Q4 2024 SmartFinancial Inc Earnings Call
Speaker Change: Nathan Strall, Rhett Jordan, Ronald Gorczynski, Wesley Welborn, Rhett Jordan, Ronald Gorczynski, Rhett Jordan, Ronald Gorczynski, Wesley Welborn, Rhett Jordan, Ronald Gorczynski,
Ezra: Hello everyone and welcome to the Smart Financial fourth quarter 2024 earnings release and conference call. My name is Ezra and I will be your coordinator today. If you would like to ask a question please press star followed by one on your telephone keypad. If you change your mind press star followed by two. I will now hand you over to Nate Stroll, Director of Investor Relations to begin. Please go ahead.
Nate Stroll: Our business development pipeline to continue to build solid I'm still holding to our past guidance of mid to high single digits on loan growth as we look out over the next few quarters, even though we bettered that in 2024 I also expect that we can pace deposit growth to fund that organically.
Nate Stroll: I'm going to stop there and hand, it over to Ron to let him dive into some details so Ron take it from here. Please.
Ron: Thanks, Bill and good morning, everyone I'll start by highlighting some key deposit results as Billy mentioned, we had a very strong loan growth quarter fully funded through our deposit production.
Ron: During the quarter, we experienced non brokered deposit growth of $350 million nearly 34% on an annualized basis, resulting in a loan to deposit ratio of 83%.
Ron: The weighted average cost of non brokered production was 337%.
Ron: Total interest bearing cost for the deposit portfolio decreased 18 basis points to three 2% and were 297% for the month of December.
Ron: The deposit portfolio composition remained relatively consistent with the slight increase in noninterest bearing deposits, increasing 21% of total deposits.
Ron: With some transitory noninterest bearing deposits in our year end totals, we anticipate that this percentage will stabilized around 20% moving forward.
Ron: Net interest margin expanded quarter over quarter, increasing 13 basis points to three 4%.
Ron: This expansion is attributable to several factors, including our prior quarters deposit repositioning efforts and a favorable 7.08% weighted average yield on new loan originations, resulting in a total loan portfolio yield increased two basis points to six 4% which includes fees.
Ron: Net interest income net interest income grew $2 8 million or 31% annualized supported by $150 million of growth in interest earning assets.
Ron: Looking ahead, we anticipate our margin to continue expanding throughout 2025, although at a slower rate than observed in the past two quarters.
Ron: The primary factors driving this margin expansion, our new loan production and the amortization and maturities of lower yielding fixed and adjustable rate loans.
Ron: We anticipate reduction in deposit costs to progress at a slower pace due to the decreased probability of further federal reserve rate cuts.
Ron: The higher costs associated with new deposit production.
Ron: As a result of these factors and current market conditions, we anticipate our first quarter 2025 margin in the three two to 3% to 5% range.
Ron: Our quarterly provision expense for credit losses amounted to $2 1 million, primarily from higher loan growth.
Ron: Net charge offs to average loans were two basis points on an annualized basis overall, the bank's asset quality remained strong with nonperforming loans to total loans at 20 basis points and the allowance for credit losses remaining steady at 96 basis points of total loans.
Ron: Operating noninterest noninterest income for the quarter totaled 9.0 million exceeding expectations.
Ron: This performance was driven by increased revenue from insurance commissions and mortgage banking, which contributed 355000 and 131000, respectively. However.
Ron: However, this was partially offset by a decrease of <unk> 500000, and investment services revenue, primarily due to decreased volume experienced during the quarter.
Ron: Operating expenses were $32 3 million slightly above our third quarter guidance due to higher performance based incentive accruals and commissions from strong Q4 performance. Additionally, increased other real estate and loan related expenses increased from the writing down some repossessed equipment.
Ron: In our equipment Finance division to expedite the liquidation process.
