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SmartFinancial, Inc. (SMBK) Q1 2019 Earnings Call Transcript

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SmartFinancial, Inc.  (NASDAQ: SMBK)
Q1 2019 Earnings Call
April 25, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the SmartFinancial First Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Frank Hughes, Investor Relations. Please go ahead.

Frank Hughes -- Executive Vice President, Investor Relations

Thank you, Andrew. Good morning and thank you for joining us today on our first quarter 2019 earnings call. With me this morning are Miller Welborn, Chairman of SmartFinancial, Inc; Billy Carroll, President and CEO; Ron Gorczynski, Chief Admin Officer; Bryan Johnson, our Chief Financial Officer. After our prepared remarks, we will then take questions. Yesterday evening, we issued an earnings release discussing our first quarter results. We have also prepared a slide presentation, which we will refer to during these remarks. Both of these can be found on our website at smartbank.com in our Investor Relations section.

During today's call, we will make forward-looking statements, which are subject to risk and uncertainties and are intended to covered by the Safe Harbor provisions of federal securities law. Actual results and trends could differ materially from these set forth in such statements due to various risks, uncertainties and other factors. More detailed information about these and other risk factors can be found in our press release that preceded this call and in the Risk Factors and Forward-Looking Statement sections of our Annual Report on Form 10-K.

Statements are valid only as of today's date and the Company disclaims any obligation to update this information except maybe required by applicable law.

Additionally, today's presentation contains non-GAAP financial measures, the reconciliations of such measures to the most comparable GAAP figures are included in our earnings press release at the end of the earnings call presentation. Please also note this event is being recorded.

I will now turn the call over to our Chairman of the Board, Miller Welborn.

Wesley Miller Welborn -- Chairman

Thanks, Frank. Thanks group for joining us this morning. We look forward to business with this group and discussing our Q1 '19 earnings and operations. Great quarter to talk about this morning and excited about where we are as a bank. Firstly, I wanted to do is address the news from yesterday about our termination of our merger agreement with Entegra Bank. We're certainly disappointed it didn't work out. We really liked the idea, the combination, the team, the footprint and operations are all first-class. It's just a situation where they were faced with a unsolicited topping offer that was in excess of 25% greater than our agreed upon price. We did have the opportunity to match the higher offer but we chose not to do so. The Entegra Board exercised their proper fiduciary responsibility and they did what they had to do. And we did as well. Our acquisition strategy has been very disciplined over the past several years with five or six previous deals and we intend to remain very disciplined in the future as we address future possibilities. And we've already received our $6.4 million breakup fee and Billy is going to talk about a few more of these specifics we've made but -- improvements we've made, but suffice it to say, we're better and stronger than ever and let me be clear, we are playing off hands.

A couple of comments about our first quarter numbers. Great earnings quarter with year-over-year growth, the earnings of 39% to $4.7 million, very strong annualized loan growth at about 15% annualized growth, $63 million increase in the loan portfolio. And our yield on earning assets improved to 5.25% year-over-year. Non-interest expense certainly improved and our NIM held very strong for the quarter. I'll also say all this was done while working very hard on our previously discussed MOE. I think it's great excellent testimony to the work ethic and determination of this team. I can't wait to see what the balance of 2019 has in store for us.

And with that, I will turn it over to Billy, to dig in a little deeper.

William Y. Carroll -- President and Chief Executive Officer

Thanks, Miller, and good morning to everyone on the call. And I'll make a couple of comments to follow up on Miller's related to the termination of our merger. And Miller hit the nail on my head. You know, we're disciplined in this deal at the revised terms just wasn't good for us and good for our shareholder base and we are a little disappointed. But I'll tell you, I'm energized of the work that has been done prepping for us to be a $4 billion bank. So that won't happen in July as we had originally planned but it'll happen soon.

