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What changed in SMARTFINANCIAL INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SMARTFINANCIAL INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+231 added−247 removedSource: 10-K (2025-03-17) vs 10-K (2024-03-15)

Top changes in SMARTFINANCIAL INC.'s 2024 10-K

231 paragraphs added · 247 removed · 197 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

56 edited+4 added−19 removed166 unchanged
Biggest changeUnder this authority, our bank regulators can require us or our subsidiaries to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders, pursuant to which we would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions. 11 Table of Contents If we become subject to and are unable to comply with the terms of any future regulatory actions or directives, supervisory agreements, or orders, then we could become subject to additional, heightened supervisory actions and orders, possibly including consent orders, prompt corrective action restrictions and/or other regulatory actions, including prohibitions on the payment of dividends on our common stock and preferred stock.
Biggest changeUnder this authority, our bank regulators can require us or our subsidiaries to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders, pursuant to which we would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions.
In addition to deposits, sources of funds for the Bank’s loans and leases and other investments include amortization and prepayment of loans and leases, sales of loans and leases or participations in loans, sales of its investment securities and borrowings from other financial institutions.
In addition to deposits, sources of funds for the Bank’s loans and leases and other investments include amortization and prepayment of loans and leases, sales of loans and leases or participations of loans, sales of its investment securities and borrowings from other financial institutions.
In addition to salaries, these programs include annual bonuses, stock awards, a 401(k) Plan with an employer matching contribution, healthcare and insurance benefits, health savings, flexible spending accounts, generous paid time off including unlimited paid time off options, flexible scheduling, tuition reimbursement, financial planning, company paid life insurance, company paid dental insurance, company paid vision insurance, family leave, and an associate assistance program that includes enhanced mental health benefits. ​ Competition We compete in a highly competitive banking and financial services industry.
In addition to salaries, these programs include annual bonuses, stock awards, a 401(k) Plan with an employer matching contribution, healthcare and insurance benefits, health savings with an employer matching contribution, flexible spending accounts, generous paid time off including unlimited paid time off options, flexible scheduling, dental insurance, family leave, company paid vision insurance, tuition reimbursement, financial planning, company paid life insurance, company paid disability, and an associate assistance program that includes enhanced mental health benefits. ​ Competition We compete in a highly competitive banking and financial services industry.
Financial Statements and Supplementary Data - Note 15 - Regulatory Matters.” 15 Table of Contents In 2019, the federal banking agencies issued a final rule that, among other provisions, revised the agencies’ regulatory capital rule and included a transition option that allows institutions to phase in over a 3-year transition period the day-one effects of adopting the current expected credit losses methodology (CECL) on their regulatory capital ratios (“2019 CECL rule”).
Financial Statements and Supplementary Data - Note 15 - Regulatory Matters.” In 2019, the federal banking agencies issued a final rule that, among other provisions, revised the agencies’ regulatory capital rule and included a transition option that allows institutions to phase in over a 3-year transition period the day-one 14 Table of Contents effects of adopting the current expected credit losses methodology (CECL) on their regulatory capital ratios (“2019 CECL rule”).
This new rule and the earlier such policy statements and regulations indicate that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution.
This rule and the earlier such policy statements and regulations indicate that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution.
The Company participates in the Federal Reserve discount window borrowings program. The Company also enters into repurchase agreements and these are treated as short-term borrowings. ​ Investment and Insurance Services ​ The Bank contracts with Raymond James Financial Services, Inc.
Additionally, the Company participates in the Federal Reserve discount window borrowings program. The Company also enters into repurchase agreements and these are treated as short-term borrowings. ​ Investment and Insurance Services ​ The Bank contracts with Raymond James Financial Services, Inc.
The Bank utilizes brokered deposits to accomplish several purposes, such as (i) acquiring a certain maturity and dollar amount without repricing the Bank’s current customers which could increase or decrease the overall cost of deposits and (ii) acquiring certain maturities and dollar amounts to help manage interest rate risk. ​ 8 Table of Contents Other Funding Sources ​ The Federal Home Loan Bank (“FHLB”) allows the Company to obtain advances through its credit program.
The Bank utilizes brokered deposits to accomplish several purposes, such as (i) acquiring a certain maturity and dollar amount without repricing the Bank’s current customers which could increase or decrease the overall cost of deposits and (ii) acquiring certain maturities and dollar amounts to help manage interest rate risk. ​ 7 Table of Contents Other Funding Sources ​ The Federal Home Loan Bank (“FHLB”) allows the Company to obtain advances through its credit program.
Member banks do not have any control over the Federal Reserve System as a result of owning the stock and the stock cannot be sold or traded. 16 Table of Contents The deposits of SmartBank are insured by the FDIC up to applicable limits, and, accordingly, SmartBank is also subject to certain FDIC regulations and the FDIC has backup examination authority and some enforcement powers over SmartBank.
Member banks do not have any control over the Federal Reserve System as a result of owning the stock and the stock cannot be sold or traded. 15 Table of Contents The deposits of SmartBank are insured by the FDIC up to applicable limits, and, accordingly, SmartBank is also subject to certain FDIC regulations and the FDIC has backup examination authority and some enforcement powers over SmartBank.
In this Report on Form 10-K, the words “SmartFinancial,” “the Company,” “we,” “us,” and “our” refer to SmartFinancial, Inc. together with SmartBank and SmartFinancial’s other wholly-owned subsidiaries, except where the context requires otherwise. ​ The Company makes our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on our website at www.smartbank.com as soon as reasonably practicable after we electronically file such material with the SEC.
In this Report on Form 10-K, the words “SmartFinancial,” “the Company,” “we,” “us,” and “our” refer to SmartFinancial, Inc. together with SmartBank and SmartBank’s wholly-owned subsidiaries, except where the context requires otherwise. ​ The Company makes our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on our website at www.smartbank.com as soon as reasonably practicable after we electronically file such material with the SEC.
Department of the Treasury, requires financial institutions to establish anti-money laundering programs with minimum standards that include: ● the development of internal policies, procedures, and controls; 18 Table of Contents ● the designation of a compliance officer; ● an ongoing employee training program; ● an independent audit function to test the programs; and ● identify and verify the identity of beneficial owners of legal entity customers .
Department of the Treasury, requires financial institutions to establish anti-money laundering programs with minimum standards that include: ● the development of internal policies, procedures, and controls; 17 Table of Contents ● the designation of a compliance officer; ● an ongoing employee training program; ● an independent audit function to test the programs; and ● identify and verify the identity of beneficial owners of legal entity customers .
