Q2 2024 SmartFinancial Inc Earnings Call

Ezra: Hello everyone and welcome to Smart Financial's second quarter 2024 earnings release and conference call.

Hello, everyone and welcome to Smart financial second quarter 'twenty 'twenty four.

Ezra: My name is Ezra, and I will be coordinating your call today. If you would like to ask a question, please press star followed by one on your telephone keypad. Now, if you change your mind, please press star followed by two. I will now hand over to your host, Nate Stroll, Director of Investor Relations, to begin. Nate, please go ahead.

Rob: Our earnings release and conference call. My name is as Rob and I will be coordinating your call today.

If you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press star followed by two I will now hand over to your host Nate Strolled director of Investor Relations to begin Nate. Please go ahead.

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

Nathan Strall: Thanks, and good morning, everyone and thank you for joining us for Smart Financial's second quarter 2024 earnings call.

Speaker Change: Today's call, we will reference the slides and press release that are available within the Investor Relations section on our website Smartbike Dot com.

Speaker Change: Billy Carroll, our President and Chief Executive Officer, who will begin our call followed by Ron Gorczynski, Our Chief Financial Officer, who will provide some additional commentary.

Nathan 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 will list the factors that might cause these results to differ materially in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward-looking statements because of new information, early developments, or otherwise, except as may be required by law.

Speaker Change: We will be available to answer your questions at the end of the call. Our comments include forward looking statements. These statements are subject to risks and uncertainties and the actual results could vary materially.

Speaker Change: A list of factors that might cause these results to differ materially in our press release and in our SEC filings, which are available on our website.

Speaker Change: 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.

Nathan 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 the investor presentation filed on July 22nd, 2024 with the SEB.

Speaker Change: 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 the Investor presentation filed on July 20.

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

William Young Carroll: And now, I'll turn it over to Billy Carroll to open our call. Thanks, Nate. And good morning, everyone. Great to be with you.

William Young Carroll: Thanks, Nate, and good morning, everyone. Great to be with you, and thank you for joining us today and for your interest in SMBK. I'll open our call today with some commentary, then hand it over to Ron to walk through the numbers in greater detail. After prepared comments, we'll open it up with Ron, Nate, Rhett, Miller, and myself available for Q&A. So let's jump right in.

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

William Young Carroll: Ill open our call today with some commentary then hand, it over to Ron walked through the numbers in greater detail.

Speaker Change: After our prepared comments, we'll open it up with Ron Nate.

Speaker Change: And myself are available for Q&A.

Ron: So let's jump right in a pretty good quarter for us where we saw more of the inflection we've anticipated we posted net income of $8 million for the quarter or <unk> 48 per diluted share on an operating basis. We came in at seven $8 million or <unk> 46 per diluted share the delta being a small gain on the sale of a piece of bank.

William Young Carroll: A pretty good quarter for us where we saw more of the inflection we've anticipated. We posted net income of $8 million for the quarter, or $0.48 per diluted share. On an operating basis, we came in at $7.8 million, or $0.46 per diluted share, the delta being a small gain on the sale of a piece of bank property. Jumping into the highlights, we'll be referring to the first few pages in our deck, pages 3, 4, and 5.

Ron: Great.

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

William Young Carroll: First, and in my opinion, one of the most important metrics, we continue to increase the tangible book value of our company, moving up from $21.66 per share, including the impacts of AOCI, and $23.18 excluding that impact. That's a 10% annualized quarterly over quarter increase. Looking at the graph on the lower right on page five, you'll see the value growth we continue to look to deliver for our shares. We had a very solid loan growth quarter, over 11% annualized, as we saw continued growth and new relationships and an increase in funding online.

Ron: First in my opinion, one of the most important metrics. We continue to increase the tangible book value of our company moving up from $41 66 per share, including the impacts of <unk> and $23 18, excluding that impact.

Ron: That's a 10% annualized quarter over quarter increase looking at the graph on the lower right on page five you will see the value growth, we continue to look to deliver for our shares.

Ron: We had a very solid loan growth quarter over 11% annualized as we saw continued growth in new relationships and an increase in funding on lines.

William Young Carroll: There was some contraction in deposits that was expected after experiencing fairly robust growth in the first quarter. While the balance sheet remained relatively flat, we've remixed it and continue to bring in some outstanding new client relationships. Our history of strong credit continues with the metric holding very low at 20 basis points and NPAs. As you know, we operate with a low risk profile in terms of credit.

Ron: There was some contraction in deposits that was expected after experiencing a fairly robust growth in.

Ron: In the first quarter.

Ron: While the balance sheet remained relatively flat.

Ron: We've remixed it and continue to bring in some outstanding new client relationships.

Ron: Our history of strong credit continues with the metric holding very low at 20 basis points in Npa's.

William Young Carroll: Our CRE ratios continue to hold flat, giving us the ability to add in those buckets when the right opportunity arises. The only movement we've really seen on credit has been a few lingering small trucking company credits we've worked through and have found equipment. We continue to be very pleased with the production of that team, just focusing a little more on the heavy equipment. Total revenue came in at $40.4 million, and interest income continued to expand with the inflection point we've discussed. Non-interest expenses were relatively steady at $29.2 million for the quarter.

Ron: We operate with a low risk profile in terms of credit.

Ron: Sorry ratios continue to hold flat, giving us the ability to add in those buckets when the right opportunities present.

Ron: The only move but we've really seen on credit has been a few lingering small trucking company credits, we've worked through in our fab equipment portfolio.

Ron: We've continued to be very pleased with the production of that team just focusing a little more on the heavy equipment sector.

Ron: Total revenue came in at $44 million.

Ron: And net interest income continued to expand with the inflection point we've discussed.

Ron: Noninterest expenses were relatively steady at $29 $2 million for the quarter.

William Young Carroll: The operating leverage that we've talked about on prior calls is starting to happen as we continue to grow the revenue line with minimal investments on the expense side. Looking at the charts on page 5, highlighting the operating PPNR chart, the movement upward has started after a couple of flattish quarters. We're looking forward to and expecting to continue to see that trend happen.

The operating leverage that we've talked about on prior calls is starting to happen as we continue to grow the revenue line with minimal investments on the expense side.

Ron: Looking at the charts on page five highlighting the operating PPE NR chart. The movement has started after a couple of flattish quarters.

Ron: We're looking forward to and expecting to continue to see that trend to happen.

William Young Carroll: Before Ron jumps into the details, just a couple of additional high-level comments from me on growth. We were pleased with the results on the loan side; we were up $96 million, again, about 11% annualized for the quarter and seven and a half percent annualized year to date. Our regional sales teams are doing a nice job growing new clients, and yield on the loan side continued to expand, with the full portfolio's average loan yield up nine basis points to 5.8 percent.

Speaker Change: Before rod jumps into the details just a couple of additional high level comments from me on growth. We were pleased with the results on the loan side, we were up $96 million again about 11% annualized for the quarter and seven 5% annualized year to date.

Speaker Change: Our regional sales teams are doing a nice job growing new clients.

Rod: Yields on the loan side continued to expand with the full portfolio's average loan yield up nine basis points to five 8%.