And so if we continue to execute, we're going to hit that mark. So we've started a lot of those initiatives to really get us to that spot. And that's really what we've been working on for the last couple of quarters. If you'll flip over and hopefully you have the decks in front of you, if you flip over to Page 5, we've put a Slide in the deck that talked a little bit about the areas we've been working on and that we'll continue as we pivot. We are continuing work on centralization of some operational and finance areas. We've done a bank wide organizational chart planning to gain efficiencies in a number of different departments throughout the company. We got a major decision on a core data processing our provider. We have a contract at SmartFinancial, SmartBank that is up in early 2020.

So we had started a process of core decisioning as part of our merger planning. That process is ongoing. We are continuing to move through that. That should yield some great benefit for us as we look ahead. We are continuing the hiring of our bank talent, continuing to evaluate M&A opportunities. Although we've been out of the game for a little while, we are jumping back in and starting to look at opportunities there.

And then we've also got an approved share repurchase program in place. And I think that's important to note that that's available to us as we evaluate capital utilization opportunities. So we're going to move forward, we're going to pivot a little bit, but I love where we are positioned today. We may have some other questions on this, we'll be glad to answer those in a bit. But I want to go ahead, jump into the highlights of the quarter.

As Miller said, is really a solid quarter with everything we had going on. I want to turn it over to Bryan in just a second to dive into the financial metrics in some greater detail. But -- and then he'll hand it back to me. I will wrap up and give you some anecdotal color of where I see the bank today. Again, great quarter. Operating metrics, and I'll focus a little more on our non-GAAP numbers and metrics for purpose of this call, continue to trend in a positive way particularly when you look at our year-over-year Q1 to Q1. For us, I'll -- I'd focus more on the year-over-year versus the Q-over-Q just because we're in such a rapid growth mode. I think those are key metrics to look at, solid quarter-to-quarter but even better year-over-year.

Looking at it in my opinion, some of our key metrics, ROA, ROE, EPS, total revenue, all had great growth plus organic balance sheet growth, all well prepping for a major deal. And a really probably as important, if not more important, our credit quality remained extremely solid. Earnings coming in around $0.40, core $0.39, fully diluted, it was right in our target range. Core ROA, right on our 1% near-term target, and core return on tangible equity at 10.79%, all really good metrics. Expenses, efficiency ratios, expenses were in check for the quarter. We had a couple of items, were some variances from Q4, we had two months of Foothills in Q4, three months of that combination in the first quarter with that full run rate. Had some data processing credits that we had to use in 2018 to lower the data processing expense a little bit in Q4, had to pick that up in Q1. All that said, still ended the quarter with a sub 65% efficiency ratio.

Balance sheet, loan and deposit growth really strong, as Miller alluded to, a 14.5% annualized clip on loan growth. And we also kept funding pace with core funding, also having strong organic growth as well. Credit quality, again, really solid, non-performers have stayed low for us but even dipped further ending the quarter at 0.18%. So overall really like where we are from a financial side and our financial metrics. And I'm going to hand it over to Bryan and let him jump into the Slide deck, go through the numbers in greater detail.

Christopher Bryan Johnson -- Executive Vice President and Chief Financial Officer

Thank you, Billy, everyone. I'm going to start on Slide 8, balance sheet trends. So looking here, you can see going back to the end of 2017, our key balance sheet items. Total assets, up $630 million, net loans up over $500 million, total deposits up $550 million plus. Book value per share up over $2, tangible book value per share up $1.28. Every one of those graphs going up into the right.

So what did our earnings look like in the quarter? On the next page you can see the profiles. Net operating, diluted EPS was up 15% year-over-year. Moving up a couple of lines, EBIT, earnings before income taxes, increased 45% year-over-year. Driving that increase, net interest income up 25%. We'll go into further details on that but that's coming both from increases in yields and increases in earning assets. Same time, non-interest income up 17%, offset slightly by non-interest expense, up 18%. We'll remind you, compared to last year, we have had two acquisitions that's driving the increases in both salaries, EBIT and occupancy, and that mean, the Foothills and the Tennessee Bancshares shares acquisitions. Total revenue up 24% year-over-year. So very good metrics.

