SmartFinancial, Inc. (SMBK) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the SmartFinancial Fourth Quarter 2024 Earnings Release and Conference Call. My name is Ezra, and I will be your coordinator today. [Operator Instructions] I will now hand you over to Nate Strall, Director of Investor Relations, to begin. Please go ahead.

Good morning, everyone, and thank you for joining us for SmartFinancial's Fourth Quarter 2024 Earnings Conference Call. During today's call, we will reference the slides and press release that are available in our 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 able to answer your questions at the end of the call. Our comments include forward-looking statements. These statements are subject to risks and uncertainties, and the actual results could vary materially. We list these factors that might cause 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 January 21, 2025, with the SEC. And now I'll turn it over to Billy Carroll to open our call.

Thanks, Nate, and good morning, everyone. Great to be with you, and thank you for joining us today and for your interest in SMBK. I'll open our call today with some commentary and hand it over to Ron to walk through some numbers in greater detail. After our prepared comments, we'll open it up with Ron, Nate, Rhett, Miller and myself available for Q&A. So let's jump right in. A really nice quarter for us wrapping up a really nice year as we execute on what we've been messaging. We posted net income GAAP and operating of $9.6 million for the quarter or $0.57 per diluted share. I continue to be very proud of the way our team is performing, and I'm excited to watch us gain the operating leverage as we've anticipated. Jumping into the highlights, I'll be referring to the first few pages in our deck, Pages 3 through 6. First, and in my opinion, one of the most important metrics, we continue to increase the tangible book value of our company. Moving up to $22.85 per share, including the impacts of AOCI and $24.25 excluding that impact. That's over 9% annualized quarter-over-quarter, excluding the AOCI movement. Looking at the graph on the lower right on Page 6, you'll see the value increase we continue to deliver for our shares. Our balance sheet growth was outstanding in the last quarter of the year. On the loan side, we grew at a 20% annualized pace for Q4 and grew at a 13.4% year-over-year as our market teams are continuing to add outstanding new relationships. On the deposit side of the balance sheet, growth was equally impressive with quarter-over-quarter annualized growth at approximately 34%. That number includes some temporary short-term noninterest-bearing funding that came in late in the year. But even taking that out, we were still at near 30% annualized on core deposit growth. Ron will provide more detail on that in a moment. Our history of strong credit continues with the metric dropping to just 19 basis points in NPAs. Credit is always a focus for our company, and I'm proud to see these numbers continue at exceptionally low levels. Total revenue came in at $46.8 million as net interest income continued to expand as we had anticipated. We also had another nice noninterest income quarter. Noninterest expenses were up just slightly to over -- just at over $32 million. A good portion of that delta from the prior quarter relates to increased incentive compensation related to robust growth in the second half of the year. I feel we can hold our expense growth to very reasonable levels as we look into 2025. As discussed in previous quarters, we continue to focus on operating leverage expansion driven by solid revenue growth and thoughtful investment on the expense end. Looking at the charts on Page 5 and 6, you'll see our trend lines continue to move in the right direction. One I would like to highlight is the operating PPNR chart. Throughout 2024, we saw continued upward momentum driven by growth and margin expansion, a trend we expect to accelerate throughout this coming year. So just a couple of additional high-level comments for me. On growth, we are extremely pleased with the results. In regard to the loan side, for the year, we grew our gross loan book approximately $462 million, again, about 13.4% year-over-year. The sales momentum in our company is very good and it's balanced across all of our regions. We've done this while increasing our loan portfolio yields throughout the year despite seeing rate cuts. Our total yield at the end of the year was 6.04% including fees, and we continue to hold at 5.95% without fees. As I mentioned just a moment ago, the deposit growth we've shown has been very impressive. We remixed a little bit this year, trading out of some higher rate public funds, but growth in true core has been outstanding. Our loan-to-deposit ratio has increased a little throughout the year and now is at 83% at year-end, which is a nice spot for us. This position gives us continued flexibility to leverage our strong deposit base. Our business development pipelines continue to feel solid. I'm still holding to our past guidance of mid- to high single digits on loan growth as we look at over the next few quarters, even though we bettered that in 2024. I also expect that we can pace deposit growth to fund that organically. I'm going to stop there and hand it over to Ron to let him dive into some details. So Ron, take it from here, please.