This trend is expected to continue to expand, requiring continual monitoring of developments in the states and nations in which our customers are located and ongoing investments in our information systems and compliance capabilities. ​ 20 Table of Contents Other laws and regulations impact SmartFinancial and SmartBank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes.
This trend is expected to continue to expand, requiring continual monitoring of developments in the states and nations in which our customers are located and ongoing investments in our information systems and compliance capabilities. 19 Table of Contents ​ Other laws and regulations impact SmartFinancial and SmartBank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes.
Through this policy, we strive to carry out our banking activities in a responsible manner, placing the financial needs of our clients and economic health of our communities at the core of our focus. ​ ​ 9 Table of Contents Talent Acquisition, Development, and Retention We foster a work environment that respects individual needs, establishes high expectations, and recognizes achievement.
Through this policy, we strive to carry out our banking activities in a responsible manner, placing the financial needs of our clients and economic health of our communities at the core of our focus. ​ ​ 8 Table of Contents Talent Acquisition, Development, and Retention We foster a work environment that respects individual needs, establishes high expectations, and recognizes achievement.
Within the Credit Policy, procedures exist that elevate the approval requirements as credits become larger and more complex. All loans and leases are individually underwritten, risk-rated, approved, and monitored. 7 Table of Contents Responsibility and accountability for adherence to underwriting policies and accurate risk ratings lies in each portfolio segment.
Within the Credit Policy, procedures exist that elevate the approval requirements as credits become larger and more complex. All loans and leases are individually underwritten, risk-rated, approved, and monitored. 6 Table of Contents Responsibility and accountability for adherence to underwriting policies and accurate risk ratings lies in each portfolio segment.
Under this policy, our Company may invest in federal, state and municipal obligations, corporate obligations, public housing authority bonds and securities issued by Government-Sponsored Enterprises (“GSEs”). Investments in our portfolio must satisfy certain quality criteria. Our Company’s investments must be “investment-grade” as determined by a nationally recognized investment rating service.
Under this policy, our Company may invest in federal, state and municipal obligations, corporate obligations, public housing authority bonds and securities issued by Government-Sponsored Enterprises (“GSEs”). Investments in our portfolio must satisfy certain quality criteria. Our Company’s investments purchases should be “investment-grade” as determined by a nationally recognized investment rating service.
The Bank has chosen not to opt into the CBLR at this time. In 2023, our and SmartBank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer. Based on current estimates, we believe that we and SmartBank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2024.
The Bank has chosen not to opt into the CBLR at this time. In 2024, our and SmartBank’s regulatory capital ratios were above the applicable well-capitalized standards and met the capital conservation buffer. Based on current estimates, we believe that we and SmartBank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2025.
The Company adopted ASU 2016-13 on January 1, 2023, and has chosen the three-year phase in option. Payment of Dividends We are a legal entity separate and distinct from SmartBank and our other subsidiaries. The primary sources of funds for our payment of dividends to our shareholders are cash on hand and dividends from SmartBank.
The Company adopted ASU 2016-13 on January 1, 2023, and has chosen the three-year phase in option. Payment of Dividends We are a legal entity separate and distinct from SmartBank and its’ subsidiaries. The primary sources of funds for our payment of dividends to our shareholders are cash on hand and dividends from SmartBank.
Additionally, the bank has the ability to provide insured deposit accounts above the FDIC threshold via either an Insured Cash Sweep (“ICS”) or a Certificate of Deposit Account Registry Service (“CDARS”) program. ​ Brokered deposits are deposits obtained by utilizing an outside broker that is paid a fee.
Additionally, the bank has the ability to provide insured deposit accounts above the FDIC threshold through either an Insured Cash Sweep (“ICS”) or a Certificate of Deposit Account Registry Service (“CDARS”) program. ​ Brokered deposits are deposits obtained by utilizing an outside broker that is paid a fee.
The FDIC calculates quarterly deposit insurance assessments based on an institution’s average 17 Table of Contents total consolidated assets less its average tangible equity, and applies one of four risk categories determined by reference to its capital levels, supervisory ratings, and certain other factors.
The FDIC calculates quarterly deposit insurance assessments based on an institution’s average 16 Table of Contents total consolidated assets less its average tangible equity, and applies one of four risk categories determined by reference to its capital levels, supervisory ratings, and certain other factors.
We provide commercial business loans, commercial and residential real estate construction and mortgage loans, agriculture loans, leases, consumer loans, revolving lines of credit and letters of credit. The Company also originates one to four family residential mortgage loans and generally enters into a commitment to sell these loans in the secondary market.
We provide commercial business loans, commercial and residential real estate construction and mortgage loans, agriculture loans, leases, consumer loans, revolving lines of credit and letters of credit. The Company also originates one to four family residential mortgage loans and occasionally enters into a commitment to sell these loans in the secondary market.
In 2016, the banking agencies also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2023, these rules have not been implemented by the banking agencies.
In 2016, the banking agencies also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2024, these rules have not been implemented by the banking agencies.
All of the federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels for federally insured depository institutions. SmartBank was well capitalized at December 31, 2023, and brokered deposits are not restricted.
All of the federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels for federally insured depository institutions. SmartBank was well capitalized at December 31, 2024, and brokered deposits are not restricted.
If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to SmartBank, the Company’s capital ratios as of December 31, 2023 would exceed such revised well-capitalized standard.
If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to SmartBank, the Company’s capital ratios as of December 31, 2024 would exceed such revised well-capitalized standard.
SmartBank has a rating of “Satisfactory” in its most recent CRA evaluation. 19 Table of Contents In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework.
SmartBank has a rating of “Satisfactory” in its most recent CRA evaluation. 18 Table of Contents In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework.
If our regulators were to take such additional supervisory actions, then we could, among other things, become subject to significant restrictions on our ability to develop any new business, as well as restrictions on our existing business, and we could be required to raise additional capital, dispose of certain assets and liabilities within a prescribed period of time, or both.
If our regulators were to take such additional 10 Table of Contents supervisory actions, then we could, among other things, become subject to significant restrictions on our ability to develop any new business, as well as restrictions on our existing business, and we could be required to raise additional capital, dispose of certain assets and liabilities within a prescribed period of time, or both.
The say-on-pay, the say-on-parachute and the say-on-frequency votes are explicitly nonbinding and cannot override a decision of our Board of Directors. Other Regulatory Matters We are subject to oversight by the SEC, the Public Company Accounting Oversight Board, New York Stock Exchange and various state securities and insurance regulators.
The say-on-pay, the say-on-parachute and the say-on-frequency votes are explicitly nonbinding and cannot override a decision of our Board of Directors. 12 Table of Contents Other Regulatory Matters We are subject to oversight by the SEC, the Public Company Accounting Oversight Board, New York Stock Exchange and various state securities and insurance regulators.