Going to next slide, diving into net interest income. Margin was down quarter-to-quarter but that was due primarily to lower accretion. Accretion drove probably about two-thirds of the decrease in margin. But having said that, we strip out all the accretion, margin held, we changed less than 1 basis points quarter-to-quarter. Couple of other things I'll highlight, as you look down at all our other earning assets. Increases on yields on taxable securities, increases in yields on tax-exempt securities, increases in yields on fed funds and other investments. So while we are seeing some pressure on the deposit side like everybody else, we're making it up on the earning assets side. Cost of funds ended at 1.21% for the quarter.

Moving on to non-interest income on Slide 11. You see we've had consistent increases on both deposit accounts and other non-interest income components. Really the only item we've had with a little bit of volatility has been our gain on sale of loans and other assets. We did have a very strong third quarter of last year. And as you know, the mortgage business is highly seasonal and subject to interest rate changes. So first quarter is normally slow but picks up in the second quarter. And based on what we're seeing with the drop in interest rates as lot of other people said, the mortgage business is picking up.

Next page, non-interest expense. I'll highlight here that we were able to keep the all-in efficiency ratio under 70% for the second quarter in a row and looks even better if you look at the operating efficiency ratio down at 64.3%. Salary increases was primarily due to adding associates plus as Billy said, we had three months of Foothills, first two months in the prior quarter. If you look at merger expenses, that had $23,000 about two-thirds of that was related to the integrity line, movement idea.

Moving on to the next page. If you go into some details on our deposits, we still hold it about one-third time deposits, one-third savings money markets, one-third DDAs. You can see that on the right side, break down over time and how we've managed to go every single category. And finally down in the lower left, historical cost of deposits. We're able to lag during the cycle but if the fed funds rate increases, last quarter there was a little bit of an increase whereas this quarter, we do think the pace of increases have slowed down. And if you do the math on the beta down there at the bottom over the last year it's 57%.

Turning over to the loan portfolio. Billy noted that had outstanding loan growth 14.5% for the quarter up over $60 million. I don't think that's very praiseworthy about that and which our production team has done an outstanding job is that if you look at that CRE ratio down at the bottom lower left it didn't move a blip. For a bank that's historically been at CRE shop to be able to transition and grow like that and C&I and other residential loans, it's just outstanding and a real tribute to the lending team.

Finally let's talk asset quality and loan adjustments. Superior asset quality just 18 basis points compared to peer's above 90 basis points. If you look quarter-to-quarter in the earnings release you'll see non-performing loans were down $700,000, OREO down over $400,000 so net decrease of NPAs of over $1 million. Looking down at the lower right, if you want to pick out on anything you'll see there's a slight blip up. I do mean slight on net charge offs to average loans. Those were fully reserved, FAS 114 loans. We knew we most likely weren't going to get anything on, legal cases were like with their course and they were charged off. So that's a onetime event and we expect that to trend down.

Finally, we'll talk a little bit about our acquired loans. We have $8.7 million in allowance. We have $20 million in discounts on the loans we acquired. Our acquired book is still above 30% or approximately $550 million above portfolio.

With that, I will turn it back to Billy to wrap up.

William Y. Carroll -- President and Chief Executive Officer

Thanks, Bryan. I appreciate the detail on those additional pieces. As you can see and hear from his comments, a number of very positive trends have continued. We have a few areas where we need to concentrate. The good thing is we know where those are and we are planning around those pieces of the puzzle. I also wanted to touch a little bit on Foothills. It's been overshadowed some that the Foothills Bank, East Tennessee, a Maryville based Bank acquisition that we did end of last year, it's been overshadowed a little bit with the larger deal discussions. But we had a very successful conversion and rebranding of Foothills Bank in February. This has been a great deal for us, a very smooth cultural and operational integration. I couldn't be happier with it. Like I said, I think it's just been a little overshadowed with everything else but a very solid transaction that is working exactly like we accordion.

