SmartFinancial(SMBK)2025-03-17 21:00Asset Quality and Credit Losses - SmartFinancial's asset quality may decline, leading to greater loan losses than anticipated, influenced by economic conditions in local markets, particularly Tennessee[9]. - The allowance for credit losses is calculated using a qualitative framework and adjustments based on risk factors not included in quantitative modeling[341]. - The allowance for credit losses (ACL) for unfunded commitments was recorded at $2.5 million as of December 31, 2024, compared to $2.4 million in 2023, reflecting a slight increase of 4.2%[392]. - The company employs a credit risk management process with defined policies and routine reporting to manage credit risk in the loan and lease portfolio segments[470]. - The total provision charged to expense for credit losses in 2024 was $5.066 million, compared to $3.755 million in 2023[469]. - The company adopted ASU 2016-13 on January 1, 2023, impacting the allowance for credit losses across various segments[467]. - The total amount of consumer and other loans reached $14,189 million in 2024, up from $13,535 million in 2023, reflecting a growth of approximately 4.8%[485]. - The total past due loans as of December 31, 2024, amounted to $13,650,000, with a total loan portfolio of $3,906,340,000[487]. - The total impaired loans and leases amounted to $4,302,000, with interest income recognized on a cash basis of $201,000 for the year ended December 31, 2022[489]. Financial Performance - Net income for 2024 was $36,141 thousand, a 26.4% increase from $28,593 thousand in 2023[355]. - Comprehensive income for 2024 was $38,377 thousand, slightly up from $38,010 thousand in 2023, indicating a marginal increase of about 1.0%[357]. - Net income for the year ended December 31, 2023, was $36,141,000, compared to $28,593,000 in 2022, representing an increase of about 26.8%[360]. - Basic earnings per share for 2024 increased to $2.16 from $1.70 in 2023, while diluted earnings per share rose to $2.14 from $1.69[441]. - Net income available to common shareholders for 2024 was $36.141 million, compared to $28.593 million in 2023, reflecting a year-over-year increase of approximately 26.5%[441]. Revenue and Income Sources - Noninterest income increased to $34,152 thousand in 2024, compared to $22,325 thousand in 2023, showing a significant rise of about 53.0%[355]. - Revenue from service charges on deposit accounts is recognized at the end of the statement period when the performance obligation has been satisfied[407]. - Revenue from investment services is recognized over the period in which services are performed, based on a percentage of the value of the assets under management[408]. - Insurance commissions are recognized when the commission payment is remitted, typically upon the issuance of the insurance policy[409]. Assets and Liabilities - Total assets increased to $5,275,904 thousand in 2024, up from $4,829,387 thousand in 2023, representing an increase of approximately 9.3%[353]. - Total deposits rose to $4,686,483 thousand in 2024, compared to $4,267,854 thousand in 2023, marking an increase of about 9.8%[353]. - The company reported a total of $3,906,340 thousand in loans and leases for 2024, an increase from $3,444,462 thousand in 2023, which is an increase of approximately 13.4%[353]. - The total fair value of available-for-sale securities as of December 31, 2024, was $482.328 million, down from $408.410 million in 2023[445]. - The total amount of related party deposits decreased to $70.6 million in 2024 from $85.0 million in 2023[502]. Internal Controls and Compliance - The company maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in the Internal Control – Integrated Framework (2013)[344]. - The independent auditor expressed an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2024[331]. - The audit included evaluating the design and operating effectiveness of internal controls related to the allowance for credit losses[343]. - The company is subject to inherent limitations in its internal control over financial reporting, which may not prevent or detect misstatements[350]. Market and Economic Conditions - The company is exposed to market risk from interest rate fluctuations, which can significantly impact net interest income[314]. - Inflation may influence interest rates, affecting operating expenses, particularly personnel costs and supplies[323]. - The impact of recent bank failures in 2023 has raised concerns about customer confidence and liquidity in the banking industry[9]. - The company is focused on managing the balance between interest rate-sensitive assets and liabilities to maintain profitability[319]. Acquisitions and Goodwill - The acquisition of Sunbelt Group, LLC resulted in the establishment of goodwill amounting to $4.6 million, reflecting the intangible value of Sunbelt's business and reputation[436]. - The total consideration paid for the acquisition was $6.5 million, with $5.2 million paid in cash at closing and the remainder to be paid in equal installments in 2023 and 2024[436]. - The company recognized an intangible asset related to customer relationships valued at $1.9 million, amortized over 14 years[437]. Stock and Shareholder Information - The company declared a common stock dividend of $0.32 per share for 2023, totaling $5,427,000, up from $0.28 per share in 2022[360]. - The total number of common shares outstanding as of December 31, 2023, was 16,988,879, a slight increase from 16,900,805 shares at the end of 2022[360]. - The company repurchased common stock totaling $2,967,000 during the year ended December 31, 2023[360].