Smartfinancial Inc. Q1 FY2025 Earnings Call

Hello, everyone, and welcome to the SmartFinancial First Quarter 2025 Earnings Release and Conference Call. My name is Andra, and I will be your coordinator today. I will now hand over to Nathan Strall, Director of Investors relations to begin. Nathan, please go ahead.

Thank you, Andra. 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 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. 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. It's great to be with you today, and I appreciate your interest in SMBK. I'll start our call with some comments before handing it over to Ron to discuss the numbers in more detail. After our prepared remarks, we'll be available for Q&A. Let’s get started. We had a strong quarter as we began 2025 and continued to make progress on our goals. The start of the year has been a bit unpredictable, which makes long-term planning more challenging, but we remain focused on our objectives. As you will hear, our company is executing well, and we are optimistic about our future. For the quarter, we reported net income of $11.3 million or $0.67 per diluted share. I’m very proud of our team's performance and look forward to us gaining operational efficiency as expected. Moving to the highlights, I’ll reference the first few pages of our presentation. First, one of the key metrics is our tangible book value, which increased to $23.61 per share, with a 9% annualized growth quarter-over-quarter excluding any AOCI impact. The lower right graph on Page 5 shows the value increase we’ve delivered. We had a strong start to the year, with loans growing at a 9% annualized rate in Q1, aligning with our expectations thanks to our market teams building valuable new relationships. Deposits also grew well at a 10% annualized quarter-over-quarter. While there was some typical mix shift in the first quarter, I was pleased with the team’s efforts to attract new deposit clients, and Ron will elaborate on this shortly. Our strong credit history continues as we maintained a low NPAs metric of just 19 basis points. Credit remains a priority for us, and I’m pleased to see these figures remain exceptionally low. Total revenue was $46.8 million as net interest income expanded as anticipated, along with another solid quarter of noninterest income. Noninterest expenses remained stable at just above $32 million, and I feel we are effectively managing expense growth in 2025. The operational efficiency we’ve talked about is becoming evident as we grow revenue with manageable expenses. The charts on Pages 4 and 5 illustrate these positive trends, and I expect them to continue. To add a few more comments on growth, we’ve executed well over the past few quarters due to the stellar work of our sales teams. We had a strong start to the year in loans, particularly after the significant growth we saw in Q4. We grew our loan book at a 9% annualized quarter-over-quarter rate. The sales momentum is robust and balanced across all regions. Our average portfolio yield was 5.97%, slightly down from Q4, but remains solid following the recent Fed rate cuts, with new loan production positively impacting our overall yield levels. Regarding deposits, as I noted earlier, I’m very pleased with our growth during this traditionally seasonal quarter. Our loan-to-deposit ratio remained steady at 83%, which gives us a strong position and continued flexibility to leverage our robust deposit base. Our balance sheet pipelines look solid, and I maintain our previous guidance of mid- to high single-digit growth moving forward. I also believe we can grow deposits organically to support this growth. Overall, we’ve had a great start to the year. I’ll stop there and turn it over to Ron for more details. Ron?

Thanks, Billy, and good morning, everyone. I'll start by highlighting some key deposit results. 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 nonbroker 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 was offset by the full effect of the prior quarter rate cuts resulting in a decrease to our total loan portfolio yield of 7 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 2 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 2 to 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 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. 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-offs to average loans were 0.01% on an annualized basis. Overall, the bank's asset quality remains strong with nonperforming assets to total assets at 0.19%, and the allowance for credit losses remained steady at 0.96% of total loans. Operating noninterest 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 million to $33 million, with solid benefit expenses in the range of $19.5 million 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 are forecasting an 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 7 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 a 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 broadest stories in the Southeast. Outstanding markets, strong experienced bankers, coupled with just as experienced and strong operational and support team, along with some great complementary 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 years 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 5 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 our culture, and we have several currently in our talent pipeline. I believe we are 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 as we continue to build a profitable and attractive franchise. Also want to take an opportunity to welcome our newest Board member, Kelly Shewmaker. Kelly is the CFO at Auburn University and 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 SmartFinancial and SmartBank team in 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.

Our first question comes from Stefan Scouten with Piper Sandler.

Really good quarter. It seems 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 you're seeing at a ground level with your customers, kind of what customer sentiment looks like and why you would continue to have belief around that ability to hit that loan growth kind of strength of your markets a little bit more would be great, Billy.

