SmartFinancial - Earnings Call - Q4 2024
January 22, 2025
Executive Summary
- Q4 2024 delivered continued operating improvement: diluted EPS rose to $0.57 (vs $0.54 in Q3 and $0.37 YoY), net interest income reached $37.8M, and tax‑equivalent NIM expanded 13 bps sequentially to 3.24% as deposit costs fell 11 bps q/q to 2.43%.
- Balance sheet growth was strong: net organic loans/leases grew $189M (20% annualized q/q), deposits rose to $4.69B (from $4.32B in Q3), and TBVPS increased to $22.85; credit quality remained solid with NPAs/assets at 0.19% and NPLs/loans at 0.20%.
- Management guided Q1 2025 NIM to 3.20–3.25%, noninterest income to mid–high $7M, noninterest expense to $32.0–$32.5M, and an effective tax rate ~20% as REIT structuring benefits take hold.
- Strategic message: operating leverage is inflecting; 2025 focus remains revenue growth, disciplined expenses, and continued margin progress; the Board declared a $0.08 quarterly dividend payable Feb 18, 2025.
What Went Well and What Went Wrong
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What Went Well
- Margin and funding: “Net interest margin expanded… increasing 13 basis points to 3.24%,” driven by lower deposit costs and 7.08% new loan production yields; deposit costs on interest‑bearing fell 18 bps to 3.02% (2.97% in December).
- Growth and operating leverage: CEO—“A really nice quarter… We posted net income… $0.57 per diluted share… excited to watch us gain the operating leverage as we’ve anticipated”; TBVPS up to $22.85; operating PPNR momentum cited.
- Credit resilience: Nonperforming assets/assets improved to 0.19% (from 0.26% in Q3); NPLs/loans declined to 0.20%; net charge‑offs remained very low at 0.02% annualized.
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What Went Wrong
- Fee mix: Noninterest income declined $109K q/q; investment services revenue fell $499K (lower activity), partially offset by +$355K insurance commissions.
- Expenses: Noninterest expense increased $1.45M q/q to $32.3M on incentive accruals and write‑downs of repossessed assets at the equipment finance subsidiary; efficiency ratio remained ~69%.
- Tax: Income tax expense rose to $2.7M on higher pretax income and final state adjustments related to the new REIT in Q4 (benefit expected prospectively).
Transcript
Operator (participant)
Hello everyone and welcome to the SmartFinancial Q4 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 (Director of Investor Relations)
Good morning everyone, and thank you for joining us for SmartFinancial Q4 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 investors' presentation filed on January 21st, 2025, with the SEC. And now, I'll turn it over to Billy Carroll to open our call.
Billy Carroll (CEO)
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 three through six. 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 six, 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 non-interest-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 bps 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 non-interest income quarter. Non-interest expenses were up just slightly to 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 five and six, you'll see our trend lines continue to move in the right direction. One I would like to highlight is the operating PP&R 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 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 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.
Ron Gorczynski (CFO)
Thanks, Billy. 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-broker 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-broker production was 3.37%. Total interest-bearing costs for the deposit portfolio decreased 18 bps to 3.02% and were 2.97% for the month of December. The deposit portfolio composition remained relatively consistent, with a slight increase in non-interest-bearing deposits increasing to 21% of total deposits. With some transitory non-interest-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 bps 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 bps 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 two quarters. The primary factors driving this margin expansion are 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 bps on an annualized basis. Overall, the bank's asset quality remained strong, with non-performing loans to total loans at 20 bps and the allowance for credit losses remaining steady at 96 bps 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 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 non-interest income in the mid- to high $7 million range and non-interest expense in the range of $32-$32.5 million, with salary and benefit expenses in the range of $19.5-$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-favorable 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 in our accumulated other comprehensive income, the company's consolidated TC ratio decreased 50 bps 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.
Billy Carroll (CEO)
Thanks, Ron. I want to reiterate again the value proposition with our company, drawing your attention back to page eight 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 a clear line of sight on our return targets. We're building a great franchise in arguably some of the most attractive markets in the country, and it 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 open 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 eight 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 set 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 our 600 associates.
I'm very proud of the work that we have going on here at SMBK. So I'm going to stop there, and we'll open it up for questions.
Operator (participant)
Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. Please ensure your device is unmuted locally. If you change your mind or your question has already been answered, please press star followed by two. Our first question comes from Will Jones with KBW. Will, your line is now open. Please go ahead.
Will Jones (Analyst)
Yeah. Hey, good morning, everyone.
Ron Gorczynski (CFO)
Hey, Will. Good morning.
Will Jones (Analyst)
Good morning.
Hey. 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 yield hold stable quarter over quarter just in light of some of the handful of cuts that we've recently gotten. I was just hoping maybe you could help us reconcile how you were 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 through the quarter and maybe where we could expect to see that trend through the first half of 2025. Thanks.
