Q1 2025 SmartFinancial Inc Earnings Call
Okay.
Ezra: Hello, everyone, and welcome to the Smart Financial First Quarter 2025 Earnings Relief and Conference Call.
Speaker Change: Hello, everyone and welcome to the Smart financial first quarter 2025 earnings release and conference call. My name is as right now it 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 choose.
Ezra: 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, please press star followed by two.
Your mind. Please press star followed by two we will be taking questions at the end of the court. We will now I will now hand over to Nathan stroke director of Investor Relations to begin they can please go ahead.
Ezra: We will be taking questions at the end of the call.
Nathan Strall: I will now hand over to Nathan Strall, Director of Investors Relations, to begin. Nathan, please go ahead.
Nathan Strall: Thank you, Ezra. Good morning, everyone. And thank you for joining us for Smart Financial's first quarter 2025 Earnings Conference. During today's call, we will reference the slides and press release that are available in the investor relations section on our website, smartbank.com.
Nathan: Thank you Andrew Good morning, everyone and thank you for joining us for Smart financial first quarter 2025 earnings Conference call.
Nathan: During today's call, we will reference the slides and press release that are available on the Investor Relations section on our website.
Nathan Strall: 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: Dot com.
Nathan: Our president and Chief Executive Officer will begin the call followed by Ron Gorczynski, Our Chief Financial Officer, who will provide some additional commentary we will be available to answer your questions at the end of our call.
Nathan Strall: We will be available to answer your questions at the end of our call. Our comments include forward-looking statements. These statements are subject to risk and uncertainty, and the actual results could vary materially. We list the factors that might cause these results to differ materially in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward-looking statements because of new information, early developments, or otherwise, except as may be required by law.
Nathan: Our comments include forward looking statements. These statements are subject to risks and uncertainties and the actual results could vary materially.
Nathan: We list the factors that might cause these results to differ materially in our press release and in our SEC filings, which are available on our website, we do not assume any obligation to update any forward looking statements because of new information early developments or otherwise, except as may be required by law during.
Nathan Strall: During the call, we will reference non-GAAP financial measures related to the company's performance.
Nathan: During the call, we will reference non-GAAP financial measures related to the company's performance.
Nathan Strall: You may see the reconciliation of these measures in the appendices of the earnings release and investor presentation filed on April 21, 2025, with the ad hoc committee.
Nathan: You may see the reconciliation of these measures in the appendices of the earnings release and Investor presentation filed on April 21, 2025 with the SEC.
William 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. And thank you for joining us today. And for your interest in SMBK.
Speaker Change: And now I'll turn it over to Billy Carroll to open our call.
Billy 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 Jay.
William Carroll: I'll open our call today with some commentary and hand it over to Ron to walk through the numbers in some greater detail.
Billy Carroll: I'll open our call today with some commentary and hand, it over to Ron to walk through the numbers in some greater detail. After our prepared comments, we'll open it up with Ron Nate military myself available for Q&A.
William Carroll: After our prepared comments, we'll open it up with Ron, Nate, Rhett, Miller and myself available for Q&A. So let's jump right in. Another very nice quarter for us as we kick off 2025 and continue executing on what we've been So those numbers are based on 2035 year strategic plan, which is what you can see on the left and looks like. That's what we have so far. The start of the year has been a bit more volatile than any of us would prefer. And while the uncertainty is making it a little more difficult to plan longer term, we're not letting that deter us from our objective.
Billy Carroll: So let's jump right in another very nice quarter for us as we kick off 2025 and continue executing on what we've been messaging.
Billy Carroll: The start of the year has been a bit more volatile than they had that any of us would prefer and while the uncertainty here is making it a little more difficult to plan longer term, we're not letting that deter us from air objectives as Youll hear on this call. This company is continuing to execute and we're remaining very bullish on where we're headed for.
William Carroll: As you'll hear on this call, this company is continuing to execute and we're remaining very bullish on where we're headed. For the quarter we posted net income gap and operating of $11.3 million or 67 cents per diluted share.
Billy Carroll: For the quarter, we posted net income GAAP and operating of $11 $3 million or <unk> 67 per diluted share I continue to be very proud of the way. Our team is performing and I am excited to watch us gain operating leverage as we'd anticipated.
William Carroll: I continue to be very proud of the way our team is performing and I'm excited to watch us gain operating leverage as we've anticipated.
William Carroll: Jumping into the highlights, I'll be referring to the first few pages in our deck. First and, in my opinion, one of the most important metrics, we continue to increase the tangible book value of our company, moving up to $23.61 per share, including the impacts of AOCI, and $24.76, excluding that impact. That's over 9% annualized, quarter over quarter, excluding the AOCI move. Looking at the graph on the lower right on page five, you'll see the value increase we continue to deliver for our shares. On balance sheet growth, we had a very solid start of the year.
Billy Carroll: Jumping into the highlights I'll be referring to the first few pages in our deck first and then and in my opinion one of the most important metrics. We continue to increase the tangible book value of our company moving up to $23 61 per share, including the impacts of AMC.
Billy Carroll: And $24.76 excluding that impact.
Billy Carroll: So, we're 9% annualized quarter over quarter, excluding the Aoc I'm looking.
Billy Carroll: Looking at the graph on the lower right on page five you'll see the value increase we continued to deliver for our shares.
Billy Carroll: On balance sheet growth.
Billy Carroll: We had a very solid start of the year on the loan side, we grew at 9% annualized at a 9% annualized pace for Q1 right on top of our expectations as our market teams are continuing to add outstanding new relationships.
William Carroll: On the loan side, we grew at a 9% annualized pace for Q1, right on top of our expectations, as our market teams are continuing to add outstanding new relationships. On the deposit side of the balance sheet, growth was also sound at 10% quarter over quarter annualized. Well, we did have some makeshift, which is common for the first quarter of the year. I was pleased with the team's focus on bringing in new deposit clients. Ron will provide some more detail on that in a moment. Our history of strong credit continues with a metric at just 19 basis points and NPAs.
Billy Carroll: On the deposit side of the balance sheet growth was also solid at 10% quarter over quarter annualized.
Billy Carroll: While we did have some mix shift which is common for the first quarter of the year I was pleased with the team's focus on bringing in new deposit clients Ron will provide some more detail on that in a moment.
Billy Carroll: Our history of strong credit continues with the metric at just 19 basis points in NPA credit is always a focus for our company and I'm proud to say these numbers continue at exceptionally low levels.
William Carroll: Credit is always a focus for our company, and I'm proud to see these numbers continue at exceptionally low level. Total revenue came in at $46.8 million as net interest income continued to expand as we had anticipated. We also had another very nice non-interest income quarter. Non-interest expenses held to the same level as last quarter at just over $32 million. I feel we continue to continue to hold expense growth to very reasonable levels during 2025. That operating leverage we've talked about is happening as we continue to grow the revenue line with manageable investment on the expenses.
Billy Carroll: Total revenue came in at $46 $8 million as net interest income continued to expand as we had anticipated. We also had another very nice non interest income quarter.
Billy Carroll: Noninterest expenses held to the same level as last quarter at just over $32 million I feel we contingent continue to hold expense growth to very reasonable levels during 2025.
Billy Carroll: Operating leverage we've talked about is happening as we continue to grow the revenue line with manageable investment on the expensive.
William Carroll: Looking at the charts on pages four and five, you'll see very nice trends. All of those charts are great graphics to illustrate what we've been messaging. And I look forward and are expecting to see those trends continue.
Billy Carroll: Looking at the charts on pages, four and five Youll see very nice trends all of those charts are great graphics to illustrate what we've been messaging and I look forward and are expecting to see those trends continue.
William Carroll: So just a couple of additional high level comments from me on growth, we have executed well over the last several quarters. And it is a direct result of the outstanding work of our sales teams. In regard to loans, a nice start to the year, particularly after posting outsized growth in Q4. As I stated, we grew our loan book at 9% annualized quarter over quarter. The sales momentum in our company is very good and it's balanced across all regions. Our average portfolio yield including fees and accretion was 5.97% down just slightly from Q4, but still very solid after absorbing the fourth quarter Fed rate.
Billy Carroll: So just a couple of additional high level comments for me on growth, we have executed well over the last several quarters and it is a direct result of the outstanding work of our sales teams in regard to loans, a nice start nice start to the year, particularly after posting outsized growth in Q4 as I stated we grew our loan book.
Billy Carroll: At 9% annualized quarter over quarter, the sales momentum member in our company is very good and it's balanced across all regions.
Billy Carroll: Our average portfolio yield including fees and accretion was 597% down just slightly from Q4, but still very solid after absorbing the fourth quarter fed rate cuts and new loan production continues to come onto the books are accretive to our total portfolio yield levels.
William Carroll: and New Loan Production continues to come onto the books accretive to our total portfolio yield level. In regard to deposits, I mentioned it a moment ago, I'm very pleased with the deposit growth we've seen, particularly during a quarter where we normally see some seasonality. Our loan-to-deposit ratio is held from year-end at 83%, which is a nice spot for us, and this strong position gives us continued flexibility to leverage that strong deposit. Our balance sheet pipelines continue to feel sour. I'm holding to our past guidance of mid to high single digits on growth as we look forward.