Ron: Looking ahead to the first quarter, we are forecasting noninterest income in the mid to high $7 million range and noninterest expense in the range of 32 to $32 $5 million with salary and benefit expenses in the range of 19, 5% to $20 million as accruals for incentive based compensation will fluctuate based on our performance.
Ron: We continue to focus on cost management efforts centered on controlling expenses.
Ron: Additionally, we previously reported the establishment of a real estate investment Trust subsidiary to monitor and manage the performance of certain real estate loans and to create a more taxpayer rental structure.
Ron: There were some final adjustments that slightly elevated our tax rate, but as anticipated that our corporate effective tax rate to stabilize at the 20% range.
Ron: I'll conclude with capital.
Ron: During the fourth quarter, we allocated significant capital to high return lending opportunities, which in turn slightly leveraged our capital ratios.
Ron: Coupled with a $6 $3 million decrease in our accumulated other comprehensive income the company's consolidated TCE ratio decreased 50 basis points to seven 5%.
Ron: Total risk based capital remained well above regulatory well capitalized standards at 11, 2% overall, we believe our capital capital levels remain optimally balance to continue to support growth, while maximizing returns on equity with that said I'll turn it back over to Billy Thanks, Ron.
Speaker Change: And I want to reiterate again the value proposition with our company drawing your attention back to page eight of our deck.
Speaker Change: On the road a lot in 2020 for reminding our investors and stakeholders of the investments we've made and what we accomplished recently, we are seeing the profitability inflection and have clear line of sight on our return targets. We're building a great franchise and arguably some of the most attractive markets in the country and it put together a team that is moving us in a great direction.
Speaker Change: Changes in our company over the last couple of years have been tremendous and it's formed in my opinion one of the southeast brightest stories, we've said, we need a little time to sync up the new markets and teams we've added in recent years.
Speaker Change: But those markets were now rolling with Birmingham, Albany, <unk> flagship offices open and market share growing quickly.
Speaker Change: The key themes for us in 2025, we're going to be similar to 2024 with a focus on generating operating leverage and hitting our profitability targets.
Speaker Change: The majority of expense growth in the company. During this coming year should be primarily talent related and measured methodical investments in our banking platform.
Speaker Change: We will continuously look to hire sales associate to align with our company culture and 2024, we added 17, new revenue producing team members and have several on our talent pipeline currently.
Speaker Change: We're adding some outstanding regional bankers to our team and I believe we continue to be one of the regions companies of choice for great bankers.
Speaker Change: And associate standpoint, we were honored to become a certified great place to work. This year as you can see we've noted noted it in our deck.
Speaker Change: This quarter. This is in addition to being recognized as a regional top workplace for eight consecutive years, so to summarize I love, where we're sitting we are executing.
Speaker Change: <unk> grown our revenue line and gaining operating leverage margin is expanding and we can see further tailwind coming with significant rate resets set to occur in our fixed rate loan portfolio.
Speaker Change: Credit continues to be very solid and we're seeing great new client growth with a sales energy that is outstanding also had a great quarter and a great year for our company as we continue to build a profitable and attractive franchise I. Appreciate the work of our smart financial Smart Bank team and the efforts of our near 600 associates. So I'm very proud of the work that we.
Speaker Change: Have going on here at SMB K, so I'm going to stop there we will 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: Please ensure your devices and muted Lucky if you change your mind or your question has already been answered. Please press star two.
Speaker Change: Our first question comes from will Jones with K B W. Will your line is now open. Please go ahead.
Will Jones: Yeah, Hey, good morning, everyone.
Speaker Change: Well good morning, good morning.
Speaker Change: So Ron I wanted to start on loan yields.
Really impressive feat that you're able to see that loan yield.
Speaker Change: Hold stable quarter over quarter, just in light of some of the handful of cuts.
Speaker Change: But we've recently gone live just hoping maybe you could help us reconcile how.
Speaker Change: How are you able to kind of achieve that stability quarter over quarter I assume.
Speaker Change: <unk> growth this quarter was it was.