The Department of Justice (the “DOJ”), and the federal bank regulatory agencies have issued an Interagency Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether discrimination exists, how the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices.
The Department of Justice (the “DOJ”), and the federal bank regulatory agencies have issued an Interagency Policy Statement on Discrimination in Lending that provides guidance to financial institutions in determining whether discrimination exists, 20 Table of Contents how the agencies will respond to lending discrimination, and what steps lenders might take to prevent discriminatory lending practices.
Reports on all purchases, sales, net profits or losses and market appreciation or depreciation of the bond portfolio are reviewed by our Assets Liability Committee (“ALCO”) each quarter.
Reports on all purchases, sales, net profits or losses and market appreciation or depreciation of the bond portfolio are reviewed by our Asset Liability Committee (“ALCO”) each quarter.
We invest in a healthy work-life balance, competitive compensation and benefit packages, and a vibrant, team-oriented environment centered on professional service and open communication among associates. We hold ourselves accountable by taking part in an annual engagement survey to ask for feedback from our associates.
We invest in a healthy work-life balance, competitive compensation and benefit packages, and a vibrant, team-oriented environment centered on professional service and open communication among associates. We hold ourselves accountable by taking part in annual engagement surveys to ask for feedback from our associates.
Being trustworthy, loyal, and innovative are some of the characteristics exemplified by our associates. Our core values define our culture: Act with Integrity, Be Enthusiastic, Create Positivity, Demonstrate Accountability, and Embrace Change. ​ As of December 31, 2023, we employed 570 full-time and 15 part-time associates, primarily across our three-state footprint of Tennessee, Alabama, and Florida.
Being trustworthy, loyal, and innovative are some of the characteristics exemplified by our associates. Our core values define our culture: Act with Integrity, Be Enthusiastic, Create Positivity, Demonstrate Accountability, and Embrace Change. ​ As of December 31, 2024, we employed 597 full-time and 15 part-time associates, primarily across our three-state footprint of Tennessee, Alabama, and Florida.
SmartBank is not required to accrue for this assessment given our uninsured deposits, as of December 31, 2022, was under $5.0 billion.
SmartBank is not required to accrue for this assessment given our uninsured deposits, as of December 31, 2022, were under $5.0 billion.
Under the federal Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company, such as the Company, or before acquiring control of any state member bank, such as SmartBank.
Under the federal Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the Federal Reserve before acquiring control of any bank holding company, 11 Table of Contents such as the Company, or before acquiring control of any state member bank, such as SmartBank.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet 14 Table of Contents minimum capital requirements.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital requirements.
As of March 1, 2024, SmartBank has 42 full-service bank branches in select markets in East and Middle Tennessee, Alabama and Florida.
As of March 1, 2025, SmartBank has 42 full-service bank branches in select markets in East and Middle Tennessee, Alabama and Florida.
The principal sources of income for the Bank are interest and fees collected on loans and leases, fees collected on deposit accounts and interest and dividends collected on other investments. The principal expenses of the Bank are interest paid on deposits, employee compensation and benefits, office expenses and other overhead expenses.
The principal sources of income for the Bank are interest and fees collected on loans and leases, fees collected on deposit accounts and interest and dividends collected on other investments. The principal expenses of the Bank are interest paid on deposits, provision for credit losses, employee compensation and benefits, office expenses and other overhead expenses.
FDICIA establishes five regulatory capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation.
FDICIA establishes five regulatory capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain 13 Table of Contents other factors, as established by regulation.
Public companies must give shareholders the opportunity to vote on the compensation at least every three years and the opportunity to vote on frequency at least every six years, indicating whether the say-on-pay 13 Table of Contents vote should be held annually, biennially, or triennially.
Public companies must give shareholders the opportunity to vote on the compensation at least every three years and the opportunity to vote on frequency at least every six years, indicating whether the say-on-pay vote should be held annually, biennially, or triennially.
On November 18, 2021, the federal banking agencies issued a joint final rule that requires a banking organization to notify their primary federal regulator within 36 hours of becoming aware that a significant “computer-security incident” has occurred.
The federal banking agencies issued a joint final rule that requires a banking organization to notify their primary federal regulator within 36 hours of becoming aware that a significant “computer-security incident” has occurred.
Pursuant to Tennessee banking law, the Bank may not, without the prior consent of the Commissioner of the Tennessee Department of Financial Institutions (the “TDFI”), pay any dividends to the Company in a calendar year in excess of the total of the Bank’s retained net income for that year plus the retained net income for the preceding two years.
Pursuant to Tennessee banking law, the Bank may not, without the prior consent of the Commissioner of the TDFI, pay any dividends to the Company in a calendar year in excess of the total of the Bank’s retained net income for that year plus the retained net income for the preceding two years.
The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and FHA. 21 Table of Contents
The DOJ has increased its efforts to prosecute what it regards as violations of the ECOA and FHA.
In addition to our banking services, Fountain Equipment Finance, LLC offers loans and leases for heavy equipment, semis, and trailers to small and medium sized businesses throughout the Southeast, and maintain offices offering such services in Knoxville, Atlanta, Charlotte, Memphis, Nashville, and Birmingham, and we offer insurance products through SBK Insurance, Inc., formally Rains Insurance Agency, Inc., within our full-service branches.
In addition to our banking services, our wholly owned subsidiary Fountain Equipment Finance, LLC, offers loans and leases for heavy equipment, semis, and trailers to small and medium sized businesses throughout the Southeast, and maintains offices offering such services in Knoxville, Atlanta, Charlotte, Memphis, Nashville, and Birmingham, and we offer insurance products through SBK Insurance, Inc., within our full-service branches.
These nontraditional financial service providers have been successful in developing digital and other products and services that effectively compete with traditional banking services 10 Table of Contents but are in some cases subject to fewer regulatory restrictions than banks and bank holding companies, allowing them to operate with greater flexibility and lower cost structures.
These nontraditional financial service providers have been successful in developing digital and other products and services that effectively compete with traditional banking services but are in some cases subject to fewer regulatory restrictions than banks and bank holding companies, allowing them to operate with greater flexibility and lower cost structures. 9 Table of Contents ​ We encounter strong pricing competition in providing our services.
The final rule also requires a bank service provider to notify each of its affected customers as soon as possible when it determines that it has experienced a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption for four or more hours. Compliance with the final rule was required by May 1, 2022.
The rule also requires a bank service provider to notify each of its affected customers as soon as possible when it determines that it has experienced a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption for four or more hours.