Rod: Mix was almost identical to the first quarter.

William Young Carroll: Our mix was almost identical to the first quarter. On the deposit side, we contracted a little, as I mentioned, after a higher-than-expected growth in Q1. The contraction was primarily some seasonality coupled with tax payments, plus in the quarter we rolled off $15 million in wholesale funding that was not replaced. The leveraging of deposits was by design. I'm pleased with the work on the deposit cost as well, as average total costs were up only four basis points in the quarter to 2.56%. We also continue to hold our non-interest bearing mix at over 20%, which is not an easy feat in this environment.

On the deposit side, we contracted a little as I mentioned after a higher than expected growth in Q1. The contraction was primarily some seasonality coupled with tax payments plus the quarter, we rolled off $15 million of wholesale funding that was not replaced.

Rod: The leveraging of deposits was by design.

Rod: Bringing our loan to deposit ratio to 83% I am pleased with the work on the deposit cost as well as average total costs were up only four basis points in the quarter to two 5%, 6%. We also continue to hold our noninterest bearing mix at over 20%, which is not an easy feat in this environment.

Rod: Yes.

Rod: And I think Ron I think that is at our mine and I'm going to pass it over to you. Thanks, Bill and good morning, everyone.

Ronald J. Gorczynski: And I think, Ron, I think that is it on mine. I'm gonna pass it over to you. Thanks, Billy. Good morning, everyone.

Ronald J. Gorczynski: We are very pleased with our balance sheet's performance over the last several quarters. Billy touched on our deposits, which I'll provide more commentary on in a minute, but I want to start with the positive trend we saw in our securities portfolio. For the quarter, the weighted average yield rose 66 basis points to 3.60%. As highlighted during previous calls, we had 150 million of low-yielding treasuries mature in the first half of the year, and we redeployed 118 million of those proceeds into new securities with a weighted average yield of 5.73%.

Ron: We're very pleased with our balance sheets performance over the last several quarters really touch based on our deposits, which I'll provide more commentary on in a minute, but I wanted to start with the positive trend we saw in our securities portfolio for.

Ron: For the quarter, the weighted average yield rose 66 basis points to 360%.

Ron: Highlighted during previous calls, we add $150 million of low yielding treasuries mature in the first half of the year and we redeployed $118 million of those proceeds into new securities with a weighted average yield of 573%.

Ronald J. Gorczynski: The remaining principal balance of these maturities has been mostly earmarked to fund new loan production. As a result, funding for new security purchases will only be allocated to the most advantageous opportunities and for general balance sheet management.

Ron: The remaining principal balance of these maturities have been mostly earmarked to fund new loan production.

Ron: As a result funding for new security purchases will only be allocated to the most advantageous opportunities and for general balance sheet management.

Ronald J. Gorczynski: To add a little more color to our deposit portfolio, during Q2, interest-bearing deposit costs increased seven base points to 3.23% and were 3.23% for the month of June. The weighted average cost of new deposit production for the quarter was 3.16 percent, and our overall deposit composition remained consistent, with non-interest bearing to total deposits remaining above 20 percent. Looking ahead, we expect deposit balances to rebound as our client liquidity builds, our client base grows, and our relationship managers continue to win net new deposit business relationships.

Ron: To add a little more color on our deposit portfolio during Q2 interest bearing deposit costs increased seven basis points to three 3%.

Ron: And were three 3% for the month of June.

Ron: Weighted average cost of new deposit production for the quarter was $3, one 6% and our overall deposit composition remained consistent with noninterest bearing to total deposits remained above 20%.

Ron: Looking ahead, we expect deposit balances to rebound as our client liquidity builds our client our client liquidity builds and relationship managers continue to win net new deposit business relationships.

Ronald J. Gorczynski: As messaged last quarter, we have passed the inflection point in our net interest margin, which expanded by 12 basis points at 2.97%. The margin enhancement was a result of several factors, including the previously mentioned yield enhancement on the securities portfolio and a favorable 7.84% weighted average yield on new loan origination. Additionally, total deposit costs increased only four basis points link order, signaling further funding cost stabilization.

Ron: As message last quarter, we have passed the inflection point in our net interest margin, which expanded by 12 basis points to 297%.

Ron: The margin enhancement was the result of several factors, including the previously mentioned yield enhancement on the securities portfolio.

Ron: And a favorable 784% weighted average yield on new loan originations.

Ron: Additionally, total deposit costs increased only four basis points linked quarter signaling further funding cost stabilization.

Ronald J. Gorczynski: While the variables influencing margin are difficult to forecast, we do expect continued margin expansion during the second half of 2024, primarily driven by new loan production, fixed and adjustable rate loan maturities, and our liability sense of interest rate position. Currently, $115 million of fixed and adjustable rate loans with a weighted average yield of 5.83% will mature or reprice routably over the remainder of 2024. We also have $150 million in time deposits repriced during the third quarter.

Ron: While the variables influencing margin are difficult to forecast. We do expect continued margin expansion during the second half of 2024, primarily driven by new loan production.

Ron: First an adjustable rate loan maturities and our liability sensitive interest rate position currently.

Ron: Currently a $115 million of fixed and adjustable rate loans with a weighted average yield of 583% will mature or reprice ratably over the remainder of 2024.

Ron: We also have a $150 million of time deposits repricing during the third quarter.

Ronald J. Gorczynski: And while our modeling doesn't include a change in the Fed funds rate during the third quarter, we have $949 million of variable rate loans and $1.2 billion of interest rate deposits that will reprice immediately upon Fed Funds Rate Movement. As a result of these factors, this quarter, we anticipate surpassing a $42 million plus quarterly operating revenue run rate and are targeting a margin in the range of 3.05%. Operating non-interest income was $7.3 million, adjusting for a $283,000 gain from the sale of a bank-owned property, and operating expenses were lower than forecasted at $29.2 million, largely as a result of ongoing cost-management efforts. Looking ahead to the third quarter, we are forecasting non-interest income in the mid $7 million range and non-interest expense in the approximately $30.5 million range, with salary and benefit expenses comprising $1 I'll conclude with Kappa.

Ron: And while our modeling doesn't include a change in the fed funds rate during the third quarter, we have $949 million of variable rate loans and $1 2 billion of interest rate deposits that will reprice immediately upon fed funds rate movement.

Ron: As a result of these factors this quarter, we anticipate surpassing a $42 million plus quarterly operating revenue run rate and are targeting a margin in the range of three 5%.

Ron: Operating noninterest income was $7 3 million adjusting for our $283000 gain from the sale of a bank on property and operating expenses were lower than forecasted at $29 2 million largely as a result of ongoing cost management efforts.

Ron: Looking ahead to the third quarter, we are forecasting noninterest income in the mid $7 million range and noninterest expense of approximately $35 million range with salary and benefit expenses comprising $18 million.

Ron: I'll conclude with capital for much of the quarter, our stock price was trading well below its intrinsic value not fairly reflect the value of our company as such we took advantage of this opportunity and repurchased over 136000 shares at a weighted average price of $21 57.

