work that our relationship managers are doing out there in the field.

Speaker Change: Just theres a lot of just a lot of positives about being able to continue to grow.

Speaker Change: Just on the deposit side with the loan side, Ron alluded to it.

Speaker Change: Yes.

Speaker Change: The dollars are coming on at a higher rate. So I think the cost of deposits is going to continue to kind of edge higher but as we said, we like where we are from a production standpoint, and we think we can come back that continue to expand some margin. It was also across the entire footprint as well, yes, yes, yes, that's a great point number yeah. It was it wasn't.

William Young Carroll: But as we said, we like where we are from a production standpoint, and we think we can combat that and continue to expand some margin. It was also across the entire footprint as well. Yeah, yeah, yeah, that's a great point, Miller. Yeah, it was, it wasn't just one zone. I mean, that's what we've seen, you know, the regional president group we have right now is doing such a nice job of really getting out and growing these zones. And so it's very, very evenly distributed throughout our entire footprint.

Speaker Change: Just one zone.

Speaker Change: That's what we've seen.

Speaker Change: The regional President group, we have right now is doing such a nice job of.

Speaker Change: Really getting out and growing these and so it's very very evenly distributed throughout our throughout our entire footprint.

Speaker Change: Great well.

Will Jones: Great. Yeah, well, sounds like a nice PPNR improvement story ahead for you guys. So thanks for the question.

Speaker Change: It sounds like a nice P P and our improvement towards the head for you guys. So thanks for the questions.

Speaker Change: Thanks will.

Speaker Change: We now turn to Thomas Wendler with Stephens. Your line is open. Please go ahead.

Operator: We now turn to Thomas Wendler with Stephens. Your line is open. Please go ahead.

Thomas Alexander Wendler: Hey, good morning, everyone.

Thomas Alexander Wendler: Hey, good morning, everyone. I wanted to start off with the yield on the 61 million security maturing this quarter. Ron, I think you might have tried to mention it earlier, but I didn't catch it.

Thomas Alexander Wendler: So I wanted to start off.

Thomas Alexander Wendler: I wanted to start off with the yield on the $61 million of securities maturing this quarter, Ron I think he might have.

Thomas Alexander Wendler: Tried to mentioned it earlier, but I didn't catch it.

Yes, two 1%.

Ronald J. Gorczynski: Yeah, 2.1%.

Thank you and then is it safe to assume that's kind of just going to be flowing into cash.

Thomas Alexander Wendler: And is it safe to assume that it's kind of just going to be flowing into cash?

Ronald J. Gorczynski: Yes at this point, yes, that's where we're looking at.

Ronald J. Gorczynski: Yeah, at this point, yes, that's where we're looking.

Speaker Change: Okay. Thank you for that.

Thomas Alexander Wendler: Okay, thank you for that. Next, I just wanted to move over to revenue. You guys are targeting a 1% ROA, and I think you've previously mentioned kind of hitting a 50 million revenue bogey in the second half of this year. Is that still how you're kind of thinking about revenue growth moving forward?

Speaker Change: Next I just wanted to move over to <unk>.

Speaker Change: Revenue you guys are targeting a 1% ROA and I think you've previously mentioned kind of hitting a $50 million revenue bogie in the second half of 'twenty five is that still how youre kind of thinking about revenue growth moving forward.

Speaker Change: Yeah Thomas out all open and then let Ron kind of dive into where we think kind of longer term outlook is but yes.

William Young Carroll: Yeah, Thomas, I'll open and then let Ron kind of dive into where we think the kind of longer-term outlook is. But yes, you know, obviously, as we've alluded to a couple of times, you know, this is our whole focus right now is getting this operating leverage back. And, and you can see it starting to happen. It just doesn't happen overnight. It just, it's taken, takes a little while.

Speaker Change: Obviously.

Speaker Change: As we've alluded to a couple of times. This weird our whole focus right now is getting this operating leverage back in and you can see it starting to happen it just doesn't happen overnight.

Speaker Change: Take it take a little while but yes, we're seeing that that continue to move up Ron had mentioned, we're moving back towards the $42 million run rate here in the near term.

