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SI

SMARTFINANCIAL INC. (SMBK)·Q4 2024 Earnings Summary

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

  • 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 .

  • 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) .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Interest Income ($M)$31.52 $32.81 $35.03 $37.78
Noninterest Income ($M)$7.58 $7.60 $9.14 $9.03
Diluted EPS ($)$0.37 $0.48 $0.54 $0.57
NIM (FTE, %)2.86% 2.97% 3.11% 3.24%
Cost of Total Deposits (%)2.00% 2.56% 2.54% 2.43%
Efficiency Ratio (%)70.49% 72.25% 69.83% 68.98%
ROA (Annualized, %)0.73% 0.66% 0.74% 0.75%
  • Additional revenue context (management): “Total revenue came in at $40.4M” (Q2), “$44.1M” (Q3), “$46.8M” (Q4) .

Segment/Balance Mix (Loans and Leases)

Category ($M)Q3 2024Q4 2024
Commercial RE – Owner Occupied868.1 867.7
Commercial RE – Non‑Owner Occupied1,031.7 1,080.4
Commercial & Industrial731.6 775.6
Construction & Land Dev.315.0 361.7
Consumer Real Estate690.5 741.8
Leases67.1 64.9
Total Loans & Leases3,717.5 3,906.3

Key KPIs

KPIQ2 2024Q3 2024Q4 2024
Loans & Leases (EOP, $B)$3.574 $3.717 $3.906
Deposits (EOP, $B)$4.317 $4.322 $4.686
Net Organic Loan Growth (QoQ, $M)$97 $144 $189
NPLs / Loans (%)0.19% 0.26% 0.20%
NPAs / Assets (%)0.20% 0.26% 0.19%
ACL / Loans (%)0.97% 0.96% 0.96%
Net Charge‑offs (Ann., %)0.05% 0.15% 0.02%
Cost of Interest‑Bearing Deposits (%)3.23% 3.20% 3.02%
TCE / Tangible Assets (%)7.66% 7.99% 7.48%
Tangible Book Value/Share ($)$21.66 $22.67 $22.85
Loan‑to‑Deposit Ratio (%)83% 86% 83%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (FTE)Q4 20243.10–3.15% (guide from Q3 call) Actual: 3.24% Above prior guide (beat)
Net Interest Margin (FTE)Q1 2025—3.20–3.25% New near‑term guide
Noninterest Income ($M)Q4 2024Mid–high $7M Actual: $9.03M Above guide
Noninterest Income ($M)Q1 2025Mid–high $7M Mid–high $7M Maintained
Noninterest Expense ($M)Q4 2024$31.0–$31.5M Actual: $32.29M Above guide
Noninterest Expense ($M)Q1 2025—$32.0–$32.5M New guide
Salaries & Benefits ($M)Q4 2024$19.0–$19.5M Actual: $19.75M Above guide
Salaries & Benefits ($M)Q1 2025—$19.5–$20.0M New guide
Effective Tax Rate2025≈20% (introduced Q3) ≈20% (reaffirmed) Maintained
DividendQ1 2025—$0.08/share; pay 2/18/25 Declared
Operating Revenue Target3Q 2025~$50M quarterly run‑rate Reiterated Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Margin trajectoryNIM inflected to 2.97% (Q2), guided 3.05% (Q3 outlook); delivered 3.11% in Q3; guided Q4 3.10–3.15% NIM 3.24%; guide Q1 2025 3.20–3.25%; expect 2025 expansion at slower pace Improving, above guide
Deposit costs/mixCost of total deposits 2.56% (Q2); 2.54% (Q3); mix of non‑interest ~20% Cost 2.43%; interest‑bearing 3.02%; non‑interest ~21% (some transitory) Improving, stabilizing
Loan growthQ2 +$97M (11% ann.); Q3 +$144M (16% ann.) Q4 +$189M (20% ann.); 13.4% YoY; pipelines healthy Accelerated; some pull‑forward
Noninterest incomeQ2 $7.6M; property gain prior quarter; Q3 swaps/investment services strong $9.03M; investment services down $499K; insurance commissions up $355K Mixed; resilient overall
Asset qualityNPAs/assets 0.20% (Q2), 0.26% (Q3) Improved to 0.19%; NCOs 0.02% ann. Strong/stable
Tax/REIT structureREIT formed; guide ~20% ETR (Q3) Final adjustments in Q4; expect ~20% going forward Maintained
Technology/sales enablementLeverage nCino + Salesforce to drive prospecting (Q2/Q3) Continued focus on operating leverage and scalable platform Ongoing execution
Office/CRE exposureConcentration noted; within guidance; selective growth (Q2/Q3) Nashville office exposure characterized as unique “unicorn”; granular portfolio; strong recourse Managed risk posture
M&A postureFocus on organic performance (Q2/Q3) Patient stance; potentially benefit from market disruption Unchanged