Some other anecdotal comments about the quarter. Obviously we have been focused a lot on this proposed deal over the last several months and no doubt it impacted some of our stand-alone efficiency initiatives as we've been planning to be a $4 billion bank. So we're a little heavier in some expense categories than we would have been otherwise. But we know -- we know where those are and we know what we need to be doing to get those back in line here in the next little bit. Our non-interest income continues to be an area of emphasis. As Bryan noted in the Slide deck, the overall trend year-over-year is positive but we've just grown assets at a faster pace, so it kept our ratio flat.

We had some service revenue enhancement initiatives in place but we put those on hold during our M&A discussions. Now we're back, we have those back on our board. We've also added three new financial advisors to our investment platform over the last few months. So we think we've got some good trends moving on that front over the next few months. Mortgage was a little soft in Q1 and we're looking at some ways to generate stronger revenue production there. So we really believe that we'll see that number continue to climb. So my non-interest income projections I think we'll continue to move in the right direction. They've just been a little bit flat for a couple of reasons over the last quarter or two.

As I mentioned, we added three new financial advisors in our investment platform which have been great ads from a production standpoint. We also added a new market executive in Huntsville, Alabama, probably one of the best growth opportunity markets in our entire footprint. Really excited to bring a new outstanding market executive with a lot of Huntsville experience under our team. We've also added a couple of new lenders in Knoxville in the recent months. So our ability to attract talent continues to be one of our strengths. Asset quality again Bryan alluded to this, outstanding, really low levels. The only blip was just some cleanup of those and it was very small -- a small tick up and charge-offs but that should be non-recurring, NPAs 0.18%, well below Peer Median.

I'll give you a quick seasonal update as well. Our plan is to run parallel here in Q2 and we anticipate some guidance coming out in Q3 on that for you. And Bryan touched on this but I also want to just hit on it again, CRE ratios. As he said, don't overlook that. I mean, we've been a historically a commercial real estate bank if we -- as we have transitioned from a smaller community bank now to a much larger community bank. And to be able to have $60 million in net balance growth on our loan side and not to take CRE ratios up, it's a testament to our sales team. The lenders that we have hired over the course of the last year as we now have great diversification in our loan growth.

I will stop here and I will give you a couple -- just looking forward a couple of big takeaways on the call and then I'm going to stop and open it up for comments. Big takeaways I think for where we are now strategically, we are in a great position. Obviously, as I said, mixed emotions yesterday with that announcement but we are in such a better position prior to the Entegra announcement as we have evaluated a lot of our strategic objectives. The internal planning that we have done over the last few months has made us an outstanding organization already was there but this has made us so much better. On the M&A front, that' s probably going to be a question that we are going to get, I'd be happy to answer on those.

I actually was asked yesterday do I feel pressured to get back into another deal? My answer is no. Really not at all. As we demonstrated again this quarter we are building a great organic growth Company. We just like M&A. And I think we've gotten pretty darn good at it. So we are going to continue to evaluate those M&A options. I do believe that there will be some available to us if the fit is right but we don't feel pressure as a team to do it. I personally hope to find some because I think we are one of the best integrators in the Southeast now as evidenced by really early successful on a last couple of deals. We have a strong and we are focused on efficiencies. There are senior team bearing this well over the last few weeks as we've been waiting on this announcement.

We've been diving into our focus on efficiency and expense control. That process is going to bear some great fruit as we look through the rest of 2019. And lastly, we have an open playbook. This is the first time in a long time where we've got the ability to really step back and assess a number of great strategic opportunities for this Company. So that process started yesterday and we are really excited about where we -- where our team is positioned and we are ready to tackle those great opportunities ahead.