William Young Carroll: But yeah, we're seeing that continue to move up. Ron had mentioned, you know, we're moving back toward the $42 million run rate here in the near term. And, and then Ron can kind of run, I'll let you maybe speak to the forecast about looking into the mid part of next year. We think we can really start to generate that leverage by then.

Speaker Change: And then Ron can count it Ron I'll, let you may be speak to forecast about looking into mid part of next year. We think we can really start to generate that leverage by them yes.

Ronald J. Gorczynski: Yeah, we're looking at, as we said it really, our story hasn't changed in our revenue projection. We're still looking at probably the second half of Q3. We probably will hit that run rate of 50 million plus, pretty excited to see that happening, and And the 42 million is billed indicated.

Ronald J. Gorczynski: Yes, we're looking at as we said really our story Hasnt change in our revenue projection, we're still looking at probably the second half of Q3, we probably will hit that run rate to $50 million plus pretty excited to see that happening and.

Ronald J. Gorczynski: And the $42 million as Bill had indicated we're looking at Q3 of this year.

Ronald J. Gorczynski: Okay.

Speaker Change: Alright, I appreciate all color thanks for answering my questions guys.

Thomas Alexander Wendler: All right, I appreciate it, O'Connor. Thanks for answering my questions, guys.

Speaker Change: Okay. Thanks, Tom.

Speaker Change: Our next question comes from Freddie Strickland with Janney Montgomery. Your line is open. Please go ahead.

Operator: Our next question comes from Feddie Strickland with Janice Montgomery. Your line is open, please go ahead.

Feddie Justin Strickland: Hey, good morning, guys.

Feddie Justin Strickland: Good morning.

Feddie Justin Strickland: Morning. Just wanted to go back to the non-interest income guide. Does that seven and a half million include mortgage? And can you just talk about what you're seeing with that business? Does it seem like we could maybe see a bit of a pickup in 24 versus 23 given the population inflow, or are rate and supply constraints still just too much of an issue right now?

Feddie Justin Strickland: Just wanted to go back to the noninterest income guide does that seven 5 million include mortgage and can you just talk about what youre seeing with that business does it seem like we could maybe see a bit of a pick up in 24 versus 23, given the population inflow or rate and supply constraints still just too much of an issue right now.

Feddie Justin Strickland: Alright.

William Young Carroll: I look Feddie, let me take the first part, then I'm going to hand it over to Ron to maybe talk through a little bit more of that, just kind of specifically about mortgages. Mortgages have never been a huge piece for us. But that said, we really have had what we feel is a good start to the year for that. One of the things, as we've talked about on prior calls, we added a new Chief Banking Officer, Martin Schroet.

Speaker Change: Let me take the first part then I'll hand, it over to Ron to maybe talk through a little bit more of that just kind of specifically about mortgage.

Speaker Change: Mortgage has never been a huge piece for us.

Ronald J. Gorczynski: But that said, we really have had a what we feel is a good start to the year for that.

One of the things is.

Ronald J. Gorczynski: We've talked about on prior calls.

Ronald J. Gorczynski: We added a new Chief banking Officer Martin Schroeter.

William Young Carroll: Last year, Martin took the lead over that mortgage group, and we're seeing some really nice things happen with that, really with both product mix, growth, and pipelines. And so that's been a big plus, so we've been pleased with that moving forward. But Ron, do you want to speak to kind of the broader non-interest income question? Uh, yeah, we...

Ronald J. Gorczynski: Last year Martin has taken lead over that mortgage group and we're seeing some really nice things happened with that really with both product mix growth pipelines.

Ronald J. Gorczynski: So that's been a big plus of where we've been pleased with that.

Ronald J. Gorczynski: Moving forward, but Ron do you want to speak to kind of the broader noninterest income question.

Ronald J. Gorczynski: Yes.

Ronald J. Gorczynski: Yeah, we, you know, most of the stuff is pretty stable, nominal, nominal increases, but I'll go back to mortgages. We're pretty much looking at a 15% increase in the guidance for our mortgage revenue line. In the past, we portfolioed more, we had a lot of private banking clients that we decided to keep in house. But as we switch more to a secondary market, right now, we're 38% of our production going to the secondary market.