Billy Carroll: In regard to deposits I mentioned, it a moment ago I'm very pleased with the deposit growth, we've seen particularly during a quarter. When we normally see some seasonality our loan to deposit ratios held from year end at 83%, which is a nice spot for us in this strong position gives us continued flexibility to leverage that strong deposit.
Billy Carroll: Yes.
Speaker Change: Our balance sheet pipelines continue to feel solid I'm holding to our past guidance of mid to high single digits on growth as we look forward and I also think we can pace deposits organically to fund this growth. So all in all a very nice way to start the year I'm going to stop there and I'll hand, it over to Ron and let him dive into some additional.
William Carroll: And I also think we can pace deposits organically to fund this growth. So all in all, a very nice way to start the year.
William Carroll: I'm going to stop there. I'm going to hand it over to Ron and let him dive into some additional details.
Ron: Details Ron.
Ronald Gorczynski: and good morning, everyone. I'll start by highlighting some key deposits. During the quarter, we achieved non-brokered deposit growth of $114 million, over 10% on an annualized basis, resulting in a loan-to-deposit ratio of 83%. The weighted average cost of non-broker production was 3.39%. Total interest bearing costs decreased 10 basis points to 2.92% and were 2.96% for the month of March. The composition of our deposit portfolio remained largely stable, with a minor reduction in non-interest bearing deposits. As noted on the last call, there were some transitory non-interest bearing deposits included in our year-end total. Coupled with a few clients utilizing some excess cash security throughout the quarter, we finished with an average non-interest bearing to total average deposit ratio of 19%.
Ron: Thanks, Billy and good morning, everyone.
Ron: I'll start by highlighting some key deposit results during the quarter, we achieved non broker deposits loans of $114 million over 10%.
Ron: Basis, resulting in a loan to deposit ratio of 83%.
Ron: The weighted average cost of non brokered production was $3 three 9%.
Ron: Total interest bearing cost decreased 10 basis points to 292% and were $2, 96% for the month of March.
Ron: The composition of our deposit portfolio remains largely stable with a minor reduction in noninterest bearing deposits as noted on the last call. There were some transitory noninterest bearing deposits included in our year end totals coupled.
Ron: Coupled with a few clients utilizing some excess cash liquidity throughout the quarter. We finished with an average noninterest bearing to total average deposit ratio of 17 of 19%.
Ronald Gorczynski: Net Interest Margin was 3.21%, slightly down from last quarter, but in line with our previous guidance. Our loan portfolio experienced a favorable 7.29% weighted average yield on new loan originations. However, the impact of those originations were offset by the full effect of the prior quarter rate cuts, resulting in a decrease to our total loan portfolio yield of seven basis points to 5.97%. Additionally, we experienced an elevation in our liquidity levels from our deposit growth, which also impacted our margin. Despite having two fewer days in the quarter, net interest income increased by $455,000 with our average interest earning assets growing over $185 million, which was primarily driven by our net balance loan growth during the quarter.
Ron: Net interest margin was three 1%.
Ron: Slightly down from last quarter, but in line with our previous guidance.
Ron: Our loan portfolio experienced a favorable 729% weighted average yield on new loan originations. However, the impact of those originations were offset by the full effect of the prior quarter rate cuts, resulting in a decrease to our loan total loan portfolio yield of seven basis points to 597%.
Ron: We experienced an elevation in our liquidity levels from our deposit growth, which also impacted our margin.
Ron: Despite having two fewer days in the quarter net interest income increased by 455000 with our average interest earning assets growing over $185 million, which was primarily driven by our net balance loan growth during the quarter.
Ronald Gorczynski: With our sustained low loan-to-deposit ratio, we remain in an advantageous position to fund our loan production. Looking ahead, we anticipate 2-3 basis points of margin expansion quarterly throughout 2025. While we expect our overall deposit portfolio cost to increase throughout the year, primarily from higher costs of new production, Our new loan production, coupled with the amortization and maturities of our lower-yielding fixed and adjustable rate loans, will drive margin expansion. With these factors and given current market conditions, we are forecasting a second quarter 2025 margin and a 3.25% rate.
Ron: When they are sustained low loan to deposit ratio, we remain in an advantageous position to fund our loan production looking.
Ron: Looking ahead, we anticipate two to three basis points of margin expansion quarterly throughout 2025.
Ron: While we expect our overall deposit portfolio across to increase throughout the year, primarily from higher cost of new production, our new loan production, coupled with the amortization and maturities of our lower yielding fixed and adjustable rate loans will drive margin expansion.
Ron: With these factors and given current market conditions, we are forecasting a second quarter 2025 margin in the 3% to 5% range.
Ronald Gorczynski: Our quarterly provision expense for credit loss is totaled $979,000, primarily due to increased loan growth. Net charge-offs to average loans were 0.101% on an analyzed basis. Overall, the bank's asset quality remains strong with non-performing total assets at 0.19%. And the allowance for credit losses remains steady at 0.96% of total loans. Operating non-interest income for the quarter totaled $8.6 million which was above our guidance. The outperformance was primarily driven by stronger than forecasted insurance and mortgage banking revenues, along with continued strong activity from our capital market. Operating expenses were $32.3 million, unchanged from the previous quarter.
Ron: Our quarterly provision expense for credit losses totaled $979000, primarily due to increased loan growth net charge offs to average loans were 410% to 1%.
Ron: On an annualized basis overall, the bank's asset quality remains strong with nonperforming assets total assets at one 9%.
Ron: Lounged for credit losses remained steady at four 996% of total loans.
Ron: Operating noninterest income for the quarter totaled $8 6 million, which was above our guidance.
Ron: Performance was primarily driven by stronger than forecasted insurance and mortgage banking revenues.
Ron: Along with continued strong activity from our capital markets group.
Ron: Operating expenses were $32 3 million unchanged from the previous quarter.
Ronald Gorczynski: There were slight positive and negative movements within several expense categories, but overall, we were pleased that we held expenses flat quarter over quarter. Non-interest income growth and expense containment continue to be primary objectives as we focus on fully leveraging our infrastructure. For the second quarter, we are forecasting non-interest income in the low to mid $8 million range and non-interest expense in the range of $32.5 to $33 million, with salary and benefit expenses in the range of $19.5 to $20 million. It is important to note that accruals for incentive-based compensation will fluctuate based on performance and may vary throughout the year.
Ron: <unk> positive and negative movements within several expense categories, but overall, we were pleased that we held expenses flat quarter over quarter.
Ron: Noninterest income growth and expense containment continue to be primary objectives, as we focus on fully leveraging our infrastructure.
Ron: For the second quarter, we are forecasting noninterest income in the low to mid $8 million range and noninterest expense in the range of $32 $5 million to $33 million with salary and benefit expenses in the range of 19 $5 million to $20 million.
Ron: It is important to note that accruals for incentive based compensation will fluctuate based on performance and they vary throughout the year.
Ronald Gorczynski: Our effective corporate tax rate for the quarter was approximately 17%. Despite some fluctuations since the establishment of our Real Estate Investment Trust, we anticipate our tax rate will stabilize and are forecasting an effective tax rate between 18 to 19 percent going forward.
Ron: Our effective tax our effective corporate tax rate for the quarter was approximately 17% despite.
Ron: Despite some fluctuations since the establishment of a real estate investment Trust, we anticipate our tax rate will stabilize and we're forecasting an effective tax the tax rate between 18% to 19% going forward.
Ronald Gorczynski: I will conclude with capital. The company's consolidated TCE ratio increased to 7.6%, and our total risk-based capital ratio remained well above regulatory well-capitalized standards at 11.2%. Overall, we believe our capital ratios remain optimally balanced to continue to support growth while maximizing returns on investment.
Ron: I will conclude the capital the Companys consolidated TCE ratio increased to seven 6% and our total risk based capital ratio remained well above regulatory well capitalized standards at 11, 2% overall, we believe our capital ratios remain optimally balance to continue to support growth while maximizing returns on it.
William Carroll: With that said, I'll turn it back over to Bill. Thanks, Ron. I want to reiterate again the value proposition with our company.
Ron: Equity.
Ron: That said I will turn it back over to Bill.
Bill: Thanks, Ron.
Speaker Change: I want to reiterate again the value proposition with our company drawing your attention back to page seven of our deck.
William Carroll: Drawing your attention back to page seven of our deck. We are successfully moving into the leveraging phase of growth for our company. We're seeing the inflection in the movement in our numbers, and we have clear vision of our return targets after absorbing the investment. We're building a great franchise, we're in arguably some of the best and most attractive markets in the country, and have put together a team that is rapidly moving us forward. You've heard me say before, and I believe this, we are one of the brightest stories in the South. Outstanding markets, strong, experienced bankers, coupled with a just as experienced and strong operational and support team, along with some great complimentary business lines.
Speaker Change: We are successfully moving into the leveraging phase of growth for our company, we're seeing the inflection and the movement in our numbers and we have a clear vision of our return targets. After absorbing the investments. We've made we're building a great franchise, where and arguably some of the best and most attractive markets in the country and have put together a team that is rapidly moving this forward.
Speaker Change: Let me say before and I believe this we are one of the broadest stories in the southeast.
Speaker Change: Outstanding markets strong experienced bankers, coupled with are just as experienced and strong operational and support team along with some great complementary business lines.