Ronald J. Gorczynski: For much of the quarter, our stock price was trading well below its intrinsic value, not fairly reflecting the value of our company. As such, we took advantage of this opportunity and repurchased over 136,000 shares at a weighted average price of $21.57. Despite the repurchases, our consolidated TCE ratio grew 23 basis points to 7.7%. However, our total risk-based capital ratio did decrease slightly by 17 basis points. However, this was largely due to our strong loan growth being funded with zero risk-weighted cash. Overall, we continue to be in a well-capitalized position with a very strong future credit and earnings outlook. With that said, I'll turn it back over to Billy. Thanks, Ron.

Ron: Despite the repurchases are consolidated TCE ratio grew 23 basis points to seven 7%.

Ron: Our total risk based capital ratio did decrease slightly by 17 basis points. However, this was largely due to our strong loan growth being funded with zero risk weighted cash overall, we continue to be in a well capitalized position with a very strong future credit and earnings outlook with that said I'll turn it back over to Billy.

William Young Carroll: Thanks, Ron. I want to reiterate again the value proposition for our company, drawing your attention back to page seven of our deck, reminding our stakeholders of what we've accomplished over the last few years with the best still to come. As we've discussed, the major investments we made in seven de novo markets a couple of years ago were comparable to an acquisition without issuing stock.

William Young Carroll: Thanks, Ron.

William Young Carroll: I want to reiterate again the value proposition for our company drawing your attention back to page seven of our deck.

William Young Carroll: Winning our stakeholders of what we've accomplished over the last few years with the best still to come.

William Young Carroll: We've discussed the major investments we made in seven de Novo markets. A couple of years back was comparable to an acquisition without issuing stock when alluded a return a little to accomplish this but now that we're through absorbing the 500 basis point rate increase we can feel the operating leverage starting to kick in.

William Young Carroll: We diluted our return a little to accomplish this, but now that we're through absorbing the 500 basis point rate increase, we can feel the operating leverage starting to kick in. We've made it through the tough part and are getting over the hump of moving our ROA and ROE back to over 1% and 12%, respectively, as we had prior to the market expansions and ratings. The Operating Foundation we built coupled now with the sales organization we're creating, I'd be very optimistic about our company's future. We're now more fully leveraging the functionality of our Encino platform.

William Young Carroll: Made it through the tough part and are getting over the hump of moving our ROA and ROE back to over 1% and 12% respectively. As we had prior to the market expansions and rate increases.

William Young Carroll: Operating foundation, we've built coupled now with the sales organization, we're creating that would be very optimistic about our company's future.

William Young Carroll: We are now more fully leveraging the functionality of our <unk> platform. We're utilizing the sales force front end to consistently create a stronger prospecting process for our sales teams.

William Young Carroll: We're utilizing the Salesforce front end to consistently create a stronger prospecting process for sales, and we're leaning into their pricing and profitability systems to coach our teams on the value of full relationships. The regional president structure we have and the accountability we're putting into these zones are really starting to bear fruit. Our operating platform combined with a reinvigorated sales force. Operating in some of the best markets of the country is a pretty good form of. We're continuing to look to add sales talent that fits our culture.

William Young Carroll: And we're leaning into their pricing and profitability systems to Kevin care teams and the value for relationships.

William Young Carroll: Regional President structure, we have and the accountability, we're putting into these zones is really starting to bear fruit.

William Young Carroll: Our operating platform combined with a reinvigorated sales emphasis operating in some of the best markets of the country is a pretty good formula.

William Young Carroll: We've added over 10 new sales team members so far this year and have several in our talent pipeline currently. I believe we continue to be one of the region's banks of choice for great bankers. I also think we're positioned well for whatever materializes in the way of rates. We're continually running several scenarios of forecasting to make sure we can accomplish our return targets and those objectives on a variety of paths. So to summarize, I like where we're sitting.

William Young Carroll: We're continuing to look to add sales talent that fits our culture. We've added over 10, new sales team members. So far this year and have several in our talent pipeline. Currently I believe we continue to be the one of the regions Bank of choice for Great. Bankers also think we're positioned well for whatever materializes the way of rates we're continually.

William Young Carroll: Running several scenarios of forecasting to make sure we can accomplish share return targets.

William Young Carroll: And those objectives on a variety of paths so to summarize I like where we're sitting.

William Young Carroll: We are executing and have started gaining the operating leverage that we anticipated with a solid path back to our return to our original margin, and credit continues to be very sound. And we're seeing great new client growth and sales energy in our company. All said, a very solid first half for our company. I appreciate the work of the SmartFinancial and SmartBank teams and the efforts of the nearly 600 associates we have. This team is continuing to perform well and building a great culture. We're going to stop there and then open it up for questions.

William Young Carroll: We are executing and it started getting the operating leverage.

William Young Carroll: That we anticipated with a solid path factor return products margin is starting to expand back credit continues to be very sound and we're seeing great new client growth and sales energy in our company.

William Young Carroll: All said a very solid first half for our company I appreciate the work of the smart financial and Smart Bank team and the efforts of over the near 600 Associates. We have this team is continuing to perform well and building a great culture, we're going to stop there and then open it up for questions.

Speaker Change: Thank you very much if you would like to ask a question. Please press star followed by one on your telephone keypad now.

Speaker Change: When preparing to ask your question. Please ensure your devices on muted locally if you change your mind. Please press star followed by <unk>.

Ezra: When preparing to ask your question, please ensure your device is unmuted locally. If you change your mind, please press star followed by two. We've got our first question from Will Jones with KBW. Will, your line is now open. Please go ahead. Yeah.

Our first question from Globe Jones with K B W. Will your line is now open. Please go ahead.

Will Jones: Yeah, hey, thanks. Good morning. Morning, Will.

William Bradford Jones: Yeah, Hey, thanks, good morning.

William Bradford Jones: Good morning.

Will Jones: Hey, so great work on the margin this quarter. You know, I think it may have been a little underappreciated, some of the reinvestment opportunities you guys were having. Ron, you called out some of the significant bond maturities you saw over the first half of the year. I just wanted to start there, so the bond yields of 360 that we saw this quarter, does that kind of fully reflect, you know, the full benefit of some of the reinvestment you've done?

William Bradford Jones: So great work on the margin this quarter I think it may have been a little underappreciated. So some of the reinvestment opportunities you guys are having.

Ron: Ron you called out some of the significant bond maturities you saw over the first half of the year.

Speaker Change: I was just curious just wanted to start there.

Rob: The bond yields of three 360 that we saw this quarter does that kind of fully reflect the full benefit of some of the reinvestment you've done or I'm, just trying to gauge where there may be a little more upside to two securities yields as we move into the third quarter. So Rob Whats a good jumping point off do you think for that securities yield per center.

Will Jones: Or I'm just trying to gauge, you know, where there may be a little more upside to security yields as we move into the third quarter. So, Ron, what's a good jumping point, do you think, for that security yield percentage?

Speaker Change: <unk>.

Ronald J. Gorczynski: Yeah, for the next couple of quarters, we're probably in the 360-365 range. We managed to get pretty close to full benefit for Q2. So it'll be like kind yields going forward.

Rob: Yes for the next couple of quarters, we're probably in the $363 65 range.

Speaker Change: We managed to get pretty close to full benefit for Q2, so it'll be like con yields going forward.