Ronald J. Gorczynski: So the stuff is pretty stable in nominal.

Ronald J. Gorczynski: We will increase that but I'll go back to mortgage.

Ronald J. Gorczynski: Pretty much looking at 15% increase in the guidance for our mortgage revenue line.

Ronald J. Gorczynski: In the past we portfolio more we did a lot of private banking clients that we decided to keep in house, but as we switch more towards secondary market right now we're at 38% of our productions go into secondary.

Ronald J. Gorczynski: We're probably through mid-year, the later part of 2024; we're looking at a 50-50 mix. So that should be a promising component of our non-interest income. The rest is just going to be steady, steady, consistent growth quarter over quarter.

Ronald J. Gorczynski: Probably through mid year later part of 2020 for looking at a 50 50 mix so that should be a promising component of our noninterest income. The rest is just going to be a steady steady consistent growth quarter over quarter.

Speaker Change: Thanks, I appreciate the color on that and then I have one for red as well here just wondering if you could talk a little bit more about the equipment finance business, what youre seeing in particular I'm wondering if you could give an update on what youre seeing in the trucking sector.

Unknown Speaker: Unknown Speaker

Rhett D. Jordan: Thanks, I appreciate the color on that. And then I have one for Rhett as well. Just wondering if you could talk a little bit more about the equipment finance business, what you're seeing, in particular. I was wondering if you could give an update on what you're seeing in the trucking sector, whether that was incrementally a little better or worse this quarter from a credit standpoint.

Speaker Change: That was incrementally a little better or worse this quarter from a credit standpoint.

Speaker Change: Yes, absolutely.

Rhett D. Jordan: Yeah, absolutely. We are still seeing good production in that space. As far as equipment finance is concerned, the heavy construction side of that is doing really, really well. In the trucking space specifically, that continues to be the area where what Problem assets we have in that bucket fall in that segment, but it definitely, I will say, peaked. We have seen it stabilize. We're basically kind of still working with the same group of clients that we were working with at the end of the year that are facing some challenges.

Speaker Change: We're.

Speaker Change: Still seeing good production in that space as far as equipment finance.

Speaker Change: Heavy construction side of that is doing really really well.

Speaker Change: In the trucking space, specifically that continues to be an area where what what.

Speaker Change: Problem assets, we have in that bucket.

Speaker Change: All in that segment, but it definitely.

Speaker Change: I will say peak, we have seen it.

Speaker Change: Stabilized, we're basically kind of still working with the same group of clients. We were working with at the end of the year that are facing some challenges.

Rhett D. Jordan: But I want to make sure that you and everyone else are clear that, I mean, it's a very small segment of the bank's overall portfolio and exposure. The total watch list items, classified items, and repos we have are only about 0.8% of capital and exposure. So it's a very minor piece of the segment for us.

Speaker Change: But I want to make sure that.

Speaker Change: That you and everyone else or clear that I mean, it's a very small segment of the bank's overall portfolio exposure, it's about the total.

Speaker Change: Watch list items classified items and.

Speaker Change: Repos, we have is only about 8% of capital and exposure.

Speaker Change: It's a very minor piece of the of the segment for us.

Feddie Justin Strickland: Thanks, Rhett. I appreciate it. And that's it for me. I'll step back into the queue. Thanks for taking my questions, guys.

Speaker Change: Thanks, Rod appreciate it and that's it for me I'll step back in the queue. Thanks for taking my questions Scott.

Speaker Change: Thank you.

Speaker Change: As a reminder, if <unk> like to ask a question. Please press star one on your telephone keypad now.

Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad now. We now turn to Steve Moss with Raymond James. Your line is open, please go ahead.

Speaker Change: We know incentives Steve Moss with Raymond James Your line is open. Please go ahead.

Stephen M. Moss: Good morning, guys.

Stephen M. Moss: Uh, maybe just starting on the buyback, morning. On the buyback here, just curious as to how you're thinking about the, you know, how aggressive you're interested in being on the buybacks here and just your thoughts on that in terms of capital here.