None of these associates are represented by a collective bargaining agreement. During 2023, we successfully onboarded 123 new associates. Over 66% of the Company’s associates are women, and 9.1% are minorities. Among the Company’s 302-person banking officers, women make up approximately 55.3% of these associates, while minorities account for 5.6% of the banking officer members.
None of these associates are represented by a collective bargaining agreement. During 2024, we successfully onboarded 112 new associates. Over 66% of the Company’s associates are women, and 9% are minorities. Among the Company’s 320-person banking officers, women make up approximately 55% of these associates, while minorities account for 6% of the banking officer members.
Regulation of the Bank SmartBank, which is a member of the Federal Reserve System, is subject to comprehensive supervision and regulation by the Federal Reserve, and is subject to its regulatory reporting requirements, as well as supervision and regulation by the Tennessee Department of Financial Institutions (“TDFI”).
Regulation of the Bank SmartBank, which is a member of the Federal Reserve System, is subject to comprehensive supervision and regulation by the Federal Reserve, and is subject to its regulatory reporting requirements, as well as supervision and regulation by the TDFI.
Traditionally, the Company has purchased and held investment securities with very high levels of credit quality, favoring investments backed by direct or indirect guarantees of the U.S. government. ​ While our investment policy permits our Company to trade securities to improve the quality of yields or marketability or to realign the composition of the portfolio, the Bank historically has not done so to any significant extent. ​ Our investment committee implements the investment policy and portfolio strategies and monitors the portfolio.
Traditionally, the Company has purchased and held investment securities with very high levels of credit quality, favoring investments backed by direct or indirect guarantees of the U.S. government. ​ Our investment policy permits our Company to sell securities to improve the quality of yields or marketability or to realign the composition of the portfolio. ​ Our investment committee implements the investment policy and portfolio strategies and monitors the portfolio.
Presently, the senior leadership team includes seven associates, two of whom are women. ​ We recognize the social and environmental responsibility that arises from the impact of our activities on peoples’ lives and society.
Presently, the senior leadership team includes six associates, two of whom are women. ​ We recognize the corporate responsibility that arises from the impact of our activities on people’s lives and society.
The survey results mold our initiatives so that we can focus on being a great place to work and do business with. In 2017, 2018, 2019, 2020, 2021, 2022 and 2023, we were nominated as a Top Workplace USA by USA Today and Top Workplace by the Tennessean and the Knoxville News Sentinel.
The survey results mold our initiatives so that we can focus on being a great place to work and do business with. In 2024, we certified as A Great Place to Work®. Additionally, beginning in 2017 through 2024, we were nominated as a Top Workplace USA by USA Today and Top Workplace by the Knoxville News Sentinel.
At December 31, 2023, our net loan and lease portfolio totaled approximately $3.4 billion, representing approximately 71% of our total assets.
At December 31, 2024, our net loan and lease portfolio totaled approximately $3.9 billion, representing approximately 73% of our total assets.
The larger national and super-regional banks may have significantly greater lending limits and may offer additional products than we are capable of providing.
Additionally, other banks offer different products or services from those that we provide. The larger national and super-regional banks may have significantly greater lending limits and may offer additional products than we are capable of providing.
The Federal Reserve is also required to consider: (1) the financial and managerial resources of the companies involved, including pro forma capital ratios; (2) the risk to the stability of the United States banking or financial system; (3) the convenience and needs of the communities to be served, including performance under the Community Reinvestment Act (“CRA”); and (4) the effectiveness of the companies in combatting money laundering. 12 Table of Contents Change in Control Federal law restricts the amount of voting stock of a bank holding company or a bank that a person may acquire without the prior approval of banking regulators.
The Federal Reserve is also required to consider: (1) the financial and managerial resources of the companies involved, including pro forma capital ratios; (2) the risk to the stability of the United States banking or financial system; (3) the convenience and needs of the communities to be served, including performance under the Community Reinvestment Act (“CRA”); and (4) the effectiveness of the companies in combatting money laundering.
Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027. Cybersecurity and Data Privacy State and federal banking regulators have issued various policy statements and, in some cases, regulations, emphasizing the importance of technology risk management and supervision.
Cybersecurity and Data Privacy State and federal banking regulators have issued various policy statements and, in some cases, regulations, emphasizing the importance of technology risk management and supervision.
For additional discussion of our loan portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Loan and Lease Portfolio Composition.” ​ Commercial Real Estate: Commercial real estate loans include owner-occupied commercial real estate loans and loans secured by income-producing properties. Owner-occupied commercial real estate loans to operating businesses are long-term financing of land and buildings.
For additional discussion of our loan portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Loan and Lease Portfolio Composition.” ​ Commercial Real Estate – Non-Owner Occupied: Commercial real estate loans for income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers are repaid from rent income derived from the properties.
In July 2023, the SEC adopted rules that require disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance.
The SEC adopted rules that require disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance, to be included in the Company’s (i) Current Reports on Form 8-K and (ii) Annual Report on Form 10-K.
As a result of the merger, the Company assets increased approximately $485 million, and liabilities increased approximately $443 million. ​ 6 Table of Contents Banking Services Lending Activities General: The Company maintains a diversified loan portfolio by providing a broad range of commercial and retail lending services to business entities and individuals.
Any future business combinations or purchases or series of business combinations or purchases that we might undertake may be material in terms of assets acquired, liabilities assumed, or equity issued. ​ 5 Table of Contents Banking Services Lending Activities General: The Company maintains a diversified loan portfolio by providing a broad range of commercial and retail lending services to business entities and individuals.
These loans are repaid by cash flow generated from the business operation. Real estate loans for income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers are repaid from rent income derived from the properties. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.
Loans within this portfolio segment are particularly sensitive to the valuation of real estate. Commercial Real Estate - Owner Occupied: Commercial real estate loans to operating businesses are long-term financing of land and buildings where the owner occupies the property. These loans are repaid by cash flow generated from the business operation.
We received culture excellence awards on leadership, innovation, compensation and benefits, employee appreciation, employee wellbeing, purpose and values, work-life flexibility, and professional development based on the feedback from our associates. Our board of directors recognizes the importance of succession planning for our chief executive officer and other key executives.
Our board of directors recognizes the importance of succession planning for our chief executive officer and other key executives.
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Any future business combinations or purchases or series of business combinations or purchases that we might undertake may be material in terms of assets acquired, liabilities assumed, or equity issued. ​ 5 Table of Contents Sunbelt On September 1, 2022, Rains Agency Inc.
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If we become subject to and are unable to comply with the terms of any future regulatory actions or directives, supervisory agreements, or orders, then we could become subject to additional, heightened supervisory actions and orders, possibly including consent orders, prompt corrective action restrictions and/or other regulatory actions, including prohibitions on the payment of dividends on our common stock and preferred stock.