William Young Carroll: Yeah, okay, that's great. And then, I mean, the commentary around deposit costs, you know, [inaudible].

Speaker Change: Yes, Okay, that's great and then the commentary around deposit costs.

Speaker Change: It feels very favorable.

Speaker Change: I think I recall last quarter that we talked about March deposit costs of $3 23, and that's kind of where we landed this quarter and our new deposits are even coming on lower so.

Speaker Change: I know, it's still can be too early to call victory on deposit costs, but do you think we could see an inflection next quarter or maybe as we exit 2024.

William Young Carroll: Well, I'll start and then Ron, you can chime in. Well, yeah, I mean, we Unknown Speaker, I think that playing there will benefit this quarter, you know, we very well. We're going to kind of wait and watch. We could see we could leverage it a little bit more in Q3. You know, so I think I don't know if we're ready for an inflection yet without a rate cut. But I think we're we can hold our own for a little, Rana, any additional callers. Yeah, we definitely should have done that.

Speaker Change: Well I'll start and then Ron you chime in.

Ron: I think we.

Ron: Nice job on on on that front I'd like to your point, it's not easy and I don't know.

Ron: We've declared victory yet obviously, we feel like rates.

Ron: I think next next move market into.

Ron: Down.

Ron: But the team's done a good job of.

Ron: Holding that as we talked about we leveraged.

Ron: A little bit of that liquidity. So we're not we're not in a position where we like we have to push on the deposit rates.

Ron: So that I think that played their benefit this quarter.

Ron: We very well, we're going to kind of wait and watch.

Ron: We could say, we could leverage it a little bit more in Q3.

Ron: So I think.

Ron: I don't know if we're ready for an inflection yet without a rate cut but.

Speaker Change: I think were weakened.

Speaker Change: Hung around for a little while.

Ron: Ron at any any additional color.

Ronald J. Gorczynski: Yeah, we, you know, we want to, we can't be aggressive on our rate assumptions. We're thinking, you know, the amount of increasing has, has, has stalled. So we're looking at three to four basis points, I think, of costs, incrementally going quarter over quarter, still underpacing the amount of our loan yields or asset yields increasing much more than that.

Speaker Change: Yes.

Speaker Change: We want to we can't be aggressive on our rate assumptions, we're thinking the amount of increasing.

Ron: Has has has stalled so we're looking at three to four basis points I think of cost incrementally going quarter over quarter.

Ron: Still under pacing the amount of our loan yields are asset yields increasing much more than that.

Ronald J. Gorczynski: Okay, that's super helpful. And then just last question, Ronda, just housekeeping: the 150 million time deposits that were repriced, where are those going to? And where are they coming from in terms of rates?

Ron: Okay.

Ron: Super Helpful. And then just last from me Ron just housekeeping, the 150 million of time deposits that reprice wherever.

Speaker Change: Those go into.

Speaker Change: And where are they coming from in terms of rate.

Ronald J. Gorczynski: Yeah, for Q1, we had one where they're going to we had about 78% 80% retainage. And they're going anywhere from sheet rate, so anywhere from 275 to low fours. Again, it all depends on the customer, the amount, and such. So there's really not one answer for that. We're seeing a variety of outcomes, but we are retaining about 80% of the time.

Speaker Change: Yes.

Speaker Change: For Q1.

Speaker Change: We had one where they are going to we had about 78% 80% <unk>.

Speaker Change: And theyre going anywhere from sheet rates, so anywhere from $2 75 to low fours.

Speaker Change: Again, it all depends on the customer the amount and such so.

Speaker Change: There's really not one answer for that is we're seeing a variety of outcomes, but we are retaining about 80% of the time deposits.

Will Jones: Yeah, okay. That's helpful. Great quarter, guys. That's it for me.

Speaker Change: Yeah, Okay. That's helpful.

Speaker Change: Quarter guys. That's it for me.

Thanks will thanks Luke.

Ezra: Thank you. And our next question is from Stephen. Unknown Speaker With Pippa Sandler. Stephen, your line is now open, please go ahead.

Speaker Change: Thank you and our next question is from Stephens.

Alton with Piper Sandler Stephen Your line is now open. Please go ahead.

Stephen: Thanks, guys. Good morning.

Stephen: Yeah. Thanks, guys good morning.

Stephen M. Moss: So I appreciate all the commentary.

Speaker Change: For our guidance there.

Stephen: I appreciate all the commentary and the forward guidance there. I think he said 305 NIM expected for the third quarter. If I look back at my notes, I think we were talking about 290 for this quarter. So I guess my question is, what came in better than you would have expected at this point last quarter? And do you think some of those trends can continue versus that relative?

Stephen: I think you said 305 NIM expected for the third quarter.

Speaker Change: Look back at my notes I think we were talking like a 290 for this quarter. So I guess my question is what.

Speaker Change: What came in better than you would've expected at this point last quarter and do you think some of those trends can continue versus that relative to the group.

Ronald J. Gorczynski: Well, yeah, I'll start, and Billy can add to it. First, this is the third consecutive quarter where our growth in interest income exceeded the growth in interest expense, a trend we expect to continue. You know, I think our loan yields, our loan production came in higher than expected. Our loan yields, you know, we expected, well, they are expected to increase seven to nine basis points. And I think we're a little bit less than that for our expectations last quarter.

Speaker Change: Yeah, I'll start and bill can add to it.

Speaker Change: First this is the third consecutive quarter, where our growth in interest income exceeded the growth in interest expense.

Speaker Change: And we expect to continue.

Bill: I think our loan yields our loan production came in heavier than expected.

Bill: Our loan yields we expected well why.

Bill: We are expected to increased 79 basis points and I think we're a little bit less than that for <unk>.

Bill: Our expectations last quarter.

Ronald J. Gorczynski: And I think our deposit costs have slowed. We're probably a little bit heavier, but we came in, you know, at four basis points. So, really, a combination of things. And also, our loan and deposit mix has changed. So, you know, kind of a variety of good things that are happening for us at this point.

Bill: And I think our and our deposit costs have slowed we're probably a little bit heavier, but we came in at four basis points. So really a combination of things and also our our loan to deposit mix has changed so.

Speaker Change: Kind of a variety of.

Speaker Change: The good things that are happening for us at this point.

Ronald J. Gorczynski: Yeah, that's helpful. That makes sense. And then as you think about the prospect, I know you said you don't have any rate cuts, I guess, in the third quarter in kind in your model, but when you think about the prospect of rate cuts, have you guys quantified what maybe each 25 basis point cut looks like for you guys from a NIM perspective or an NII perspective? I mean, obviously, I can see the asset sensitivity that's in the presentation, but I was just curious how you think about it on each maybe 25 basis point move.

Speaker Change: Yes, that's helpful that makes sense.

Speaker Change: And then as you think about the prospect I know you said you don't have any rate cuts I guess in the third quarter and kind of your model, but when you think about the prospect of rate cut have you guys quantified what maybe each 25 basis point cut looks like for you guys from a NIM perspective.

Speaker Change: Or an NII perspective, I mean, obviously I can see the asset sensitivity within the presentation, but just curious how you think about it on each maybe 25 basis point move.