William Carroll: We expect the rest of 2025 to have a similar look as we focus on continued growth in our EPS line and hitting our near term revenue and return targets.
Speaker Change: We expect the rest of 2025 to have a similar look as we focus on continued growth in our EPS line and hitting our near term revenue and return targets.
William Carroll: also wanted to make some comments on Talent Act. One of the areas where we are focusing and one that I continue to be very excited about is our ability to recruit outstanding new team members. The majority of the expense growth in our company in the coming year should come primarily from talent related expenses, along with some appropriate investment in our platform. on adding revenue-producing team members. We have brought on five over the last couple of months with this specific group targeted with just private banking and treasury management areas. We focused here to complement some of the commercial banking talent we added in 2024.
Speaker Change: Also wanted to make some comments on talent acquisition.
Speaker Change: The areas, where we are focusing and one that I continue to be very excited about is our ability to recruit outstanding new team members.
Speaker Change: The majority of the expense growth in Air company in the coming year should come primarily from talent related expenses, along with some appropriate investment in our platform.
Speaker Change: On adding revenue producing team members, we have brought on five over the last couple of months with this specific group Targa.
Speaker Change: Targeted would just private banking and Treasury management areas, we focused here to complement on some of the cup. We focused here to complement some of the commercial banking talent. We added in 2024, we're always looking to add revenue producing associates.
William Carroll: We are always looking to add revenue-producing associates that fit with our culture, and we have several currently in our talent pipeline. I believe we're included in a very small handful of banks that have built a culture where outstanding regional bankers want to work. We will continue to look for these organic growth opportunities and remain very focused on recruiting.
Speaker Change: Their culture and we have several currently in our talent pipeline.
Speaker Change: I believe were included in a very small handful of banks that have built a culture, where outstanding regional bankers want to work.
Speaker Change: We will continue to look for these organic growth opportunities and remain very focused on recruiting.
William Carroll: So to summarize, I love where we're sitting. We are executing, growing that revenue line while staying prudent on expense growth, even while dealing with a little bit of uncertainty in the economy. We remain optimistic around our margin as new production stays strong, and as we see the tailwind coming from the rate resets in our loan portfolio over the next couple of years. Credit continues to be very sound, and we're seeing great new client acquisitions with sales energy that is outstanding. All said, a great way to start the year for our company is we continue to build a profitable and attractive franchise.
Speaker Change: So to summarize I love, where we're setting we're executing growing that revenue line, while staying prudent unexpected growth, even while dealing with a little bit of uncertainty in the economy.
Speaker Change: We remain optimistic around our margin as new production stays strong and as we see the tailwind coming from the rate resets on our loan portfolio over the next couple of years.
Speaker Change: Credit continues to be very sound.
Speaker Change: And we're seeing great new client acquisitions with sales energy that is outstanding all set a great way to start the year for our company as we continue to build a profitable and attractive franchise also want to take an opportunity to welcome our newest board member Kelly Schoemaker, Kelly as CFO at Auburn University brings a great skill set to our board.
William Carroll: I also want to take an opportunity to welcome our newest board member, Kelly Showmaker. Kelly is the CFO at Auburn University, brings a great skillset to our board, and gives us great perspective throughout Alabama and the entire Southeast. So Kelly, welcome.
Speaker Change: And gives us great perspective throughout Alabama, and the entire southeast So Kelly welcome.
William Carroll: I also appreciate the work of our SmartFinancial and SmartBank team and the efforts of our over 600 associates. I'm very proud of the work that we have going on here at SMBK.
Speaker Change: Also appreciate the work of our smart financial and Smart Bank team and the efforts of our over 600 associates I am very proud of the work that we have going on here at SMB K. So we'll stop there and open it up for questions.
Ezra: So we'll stop there and open it up for questions. Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. Please ensure your device is unmuted locally. And if you change your mind or your question has already been answered, please press star followed by two.
Speaker Change: Thank you very much if you would like to ask a question. Please press star followed by one on your telephone keypad. Please.
Speaker Change: Please ensure your devices and muted locally if you change your mind or your question has already been answered. Please press star followed by tier.
Stephen Scouten: Our first question comes from Stephen Scouten with Piper Sandler. Stephen, your line is now open. Please go ahead. Great, thanks so much. Appreciate the time this morning, guys.
Speaker Change: Our first question comes from Stephen Scouten with Piper Sandler. Your line is now open. Please go ahead.
Stephen Scouten: Great. Thanks, so much I appreciate the time this morning guys.
William Carroll: Really good quarter, feels like things are all kind of moving in the right direction now, which, you know, obviously, it's a little bit different from what the market's trying to tell us.
Stephen Scouten: Really good quarter. It feels like things are all kind of moving in the right direction now, which obviously is a little bit different from what the market is trying to tell us can you talk a little bit about what youre seeing at a ground level with your customers kind of what customer sentiment looks like and why you would continue to have beliefs around that ability to hit that loan growth.
William Carroll: Can you talk a little bit about what you're seeing at a ground level with your customers, kind of what customer sentiment looks like and, and why you would continue to have beliefs around that ability to hit that loan growth, kind of strengthen your markets a little bit more would be great. Yeah, Stephen, I'll start and then I'll ask Rhett to chime in as he's, we've stayed, you know, trying to stay pretty close to clients during a little bit of the volatility that we've experienced. But, you know, overall, you know, again, it kind of goes back to markets, you know, our markets just continue to be really strong.
Stephen Scouten: The strength of your markets, a little bit more would be great.
Speaker Change: Yeah, Stephen I'll start and then I'll ask Bret chime in and we try and stay pretty close to clients during a little bit of the volatility that we've experienced but overall again it kind of goes back to markets.
Speaker Change: Our our markets just continue to be really strong we're talking to a lot of clients staying plugged in a obviously you've got got.
William Carroll: You know, we're talking to a lot of clients, you know, staying plugged in. Obviously, you've got, you know, a lot of conversation going on around tariffs, which are we going to have them or are we not? You know, it's really a back and forth. But as we talk to our clients, their businesses all seem to be doing well. Now, I think it's, I do think they're going to continue to watch and, you know, be cautious. But, you know, I still feel good about our prospects to grow at, you know, at the pace that we've given.
Speaker Change: A lot of conversation going on around tariffs, which are where are.
Speaker Change: Are we are we get I have them all we got.
Speaker Change: It's really a back and forth, but as we talk to our clients their business their businesses all seem to be doing well, but I think it's.
Speaker Change: I do think they're going to continue to watch and be cautious, but I still feel good about our prospects to grow at.
Speaker Change: Pace that we've given.
William Carroll: But, you know, it's, it really is one of those things that we, you know, we feel pretty excited about where we are. A lot of it is continuing to add, you know, business coming from these team members that we've added over the course of the last several years. So, we're bringing in business that's seasoned, we're bringing in businesses that have been around for a long time. And I think all those things bode well for us and our ability to continue to grow.
Speaker Change: It really is one of those things that we.
Speaker Change: We feel pretty excited about where we are a lot of it is continuing to add business coming from these team members that we've added over the course of the last several years. So we're bringing in business that season, we're bringing in businesses that have been around for a long time and I.
Speaker Change: I think all of those things bode well for us and our ability to continue to grow that but you might you might give some color on that as you guys talk a little bit with our credit team members in our production team members about.
Rhett Jordan: But, as you guys have talked a little bit with our credit team members and our production team members about, you know, client, you know, client take on the current environment, you want to give some color there? Sure. We did, as the, to Billy's comment, as the tariff matter unfolded, we reached out to clients that were either in specific industries that we felt like might have a higher impact or that, you know, that we were aware had some degree of international component to their receivables, suppliers, etc. And the overall... feedback we've gotten has been really optimistically positive in regard to expected impact.
Speaker Change: No.
Speaker Change: Clive.
Speaker Change: Take on the current environment do you want to give some color there sure we did.
Speaker Change: As the stability comment.
Speaker Change: Tariff matter of unfolded, we reached out to clients that worried or in specific industries that we felt was a higher impact of it. We were aware had some degree of international component to the receivables suppliers et cetera.
Speaker Change: Oh.
Speaker Change: Feedback we've gotten has been.
Speaker Change: Optimistically positive in regard to expected impact both of them.
Rhett Jordan: are providing us commentary that they're not seeing any degree of decline in order volume. They're not expecting any significant changes in pricing in the near term, either from the supply side or certainly nothing that they don't feel like they would be able to to continue to, for lack of a better word, pass through in their normal operations of business. So we don't, at this point in time, feel like it's a major deterrent for our client base. So we don't have a lot that would have been directly impacted.
Speaker Change: We are providing us commentary that theyre not seeing any degree.
Speaker Change: A decline in order volume, although not expecting any significant changes in pricing in the near term either from the supply side or certainly no things that they don't feel like they would be able to grow.
Speaker Change: Well to continue to for lack of better word password in their normal operations of the business. So we don't we don't at this point in time, we feel like it's a major determinant.
Speaker Change: Our client base. So we don't have a life that would have been directly impacted.
William Carroll: And so it seems at this point in time to be, I think there's a little bit of a wait and see perspective from a lot of them, but thus far, with what we have gotten feedback on. I also want to add, this isn't second-hand information or anecdotal information that we're gleaning from other people. I can't stress enough about how hands-on our market leaders are and our executive team is in visiting these different markets and how many different clients, current clients, prospective clients, we have been in front of on a continual basis. And we do that all the time.