Speaker Change: Another contributing factor as well as maybe some of the fixed rate reports until when do you have.
Speaker Change: Can you just help us maybe piece together, how that loan yield transpired through the quarter, and maybe where we could expect to see that trend through the early half of 2025.
Speaker Change: Yes, that's a great question.
Speaker Change: We our loan yields are production is still low.
Speaker Change: North of 7% for originations during the quarter, we did see also.
Speaker Change: The opportunities we have received excess loan prepayments, which kind of accounted for three basis points of the margin also.
We've seen a lot of traction on.
Speaker Change: On both not only good loan lending opportunities, but still draws from our unfunded line of credits at a higher rates. So at this point.
Speaker Change: We managed to block and tackle to keep these consistent but we will see a trending down a little bit lower as we move forward into 2025 at least for the first first quarter or two.
Great and I know you said it but could you just remind me of where new loan production was up and then the fourth quarter.
Speaker Change: Seven 8%.
Speaker Change: Okay perfect.
Speaker Change: And maybe the ability for you.
Speaker Change: It's great to hear that Theres still optimism on maintaining.
Speaker Change: Mid to high single digit loan growth pace.
Speaker Change: Just curious if maybe you could talk about how maybe some of the competitive dynamics have changed.
Speaker Change: How do you expect maybe the competitive dynamics change in the coming years.
Speaker Change: The industry feels better.
Speaker Change: Fairly bold up on growth as a whole.
Speaker Change: And then maybe also touch on how you view your CRE concentrations and whether that could possibly be a limiting factor.
Speaker Change: For you guys next year.
Speaker Change: Yeah, well yeah, good good questions yet from a growth standpoint.
Speaker Change: We have like I said, we've guided to that mid to high single digits again, which is kind of where we've been for the last few quarters, we've been able to we've been able to beat that I think some of it as well.
Speaker Change: We always build some paydown assumptions in there.
Speaker Change: Their projections as well and quite frankly, we just didn't get a lot of that in the second half of the year. So I think if you look at some normal pay down pay pay down and pay off.
Speaker Change: Happenings along with production I still think we're about right the competitive side.
Speaker Change: It's still there.
Speaker Change: It is I think when you look at the regions, where we operate I mean, <unk> got really good economic climates, you've got really good economic environments.
Speaker Change: I think there is a bullish ceiling.
Speaker Change: And at least in the regions, where we're operating probably nationally as well, but I know, where we were we're doing doing business.
Speaker Change: It is you know rates while rates have stayed elevated a little bit.
Speaker Change: I think we still feel good about our ability to compete.
Speaker Change: It's a I think it is going to be an interesting year I know.
A lot of a lot of other companies like us feel like they can continue to grow.
Speaker Change: Their balance sheet, but we said, we're very optimistic about that our sales teams as I've mentioned.
Speaker Change: Really starting to hit on almost all cylinders and really we're very bullish on kind of the position we are as a company.
Speaker Change: To your CRE question, and I'll throw it over to Rhett to let him give a little bit of color on this as well.
Speaker Change: Don't think that'll be a big limiter.
Speaker Change: We had some really good opportunities over the last quarter to pick up some nice.
Speaker Change: Nice just nice core relationship opportunities that add a little bit of a CRE emphasis.
Speaker Change: But I think the majority of the growth that we're seeing is still probably fairly fairly fairly balanced as as as our production charts have shown but rather I'd love to let you maybe just kind of dive into that just a little bit deeper and talk a little bit about what we're seeing on the production side the mix.
Speaker Change: Maybe just a little bit about CRE piece, whether that is coming.
Speaker Change: Yes, if you look at.
Speaker Change: I'll start with this but this particular quarter you look at this quarter's production.
Speaker Change: And balances I mean about 34% of that was.
Speaker Change: CRE.
Speaker Change: Taco category.