So I will stop right there. Open it up -- I know we will have some questions, open it up and then our team will be able to answer those. So, questions?

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Catherine Mealor of KBW. Please go ahead.

Catherine Mealor -- KBW -- Analyst

Thanks. Good morning.

William Y. Carroll -- President and Chief Executive Officer

Good morning, Catherine.

Wesley Miller Welborn -- Chairman

Hi, Catherine.

Catherine Mealor -- KBW -- Analyst

Thank you for all of your comments. I just had an couple of questions. One was first on expenses. So, Billy, you mentioned that you did a lot of -- as you said, we're prepping to be a $4 billion bank with some investments in the core data processing and people and all that. So as we think about this -- if we take out Entegra of our forecast, is it -- should we have -- should we keep them at a little bit of an elevated level of expenses near term just given we'll still have some impact from some of those investments that will be better levered as you continue to grow and maybe as you do your next deal? Or am I thinking about it too much in that, that really won't move the needle?

William Y. Carroll -- President and Chief Executive Officer

So, I think you're really thinking about it right on Catherine. I think expenses have been elevated. We were planning to be a $4 billion Company and we were thinking about some of the expense size on the other side. Obviously those won't be there. But I think that's really been part of what I alluded to with our team's efficiency planning over the last little bit. Some of that will. So I think to answer your question, yes, we are probably going to have a slightly higher expense run rate moving forward because we do see the growth. We see the opportunities. While we don't have any teed up to lever that today.

I think our team and our Board has always been given us the latitude to invest for where we think the Company is headed. So I think we probably hear in the like next little bit we'll have a slightly higher but not a lot. I mean, I think we're still -- there's still some areas here internally where we can get some of those efficiency gains back. We'll get those, but probably on the whole a slightly higher expense run rate.

Catherine Mealor -- KBW -- Analyst

Got it. Okay. So is it somewhere around kind of where we're kind of hovering around this 14.7% (ph) where you were this quarter and then grown a little bit from there?

William Y. Carroll -- President and Chief Executive Officer

Yes, I think that's -- I think that's about right.

Catherine Mealor -- KBW -- Analyst

Okay, great. And then on the buybacks, any immediate thought on getting active on the buyback now that you don't need the capital for the Entegra deal or just given because you see better growth and you're going to get back in the M&A conversations maybe you'll be a little more conservative on holding back that capital? How do you think about that?

Wesley Miller Welborn -- Chairman

Catherine, we have the approved buyback. We obviously right after it was approved, we jumped right into this other deal where we're looking at. So we have not utilized that yet but it's certainly on the tip of our tongues, we look at it on a regular basis, and if it becomes a good business station, we'll certainly jump in there.

William Y. Carroll -- President and Chief Executive Officer

And I'll add, Catherine, you all know it's a math formula for us and we've got the models and really looked at kind of where -- where our stock price is and utilization of that capital. So, yes, we watch the stock price, so I still think we're undervalued as a Company. And so as we see -- if we see an opportunity where we need to jump in, we'll jump in. We also know that with our growth trajectory we want to have capital available to do that. So it's a balance but yes we're watching it...

Wesley Miller Welborn -- Chairman

Looking at it regularly.

William Y. Carroll -- President and Chief Executive Officer

We're there and we'll utilize it if we need to.

Catherine Mealor -- KBW -- Analyst

Okay, great. That's all I got. Sorry for the Entegra deal but excited to see what you all will do next. Thank you.

William Y. Carroll -- President and Chief Executive Officer

Thanks.

Operator

The next question comes from Tyler Stafford of Stephens. Please go ahead.

Tyler Stafford -- Stephens -- Analyst

Hey, good morning guys.

Wesley Miller Welborn -- Chairman

Good morning, Tyler.

Tyler Stafford -- Stephens -- Analyst

Hi, nice quarter. Congratulations. I just want to dig in to the margin a little bit here. Just on the loan side first. Can you just talk about what you're seeing in terms of pricing for new loan production and where there's new money yields are coming on relative to the core loan yields today?

