SMARTFINANCIAL INC. Q4 FY2024 earnings call

• Billy Carroll highlighted net income of $9.6 million for the quarter ($0.57 per diluted share), increasing tangible book value to $22.85 per share including AOCI and $24.25 excluding it. • Loan growth was 20% annualized in Q4, with total loan book up 13.4% Y/Y. Deposit growth was strong, with non-broker deposits up $350 million, 34% annualized. • Credit quality remained strong with NPAs at 19 basis points and net charge-offs to average loans at 2 basis points annualized. • Net interest margin expanded 13 basis points to 3.24% due to deposit repositioning and favorable loan originations. • Noninterest income was $9.0 million, and noninterest expenses were slightly up due to increased incentive compensation.

For the fourth quarter, SmartFinancial had strong loan growth with a 20% annualized pace in Q4 and a 13.4% year-over-year growth in the gross loan book, totaling approximately $462 million. Non-broker deposit growth was $350 million, nearly 34% annualized, resulting in a loan-to-deposit ratio of 83%. Net interest margin expanded quarter-over-quarter to 3.24%. The weighted average cost of non-broker deposit production was 3.37%, and total interest-bearing costs for the deposit portfolio decreased 18 basis points to 3.02%.

• Anticipate margin to continue expanding in 2025 but at a slower pace than recent quarters, driven by new loan production and loan amortizations/maturities. • Expect first quarter 2025 margin in the 3.2% to 3.25% range. • Guide to mid to high-single-digit loan growth over the next few quarters, with deposit growth to fund it organically.

• Deposit cost reduction pace expected to slow due to fewer Fed rate cuts and higher costs of new deposit production. • Market conditions could impact margin expansion.

Q: Will Jones asked about loan yield stability and CRE concentrations.

A: Ronald Gorczynski said loan yields were supported by excess prepayments and good lending opportunities, with Rhett Jordan noting CRE was a normalized part of production.

Q: Nick Lorenzoni asked about revenue targets and office exposure.

A: Billy Carroll and Ronald Gorczynski discussed loan growth funded by deposits and margin expansion, with Rhett Jordan providing details on office exposure and the Phillips Plaza deal.

Q: Steve Moss asked about expense growth and loan growth tempering.

A: Ronald Gorczynski said expense growth expected 2.5%-3%, with Billy Carroll noting some loan growth tailwinds in Q4 might temper in Q1.

Q: Stephen Scouten asked about balancing hiring and profitability.

A: Billy Carroll and Rhett Jordan discussed continuing growth with strong producers and focusing on profitable growth.

Q: Christopher Marinac asked about loan-to-deposit and credit quality.

A: Ronald Gorczynski discussed liquidity and comfortable cash levels, while Billy Carroll emphasized focus on solid credit in the loan book.