SMBK - Earnings call 4 2023 | SmartFinancial, Inc.

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Operator

Hello, everyone, and welcome. My name is Drew, and I'll be your conference operator today. At this time, I would like to welcome everyone to the SmartFinancial Fourth Quarter 2023 Earnings Release and Conference Call. [Operator Instructions] I will now turn the call over to your host, Nate Strall, please go ahead.

Nathan Strall

Good morning, everyone, and thank you for joining us for SmartFinancial's Fourth Quarter 2023 Earnings Conference Call.

During today's call, we will reference the slides and press release that are available within the Investor Relations section on our website, smartbank.com. Chairman, Miller Welborn, will begin the call, followed by Billy Carroll, our President and Chief Executive Officer. Officer; commentary. Jordan, Financial will Credit Chief provide also Gorczynski, and Chief Rhett Officer, Ron

be to will the We available call. end at of the answer your questions

of and statements Our any not We materially. and materially factors which information, these subject statements. because in include in cause the actual on do These obligation available might or to comments to could filings, forward-looking list risks developments results uncertainties required that vary except our new and We are may results assume our release are differ forward-looking to otherwise, update SEC website. our any be statements law. early as by press

financial the related company's to we the reference During call, non-GAAP measures performance. will

appendixes January earnings filed our it to may investor presentation call. XXXX, and XX, over of Welborn the now You reconciliation to in the see I'll on release open the of with SEC. And these Miller turn Chairman, the measures

Wesley Welborn

of Thanks, Nate. activity fourth XXXX quarter for of another The incredibly SmartBank. busy quarter was

we of all and more last be challenging very performed. couldn't we entire a proud for was our our year industry, team As how year know,

improvements I'm about to going every continued aspect in quarter. With the Billy. made of proud year. We do for business remains team turn believe and a operate begin that are company entire the to line I we're very our and have strong every as new The of we of strong over that, and we effort to poised our economy the future. a a made footprint bright we it in sincerely for focus we I'm improve Southeastern optimistic fourth

William Carroll

fourth jump going morning discuss and into with and good Miller, morning, Thanks, highlights. this be Great to right quarter you I'm today. to everyone. our

one X see bow and put You'll it for of we good higher rates. XXXX, was these will had to say our from on an a industry Slide where year impacts of our unusual I on deck. most

and nice was had an our forecasted after in of That with line inflection see. coming couple went some margin a very in revenue to stabilization contraction. as This we quarter point of quarters

be usual, million and at momentarily. discussing today net metrics operating or $X.X We income. will I'll into operating financial As dive primarily details came EPS in in $X.XX more non-GAAP on Ron

sides We to sheet X%, deposits balance both annualized, grow the loans of respectively, with the continue increasing both during X% quarter. and

little position loan-to-deposit basis an staying from slightly to for related with substandard more loan to last moving Our us feel to right very was on increase. and ratio an Rhett key book. sound, at tangible focus flexibility a XX%, Equipment. our but remains metrics number only of continuing our liquidity in our good points. quality book around value sector quarter weakness moment up these ratio of will tick and we a continue nice very is a in we healthy Alabama And XX on growth. Credit dive number the into here, our credit to did trucking That give about strong NPA Fountain continues to

it. AOCI impact Now at and $XX.XX, $XX.XX the including of excluding

quarter. We a a this a rural office assist nice a You location. our will one had the the former of of was community with items win-win CRA couple markets of opportunity a note helping great had donation nonrecurring with donation. This we to Alabama qualifying

of that feel good quarters back. to rates of a it in going tightening. of that interest line was lingering after bit finalize. Deposit we're color continue an those on assets, to and stabilized. begin moment. We bounce working ship matter reprice legal is as on little to a provide turn a couple back feel And the did revenue have grow loan income a other we see The to to accrual Ron on net balances did