Yes, Stephen, I'll begin, and then I'll ask Rhett to provide input as we strive to remain closely connected with clients, navigating the volatility we've encountered. Overall, our markets continue to show strength. We are in frequent communication with many clients and staying informed. There’s ongoing discussion about tariffs and whether we will have them or not, which creates some uncertainty. However, from our conversations with clients, their businesses appear to be performing well. While they are likely to remain watchful and cautious, I am optimistic about our potential to grow at the rate we’ve projected. We feel excited about our current positioning. A significant factor is the business we’re gaining from the team members we've hired over the past several years. We are attracting established businesses that have been operating for a long time, which benefits our growth potential. Rhett, you may want to elaborate based on your discussions with our credit and production teams regarding client perceptions of the current environment.

Sure. In response to Billy's comment about the tariff issues, we reached out to clients in specific industries that we believed might be more affected or those with some international aspects to their accounts. Overall, the feedback we received has been very positive regarding the expected impact. Clients have indicated that they aren’t experiencing any decline in order volume, and they don’t anticipate any significant pricing changes in the near future, whether from suppliers or in a way that would affect their normal operations. At this point, we don’t see this as a major concern for our client base, and we don’t have many clients that have been directly impacted. It seems to be manageable at this time.

Want to make a comment?

Yes, Stephen, this is Miller. I want to emphasize that the information we have is based on what we've learned from others. Our market leaders and executive team are very involved in understanding different markets and the number of clients—both current and potential—that we engage with consistently. This is an ongoing effort, not limited to just the past quarter. We are quite active in our markets and have, I believe, immediate and accurate insights into their performance, which is generally strong.

That's great. That's helpful insight. How should we approach expectations regarding potentially leveraging the balance sheet from this point forward? There is a lot of capacity in the loan-to-deposit ratio, but I’m curious about your comfort level in significantly increasing the balance in the securities book and the various factors influencing balance sheet trends and where you see the mix heading?

Yes, that's a good question, Stephen. We do have some capacity. The way we describe it here is that we are focusing on strong, prudent growth. We are noticing competition and various competitive structures and rates. We have maintained our stance on rates and structures, but we have experienced some pressure in certain areas. As we progress through the year, especially if growth slows a bit, we may need to adjust our expectations for growth. This is why we are aiming for a mid-to-high single-digit growth approach. I believe we have a capable team, but we also want to ensure that we are taking on business that meets our desired return levels, structured with the appropriate loan and credit arrangements. Overall, I feel optimistic about our current position; we are achieving growth in the manner we prefer. We also have the option to increase growth if we choose to do so. However, I believe we can achieve the growth we want while still meeting the return targets we set. Ron, would you like to discuss the utilization of cash and your thoughts on that?

Yes. I think at this point, we're pretty solid on our investment percentage of 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 mix 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. And then just last thing for me. Obviously, volatility for the industry has taken stock prices down significantly, your stock's back down to about 120 tangible book, give or take. How do you think about share repurchases at 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?

Ron, do you want to.

Yes. 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. We'll start talking about repurchasing more over that.

Yes. And Stephen, just for us, I mean, traditionally, when we've looked at that, obviously, the whole sector is kind of, I think, in a pretty good spot from a valuation standpoint with a lot of upside potential. But we've typically not looked to buy back until we get a little bit closer to that book value number that's been traditional 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.

Our next question comes from Catherine Mealor with KBW.

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 guidance assuming the 2 to 3 bps 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?

Yes. Catherine, being slightly liability sensitive, we're pretty much matched. We see for Fed cuts, we will benefit from it slightly. We don't have material movements from any of these either down or up. So we're pretty good positioned. We gave guidance on thinking it's going to be probably in the September range that we'd have a rate cut. But I think we'll be pretty much neutral but benefit 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 2 to 3 bps expansion.

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

Okay. Great. And then you may miss or talked about it in the beginning, but I might have missed it. In terms of new loan pricing, can you talk about what that looks like I hope we've heard anecdotally, 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.

Yes. Ron, what do we expect for new production this quarter?

For the quarter was 729.

As we review our pipeline, we're still projecting around a 7% figure. This encompasses a mix of fixed and floating rates, and we feel relatively confident about that 7%, give or take. We are noticing some increased competitive pressure in the markets, but we've managed to maintain our pricing and structure without significantly hindering our growth. Our goal is to sustain that approximate 7% pace. However, as the year progresses and others push for growth, we may see that number decrease slightly. Right now, we're comfortable staying around the 7% mark in the near term, but it's uncertain how that might change as the year unfolds.