Speaker Change: 60, plus percent came in a mix of C&I owner occupied real estate one four family.
Speaker Change: Again, you look at the chart on page 10 of our loan composition mix you can see it really did not swing to any degree of significance of any category. So we've continued to see good opportunities to build upon in the series space, but we're seeing good opportunities across the entire spectrum.
Speaker Change: <unk> of loan types and that production has been.
Speaker Change: Very consistent it's been consistent geographically, it's been consistent with when the portfolio from a diversification standpoint, so while we are continuing to see opportunities in the CRE segment.
Speaker Change: It is.
Speaker Change: Normalized piece of our production and we think that trend is going to continue as we look at our pipeline and I'd like to really emphasize the fact, how geographically spread out it was within all of our markets as well again, just any limits your doctor.
Speaker Change: No. That's great. That's all very helpful color guys, well, congrats on a great quarter and great greater into the year.
Speaker Change: Okay. Thank you will.
Speaker Change: Okay.
Speaker Change: Our next question comes from Russell Gunther with Stephens. Thank Russell. Your line is now open. Please go ahead.
Speaker Change: Hey, good morning, everyone. This is Nick Lord zoning I'm, just filling in for Russell.
Speaker Change: Hey, Nick.
Speaker Change: So this.
Speaker Change: Hey, so to start off I wanted to talk about your $50 million revenue target for <unk> 25.
Speaker Change: What are what specific factors are giving you guys the confidence in achieving that $350 million revenue target.
Speaker Change: Yes.
Speaker Change: Yes.
Ron: Ill give a little hot maybe just to kind of a macro thought on that and then let Ron maybe talk a little bit more about how.
Ron: How we how we plan to get there you know really when you look at the revenue growth that we've had over the last few quarters I mean, it's really more just continuation of the trend.
Ron: When you look at.
Ron: When you do the math just on kind of what we're looking at from a from a.
Ron: Loan and deposit growth standpoint continue to hold those expense lines.
Ron: You get to that $50 million kind of right there towards the end of Q3 were at their Q4. So we.
Ron: We still feel very confident.
Ron: On our ability to hit these these near term.
Ron: Return targets.
Did that $50 million revenue line on a quarterly run rate by the by the second half towards the end of the year and that that should equate to that 1%, 12% ROE ROA ROE respectively, and that's the near term goal and then then we'll sit down and kind of assess what the next bill needs to be but.
Ron: We've said.
Ron: On these calls.
Ron: And we're out at our meetings.
Ron: We feel very very good about our ability to hit that surround that and if you've got any additional color on how.
Ron: How we plan to achieve this.
Ron: Did you handle most of the high points really loan growth funded by our deposit.
Ron: Deposit growth.
Ron: We will have a larger balance sheet and we do expect.
Ron: Not as fast but margin expansion throughout 2025 those are really.
Ron: Together in our our loan repricing as I mentioned in my opening prepared remarks, our repricing is a pretty powerful through this period of time.
Ron: Yeah.
Ron: Okay. That's great. Thank you and then one more question could you discuss your office exposure in general and specifically in Nashville, including how it's holding up and expectations going into 2025 in.
Ron: And maybe just maybe any color on that recent sales Philips plaza in the 85% discount in the $16 million why don't you guys provided.
Ron: Yeah.
Ron: Yeah pretty pretty good pretty good deal to be honest, but I'll give some high cause and I'll, let I'll, let maybe go into the details a little bit we don't do we really don't do a lot of office we havent.
Ron: Traditionally obviously, we had a opportunity with a nice core.
Ron: <unk> core client in that Nashville zone that we took obviously public information from the D filings took the opportunity to.
Ron: To do that which we feel very very good about really.
Ron: Got it.
Ron: That relationship with that client there.
Ron: But we feel really good about our office exposure.
Ron: And really when you look at it manageable I don't think I personally don't think that that's a that's an indication that nashville's got issues I think when you look at that when you look at those types of transactions obviously.