Revenue saw. not over the was I contraction that back. but The what we XXXX, growth hampered key we're we environment at look confident trending last are back look quarters year. accomplish EPS I rate to with revenue every growth few As and happy to I'm the now

their have earnings We that did allow company number our momentum coming at us now will rates a Also, We profitability KlariVis. key platform pricing will operational to to aggregating fully system. changes well a stabilize. our bank including utilizing loan data gain we these reporting an $X look this company, as accomplish nCino of that made foundation commercial initiatives is system better billion as position our year. We as to built new the and outstanding as benefit some and

efficiencies QX and platform to also in better moving loans. we growth where some nCino's shipped with close are our All Ron a good for it XXXX gain let portfolio help moment. numbers. Rhett? smaller quarter us dive to on me to over and the to hand to a into We additional Rhett to consumer focus first all, But on comments for deeper the I'll in discuss loan in a then

Rhett Jordan

and basis. The completing quarter other product efforts nonowner-occupied our financing CRE the The into portfolio production existing Billy. throughout to of annualized saw and primary a primarily transitioned focus composition was a as cycle. of strong X% the had growth growth this except overall which you, to C&I We projects and geographic for transitioning with a space, permanent construction and remained reductions slight increase sectors. growth year, across expected strong a really diversification loan increase through while slight had in our level, bank composite we quarter-over-quarter due loans of Thank maintain categories C&D continuing our organic overall in in

the point an While overall continue basis increase price parameters we to see yield. and in average portfolio improved X

$XX decline down quarter-over-quarter, total to of total about as continued expected X% down balances in construction from loans to reducing outstanding million XX% was to and XX% of from and Our XX% portfolio capital.

environments quarters, balance start in an positions in normal mentioned commercial and had XXXX, the higher rate expected during costs, and continued result changes dynamics. in these project for those we As challenging more are construction above construction interest prior creating with metrics space slower of

total balances portfolio down in of production CRE completion of came segments outstanding total about XX% from and total grew steady that portfolio. capital, period. in Again, for Our held XXX% ratio with of slightly last at from quarter targeted steady results projects the the nonowner-occupied at loans. The the relatively construction previously mentioned, as of very CRE in strategic diversified movement performance nonconstruction X%

As very note, quarter two and increase was you will we factors. the the a This for result see in NPA fourth our movement minor did ratios of delinquency specific period.

Fountain our First, subsidiary trucking as in of dues levels year saw small and the the segment past normal above progressed. classified Equipment

flattening progressed. problem valuations account the line trend the of XXXX, as marketplace underlying of the equipment both activity in challenging While some assets fountain the experienced some we in the this operators and the part conditions portfolio of observe in half a year did in second of

important our year-end. portfolio had well recognize performed strong subset year yield Fountain this I trucking subsidiary and to minor think performance of our that of solid above Equipment fountain quite of segment, overall, an the outside a it's fountain XX% portfolio the at with majority very average and profitability

for multistate equipment whom Alabama The direct and of the credit second real assets our large finance. footprint relationship operation we in was broker with last NPA quarter a for have our held movement mortgage some driver result was estate single a

with was our a and in operator total the overall size term small as very portfolio format, a its company secured for of creditor to debt exposure debt base. percentage held Our and minimal that

assets two and working those was be portfolio. Outside satisfactory all general and the presently. process isolated which our reduce what CRE the overall credit a performance quarter we strong impact metrics portfolio allocation held specific are reserve we this believe a NPAs diversification when reductions and positioned of for saw two to to through the prior have from relationship exposure to general collection portfolio excluding space of impact an show have our the a the aforementioned very We within minimal items. and strong. continued to performance. of exposure This continue in to our matters, classified concentrations Delinquencies,

loss steady did ratio the with prior annual we concentrated to XX% period of held at fourth XX% annualized segment the fourth losses losses quarter, trucking of realize X.XX% those subsidiary. our small Fountain in and quarter of to Our

our this saw overall, Alabama of the increase model, progress from loans. Realized Combine resolved. in that factor that in growth until Overall, fully is balance specific that a the loan production reserve be XXXX. from positive into with allowance to loan quarter as impact positioning, drove the fourth the we our basis X% for credit holding we our movements resulted outlook model from to input and provision As X.X% that is to demand increase for good are CECL slight the total the normal reserve. with the a continues against in quarter we X.XX% predominantly increase

this our top-of-class some we XXXX pristine of is credit credit very and isolated profitable matters some way, QX continued portfolio see any maintaining do impact not in we bank's a believe our did the we management are undesired commitment for history quarter, targeted portfolio long in ratios growth. that While in systemic beginning with quality, and caused in