Management Commentary

  • CEO (Billy Carroll): “A really nice quarter for us… We posted net income GAAP and operating of $9.6 million… $0.57 per diluted share… excited to watch us gain the operating leverage as we’ve anticipated.”
  • CFO (Ron Gorczynski): “Net interest margin expanded… to 3.24%… primary factors… new loan production and amortization/maturities of lower‑yielding loans… anticipate a first quarter 2025 margin in the 3.2% to 3.25% range.”
  • CEO on strategy: “We are executing, growing our revenue line and gaining operating leverage… Margin is expanding… Credit continues to be very solid.”
  • CEO on 2025 priorities: “Key themes… similar to 2024 with a focus on generating operating leverage and hitting our profitability targets.”

Q&A Highlights

  • Loan yields and originations: New loan production yield was 7.08% in Q4; management expects slight moderation early 2025 as rates and competition evolve .
  • Expense outlook: Using Q4 run‑rate as a proxy, management targets 2.5–3.0% expense growth in 2025 (mostly salaries/benefits, IT upgrades) .
  • Margin path and rates: Expect continued NIM expansion in 2025, albeit slower; deposit cost reductions to progress more slowly given rate outlook and production costs .
  • Liquidity & LDR: LDR ~83% at year‑end; liquidity coverage improved toward ~19% in cash/securities; capacity to lever further if desired .
  • Office exposure: Nashville office loan characterized as highly favorable, low funded amount at closing, strong recourse; overall office exposure granular (avg loan size ~$1.2M) .

Estimates Context

  • S&P Global/Capital IQ consensus estimates were not retrievable at this time due to API request limits, so we cannot definitively characterize EPS or revenue beats/misses for Q4 2024. Values would ordinarily be sourced from S&P Global; please note unavailability for this recap and we can update upon access restoration.

Key Takeaways for Investors

  • Margin beat and trajectory: NIM of 3.24% exceeded prior quarter guidance; Q1 2025 guide 3.20–3.25% supports continued EBIT/PPNR leverage as funding costs moderate and loan repricing persists .
  • Operating leverage in motion: Total revenue growth (management: $46.8M in Q4) alongside disciplined expense growth (2.5–3.0% 2025 target) underpins ongoing ROA/ROE improvement .
  • Growth engine intact: Robust loan pipelines and balanced production by category/geography suggest sustainable mid‑ to high‑single‑digit growth near‑term, with core deposits pacing funding .
  • Funding/cost tailwinds: Deposit costs fell 11 bps q/q (total) and 18 bps on interest‑bearing; non‑interest DDA ≈20% provides ballast; management is proactively remixing and lowering promo tiers .
  • Credit remains a differentiator: NPAs/assets back to 0.19% and NCOs at 0.02% annualized despite strong growth; ACL/loans steady at 0.96% .
  • Tax rate visibility: REIT structure should hold the effective tax rate around 20% going forward, modestly aiding after‑tax earnings power .
  • Capital and TBV accretion: TBVPS up to $22.85 (+~10% YoY), TCE/TA at 7.48% after growth investment; dividend held at $0.08/share .

Sources: Q4 2024 earnings press release and tables ; Q4 2024 earnings call transcript ; Q3 2024 press release and call ; Q2 2024 press release and call .