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(“Rains Agency”), an indirect wholly-owned subsidiary of SmartFinancial, entered into a Purchase Agreement with the sole member of Sunbelt Group, LLC (“Sunbelt”), a Tennessee limited liability company. Sunbelt, with an office in Chattanooga, Tennessee was formed in 1984, and was an independent, full-service insurance agency providing personal and commercial property and casualty insurance as well as life and health.
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Change in Control Federal law restricts the amount of voting stock of a bank holding company or a bank that a person may acquire without the prior approval of banking regulators.
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In addition, Sunbelt had a dedicated transportation insurance department that focused their attention solely on the insurance needs of the transportation industry.
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Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027. The final rules were challenged in federal court and a preliminary injunction was granted in March 2024 enjoining implementation of the rules.
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The purchase of Sunbelt was consummated September 1, 2022, with an aggregate purchase price payable by Rains Agency of $6,500,000, of which $5,200,000 was paid in cash at the closing of the Acquisition, and the remainder of which, in equal cash installments, was paid on September 1, 2023, and will be payable on September 1, 2024 (the “ Deferred Payments ”).
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The effective dates will be extended for each day the injunction remains in place, pending the resolution of the lawsuit. If the final rules are reinstated, they are likely to make it more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on its CRA exam.
Removed
The Deferred Payments are subject to acceleration in certain circumstances involving a change in control of Rains Agency and are subject to set-off for any indemnification or other obligations of the sellers under the Purchase Agreement to Rains Agency under the terms of the Purchase Agreement.
Removed
In connection with the acquisition, Rains Agency acquired $349 thousand of assets and assumed $364 thousand of liabilities from Sunbelt. The assets and liabilities of Sunbelt, as of the effective date of the merger, were recorded at their respective estimated fair values and combined with those of the Company.
Removed
The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill, which was approximately $4.6 million. Rains Agency subsequently changed its name to SBK Insurance, Inc. in 2023.
Removed
Fountain Acquisition On May 2, 2021, the Company entered into a Purchase Agreement with members of Fountain Leasing, LLC (“Fountain”), a Tennessee limited liability company. Fountain, headquartered in Knoxville, Tennessee and founded in 2006, offered construction equipment financing to small and medium sized businesses throughout the Southeast, and maintained offices in Atlanta, Charlotte, Memphis, and Nashville.
Removed
The purchase was consummated May 3, 2021, with Fountain Leasing, LLC, members receiving $14 million in cash at closing, and the Company repaid approximately $46 million of Fountain Leasing, LLC indebtedness. Following the closing of the acquisition, on May 4, 2021, the Company changed the name of Fountain Leasing, LLC to Fountain Equipment Finance, LLC.
Removed
The assets and liabilities of Fountain, as of the effective date of the merger, were recorded at their respective estimated fair values and combined with those of the Company.
Removed
The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill, which was approximately $2.4 million. As a result of the merger, the Company assets increased approximately $54 million, and liabilities increased approximately $683 thousand.
Removed
Sevier County Bancshares Merger On April 13, 2021, the Company along with the Bank entered into an agreement and plan of merger (the “Merger Agreement”) with Sevier County Bancshares, Inc., a Tennessee corporation (“SCB”).
Removed
The merger was consummated September 1, 2021, with SCB stockholders receiving, either (i) $10.17 in cash (the “Per Share Cash Consideration”), or (ii) 0.4116 shares of Company common stock, par value $1.00 (the “Per Share Stock Consideration”).
Removed
Pursuant to the terms of the Merger Agreement, (i) each SCB shareholder holding 20,000 shares or more of SCB common stock received the Per Share stock Consideration and (ii) each SCB shareholder holding fewer than 20,000 shares of SCB common stock could elect to receive either the Per Share Stock Consideration or the Per Share Cash Consideration.
Removed
After the merger, original stockholders of SmartFinancial owned approximately 90% of the outstanding common stock of the combined entity on a fully diluted basis while the previous SCB stockholders owned approximately 10%.
Removed
The assets and liabilities of SCB, as of the effective date of the merger, were recorded at their respective estimated fair values and combined with those of the Company.
Removed
The excess of the purchase price over the net estimated fair values of the acquired assets and liabilities was allocated to identifiable intangible assets with the remaining excess allocated to goodwill, which was approximately $17.2 million.
Removed
Although digital products and services have been important competitive features of financial institutions for some time, the COVID-19 pandemic accelerated the move toward digital financial services products and we expect that trend to continue. ​ We encounter strong pricing competition in providing our services. Additionally, other banks offer different products or services from those that we provide.
Removed
The final rule applicable to the cybersecurity disclosure to be included in the Company’s (i) Current Reports on Form 8-K became effective on December 18, 2023 and (ii) Annual Report on Form 10-K became effective for any fiscal year ending on or after December 15, 2023.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+19 added−15 removed159 unchanged
Biggest changeIf interest rates immediately 22 Table of Contents decreased by 200 basis points, we could expect net interest income to increase by approximately $10.5 million over the next 12-month period. In recent years, the Federal Reserve implemented a series of accommodative domestic monetary initiatives.
Biggest changeIf interest rates immediately decreased by 200 basis points, we could expect net interest income to increase by approximately $1.5 million over the next 12-month period. The Federal Reserve reduced rates five times during 2019 through 2021. However, i nterest rates increased significantly in 2022-2023 to slow economic growth and counteract rising inflation.
Securities that we issue, including our common stock, are not savings or deposit accounts or other obligations of any bank, insured by the FDIC, any other governmental agency or instrumentality, or any private insurer, and are subject to investment risk, including the possible loss of our shareholders’ investments.
Our securities are not FDIC insured . Securities that we issue, including our common stock, are not savings or deposit accounts or other obligations of any bank, insured by the FDIC, any other governmental agency or instrumentality, or any private insurer, and are subject to investment risk, including the possible loss of our shareholders’ investments.
Our ability to compete successfully will depend on a number of factors, including, among other things, our ability to recruit and retain experienced and talented bankers at competitive compensation levels, build and maintain long-term client relationships while ensuring high ethical standards and safe and sound banking practices, compete with the scope, relevance and pricing of the products and services we provide, maintain a competitive level of client satisfaction with our products and services, keep pace with technological advances and invest in new technology 26 Table of Contents (including those related to or involving artificial intelligence, machine learning, blockchain and other technologies), and depend on general economic trend and trends within our industry.
