- Earnings call transcript Q3 2022

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Operator

[Abrupt start] We acquired this Chattanooga based insurance agency during the quarter and are very excited to merge it into our existing platform. This agency has a great business line focused on the trucking and transportation insurance business.

As many of y'all know, we have some great ties into that industry, particularly with Miller's background and experience and we're very excited to create some synergies to grow this speed generating business line.

Before I turn it over, just a couple of other notes. Both new markets and legacy markets are all performing very well. Birmingham national and open MSA their office Brentwood in opened the in is just Alabama our office Franklin QX. We slated to

outstanding from team Fountain Finance having Our Equipment an is year.

finance of almost have sheet this of some we doubled ago size great group We that momentum couple a there. the since balance acquiring and have years equipment

walk sheet and well so let company, credit, have number turn over will some We it their then a balance expense of the additional in things Rhett. through to Ron and details Rhett go and income going ahead the side very provide me and on

Rhett Jordan

Thank you, Billy.

As Billy loans. and quarter loans leases third mentioned growing at through annualized earlier, PPP loan continued a period-over-period excluding organic growth with net XX% solid pace,

X, XX% these with resulted be were total costs has very our XX quarter billion diversified on X. just of quarter evenly shown $X was evenly variable split see points. lease over Slide million spread footprint between and you of and fixed to to across loan from The balances ratio. loan products. $XXX and Deposits portfolio Combination over over rate average just a production Well segments on flat balances deposit over portfolio the toward in deposit grew As quarter the continued our net target the very for portfolio basis $X factors mix Slide stable loan as in billion. quarterly putting outstanding can markets.

rate funds the upward several areas show Billy and direction rates accordingly. economic higher clients economic corresponding indicate some based by our fed market pressure production a rates term move gradual rates continuing as probability over on outlooks continue continuing responding near to to outlooks of renewals relay continue guidance. to next interest beginning driven some most lending solid their and increases, and to inflationary positive to our due earlier, loan are see with to mentioned are teams results While recession and Interest business quarters, guidance and market term to corresponding for our market increases

cautiously couple term Given in next expectation, that for of the the we're continued opportunities quarters. portfolio loan optimistic over near growth directional still

next our be us to the extended performance portfolio extremely quality lending slide challenging as conservative some all over to given credit underwriting that has results the portfolio our outlooks, been for last to maintain but As months indicates, we've such strong year, an continues few additional timeframe. have teams it strong economic steps allowed extremely refresh those on factors key these taken

stress outlooks growth rate time lending approach, interest always equity historically to credit our requirements of with breadth Our and and in analysis, have weaker segments industry this economic components essential of exposure core tier protect quality strong top essential been performance. cash challenging our they're to limited

quarter-over-quarter. I noted total classified asset total and looking strong Slide all stable it to performance past the previously assets core loans quarter loans X, improved continued our are loans total metrics. As Non-performing at reflecting loans, quality to and shows across due assets third

of guidance to active CRE right at on that ended ratio did stable well to construction in X% construction prior were quarter ratios quarter as total the CRE the holding funding due CRE projects. increase capital. Our XXX% end at the with slight continued predominantly regulatory a have We target

of historically to underwriting and our the continued our credit our guidance managed As noted the upper and feel in so in book prior CRE calls, end profiles CRE very conservative given comfortable doing ratio that portfolio space. in of the we've historically

in and with in loan have we credit these production significant strong our optimistic a our opportunities as been and our distributed continues we be quality year. all Our non-CRE of evenly being close cautiously out loan XXXX outlook the pipeline to across solid Overall, results areas nature. and year-to-date are portion still market

I'll positioning. Ron? turn you walk our to allowance to over Ron through it Now

Ron Gorczynski

everyone. good Rhett morning, and Thanks

Slide move reserve. X, loss Let's to our loan forward

$XXX As and quarter, loan Rhett end, and with cash at provisioning. our would leases recorded of covered production. of utilized related allowance much the we our XX leases XX, at loans was total our that total credit related strong growth loans over excess to basis X.X%. new reserves, provision was minimal loan our $XXX,XXX fund to credit points add the stats, and we At Slide like I Onto to quarter originated million a hundred during

our total represented ratio which securities, includes As loan giving to position, loan XX% our liquidity much to to the fund deposit previously us growth. mentioned, future of assets approximately overall and cash increased XX% flexibility and