Ronald J. Gorczynski: Yeah, at this point, we're slightly liability sensitive, you know, these 25 base points cuts are really not hurting us. It helps us, it's not hurting us. So I think, incrementally, we're probably putting on $400,000 of income annually, or two basis points we pick up for that for the next quarter if it happened early in the quarter. So let's just say two basis points.

Speaker Change: Yeah at this point.

Speaker Change: Liability sensitive.

Speaker Change: These 25 basis points cuts are really not.

Speaker Change: It helps us it's not hurting us so I think incrementally, we're probably putting on $400000 of income.

Annually.

Speaker Change: Two basis points, we pick up.

Speaker Change: For that for the next quarter.

Speaker Change: If it happened early in the quarter.

Speaker Change: So, let's just say two basis points.

William Young Carroll: And then as we think about, and apologies if I missed it, kind of that ideology behind the $50 million in operating revenue for 3Q25, I think was kind of where you guys were targeting. Do we still think that's a viable path? And if so, how much balance sheet growth do we need to see to get there, or where does NIM need to go? How can we think about the path to that number and the progress we would need to see to get there?

Speaker Change: Okay, Great and then as we think about.

Speaker Change: I apologize if I missed it kind of that ideology behind the $50 million in operating revenue for <unk> 25, I think it was kind of where you guys were targeting do we still think thats a viable path and if so.

Speaker Change: How how much balance sheet growth do we need to see to get there or where does the NIM need to go like how can we think about the path to that.

Speaker Change: That number and the progress we would need to see to get there.

William Young Carroll: Hey, Stephen, it's Billy. Yeah. Yeah, we still feel we still feel very good about our ability to get there. Obviously, it's a function of growth and it's a function of growth and margin. You know, expense controls are kind of a given, you know, we believe we will continue to hold our expense line, you know, we just have reasonable growth over the next several quarters. And I think you see us, as Ron said, he kind of gave us our guidance of getting up, hopefully, north of 42 is what we think for next quarter. I think you can see that trend continue to move up into the high 40s.

Speaker Change: Hey, Stephen It's Bill yes.

Speaker Change: Yes.

Speaker Change: We still feel we still feel very good about our ability to get there obviously.

Speaker Change: It's a function of growth is to foster growth and margin <unk>.

Speaker Change: Expense controls are kind of a given we believe we continue to hold our expense line.

We just just reasonable growth over the next several quarters and I think you see us as Ron said, you had kind of given our guidance of getting up hopefully north of 42 is what we think for next quarter. I think you can see that trend continue to move up into the high forties.

William Young Carroll: And so for us, you know, it's a function of getting some growth. It's a lot of getting growth on the balance sheet. I think, you know, for us, if we can get, you know, ideally get a couple of hundred million of growth on the balance sheet over the next year, I think that's, I think that's doable. I think if we do that, with a NIM and the 335 to 340 range, coupled with the balance sheet growth, I think it gets us there by the end of next year.

Speaker Change: And so for us it is.

Ron: Function of getting some growth.

Speaker Change: It's a bunch of getting the growth on the balance sheet.

Speaker Change: For us if we can get ideally get a couple of hundred million dollars.

Speaker Change: On the balance sheet over the next year I think Thats I think Thats doable I think if we do that with a with a NIM in the $3 35 to $3 40 range.

Speaker Change: Coupled with the balance sheet growth.

Speaker Change: I think it gets as it gets us there by the end of next year and Thats our goal.

Speaker Change: As we've talked about.

William Young Carroll: And that's our goal. You know, as we've talked about, and others on this call, the growth that we had coupled with a little bit of this rate increase squeezed us a little bit, but that was fine. We're coming out of it now, and we have a really good, I think, path. We obviously have to execute. We have to grow the balance sheet, but our sales teams are teed up to do that.

You and others on this call.

But the growth that we had coupled with the with a little bit of this rate increase squeeze just a little bit but that was fine we're coming out of it now.

Speaker Change: Haven't really good I think a path, we obviously got to execute we got it we got to grow the you got to grow the balance sheet, but the sales team.

William Young Carroll: And I think if we can get this couple hundred million of growth on the balance sheet coupled with that margin expansion into that 335 range, it gets us where we want to be from a return target.

Speaker Change: Up to do that and I think if we can get this couple of hundred million dollars.

Speaker Change: Growth on the balance sheet, coupled with that margin expansion into that $3 35 range.

Speaker Change: It gets us where we want to be from a return target standpoint.

Stephen: Absolutely. That's extremely helpful. Thank you. I appreciate it all the time.

Speaker Change: Absolutely that's extremely helpful color. Thank you I appreciate it.

Speaker Change: Thanks, Dave and thanks Steven.

Ezra: Thank you. Our next question is from Steve Moss with Raymond James. Steve, your line is now open. Please go ahead.

Speaker Change: Thank you. Our next question is from Steve Moss with Raymond James Steve. Your line is now open. Please go ahead.

Thomas: Hey, good morning, guys. This is Thomas filling in. Hey, Tom. All right. Good morning.

Speaker Change: Hey, Good morning, guys. This is <unk> filling in for Steve.

Tom: Hey, Tom Good morning.

Thomas: Hey, so loan growth is really strong this quarter. Um, you know, what are some of the kind of notable underlying trends you're seeing there, maybe, you know, geographically, or in a product segment? And then maybe how's the overall pipeline looking?

Speaker Change: Hey, so.

Speaker Change: Loan growth was really strong in the quarter.

Speaker Change: What are some of the kind of notable underlying trends youre seeing there maybe geographically or in that product segment.

Speaker Change: Maybe how is the overall pipeline looking.

Speaker Change: Okay.

William Young Carroll: Yeah, I'll start with Pipeline. I'll start with Pipeline. Then I'll let Rhett jump in and talk a little bit about kind of what we're seeing, what the mix is, what the trends look like. Overall, Pipeline's still really good.

Yes, I'll start with pipeline I'll start with pipeline that I'll I'll, let rich.

Rich: Jump in and talk a little bit about kind of what we're seeing what the mix is what's trends look like.

Rich: Overall pipelines.

Speaker Change: Still really good.

William Young Carroll: You know, we continue to have, as we saw this quarter in Q2, and I think we're going to see a little bit more in Q3, continued growth on some of the lines that we have out there, some of the construction deals that are still funding. So that's a plus, but I still feel pretty good about the guidance that we've given in the past. I feel pretty good about that, that kind of mid to high single-digit guidance on the loan growth side.

Speaker Change: We've got.

Speaker Change: We continue to have as we saw this quarter in Q2, I think we're going to see a little bit more in Q3 continued.

Speaker Change: Both on some of the lines that we have out there some of the construction deals that are still.

Speaker Change: Funding, so that's a plus but I still feel pretty good about our guidance.

Speaker Change: That we've given in the past I feel pretty good about that kind of that mid to high single digit guidance on the loan growth side.