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

On the deposit side, it seems to be a positive situation. What is the current status of net margin related to new deposits?

Yes, Ron, where do we come in?

The CDs were coming in around 350, 360-ish money markets, probably very similar. Other than that, we've been quite fortunate we've been pretty stable. We're looking at 2 to 3 basis points of it, again, growth in the deposit costs quarter-over-quarter. But depending on the market movement of our 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 3.20% margin, which is great in that kind of thing. The outlook for the margin and continue.

Yes. No, you're right, Catherine. Yes. Net-net, we're still coming in accretive to where we are today on new.

Our next question comes from Russell Gunther with Stephens.

I wanted to take a moment to discuss the positive trend in expenses, as you provided a short-term outlook on how that's expected to develop. Looking at the bigger picture for the rest of the year, how do you foresee this trajectory progressing? Additionally, is there anything specific behind the strong results related to the expense savings initiatives? If not, is that something you're considering in relation to the overall growth rate for the year?

Yes. Let me begin with some high-level comments. Ron, if you want to provide more details after that, please feel free. For us, we have really focused on keeping our expense line stable. While we anticipate some growth, it's manageable when you consider last year, when we launched new branches and added staff to support them. The growth we experienced last year was partly due to these new branches and teams. Currently, we are not looking to make any new additions; most of our investments in these markets have already been made. We are seeing incremental growth as we continue to recruit new team members, particularly in revenue-generating roles, which will contribute to some growth. Our technology spending is steady, with some potential new expenditures, but this gives us confidence that our expense growth will remain stable in the coming quarters. Ron, why don't you provide more details on specific areas?

Yes, I'm actually going to refer back to last quarter when we provided guidance indicating that we should expect expense growth in the range of 2.5% to 3%. Our guidance remains unchanged. We are effectively managing our expenses while still supporting our growth, so we are in a strong position. We plan to maintain our expenses within that range. Looking ahead, we should be able to achieve this.

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 a lot of good granularity in your deck around the loan portfolios. But I 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.

Yes. Rhett, I would like you to join in as well. We have examined this situation fairly broadly and aren't focusing on any particular area more than others. However, if I had to mention an area, it would be that we still have some truck exposure through our fountain subsidiary, which typically involves smaller credits. Additionally, we have made significant progress with our dealer floor plan, and our auto exposure includes both the dealer side and the manufacturing side. We're keeping close ties with those suppliers to understand their perspectives on how the tariffs might develop. Those are the two main points that come to mind, Rhett. Please feel free to add anything else that you believe deserves extra attention.

No, I think those are certainly 2 of the primary ones that we have on the radar spring. And then just the other side of that is, as I mentioned earlier, clients that we know have any degree of primary supply chains we're seeing more clients that are international in format. 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 that and then I guess on the back side, we're also just keeping an eye on any impacts that tariffs to have on, I'd call it broader-scale scenarios like construction materials, things of that nature that could impact some construction costs.

But also the thing that's good to add here is that we are 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 in every segment of the bank. I mean we are highly engaged in the credit process and the credit of our client base.

Our next question comes from Brett Rabatin with Hovde Group.

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

I can address that. At a high level, with the investment segment, there’s been a slight decrease in assets under management due to a bit more fee-based business, and the market has held us back. This might result in a lower recurring fee. The first quarter is generally strong for our insurance division, as we typically see contingency revenue payouts during this time. These two factors probably contributed to a stronger first quarter than usual. Ron, is there anything else you would like to add?

Yes. 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 variable going forward. Other than that, we just have built a steady cash flow here on our income.

Okay. That's helpful. And then I wanted to go back to the mid-to-high single-digit loan growth and just looking at the first quarter, a lot of the growth was in commercial real estate wanted to see what the appetite was for C&D from here? And then just any thoughts on the C&I book? And 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.

Yes. I'll let Rhett provide some insights into how our production pipeline looks in terms of splits. Overall, we are still maintaining a balanced approach to our growth. Rhett can offer some details on the pipelines and their expected performance, which will likely reflect our current percentage situation. We are not heavily favoring any particular sector at the moment. We aim to grow our commercial and industrial book as much as possible, and we've also seized some good real estate opportunities over the past couple of quarters. Rhett, do you have anything to share about the pipelines and how you see them developing?

No, Billy, you got it right. If you look at our current pipeline, the mix is quite similar to what we’ve observed over the past several quarters. It’s geographically diverse and varied across our product mix as outlined in the presentation. Nothing in our pipeline is so significant that it would push us in one direction or another regarding the mix. While we face some competition, it is fairly distributed across our area. We continue to see good demand metrics in our market areas for both housing and commercial development. Overall, it aligns with what we have historically experienced.