Our ability to compete successfully will depend on a number of factors, including, among other things, our ability to recruit and retain experienced and talented bankers at competitive compensation levels, build and maintain long-term client relationships while ensuring high ethical standards and safe and sound banking practices, compete with the scope, relevance and pricing of the products and services we provide, maintain a competitive level of client satisfaction with our products and services, keep pace with technological advances and invest in new technology (including those related to or involving artificial intelligence, machine learning, blockchain and other technologies), and depend on general economic trend and trends within our industry.
Thus, any borrowing that must be incurred by us to make a required capital injection to the Bank becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations. 24 Table of Contents Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings.
Thus, any borrowing that must be incurred by us to make a required capital injection to the Bank becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations. 23 Table of Contents Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings.
A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual 33 Table of Contents decisions of investors and general economic and market conditions over which we have no control.
A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual 32 Table of Contents decisions of investors and general economic and market conditions over which we have no control.
A substantial focus of our marketing and business strategy is to serve small to medium-sized businesses in our market areas. As a result, a relatively high percentage of our loan and lease portfolio consists of commercial loans to such businesses. We further anticipate an increase in the amount of loans to small to medium-sized businesses during 2023.
A substantial focus of our marketing and business strategy is to serve small to medium-sized businesses in our market areas. As a result, a relatively high percentage of our loan and lease portfolio consists of commercial loans to such businesses. We further anticipate an increase in the amount of loans to small to medium-sized businesses during 2025.
Our recent acquisition and future expansion may result in additional risks. We expect to continue to expand in our current markets and in other select markets through additional branches or through acquisitions of all or part of other financial institutions. These types of expansions involve various risks, including the risks detailed below.
Our acquisition activity and future expansion may result in additional risks. We expect to continue to expand in our current markets and in other select markets through additional branches or through acquisitions of all or part of other financial institutions. These types of expansions involve various risks, including the risks detailed below.
If we are unable to replace our purchased credit impaired loans and leases and the related accretion with a significantly higher level of new performing loans and leases and other earning assets due to 27 Table of Contents our inability to identify attractive acquisition opportunities, a decline in loan demand, competition from other financial institutions in our markets, stagnation or continued deterioration of economic conditions, or other conditions, our financial condition and earnings may be adversely affected.
If we are unable to replace our purchased credit impaired loans and leases and the related accretion with a significantly higher level of new performing loans and leases and other earning assets due to our inability to identify attractive acquisition opportunities, a decline in loan demand, competition from other financial institutions in our markets, stagnation or continued deterioration of economic conditions, or other conditions, our financial condition and earnings may be adversely affected.
In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings. 32 Table of Contents Employee misconduct could expose us to significant legal liability and reputational harm.
In addition, to attract and retain personnel with appropriate skills and knowledge to support our business, we may offer a variety of benefits, which could reduce our earnings. 31 Table of Contents Employee misconduct could expose us to significant legal liability and reputational harm.
Loan repayments are a relatively stable source of funds but are subject to the borrowers’ ability to repay loans, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inflation, labor shortages, inclement weather, natural disasters, acts of war, prolonged government shutdowns and other factors.
Loan repayments are a relatively stable source of funds but are subject to the borrowers’ ability to repay loans, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inflation, the imposition of tariffs and retaliatory responses, labor shortages, inclement weather, natural disasters, acts of war, prolonged government shutdowns and other factors.
The small to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, including the continued elevated inflationary and interest rate environment, which may impair a borrower’s ability to repay a loan or lease, and such impairment could have an adverse effect on our business, financial condition and results of operations.
The small to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, including the continued elevated inflationary and interest rate environment, which may impair a borrower’s 28 Table of Contents ability to repay a loan or lease, and such impairment could have an adverse effect on our business, financial condition and results of operations.
Thus, in addition to our dependence on the interest rate environment, we are dependent upon (a) the existence of an active secondary market and (b) our ability to profitably sell loans into that market. Profitability of our mortgage operations will depend upon our ability to increase production and thus income while holding or reducing costs.
Thus, in addition to our dependence on the interest rate environment, we are dependent upon (a) the 30 Table of Contents existence of an active secondary market and (b) our ability to profitably sell loans into that market. Profitability of our mortgage operations will depend upon our ability to increase production and thus income while holding or reducing costs.
Failure to achieve these anticipated benefits on the anticipated timeframe, or at all, could result in a reduction in the price of our common stock as well as increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially and adversely affect our business, results of operations and financial condition.
Failure to achieve the anticipated benefits of an acquisition on the anticipated timeframe, or at all, could result in a reduction in the price of our common stock as well as increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially and adversely affect our business, results of operations and financial condition.
Our access to liquidity could also be impaired by factors that are not specific to us, such as severe volatility or disruption of the financial markets or negative views and expectations about the 30 Table of Contents prospects for the financial services industry as a whole.
Our access to liquidity could also be impaired by factors that are not specific to us, such as severe volatility or disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole.
Although we regularly add additional security measures to our computer systems and network infrastructure to mitigate the possibility of cyber security breaches, including firewalls and penetration testing, it is difficult or impossible to defend against every risk being posed by changing technologies as well as criminal intent on committing cyber-crime.
Although we regularly add additional security measures to our computer systems and network infrastructure to mitigate the possibility of cyber security incidents, including firewalls and penetration testing, it is difficult or impossible to defend against every risk being posed by changing technologies, including artificial intelligence, as well as criminal intent on committing cyber-crime.
Failure to realize the expected revenue increases, cost savings, increases in product presence and/or other projected benefits from an acquisition could have a material adverse effect on our financial condition and results of operations.
Failure to realize the expected revenue increases, cost savings, increases in product presence and/or other 27 Table of Contents projected benefits from an acquisition could have a material adverse effect on our financial condition and results of operations.
Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security 23 Table of Contents breaches or viruses.
Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security incidents. We may be required to spend 22 Table of Contents significant capital and other resources to protect against the threat of security incidents, or to alleviate problems caused by security incidents.
As of December 31, 2023, SmartFinancial is considered to be in a slightly liability-sensitive position, meaning income is generally expected to decrease with an increase in short-term interest rates and, conversely, to increase with a decrease in short-term interest rates.
As of December 31, 2024, SmartFinancial is considered to be in a neutral to slightly liability-sensitive position, meaning income is generally expected to decrease with an increase in short-term interest rates and, conversely, to increase with a decrease in short-term interest rates.
As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving cash or equity securities and related capital raising transactions may occur at any 28 Table of Contents time.
As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving cash or equity securities and related capital raising transactions may occur at any time.