William Young Carroll: We feel good about our ability to grow the deposit side too. A little of it's going to be how we want to handle the rate fluctuation. As I said, we may look to lever a little bit more in Q3 because we've got the ability to do it. It's just going to be a function of how we want to manage that. But Pipeline's good, and we continue to feel optimistic about their ability to grow the loan book. Rhett, you might talk a little bit about what we've seen, the types of loans that we've been putting on lately and kind of what we expect for Q3. Sure. Yeah, Thomas, it's, if you look at it.

Speaker Change: We feel good about our ability to.

Speaker Change: Two to grow the deposit side too a little of it is going to be how we want to handle the rate fluctuation as I've said, we may look to lever a little bit more in Q3, because we've got the ability to do it. It's just could be a function of how we want to manage that but the pipelines are good.

Speaker Change: We feel continue to feel optimistic on our ability to grow the loan book right you might talk a bit about what we've seen the types of.

Thomas: Types of loans that we've been putting on lately and kind of what we expect for Q3 sure Thomas.

Speaker Change: If you look at the <unk>.

Portfolio itself, just our balanced growth has really come predominantly.

Thomas: Our C&I lending space or commercial real estate owner occupied and non owner occupied a good mix there and then we've had good.

Speaker Change: You do a balance.

Speaker Change: Our one to four family term debt so.

Speaker Change: Construction as you can see in our ratios we've continued to see our CRE construction ratios decline that's been kind of a combination we did have a couple of larger.

Speaker Change: One to four construction projects that paid off.

Speaker Change: So.

Speaker Change: The beginning half of the year, but we do have a number of good projects underway now that we believe will see similar dollars over so it's been a pretty.

Unknown Executive: [inaudible] Unknown Executive, Unknown Attendee, Nathan Strall, SmartFinancial Inc., Unknown Attendee, [inaudible]

Speaker Change: A pretty good mix across the portfolio and you can see that in the slide deck with the fact that our.

Speaker Change: Our.

The categories within the portfolio, we're continuing to just trend.

Speaker Change: Relatively steady period to period, so what we're just not seeing big swings in each center.

Speaker Change: It's been very geographically diverse.

Speaker Change: Sure.

Speaker Change: We typically will see some of our larger segment markets.

Speaker Change: Are all contributing.

Speaker Change: At a pretty comparable rate.

Speaker Change: But are also are looked at market et cetera. Some of our newer footprint markets are beginning to gradually increase our production as well so it's really coming from across the footprint.

William Young Carroll: Thomas, I'll add too, you know, and I touched on a little bit in my prepared comments about our regional president structure and how we're really, really getting those teams engaged on the sales side. I think we've always sold well, but right now, I mean, we've got a really good group of leadership in these regional spots, and the growth that we're seeing, the sales energy that we have, it's as good as we've ever had in this company, in a market where it's not easy to sell.

Speaker Change: And Thomas I'll add too.

Thomas: I touched on a little bit in my prepared comments about our regional president structure and how we're really really getting those teams engaged on the sales side. We've all I think we've always sold well, but right now I mean, we've got.

Thomas: We've got a really good group of leadership.

Thomas: These regional spots and the growth that we're seeing the sales energy that we have.

Thomas: It's as good as we've ever had in this company and in a market, where it's not easy to sell.

William Young Carroll: And so I think that's the reason you hear some optimism and air tone. Obviously, we've got work to do, we've got targets that we need to hit, that we've stated publicly that we're going to go get after, and I know we can get there, but it's a good energy, and, as Miller and Rhett alluded to, it's spread throughout all of our geography, so it's very evenly balanced, and we feel really good about the prospects of growing that side.

Thomas: And so I think Thats. The reason you hear some optimism.

Airtime, we've obviously, we've got work to do we've got targets that we need to hit.

milliron red: We've stated publicly that we're going to go get after it and I know, we can get there, but but it's a it's a good energy and as his milliron red alluded to it's spread throughout all of our geographies so very evenly balanced.

milliron red: And we still feel really good about the prospects of growing that side.

milliron red: Yeah.

Thomas: Okay, great. Thanks for all the colors, guys.

Speaker Change: Okay, great. Thanks for all the color guys.

Speaker Change: So I'll cover it for me I'll step back thank you.

Speaker Change: Thank you thanks, Dave Thanks.

Speaker Change: Hum.

Speaker Change: Got it.

Speaker Change: That's right.

Thomas: That'll cover it for me. So I'll step back. Thank you.

Speaker Change: Our next question is from Russell Gunther with Stephens Russell. Your line is now open. Please go ahead.

Ezra: Thank you. Thanks, Dave. Thomas, Thomas, Thomas, that's right. Thomas, he's seven. He's seven, that's right.

Russell Gunther: Our next question is from Russell Gunther with Stephens. Russell, your line is now open. Please go ahead.

Russell Gunther: Hey, good morning, guys.

Russell Gunther: Russell I wanted to.

Russell Gunther: Just to circle back to the loan growth discussion so I.

I think the mid to high single digits implies kind of closer to the mid <unk>.

Speaker Change: Single digits for the back half of the year, obviously <unk> was quite strong but.

Speaker Change: One would just be helpful. If you could set the table more specifically for the next couple of quarters on loan growth and.

Speaker Change: And I'd also be curious to learn if there were any notable commercial lender hires in <unk>.

Speaker Change: Yes.

Speaker Change: Second half growth.

Speaker Change: And that's the reason I wanted to kind of we balanced it out little bit lighter Q1, little stronger Q2 came in at seven and a half year to date.

Speaker Change: I think we're still I think we're right there give or take.

Speaker Change: I think again that 5% to 8% number still feels pretty good again, it's just going to be a function of K cups.

Speaker Change: Coupled with our pipelines are good it's just a function of getting them all closed in on the balance sheet.

Speaker Change: Some deals may fall out, but we still we're still very optimistic that we can continue our growth.

Speaker Change: Similar to what we saw in the first half of the year. So.

Speaker Change: Again.

Speaker Change: Yes.

Speaker Change: I feel like that can be apparently it may be not be it may not be as lumpy as we saw.

Speaker Change: First half but.

Speaker Change: 5% to 8% is still I think a pretty good range.

Speaker Change: As far as far as new hires.

Speaker Change: Picked up a couple of really good commercial bankers.

Speaker Change: In the first half as I talked about we've added 10 total new sales team members some of that to recalibrate it folks come and go but yes I think.

Speaker Change: The team that we've added.

Speaker Change: Have been really really good and most of most of those have been on the commercial side.

Speaker Change: We've had we've had a couple in a couple of other revenue producing arms, but most of it commercial couple of really good private bankers.

Speaker Change: So.

Those folks that we feel very good about their ability to continue to bring in new business. So I think thats. The reason were we kind of lean to continue to feel like we can hit those.

Those those loan growth targets on a and it's still in a world where loan growth organic loan growth is not easy.

Speaker Change: Yep understood I appreciate it and then you.

Speaker Change: You guys have touched on.

Speaker Change: <unk> and CND concentration ratios on the call and maybe pointed them.

Speaker Change: Little bit higher based on back half of the year growth expectations, but just give us a sense for where you plan to target those ratios and whether or not.

Speaker Change: That is any impediment to kind of growth targets for the back half of this year or next.

Speaker Change: Yeah.

Speaker Change: And then again ill, let Bret chime in with his thoughts on <unk>.