Our next question comes from Steve Moss with Raymond James. Nothing in our pipeline is expected to significantly impact our mix. While we do have some competition, it's fairly distributed across our areas. We continue to observe strong demand and supply metrics in both housing and commercial development. Overall, our current situation aligns with historical trends we've experienced over the past several months.

I wanted to ask about the revenue side. You mentioned the goal of $50 million by the fourth quarter of '25. Given the current margin, the loan growth you've experienced, and the fee income trends, do you think the third quarter is a reasonable estimate for reaching that target?

I'll let Ron answer that. Steve, we're still managing a challenging situation. Our trends look positive, but we need to be cautious about what happens, particularly in the second half concerning growth and rates. While there's still some uncertainty, based on our forecasts, we believe our fourth-quarter targets remain achievable, and we have consistently communicated this on our calls and within our team. This year, we aimed to align our numbers with our expectations, utilizing everything we've built and acquired over the past several years. We are focused and committed to our goals, and we hope to reach them sooner, but we are maintaining our guidance.

Okay. I wanted to ask about the credit situation. Are we mostly finished with the charge-offs on the fountain portfolio? It seems we've managed well in the last two quarters, and that's starting to affect the provision expense.

Yes. Rhett can kind of speak to that. I think we're getting closer, but you want to dive into what we're seeing in the fountain portfolio?

Might be a strong statement, but I certainly think we have seen a slowdown as you see in the numbers. 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 of size and such of the tariffs and how the foods might impact just the supply chain and smaller transportation operator. 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 sharing 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.

Yes. The team has done a good job, and Rhett along with our founding team has worked diligently to navigate through these challenges. While the situation remains relatively minor in the grand scheme, we are still addressing a few of these issues. I might expect to see a bit more, but I hope we are nearing a resolution soon.

Got it. Appreciate that. And then just 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, it seems like organic growth is going pretty well. So maybe that's on the back burner, but I just want to take your temperature there.

Yes, it's interesting. The recent valuation pullbacks might have influenced some people, but we are focused on our organic strategy. That's our priority and where we aim to be. If potential deals arise, we will consider them, but we are not currently anticipating anything that would significantly disrupt our commitment to organic growth in the near future. Our primary focus remains on talent acquisition and organic expansion at this time.

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

Our next question comes from Christopher Marinac, Janney Montgomery Scott.

I just had a quick question on equipment financing and finance leasing. And just curious on that business line was you do more there? And are you happy so far with the results looking back on the transaction several quarters ago.

Yes, that's a great question, Chris. I'll let Rhett, who oversees that area, provide some insights as well. To answer your question briefly, yes, it's been a fantastic business line since we acquired it. We started with about $50 million and have successfully grown it to roughly $140 million recently. The growth and yields we've experienced make it a very positive transaction for us, and we continue to feel good about it. While there were some minor challenges in the trucking business last year, this acquisition has proven to be very beneficial for us. We have been more selective with the trucking credits we've added recently, but overall, we are quite satisfied with the results. I don't want to go into too much detail, but I can share some insights on our growth expectations moving forward.

Yes, thank you, Bill. For the general question, Chris, I would absolutely say yes. Reflecting on Billy's point, we have significantly grown the portfolio segment and added talent there as well. We will continue to do this on the banking side; when we find a strong, experienced producer in that space, we will look to bring them on or make some adjustments to our credit profiles based on our general credit standards for new bookings. Yes, this is a somewhat concentrated line of business, primarily in transportation and construction, which is expected in the Equipment Finance segment. However, I view our continued growth in this area as a bottom line factor, and from that standpoint, it's still a profitable lending business for the bank, and we have a very positive outlook for it.

Great. I appreciate it. Just a quick follow-up on M&A, just going a little deeper than prior question. 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 might be smaller institutions smaller than you looked at in the past? And is that at all possibility as the next several years develop?

Yes. I think we would. Obviously, deposits in today's world, as we all know, the deposit piece of these equations is really important. We've got some great. 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 we could probably put a little more gas on that fire. So yes, if we had the opportunity to do something like that, that would probably be since attractive. We're again, as we've 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 would be something that we could entertain.

Thank you very much. That concludes our Q&A session. I will now hand back over to Miller Welborn, Chairman of the Board to close the call.

Thanks, Ezra, and 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.