Our a having a basis XX to reduction and expansion, point third despite net acquired related quarter $XXX,XXX loan quarter-over-quarter margin of accretion. was PPP X.XX%,

period, costs. yield basis XX the earning increased our XX increase During our funding points basis interest in the by asset point outpacing

as at position. liquidity While of rates points a rising compression margin, still strong these experience our basis our pressure of we approximately result XX on

yield increasing our our portfolio, less in quarter, the portfolio of the X.XX% PPP on yield points X.XX%. September loan basis XX increased loan For fees with loan to

which bearing deposit acceleration. Our September contributed in of deposit competition to to significant increased Noteworthy cost a for beta also quarter deposit with X.XX%. costs deposit the this quarter increase X.XX% interest points our XX our across was basis footprint,

the XX% XX, beta since be are estimating our March, September to beta quarter. deposit deposit for XX% around roughly the and fourth our As was we

mentioned pricing; losing be our As the last judicious of at approach during expense earnings however, to deposit relationships. not in we'll good raising our call,

points of of acquired to Further, over our differences only we annualized of $X.X On income, aggregate $XX XX, in smart interest grow We're to to to prior XX% for these the loan in quarter, in for increase quarter-over-quarter revenue our and some which the mortgage a four margin increased offset is period. headwind an million. For fourth revenue $XXX,XXX you'll but be sensitivity totalled of our basis loan, banking the X.XX% spite same to associates our Slide revenue $X.X quarterly in find proud approximately million related year $XXX,XXX. PPP company operating our of forecasting our approximately fee included estimated range forecast compared rate or space of extremely information. are record accretion a margin reduced bank million not

sharp our cash to in during interest the the sheet asset of sensitive has shifted our slightly balance sensitive quarter, rates the and a liquidity asset of deployment With some rise from position. modestly

specified more rates loans available and with a are We Currently, short-term we margin in position. further more as will expecting net approach million neutral muted increases the interest resetting radically would asset with of impact XXXX. from $XX The almost income in time period $X.X million On income, immediately. rate $XXX positive resetting over million, rate remainder $X.X loans quarter. have XX, $X.X our to million be billion over non-interest from net but prior the sensitivity decrease have we Slide a reported the a floating reset was

To on goals was charges as income reoccurring fee core enhanced structure, treasury quarter. end of streams. that our stated over We building increased implemented $XXX,XXX, during primarily the which management fee of focusing continued service a result an

for We generated momentum positive income equipment also leasing almost collectively our in saw in divisions, non-interest wealth, million quarter. and $X.X the insurance which

capital department. team acquisition. quarter generation further will We non-interest enhance our during markets income weaker income recording from going and revenue on We the from face gain did our challenges Sunbelt mortgage with forward banking sale less expected $XXX,XXX our our

loans several our quarters, has significantly banking mortgage production relatively production market declined. past over consistent the our has secondary remained of While

For of sold secondary for the same to quarter, the prior into only market we had XX% period. X% volume the compared year our

we persist we rates as this more become rise journey through and environment. attractive, adjustable continue trend expect As to to rate this rate products

range. million on efficiencies ratio non-interest efforts expense the the management. focus to currently, was Our XX, operating fourth creating operating representing forecast income is $X.X our for XX%, our On continued in Slide at while quarter efficiency in

efficiency its our to further we further steady We scale ratio our our continue expect as platform and business. decline leverage

prior but an non-interest million driven expenses incentive our to of was utility The occupancy and new of operating by increase Sunbelt related also additional expansion increase expense higher to this branch and experience the million, related continue were to higher the acquisition as an quarter. majority expense to salary a production Our of the outpace in extent equipment and expectations team accruals initiatives. $X.X members lesser increase Insurance, $XX.X market we from

experience to people and as invest platform. our categories various expense in flows continue we and will We and ebbs

fourth expense of the and On rate $XX.X approximately capital. of Slide $XX.X expense quarter, benefit and we run are million XX, forecasting salary million For range to with

movement to primarily in growth, associated Although our capital insurance current able downward ratios our benefited experience purchase from strong transaction. the and accommodate earnings the were our capital a of our slight created a and goodwill from we Sunbelt to attributable did our majority loan

our fund build tangible a future share. and earnings momentum, we capital given At building value quarter ratios. end, our sufficient pipeline $XX.XX forward, rate was capital and growth to per Moving loan book at anticipate

losses, of X.X% I'll it of was per growth our the tangible book that security increase and compound back With X%. five-year excluding our quarter-over-quarter of annualized However, almost to a said, over impact temporary representing turn value Billy. $XX.XX rate a unrealized share