Ron Gorczynski (CFO)
Yeah, that's a great question. 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 bps 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 lines of credit at a higher rate. So at this point, we've 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.
Will Jones (Analyst)
Great. I know you said it, but could you just remind me of where new loan production was in the fourth quarter?
Ron Gorczynski (CFO)
7.08%.
Will Jones (Analyst)
Okay. Perfect. And maybe, Billy, for you, it's great to hear that there's still optimism on maintaining a mid to high single-digit loan 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 year as the industry feels fairly bold 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. Thanks.
Billy Carroll (CEO)
Yeah. Will, yeah, good questions. Yeah. 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 into our 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 paydown and payoff 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 feeling, at least in the regions where we're operating, probably nationally as well, but I know where we're doing business. It is. While rates have stayed elevated a little bit, I think we still feel good about our ability to compete. Yeah, 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'll 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.
Rhett Jordan (Chief Credit Officer)
Absolutely, Billy. Yeah. If you look at, just start with this particular quarter, you look at this quarter's production in balances, I mean, about 34% of that was in a CRE call code category. 60+% came in a mix of C&I, owner-occupied real estate, one to four family. Again, you look at the chart on page 10 of the loan composition mix, you can see it really did not swing to any degree of significance in any category. So we've continued 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. 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's just a normalized piece of our production.
We think that trend's going to continue as we look at our pipeline.
Billy Carroll (CEO)
I'd like to really emphasize the fact how geographically spread out it was within all our markets as well. It wasn't just any one limiting factor.
Ron Gorczynski (CFO)
Perfect.
Will Jones (Analyst)
That's great. That's all very helpful, Kelly, guys. Well, congrats on a great quarter and great end to the year.
Rhett Jordan (Chief Credit Officer)
Okay. Thanks, Will.
Operator (participant)
Our next question comes from Russell Gunther with Stephens Inc. Russell, your line is now open. Please go ahead.
Nick Lorenzini (Analyst)
Hey, good morning, everyone. This is Nick Lorenzini. I'm just filling in for Russell.
Billy Carroll (CEO)
Hey, Nick.
Nick Lorenzini (Analyst)
Hey. To start off, I want to talk about your $50 million revenue target for 3Q25. What specific factors are giving you guys the confidence in achieving that $350 million revenue target?
Billy Carroll (CEO)
Yeah, and I'll give 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 continuation of the trend. When you look at when you do the math just on kind of what we're looking at from a loan and deposit growth standpoint, continue to hold those expense lines, you get to that $50 million kind of right there toward 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 hit that $50 million revenue line on a quarterly run rate by the second half toward the end of the year, and that should equate to that 1%, 12% 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 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 it.
Ron Gorczynski (CFO)
Yeah. 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 repricings, as I'm mentioning in my opening prepared remarks. Repricing is pretty powerful through this period of time.
Nick Lorenzini (Analyst)
Okay. That's great. Thank you. And then one 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 Philips Plaza and the 85% discount in the $16 million loan you guys provided?
Billy Carroll (CEO)
Yeah. Pretty good deal, to be honest. But I'll give some high points, and I'll let Rhett maybe go into the details a little bit. 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 Nashville zone that we took, obviously, public information from the deed 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 yeah, we feel really good about our office exposure. And really, when you look at Nashville, I personally don't think that that's an indication that Nashville's got issues. I think when you look at those types of transactions, obviously, 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 caps a little bit lower on like buildings, but you might see a few more of those one-offs, but I still don't think you're going to see much of it kind of in our peer space, personally. Rhett, you want to maybe dive in a little bit deeper just to kind of some of our office detail?
Rhett Jordan (Chief Credit Officer)
Yeah. I mean, from the 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 amortizations 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 I'm going off memory. I believe that's correct. The transaction in 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 on the purchase price for this buyer compared to the previous valuation, you saw it in the filing. I mean, it was extremely low. I mean, obviously, there was a 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. 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 particular property is extremely good. And we have recourse with local borrowers. It's a big piece.
Nick Lorenzini (Analyst)
Got it. Got it. That's great detail. That's all I have. Thanks for taking my questions, guys.
Miller Welborn (EVP)
Thank you.
Operator (participant)
Our next question is from Steve Moss with Raymond James. Steve, your line is now open. Please go ahead.
Steve Moss (Analyst)
Good morning, guys.
Christopher Marinac (Analyst)
Hey, Steve.
Steve Moss (Analyst)
Next quarter here and maybe just starting with expenses. Morning, guys. Billy, you kind of mentioned a reasonable expense growth pace for 2025. Just kind of thinking, are you thinking mid-single digits, maybe mid to upper, just given some of the trends you guys are having?