Speaker Change: So is it safe.
Speaker Change: Saves at this point in time to be I think theres, a little bit of a wait and see perspective from a lot of them, but thus far with what we would've gotten feedback on it.
Speaker Change: It seems to be really hard and.
Miller: And I can comment statement this miller.
Miller: I also want to add this isn't second hand information or anecdotal information that we're blending from other people I can't stress enough about how hands zoned our market leaders are and our executive team is it does things in these different markets and how many different.
Speaker Change: Clients current clients prospective clients, we have been in front of on a continual basis and we do that all the time not just this past quarter. I mean, we are very busy in our markets and have I believe firsthand real time knowledge of where these markets are in their all.
William Carroll: It's not just this past quarter. I mean, we are very visible in our markets and have, I believe, first-hand, real-time knowledge of where these markets are. And they're all performing pretty dead gun strong.
Miller: Pretty dead gum strong.
Stephen Scouten: That's great.
Stephen Scouten: That's helpful color guys.
Speaker Change: That's great. That's helpful color guys and then how should we think about.
Stephen Scouten: And then how should we think about expectations around maybe levering up the balance sheet from here. I mean, a lot of room in the loan deposit ratio in theory, but just kind of wonder what your level of comfort is of taking that, you know, appreciably higher, kind of the securities book balance there and just kind of the moving parts around balance sheet trends where you see the mix going. Yeah, it's a good question, Stephen. You know, we've got some space. You know, I think we're, the words that we've used around here, it's really, it's just good, strong, prudent growth.
Speaker Change: Expectations around maybe levering up the balance sheet from here I mean, a lot of room in the loan to deposit ratio in theory, but just kind of wondering what your level of comfort as I've taken that appreciably higher kind of the securities book balance there and just kind of the moving parts around balance sheet trends, where you see the mix going.
Speaker Change: Yeah. It is.
Stephen Scouten: A good question Steven.
Speaker Change: Got some space.
Speaker Change: I think we're there.
Speaker Change: The words that we've used around here.
Speaker Change: It's really it's just good strong prudent growth.
William Carroll: You know, I do think, you know, we are seeing, we're seeing competition. We're seeing some different structure and rate competition. We've kind of held and stuck our guns on, you know, on rates and structure. We've seen a little bit of pressure in some of those areas. And I think as we go through the year, especially if growth is a little bit softer, you know, I think, you know, we could see us, that's the reason I think we've tried to hedge kind of that mid to high singles as far as our growth goes. I think we've got a team that could really produce, but at the same time, we want to make sure that we're putting on, we're putting on business that's getting us the right return level, that it's structured with the appropriate loan and credit structures we want.
Speaker Change: Yes, I do think we are seeing.
Speaker Change: Seeing competition, we're seeing some different structure and rate competition, we've kind of held in stuck their guns on on on rates and structured we've seen.
Speaker Change: We've seen a little bit of pressure in some of those areas and I think as we go through the year, especially if growth is a little bit softer.
I think we could we could see us actually and I think we've tried to hedge kind of that mid to high singles as far as their growth goes I think we've got a team that can really produce but at the same time, we want to make sure that we're putting on.
Speaker Change: We're putting on business.
Getting us the right return level that is.
Speaker Change: Structured with the appropriate loan and credit structures, we want so again.
William Carroll: So again, I really like where we're sitting, because we're getting growth, we're getting it the way we want it. And we do have the ability to kind of keep our foot on the accelerator a little bit if we want to, but at the same time, I think we can get the growth that we want and continue to hold to the return targets that we want, that we set out to do.
Speaker Change: I really like where we're sitting because we're getting growth we're getting it the way we want it.
Speaker Change: And we do have the ability to to kind of keep our foot on the accelerator a little bit if we want to the same time I think we can get the growth that we want and continue to hold to that.
Speaker Change: The return targets that we want us that we set out to do and then Ron I don't know if you want to talk a little bit about just kind of the utilization of the kind of cash and what youre thinking there.
Ronald Gorczynski: And Ron, I don't know if you want to talk a little bit about just kind of the utilization of the kind of the cash and what you're thinking there. Yeah, I think at this point, we're pretty solid on our investment percentage to assets. We are sitting on a little extra cash, as I said, probably about 150 million more that we could lend out of the cash portfolio. So we'll probably see some mid shift going forward on the balance sheet, but nothing drastic. We're in a pretty good position, as Billy said, to fund our loan growth.
Speaker Change: Disappointing, we're pretty solid on our investment percentage to assets, we are sitting in a little extra cash as I as I said probably.
Ron: Probably about 150 under $50 million more and we could land out of the cash portfolio. So we will probably see some mix shift going forward on the balance sheet, but nothing drastic where we're in a pretty good position as Billy said to fund our loan growth so how much.
Ronald Gorczynski: So not much more.
Speaker Change: More.
Stephen Scouten: Okay, extremely helpful there.
Stephen Scouten: Okay extremely helpful. There and then just last thing for me obviously volatility.
Stephen Scouten: And then just last thing for me, obviously volatility. for the industry has taken stock prices down significantly, your stocks, you know, back down to about 120 intangible book, give or take, how do you think about share repurchases with these levels?
Stephen Scouten: For the industry has taken stock prices down significantly your stocks.
Stephen Scouten: Back down to about 120, <unk> tangible book give or take how do you think about <unk>.
Stephen Scouten: Share repurchases at these levels can you remind me what your authorization might look like today, and just kind of the priority of that versus other potential capital actions.
William Carroll: And can you remind me what your authorization might look like today, and just kind of the priority of that versus other potential capital action? Yeah, for the authorization, we have about $1.5 million left to purchase. So we're on the backside of it. Once we get near that level, we'll probably get, you know, we'll start talking about repurchasing more over that. Yeah. And just for us, I mean, traditionally, when we've looked at that, obviously, you know, the whole sector is kind of in a, I think, in a pretty good spot from a valuation standpoint with a lot of upside potential.
Stephen Scouten: Iran. Yes for the authorization, we have about $1 $5 million left to purchase. So we are on the back side of it.
Stephen Scouten: Once we get near that level will probably get will start talking about repurchasing more over that yeah.
Stephen Scouten: For us I mean traditionally when we've looked at that obviously.
Stephen Scouten: The whole the whole sector has got it.
Stephen Scouten: And a pretty good spot from a valuation standpoint, with a lot of upside potential, but we've typically not look to buy back until we get a little bit closer to that book value.
William Carroll: But we've typically not looked to buy back until we get a little bit closer to that book value number that's been traditionally with us. That's probably kind of where we are. So probably kind of stay here right now. But we are positioned to do some purchases if we need to.
Stephen Scouten: That's been traditionally with us that's probably kind of where we are so probably kind of stay here right now, but we are positioned to do some purchases if we need to.
Stephen Scouten: Great. Thanks for all the color.
Speaker Change: Great. Thanks for all the color and congrats on a great start to the year.
Stephen Scouten: Congrats on a great start to the year. Thank you. Thanks, Stu.
David: Thank you thanks, David.
Catherine Miller: Our next question comes from Catherine Miller with KBW.
Speaker Change: Our next question comes from Catherine Mealor with K B W. Catherine Your line is now open. Please go ahead.
Catherine Miller: Catherine, your line is now open, please go ahead. Thanks. Good morning. Good morning, Catherine.
Catherine Mealor: Thanks, Good morning.
Speaker Change: Thank you Joe Good morning, Catherine.
Catherine Miller: I wanted to start maybe just on the margin and just to see how we should be thinking about if we do start to see the Fed cut rates at the June meeting, how that could impact your guide. I'm assuming the two to three bits of NIM expansion per quarter, just kind of curious what that means in terms of the Fed backdrop and if that is better or worse if we see more or less cuts. Ron, you want to take that? Yeah, good morning, Catherine. Being slightly liability sensitive, you know, we're pretty much matched. We see for Fed cuts, you know, we will benefit from it slightly.
Catherine Mealor: I wanted to start maybe just on the margin.
Catherine Mealor: And just to see.
Catherine Mealor: Should be thinking about if we start if we do start to see the fed cut rates.
Catherine Mealor: At the June meeting, how that impacts you guys I'm, assuming the two to three.
Catherine Mealor: Absent in an expansion per quarter, just kind of.
Catherine Mealor: Curious what that means in terms of the fed that drop and if that is better or worse, if we see more or less cuts.
Ron: Ron you want to take that.
Catherine Mealor: Morning, Kathryn being slightly liability sensitive.
Catherine Mealor: We're we're pretty much matched we see for fed cuts.
Catherine Mealor: We will benefit from it slightly.
Ronald Gorczynski: We don't have material movements for many of these, you know, either down or up. So we're pretty good positioned. You know, we gave guidance on thinking it's going to be, you know, probably in the September range that we'd have a rate cut. But I think we're I think we'll be pretty much neutral but benefit on the way on the rate cut down.
Catherine Mealor: We don't have material movements from any of these either down or up so we're pretty good position.
Catherine Mealor: We gave guidance so I'm thinking it's going to be probably in the September range that we'd have a rate cut.
Catherine Mealor: But I think we're I think will be pretty much neutral point benefit on the way on the rate cut down.