Stephen M. Moss: Maybe just starting on the buyback.

Stephen M. Moss: Morning.

On the buyback here, just curious as to how youre thinking about the how aggressive youre interested in being on the buybacks here and just your thoughts on.

Stephen M. Moss: On that in capital here.

Yes, Steve.

William Young Carroll: Yeah, I'll Steve, I'll make a comment that I'll let Ron kind of give an additional give some additional color. You know, I think it's it's really as Unknown Speaker We're trading right now. We want to be as aggressive as we can be on it. I mean, to be honest, I mean, it's, you know, obviously, you've got parameters around that that we work through. But for us, I mean, I think it's the best investment we could be making. And so, you know, we're going to look to put as much over there as we can. Ron, you might talk a little bit more about your specific thoughts around that.

Speaker Change: Steve I'll make a comment then I'll, let Ron kind of just.

Speaker Change: Give us give additional give some additional color I think it's really as.

Speaker Change: Where we're trading right now we want to be as aggressive as we can be on it I mean to be honest I mean it.

Ronald J. Gorczynski: Obviously, you got you've got parameters around that that we work through but.

Ronald J. Gorczynski: For Us I mean, I think it's the best investment we can be making today.

Ronald J. Gorczynski: And so yes.

Ronald J. Gorczynski: We're going to look to put as much over there as we can but Ron you might talk a little bit more about specifics thoughts around that.

Ronald J. Gorczynski: Yeah, currently, our capacity is $4.5 million worth of shares. You know, we'll actually, again, we anticipate starting that in a few days after the blackout period. And then we'll go from there. Again, we like where the stock is trading. And, you know, if we have to expand our buyback, we will. But right now, that's kind of our plan, our short-term plan on this.

Ronald J. Gorczynski: Yes, we have currently our capacity is $4 $5 million worth of shares.

Ronald J. Gorczynski: We will execute again, well, we anticipate starting that.

Ronald J. Gorczynski: In a few days after the blackout period and then we'll go from there again, we like where the stock is trading and.

Ronald J. Gorczynski: We have to expand our buyback, we will but right now thats kind of our plan our short term plan on this.

Speaker Change: Okay, Great and then.

Stephen M. Moss: Okay, great. And then in terms of just the loan payoffs this quarter, Billy, just wondering if you can quantify the size of those payoffs, and it sounds like you probably have a few more in the upcoming quarter, maybe impacting loan growth.

In terms of just the.

Speaker Change: <unk>.

Speaker Change: Just the loan payoffs this quarter.

Speaker Change: Bill I'm, just wondering if you can quantify or quantify the size of those paths and it sounds like you probably have a few more in the upcoming quarter, maybe impacting loan growth.

William Young Carroll: Yeah, straight.

Bill: Yes, Steve I'll, let Rick talk specifically about about the numbers and kind of what we saw last quarter. It has it's not it's not a it's not huge but it's still a little impactful is probably the best way to put it in and a lot of it in that.

Rhett D. Jordan: Yeah, I'll let Rhett talk specifically about the numbers and kind of what we saw last quarter. It has, you know, it's not it's not a huge deal, but it's still a little impactful is probably the best way to put it. And I said it in my comments.

Speaker Change: I've said it in my comments.

William Young Carroll: It's really, quite frankly; I think it's healthy. It makes you feel better about the economy. We've got a lot of business transactions going on, you know, and we're seeing, you know, clients get opportunities to sell some assets at higher values, a couple of those potentially business sales, like I said, you know, we've got some things that we're seeing out there that will probably continue into the quarter.

Speaker Change: It's really it's quite frankly, I think it's healthy it makes it makes you feel better about the economy, we've got a lot of business transactions going on.

Speaker Change: And we're seeing.

Speaker Change: To get opportunities to sell some assets.

Rick: At higher values couple of those potentially business sales like I said we.

Rick: We've got some things that were.

Rick: We're seeing out there that will probably continue to just get into the quarter I think at the end of the day, we can kind of we can kind of overcome that with the growth projections, we have but saw a huge number but it is notable that you might talk specifically about kind of dollars and what we're seeing on that front, yes, I mean again as far as.