Ron direct the other I'll over turn Now discuss deposit financial composition, Ron? liquidity key to measures. call and to

Ronald Gorczynski

everyone. good morning, Rhett, and Thanks,

on start XX. Let's Slide

at $XX quarter, loan-to-deposit and XX%. fourth deposit and we the annualized growth During of ratio or $XXX year-over-year over our had continued keeping million over of growth million X%

expansion we in deposit that growth. markets Moving momentum legacy with areas, drive our XXXX, in will market our anticipate coupled mid-single-digit into growth

As did interest-bearing slower but at see noninterest-bearing a into from deposits accounts pace. migration continued expected, much we

the month were of points XX-basis increased and costs December. deposit total Our for to X.XX% X.XX%

but over at the pace, and the from Looking loans XX a XX, we relieve expect XX to see pressure our you'll ahead, of migration which and muted funding upward months. some additional continue on cash costs. On flows Slides next do securities the will details

liquidity rate of quarters, at interest have year-end. continued which maturing we Slides and quarter are to we deployment. of year, a nearly maturing look several this strategies million for of bank's we currently in $XXX position, million over reprice forward asset total average overview bank's we Net the the a XX reviewing sources In assets. have quarter-over-quarter liquidity provide repricing point with X.XX%, $XXX quarter, for by our XX% weighted was unchanged margin later assets mentioned XX, we've the set including cash As base With or to improvement. and its X-basis securities this an we earning improvement. On of XX% X.XX% representing and remained which, profitability for total,

X.XX%. cost the on and was average X.XX% average commercial of weighted production the deposit QX, new was weighted For loan originations yield

X.XX% versus basis Our X.XX% last X to quarter. contractual points yield loans on expanded

on we interest-bearing quickly competitive While yield proceeds can exercise counter repositioning. we careful see this, of impact from excess the migration and deposit were liabilities, to interest-earning pricing deployment the To these that discipline assets to we of improvements. asset outpace thoughtful caution our continue pleased pressures and cost loan

have we remain $XX second previous million return our interest we $XX sensitivity plus million range of operating stabilization run XXXX. On Slide to half As in XX, in gradually the lower to our quarterly our margin the continues, revenue project rate rate information. and

We within at have approximately with portfolio variable of million a rate loan $XXX XX% months. repricing X

along For any our in current we will immediately with have the quarter. deposits $XXX during million rate of XX% of to movements interest-bearing CDs this Fed our with repricing deposits, that reprice conjunction

and noninterest income operating We guidance have million details XX and and expense previously $X.X line our of Slide million, with at Both income provided expenses respectively. noninterest and in XX. $XX.X on were

on with We the income noninterest streams focused they relationship capturing customer as are opportunities revenue pleased income themselves. and present remain

As expense income, over into to having quarters. downward anticipate several we as with as noninterest well ratio XXXX going the start our next consistency trending efficiency continued

to and first expect $XX.X salary the benefit $XX.X expenses. capital $XX of million $XX in $X $XXX up grew range, million the those and from range Slide changes. Looking to in million, to to million ASCI by rate XX, the $XX million income expense during the almost and finishing in million million ahead, interest off making decrease expenses quarter earnings due we million both And total losses noninterest with on driven mid-$X quarter noninterest

liquidity Over book turn progress to to on I'll strategies. back in and primary made value. With position repositioning management strong, a execute various over balance said, defend well-capitalized months, our past sheet and, XX most We mission we've that tangible remain our Billy. the capital through continue significant it importantly, grow and to

William Carroll

Thanks, Ron.

accomplishments positioned balance XX% very which year, are us nice all we are And more case. was can holding make you serve knew I But operational with going even was still our the stated see we had we like to good a as going to some had with but We well. be growth. sheet that didn't earlier, that efficient. that, trends, As we