Catherine Miller: Great. Okay, so if we get earlier cuts in September, there could be a little bit of maybe upside to that two to three bits expansion. I probably, yes, yes, it will be. We did it earlier than September, correct? Okay, okay, great.
Catherine Mealor: Great. Okay. So if we get earlier cuts in September there could be a little bit of maybe the upside of that two to three bps expansion.
Catherine Mealor: Hi.
Catherine Mealor: Probably yes, yes, it will be if we get it earlier than September correct.
Catherine Mealor: Okay, Okay great.
Catherine Miller: And then, we may have talked about it in the beginning, but I may have missed it. In terms of new loan pricing, can you talk about what that's looking like today? I feel like we've heard anecdotally that that's become a lot more competitive over the past few months. I'm just kind of curious what you're seeing on loan pricing today.
Catherine Mealor: And then.
Catherine Mealor: Have you.
Catherine Mealor: Let's start talking about at the beginning but I missed it in terms of new loan pricing can you talk about what that looks like you guys spoke we've heard anecdotally that thats become a lot more competitive over the past few months and just kind of curious what youre seeing on loan pricing today.
Ronald Gorczynski: Yeah, Ron, where did we what did we, I guess, what would we have new production for the quarter? The quarter was 729. Yeah. And then, Rhett, I think we I think if we look on the pipeline, and again, I spoke about this, we were still coming in around that 7% number, Catherine, that's kind of what we've got in the pipeline currently. Now, that's obviously a fixed and float but coming in at around seven. You know, we feel pretty good about that 7% plus minus number a little bit. We are seeing some a little bit more competitive pressure in the markets.
Speaker Change: Yeah, Ron where did we what did we I guess what would we have new production for the quarter. The quarter was 729, yeah. Some within and then read I think we I think as we look on the pipeline I think you and I spoke about this.
Catherine Mealor: Still coming in around that 7% number Kathryn that's kind of what we've got in the pipeline. Currently now that's obviously a mix of fixed and float but but.
Catherine Mealor: But come in are fixed and float but coming in at around seven.
Catherine Mealor: We feel pretty good about that 7% plus or minus number a little bit we are seeing yes, we're seeing some we're seeing some some a little bit more competitive pressure.
Catherine Mealor: In.
Catherine Mealor: In.
William Carroll: You know, as I spoke with our last question, we've been able to kind of hold and stick our guns on the pricing and structure that we want and it's not really deterred us from getting the growth. So, we're going to try to keep holding that pace at that plus minus seven. But, you know, it wouldn't surprise me to see as we continue through the year, you know, with folks really pushing and stretching for some that we can see that number kind of come down a little bit. So, I think we're okay in the seven percent-ish range here near term.
Catherine Mealor: In the markets.
Catherine Mealor: Yes.
Catherine Mealor: As I spoke with our last question.
Catherine Mealor: We've been able to kind of hold and stick to our guns on the pricing and structure that we won and it's not really deterred us from getting the growth.
Catherine Mealor: So we're going to try to keep we're going to try to keep keep holding that pace.
Speaker Change: At that plus minus seven.
Catherine Mealor: But I.
Catherine Mealor: It wouldn't surprise me to see as we continue through the year with folks really pushing and stretching for some growth that we could see that number got it kind of come down a little bit.
Catherine Mealor: We're okay in the 7% ish.
Catherine Miller: But, you know, TBD on what that looks like as the year goes forward.
Catherine Mealor: <unk> here near term, but TBD on what that looks like as the year goes forward you're dead on.
Catherine Miller: You're dead on though. We are hearing and seeing some competitors really really pushing some pricing and getting awful competitive out there.
Catherine Mealor: We're hearing and seeing some competitors really.
Catherine Mealor: Really pushing some pricing and getting volatile competitive out there.
Ronald Gorczynski: But then on the deposit side, it feels like that's become that continues to be a better story. So maybe your your net margin for new incremental growth is still kind of where new deposits coming on about right now.
Catherine Mealor: And then on the deposit side it feels like that's to come that continues to be a better story. So maybe youre net margin for new incremental growth is still.
Catherine Mealor: Whereas new deposits coming on about right now.
Ronald Gorczynski: Yeah, Ron, what, where'd we come in? The CDs, the CDs were coming in around the $3.50, $3.60 ish money markets, probably very similar. Other than that, we've been quite fortunate we've been pretty stable. We're looking at two to three basis points of, again, growth in the deposit costs quarter over quarter. But, you know, dependent on the market movement or competitors, we're seeing it really pretty relaxed at this point.
Ron: Yes, Ron we come in.
Ron: The Cds, the Cds, where we're coming in around three $353 60 ish money markets, probably very similar.
Ron: Although now we have been quite.
Ron: Quite fortunate we've been pretty stable.
Ron: We're looking at two to three basis points.
Ron: Again growth in the deposit cost quarter over quarter, but.
Ron: Dependent of the market movement or competitors.
Ron: We're seeing it.
Ron: Really pretty relaxed at this point the uptick.
Catherine Miller: Great. So still new production for both loans and deposits combined is still kind of coming on higher than your current 320 margin, which which is great. And that kind of defends the outlook for the margin and continuing. Yeah, yeah, great. Yeah, no, you're you're right, Catherine.
Ron: Great. Okay. That's all new production for both loans and deposits combined is still kind of coming on higher than your current three 'twenty margin.
Ron: Which is great and that kind of defense.
Speaker Change: The outlook for the margin to continue yes, net net great, Yes, Youre right Kathryn Yes, net net net we're kind of we're still coming in at accretive to where we are today on that.
Catherine Miller: Yeah, net net net, we're kind of we're still coming in accretive to where we are today on Okay, that's all I got. Thank you.
Speaker Change: Okay. Okay. That's all I got thank you.
Speaker Change: Thank you.
Russell Gunther: Our next question comes from Russell Gunther with Stephens. Russell, your line is now open, please go ahead. Hey, good morning, guys.
Speaker Change: Our next question comes from Russell Gunther that's.
Speaker Change: Steven.
Speaker Change: George.
Speaker Change: Line is now open. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Hey, good morning, guys.
William Carroll: I wanted to spend a minute on expenses trends really good and you guys gave us a near-term look at how that's expected to go but maybe just a bigger picture as you think about the rest of the year how are you expecting the trajectory to progress and then is there anything underlying the strong results in terms of a specific expense save initiative and if not is that something contemplated in how you're thinking about the overall growth rate for the year? Yeah, let me start with just some just some kind of high level comments. And then Ron, if you want to maybe dive into that a little more detail.
Speaker Change: Wanted to focus on.
Speaker Change: I wanted to spend a minute on expenses.
Speaker Change: He is really good and you guys gave us a near term.
Speaker Change: Look at how that's expected to go but maybe just bigger picture as you think about the rest of the year.
Speaker Change: Are you expecting the trajectory to progress and then.
Speaker Change: Is there anything underlying the strong results in terms of the specific expense save initiative and if not is that something contemplated and how youre thinking about the overall growth rate for the year.
Speaker Change: Yeah, Let me start with just some just some kind of high level comments and then Ron if you want to maybe dive into that a little.
Speaker Change: More detail yeah.
William Carroll: Yeah, Russell, for us, you know, and I think Ron and I both kind of said it in our comments, I think for us, you know, we've really, really focused on trying to get this expense line to be to be fairly stable. Obviously, we're going to have some growth, but I do think all of that is manageable. You know, when you look back last year, you know, we still had, you know, some new branch, some new branches that were coming on lines, we were adding some staff to staff those and some of that. So when you look at the growth that we had last year, it was a little more, but a lot of that was just kind of new.
Speaker Change: Well for us.
Speaker Change: And I think Brian that both kind of set it in our comments I think for us.
Speaker Change: We have really really.
Speaker Change: <unk> focused on trying to get this expense line to be could be fairly stable. Obviously, we're going to have some growth, but I do think all of that is manageable. When you look back last year, we still had some new branch some new branches that were coming online we are adding some staff to staff those and some of that so when you look at the growth that we had last year. It was.
Speaker Change: A little more but a lot of that was just kind of knew there was some net new branches net new teams that we needed that I think for US now we're really not looking to do any of that I think most of the investments that we've made in all these markets with the teams has been done.
Ronald Gorczynski: There's some net new branches, net new teams that we needed to add. I think for us now, you know, we're really not looking to do any of that. I think most of, you know, the investments that we've made in all these markets with the teams has been done. You know, we are seeing incremental growth that we had, as I alluded to, as we continue to recruit some new team members, particularly on the revenue producing side. Yeah, we'll see a little bit of growth there. You know, our tech spend is relatively stable with, you know, with a little bit of new potentially coming on.
Speaker Change: We are seeing incremental growth that we had as I alluded.
Speaker Change: Alluded to as we continue to recruit.
Speaker Change: Recruit some new team members, particularly on the revenue producing side, yes, we will see a little bit of growth. There. Our tech spend is relatively stable with a little bit of new potentially coming on but but all of that I think that's the reason it gives us some confidence that these that our expense growth can be fairly stable.
Ronald Gorczynski: But all in all, I think that's the reason it gives us some confidence that our expense growth can be fairly stable.