William Young Carroll: I think at the end of the day, we can kind of we can kind of overcome that with the growth projections we have. But it's not a huge number. But but it's it's it is noticeable, right?

Rhett D. Jordan: You might talk specifically about kinds of dollars and what we're seeing on that front. Yeah, you know, I mean, again, as far as Payoffs in that, what I would consider larger-sized payoffs. You know, we had a total of about 27 or so million in the first quarter. As Billy commented there, Steve, all of that really was related to transactions where clients were just selling assets in the marketplace.

Rick: <unk>.

Rick: Payoffs.

Rick: What I would consider larger SaaS payoffs.

We had total of about probably 20.

Rick: Seven or so million in the first quarter.

Rick: As has really come into their stable.

Rick: All of that really would relate it to.

Rick: <unk> transactions, where clients were just were selling assets in the marketplace are quite a bit of it or what.

Rhett D. Jordan: Quite a bit of it was what might have been single-tenant transactions that were construction that were resold in the secondary market or were actually sold for the first time in the secondary market. And then the other piece of it, we've had a couple of instances of clients selling either companies or pieces of companies. And so they paid some debt down associated with those components of their overall business model.

Rick: What might have been single tenant transactions that were construction.

Rick: Some of that.

Rick: They were resold in the secondary market.

Rick: Actually we sold the first time in the secondary market and then the other piece of it we've had a couple of businesses of clocks selling either companies or pieces of <unk>.

Rick: So they paid some debt down associated with those components of their overall business model.

Stephen M. Moss: So, you know, we continue to fight that a little bit here and there. You know, I would anticipate we'll continue to see some pressure here and there as the year goes on in that space, just because with where cap rates are in our footprint compared to interest rates, I think we do have quite a few investors that are looking at the opportunity to still get a pretty good return on their asset and perhaps just sit on the sidelines a little bit longer waiting to start that next project to see if rates do happen to move down for them So that'll be an area that we will continue to watch and fight against a little bit. But that's kind of been the nature of what we've seen thus far.

Rick: So we continue to define that a little bit here and there I would anticipate we will continue to see some pressure here and there as the year goes in that space, just because with where cap rates are in our footprint.

Rick: Compared to interest rates. So I think we do have quite a few investors that are looking at the opportunity to still get a pretty good return on their on their asset.

Rick: Perhaps just.

Rick: And then on the sidelines, a little bit longer waiting to start that next project to see if rates stay would happen to move down for them a little bit so that'll be.

Rick: In the area that we will continue to.

Rick: Watch and fight against a little bit, but so, but that's kind of been the nature of what we've seen thus far in the year.

Okay.

William Young Carroll: Appreciate that. And so, in terms of just overall loan growth, I mean, it sounds like it still remains healthy. Just kind of curious, does the construction bucket, you know, it sounds like that will continue to go down here going forward for the next several quarters.

Speaker Change: I appreciate that and so in terms of just.

Speaker Change: Okay.

Speaker Change: Overall loan growth I mean, it sounds like still remains healthy.

Speaker Change: Just kind of curious does the construction bucket.

Speaker Change: Sounds like that will continue to go down here going forward for the next several several quarters.

Speaker Change: Yeah, I think it is overall, we production pipelines are healthy and right now we're on calls with our regional presidents yesterday and kind of get the feel for outlook and we still feel good about the outlook.

Speaker Change: But yes I mean.

William Young Carroll: Yeah, I think it is. Overall, the production pipelines are healthy. I know Rhett and I were on calls with our regional presidents yesterday and kind of getting a feel for Outlook. And we still feel good about it.

You can kind of speak to as you said any additional color that you think on that yes.

Speaker Change: If I heard you right I think you may have said there are sufficient for the construction book go down I don't know that I wouldn't expect it necessarily to go down I think it will hold steady as a year ago, which again, we are seeing good production opportunities, especially the <unk>.

Speaker Change: And our footprint.

Speaker Change: Unfortunately trying to predict the timing of warehouse sales that sort of thing at times can be a little a little more difficult and we are still in a very robust market and every footprint already and what you are seeing continual.

