• Net Income: $9.6 million for the quarter, or $0.57 per diluted share.
• Tangible Book Value: $22.85 per share including AOCI impacts; $24.25 excluding AOCI impacts.
• Loan Growth: 20% annualized pace for Q4; 13.4% year-over-year.
• Deposit Growth: Approximately 34% annualized growth, with core deposit growth near 30% annualized.
• Total Revenue: $46.8 million.
• Non-Interest Expenses: Over $32 million.
• Net Interest Margin: Expanded by 13 basis points to 3.24%.
• Loan Portfolio Yield: 6.04% including fees; 5.95% without fees.
• Non-Performing Loans: 20 basis points of total loans.
• Allowance for Credit Losses: 96 basis points of total loans.
• Operating Non-Interest Income: $9.0 million.
• Provision Expense for Credit Losses: $2.1 million.
• Capital Ratios: Total risk-based capital at 11.2%; TC ratio decreased to 7.5%.

• Warning! GuruFocus has detected 3 Warning Sign with SMBK.

Release Date: January 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SmartFinancial Inc (NYSE:SMBK) reported a strong net income of $9.6 million for the fourth quarter, translating to $0.57 per diluted share.
• The company achieved impressive loan growth, with a 20% annualized pace for Q4 and 13.4% year-over-year growth.
• Deposit growth was robust, with a quarter-over-quarter annualized growth rate of approximately 34%, even after excluding temporary noninterest-bearing funding.
• Net interest margin expanded by 13 basis points to 3.24%, driven by favorable loan originations and deposit repositioning efforts.
• The company maintained strong credit quality, with nonperforming loans at 20 basis points and a steady allowance for credit losses at 96 basis points of total loans.

Negative Points

• Non-interest expenses increased slightly to over $32 million, partly due to higher performance-based incentive accruals.
• Investment services revenue decreased by $500,000, primarily due to lower volume during the quarter.
• The company's consolidated TC ratio decreased by 50 basis points to 7.5%, indicating a slight leveraging of capital ratios.
• The weighted average cost of nonbrokered deposit production was relatively high at 3.37%.
• There is an expectation of a slower pace of margin expansion in 2025 compared to the past two quarters.

Q & A Highlights

Q: How did SmartFinancial manage to maintain stable loan yields despite recent rate cuts? A: Ronald Gorczynski, CFO, explained that the stability was achieved through a combination of factors, including loan production yields remaining above 7%, excess loan prepayments, and draws from unfunded lines of credit at higher rates. However, he anticipates a slight decline in loan yields in early 2025.

Q: What are the expectations for loan growth in 2025, and how might competitive dynamics affect this? A: William Carroll, CEO, expressed optimism about maintaining mid- to high single-digit loan growth, citing strong sales momentum and balanced growth across regions. He acknowledged competitive pressures but emphasized the company's ability to compete effectively in favorable economic environments.

Q: What factors give SmartFinancial confidence in achieving its $50 million revenue target by Q3 2025? A: William Carroll highlighted the continuation of recent revenue growth trends, driven by loan and deposit growth and controlled expenses. Ronald Gorczynski added that loan repricing and organic deposit growth would support this target, along with expected margin expansion.

Q: Can you discuss SmartFinancial's office exposure, particularly in Nashville, and the recent sale of Phillips Plaza? A: William Carroll noted that office exposure is limited and not a significant concern. The Phillips Plaza transaction was described as a unique opportunity with a favorable purchase price for the buyer, and the bank's exposure is well-managed with recourse to local borrowers.

Q: How does SmartFinancial plan to balance hiring new talent with achieving profitability targets? A: William Carroll emphasized a balanced approach, focusing on hitting profitability targets while selectively adding sales talent. The company aims to continue its growth strategy by hiring key individuals when opportunities arise, without compromising its financial goals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.