Ronald Gorczynski: As we look at over the next couple of quarters, but Ron, I mean, you want to dive in and go a little bit deeper on any of those specific lines. Yeah, I'm actually going to go back to last quarter. We gave guidance that we should see expense growth in the 2.5 to 3% range. And our guidance still stands, I mean, we're able to. To control our expenses without impeding our growth. So, we're, we're in a good shape. We're not looking at really. Going to hold our expenses within that band. So, again, going forward, we'll, we should be able to achieve that.
Speaker Change: As we look out over the next couple of quarters, but Ron I mean, you've wanted to dive in a little bit deeper on any of those specific lines, yeah, I'm actually going to go back to last quarter. We gave guidance that we should see expense growth in the 2.5% to 3% range and our guidance still stands.
Speaker Change: We're able to to control our expenses without impeding our growth. So we're in a good shape, we're not looking at it.
Speaker Change: Really going to hold our expenses within that band. So again going forward, we should be able to achieve that.
Russell Gunther: Got it.
Russell Gunther: Okay, guys, super helpful.
Speaker Change: Got it Okay Super helpful and I appreciate the context, and then just switching gears last one for me and you touched around it broadly, but as we think about the potential impact from tariffs.
Russell Gunther: And I appreciate the context.
Russell Gunther: And then just switching gears last one for me, and you touched around it broadly. But as we think about, you know, the potential impact from tariffs, a lot of good granularity in your deck around the loan portfolios, but would love to get a sense for anything that you're paying closer attention to today that may have borrowers with some outside exposure to the Tariff Volatility that's going on and if you could size up what that exposure would be. Thank you. Yeah, and I'll ask you to kind of chime in as well. I don't think, you know, I think we've, we've kind of looked at it fairly broadly.
Speaker Change: There are a lot of good granularity in your deck around alone portfolios, but would love to get a sense for anything that you are paying closer attention to today that may have borrowers with some outside exposure.
Speaker Change: The.
Speaker Change: Tariff volatility that's going on and if you can size up what that.
Speaker Change: Exposure would be thank you.
Yeah.
I'll ask you to kind of chime in as well I don't think I think we've kind of looked at it fairly broadly Russell I don't think Theres any particular area that we're focusing on more than others. We do we I would say probably if there is an area that we have we've still got.
Russell Gunther: Russell, I don't think there's any particular area that we're focusing on more than others. You know, we do, we, I would say probably if there's an area that we have, we've still got, you know, a little bit of the, got a little bit of trucking exposure through our Fountain subsidiary, but those are, those are typically smaller credits. We also have, you know, we've, we've done a lot with our dealer floor plan. We've got some auto, got a little bit of auto exposure, both on dealer side as well as some manufacturing side. We're staying close to those, you know, those suppliers getting, getting, kind of getting their take on the way they see these tariffs playing out.
Speaker Change: Little bit of the.
Speaker Change: We got a little bit of trucking exposure through our fountain.
Speaker Change: Subsidiary, but those are.
Speaker Change: Those are typically smaller credits.
We also have we've done a lot.
Speaker Change: With our dealer floor plan, we got some auto.
Speaker Change: We got a little bit of auto exposure, both on dealer side as well as the manufacturing side, we're staying close to those.
Speaker Change: Those suppliers getting getting then it kind of getting their take on the way. They see these tariffs playing out those are the first two to come to mind to me Brad I don't know if theres anything that you want to add add to that or if there's anything that you think might warrant leblanc for attention I think those are certainly two of the primary ones that we have all the.
William Carroll: Those are the first two to come to mind to me, Rhett. I don't know if there's anything that you want to add, add to that, if there's anything that you think might, might warrant a little extra attention. No, I think those are certainly two of the primary ones that we have on the radar screen. And then just the other side of that is, as I mentioned earlier, clients that we know, you know, have any degree of primary supply chain sourcing or clients that are international in format. We are, we're staying in touch with them just to see if and when they start seeing any changes coming either from their supply side or from their client order volume.
Speaker Change: Radar screen.
Speaker Change: The other side of that is.
Speaker Change: I mentioned earlier clients that we know have any degree of primary.
Speaker Change: Supply chain sourcing or.
Speaker Change: Our clients that are international.
Speaker Change: Format.
Speaker Change: We're just staying in touch with them to see if and when they start seeing any changes coming either from the supply side or from their client order volume.
Rhett Jordan: That, and then, and then I guess on the, on the back side, we're also just keeping an eye on any impacts that tariffs could have on I call it broader, broader scale scenarios like construction materials, things of that nature that could impact. costs, thanks of that. But I also think it's good to add here that we being a stronger credit bank as we are and always being a credit first bank, I don't know that we're looking at these any stronger than we do every quarter and every segment of the bank. I mean, we're, we are, we're highly engaged in the credit process and the credit of our client base.
Speaker Change: And then and then just on the backside. We're also keeping an eye on any impacts that tariffs could have on.
Speaker Change: I would call it broader broader scale scenarios like construction materials things of that nature that could impact some construction costs things of that nature down the road, but I also think it's a good add here that we being a stronger credit back because we are and always being a credit first by I don't know that we're looking at these any stronger than we do every quarter and every.
Speaker Change: Segments of the bank I mean, where we are we are highly engaged in the credit process and the credit of our client base.
Russell Gunther: I appreciate you each for taking a stab at the question.
Speaker Change: I appreciate your it's for.
Speaker Change: Taking a stab at the question and that's it for me. Thank you.
Russell Gunther: And that's it for me. Thank you.
Russell Gunther: All right, thanks.
Speaker Change: Alright, Thank you Russell.
Brett Rabatin: Our next question comes from Brett Rabatin with Hovda Group. Brett, your line is now open, please go ahead. Hey guys, good morning.
Speaker Change: Our next question comes from Brett Robinson with the group practice. Your line is now open. Please go ahead.
Speaker Change: Hey, guys good morning.
Ronald Gorczynski: wanted to start with fee income. And if I heard the guidance correctly, it was low to mid eights for two Q. And within that wanted to see maybe your thoughts on investment services and, and insurance and, and where those where those businesses might trend kind of given their one Q performance and any anything else that that might be keeping the fee income fairly flawless from here. Yeah, Ron, I'll take a stab. I know just kind of high level, obviously, you know, with an investment side, you know, a little more with a little more fee based business, you get a little bit of get a little bit of an AUM drop with market held back, you know, so so you know, some of that some of that recurring fee might be a little bit lower.
Speaker Change: Wanted to address.
Speaker Change: Art with fee income.
Speaker Change: I heard the guidance correctly, it was low to mid eights for <unk> and <unk>.
Speaker Change: Within that wanted to see.
Speaker Change: Maybe your thoughts on investment services.
Speaker Change: In insurance.
Speaker Change: And where those where those businesses might trend.
Speaker Change: Given the <unk> performance or anything else that might be keeping.
Speaker Change: Fee income fairly flattish from here.
Speaker Change: Yeah, Ron I'll take a stab and I've just kind of high level obviously.
Speaker Change: The investment side.
Speaker Change: With a little more fee based business, you're getting a little bit get a little bit of it AUR drop with market held back.
Speaker Change: Some of that some of that recurring fee might be a little bit lower Q1 is typically a pretty strong quarter for our insurance group, we've got particularly contingency revenue payouts occur during Q1, so we had a little bit more there. So those are those two items, probably helped bolster the first quarter a little bit more breadth.
Ronald Gorczynski: Q1 is typically a pretty strong quarter for our insurance group, with we've got typically contingency revenue payouts occur during Q1. So we have a little bit more there. So those those two items probably help bolster the first quarter a little bit more breath than normal.
Ronald Gorczynski: But Ron, anything else that you want to anything else that you want to touch on? Yeah, the only other item that you know, we should see an uptick going forward is our mortgage banking revenue. We are looking at hiring lenders in that space. So that's probably one that will be more bearable going forward. Other than that, we just have built a steady cash flow here on our income.
Speaker Change: The normal, but Ron anything else that you want to anything else that you want to touch on.
Speaker Change: Right in that.
Speaker Change: Should see an uptick going forward as our mortgage banking revenue, we are looking at hiring lenders in that space.
Speaker Change: That's probably one that will be more variable going forward other than that.
<unk> have built a steady cash flow here on our income.
William Carroll: Okay, that's helpful. And then wanted to go back to the mid to high single digit loan growth. And, you know, just looking at the first quarter, a lot of the growth was in commercial real estate, you know, wanted to see what the appetite was for, for C&D from here. And then just, you know, any thoughts on the C&I book? And if, if, you know, there's any visibility of pull through with that, or if that's the one area that's hard to predict with the tariffs and whatnot.
Speaker Change: Okay. That's helpful.
Speaker Change: And then wanted to go back to the mid to high single digit loan growth just looking at the first quarter a lot of the growth was in.
Speaker Change: Commercial real estate I wanted to see what the appetite was for <unk>.
Speaker Change: For CND from here and then just.
Speaker Change: Any thoughts on the C&I book.
Speaker Change: If there.
Speaker Change: There is any visibility or pull through with that or if.
Speaker Change: That's the one area, that's hard to predict with the tariffs and whatnot.