I horizon. My feel stabilization the rate continue growth as nice the more have we've discussed, outlook metric improvements spending, pipelines. and on still the clarity forecast is for we fairly With disciplined bullish our to on confident see we

our We've last that, and deposits -- few the a And fund key have M&A pace and continue we well strong feel can mid-single the digit built pace. sheet internally. a and that same anticipate Summarizing strength areas. in liquidity And growing the lending a pace. feel continue as around we to granular both we as at lot are diversified through result, we same is available. the We we With growth great same like we organic several have a foundation over years that very of growth. balance as a at

outsized very heard, coming to nice have you've some will again, impact cash us. To have positive in XXXX we do we a flows As us and say very back sheet. balance a have that for that

regions, as that for our markets, the discuss some to at of in community comes to us items other we us. Southeast our build footprint, our markets have recently we our I provide to matters. as -- have the a senior banks. close, noted Officer us the that operates have some and vibrancy And continue -- a we a of look added us when outstanding the an great and with of Chief Geography Martin over those. Schrodt. some built markets we've those we And When proposition. A going team, regional As community best We're last a background those team. our in very you value have outstanding large to I joined excited tailwind Banking very continue Martin holistically, executive and in company nice we're couple Martin in that the couple is couple travel quarter have will just during on to at of have years and teams real. we a to got you

to New We big them. I'll move Exchange We a are the with having partnership great they forward have a and that a to thank working this build for in to December. Stock with excited year, the you NYSE SmartFinancial. to York the culture great we team close These outstanding continue also members long-term with during associates last in worked and hard our have XXX-plus company. extremely to look

there, So I'll for and stop questions. we'll it open up

Operator

[Operator Instructions] from Our Scouten Stephen Piper today question comes first Sandler. from

Stephen Scouten

-- Alabama one this total have guess I'm one team question I just around question the I had South of loan of around what team. the size I guess I just Panhandle news that wondering -- kind the of kind how to what you those book risk in 'XX brought respect? from folks on any of what and was from kind any there's outflows material just if -- that that of much remain

William Carroll

Yes.

we outflows. and we everybody. got real in they'll had to my positioned recruiting seen of know, it efforts departures. best up better as did in wrap history. had And from region. experience very have you sometimes got strategy as risk we material no usually and no We had a leave for And better First, I'll -- we place. that that's We our case, two impact that producers marks We've is near-term coastal good fit out other we've had places. feel see folks two but those little represented that basically when fell nice and say the all been plan. it's We've that good a we a plan backup in works we're it some in

Stephen Scouten

which slowed, Okay. kind of the deposit looks Great. any continue? on to of it here Do pace shift I side? kind stabilize expect still moving think decline has mix on noninterest-bearing you but that the is of commentary if deposits, Do missed the like from can you downward. but And the this see apologies good

Ronald Gorczynski

good question. Yes, a that's

shift the floor of to are do rate probably at hopefully slowdown We increase. the seeing We mix XX%. of expect the

over lot and of quarter stabilization forward. from here, last the we're think I looking seeing a So

much the more deposit or still bit forward. but -- side expense still forward have will going not creep a little we on So of deposit going creep

Stephen Scouten

Makes it. Got Okay. sense.

Okay. from see and like are what XXXX this definitely numbers a is possibility full? is me my and for talking great just seeing what about guys level point profitability maybe can here in what to thing And maybe think you you the this correct, in profitability or return is on are ROA XX% then which -- sort XX% last XXXX from saw do you year trajectory, the in standpoint, that XX-basis a of to recovery

Ronald Gorczynski

XXXX, point, at probably we're this this second in of should think like with half be that occurring But that's see -- production, our rate lift on we'll I back pre-downward see repricing the At starting of we to That's second Yes. this ROA expecting we'll me, year. our back -- what X% point. pre-downward half excuse the plan. getting looking

William Carroll

want looked where XX really obviously, positioned kind little to Stephen, -- But about ago you we company where others, just get where We've of squeeze. that's months a about of add. bit at, I'll we good not get And unlike back is feel were the to we a I'll now.

alluded looking asset some look has of flat a conservative what Ron to, As fairly trying scenario. throw a kind lot take a rate in at, in this kind of of the a repricing, modeling we're We're growth. you And at approach. to we're

get back hold the true that I for us you think gets those market get if downward and recovery shift, you to projections normalized of a and little that faster. -- even metrics a If us bit accelerates

bit get it. So of function know about can what we pretty a be will feel We Fed just there. the good a of we It little does.

