SmartFinancial, Inc.

Hello everyone and welcome to the Smart Financial first quarter 2025 earnings release and conference call. My name is Ezra and I will be your coordinator today. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. We will be taking questions at the end of the call. I will now hand over to Nathan Stroll, Director of Investors Relations to begin. Nathan, please go ahead.

Thank you, Ezra. Good morning, everyone, and thank you for joining us for Smart Financial's first quarter 2025 earnings conference call. 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. Billy Carroll, our president and chief executive officer, will begin our call, followed by Ron Garzinski, our chief financial officer, who will provide some additional commentary. 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 risks and uncertainties, 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. During the call, we will reference non-GAAP financial measures related to the company's performance. You may see the reconciliation of these measures in the appendices of the earnings release and investor presentation filed on April 21, 2025 with the SEC. 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. 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, 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 messaging. 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 objectives. 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. 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. 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 movement. Looking at the graph on the lower right on page five, you'll see the value increase we continued to deliver for our shares. On balance sheet growth, we had a very solid start of the year. 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. While we did have some mixed 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. Our history of strong credit continues with a metric at just 19 basis points and NPAs. Credit is always a focus for our company, and I'm proud to see these numbers continue at exceptionally low levels. 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 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 expense end. 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. 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 cuts. and new loan production continues to come onto the books, accretive to our total portfolio yield levels. 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 ratios 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 base. 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. I'm going to hand it over to Ron and let him dive into some additional details. Ron?

Thanks, Billy. And good morning, everyone. I'll start by highlighting some key deposit results. During the quarter, we achieved non-broker 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 noninterest-bearing deposits. As noted on the last call, there were some transitory noninterest-bearing deposits included in our year-end totals. 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 19%. 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 loan 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. With our sustained low loan-to-deposit ratio, we remain in an advantageous position to fund our loan production. Looking ahead, we anticipate two to three 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 in the 3.25% range. Our quarterly provision expense for credit losses totaled $979,000, primarily due to increased loan growth. Net charge lost to average loans were 0.101% on an annualized basis. Overall, the bank's asset quality remains strong with non-performing assets, total assets, at 0.19%. And the allowance for credit losses remained 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 markets group. Operating expenses were $32.3 million, unchanged from the previous quarter. There were slight positive and negative movements within several expense categories, but overall, we were pleased that we held expenses flat quarter over quarter. Noninterest 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 noninterest income in the low to mid $8 million range, and noninterest 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. 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 our forecasting and effective tax rate between 18% to 19% going forward. 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 equity. With that said, I'll turn it back over to Billy.

Thanks, Ron. I want to reiterate again the value proposition with our company, 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 investments we've made. 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 Southeast. Outstanding markets, strong, experienced bankers, coupled with a just as experienced and strong operational and support team, along with some great complimentary business lines. 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. I also wanted to make some comments on talent acquisition. 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. We are always looking to add revenue producing associates that fit with their 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. 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. 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 skill set to our board and gives us great perspective throughout Alabama and the entire Southeast. So Kelly, welcome. I also appreciate the work of our smart financial and smart bank team and the efforts of our over 600 associates. I'm very proud of the work that we have going on here at SMBK. 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. If you change your mind or your question has already been answered, please press star followed by two. Our first question comes from Stefan Stoughton with Piper Sandler. Stefan, your line is now open. Please go ahead.

Great. Thanks so much. Appreciate the time this morning, guys. Um, really good quarter. It 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. 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 strength of your markets a little bit more would be great.

Yeah. Um, Steven, I'll start, and then I'll ask Brett to chime in. We've tried to 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. Our markets just continue to be really strong. We're talking to a lot of clients, staying plugged in. Obviously, you've got... know a lot of conversation going on around paris which you know are we are we are we going to have them are we not uh you know it's really a back and forth but as we talk to our clients their business uh their businesses all seem to be doing well now i think it's i 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 that we've given um It really is one of those things that 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'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. But Red, you might give some color. I know as you guys have talked a little bit with our credit team members and our production team members about client take on the current environment, you want to give some color there? Sure.