An economic downturn caused by inflation, recession, unemployment, government action, health emergencies, disease pandemics, natural disasters, adverse effects of the U.S. government’s failure to raise its debt ceiling (including defaulting on its debt obligations or experiencing credit downgrades), or other factors beyond our control would likely contribute to the deterioration of the quality of our loan portfolio and reduce our level of deposits, which in turn would have an adverse effect on our business.
An economic downturn caused by inflation, recession, unemployment, the imposition of tariffs and retaliatory responses, government action, health emergencies, disease pandemics, natural disasters, adverse effects of the U.S. government’s decisions regarding its debt ceiling (including defaulting on its debt obligations or experiencing credit downgrades), or other factors beyond our control would likely contribute to the deterioration of the quality of our loan portfolio and reduce our level of deposits, which in turn would have an adverse effect on our business.
To the extent that our activities or the activities of our customers involve the storage and transmission of confidential information, security breaches (including breaches of security of customer systems and networks) and viruses could expose us to claims, litigation and other possible liabilities.
To the extent that our activities or the activities of our customers involve the storage and transmission of confidential information, security incidents (including compromises of security of customer systems and networks) could expose us to claims, litigation and other possible liabilities.
Based on the results of this simulation model, which assumed a static environment with no contemplated asset growth or changes in our balance sheet management strategies, if interest rates immediately increased by 200 basis points, we could expect net interest income to decrease by approximately $9.5 million over a 12-month period.
Based on the results of this simulation model, which assumed a static environment with no contemplated asset growth or changes in our balance sheet management strategies, if interest rates immediately increased by 200 basis points, we could expect net interest income to 21 Table of Contents decrease by approximately $3.4 million over a 12-month period.
At December 31, 2023, approximately 79% of our loans and leases had real estate as a primary or secondary component of collateral, which includes 9% of our loans secured by construction and development collateral.
At December 31, 2024, approximately 78% of our loans and leases had real estate as a primary or secondary component of collateral, which includes 9% of our loans secured by construction and development collateral.
Additionally, we may face pressure to not do business in certain industries that are viewed as harmful to the environment or are otherwise negatively perceived, which could impact our growth. ​ Additionally, investors and shareholder advocates are placing ever increasing emphasis on how corporations address ESG issues in their business strategy when making investment decisions and when developing their investment theses and proxy 34 Table of Contents recommendations.
Additionally, we may face pressure to not do business in certain industries that are viewed as harmful to the environment or are otherwise negatively perceived, which could impact our growth. ​ Additionally, some investors and shareholder advocates are placing ever increasing emphasis on how corporations address corporate responsibility issues in their business strategy when making investment decisions and when developing their investment theses and proxy recommendations.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as diversity, equity, inclusion, environmental stewardship, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations. ​ Furthermore, as a result of our diverse base of clients and business partners, we may face potential negative publicity based on the identity of our clients or business partners and the public’s (or certain segments of the public’s) view of those entities.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as diversity, equity, inclusion, environmental stewardship, human capital management, investment in our local communities, and transparency. ​ Furthermore, as a result of our diverse base of clients and business partners, we may face potential negative publicity based on the identity of our clients or business partners and the public’s (or certain segments of the public’s) view of those entities.
Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could adversely affect our reputation, results of operations and ability to attract and maintain customers and businesses.
Any inability to prevent security incidents could also cause existing customers to lose confidence in our systems and could adversely affect our reputation, results of operations and ability to attract and maintain customers and businesses.
Any such event or failure to manage our liquidity effectively could affect our competitive position, increase our borrowing costs and the interest rates we pay on deposits, limit our access to the capital markets, cause our regulators to criticize our operations and have a material adverse effect on our results of operations or financial condition.
Any such event or failure to manage our liquidity effectively could affect our competitive position, increase our borrowing costs and the interest rates we pay on deposits, limit our access to the capital markets, cause our regulators to criticize our operations and have a material adverse effect on our results of operations or financial condition. 29 Table of Contents Our most important source of funds consists of our customer deposits.
Our failure to compete effectively in our market could restrain our growth or cause us to lose market share, which could have a material adverse effect on our assets, business, cash flow, condition (financial or otherwise), liquidity, prospects and results of operations. Our organic loan and lease growth may be limited by regulatory constraints.
Our failure to compete effectively in our market could restrain our growth or cause us to lose market share, which could have a material adverse effect on our assets, business, cash flow, condition (financial or otherwise), liquidity, prospects and results of operations.
ESG risks could adversely affect our reputation and shareholder, employee, client and third party relationships and may negatively affect our stock price. ​ Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities.
Corporate responsibility risks could adversely affect our reputation and shareholder, employee, client and third party relationships and may negatively affect our stock price. ​ Our business faces increasing public scrutiny related to corporate responsibility activities.
We may incur meaningful costs with respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may suffer. In addition, ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs. Our securities are not FDIC insured .
We may incur meaningful costs with respect to our corporate responsibility 33 Table of Contents efforts, and if such efforts are negatively perceived, our reputation and stock price may suffer. In addition, ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs.
As of December 31, 2023, our 10 largest borrowing relationships totaled approximately $256 million in outstanding balances, or approximately 7% of our total loan portfolio.
As of December 31, 2024, our 10 largest borrowing relationships totaled approximately $314 million in outstanding balances, or approximately 9% of our total loan portfolio.
As of December 31, 2023, we had 16,988,879 shares of common stock and no shares of preferred stock outstanding and had reserved or otherwise set aside for issuance 16,340 shares underlying outstanding options and 1,674,663 shares that are available for future grants of stock options, restricted stock or other equity-based awards pursuant to our equity incentive plans.
As of December 31, 2024, we had 16,925,672 shares of common stock and no shares of preferred stock outstanding and had reserved or otherwise set aside for issuance 10,148 shares underlying outstanding options and 1,595,020 shares that are available for future grants of stock options, restricted stock or other equity-based awards pursuant to our equity incentive plans.
If we are able to identify attractive acquisition opportunities, we must generally satisfy a number of conditions prior to completing any such transaction, including certain bank regulatory approvals, which have become substantially more difficult, time-consuming and unpredictable as a result of the 2007-2008 financial crisis. Additionally, any future acquisitions may not produce the revenue, earnings or synergies that we anticipated.
If we are able to identify attractive acquisition opportunities, we must generally satisfy a number of conditions prior to completing any such transaction, including certain bank regulatory approvals, which have become substantially more difficult, time-consuming and 26 Table of Contents unpredictable as a result of the 2007-2008 financial crisis.
The primary tool that management uses to measure short-term interest rate risk is a net interest income simulation model prepared by an independent third party provider.
The primary tool that management uses to measure short-term interest rate risk is a net interest income simulation model.