William Y. Carroll -- President and Chief Executive Officer

Yes. If you take a look at kind of where we're seeing the core yields, yes, overall, I think our team has continued to be able to get pretty good pricing. Obviously you have competitive situations, you got to get tighter when you have to get tighter. But, I think on the whole, we're still seeing loans come in, loans come in at fair levels. We're still around kind of that 5% (ph) handle, or a little bit better in many cases. Obviously we've got some deals that come in a little below that as well. But overall, loan yields have held well for us. I think even though you've seen a little bit a drop back in the curve, we've not seen that flow through to some of our fixed rate pricing. I think Greg Davis and his team have been able to do a really nice job of holding firm on those rate. So from a loan yield standpoint, I think we can continue to hold at same trend line where we've been over the last little bit.

Tyler Stafford -- Stephens -- Analyst

Okay, very helpful, thanks. And then I guess similar question on the deposit side. What did you guys see throughout the quarter on deposit cost? Did that ease at all for you guys as you progress this quarter?

William Y. Carroll -- President and Chief Executive Officer

Yes. I'll let Bryan, and Bryan and I, we've talked about this at length. We have lagged some of that -- some of those cost over the last little bit since we've lagged the market, we've also lagged some of our peers. We had a little bit of -- I think we were up 10 basis points in the quarter. I think it's probably eased some even for us. I think probably guidance forward is flat to slightly increasing. We did push up some writes, some CD writes, some money market writes. So it's basically CDs mature and renew. I think just the overall trend probably would be to edge up a little bit but I think we're probably more in a maintain mode right now. I don't see that number really jumping a lot kind of with where rates are. And Bryan any...

Wesley Miller Welborn -- Chairman

Market diversity has helped us a lot on that first.

William Y. Carroll -- President and Chief Executive Officer

And Bryan, any comment on that side?

Christopher Bryan Johnson -- Executive Vice President and Chief Financial Officer

Well, I would say, as Billy spot on, what pressure we've had has been on the money markets which pretty much have caught up and the CDs will continue as they reprice are going to go higher. But if you look at the rest of it, we didn't get pressure on savings and you can go look at the yields on the DDAs, we remodeled those flat as well. So -- and as Miller said, having the market diversity means a great deal. When a market leader comes back and says I can get you better than that for a 12-month CD, it helps the whole team.

Tyler Stafford -- Stephens -- Analyst

Okay. So relatively flattish pressure on the deposit side and then the loan side roughly blended yields of 5% relative to what I think core loan yields were this quarter of around 5.20%. So just wrapping those two up, those two dynamics up together, would you still expect maybe modest core NIM compression from here or how do you see the core margin progressing throughout the remainder of '19?

William Y. Carroll -- President and Chief Executive Officer

And I'll let Bryan climb in too as I dug in. I think -- I still think we're in a probably a flat, might take down a 1 basis point. I just -- I don't want to say it's contracting power because I don't think it'll contract a lot. I think we're in a spot where we can hold it, might drop. It's probably a slight contraction if any over the next couple of quarters but that would be my guess. Bryan your thoughts?

Christopher Bryan Johnson -- Executive Vice President and Chief Financial Officer

I would agree with that. And I think we pretty much probably some -- what should be for us at the bottom at least this range, I don't see it -- I don't see that curve continuing to drive down on us.

Tyler Stafford -- Stephens -- Analyst

Okay, helpful. And then just last kind of modeling question for me just on the tax rate, it was little bit higher. This quarter, just expectations for the effective tax rate this year?

William Y. Carroll -- President and Chief Executive Officer

Yes, that was driven by non-deductible merger expenses. So that did tick us up probably at I would say probably 0.5% maybe 60 basis points. So we'll expect that to roll back now and once the non-deductible stuff comes off. So 24.5%, 24.3% maybe.