Rhett Jordan: Yeah, I'll let Rhett kind of chime in on just kind of kind of where our production pipeline is looking from a from a split standpoint. But overall, you know, I, we still are maintaining a fairly balanced approach to pair growth. And I think, and Rhett can give you some some details on on pipelines and where we think it's come, but it's probably going to mirror kind of where we are from a percentage as it sits today. I don't think Partial overview We've had some good opportunities with some real estate—.. It's diverse geographically. It's diverse across our product mix as broken down into deck.
Speaker Change: Yes, I'll, let Rick kind of chime in on just kind of kind of where our production pipeline is looking from a from a split standpoint.
Speaker Change: But overall.
Speaker Change: We still are maintaining a fairly balanced approach.
Speaker Change: And I think.
Speaker Change: And Rick can give you some details on pipelines and where we think there's probably going to mirror kind of where we are from a percentage as it sits today I don't think there's one particular sector that we're leaning into any heavier yeah. Obviously, we look to grow that C&I book as much as we can.
Speaker Change: But we've had some good opportunities with some real estate, we've been able to take those over the last couple of quarters to read anything on kind of pipeline and how you see the pipelines breaking down that $1 billion.
Speaker Change: You look at our pipeline as it sits today just the mix of what's out there.
Speaker Change: Spirit similar I would say what we have been.
Speaker Change: For the past several quarters, so it's a very.
Speaker Change: Diverse geographically, it's diverse across our all of our product mix that was broken down into the deck.
Rhett Jordan: Nothing that really I've seen in our pipeline is going to swing us one way or another in regard to mix. We do have some C&D in the pipeline, but it's pretty spread across the footprint. We're still continuing to see good demand, supply and demand metrics across our market areas. For housing and for development on the commercial side as well. It's still in line with what we have historically been saying for the past...
Speaker Change: Nothing that really are not seeing in our pipeline as you all know theres going to sway us one way or another in regard to mix we've got.
Speaker Change: We do have.
Speaker Change: So sandy.
Speaker Change: The pipeline, but it is it's pretty spread across the footprint.
Speaker Change: We're still continuing to see good demand supply and demand metrics across our market areas.
Speaker Change: For housing in Peru for <unk>.
Speaker Change: Development on the commercial side as well so I mean it.
Speaker Change: It's still a pretty it's still in line with what we have historically been seeing for the quarter.
Brett Rabatin: Okay, great. Appreciate the call, guys. Thanks, Brett.
Speaker Change: Okay, Great appreciate all the color guys.
Brett Robinson: Thanks, Brett.
Steve Moss: Our next question comes from Steve Moss with Raymond James. Steve, your line is now open, please go ahead. Good morning, guys.
Speaker Change: Our next question comes from Steve Moss with Raymond James Steve. Your line is now open. Please go ahead.
Steve Moss: Good morning, guys.
Steve Moss: I just wanted to ask about the.
Steve Moss: I want to ask about the Morning. On the revenue side, you guys have talked about $50 million by the fourth quarter, 2025. I guess just given where the margin is, the loan growth you guys have had, and you know, seeing income shaking out where it is, seems like the third quarter is probably a reasonable crossing point. Is your estimation exact?
Steve Moss: Good morning wanted to ask about the on the revenue side, you guys have talked about $50 million by the fourth quarter 25, I guess, just given where the margin is the loan growth you guys have had.
Steve Moss: And you'll see income shaken out where we're at is it seems like the third quarter is probably a reasonable crossing point.
Steve Moss: In your estimation these days.
Ronald Gorczynski: I'll let Ron answer that, Steve. We're trying to, we're trying, we're still, we're still holding in charge, Steve. I will say, you know, our trends are good. I guess the caveat is just kind of what happens, especially as you get into the second half with growth and with rates. So yeah, there's still a little bit, but kind of based on what we have built in their forecast, we still think that fourth quarter number is, and that's really kind of what we've said, we've reiterated it on these calls, we've reiterated it around our team. And again, this was a year that we really wanted to kind of get, you know, get these numbers where we needed them to be, you know, leveraging everything that we've built over the course of the last, built and bought over the course of the last several years.
Steve Moss: I'll, let Ron answer that.
Steve Moss: We're still we're still hold again.
Steve Moss: Steve you talked about.
Steve Moss: Okay.
Steve Moss: Yes.
Steve Moss: I will say.
Steve Moss: Our trends your trends are good I guess.
Steve Moss: The caveat is just kind of what happens, especially as you get into the second half with growth.
Yes.
Steve Moss: So yes, there is still a little bit but kind of based on what we have built into our forecast. We still think that fourth quarter number is and thats really kind of what we said we reiterated it on these calls we reiterated it.
Steve Moss: Around our team again this was a year that that we really wanted to kind of get get these get these numbers were where we needed them to be.
Steve Moss: Leveraging everything that we built over the course of the last built and bought over the course of the last several years and so.
William Carroll: And so, you know, all that is playing out and we're just kind of keeping our head down, grinding through and, you know, hopefully we get there a little bit faster, but we're still holding our guide. Okay, I figured I'd ask.
Steve Moss: All of that is playing out more just kind of keeping our head down grinding through.
Steve Moss: Hopefully, we get there a little bit faster, but were still hold their guidance.
Steve Moss: Okay figured I'd ask.
Rhett Jordan: Um, in terms of on the credit front here, I take it that we're, are we pretty much through the charge offs on the Fountain portfolio, you know, charge off in quite a bit of the last two quarters, and, you know, obviously starting to impact the provision expense here.
Steve Moss: In terms of.
Steve Moss: On the credit front here I take it.
Or are we pretty much through the charge offs on the.
Steve Moss: Pattern portfolio charge offs quite well over the last two quarters, and obviously certainly impact the provision expense here.
Rhett Jordan: Yeah, Rhett can kind of speak to that. I think we're getting closer, but you want to dive into what we're seeing in power. Yeah, you know, done with might be a strong statement, but I certainly think we have seen it slow down, as you see in the numbers. You know, we were certainly seeing a direct slowdown, and we're optimistic prior to some of what we've been talking about a little bit earlier on potential impact, depending on the longevity, duration, the size and such of the tariffs and how those might impact just the supply chain and smaller transportation operators.
Steve Moss: Yeah Yeah.
Brett Robinson: Brett can you kind of speak to that I think we're getting closer but yes.
Speaker Change: You want to dive in into what we're saying about yeah.
Brett Robinson: Yes.
Speaker Change: <unk> might be a strong segment, but I certainly think we have seen is we've seen a slowdown as you can see in the numbers.
Brett Robinson: We were we were certainly.
Speaker Change: <unk>.
Speaker Change: Direct slowdown and we're optimistic.
Speaker Change: And through some of what we've been talking about a little bit earlier, all of the potential impact depending on the longevity durations of saw.
Speaker Change: Sizes such of the yard.
Speaker Change: The tariffs and how those might impact.
Speaker Change: Just the <unk>.
Speaker Change: Supply chain and smaller.
Rhett Jordan: So we don't believe it will be at a pace like we saw last year, but I do believe we'll still have a few stragglers here. We don't anticipate it to be in line with what we saw last year.
Speaker Change: Patient operator so.
Speaker Change: We don't believe it will be at a pace like we saw last year.
Speaker Change: We believe we will still have a few stragglers here and there, but it will be dealing with us.
But we don't anticipate it to be in line with what we saw that team's done a good job.
William Carroll: Yeah, the team's done a good job. You know, Rhett and our talent team have done a really nice job of trying to manage through that. And it's still all relatively small in the overall scheme of things. But, you know, that is, yeah, we're still working through a couple of those. May see a little bit more, but hopefully that is coming to an end here relatively quickly. Got it.
Speaker Change: <unk> and her team have done a really nice job of trying to manage through that and it's still relatively small in the overall scheme of things, but but that is we're still working through a couple of others may see a little bit more but but hopefully that is coming to it in here relatively quickly.
Steve Moss: Appreciate that.
Speaker Change: Got it I appreciate that and then just one.
Steve Moss: And so, you know, one other thing, maybe just on the M&A frontier, just kind of curious if you guys have any updated thoughts around doing a deal? You know, seems like organic growth is going pretty well. So maybe that's on the back burner, but just want to take your temperature there. Yeah, you know, it is interesting. And obviously, with a with the valuation, you know, pullbacks, that may have changed some different folks thought, but for us, you know, we're still we're still just kind of head down focusing on our air organic. You know, that's, that's where we are.
Speaker Change: One other thing David just on the M&A M&A frontier just kind of curious if you guys have any updated thoughts around doing a deal.
Speaker Change: It seems like organic growth has gone pretty well so maybe that's on the back burner, but just wanted to take your temperature there.
Speaker Change: Yeah.
Speaker Change: It is interesting and obviously with the valuation.
Speaker Change: Pullbacks that may have changed some different folks but for us.
Speaker Change: Still we're still just kind of heads down focusing on our organic strategy.
William Carroll: That's where we, we want to be. Obviously, we're, you know, when deals pop up, we, you know, we get, we get called or asked about them. But, but, you know, there's nothing really, we think is going to really greatly deter us from just kind of hitting, hitting this organic stride that we've got going over the next little bit. That's where that's, that's 1A. Obviously, we would look for anything that, you know, made a lot of sense. But for us, it really is primarily focused on adding, adding talent and growing organically right now. Yeah, I would say organic is probably 1A and 1B right now.
Speaker Change: That's where we are that's where we want to be obviously.
Speaker Change: Deals pop up we get we get called or ask about them, but there's nothing really that we.