We did, as 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 we were aware had some degree of international component to their receivables, suppliers, et cetera. And the overall feedback we've gotten has been really optimistically positive in regard to expected impact. Most of them are providing us commentary that they're not seeing any degree of a 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 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. uh, for our client base. So we don't have a lot that, uh, that would have been directly impacted. Um, and so it, uh, it, it seems at this point in time to be, I think there's a little bit of a wait and see, uh, perspective, uh, from a lot of them, but, uh, but thus far, uh, with what we have gotten feedback on, uh, it, it seems to be really positive. I want to make a comment. Steven Miller. 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. It's not just this past quarter. I mean, we are very visible in our markets and have, I believe, firsthand, real-time knowledge of where these markets are, and they are all performing pretty dead gum strong.

That's great. That's helpful color guys. 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 to deposit ratio in theory, but just kind of wondering 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, Steven. We've got some space. I think the words that we've used around here, it's really just good, strong, prudent growth. I do think we are seeing competition. We're seeing some different structure and rate competition. We've kind of held and stuck our guns on rates and structure. We've seen Uh, we've, 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, uh, is a little bit softer, um, you know, I, I, I think, you know, we could, we could see us. That's the reason I think we've tried to hedge kind of that, that mid to high singles, as far as their 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, um, 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. 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 set out to do. And 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 you're thinking there.

Yeah, I think at this point, we're pretty solid on our investment percentage to assets. We are setting out 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. So not much more.

okay extremely helpful there um 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 a tangible book give or take how do you think about um share purchases with these levels and can you remind me what your authorization might look like today and just kind of the priority of that versus other potential capital actions

Yeah, for the authorization, we have about $1.5 million left to purchase. So we're on the back side 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 opportunities. But we've typically not looked to buy back until we get a little bit closer to that 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.

Great. Thanks for all the color. Congrats on a great start to the year.

Thank you. Thanks, too.

Our next question comes from Catherine Miller with KBW. Catherine, your line is now open. Please go ahead. Thanks. Good morning.

Good morning, Catherine.

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, do 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. We don't have material movements from any 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.

Great. Okay. So if we get earlier cuts in September, there could be a little bit of, maybe upside of that two to three BIPs expansion?

Probably, yes. Yes, it will be. We did it earlier than September, correct.

Okay. Okay, great. And then, you may have missed or 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.

Yeah, Ron, where did we, what did we, I guess, what did we have new production for the quarter?

The quarter was 729.

Yeah. And then, Rhett, I think we, I think as we look on the pipeline, I think you and I spoke about this, we're still coming in around that 7% number, Katherine. That's kind of what we've got in the pipeline currently. Now, that's obviously a mix of fixed and float, but coming, or fixed and float, but coming in at around 7%. You know, we feel pretty good about that 7% plus minus number a little bit. We are seeing, you know, we're seeing some a little bit more competitive pressure in the markets. 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 to 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 growth that we can see that number kind of kind of come down a little bit. So I think we're okay in the 7%-ish range here near term, but TBD on what that looks like as the year goes forward.

You're dead on, though. We are hearing and seeing some competitors really pushing some pricing and getting awful competitive out there.

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 kind of where new deposits coming on about right now.

Yeah.

Ron, what, uh, where'd we come in?

Um, the CDs, the CDs where we're coming in around three, three 50, three 60 ish money markets, probably very similar. Um, other than that, we've been quite fortunate. We've been pretty stable. We're looking at two to three basis points of its, again, growth in the deposit costs quarter over quarter. But, you know, dependent of the market movement or competitors, we're seeing it really pretty relaxed at this point, the uptick.

Great. Okay. So still new production for both loans and deposits combined is still kind of coming on higher than your current 320 margin. Um, which, which is great. And I kind of defend the outlook for the margin and continue.

Great. Yeah, no, you're, you're right. Catherine. Yeah. Net net net. We're, we're kind of, we're still coming in accretive to where we are today on new.

Okay. That's all I got. Thank you.

Thank you.

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

Hey, good morning, guys. I wanted to focus on, hey, good morning. I wanted to spend a minute on expenses. The trend is 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 the specific expense save initiative, and if not, is that something contemplated in how you're thinking about the overall growth rate for the year?

