Participants

Nate Strall; Vice President, Director of Strategy And Corporate Development; Smartbank

William Carroll; President, Chief Executive Officer, Director; SmartFinancial Inc

Ronald Gorczynski; Chief Financial Officer, Executive Vice President; SmartFinancial Inc

Miller Welborn; Chairman of the Board, President of Welborn & Associates, Inc; Smartbank

Will Jones; Analyst; Keefe, Bruyette & Woods, Inc

Russell Gunther; Analyst; Stephens

Brett Rabatin

Steve Moss; Analyst; Raymond James Ltd

Stephen Scouten; Analyst; Piper Sandler & Co

Presentation

Operator

Hello, everyone and welcome to the Smart Financial fourth quarter, 2024 earnings release and conference call. My name is Ezra and I will be your coordinator today. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, press star followed by two, I will now hand you over to Nate Strall Director of Investor Relations to begin. Please go ahead.

Nate Strall

Good morning everyone and thank you for joining us for Smart Financial'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 our website smartbank.com, William Carroll, our President and Chief Executive Officer; will begin our call followed by Ron Gosin, 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 state. 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 FBC.
And now I'll turn it over to William Carroll to open our call.

William Carroll

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 first and, 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 and NPAS credit is always a focus for our company and I'm proud to see these numbers continue at exceptionally low levels.
Total revenue came in at $46.8 million as net interest income continued to expand as we had anticipated. We also had another nice noninterest income quarter. Non-interest 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 low, 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 continued 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 truecore has been outstanding Our loan to deposit ratio was 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 amid the 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.

Ronald Gorczynski

Thanks William and good morning, everyone. I'll start by highlighting some key deposit results. As William mentioned, we had a very strong long 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 nonbroker 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 remains relatively consistent with a slight increase in noninterest bearing deposits increasing at 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 a struggle 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 two basis points to 6.04% which includes fees, net interest income, 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 two quarters, the primary factors driving this margin expansion are new loan production and the amortization and 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 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 two 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 non-interest 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 the 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 increased 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 to 32.5 million with salary and benefit expenses in a range of 19.5 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 bearable structure. There were some final adjustments that slightly elevated our tax rate, but it 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 and accumulated other comprehensive income.
The company's consolidated TC 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.

William Carroll

William. Thanks Ron. And I want to reiterate again the value proposition with our company drawing your attention back to page 8, of our debt. 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. 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 open and market share growing quickly, key the 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 extense 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, noted it in our deck this quarter, this is in addition to being recognized as a regional top workplace for eight consecutive years. So to summarize a lot of 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, also 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 smart financial smart bank team and the efforts of our 600 associates. I'm very proud of the work that we have going on here at SNBK.
So, I'm going to stop there, and we'll open it up for questions.

Question and Answer Session

Operator

Thank you very much (Operator Instructions)
Our first question comes from Will Jones with KBW. Will your line is now open? Please go ahead.

Will Jones

Hey, good morning. Everyone.

Ronald Gorczynski

Hey, Will. Good morning.

Will Jones

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

Ronald Gorczynski

Yeah, that's a great question. We, our loan yields are, our production is still north of 7% originations during the quarter. We did see also opportunities we have received excess loan prepayments which kind of accounted for three basis points of the margin.
Also, We've, we've seen a lot of traction both, not only a good loan lending opportunities but still draws from our unfunded line of line of credits at 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 1st, 1st quarter or two.

Will Jones

Right now. I know you said it. But could you just remind me of where new loan production was, in the, in the fourth.

Ronald Gorczynski

Quarter, a 7.08%?

Will Jones

Okay, perfect. And, and maybe Bill for you that it's, it's great to hear that there's still, optimism on maintaining, made the high single digit long growth pace. Just, just curious if maybe you could talk about how, how maybe some of the competitive dynamics that have changed, or how you expect maybe the competitive dynamics to change in the coming year as, the industry, feel feels fairly, bold up on, growth as a whole.
And then maybe also touch on how you view, your CRE concentrations and, and whether that could possibly be a limiting factor for you guys next year. Thanks.

William Carroll

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 Rett 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

Nate Strall

Yeah, 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 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 with 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.

Miller Welborn

And I'd like to really.

Nate Strall

Emphasize the fact how geographically spread out it was.

Miller Welborn

Within all our markets as well and just anything one limit.