Billy Carroll

Ron. Thank you,

continue business rate technology. slowing investment to feel a some some As positioned our in outlook recently this new our had solid. new really loan capitalizing in Ron even I we're hit possible we've We still well, starting on you very of feel continue to we growth nice made to can grow stride we're can with and and hear, increases. due by lines the markets, is mentioned company. guidance to that

at pipeline over I than do do a higher able better somewhere a good. pace. should And probably I forward, be couple feel look of a at still little is feel nice grew QX into next it we quarters. little growth this though Our digits, grow moving loan ease quarter, will in that the even single We the maybe pace XX% to

team, add adding discussion we're to folks to conversations with recent talent continuing and several are in others. weeks our in We several

the into coming hiring we picked see we as momentum look continuing last we ahead the So quarters. that hiring year, up that the

always do you numbers calls. We that are will whole culture it's say we on these in a culture I team to that date our these our folks our differentiate just calls and building. to listen want don't markets we members think want to the continue quick with that that to SMBK out overlook close and thank happen. phenomenal Many talk to as we make I the about SMB, those of We team. our also

and it we in company and stop time So thank a for will there be It open you. to up questions. involved continues great be this to

Billy Carroll

All a will for the just like bear don't… you're you maybe right. the come up and Feddie, looks it just us. questions listening, Folks with queue, minute this operator in up I with wait but us. We'll first

Feddie Strickland

Can Feddie. me? hear you is this Yeah,

Billy Carroll

go Thank ahead. Yes, you.

Feddie Strickland

you this morning? Okay. they up are if guys This, I or cued me not. sure wasn't doing How

Billy Carroll

We're Thank good. you.

Feddie Strickland

speak to in Was opportunities presence plans there. know and little in if bit I the just have whether your much guys you expand that wondering could any Nashville. you how curious, about a market. LBO just we there's Nashville an I have in opportunity you was you think talked to

Billy Carroll

Yes. Feddie, is. it

year, do. we're office to see momentum ground that do bit. good the said, demonstrated seen to really team do have We markets revenue are. producers we've in at next about starting obviously doubt country. bid this can company Franklin a opening opportunities really We year We Excited wanted now, our don't on last to quarter. commentary we added there's really I kind this what are something to start Again, to here digest back any the one that this good again, about that competitive As little culture, Brentwood do look just Excited the year, expand the of about with off best think we that. we ability over that market we to year. that. part But doing first last our the there's on of really year. little we the some as what going. and like, the that's that markets all end can of think we the think we're our to over feel this Obviously, add of think harder. going to we we my I have last some as we

Miller Welborn

bit years it us. for people market for that's further. with we incredibly lean . in strong couple around on it the So been an in can last we we and played Murphysboro, little of and a think there, Great

Feddie Strickland

it makes I'll this, That just And I to ask think it. already know answer -- Got sense. but the anyway. I

expanding look building share As footprint existing beyond You're towards from in markets, at current come really primarily that's right to not we going growth, out looking right? market future now. your

Billy Carroll

strategically always not -- Feddie. correct, there's that we're kind of in. We're looking last new at There's other we're other Nashvilles, opportunistic, in think of to great now markets We opportunity zones for look go to That's regions the you as well a Alabama kind of where looking always that really, we the we any markets and nothing but we're entered MSAs of these that outside between are. there. the Birmingham ton there's outside year.

going where existing something that's zones. XA probably focus Our opportunistic SP-X if going to Focus So be, always that's is is comes to But but be up.