Tyler Stafford -- Stephens -- Analyst

Okay. Thanks again guys.

Wesley Miller Welborn -- Chairman

Thanks, Tyler.

Operator

(Operator Instructions) The next question comes from Feddie Strickland of FIG Partners. Please go ahead.

Feddie Strickland -- FIG Partners -- Analyst

Good morning, guys.

William Y. Carroll -- President and Chief Executive Officer

Hi, Feddie.

Feddie Strickland -- FIG Partners -- Analyst

Quick question. I really appreciate the Slide on the acquisition strategy. Can you give us any more color on a minimum definition for meaningful earnings accretion?

William Y. Carroll -- President and Chief Executive Officer

It's funny. Obviously, you're going to do a deal, we need to get some earnings accretion out of it. And so for us the number -- especially -- I'll say this, especially as we've gotten larger, doing smaller deals, it makes getting double digits earnings accretions a heck of a lot tougher. But for us, you'd like to see something that would be north of somewhere in the high single digits is probably a fair range. It depends on really where it is. If we -- it just come on to Foothills deals, a great example. It was earnings accretive but it wasn't as earnings accretive as our previous deals. But it was a great end market fill in. So if we can find some, if we find the opportunities, that can add density in our footprint or in Arizona where we already are, then we're probably willing to take a little bit lesser. High single-digit is probably a good guess.

Wesley Miller Welborn -- Chairman

That's a hard question to answer because locations means so much -- as much as anything in that. So it could be -- but yeah hopefully high single digits will certainly be a target we would look at and make a few exceptions based on location.

Feddie Strickland -- FIG Partners -- Analyst

Now I understand that. You know I had to ask so anyway forced to get it.

Wesley Miller Welborn -- Chairman

That's a great question.

Feddie Strickland -- FIG Partners -- Analyst

And one quick follow up on that. Would you consider several quarters without M&A. Is that scenario possible?

Wesley Miller Welborn -- Chairman

Absolutely possible. And we've said this repeatedly. Our Board is never ever and I literally mean that never ever pushed us, ask us, driven us neither any of our investors to make an acquisition. We just feel like the ones that we've made have been good, timely, creative and just have worked really well for us. So are we going to be continuing in the market and have our eyes and ears open? Absolutely. But if we don't do one for a year, no big deal at all. We feel zero pressure.

William Y. Carroll -- President and Chief Executive Officer

I think it's a great comment, Miller. And Feddie, what I would just add, as I said in my comments, we have -- a lot of times I don't think we get enough credit for this. We're building a great organic Company. When you look at the number of sales ads that we've had in our existing markets through these acquisitions, every acquisition that we've done, we've gone into the market and improved that core franchise that we've bought by adding great sales talent. And so that we -- we're -- lot of banks kind of really tapped that and that's what they're known for. We're doing both. And so for us we like doing -- we like doing M&A because I think we are -- I think we're probably one of the best in the Southeast at it. And so for us we obviously love to do it, but it's got to fit. So after something if we can't find the right fit, we've got a great organic strategy, like I said, we got 14.5% clip on the loan side annualized this quarter. That's probably higher than what we would normally see. I think we're still a solid high single digits organic growth Company. And -- but I still think if we need to kind of just buckle down, focus on -- focus inward, focus on internal efficiencies and organic growth, that's a strategy that we've already got sitting here and we're executing today. So we definitely would go a few quarters without it if there's not a great deal.

Wesley Miller Welborn -- Chairman

I think it was proven by the discipline we had when we addressed this and the opportunity to move our bid up. We were very disciplined on -- probably the most proud of our Board for staying disciplined and how we price this deal and looked at the accretion and dilution and just staying focused.

Feddie Strickland -- FIG Partners -- Analyst

Absolutely. I think that's it for me. Really appreciate it guys.

William Y. Carroll -- President and Chief Executive Officer

Thanks, Feddie.

Wesley Miller Welborn -- Chairman

Thanks.