Stephen Scouten

period really does significantly need million And of sense. of big imply operating Because big like in feels jump pretty time. level? from a pretty Makes ramp just number? it short ramp kind like to to perspective, that that Does revenue it. $XX a get to that a 'XX an that Got relatively like in back

Ronald Gorczynski

the starting to hit the consecutively, we're Well, going forward, I net $XX revenue looking we'll mid-XXXX, think probably million bogey. in increases, we're quarter-over-quarter from

repricing But have we get will feel occurring, ramp. we the that's again, there. all yes, with confident considerable we'll So

Operator

Our comes Matt next Olney from from question Stephens.

Matt Olney

liquidity. to I the Great. want balance ask about more sheet

You quickly. nice can you mentioned with for around here what with us while. talked the got liquidity? some we've you've about provide And due do this provide a flows does to Any updated optionality. coming nice some cash expect you thoughts pretty It improved

Ronald Gorczynski

Sure. but to We we'd targeting XX% growth security ultimately, it still ratio. -- loan we're our fund like being asset that with to

or month we trying put million to So maintain. buffer kind of next over that that $XXX get much the are pretty bogey we're XX% work to or to two to strategizing to

over the we purchases have So investment X will next months.

Matt Olney

Okay.

loan I on that. growth And -- on the into growth Any heard range commentary I growth growth have front, loan heard securities. guidance. may growth partially the the the this year? What's expectations for some I So loan loan and deposit guidance. missed of

William Carroll

kind Yes. -- Matt, of projecting in of we're kind mid-singles. the I think staying we're that

can of I hopefully think north we be X%. somewhere there,

is about regional Our internally that. you growth, sheet. X%-ish prospects, the the balance about getting When good year continue is I growth good at -- look good sheet as sit we we've mean with feel way the sides we presidents our got at we bogey starting. look of about on and feel down look to pipelines again, balance both our

upper So that -- in but singles, wouldn't kind growth year. single for we're high say not balance of the I still kind sheet mid-plus of

Matt Olney

-- some You is got mix provide far it collateral that size That's as just then that? Yes. Rhett, the any was in What color of sounds collateral feel is you you can mentioned you loan as what before, collateral. that the credit want into And it. like to and about on walk of type that Okay. that? good more helpful. Alabama this, the

Rhett Jordan

Total real mean, a balances. collateral that some is them of some $X single size was predominantly and size of well. in It it loan. all there And associated about a then million as estate of office total equipment with loans the I but of group was is of the wasn't --

Matt Olney

of as And Okay. of credit, a drag is you type Or far a event? that near-term as little could think? for while, this that resolution out

Rhett Jordan

thing. quarter long don't we went process think And those the don't mean location think in positioning we -- factor allowance what take to depending I a just and a But of little it ahead period, for the I be and of more, on it's us it of drag I we legal be or a but assets. will the some in risk said, against I a out there. positioned go the some going drag may up through, believe like of of to out Matt.

about So we we're pretty point. positioned where feel good this at

Operator

from Strickland Feddie Janney Our next from Scott. question today Montgomery comes

Feddie Strickland

on I pickup some yields discussion, Just there's wanted could you're and securities ask, that off. appreciate so how What have getting and of detail into, know reinvesting sense you the we the of maybe the there's securities kind a on book to have new time? can -- securities over I just been rolling much are you

Ronald Gorczynski

somewhere we're into. -- exact it's this that over At plus probably X.XX% point, it's into, to minus depending X% on range, or the we're looking but looking we're getting definitely probably security over reinvest

Feddie Strickland

Got you.

pay barometer? we should whatever as attention does a of use kind to that and a funds So bit Fed just of

Ronald Gorczynski

I X, probably funds, Fed think. XX below Yes, yes. that would but basis points, maybe

Feddie Strickland

you. mentioned... Got then you And

William Carroll

move. thinking we're, in Feddie, move, little right bit of out ahead a say, about on out and little bit you're ladder you its curve Yes. the It's it. obviously, seeing kind of going I go to figure move where a duration funds I trying a You're think funds you. again, market was to

Ron to balance get short-term decent But to yields trying that going versus said, as of long-term benefits. still again, this. we're So kind on