Thanks, Billy, and good morning, everyone. I'll start by highlighting some key deposit results. As Billy mentioned, we had a very strong loan growth quarter, fully funded through our deposit production. During the quarter, we experienced non-brokered deposit growth of $350 million, nearly 34% on an annualized basis, resulting in a loan-to-deposit ratio of 83%. The weighted average cost of non-brokered production was 3.37%. Total interest-bearing costs for the deposit portfolio decreased 18 basis points to 3.02% and were 2.97% for the month of December. The deposit portfolio composition remained relatively consistent with a slight increase in noninterest-bearing deposits increasing to 21% of total deposits. With some transitory noninterest-bearing deposits in our year-end totals, we anticipate that this percentage will stabilize around 20% moving forward. Net interest margin expanded quarter-over-quarter increasing 13 basis points to 3.24%. This expansion is attributable to several factors, including our prior quarter's deposit repositioning efforts, and a favorable 7.08% weighted average yield on new loan originations, resulting in a total loan portfolio yield increase of 2 basis points to 6.04%, which includes fees. Net interest income grew $2.8 million or 31% annualized supported by $150 million of growth in interest-earning assets. Looking ahead, we anticipate our margin to continue expanding throughout 2025, although at a slower rate than observed in the past 2 quarters. The primary factors driving this margin expansion, our new loan production and the amortization of maturities of lower-yielding fixed and adjustable rate loans. We anticipate reduction in deposit costs to progress at a slower pace due to the decreased probability of further Federal Reserve rate cuts and the higher costs associated with new deposit production. As a result of these factors and current market conditions, we anticipate a first quarter 2025 margin in the 3.2% to 3.25% range. Our quarterly provision expense for credit losses amounted to $2.1 million, primarily from higher loan growth. Net charge-offs to average loans were 2 basis points on an annualized basis. Overall, the bank's asset quality remains strong with nonperforming loans to total loans at 20 basis points and the allowance for credit losses remaining steady at 96 basis points of total loans. Operating noninterest income for the quarter totaled $9.0 million, exceeding expectations. This performance was driven by increased revenue from insurance commissions and mortgage banking which contributed $355,000 and $131,000, respectively. However, this was partially offset by a decrease of $500,000 in investment services revenue, primarily due to decreased volume experienced during the quarter. Operating expenses were $32.3 million, slightly above our third quarter guidance due to higher performance-based incentive accruals and commissions from strong Q4 performance. Additionally, increased other real estate and loan-related expenses, increase from the writing down of some repossessed equipment in our equipment finance division to expedite the liquidation process. Looking ahead to the first quarter, we are forecasting noninterest income in the mid- to high $7 million range and noninterest expense in the range of $32 million to $32.5 million with salary and benefit expenses in the range of $19.5 million to $20 million, as accruals for incentive-based compensation will fluctuate based on our performance. We continue to focus on cost management efforts centered on controlling expenses. Additionally, we previously reported the establishment of real estate investment trust subsidiary to monitor and manage the performance of certain real estate loans and to create a more tax variable structure. There were some final adjustments that slightly elevated our tax rate, but is anticipated that our corporate effective tax rate to stabilize at the 20% range. I'll conclude with capital. During the fourth quarter, we allocated significant capital to high-return lending opportunities, which in turn slightly leveraged our capital ratios. Coupled with a $6.3 million decrease in our accumulated other comprehensive income, the company's consolidated TCE ratio decreased 50 basis points to 7.5%. Total risk-based capital remained well above regulatory well-capitalized standards at 11.2%. Overall, we believe our capital levels 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. And I want to reiterate, again, the value proposition with our company, drawing your attention back to Page 8 of our deck. We've been on the road a lot in 2024, reminding our investors and stakeholders of the investments we've made and what we've accomplished recently. We are seeing the profitability inflection and have clear line of sight on our return targets. We're building a great franchise, and arguably some of the most attractive markets in the country and to put together a team that is moving us in a great direction. The changes in our company over the last couple of years have been tremendous. And it's formed, in my opinion, one of the Southeast's brightest stories. We've said we needed a little time to sync up the new markets and teams we've added in recent years. But those markets are now rolling with Birmingham, Auburn and Montgomery flagship offices opened and market share growing quickly. Key themes for us in 2025 are going to be similar to 2024 with a focus on generating operating leverage and hitting our profitability targets. The majority of expense growth in the company during this coming year should be primarily talent-related and measured methodical investments in our banking platform. We will continuously look to hire sales associates who align with our company culture. In 2024, we added 17 new revenue-producing team members and have several in our talent pipeline currently. We're adding some outstanding regional bankers to our team, and I believe we continue to be one of the region's companies of choice for great bankers. From an associate standpoint, we were honored to become a certified Great Place to Work this year. As you can see, we've noted it in our deck this quarter. This is in addition to being recognized as a regional top workplace for 8 consecutive years. So to summarize, I love where we're sitting. We are executing, growing our revenue line and gaining operating leverage. Margin is expanding, and we can see further tailwinds coming with significant rate resets set to occur in our fixed rate loan portfolio. Credit continues to be very solid, and we're seeing great new client growth with a sales energy that is outstanding. All said, a great quarter and a great year for our company as we continue to build a profitable and attractive franchise. I appreciate the work of our SmartFinancial, SmartBank team and the efforts of 600 associates. I'm very proud of the work that we have going on here at SMBK. So I'm going to stop there. We'll open it up for questions.