Speaker Change: Things are going to really greatly detour us from just kind of hidden in this organic strides that we've got going over the next little bit that's where that's that's one day.
Speaker Change: Obviously.
Speaker Change: Look for anything that made a lot of sense, but for us. It really is primarily focused on adding adding talent and growing organically right now yeah, I would say organic is probably one I'd add one thing.
William Carroll: Based on what the currency is, it would be hard to do a deal, but we're always looking and always interested, but it's, it's organic.
Speaker Change: Based on what currency is it would be hard to do a deal, but we're always looking at always interested but it's it's.
Speaker Change: Organic today.
Steve Moss: Well, I appreciate all the color here, guys. Thank you very much. Nice quarter. Thanks. Bye. Thank you very much.
Speaker Change: Well I appreciate all the color here guys. Thank you very much nice quarter.
Speaker Change: Thanks.
Speaker Change: <unk>.
Speaker Change: Thank you very much just as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.
Ezra: Just as a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now.
Christopher Marinac: Our next question comes from Christopher Marinac, Janey Montgomery Scott.
Speaker Change: Our next question comes from Christopher Marina Janney Montgomery Scott Christopher Your line is now open. Please go ahead.
William Carroll: Christopher, your line is now open. Please go ahead. Hey, thanks for hosting us all this morning. I just had a quick question on equipment financing and finance leasing and just curious on that business line. Would you do more there? And are you happy so far with the results looking back on the transaction several quarters ago? That's a great question, Chris. And I'll stop.
Speaker Change: Hey, Thanks for hosting US all this morning, it's just had a quick question on equipment financing.
Speaker Change: Finance leasing and just curious on that business line would you do more there and are you happy so far with the results looking back on the transaction several quarters ago.
Speaker Change: Yeah.
Speaker Change: Great question Chris.
Rhett Jordan: Rhett kind of oversees that line for us. I'll let him chime in too. But Dave, short answer is yes. I mean, it's been a great little business line that we added, you know, when we bought it, when we bought the one, you know, and we kept it and we've been able to grow it from you know, mid 50 million outstanding now to about 140, you know, in the last last little bit. And, and so the growth that we've had, the yields that we've had, it has been a really, really good transaction. And so we really like it still like it.
Speaker Change: Stop read kind of overseas that line.
Speaker Change: So I'll, let him chime in too, but short answer is yes, I mean, it's been a it's been a it's been a great.
Speaker Change: Little business.
Speaker Change: Line that we added when we bought it when we bought the one.
Speaker Change: We kept it.
Speaker Change: To grow it from.
Speaker Change: Mid $50 million of outstanding now.
Speaker Change: 140.
Speaker Change: Last last little bit and so the growth that we've had the yields that we've had it has been a really really good transaction and so we really like it still like it yes. He took a little couple of bumps with some with some of the trucking business.
William Carroll: Yeah, you take a little couple little bumps with some with some of the trucking business, you know, as we kind of look back last year, but even factoring that into the equation, this has been a very, very good acquisition for us. So, you know, we like it, you know, we've, we've, we've been a little more selective in the trucking, the trucking credits that we've added over the course of the last little bit, we pull back in that area in that particular segment. But, but overall, been very pleased with it.
Speaker Change: We kind of look back last year, but even factoring that into the equation. This has been a very very good.
Speaker Change: Acquisition for us so we like it.
Speaker Change: We've been a little more selective in the trucking.
Speaker Change: The trucking credits that we've added.
Speaker Change: Over the course of the last one, but we pulled back in that area in that particular segment.
Speaker Change: But overall been very pleased with it.
Rhett Jordan: I don't know, Rhett, any, any color as to kind of add in and talk a little bit about that kind of where we see the growth coming, moving forward. Yeah, no, really. Bill, I mean, for purposes of the general question, Chris, I would say yes, absolutely. I mean, I go back to Billy's point. I mean, we did, we have grown the portfolio segment considerably. We have added some talent there as well. And we'll continue just like we do on the bank side. When we find a very seasoned, very, very strong producer in that space, we will look to bring them on board.
Speaker Change: Color as to kind of added and talk a little bit about kind of where we see the growth coming moving forward yes.
Speaker Change: Thank you.
Speaker Change: I mean.
Speaker Change: For purposes of the General question, Bruce I would say, yes, absolutely.
Speaker Change: Go back to Bill's point I mean, we did we have grown the portfolio segment considerably.
Speaker Change: We have added some talent there as well.
Speaker Change: And we will continue just like we do on the bike side when we find it very seasoned very you know very strong producer in that space, we will but we will look to bring them onboard.
Rhett Jordan: We have, we made some adjustments, tweaked here and there on some credit profiles, kind of what our general metrics are for credit standards or what we book new. Yes. It is a somewhat concentrated line of business. I mean, we do have concentrations in transportation, construction phenomenally. I mean, that would be expected in the equipment finance segment. But, you know, when I think about would I, would I continue, would I have done the transaction again, or would I continue to seek to grow it? You know, I kind of look at that as a bottom line factor.
Speaker Change: We have we basically just looks tweak to layer on some some credit profiles kind of what our general metrics over four rollover British standards of what we book New yes.
Speaker Change: It is a somewhat concentrated a lot of business.
Speaker Change: Concentrations in transportation construction predominantly I mean that would be expected.
Speaker Change: The finance segment, but when I think about.
Speaker Change: Wood.
Speaker Change: Our continued without doing the transaction, yet or what I continue to seek to grow with.
Speaker Change: I kind of look at that as a bottom line sector and from that perspective, absolutely.
Christopher Marinac: And from that perspective, absolutely. It's still a profitable line of business for the bank, continues to be. And we have, we have a very positive outlook. Great.
Speaker Change: Profitable line of business continues to be.
Speaker Change: We have a very positive outlook.
Speaker Change: Yeah.
Christopher Marinac: Thanks for all that background. I appreciate it.
Speaker Change: Great. Thanks for all that background I appreciate it just a quick follow up on M&A just go a little deeper than prior question.
William Carroll: Just a quick follow up on M&A, just going a little deeper than prior questions. Would you ever consider doing a deposit kind of based acquisition where the lending market may not be attracted to you, but the deposits would be and might be smaller institutions, you know, smaller than you've looked at in the past? And is that at all the possibility as the next, you know, several years develop? Yeah, I think we would, you know, obviously, you know, deposits in today's world, as we all know, the deposit, the deposit piece of these equations is really important.
Speaker Change: Would you ever considered doing a deposit kind of based acquisition, where the lending market may not be attractive to you, but those deposits would be and might be smaller institutions smaller than you've looked at in the past and is that at all possibility as the next several years develop.
Speaker Change: Yeah.
Speaker Change: I think we would.
Speaker Change: Obviously, you know deposits in today's world as we all know the deposit.
Speaker Change: The deposit piece of this equation is really important we've got some great. Yes. The good thing about it the folks that we've added over the last several years are great generators on both sides of the balance sheet and I think that's what gives us a lot of confidence in our ability to grow we're not just hiring lenders, we're hiring really good bankers and so what we've been able to do.
William Carroll: We've got some great, you know, the good thing about it, the folks that we've added over the last several years are great generators on both sides. I think that's what gives us a lot of confidence in our ability to grow. We're not just hiring lenders, we're hiring really good bankers. And so what we've been able to do there, but obviously the lending opportunities could give, we could probably put a little more gas on that fire. So yeah, if we had the opportunity to do something like that, that would probably be something that's attractive.
Speaker Change: There, but obviously the the lending opportunities could get we could probably put a little more gas on that fire. So yeah. We had the opportunity to do something like that that would probably be.
William Carroll: Again, as we said, we're really not looking to do much of that right now. We're kind of just funding organically as we grow, but if the right situation presented itself, it'd be something that we could enter.
Speaker Change: Attractive where again, we've said really not looking to do much of that right. Now we're kind of just funding organically as we grow but no. If the right situation presented itself it would be something we could entertain.
Christopher Marinac: Great.
Christopher Marinac: Thank you, Billy.
Speaker Change: Great. Thank you Bill. Thank you Miller to appreciate it.
William Carroll: And thank you, Mealor, too.
William Carroll: Appreciate it.
William Carroll: Thanks, Chris.
Speaker Change: Thanks, Chris I appreciate it.
William Carroll: Appreciate it.
Ezra: Thank you very much.
Speaker Change: Thank you very much.
Mellor Welborn: That concludes our Q&A session.
Speaker Change: That concludes our Q&A session I will now hand back over to Miller Welborn Chairman of the board to close the call.
Mellor Welborn: I will now hand back over to Mellor Welborn, Chairman of the Board, to close the call. Thanks, Ezra. Thanks, everybody, for joining us today. We appreciate your time. We appreciate your interest and support of SMBK, and we look forward to talking to you again in the near future. Have a great day.
Thanks, Ezra thanks, everybody for joining us today. We appreciate your time, we appreciate your interest and support of SMB Kay and we look forward to talking to you again in the near future have a great day.
Ezra: Thank you very much, Madhur, and thank you to everyone. for joining.
Speaker Change: Thank you very much Mr and thank you to everyone.
Ezra: This concludes today's conference call. You may now disconnect your line.
Speaker Change: We're joining this concludes today's conference call you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].