Miller Welborn

impact Yes. these talked to And could lower here, that capital if and I about impact and We guys these to it's on on think downstream. comes are always be some $X I do look hopefully impact this those say, billion some opportunity. that portfolios. but negative M&A not, liquidity some potential We've if some of deploying been a negative potential that securities into will it banks upstream certainly bit little in a interesting. that's AOCI

Feddie Strickland

for incremental XXXX into like there the hikes? was seems one growth one the It up can seem it sounds I'll like me, margin what -- we should be a Ron of step if does Got queue. guidance alluding come to last you. fourth margin margins in like additional back given in And and It get earlier. quarter, couple just your some that's going early rate

Billy Carroll

a And probably of think, I color gap then, that's little numbers analyst let between me little and I think think some in. maybe do I the the and do a jump of bit you at that do book. Ron, add Yes. of some hikes, slightly couple been And well. still slightly ours. the in yields get think was below time loans the pipeline really market to loan at on do of rates are our the had rate the the along -- coming have I first where we Feddie,

a bit over do more that but starting So you're I months. think next have to, at we loan we'll those see those the as loans, catch little think for will a alluded show momentum now. really rate the our those variable loan yields Ron reset, And We were lagging up continue few bit. as to different yields reset our of quarters. positive to

think piece it. important I So equation really -- of a I obviously, -- something up picked that you that's It's on now. our do I'm think right

I note. something think to it's important

Ron Gorczynski

Yes. pretty further deposit of as expansion that, higher XX% our as in been yes, can we range to, long we competition, deposit long will have that we into -- as to beta our keep XXXX. loan sort we range, as alluded going down significant And margin as has is definitely a

Feddie Strickland

day, it didn't And anything. say just analyst to the other

So just just if queue and see and works. it

Miller Welborn

seeing up. we're So queue them

So I think we have next...

Ron Gorczynski

Kevin Fitzsimmons.

Miller Welborn

Kevin , are you on the phone?

Ron Gorczynski

I'll line. his line the on is open Kevin now.

Kevin Fitzsimmons

And in seen at over lot loan-to-deposit if you looking It what do. that quarters being can think Deposit some here the of deliberately levels, some maybe the that's that's but outlook and not banks your the something But for come environment you so next it give seems several obviously much. levels banks, it deposit for have will just ratio somewhat changing a we've flexibility and with down like assume of -- going? XX%. still you bleed managed But deposit of to this what deposits as look over But it, five frame course of want let call of do does at you at. kind -- you you keep if or keep should we Or the where can see forward? look time that next, flattish, that to you did like I we you to don't look quarters, the going four know lower quarter? levels expect you

Billy Carroll

free core to with run given that to And the feel as deposit just our in. open markets liquidity. We're let you'll stay a thing a standpoint. Yes. chime we little business. I'll in a up edged and think really to, margin that if from then to -- do start guys, do the the we're going feel But that it's see that of keeping like need flexibility because be aggressive enough bit little alluded I out we noncore ratio because that. to to, Ron continue to We'll right have I Yes, bit.

the over So probably and I talking of teams Ron probably it, side into our for the program. growth think right diving efforts deposit treasury Kevin, but think slowly has last added the over is deposits next numbers. we've little had thing continuing. been were side of see maybe I bit. the really The have about a has they've continue I outstanding. think on that you'll year, the course been than great I we the that probably lot put we're had the good, number used And been Loan The you can new to better about us. into And We've anticipated. that that's the creep see approach that

especially really based that's So our us. to of more deposit business something checking recruitment is important

you're we'll we'll while that's our see deposit also So rolls. adding stuff let probably probably some to but think continue, rate going generation I work higher --

the the kind to I at as that try we probably end increases. a down of for So have of deposits. far still day, think number continuing forecast flattish rate as to hold but

So you color all anything have you guys anything? Nick, any or Ron,

Ron Gorczynski

go with incrementally gatherers gather they indeed, had they Yes, did -- recombining deposit in lift-outs, showing as they were we and but quarter we deposits. shine the yes, third knew higher, said, will can for Billy that us, we the

Billy Carroll

deposits. good And

Ron Gorczynski

we -- creep deposits. loan-to-deposit we'll or did ratio good our little I'm expect X%, But slight not deposits will go. model it. X%. modeled that we as have X% yes, decrease to we And in we have up a incrementally again, And that, sure that but