Bret: On fundings.

Speaker Change: We we've always like commercial real estate, we don't we don't shy away from it.

Bret: Again, I think when you look at the way we underwrite the types of deals that we look at the sponsors that we have on those deals.

Feel good about it so yes, I don't think were not looking to go lean in heavy to CRE, but we want to continue to prudently use.

Bret: Bucket, where we end up.

Speaker Change: I'll, let you all know just kind of based on kind of where you think projections, our fundings I'll, let you kind of chime in on thoughts around the kind of growth maybe in the ratios over the next quarter or two.

Speaker Change: As we mentioned a little bit earlier, we had a handful of.

Speaker Change: Projects that we're wrapping up near the end of last year.

Speaker Change: The transition into the first part of the <unk> of 24.

Speaker Change: Paid off so we had some some balance reduction as a result of that.

Speaker Change: But as I mentioned, we still continue to have good production in the segment of new loans going on the books that we'll see some more some advances so.

Speaker Change: I would envision that we will begin to see those ratios begin to transition back up a little bit.

Speaker Change: But I don't see it being a significant move honestly and balances outstanding between now and year end. We may we may see it turned up a little bit from where it sits today. This is really I think the lowest quarters, we've had in a while.

Speaker Change: But I don't see it moving significantly.

Speaker Change: So at the end of the day I think it's still going to be somewhere in there.

Speaker Change: We may see it move up closer to us.

Speaker Change: 70, <unk> type of ratio market and the construction segment.

Speaker Change: I didn't get much higher than that.

Speaker Change: Okay, great. Thank you guys and then last one for me you quantified the benefit that.

Speaker Change: A rate cut would bring to the table what type of rate backdrop do you guys assume in that kind of $50 million revenue target we discussed earlier.

Speaker Change: Yes.

Speaker Change: Right now we're kind of we're running this thing you're kind of in a flat I mean flat rate scenario. Obviously, we know what the market is saying and I think we all feel like the next moves are down it's just a matter of when.

But but but the assumptions that we built in <unk>.

Ben: Ben in a in a rate environment that holds flat.

Speaker Change: Got it okay, great guys. Thank you very much for taking my questions.

Rob: Thanks, Rob Thanks Russell.

Thank you just a reminder to ask a question. Please press star followed by one on your telephone keypad now when prepping to ask a question. Please ensure your devices and you take locally if you change your mind. Please press star followed by two.

Christopher <unk>: Our next question from Christopher <unk> with Janney Montgomery Scott.

Speaker Change: Christopher Your line is now open. Please go ahead.

Russell Gunther: Hey, good morning, guys.

Christopher <unk>: Thanks, Good morning, I wanted to go back to the pricing points that youre, making in the presentation and also this morning is there a minimum kind of new loan yield.

William Young Carroll: And Russell, I wanted this morning to circle back to the low growth discussion. So I think the mid to high single digits implies kind of closer to the mid single digits for the back half of the year. Obviously, 2Q is quite strong, but it would just be helpful if you could set the table more specifically for the next couple quarters on loan growth, and I'd also be curious to learn if there were any notable commercial underhires in 2Q.

William Young Carroll: Yeah, second half growth, you know, and that's the reason I alluded to, we balanced it out a little bit lighter Q1, a little stronger Q2, came in at seven and a half years to date. I think we're still, I think we're right there, you know, give or take. I think that, again, that five to 8% number still feels pretty good. Again, it's just going to be a function of, you know, can we do a couple of deals; our pipelines are good.

William Young Carroll: It's just a function of getting them all closed and on the balance sheet. You know, some deals may fall out, but we're still very optimistic that we can continue our growth, similar to what we saw in the first half. So again, I feel like that can be fairly, it may not be as lumpy as we saw in the first half, but five to 8% is still, I think, a pretty good range.

William Young Carroll: As far as new hires, you know, we picked up a couple of really good commercial bankers in the first half, as I talked about. We've added 10 total new sales team members. Now, some of that's recalibrated. We, you know, folks come and go, but yeah, I think the 10 that we've added have been really, really good. And most of those have been on the commercial side. We've had a couple in a couple of other revenue-producing arms, but most of it has been commercial, a couple of really good private equity firms, and so those folks, we feel very good about their ability to continue to bring in new business.

Speaker Change: Going on the books today, just was curious kind of how to think through that and do you think that new yield may go a little bit higher as you get into third and fourth quarter.

William Young Carroll: So I think that's the reason we kind of lean to continue to feel like we can hit those loan growth targets. And it's still in a world where loan growth, organic loan growth, is not easy.

William Young Carroll: Yep, understood. I appreciate it, Philly. And then you guys have touched on, you know, CRE and CND concentration ratios on the call and maybe pointed them a little bit higher based on back-to-the-year growth expectations. But just give us a sense for where you plan to target those ratios and whether or not that is any impediment to kind of growth targets for the back half of this year or next.

Rhett D. Jordan: So yeah, I don't think we're not looking to go lean in heavy to CRE, but we want to continue to prudently use that bucket where we end up. Rhett, I'll let you know, just kind of based on kind of where you think projections are and funding. I'll let you kind of chime in on thoughts around kind of growth, maybe in the ratios over the next quarter or two. Yeah, you know, as we mentioned a little bit earlier, we had a handful of projects that were wrapping up near the end of last year that transitioned into the first part of this year that have paid off.

William Young Carroll: Yeah, and I'll start and again, I'll let Rhett kind of chime in with his thoughts on, you know, funding. You know, we've always liked commercial real estate, you know; we don't we don't shy away from it. You know, again, I think when you look at the way we underwrite the types of deals that we look at the sponsors that we have on those deals, we feel good about it.

Rhett D. Jordan: So we had some balance reduction as a result of that. But, as I mentioned, we still continue to have good production in the segment of new loans going on the books that will see some advances. So I would imagine that we will begin to see those ratios begin to transition back up a little bit. But I don't see it being a significant move, honestly, in balances outstanding between now and We may see it trimmed up a little bit from where it sits today.

Speaker Change: Chris.

Chris: Okay you.

Chris: You gave the stats on what new loan yields going on in Q2 were 776.

Chris: <unk>.

Speaker Change: Obviously, a lot of that again.

Chris: Chris between between fixed and float.

Chris: It is but that's that's probably.

Speaker Change: A pretty good assumption it might be a little bit lower than that just thinking about some of the deals.

Speaker Change: <unk> got out there in the pipeline so it may be a little bit lower than that but not much assuming again assuming.

Speaker Change: Right stay at the spot, where we see them today.

Speaker Change: But but now I think we can continue to hold.

Speaker Change: And that mid sevens level.

Speaker Change: Okay, and then if we think through just a modest interest rate cut in the future.

Is the beta on the way down going to be similar to what we've seen.

Speaker Change: In your experience the last couple of years and we're too early to tell.

Speaker Change: Ron you were yes, I'll take that.

Ron: I think it's too early to tell the comp the market competition is really going to justify what we can do we intend to.

Speaker Change: <unk>.

Ron: We intend to take advantage of the first couple of rate cuts and then see what the market's bearing and see how how our production channeling it but.

Ron: So really short answer is it's too early to tell at this point.