William Young Carroll: But, but, yeah, I mean, Rhett, you've got any, you can kind of.

Speaker Change: Demand for housing in our footprint are builders, we're able to affirm product relatively quickly.

Rhett D. Jordan: You can speak to any additional color that you think on that. Yeah, I don't know. Steve, if I heard you right, I think you may have said a quick, "inaudible."

Speaker Change: But we are also seeing good starts so I think we'll see that space whole Emperor studies, so you're bullish on construction and we just feel like the rest of the portfolio might grow at a fast pace.

Stephen M. Moss: Okay, I appreciate that. And, and then last question for me in terms of just housekeeping, I missed the total number, the total expense number that you gave Ron.

Speaker Change: Okay I appreciate that and then.

Speaker Change: Then last question for me in terms of.

Speaker Change: Just housekeeping I missed the total number the total expense number that you gave Ron.

Ronald J. Gorczynski: Oh, yeah, total expense a 29.7 million range 29.7 million range, with a salary of $71.3 million.

Speaker Change: Yes, total expense of 29, 7% range $29 $7 million range.

Speaker Change: But with salaries that extra $1 3 million.

Speaker Change: Yes, I got that alright. Thank you very much I appreciate all the color.

Stephen M. Moss: Yes, I got that. All right. Thank you very much. I appreciate all the color.

Speaker Change: Yes.

Speaker Change: Alright, thanks, Thanks, Steve.

Operator: Thank you. We have a follow-up question from Thomas Wendler on Stephens's behalf. Your line is open, please go ahead.

Speaker Change: We have a follow up question from Thomas Wendler with Stephens. Your line is open. Please go ahead.

Thomas Alexander Wendler: Hey, guys just wanted to hop in here with one more question.

Thomas Alexander Wendler: Hey guys, just want to hop in here with one more question. Previously, you guys have talked about looking both upstream and downstream for M&A opportunities. And in the slides here, I noticed that the focus is kind of on needle-moving opportunities right now. Can you just kind of outline what it would take?

Thomas Alexander Wendler: Lee you guys have talked about looking both upstream and downstream for M&A opportunities in the slides here I noticed that the focus is kind of on needle moving opportunities right. Now can you just kind of outline what the it.

Thomas Alexander Wendler: It would take.

William Young Carroll: Yeah, you know, and it's a good question. Yeah, it's in there.

Thomas Alexander Wendler: For you to want to purchase a bank in the asset size and geography things like that.

William Young Carroll: I think, you know, we're always looking at strategic opportunities that help us grow and not just be bigger, you know, the air focus now is really is really getting better from from a from a from a, you know, from anything from a downstream standpoint, it's kind of tough given given valuations today is the reason we've talked about share buybacks, things along those lines. I think that's what that would be first and foremost, so really not looking at anything.

Thomas Alexander Wendler: Yeah.

Lee: It's a good question. So yes, it's in there I think we're.

Lee: We're always looking at strategic opportunities that helps us grow and not just bigger either air focus now is really is really getting better.

Lee: From a from a permit for anything from a downstream standpoint, it's kind of tough given given valuations. Today is the reason we've talked about share buybacks things along those lines I think that that would that would be first and foremost so really not looking anything but.

William Young Carroll: But, you know, to me, always evaluating any type of strong strategic opportunity is something that we're, we're, we're always open to doing. No, I don't have any comments on that. The only thing I would add there is that our currency is just not a place where it's going to make it possible to do anything short term. That just makes sense for us. And we look and talk internally every day about opportunities. So really, nothing to report. All right.

Lee: To me.

Lee: Always evaluating any type of strong strategic opportunity is something that we're always open to any comments on that.

Lee: I would add there is our currency is just not in a place where it's going to make it possible to do anything short term.

Lee: That makes sense for us and we look and talk internally.

Lee: Good day about opportunities.

Speaker Change: Really nothing to report.

Speaker Change: Alright, I appreciate the additional color guys.

Thomas Alexander Wendler: Alright, I appreciate the additional call, guys.

Speaker Change: Yeah. Thanks. Thanks.

Speaker Change: We have another follow up from <unk> Strickland with Janney Montgomery. Your line is open. Please go ahead.