[Operator Instructions] Our first question comes from Will Jones with KBW.

So Ron, I wanted to start on loan yields. I mean it's a fairly impressive feat that you're able to see that loan yields hold stable quarter-over-quarter, just in light of some of the handful of cuts that we've recently got. I'm just hoping maybe you could help us reconcile what -- how you're able to kind of achieve that stability quarter-over-quarter? I assume growth this quarter was a fairly contributing factor as well as maybe some of the fixed rate repricing tailwinds you have. Just help us, maybe, piece together how that loan yield transpired in the quarter? And maybe where we could expect to see that trend through the early half of 2025?

Yes, that's a great question. We -- our loan yields, our production is still north of 7% for originations. During the quarter, we did see also opportunities. We have received excess loan prepayments, which kind of accounted for 3 basis points of the margin. Also, we've seen a lot of traction on both not only good loan lending opportunities, but still draws from our unfunded line of credits at a higher rates. So at this point, we managed to block and tackle to keep these consistent, but we will see it trending down a little bit lower as we move forward into 2025, at least for the first quarter or two.

Great. I know you said it, but can you just remind me of where new loan production was in the fourth quarter?

7.08%.

Okay. Perfect. And maybe, Billy, for you, it's great to hear that there's still optimism on maintaining at a mid- to high single-digit low-growth pace. Just curious if maybe you could talk about how maybe some of the competitive dynamics have changed or how you expect maybe the competitive dynamics to change in the coming years as the industry feels fairly bulled up on growth as a whole. And then maybe also touch on how you view your CRE concentrations and whether that could possibly be a limiting factor for you guys next year?