Let me start with just some kind of high-level comments, and then, Ron, if you want to maybe dive into that in a little more detail. Russell, for us, and I think Ron and I both kind of said it in our comments, I think for us, we've really, really focused on trying to get this expense line to 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 branches that were coming online. 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. 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. Our tech spend is relatively stable with a little bit of new potentially coming on. But although I think that's the reason it gives us some confidence that our expense growth can be fairly stable as we look at over the next couple of quarters. But Ron, I mean, why don't you 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 control our expenses without impeding our growth. So 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 should be able to achieve that.

Got it. Okay, guys, 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, a lot of good granularity in your deck around the loan portfolios. But we'd 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.

T. John McCune, M.D.: : yeah and i'll ask you to kind of chime in as well, I don't think you know I think we we've kind of looked at it fairly broadly. T. John McCune, M.D.: : 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. T. John McCune, M.D.: : You know a little bit of the got a little bit of trucking exposure through our fountain. subsidiary, but those are typically smaller credits. We also have, you know, 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 kind of getting their take on the way they see these tariffs playing out. Those are the first two that come to mind to me, Brett. I don't know if there's anything that you want to add to that, if there's anything that you think 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 have any degree of primary supply chain sourcing or clients that are international. 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. And then I guess on the backside, we're also just keeping an eye on any impacts that tariffs could have on, I'd call it, broader scale scenarios like construction materials, things of that nature that could impact some construction costs, things of that nature. 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 are highly engaged in the credit process and the credit of our client base.

Well, I appreciate you each for taking a stab at the question, and that's it for me. Thank you. All right. Thank you, Russell.

Our next question comes from Brett Trabiton with Hovda Group. Brett, your line is now open. Please go ahead.

Hey, guys. Good morning. Wanted to start with fee income. And if I heard the guidance correctly, it was low to mid-8s for 2Q. And within that, wanted to see maybe your thoughts on investment services and and insurance and where those businesses might trend kind of given their 1Q performance and anything else that might be keeping the income fairly flottish from here.

Yeah. Ron, I'll take a stab. I know just kind of high level, obviously, um, you know, with an investment side, um, 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. Uh, Q1 is typically a pretty strong quarter for our insurance group with we've got typically contingency revenue payouts occur during Q1. So we had a little bit more there. So those two items probably helped bolster the first quarter a little bit more, Brett, than normal. But Ron, anything else that you want to touch on?

Yeah, the only other item that 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 cashflow here on our income.

Okay. That's helpful. Um, 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, um, commercial real estate, you know, wanted to see what the appetite was for, for C and D, uh, from here. And, and then just, um, you know, any, any thoughts on the C and I book and if, if 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.

Yeah, I'll let Rhett kind of chime in on just kind of the way our production pipeline is looking from a split standpoint. But overall, we still are maintaining a fairly balanced approach to payroll growth, and I think And Rhett can give you some details on pipelines and where we think it's coming. But it'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. Obviously, we look to grow that CNI book as much as we can. But we've had some good opportunities with some real estate. We've been able to take those over the last couple of quarters too. But Rhett, anything on kind of pipelines and how you see the pipelines breaking down?

No, Billy, you get it. You look at our pipeline as it sits today, just a mix of what's out there. It's very similar to, I would say, what we have been seeing for the past several quarters. It's diverse geographically. It's diverse across our product mix as broken down into the deck. Nothing that I've seen in our pipeline is going to swing us one way or another in regards 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 both, you know, for housing and for development on the commercial side as well. So, I mean, it's still in line with what we have historically been seeing for the past number of quarters.

Okay, great. Appreciate the call, guys. Thanks, Brett.

Our next question comes from Steve Moss with Raymond James. Steve, your line is now open. Please go ahead.

Good morning, guys. Good morning. I want to ask about the Morgan, I want 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 low growth you guys have had, and, you know, fee income shaking out where it is, it seems like the third quarter is probably a reasonable crossing point in your estimation these days?

I'll let Ron answer that. We're trying to, we're trying, we're still, we're still holding in turn. You know, I will say, you know, our, our, our trends, you know, our trends are good. I, you know, I guess the, the, the, the caveat is just kind of what happens, especially as you get into the second half with growth and you know, with rates. So, yeah, there's still a little bit, but kind of based on what we have built in there forecast, we still think, you know, that fourth quarter number is, and that's really kind of what we've said. We've reiterated it, you know, on these calls. We've reiterated it, you know, around our team. Again, this was a year that we really wanted to kind of get, you know, get these numbers where where we needed them to be, you know, leveraging everything that we built over the course of the last, built and bought over the course of the last several years. 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 their guidance.