Kevin Fitzsimmons

you've in you last a been I quarter maybe the kind active And X, have Okay. believe or question. very of Billy, talent. that talked top-level adding guys this is in more about

be near-term the priority obviously, come has demonstrating immediately is and then it really and attached expenses so to profitability. that to going improved that later about And revenues the

in being the mode. implication investing while you line are you delivering the guys, had that say bottom so not mode, you Where do always were that it much so front but And opportunistic, today? on you kind of the profitability

Billy Carroll

Kevin, on I'd in say innings we're middle probably that.

grind mean ratio the growth, look more EPS our continuing again is look we've mean the singles if since results. I tick at and mean, have, higher. at we middle focus kind think down. baseball the you and Again, thing efficiency revenue I I We're -- of growth, another I you of to to the look at continuing doubles just demonstrated playoffs. analogy in the we're this

innings. upside continue So to invest going I there's we've I do talent of middle think also the if But we're to where we're made. think pop love investments do we're those sitting. kind that I in up. in opportunities to

of take. So guys that's know you my kind you? any comments. Ron, I anything have don't if other from

Ron Gorczynski

Yes. last core several growth, quarters We've accretion for a revenue. core has fee. this at have point One happened pretty revenue truly thing lost PPP the it's been and and that's down. that over We're our shop is the really we The us. dwindled amazing

go yes, good forward. to So more think come it's I we as things

Billy Carroll

Ron, a it really income always of is strong needs I I different make a engine audience not point a and as items, been think know. starting a When our really really great Kevin, Yes to some core some but that's thing way look that figured out that's -- various to that get our decent going. return, lot of core. -- at numbers, is we've to think This a you

I we're going. that's So reason where love the

we've I from I incrementally to upside. got here. great think can a move we continue think from And metric better just some standpoint

Operator

question Catherine KBW. from our next of take Mealor We

Catherine Mealor

XX% for follow-up saying the that you're beta a -- not total quarterly had just And mentioned and just you XQ, is on deposits, on the that beta. When question the deposits? on interest-bearing I that's margin.

Ron Gorczynski

to the itself up total deposits. not the be, total would our beta the nonmaturity And -- throughout. think I in XX% They wind will deposits,

closer from should expecting the through I quarter. -- for model the the -- XX%, in we model March, think is that XX% probably beginning be range. the whole XX% of we're to But what

Catherine Mealor

cumulative Got basis? a it. On more of

Ron Gorczynski

Yes, yes.

Catherine Mealor

Okay. That makes sense.

I that just line want sure Cool. to in make we Okay. that were guidance.

of to loan the September of on were too, loan Okay. get early X.XX% end that X.XX% yields as at number a for this your so of the kind this then a loan year fair yields the said acceleration And That's mean I your Is assessment? an great. quarter in as thing. X. you yields, margin, more for next it I kind than the see kind

Ron Gorczynski

on think X.XX% yes, lot the be Yes. our -- of pipeline -- We're probably Againe, yields good. the we -- margin, we probably -- in range a loan Yes, our X.XX% you're had we for should we're

Catherine Mealor

Okay. sense. That makes

Okay. Great.

thinking as that maybe and growth grow I'm about see expense And into then think we'll you of operating as sure right. you me expenses pace how and we'll move relative see for positive potential are Let thinking revenue of next we the about next to kind the year? kind that year, leverage about which

Ron Gorczynski

growth see middle we're mid-single-digit Well, -- revenue the moving we range working range. income through and guidance again, we're of point, a haven't and pieces at this on in net pieces, really forecasting a probably expense single-digit for next lot And our giving still not year, -- still obviously, Catherine. that, interest haven't that. an upper the we We're of there's of that, probably

Catherine Mealor

at a Great. an you total can where It's you environment than can . you expenses. grow revenue pace still faster grow think

Ron Gorczynski

Oh, yes. definitely, yes. Oh,

Operator

Instructions] from Sandler. Our is next Piper question of Scouten Stephen [Operator

Stephen Scouten

dig just wanted Catherine's there a I little in last further. question on to

leverage think help and you you even beyond, get can higher are If to hikes 'XX we of XQ, in operating you the rates? operating talk about leverage you after 'XX, still finished, without deliver think even is say, that positive possibly positive rate