Operator

The next question comes from Daniel Cardenas of Raymond James. Please go ahead.

Daniel Cardenas -- Raymond James -- Analyst

Hey, good morning guys. Maybe just a quick follow up on your fee income initiatives. I mean how quickly can we see the impact of those initiatives? Is that something that we'll begin to see in Q2 or is that going to take a little bit longer to play out?

William Y. Carroll -- President and Chief Executive Officer

Yes, I think it's probably second half of the year and I'm looking at Bryan, as I say that.

Christopher Bryan Johnson -- Executive Vice President and Chief Financial Officer

Pretty good lift this quarter.

William Y. Carroll -- President and Chief Executive Officer

Well, I think, as you know -- I think -- non-core fee, you get non-core fee, it's just where you have to take that and spread it out a little bit there. But the initiatives that we've got are things that some of that will be looked at as part of this -- as part of our core data processing as we're bringing in some things related to some service charge routines. We also were looking -- like I said, mortgage, Bryan alluded to this. I think our trend line for mortgage and that's obviously a big piece of it, unlike it's moving pretty well. That could be more immediate. The FAs that we added -- we added some great FAs to our investment platform over the last several months. And those as we get -- as their trailing 12 becomes part of our trailing 12, then we start picking up some really nice revenue there.

So there's a little bit of lag on that piece. So probably not. I wouldn't say a Q2 is probably a little -- maybe a little better but I expect the second half of the year to have some better up trends.

Daniel Cardenas -- Raymond James -- Analyst

Good thinking on that. And then as we think about the efficiency ratio for the Company and you're in the -- around 62% for the quarter. Does that -- can that break 60% by the end of the year or is that going to take a little bit longer to get there?

William Y. Carroll -- President and Chief Executive Officer

I think probably a little bit longer. That's our goal. Our goal was to get this thing up 60%. And so we kind of follow up on the comments that I made to Catherine a couple of minutes ago. I think we're kind of where we are. I think you'll see this thing continue to improve. We want to be able to lever kind of the platform that we've got. So to get us down into the 50s, probably challenged by the end of the year but that's definitely the trend line we're working on.

Daniel Cardenas -- Raymond James -- Analyst

Great. And then maybe a little bit of color in terms of the new lenders that you added in the Knoxville market, how many was that and are they coming from bigger financial institutions than yours?

Wesley Miller Welborn -- Chairman

They are. It's a mix. We've got some coming from bigger financial institutions, well one from a slightly smaller financial institution. So we've got -- we've actually had three over the course of the last few months too just here in the recent weeks that we feel really, really good about. Picked up the one in Huntsville was from a large regional -- and continuing to recruit some large regional folks really in a couple of different markets right now. So it's -- like we're having great conversations with these folks, the platform that we've got, the way we underwrite, the way our credit team and lending teams are engaged in helping these producers grow their business books is really strong. So it appeals to a lot of folks especially in the larger organizations but in Knoxville, we had some from small or some from larger.

Daniel Cardenas -- Raymond James -- Analyst

Great. That's all I have for right now. I'll step back. Thanks, guys.

Wesley Miller Welborn -- Chairman

Dan, thanks.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Miller Welborn for any closing remarks.

Wesley Miller Welborn -- Chairman

Thank you. And appreciate all your interest and continued interest in SmartBank. We look forward to continuing our journey. I hope each of you have a great day. Thanks.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 40 minutes

Call participants:

Frank Hughes -- Executive Vice President, Investor Relations

Wesley Miller Welborn -- Chairman

William Y. Carroll -- President and Chief Executive Officer

Christopher Bryan Johnson -- Executive Vice President and Chief Financial Officer

Catherine Mealor -- KBW -- Analyst

Tyler Stafford -- Stephens -- Analyst

Feddie Strickland -- FIG Partners -- Analyst

Daniel Cardenas -- Raymond James -- Analyst

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