Will Jones

Yeah, that's, that's great. That's all very helpful color guys. Well, well, congrats on a, on a great quarter and great, great into the year.
Okay. Thank you. Will.

Operator

Our next question comes from Russell Gunther with Stefan's. Thank Russell. Your line is now open. Please go ahead.

Russell Gunther

Hey, good morning, everyone. This is Nick Lawrence. I, I'm just filling in for Russell and so this, hey, so to start off, I want to talk about your $50 million revenue target for three Q25. What specific factors are giving you guys the confidence in achieving that $350 million revenue target?

William Carroll

Yeah, 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

Ronald Gorczynski

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.

Russell Gunther

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 Phillips Plaza and the 85% discount in the $16 million loan you guys provided?

William Carroll

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 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 you want to give -- maybe dive in a little bit deeper, just kind of some of our office details

Brett Rabatin

Yeah, I mean, from a, from a perspective of the office exposure as a whole, I mean, it actually has been fairly steady 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, and it is very granular if our, 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 here in front of me, but I'm going off memory, I believe that's correct.
You know, the transaction at Nashville to Bill's point. I mean, for lack of a better word, I would sort of define that. Certainly for us as a 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 of the discount, the purchase price for this, for this buyer compared to the previous valuation, you saw it in the in the finding.
I mean, it was extremely low. I mean, obviously there was a there was a reason that the seller needed to liquidate that that asset when they did and our borrower picked up a, an extremely attractive purchase price and we financed a smaller portion of that.
So and then the dollar amount you mentioned of that file and 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 our exposure position in that particular property is extremely good and we have a recourse with local borrowers.

Russell Gunther

Got it, got it. That's great detail. That's all I have. Thanks for taking my questions guys.

Operator

Thank you. Our next question is from Steve Moss with Raymond James. Your line is now open. Please go ahead.

Steve Moss

Good morning, guys. (multiple speakers) 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?

William Carroll

Yeah, yeah, and I'll just, I'll go high level that Ron let Ron maybe give you give you some expense or, 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 you know, keep in mind, you know that we had, you're kind of bringing on three new flagship offices in these markets with team members that we needed to, even though we had temporary offices. 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. Ron can dive in. I mean, there's some particulars a little heavier with incentive compensation based on based on second half production. But, but really on the whole, we think we can continue to hold that relatively stable moving into 2025 but Ron why don't you would maybe just give some thought on percentage growth guidelines.

Ronald Gorczynski

Yes, Steve, taking fourth quarter 2024 and annualizing it, we're looking at a 2.5% to 3% growth rate in expenses. As Bill 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.

Russell Gunther

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, and maybe a seasonally softer first quarter.
.

William Carroll

Yeah, yeah, our pipelines is as we, as we're starting the year here, our pipeline is still pretty good. You know, so we're, we're still, we're still bullish on our ability to, to kind of hit that, that, that, that guidance plus or minus to your point. We did have some deals that we had anticipated red.
I believe we had a couple of deals that we had anticipated. It would be Q125 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. But, but so that was a piece of it. So yeah, I don't II don't project us doing 20% annualized. Again this quarter, I think we'll have a more reasonable number. But but down a little bit from there.

Ronald Gorczynski

Okay. Got you. Well.

William Carroll

Most of my questions are.

Russell Gunther

Answered. I really appreciate all the call here today. Thanks guys.

William Carroll

Thank you. Thank you.

Operator

Our next question comes from Stefan Skelton with Piper Sandler Stefan. Your line is now open. Please go ahead.

Stephen Scouten

Great, good morning guys. Thanks. Maybe following up on maybe your last comment there of just, 20% not necessarily being sustainable, but 13.4% was tremendous for the year and a year when a lot of people were struggling to deliver any growth. So, I guess what I'm, what I'm wondering is what would lead you to, 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, and any color on current pipelines or, or trends, even if it's anecdotal would be.

Ronald Gorczynski

Helpful.

William Carroll

Yeah, the pipeline is good and right, I'll ask you to chime in too. You know, as we look at pipelines and, kind of take a look at what's, what our, our credit teams got in their underwriting. You know, cues right now, it's really pretty solid. I think a lot of it is, it's a lot of it is really good. C&I business, I've ut over the last several quarters to the, to the, to the robustness of our sales process.
You know, and, and I really do like it. 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, our, our division, regional President groups are just, are doing such a great job, really guiding the growth on both the loan and deposit side of their balance sheet now. So,
I do feel, I think we can continue that. I mean, obviously we have, we have opportunities to, to make some additional hires that could be needle movers that could, that could boost you know, that, that, that guidance up a little bit. But you know, right now, we know 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.
You know, and so not just not just growth for the sake of growth but but strong profitable growth that's coming with good relationships. And so, we're going to spend some time on that and you know, and again, feel pretty bullish about it, but I don't know if you've got any kind of any other anecdotal pipeline time that you want to add.