Ron: Yes, those some of those deals were done with a different type of term and structure and borrowers back pre COVID-19, yes, there has been a little bit of a reset on some buildings like that but I.
Ron: I don't view that as a as a real concern it may make research reset some comps a little bit lower on online.
Ron: Like buildings, but.
Ron: You might see a few more of those one off but I still think you're going to see much of it kind of in our peer space.
Ron: But you want to give maybe maybe dive in a little bit deeper just kind of some of our office detail yes.
Ron: From a from a perspective of the office exposure as a whole I mean, it actually has been fairly steady has actually declined a little bit as the year has gone just an amortization for what was in the portfolio.
Ron: The.
Ron: The transaction.
Ron: It is very granular if our I think our average loan size in that office segment is.
Ron: Just south of about 1 million too if I remember correctly.
Ron: I don't have the statistic right here in front of me, but I'm going off memory I believe that's correct.
Speaker Change: The transaction at national facilities.
Ron: But a word I would sort of define.
Ron: That certainly for us is a little bit of a unicorn there were some extremely sleek components associated with that deal. I mean, you mentioned, the fact that the purchase price the discount the purchase price for this for this buyer compared to the previous valuation you saw it in the <unk>.
Ron: And then maybe it was extremely low I mean, obviously there was.
Ron: There was a reason.
Ron: So were needed to liquidate that that asset when they did.
Ron: <unk> picked up an extremely attractive purchase price.
Ron: Yes.
Ron: A smaller portion of that.
Ron: And then the dollar amount you mentioned.
Ron: So that filing keep in mind there is some.
Draw component to that for additional tenants. So that is not the dollar amount would be funded at closing.
Ron: Our our exposure position in that particular property is extremely good.
Ron: And we have for our records with local borrowers speakers.
Got it got it that's great detail, that's all I have thanks for taking my questions guys.
Thank you.
Speaker Change: Our next question is from Steve Moss with Raymond James Your line is now open. Please go ahead.
Steve Moss: Good morning, guys.
Speaker Change: So hey, Steve on a nice quarter here and maybe just.
Steve Moss: Maybe just starting with expenses morning, guys.
Speaker Change: So you kind of mentioned.
Speaker Change: Our pace of reasonable expense growth pace for 2025.
Speaker Change: I'm just kind of thinking are you thinking about mid single digits, maybe mid to upper just given.
Speaker Change: Some of the trends you guys are having.
Speaker Change: Yes, yes.
Speaker Change: I'll go high level and that Ron let Ron maybe give you give you some expense our percentage guidance for the most part we have when you look at it.
Speaker Change: Really done a nice job.
Speaker Change: Seeing some expense growth quarter over quarter as 24 happened but.
Keep in mind, and we have you are kind of bringing on three new flagship offices in these markets with team members that we needed to even though we had.
Speaker Change: Temporary offices by the time, you do that there's there's a little bit of growth. There. So when you look at a kind of a Q4 run rate we feel that's a pretty good proxy going forward now Ron Ron could got that in I mean, theres, some particulars little heavier with incentive compensation based on.
Speaker Change: Based on second half production.
Speaker Change: But really on the whole we think we can continue to hold that relatively stable.
Ron Ron: Moving into 2025, but Ron once if you would maybe you can just give some thoughts on percentage growth guidelines.
Steve Moss: Yes, Steve.
Speaker Change: Taking fourth quarter 2024, and annualize it we're looking at a two 5% to 3% growth rate in expenses as Bill indicated it's not a year over year growth because our franchise has grown considerably.
Speaker Change: Most of the increases a majority of it will be in salary and benefits category and to a lesser extent data processing related upgrades.
Speaker Change: Pretty pretty stable I think thats a good.
Speaker Change: Good.
Speaker Change: Good measuring stick to go by as you go forward in 2020 Fox forecast.
Speaker Change: Okay, Great I appreciate all that color and then just in terms of going back to loan growth here.