Okay, I figured I'd ask.

In terms of, on the credit front here, I take it that we're, are we pretty much through the charge-offs on the

um fountain portfolio you know charge us in quite low the last two quarters and you know obviously it's starting to impact the provision expense here yeah um yeah wrecking to kind of speak to that i think we we're we're getting closer but you know you want to dive into into what we're seeing in town yeah uh you know um done with might be a a strong statement but i certainly think we have seen it uh we've seen it slow down as you see in the in the numbers um you know uh we were We were certainly seeing a direct slowdown and were 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. believe it will be at a pace like we saw last year. But I do believe we'll still have a few stragglers here and there that we'll be dealing with as the year goes on. But we don't anticipate it to be in line with what we saw last year.

Yeah, the team's done a good job. You know, Rhett and our fountain 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. We may see a little bit more, but but hopefully that is coming to an end here relatively quickly.

Got it. Appreciate that. And just, you know, one other thing, maybe just on the M&A front here, just kind of curious if you guys have any updated thoughts around doing a deal. You know, it seems like organic growth is going pretty well, so maybe that's on the back burner, but just wanted to take your temperature there.

Yeah, you know, it is interesting, and obviously with the valuation, you know, pullbacks that may have changed some different folks' thoughts. But for us, you know, we're still just kind of head down focusing on our organic strategy. You know, that's where we are. That's where we want to be. Obviously, you know, when deals pop up, you know, we get called or asked about them. But, you know, there's nothing really that 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 1A. Obviously, we'd look for anything that made a lot of sense, but for us, it really is primarily focused on adding talent and growing organically right now.

I would say organic is probably 1A and 1B right now. Based on what currency is, it would be hard to do a deal, but we're always looking and always interested, but it's organic today.

Well, I appreciate all the call here, guys. Thank you very much. Nice quarter. Thanks.

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 now. Our next question comes from Christopher Marinac, Janie Montgomery Scott. Christopher, your line is now open. Please go ahead.

Rich D' hey thanks for hosting us all this morning, it 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.

Rich D' yeah that's a great question for us out and i'll stop i'll read kind of overseas that line for us i'll let him chime in to but Dave short answer yes, I mean it's been a it's been a great 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 and outstanding now to about 140, you know, in the 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. Yeah, you took a couple little bumps with some of the trucking business 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 we like it. We've been a little more selective in the trucking credits that we've added over the course of the last little bit. We pulled back in that area in that particular segment. But overall, been very pleased with it. I don't know any color as to kind of that and talk a little bit about that kind of where we see the growth coming, moving forward.

Yeah, no, Billy, I think you nailed it. 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 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 strong producer in that space, we will look to bring them on board. We made some adjustments tweaked here and there on some credit profiles, kind of what our general metrics are for credit standards and what we book new, yes. It is a somewhat concentrated line of business. I mean, we do have concentrations in transportation construction predominantly. I mean, that would be expected in the equipment finance segment. But, you know, when I think about 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. And from that perspective, absolutely, it's still a profitable line of business for the bank, continues to be, and we have a very positive outlook for it.

TAB, Mark McIntyre:" Great thanks for all that background I appreciate it just a quick follow up on m&a just going a little deeper than prior question. TAB, Mark McIntyre:" Would you ever consider doing a deposit kind of based acquisition, where the lending market may not be attractive to you, but the deposits would be and. TAB, Mark McIntyre:" might be smaller institutions, you know smaller than you've looked at the past and is that at all possibility as the next step, 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. 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 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 there, but obviously the lending opportunities could, you know, we could probably put a little more, you know, gas on that fire. So yeah, if we had the opportunity to do something like that, that would probably be something attractive where again, you know, as we've said, really not looking to do much of that, you know, right now we're kind of just, you know, funding organically as we grow, but if the right situation presented itself, it'd be something that we could entertain.

Great. Thank you, Billy, and thank you, Miller, too. Appreciate it.

Thanks, Chris. Appreciate it.

Thank you very much. That concludes our Q&A session. I will now hand back over to Miller Welburn, 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.

Thank you very much, Miller, and thank you to everyone for joining. This concludes today's conference call. You may now disconnect your lines.