Ron: No.

Ron: It is it is going to be tough, obviously, we're going to.

Ron: Given our given our air position with where we are on liquidity and our loan to deposit ratio. We've got we're doing.

Ron: We're going to probably try to push a little bit a little bit faster to ron's point.

Ron: You got it you still have competition you got to contend with so we're going to try to balance that but it's a game time decision.

Ron: It is a game time decision and I do want to follow up Chris.

Chris: On your first question.

Chris: Nate.

Speaker Change: Being said don't forget about our right rock model, it's one of the things on loan yields.

Speaker Change #100: I mentioned in my prepared comments the work that we've been doing with our pricing profitability model, it's been really impactful and so when.

Speaker Change #100: We're using our risk adjusted return on capital Bogeys.

Speaker Change #100: The sales team so.

Even if we are pricing the loan.

Speaker Change #100: A little more aggressively for example, we're still getting a rate rock returns in a lot of those that's just a function of the ancillary business the deposit business.

Speaker Change #100: The treasury business that we are getting from those clients. So yes, I think when we look at loan yields we try to look at we look at it very holistic and under the guise of risk adjusted return on capital just just kind of add to add a little additional color to that comment.

William Young Carroll: No that's great I appreciate that and then just one quick follow up as Billy had customer attitudes change at all to the positive I'll just thinking through the pipeline comments on the call. This morning is there anything different now that perhaps earlier this year.

William Young Carroll: Yes.

Speaker Change #101: And we get out.

Millar: I'll get out mill are not particularly around a lot in our markets right now we're in several of our markets last week visiting with clients and prospects.

Speaker Change #103: There continues to be a very.

Speaker Change #103: I guess cautious optimistic tone.

Speaker Change #103: That we see in.

Speaker Change #103: And really designs, where we're operating so yes, Chris I think overall.

Chris: There is there are some there are some optimism.

Speaker Change #104: Obviously, the market is changing and inflation.

Speaker Change #104: Still impactful although slowing.

Speaker Change #105: And we're seeing youre seeing some some slowdown and some clients, we're seeing a little bit of slowness here there are a little bit of a downward trend, but its a small downward trend off of a record 2023.

Miller: So things are still relatively good and thats kind of what we're seeing from cloud to Miller I know youre in the market any thoughts yet and I certainly don't want to talk politics, but that's certainly on everybody's mind and it's just that there's something different every day and I think that's the way the way it's going to blow into in November.

Speaker Change #107: That's all fair and thank you all for the comments. This morning, it's very helpful.

Chris: Thanks, Chris.

Speaker Change #107: Thank you very much.

Speaker Change #109: We have no further questions. So I will.

Wesley Miller Welborn: I will pass back to Miller welborn to compute.

Brett D. Rabatin: This is Robert Rabatin.

Wesley Miller Welborn: Thanks, Andrew and thank you all for being on the call today and for being interested in what we're doing here at the bank and for being part of our story. We appreciate your support and have a great day. Thank you.

Brett D. Rabatin: [inaudible] We may see it move up closer to a 70s type ratio mark in the construction segment, but I doubt it will be.

Brett D. Rabatin: But doubt it; it'll get much harder than that.

William Young Carroll: Okay, great. Thank you guys. And then last one for me, you quantified the benefit that a rate cut would bring to the table. What type of rate backdrop do you guys assume for that kind of $50 million revenue target we discussed earlier?

Ronald J. Gorczynski: Yeah, right now we're kind of running this thing kind of in a flat, I mean, flat rate scenario. But obviously, we know what the market's saying. And I think we all feel like the next moves are down. It's just a matter of when. But the assumptions that we built in have been in a rate environment that holds flat.

Miller-Welborn: Thanks, Ezra. And thank you all for being on the call today and for being interested in what we're doing here at the bank and for being part of our story. We appreciate the support, and have a great day. Thank you. Thank you very much. This concludes today's call. You can now disconnect your lines.

Russell Gunther: Got it. Okay, great guys. Thank you very much for taking my question.

William Young Carroll: Thanks, Russell.

Ezra: Thank you. Just a reminder to ask a question, please press star followed by one on your telephone keypad now. When preparing to ask your question, please ensure your device is unmuted locally.

Ezra: If you change your mind, please press star followed by two. We've got our next question from Christopher Marinak with Jenny Montgomery Scott. Christopher, your line is now open. Please go ahead.

Christopher Marinak: Thanks. Good morning.

Christopher Marinak: I wanted to go back to the repricing points that you made in the presentation and also this morning. Is there any minimum kind of new loan yield that is going on in the books today? Just was curious kind of how to think through that. And do you think that new yield may go a little bit higher as you get into third and fourth? Uh, Chris, I don't know what it is. You gave the stats on what new loan yields are going on. 776.

Christopher Marinak: You know, I think, obviously, a lot of that, again, Chris, between fixed and float, you know, it is, but that's probably still a pretty good assumption. You know, it might be a little bit lower than that just thinking about some of the deals that we've got out there in the pipeline. So it may be a little bit lower than that, but not much, assuming again that rates stay at the spot where we see them today. But, now I think we can continue to hold in that at that mid-sevens level.

William Young Carroll: Okay, and then if we think through just a modest interest rate cut in the future,

Unknown Executive: [inaudible] In your experience, the last couple years are too early to talk.

Unknown Executive: I'll take that. I think it's too early to tell the company, you know, the market competition is really going to justify what we can do. We intend to, We intend to take advantage of the first couple of rate cuts and then see what the market's bearing and see how our production handles it. But, you know, some really short answers. It's too early to tell at this point. No, I think it is.

Speaker Change #110: Okay. Thank you very much. This concludes today's call you can now disconnect your lines.

William Young Carroll: It is going to be tough. Obviously, we're going to, you know, given our Chris given our position with where we are on liquidity and our loan to deposit ratio, we got, we're gonna, we're gonna probably try to push it down a little bit a little bit faster. To Ron's point, you know, you got it; you still have market competition you got to contend with. So we're going to try to balance that. But it's a game-time decision. It is a crucial game-time decision. And I do want to go

Christopher Marinak: Now that's great. I appreciate that.

William Young Carroll: And then just one quick follow-up question is, you know, whether Billy had customer attitudes changed at all to the positive, like thinking through the pipeline comments on the call this morning. And is anything different now than perhaps, you know, earlier this year? You know, and we get out I know I know we all get out Miller and I, particularly are out a lot in our markets right now. We're in several of our markets last visiting with clients and processing Unknown Speaker There continues to be a very, I guess, cautiously optimistic tone that we see in really the zones where we're operating. So yeah, Chris, I think overall, there's

William Young Carroll: And I certainly don't want to talk politics, but that's certainly on everybody's mind. And it's just, there's something different every day. And I think that's the way the wind's going to blow until November.

Christopher Marinak: Nope, all fair. And thank you all for the comments this morning. It's very helpful. Thanks, Chris. Thank you very much.

Ezra: Thank you very much. We currently have no further questions, so I will. I will pass back to Miller-Welborn, to conclude.

Speaker Change #110: [music].

Speaker Change #110: Yes.

Speaker Change #110: [music].