Yes. Well, yes, good question. Yes, from a growth standpoint, we have -- and like I said, we've guided to that mid- to high single digits, again, which is kind of where we've been for the last few quarters. We've been able to beat that. And I think some of it is we always build some paydown assumptions in their projections as well. And quite frankly, we just didn't get a lot of that in the second half of the year. So I think if you look at some normal pay down and pay off happenings along with production, I still think we're about right. The competitive side is still there, it is. I think when you look at the regions where we operate, I mean, you've got really good economic climates, you've got really good economic environments. I think there is a bullish ceiling and at least in the regions where we're operating probably, nationally as well. But I know where we're doing business, it is. Rates -- while rates have stayed elevated a little bit, I think we still feel good about our ability to compete. It's a -- yes, I think it is going to be an interesting year. I know a lot of other companies like us feel like they can continue to grow their balance sheet. But we feel -- we're very optimistic about that. Our sales teams, as I've mentioned, are really starting to hit on most all cylinders and really we're very bullish on kind of the position we are as a company. To your CRE question, and I may throw it over to Rhett to let him give a little bit of color on this as well, we don't think that will be a big limiter. We had some really good opportunities over the last quarter to pick up some nice, just nice core relationship opportunities that had a little bit of a CRE emphasis. But I think the majority of the growth that we're seeing is still, probably, fairly balanced as our production charts have shown. But Rhett, I'd love to let you maybe just kind of dive into that just a little bit deeper and talk a little bit about what we're seeing on the production side, the mix and maybe just a little bit about the CRE piece and where that's coming from...

Yes, if you look at just -- start with this particular quarter, you look at this quarter's production imbalances, I mean about 34% of that was in CRE [ call quote ] category. 60-plus percent came in a mix of C&I owner-occupied real estate, 1-to-4 family. Again, you look at the chart on Page 10 of a long composition mix, you can see it really did not swing to any degree of significance in any category. So we continue to see good opportunities to Billy's point, in the CRE space, but we're seeing good opportunities across the entire spectrum of loan types and that production has been very consistent. It's been consistent geographically. It's been consistent within the portfolio from a diversification standpoint. So while we are continuing to see opportunities in the CRE segment, it is a -- it's just a normalized piece of our production. And we think that trend is going to continue as we look at our pipeline.

And I'd like to really emphasize the fact how geographically spread out it was within all our markets as well. Again, just anything, limited factor.

Our next question comes from Russell Gunther with Stephens Bank.

This is Nick Lorenzoni. I'm just filling in for Russell. So to start off, I want to talk about your $50 million revenue target for 3Q '25. What specific factors are giving you guys the confidence in achieving that $350 million revenue target?

Yes. And I'll get a little hot, maybe just kind of a macro thought on that, and then let Ron maybe talk a little bit more about kind of how we plan to get there. Really, when you look at the revenue growth that we've had over the last few quarters, I mean it's really more just a continuation of the trend. When you look at -- when you do the math just on kind of what we're looking at from a from a loan and deposit growth standpoint, continue to hold those expense lines, you get to that $50 million kind of right there towards the end of Q3 right there, Q4. So we still feel very confident on our ability to hit these near-term return targets. If we can get that $50 million revenue line, on a quarterly run rate by the second half towards the end of the year and that should equate to that 1%, 12% ROE -- ROA, ROE respectively. And that's the near-term goal, and then we'll sit down and kind of assess what the next goal needs to be. But we've said on these calls and when we're out at our meetings, we feel very, very good about our ability to hit that. So Ron, I don't know if you've got any additional color on how we plan to achieve this.

You handled most of the high points. Really, it's loan growth funded by organic deposit growth. We will have a larger balance sheet, and we do expect not as fast, but margin expansion throughout 2025. Those are really together in our loan repricing, as I mentioned in my opening prepared remarks, our repricing is pretty powerful through this period of time.

Okay. That's great. And then 1 more question. Could you discuss your office exposure in general and specifically in Nashville, including how it's holding up and expectations going into 2025? And maybe, just maybe any color on that recent sale of [ Phipps Plaza ] and the 85% discount in the $16 million loan you guys provided?