Feddie Strickland

wanted Yes. see the sorry, a but I start side likely faster And deposit in second -- we maybe potentially bit cuts repricing rate commercial will That on deposits switch see of a do If at municipal repricing. to least sense. to consumer a next year, benefit and we makes gears. lag until on a cut,

how Just the portfolio to understand would down? deposit on the act trying way

William Carroll

there just the guidance on repricing what of I think got And bit a Yes. kind -- a immediately mix. Ron side. liability we've gave little it's But I this Ron on of think

of that that. position quicker in are maybe little us a I a think little move allow to rates with a can liquidity our than some. we done We've

softer growth One with of things the bit a being little quarter. deposit this our

to -- stuff pushed cost didn't was were out. some move want there that that we and match we some Some things just because higher of

got a as but try push. But some to there. us, think I you've other comments. don't can lag we've flexibility we going But yes, know there might got if as I little we're hard for be Ron, to any push

Ronald Gorczynski

exactly. No,

the definitely advantage first want two then take see As it. Bill the or it's market cut bear. indicated, of to will and push But we hard -- what

William Carroll

It's -- end rate-sensitive kind of it's saw like mean fighting that and Feddie, of of when up, kind like we going you up core. kind I rates for

we're And to kind at so to going way I make think market we the the some of is, at that more to as But market aggressive We core sure by market look but can want of those to end as we're retain day, retaining. the and be going client know we we client. what by and the of the want we're down. business on --

Feddie Strickland

That's last one. helpful. One it. Got quick

if to the I used know curious look term Just there. some a funding you've some bank given program. second have arbitrage banks

sure not. something or looked guys not that's have if at you Just

Ronald Gorczynski

we're to of it. at lot again, developing the and strategy thought next a in that going million looking consideration been that process. our we're over have deploy We $XXX a And is

it We or to we're purchases haven't picked that's part candidates. yet going the the really how do ideal of but

Operator

question Group. Brett next from Hovde from Our Rabatin comes

Brett Rabatin

fee quarter. Billy, I with fee first know start I fee start the $X.X relative income wanted kind talk maybe in initiatives million know I performance SBA. income in -- to variables you any would 'XX? higher outlook. number 'XX lead maybe there to initiatives Are the any you mid-single-digit of stronger 'XX, you've know to and with might in got some some can you about outlook. that a that mentioned some push Wanted the and on income that products to thoughts

William Carroll

be. line. noninterest I you're Yes, put as continued that as our group guess, we've into to just there well resources I could Brett, Investments Yes. to speaking income think SmartBank insurance. Obviously,

our has think can big AUM now -- and that And little be it's while Again, think still of on our insurance, it you small, it. a a I to we continue piece could $X.X upside, too. more a more about if AUM, in I some little investments become impactful to grow that's relatively billion see statement. provide becoming could -- income that starting group

us, the grow are and really We're looking to way those in I of deposits things important. behind for continuing deposits think resources much an we're environment and bigger corporate treasury that, in more to especially TM are where big. put

has experience. TM some of is regional it banks important. I'd to Officer, Chief that the upside worked provide some side He's could some great he's Martin Martin also new ideas I got had that very related in the of Banking think Ad Schrodt. our So mentioned with there.

are curve to get stay as to out a swaps this things well. group, inversion and Ron to floating So I some continues the Using we Markets in bit at and you too. a think lock at Can lower on curve. has swap them improve for it's variety the in little day. some longer of end our the Capital absolutely I can gotten think rates there fees, of clients with When us look

bunch there. out a throwing I'm So stuff of

little can the We've got the my different levers lines. built different of your I we of end it's business it of question a guess, I is thing But that do. we about think is a number bit at these to -- of answer day. it, all the great

kind it I a think what I So gives of function upside there. will do be us just the market but think nice of there's

Brett Rabatin

Okay. business? the insurance what in the have on bank about of talked know specifically the Any of done high folks redeploy terms know other it. valuations like capital some thoughts we've to business. monetizing some core in And mentioned you and I I you --

William Carroll

revenue grow to going got on to continue ability But markets talk I -- that. in a and And Nate know aware line. I We've grow of about and that. keeping think what's business me. the seen with it lot. we've that a about Nate works Again, we're lot it, We've Yes. like watched it and talk eye an side we and that the on on we're the that

Brett Rabatin

the Okay. from an perspective have then you're lastly give industry that trucking business? know I a are involved. board maybe outlook can in a fundamental several outlook us seeing guys on just experience for you -- you what And of core me, specifically kind of just What's for lot trucking members and and in