Billy Carroll

Stephen. do, I

I a be us, think going of just is a factor thing. it growth. that's of for lot to one Again,

I rate. higher environment As growth it you might a mean, What do Fed we've because where we're is running does I X% about terminal or it, Ron question talked said the an guess models. growth. have with

think if can lot that do reason need grow, down kind obviously, fee the the I emphasis we -- can the if So but a think is actually expense little slowdown putting top sensitive. settle today, other little a of are we see side we slow think bit these are bit really see we where bit. in when of Obviously, rates some where I even line, can that's a rate down do given we we're get we rates little forecast on things a of today, of And the lines, needed to that to. we as a not

So add we're do look we we in more producers. some additional hires But where out, in and some members revenue can an room into environment think Fed still think year gain leverage. the some next as I team additional settles building for in we to even some

Stephen Scouten

That's you Okay. book? great gave number, than the a think How about kind you think betas about will, then you there if should the just other to the loan And helpful. color relative X.XX% should beta, guys deposit on like there. we XX% the gave? we loan how And variable of upside Ron, rate

Ron Gorczynski

Yes.

betas. Going to to forward, bit little be loan more out deposit betas trickier a the figure seem

I betas think to XX% we're running XX%. the around

I would date. to say So that's

I it's I would more. going that. think again, know probably we don't are accelerate probably getting I it higher keep rates. to But would

getting my that. we're maybe now accelerate production track, bit higher the which what and man should in we'll back now So X as we we're our pipeline, seeing new see beta probably handles, a little

probably mid-XXs with So go I that. would to

Stephen Scouten

forward? Is or Okay. moving Great. to And moving recessionary Kind levels what could sensitivity CECL do your reserve where then thinking could going the locks factor observed you're how be that most of sensitive be just think scenarios, where like to an be last for to that forward, me. potential kind it reserve loan of about and you unemployment to? the would thing

Ron Gorczynski

question. Great

model. you incurred As loss the on know, we're

date, To third X/X. parallel run. completed at our CECL adopting be we will We

Our CECL validated. been has model

ready X/X. to So implement on we are

an day really X one, event. For have immaterial to expecting we're day

into of at that that, really are the pieces in update than of implement lot at, we the future We as of XX% maybe because forward we that's not But the increase where and carrying fair going be. just of think knowing going ACLs. a so Not just kind guidance, we're number we marks CECL a build an will as weeks, many we're changes. think point. kind help brings -- of of the this of to at provisioning Other too it's what in that's with with we point. value there's model to going every XXXX. kind this where else couple something hand know, get moving uncertain,

increase area, So provisioning growth. roughly for loan should around XX%-ish new the the the

Stephen Scouten

concerned, far the so ago, rate. weeks And I'm that about sure playoffs as Billy, not baseball as about ended X.X

Billy Carroll

That part it. know. I of

Ron Gorczynski

too. We agree,

Operator

of next Matt Stephens question Our from Olney comes Inc.

Unidentified Analyst

bit is actually yields All wondering my of the on little give maybe more color XQ, Kind expectations what in have at? what was and been the questions on This for Jordan [ph] security you answered Matt. new for are balances. if are coming the I XXXX -- of on could a maybe your and except kind purchases

Ron Gorczynski

XX%. security get win purchases. to million kind a XX%. currently Yes, back this level want of to doing We're month. we're $X probably and cash any And Yes. -- target down at we're taking We to at not million of principal Billy, I'll getting we ourselves to we just want be around point, security position. the that. at We're don't cash new $X of advantage the back

to think of we'll back securities over that answer short point I securities at time. is this wean time, So any the the we're not But book. purchasing down. new

Operator

further queue. We have in questions no the

back So hand it I'll Miller. to

Miller Welborn

of very joining for as much. today, you Thank always. thanks each to Again, us you

us appreciate have in the If additional questions, We bank and out thanks Have any you joining for to directly. reach a interest us your great today. day.

Operator

This you conference ladies concludes Thank today's call, us. for joining gentlemen. and

disconnect You now your may lines.

SmartFinancial (SMBK) 25 Oct 222022 Q3 Earnings call transcript