Yes, pretty good deal, to be honest. But I'll give some high color, and I'll let Rhett maybe go into the details a little bit. We don't do -- we really don't do a lot of office. We haven't traditionally, obviously, we had an opportunity with a nice core client in that national zone that we took, obviously, public information from the D filings, took the opportunity to do that, which we feel very, very good about and really excited to grow that relationship with that client there. But we feel really good about our office exposure. And really, when you look at Nashville, I don't think I personally don't think that, that's an indication that Nashville has got issues. I think when you look at those types of transactions, obviously, it's -- those -- some of those deals were done with a different type of term and structure and borrowers back pre-COVID. There's been a little bit of a reset on some buildings like that, but I don't view that as a real concern. It may reset some comps a little bit lower on like buildings. But you might see a few more of those one-offs, but I still think you're going to see much of it kind of in our peer space personally. But Rhett you want to give -- maybe dive in a little bit deeper, just kind of some of our office details.

Yes. I mean from a perspective of the office exposure as a whole, I mean, it actually has been fairly steady, it's actually, I think, declined a little bit as the year has gone just in amortization of what was in the portfolio. The transaction in -- and it is very granular. I think our average loan size in that office segment is just south of about $1.2 million, if I remember correctly. I don't have that statistic right in front of me but of memory, I believe that's correct. The transaction at Nashville, to Billy's point, I mean, for lack of a better word, I would sort of define that certainly for us as a little bit of a unicorn. There were some extremely unique components associated with that deal. I mean you mentioned the fact that the purchase price -- the discount, the purchase price for this buyer compared to the previous valuation, you saw it in the findings, I mean it was extremely low. I mean, obviously, there was -- there was the reason that the seller needed to liquidate that asset when they did and our borrower picked up an extremely attractive purchase price and we financed a smaller portion of that. So -- and then the dollar amount you mentioned that filing keep in mind, there is some draw component to that for additional tenants. So that is not the dollar amount that we funded at closing. So our exposure position in that property is extremely good. And we have recourse with local borrowers. It's a big piece.

Our next question is from Steve Moss with Raymond James.

Nice quarter here. And maybe just -- maybe just starting with expenses. Billy, you kind of mentioned a pace -- a reasonable expense growth pace for 2025. Just kind of thinking -- are you thinking about mid-single digits, maybe mid- to upper just given some of the trends you guys are having?

Yes. And I'll just -- I'll go high level and Ron -- let Ron maybe give you some expense or percentage guidance. For the most part, we have -- when you look at our -- we've really done a nice job. You've seen some expense growth quarter-over-quarter as '24 happened. But keep in mind, we had -- you're kind of bringing on 3 new flagship offices in these markets with team members that we needed, even though we had temporary office. But by the time you do that, there's a little bit of growth there. So when you look at our kind of our Q4 run rate, we feel that's a pretty good proxy going forward. Now Ron can dive in. I mean, there are some particulars, a little heavier with incentive compensation based on second half production. But really, on the whole, we think we can continue to hold that relatively stable. Moving into 2025. But Ron, why don't you, if you would, maybe you can just give us some thoughts on percentage growth guidelines.

Yes, Steve, taking fourth quarter 2024 and annualizing it, we're looking at a 2.5% to 3% growth rate in expenses. As Billy had indicated, it's not a year-over-year growth because our franchise has grown considerably. Most of the increases or majority of it will be in the salary benefits category and to a lesser extent, data processing and IT-related upgrades. So pretty stable. I think it's a good measuring stick to go by as you go forward in 2025's forecast.

Okay. Great. Appreciate all that color. And then just in terms of going back to loan growth here, I'm just curious, obviously, a really good quarter. And I hear you guys some of it was on the drawdowns from unfunded commitments. But curious, was there any pull forward maybe of production? And could we see a little bit of tempering just given kind of a pull forward and maybe a seasonally softer first quarter?

Yes. Our pipeline as we're starting the year here, our pipeline is still pretty good. So we're still bullish on our ability to kind of hit that guidance, plus or minus. Yes, to your point, we did have some deals that we had anticipated, Rhett, I believe. We had a couple of deals that we had anticipated would be Q1 '25 deals that got accelerated to close at the end of the year. So we got a little bit of a tailwind on that growth there right in the second half of December. So that was a piece of it. So yes, I don't project us doing 20% annualized again this quarter. I think we'll have a more reasonable number but down a little bit from there.