William Carroll

you fairly trucking Miller, of kind still is involved in Miller your don't why just outlook. that. take that,

Wesley Welborn

and about Thank you. and it industry transportation more for in I'm the bigger, specifically years. trucking carriers the that very optimistic have stable been

you came excess with a operators, stable COVID but better a capacity to sorted will do of think of And on inexperienced whole. I'm -- COVID say is think market such and era, continue a probably bullish demand margin up kind now. the The area of will bit as that industry I little I out some into pushed improve them. have kind vital just the would It's operators I part the economy. for some the of

worries industry. all about that no So at

Operator

Our comes James. Raymond from today next question Moss from Steve

Stephen Moss

Maybe the just operating total million Ron, mentioned for second of you $XX guide half off 'XX. revenue here. in the revenue starting on

cuts Just rate if into that you're wondering incorporating any guidance.

Ronald Gorczynski

No, we're any not. and will make much We're rate rate environment flat our assuming cuts performance better. a that

be So our conservative forward we in looking to want guidance.

Stephen Moss

Okay. on just Great. just the And that I number. curious, missed subject, related

interest-bearing are indexed. how -- mentioned much your I You deposits of missed

Ronald Gorczynski

Sure.

internal index another ahead indexed and that follow XX% -- as confident can we an doing Fed think cuts to and -- we that I we $X.X are $XXX or but million appropriate. excuse the million me, $X.X rate we're billion it's feel also to have go

Stephen Moss

And then helpful. the on That's Great. loan Okay. the of Bill, upbeat here. terms pipeline in your

real It maybe forward C&I you're into estate. the for business commercial curious seeing underlying mix owner-occupied more XXXX. like here what sounds Just and going

William Carroll

Yes.

ratios, I you little yes, mix. a know, 'XX, can any good in Obviously, I Rhett mix. more But think to. our there, growth to -- fairly a we're when -- can at CRE we're want right, add you nice, lower same color at to want continue you it's a look think opportunities we risk you speak think we looked that pace. it's C&I some Yes. seeing But got those, still CRE don't we will I still too. out

So if to got any you know color want I you don't add?

Rhett Jordan

agree completely, I would Billy.

it movements and some far type through if that is as as point, finding year, go teams we in on what we create this the still stronger underwriting metrics think the CRE might opportunities will think predominantly properties the what Billy's at the are last that with income-producing help associated just pace of opportunities I forecast a they as in aspect we profile do with performance currently year. are up out I just rates of some of space rate of the do projects. are owner-occupied most did that see saw in pipeline C&I because our than the going interest little To

as So through go mix be the really good we it could year. a

Stephen Moss

Okay. here. just And credit That's of on terms in the Great. then -- helpful.

stress? the you where the guys small how curious, seeing portfolio that is Just piece trucking talked some fountain large about you're of

Rhett Jordan

Fountain, challenged little for of is of trucking the a the portfolio about as operators with over year progressed overall total ones working -- industry weight the the but through X.X% portfolio. XX% the that is it's about were The and their we

of majority those. vast of risk through the that like next hold the think I in have we We there we through the have say here challenge underlying Those valuation group of are through So this at higher going small or we year. the we simply won't there or marketplace. as operators. comes to plateau of that be as a have point went. majority. feel an 'XX. identified assets certainly more the as ones seen it's a or the a can't it's But we've issue think stated, little may the working identified just we in the I have year soundly go that two one and Most we fluctuated But go as

Stephen Moss

Very minimal.

any also, -- that leases nonperforming curious item and is assets, million. maybe in in release just restructured are loans of of included that's $X.X Great. the see I line the appearing not up Okay. to what credits in And those

there. if that's driver the Just wondering

Rhett Jordan

the aspect. No. in included nonperforming That's all

Stephen Moss

leases? then just that bucket what And loans driving of restructured and there maybe is Okay.

Rhett Jordan

I'm sorry.

William Carroll

I think that question your Was was what's that. driving right?