Speaker Change: Just curious obviously, a really good quarter and I hear you guys. Some of it was on the drawdowns from unfunded commitments, but curious was there any pull forward, maybe a production and could we see a little bit of temporary just given kind of.
Speaker Change: A pull forward and maybe a seasonally softer first quarter.
Speaker Change: Yeah Yeah.
Speaker Change: Pipeline.
Speaker Change: We're starting the year here our pipeline is still pretty good.
Speaker Change: So we're still Ralph we're still bullish on our ability to to kind of hit that.
Guidance, plus or minus yes.
Speaker Change: To your point, we did have some deals that we had anticipated red I believe we had a couple of deals that we had anticipated would be Q1 dollars 25 deals that got accelerated to close at the end of the year. So we got a little bit of a tailwind on that growth in the second half of December.
Speaker Change: So that was a piece of it so yes.
Speaker Change: I don't project us doing 20% annualized.
Speaker Change: Again this quarter I think we'll have a more reasonable number, but but down a little bit.
Speaker Change: From there.
Speaker Change: Okay got you.
Speaker Change: Most of my questions are asked answered really appreciate all the color today. Thanks guys.
Sanjay: Thank you Sanjay.
Sanjay: Our next question comes from Stephen Scouten with Piper Sandler.
Speaker Change: Your line is now open. Please go ahead.
Stephen Scouten: Hey, good morning, guys. Thanks.
Stephen Scouten: And then maybe following up on maybe your last comment there of just.
Stephen Scouten: You know, 20% not necessarily sustainable, but 13, 4% was tremendous for the year in a year when when a lot of people were struggling to deliver any growth.
Stephen Scouten: I guess what im.
Speaker Change: What I'm wondering is what would lead you to be able to put up a similar number there like a 13 or 14% versus maybe the.
Stephen Scouten: The high single that you spoke to earlier.
Stephen Scouten: And any color on current pipelines or trends, even if it's anecdotal would be helpful.
Stephen Scouten: Yeah.
Stephen Scouten: The pipeline is good.
Stephen Scouten: You can chime in too.
Stephen Scouten: We look at pipelines.
Stephen Scouten: Take a look at what our credit teams got in their underwriting.
Stephen Scouten: Huge right now is really pretty solid a lot of it is a lot of really good C&I business.
Ive alluded.
Stephen Scouten: Over the last several quarters to the to the.
Stephen Scouten: The robustness of our sales process.
Stephen Scouten: And I really do like and I do think that's had a big impact on the growth that you've seen I mean, we've really spent some time with just good solid foundational.
Stephen Scouten: Prospecting and calling efforts.
Speaker Change: Countability in our markets our sales leadership Bear Air Division Regional President groups or just are doing such a great job.
Stephen Scouten: Really.
Speaker Change: Regarding the growth on both the loan and deposit side of our balance sheet now.
Speaker Change: I do feel I think we can continue that I mean, obviously, we have opportunities to to make some additional hires that could be needle movers that could that could boost.
Speaker Change: That guidance up a little bit.
Speaker Change: But right now we.
Speaker Change: We need to continue we're going to continue to focus on making sure. We're getting the right return targets on the deals that we're looking at.
Speaker Change: So not just not just growth for the sake of growth, but with strong profitable growth that's coming with good relationships. So we're going to spend some time on that.
Speaker Change: And again feel pretty bullish about it but rather know if you've got any kind of any other anecdotal pipeline commentary that you and I know you touched on the key part of it I mean to me as you look at the production we've had for the year.
Speaker Change: It has been as we talked about where it is dark spot across the portfolio and geographically.
Speaker Change: A lot of that is just basic blocking and tackling and bank and one on one.
Speaker Change: Pursuing new prospects opportunities with existing clients, but also would say Billy pointed out in his in his commentary we have brought in over the course of the year several new hires.