Our next question comes from Stephen Scouten with Piper Sandler.

Maybe following up on maybe your last comment there of just 20% not necessarily being sustainable, but 13.4% was tremendous for the year in a year when a lot of people were struggling to deliver any growth. So I guess what I'm wondering is what would lead you to be able to put up a similar number there, like a 13% or 14% versus maybe the high single that you spoke to earlier? And any color on current pipelines or trends, even if it's anecdotal, would be helpful.

Yes. The pipeline is good, and Rhett, I'll ask you to chime in, too. As we look at pipelines kind of take a look at what's -- what our credit teams got and their underwriting is huge right now, it's really pretty solid. I mean a lot of it is -- it's a lot of really good C&I business. I've alluded over the last several quarters to the robustness of our sales process. And I really do like and I do think that's had a big impact on the growth that you've seen. I mean we've really spent some time with just good solid foundational prospecting and calling efforts and accountability in our markets. Our sales leadership are our division, regional president groups or just are doing such a great job, really guiding the growth on both the loan and deposit side of our balance sheet now. So I do feel -- I think we can continue that. I mean, obviously, we have opportunities to make some additional hires that could be needle movers that could boost that guidance up a little bit. But right now, we need to continue -- we're going to continue to focus on making sure we're getting the right return targets on the deals that we're looking at. And so not just growth for the sake of growth, but strong profitable growth that's coming with good relationships. And so we're going to spend some time on that. And again, feel pretty bullish about it. But Rhett, I don't know if you've got any kind of -- any other anecdotal pipeline commentary that you want to add?

No, Billy, I think you touched on the key part of it. I mean, to me, as you look at the production we had for the year, it has been, as we talked about, very diversified across the portfolio and geographically. A lot of that is just basic blocking and tackling and banking 101 of pursuing new prospects, opportunities with existing clients. But I also would say, Billy pointed out in his commentary, we have brought in over the course of the year, several new hires and very strong producers in their respective footprints. And we did see some really good new relationship production from those hires. So that has been a little bit of a value-add as well in our ability to produce what we did this year over the original guidance.

And I think it speaks to the culture of the entire bank, not just the production side, but the entire bank. I think our whole team of associates will outwork, outhustle and outclose, and I'll put them up against any bank anywhere in our market.

Great color there. And I guess, that leads to a follow-up question around kind of the push/pull around letting the investments you've made continue to run their course. I know, Billy, you said kind of like '25 look a bit like '24, where you continue to move that profitability up. But hired 17 producers, I think you said this year, a few more in the pipeline. How do you think about that opportunism there? If there's good talent out there to be hired versus the profitability kind of pull through? How do you balance that dynamic?

That's a great question. And it's something we talk about a lot internally. I mean we -- and you said the word, it's balanced. I think we're really focused we want to hit and we will hit the near-term profitability targets. We're going to do that. We said we're going to do it. So we're not going to let anything stand a way of us doing that. And so I think that's one A. But at the same time, we want to make sure that we're investing in the platform appropriately, that we're adding the right sales talent when they get here. So it truly is a balance, Stephen, and it's something that we work with. But I think we're trying to do it under the umbrella of making sure we hit these profitability metrics that we said we're going to after getting all these offices up online. So I think we can do both, we'll be selective. And obviously, if something comes down the road, that's unique, we'll evaluate it. But from our standpoint, I think it's just going to be continued growth the way that we did it this year, hiring a few new key folks when we can find them and keeping that balance to make sure we hit the metrics.

Stephen, I'll add too. We get asked a lot about, oh, gosh, you're an acquisitive bank. You ought have grown through acquisitions through the years. What's next? What's next? We talk a lot about just continuing to perform this year and executing on where we are. And I'm not so sure our best M&A strategy might not be just to sit back and wait and watch with some of these other deals that come to fruition and take advantage of some market disruption.