Nate Strall

Billy. I think you touched on the key part of it. I mean, to me, as you look at the production we've had for the year, it has been as we talked about very diversified across the portfolio and geographically. A lot of that's just basic walking and tackling and banking 101 of pursuing new prospects opportunities with existing clients. But I also would say, Billy pointed out in his, in his commentary that we have brought in over the course of the year, you know, 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, a little bit of a value add as well in our ability to produce what we did this year, over the original guy.

Miller Welborn

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 out, work out, hustle and out close and I'll put them up against any bank anywhere in our market.

Stephen Scouten

I love it. Great color there. And I guess it leads to a follow up question around, kind of the push pull around letting the investments you've made continue to run their course. And I know Bill, you said kind of let let 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, how do you think about that opportunism there if there's good talent out there to be hired versus wanting to let the profitability kind of pull through? How do you, how do you balance that dynamic?

William Carroll

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

Miller Welborn

You know, Steve and I'll add too. We get asked a lot about, oh gosh, y'all are acquisitive bank. Y'all 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 the market disruption.

Stephen Scouten

Yeah. Yeah, for sure. Delivery on execution cover covers a lot of 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, we get no cuts versus, I don't know, two or three cuts or kind of how you think about that trend line based on potential rate environments.

Ronald Gorczynski

Yeah, a lot of, a lot of pieces, a good question. A lot of pieces to that, a large driver, as we've been mentioning, our previous calls is our amortizations and repricing of to, for our loans, our loan portfolio, as well as reinvestment of principal cash flows from our investment portfolio. You refer back to page 15 of the deck you know, our positive side, our new, our new loan production yields are exceeding our existing portfolio yields. You know, keeping our production and deposits at a 303 150 basis point spread.
And we're still, you know, we still have some backside benefit from our deposit repositioning. We did a lot of approach on brokered, they're starting to run off, we're going to see some benefit there. And well, in and again, for Q1 cost savings realized for the, it is a full quarter of the rate cuts. Additionally, I think you know, moving to a neutral position, I think we will benefit of that going forward on a on a what could be a flat rate scenario this year. Again, a lot of pieces to this puzzle here.

Stephen Scouten

Yeah, for sure. That's helpful. Color on. Thank you and congrats guys on a great, great quarter and a great 2024. Appreciate the time.

William Carroll

Thanks, Steve.

Operator

Thank you. Just as a reminder. If you would like to ask a question, please press star followed by one on your telephone keypad. Now, our next question comes from Christopher Marinac with Jenny Montgomery, Scott Christopher. Your line is now open. Please go ahead.

Steve Moss

Hey, thanks, good morning. I wanted to circle back on loan and deposits as well as the liquidity. We've been several quarters removed from the scare. Just kind of curious how you think about that as the year shapes up. Is that another opportunity to continue the earnings progress that we've seen?

William Carroll

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

Ronald Gorczynski

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

Steve Moss

Great. Thank you for that. And then just a follow up question related to credit quality. You know, we've had many, many quarters now, I think it's been five years, we've had these, below five 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.

William Carroll

You know, it's, we, we've always, we've had such a, such a focus on credit. The short answer is probably not. You know, I think for us, when you look at our, when you look at our bank, Chris as you know, you know, I think, we've kind of got, 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. You know, I think when you look at our book, that's probably where you, we take a little bit more risk, get a little bit, we return, we like it in that sector. I've got a really good team there and, and, 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.
You know, we're able to really continue to grow at the level that we want to with really really solid credit. So, probably just not, not in our risk tolerance to take on, take on too much risk in the in the bank portfolio.

Miller Welborn

If it ain't broke, don't fix it.

Steve Moss

No, I follow up. I appreciate the time. Thanks for all the disclosure this morning.

William Carroll

Yeah, good talking to you, Chris. Thank.

Operator

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

Miller Welborn

Thank you very much. Appreciate all y'all joining us today. Thanks for your support of Smart Bank and we look forward to a exciting 2025. Have a good day.

Operator

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.