Operator: We have another follow-up from Feddie Strickland with Jannie Montgomery. Your line is open. Please go ahead.

Feddie Justin Strickland: Hey, just one more question on capital. Just curious, is there a certain level that you kind of want to maintain in terms of TC, common equity tier one, total risk-based, I mean, whatever metric you want to pick? Just wondering if there's a certain threshold that you kind of want to keep as you, you know, go forward and think about repurchases or any other method of capital deployment?

Speaker Change: Yeah.

Strickland: Hey, just one more question on capital just curious is there a certain level.

Strickland: But you kind of want to maintain in terms of TCE common equity tier one total risk base I mean, whichever metric you want to pick just wondering if there's a certain threshold that you kind of want to keep as you go forward and think about repurchases are.

Strickland: Any other method of capital deployment.

Ronald J. Gorczynski: Ron, you want to you want to? Yeah, I think we're at a good level right now. You know, we intend to use some of our, you know, earnings power to start doing some of the, you know, repurchases and stuff like that. But we are very comfortable at our level. Yeah, we could dip down to 1050 base points per capital ratio. But I think we're, I think we're, we're in a good spot. Again, just using more of our excess earnings to do some more capital-related activities.

Speaker Change: Brian you want to you want to yes.

Brian: We're at a good level right now.

Brian: We intend to use some of our earnings power to start doing some of the repurchases and stuff like that but.

Brian: We are very comfortable with our level, yes, we could dip down 10 to 50 basis points per per capital ratio, but I think we're I think we're in a good spot.

Brian: Again, just using more of our excess earnings to to do some more capital related activities.

Feddie Justin Strickland: Gotcha. And then just one additional one: with some of the M&A disruption in your backyard, are you seeing any incremental opportunities in terms of talent or new business, or have you sort of already picked up a little hanging fruit there?

Brian: Yeah.

Speaker Change: Gotcha, and then just one additional one but just curious.

Speaker Change: Some of the M&A disruption in your backyard are you seeing any incremental opportunities in terms of talent or new business or have you sort of already picked the low hanging fruit there.

William Young Carroll: Yeah, Feddie, we're still seeing some of that. You know, as I stated in my comments, we had a fairly robust start to the year by adding some really good quality bankers throughout our platform. So, you know, I think you're seeing, you know, disruption, you know, bank strategic changes. There are a lot of different things going on in our region. And so, you know, we want to be opportunistic about hiring good talent that fits us culturally and that can be additive quickly to our revenue line. So we're going to continue to look for those opportunities. And, you know, we're fairly bullish that we can find them.

Speaker Change:

Speaker Change: Yes.

Speaker Change: We're still seeing some of that.

Speaker Change: Stated in my comments, we were we had a fairly robust.

Speaker Change: Start to the year with adding <unk>.

Speaker Change: Adding some some really good quality bankers throughout our platform. So I think it is I think youre seeing.

Speaker Change: <unk>.

Speaker Change: Bank strategic changes Theres, a theres a lot of different things going on.

Speaker Change: In our region and so we want to be opportunistic.

Speaker Change: On hiring good talent that fits us culturally that can that can be added to quickly to our revenue line. So we're going to continue to look for those opportunities.

Speaker Change: We're fairly bullish that we can we can find them.

Feddie Justin Strickland: Got it. Thanks, Bill and Ron. I appreciate it.

Speaker Change: Got it thanks, Bill and Ron I appreciate it.

Wesley Miller Welborn: This concludes our Q&A. I'll now hand it back to Mela Welborn for final remarks.

Speaker Change: Thanks.

Speaker Change: This concludes our Q&A I'll now hand back to mellow welcomed for final remarks.

Wesley Miller Welborn: Thank you. We appreciate everybody joining us today. Thank you for your interest in our company, and I hope you each have a great week. Bye.

Mellow: Thank you we appreciate everybody joining us today. Thanks for your interest in our company and I Hope you have a great week. Thanks.

Operator: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.

Speaker Change: Ladies and gentlemen, thanks call has now concluded. Thank you for your participation you may now disconnect your lines.

Speaker Change: [music].