Yes, yes, for sure. Delivery on execution covers a lot of issues and gives you opportunities for sure. Good point. And then maybe just the last thing for me. Curious on the NIM expectations. I know I think, Ron, you said kind of spending higher throughout the year. Just wondering about the expectations behind that from a rate perspective, if that changes at all if we get no cuts versus, I don't know, 2 or 3 cuts or kind of how you think about that trend line based on potential rate environment.

Yes. A lot of pieces -- a good question, a lot of pieces to that. A large driver, as we've been mentioning on previous calls is our amortizations and repricing of -- for our loan portfolio as well as reinvestment of principal cash flows from our investment portfolio and we refer back to Page 15 of the deck. Our positive side, our new loan production yields are exceeding our existing portfolio yields, keeping our production and deposits at a 300, 350 basis point spread. And we're still -- we still have some backside benefit from our deposit repositioning. We did a laddered approach on brokered. They're starting to run off. We're going to see some benefit there. And again, for Q1, cost savings realized for the -- there is a full quarter of the rate cuts, Additionally, I think moving to a neutral position, I think we will benefit of that going forward on what could be a flat rate scenario this year. Again, a lot of pieces to this puzzle here.

Yes, for sure. That's helpful color. And congrats guys on a great quarter and a great 2024.

[Operator Instructions] Our next question comes from Christopher Marinac with Janney Montgomery Scott.

I wanted to circle back on loan to deposits as well as liquidity. We've been several quarters from moving from the scare. I just kind of curious how you think about that as this year shapes up. Is that another opportunity to continue the earnings progress that we've seen?

Yes. Chris, I'll start and then let Ron chime in. Yes. I mean, I think we -- I think -- yes, 83% loan-to-deposit ratio is where we're sitting today, which has been nice. I mean it's -- we still got some nice room to move. When you look at our metrics, our liquidity position has been able to stay relatively strong with -- and still and we still kind of look at that overall coverage ratio and our ability to pay out if we need to. And so the deposit side, the core deposit side of our balance sheet is something that's probably one of the -- it's the key focus. I know in a lot of our areas, growing those DDAs is something that we talk about every day. And so I like where we're positioned there. I think we can continue to grow organically. But to fund the growth. But Ron, I mean, anything else you want to add on kind of liquidity position and kind of where you see that going?

Yes. We've managed -- last quarter, we really utilized our cash. We got down to full liquidity position around 16%, 17% for cash and securities. We're up now approaching 19%. So I think we're very comfortable with where we're at. We do have cash. We could lever $100 million plus of cash. But I think as far as liquidity goes, and our access to liquidity is very strong. We have ability to grow both sides of our balance sheet with our access to funding and cash.

Great. And then just a follow-up question related to credit quality. We've had many, many quarters now. I think it's been 5 years where we've had these below 5 basis points charge-offs. I'm just curious, if there's sort of a tolerance for slightly more losses just to get more revenue and/or return through. I know that's a delicate balance. So just kind of curious how you think through that.

It's -- we've had such a focus on credit. The short answer is probably not. I think for us, when you look at our bank, Chris, as you know, I think we've kind of got our Fountain Equipment Finance piece. That's a nice component. We really, really like that line of business that's executed really well since we bought it a couple of years ago. I think when you look at our book, that's probably where -- we take a little bit more risk, get a little bit more return. We like it in that sector. We've got a really good team there, and we continue to feel comfortable with our ability to grow that book of business looking into '25. But it's kind of the overall general loan book, we're able to really continue to grow with the level that we want to with really, really solid credit. So probably just not in our risk tolerance to take on too much risk in the bank portfolio today.

Thank you very much. There are no more questions. I will hand now back over to Miller for any closing remarks.

Thank you very much. Appreciate all you all joining us today. Thanks for your support of SmartBank, and we look forward to an exciting 2025. Have a good day.

Thank you very much, Miller, and thank you to all the speakers today that have joined us. We appreciate everyone who has joined the conference call. You may now disconnect your lines.