Speaker Change: Very strong producers in their respective footprints and we did see some really good new relationship production from those higher so that has been a little bit of a.
Speaker Change: A little bit of a.
Speaker Change: Value added well in our ability to produce what we did this year over the original guidance.
Speaker Change: Think it speaks to the culture of the entire bank not just the production side, but the entire back I think our whole team of associates will work out hustle and out close and I'll put them up against any bank anywhere in our market.
Speaker Change: Hello, It very color there I guess.
Speaker Change: Leads to a follow up question around kind of the push pull around letting the investments you've made.
Speaker Change: Continue to run their course, I know Bill you said kind of 25 look a bit like 24, where you continue to move that profitability up but hired 17 producers I think you said this year a few more in the pipeline. How do you think about that opportunism. There if theres good talent out there to be hired versus wanting to let the the profitability kind of pull through how do you how do you balance that.
Speaker Change: That dynamic.
Speaker Change: Thanks.
Speaker Change: Great question.
Speaker Change: And it's something we talk about a lot internally.
Speaker Change: And you said the word its balance I think we're really focused we want to hit and we will hit. These these near term profitability targets, we're going to do that we said we're going to do it. So we're not going to let anything standard way of us doing that and so I think that is.
Speaker Change: That's one.
Speaker Change: But at the same time, we want to make sure that we're investing in the platform appropriately that we're adding the right sales talent.
Speaker Change: When they get here. So it truly is a balanced Stephen and it's something that we work with but I think we're trying to do it.
Speaker Change: The umbrella of making sure we hit these these profitability metrics that that we said, we're going to act or getting all these offices up online.
Speaker Change: I think we can do both we will be selective in.
Speaker Change: Obviously, if something comes down the road that you they will evaluate it but prior stand from our standpoint, I think it's just going to be continued.
Speaker Change: Growth the way that we did it this year or in a few new key folks when we can find them and keeping that balance to make sure we hit the metrics.
Speaker Change: Stephen I'll add too we get asked a lot about Oh gosh you audra.
Speaker Change: Acquisitive bank grown through acquisitions through the years, what's next what's next.
Speaker Change: We talk a lot about just continuing to perform this year in executing on where we are and im not so sure our best M&A strategy might not be just to sit back and wait and watch for some of these other deals that come to fruition and take advantage of some market disruption.
Speaker Change: Yeah, Yeah for sure delivery.
Speaker Change: Delivery on execution coverage covers a lot of a lot of issues and gives you opportunities for sure.
Speaker Change: Good point and then maybe just the last thing for me.
Speaker Change: I'm curious on the NIM expectations I know I think Ron you said kind of spending higher throughout the year just wondering about the.
Speaker Change: Expectations behind that from a rate perspective, if that changes at all if we get no cuts versus you know I don't know two or three cuts or kind of how you think about that trend line based on potential rate environment.
Speaker Change: Yeah, a lot of a lot of pieces of good question a lot of pieces to that large driver as we've been mentioning on previous calls is our amortizations and repricing them.
Speaker Change: For our loans, our loan portfolio as well as reinvestment of principal cash flows from our investment portfolio.
Speaker Change: Back to page 15 of the deck.
Speaker Change: Yeah.
Speaker Change: Positive side, our new loan production yields are exceeding our existing portfolio yields.
Speaker Change: Keeping our production in deposits and a 300 350 basis point spread.
Speaker Change: And we're still we still have some backside benefit from our deposit repositioning.
Speaker Change: We did a lot of the approach on brokered theyre starting to run off were going to see some benefit there.
Speaker Change: <unk> and <unk>.
Speaker Change: And again for Q1 cost savings realized.
Speaker Change: A full quarter of the rate cuts.
Speaker Change: Additionally, I think.
Speaker Change: Moving to a neutral position.
Speaker Change: I think we will benefit of that going forward on what could be a flat rate scenario. This year.
Speaker Change: Again, a lot of pieces to this puzzle here.