Stephen Moss

Yes. Correct. driving bucket What's not leases in restructured nonperforming. the included loans of and

Rhett Jordan

restructured that think metric [indiscernible]. I get going head, to trying not I'm specific look you head. far leases, the You're my to On as back at -- that I I'm and on get have to my I'll of that what off not of top don't sure have to the you top as information. to have I'm

Operator

Our next from from KBW. question today comes Mealor Catherine

Catherine Mealor

call feels from far. your of just so commentary It like the on some

got move as we So we into especially get repricing good especially kind cuts, revenue really if momentum, opportunity. the some look, of loan with 'XX we've

a a move to we this Or next little be operating in bigger we your is revenue bit year? improving think half growth we expense that the of that balance into this leverage do into with going think about Do revenue rebound? expense accelerates And really get how should of so through you of switch big next, as back and you growth? kind year profitability to as think some

William Carroll

Ron, start I'll and in. chime Yes, you then

getting got When obviously, we've end think elevated some lot in there think line ratio, some with should those there's -- little But incentives the day, of variable and I be related typically interest at net revenue as then just that the think expenses. is done control a that particularly. adding -- I but there, those I'm of at occupancy nice I Alabama ramp I we -- salary a add this of think, little am our we'll Catherine, expenses going are lot of because have that to bit not job. ratio a branches a can down look There's -- income. you obviously But echo to sorry. in ramp. efficiency in I -- a those year we've and only component

to that's at don't Ron, we're some sure comments see any if got think know growth. I make yes, So the hard end and contained but of I there work just you've we'll to in related very day, expense to that, increase the going

Ronald Gorczynski

that in to of Yes. the quarter, we're the noninterest to out. widen Really, as revenues that we're expecting XX% revenues, at first a expense and percent estimating

by the it QX the time meaning XX%, revenue. XXXX, our represents of XX% So that of

will the will make revenues out quicker expenses the sense? than increase. So that Does widen

Catherine Mealor

any you've like great. going? It been that you move either need that Or of are got technology, see environment where revenue see? expense may teams, And processes, you've in does. that you kind revenue been investments, we anything of you infrastructure on That's there to constrained feel this the we've while kind back holding

William Carroll

Yes.

we've are that we think we to lot, I evaluate spend comes back growth number have not There the not got horizon that digital necessarily a got -- with because some we pretty some to there. some that out want to make good of platforms. things one, in as sure have we want don't options on continuing spot. tech the revenue a a forecast we project. ton 'XX make our But We're

Our KlariVis a our rate. and systems are this in in, run stuff nCino little built place. We've but with already here being into in there, a in. lot of There'll and bit be built being got

things strategic want as we part related of year get we look some upgrades might later a to couple broader there's potential So digital of that at the of the into to platforms.

got I the you already stay And know the to most tools like that but we've run rate. that's that. got we You to of so we've the sure relevant mean, got feel right -- we'll into evaluate make and anticipate. Ron, on -- revenue see goes making got if the comes line if as know line year and any sure the don't how color. like back you've I coming we revenue other

Ronald Gorczynski

No, exactly, were Operationally, solid. we're sound, Bill.

keep infrastructure focused. also as I to think for related customer more IT we our And items software. it's fraud-related

good it. enhance to But opportunities have in always we'll spot. we're So a now, right

Operator

final Piper Our comes from Sandler. question from Scouten today Stephen

Stephen Scouten

wanted in I jump for to a just follow-up.

wondering I'm have litigation not that might but said color lend I was have that sure if that any I some front? you you on around there's could issue. just missed might if you had think information

William Carroll

Ron, you want to?

Ronald Gorczynski

Really.

accrual seeing many that's expect quarter. during -- been resolved amounts indicated, nothing the this first accrued that kind And of much be a It sort unusual is it's nonrecurring. -- here. pretty relates more on will pending No Not be for. much. that. to Bill Honestly, banks As the have to litigation lately. material say to we It's other of litigation that during

Operator

I'd final Welborn remarks. back for any like to Miller session to turn the over

Wesley Welborn

today. for joining Thanks, Drew, and thanks again to us each of you

out any questions, questions free a have you feel reach and please great As us always, hope have any to directly any of have to week. Goodbye. with you might if you additional

Operator

That concludes Release XXXX Earnings Conference and SmartFinancial today's Fourth Quarter Call.

disconnect You may lines. your now

SmartFinancial (SMBK) 23 Jan 242023 Q4 Earnings call transcript