Billy Carroll (CEO)
Yeah. Yeah. And I'll go high level with it, 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 2024 happened. But keep in mind, we had; you're kind of bringing on three new flagship offices in these markets with team members that we needed, 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 kind of our Q4 run rate, we feel that's a pretty good proxy going forward. Now, Ron can dive in. I mean, there's 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, if you would, maybe just give some thoughts on percentage growth guidelines.
Ron Gorczynski (CFO)
Yeah. 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 salaries and 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.
Steve Moss (Analyst)
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?
Billy Carroll (CEO)
Yeah. Yeah. Our pipeline, as we're starting the year here, our pipeline's still pretty good. So we're still bullish on our ability to kind of hit that guidance, plus or minus. Yeah. 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 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 so that was a piece of it. So yeah, 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.
Steve Moss (Analyst)
Okay. Got you. Well, most of my questions have been asked and answered. Really appreciate all the call here today. Thanks, guys.
Ron Gorczynski (CFO)
Thank you.
Miller Welborn (EVP)
Thank you, Steve.
Operator (participant)
Our next question comes from Stephen Scouten with Piper Sandler. Stephen, your line is now open. Please go ahead.
Stephen Scouten (Managing Director)
Good morning, guys. Thanks. Billy, 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.
Billy Carroll (CEO)
Yeah. The pipeline's good. And Rhett, I'll ask you to chime in too. As we look at pipelines and kind of take a look at what our credit teams got in their underwriting queues right now, it's really pretty solid. Definitely a lot of it is a lot of it's 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, our division regional president groups 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 other anecdotal pipeline commentary that you want to add.
Rhett Jordan (Chief Credit Officer)
No, 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 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.
Miller Welborn (EVP)
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. I'll put them up against any bank anywhere in our market.
Stephen Scouten (Managing Director)
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. I know, Billy, you said kind of let 2025 look a bit like 2024, 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 wanting to let the profitability kind of pull through, how do you balance that dynamic?
Billy Carroll (CEO)
That's a great question, and it's something we talk about a lot internally. I mean, and you said the word, it's balance. I think we're really focused. We want to hit, and we will hit, these near-term profitability targets. We're going to do that. We've 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'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.
Miller Welborn (EVP)
Steve, 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 some market disruption.
Stephen Scouten (Managing Director)
Yeah. Yeah. 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 think, Ron, you said kind of ending 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, two or three cuts or kind of how you think about that trend line based on potential rate environments.
Ron Gorczynski (CFO)
Yeah. 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 for our loan portfolio, as well as reinvestment of principal cash flows from our investment portfolio. You refer back to page 15 of the deck. Positive side of our new loan production yields are exceeding our existing portfolio yields, keeping our production and deposits at a 300 bps, 350 bps spread. And we still have some back-end 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. This 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.
Stephen Scouten (Managing Director)
Yeah. For sure. That's helpful color, Ron. Thank you. And congrats, guys, on a great quarter and a great 2024. Appreciate the time.
Ron Gorczynski (CFO)
Thank you, Steven.
Operator (participant)
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 Marinak with Janney Montgomery Scott. Christopher, your line is now open. Please go ahead.
Christopher Marinac (Analyst)
Hey, thanks. Good morning. I wanted to circle back on loan to deposits as well as sort of liquidity. We've been several quarters removed from the scare. I'm 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?
Billy Carroll (CEO)
Yeah. Chris, I'll start and then let Ron chime in. Yeah. I mean, I think we're 83% loan-to-deposit ratio is where we're sitting today, which has been nice. I mean, we've 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 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 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 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?
Ron Gorczynski (CFO)
Yeah. We've managed. Last quarter, we really utilized our cash. We got down to a full liquidity position around 16-17% for cash and securities. We're up now approaching 19%. So I think we're very comfortable where we're at. We do have cash. We could leverage $100 million plus of cash. But I think as far as liquidity goes, our access to liquidity is very strong. We have the ability to grow both sides of our balance sheet with our access to funding and cash.
Christopher Marinac (Analyst)
Great. Thank you for that and then just a follow-up question related to credit quality. We've had many, many quarters now. I think it's been five years where we've had these below five basis points charge-offs. I'm just curious if there is 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.
Billy Carroll (CEO)
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. It'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 if you're going to 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 2025. But it's kind of the overall general loan book.
We're able to really continue to grow at 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. If it ain't broke, don't fix it.
Christopher Marinac (Analyst)
Nope. I follow. I appreciate the time. Thanks for all the disclosure this morning.
Ron Gorczynski (CFO)
Yeah. Good talking to you, Chris. Thank you.
Operator (participant)
Thank you very much. There are no more questions. I will hand now back over to Miller for any closing remarks.
Miller Welborn (EVP)
Thank you very much. Appreciate all y'all joining us today. Thanks for your support of SmartBank, and we look forward to an exciting 2025. Have a good day.
Operator (participant)
Thank you very much, Miller. 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.