Speaker Change: Yeah for sure that's helpful color on thank you and congrats guys on a great great quarter, and a great 'twenty 'twenty four I appreciate that.
David: Thanks, David.
Speaker Change: Thank you just as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad now.
Speaker Change: Our next question comes from.
Speaker Change: Christopher Murray not quick Janney Montgomery Scott.
Speaker Change: Christopher Your line is now open. Please go ahead.
Speaker Change: Hey, Thanks, Good morning wanted to circle back on loan to deposits as well as sort of liquidity, we've been several quarters removed from the scare thats kind of curious how you think about that as a sheer shapes up is that another opportunity to continue the earnings progress that we've seen.
Chris: Yes, Chris.
Chris: Chris I'll start and then let let Ron chime in Yeah, I mean I think.
Chris: I think we're at 83% loan to deposit ratio is where were sitting today, which has been nice I mean, it's we still got some nice room to move when you look at our when you look at our metrics are liquidity position has been able to stay relatively strong.
Chris: With.
Chris: And still.
And we still kind of look at that overall coverage ratio and our ability to pay out if we need to and so on.
Chris: On the deposit side, the core deposit side of our balance sheet is something that is.
Chris: That's probably one of the key focus I know in a lot of areas growing those growing those DDA is is something that we talk about everyday and so.
Chris: I like where we're positioned there I think we can continue to grow organically, but.
Chris: To fund the growth, but Ron I mean anything else you want to add on kind of liquidity position and kind of where you see that going yes.
Chris: Yes.
Chris: We manage it last quarter, we really use utilized our cash we got down to.
Chris: Full liquidity position around 16, 17% for cash and securities.
Chris: We're up now approaching 19%. So I think we're very comfortable where we're.
Chris: We're at we do have cash.
Chris: We could lever 100 million plus of cash, but I think as far as liquidity goes and our access to liquidity is very strong.
Chris: We have the ability to grow both sides of our balance sheet with our with our access to funding in and in cash.
Speaker Change: Great. Thank you for that and then just a follow up question related to credit quality. We've had many many quarters now I think it's been five years, we've had is below five basis points charge offs.
Speaker Change: I'm just curious if there is sort of a tolerance for slightly more losses, just to get more revenue and or return through.
Speaker Change: No thats a delicate balance so just kind of curious how you think through that.
Yeah.
Speaker Change: We that we had such a.
Speaker Change: Such a focus on credit.
Speaker Change: The short answer is probably not.
Speaker Change: Yeah, I think for us when you look at our when you look at our bank, Chris as you know.
Speaker Change: I think we've kind of got we've kind of got our fountain equipment finance piece. That's a nice component, we really really like that line of business. That's executed really well since we bought it a couple of years ago I think when you look at our book, that's probably where we take a little bit more risk get a little bit more returns, we like it in that sector.
Speaker Change: <unk> got a really good team there and we.
Speaker Change: <unk> to feel comfortable with our ability to grow that book of business looking into 'twenty five, but it's kind of the overall general loan book.
Speaker Change: We're able to really continue to grow with the level that we want to really really solid credit so.
Speaker Change: <unk>, just not not in our risk tolerance.
Speaker Change: Ill take on too much risk in the bank portfolio. It Ain't broke don't fix it.
Speaker Change: Yeah.
Speaker Change: Now I'll follow up I appreciate the time, thanks, Paul with disclosure this morning.
Speaker Change: Good talking to you and Chris Thank you.
Speaker Change: Thank you very much there are no more questions I will hand, now back over to Mindy for any closing remarks.
Speaker Change: Thank you very much appreciate you joining us today. Thanks for your support of Smart banking, we look forward to exciting 2025 have a good day.
Speaker Change: Thank you very much Miller and thank you to all the speakers today that have joined US. We appreciate everyone who has joined the conference call. You may now disconnect your lines.
Speaker Change: Yeah.
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