The allowance for loan losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance could have a material adverse effect on our business, financial condition, results of operations and prospects. 29 Table of Contents Declines in the businesses or industries of our customers could cause increased credit losses and decreased loan balances, which could adversely affect our financial results.
The allowance for loan losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks.
Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks, including those we maintain with our service providers and vendors.
Although we take protective measures and endeavor to modify these systems as circumstances warrant, the security of our computer systems, software and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses or other malicious code and other events that could have a security impact.
Although we take protective measures and endeavor to modify these systems as circumstances warrant, the security of our computer systems, software and networks may be vulnerable to cyber-attacks, unauthorized access, misuse, computer viruses or other malicious code, phishing attempts, brute force attacks, exploiting software vulnerabilities (including “zero-day attacks”), ransomware or other malware, supply chain attacks, and other events that could have a security impact.
Further rate changes reportedly are dependent on the Federal Reserve’s assessment of economic data as it becomes available. The Company cannot predict the nature or timing of future changes in monetary, economic, or other policies or the effect that they may have on the Company's business activities, financial condition, and results of operations.
The Company cannot predict the nature or timing of future changes in monetary, economic, or other policies or the effect that they may have on the Company's business activities, financial condition, and results of operations.
Our most important source of funds consists of our customer deposits. Such deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff.
Such deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff.
During higher and rising interest rate environments, the demand for mortgage loans and the level of refinancing activity tends to decline, which can lead to reduced volumes of business and lower revenues, which 31 Table of Contents could negatively impact our earnings. In 2022 and 2023, in response to growing signs of inflation, the Federal Reserve increased interest rates rapidly.
During higher and rising interest rate environments, the demand for mortgage loans and the level of refinancing activity tends to decline, which can lead to reduced volumes of business and lower revenues, which could negatively impact our earnings.
As our purchased credit impaired loan portfolio, which produces substantially higher yields than our organic and purchased non-credit impaired loan and lease portfolios, is paid down, we expect downward pressure on our income.
Additionally, any future acquisitions may not produce the revenue, earnings or synergies that we anticipated. As our purchased credit impaired loan portfolio, which produces substantially higher yields than our organic and purchased non-credit impaired loan and lease portfolios, is paid down, we expect downward pressure on our income.
Such secondary sources include FHLB Cincinnati advances, brokered deposits, secured and unsecured federal funds lines of credit from correspondent banks, Federal Reserve borrowings and/or accessing the equity or debt capital markets.
Such secondary sources include FHLB Cincinnati advances, brokered deposits, secured and unsecured federal funds lines of credit from correspondent banks, Federal Reserve borrowings and/or accessing the equity or debt capital markets. We anticipate we will continue to rely primarily on deposits, loan and lease repayments, and cash flows from our investment securities to provide liquidity.
Negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations. ​ The bank failures in 2023 and related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
Negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations. ​ Any future bank failures like those experienced in 2023 or similar events may negatively impact client confidence in the safety and soundness of regional banks and may generate market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
In addition, a security breach could also subject us to additional regulatory scrutiny, expose us to civil litigation and possible financial liability and cause reputational damage. We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud.
We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud.
Removed
As of December 31, 2023, SmartFinancial is considered to be in a liability-sensitive position, meaning income is generally expected to decrease with an increase in interest rates and, conversely, to increase with a decrease in interest rates.
Added
In September, November, and December of 2024, the Federal Reserve lowered the federal funds rate and indicated that the rate is likely to be held steady in 2025, or decreased, contingent upon improving inflationary conditions. Further rate changes reportedly are dependent on the Federal Reserve’s assessment of economic data as it becomes available.
Removed
Several of these have emphasized so-called quantitative easing strategies and decreases to the Federal funds target rate. The Federal Reserve reduced rates five times during 2019 through 2021. However, i nterest rates increased significantly in 2022 and 2023 as the Federal Reserve attempted to slow economic growth and counteract rising inflation.
Added
In addition, a security incident could also subject us to additional regulatory scrutiny, sanctions, fines or penalties (which may not be covered by our insurance policies), negative publicity, release of sensitive and/or confidential information, diversion of the attention of management away from the operation of our business and increased cybersecurity protection and remediation costs, increases in operating expenses, lost revenues, expose us to civil litigation and possible financial liability and cause reputational damage.
Removed
These developments have negatively impacted customer confidence in regional banks, which could prompt customers to maintain their deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin.
Added
As a result, some clients have chosen, and may continue to choose, to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company's liquidity, loan funding capacity, net interest margin, capital, and results of operations.
Removed
If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings and our capital.
Added
While the Treasury, the Federal Reserve, and the FDIC have historically taken action to ensure that depositors of failed banks had access to their deposits, including uninsured deposit accounts, there is no guarantee that regional bank failures or bank runs will not occur in the future and, if they were to occur, they may have a material adverse impact on client and investor confidence in regional banks, negatively impacting our liquidity, capital, results of operations, and stock price. 24 Table of Contents Our success depends significantly on economic conditions in our market areas.
Removed
If we were required to raise additional capital in the current environment, any such capital raise may be on unfavorable terms, thereby negatively 25 Table of Contents impacting book value and profitability. While we have taken actions to improve our funding, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
Added
The development and use of artificial intelligence (“AI”) presents risks and challenges that may adversely impact our business. ​ We or our third-party (or fourth-party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products.
Removed
We also anticipate increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability.
Added
The development and use of AI presents a number of risks and challenges 25 Table of Contents to our business.
Removed
Among other things, there may be an increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, losses embedded in the held-to-maturity portion of our securities portfolio, contingent liquidity, commercial real estate composition and concentration, capital position and our general oversight and internal control structures regarding the foregoing.
Added
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI.
Removed
As primarily a commercial bank, the Bank has an elevated degree of uninsured deposits compared to larger national banks or smaller community banks with a stronger focus on retail deposits, and also maintains a robust commercial real estate portfolio. As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.
Added
These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance.
Removed
In addition, bank failures have and could in the future prompt the FDIC to increase deposit insurance costs. Increases in funding, deposit insurance, or other costs as a result of these types of events have and could in the future materially adversely affect our financial condition and results of operations.
Added
AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, which infringes on the intellectual property rights of others, or that is otherwise harmful.
Removed
Further, the disruption following these types of events have and could in the future generate significant market trading volatility among publicly traded bank holdings companies and, in particular, regional banks like the Company. Our success depends significantly on economic conditions in our market areas.
Added
In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs.
Removed
At the end of 2023 our loan portfolio was below both the 100 and 300 ratios as laid out in the guidance but given the guidance, our ability to grow those loan types could be constrained by the amount we are also able to grow capital.
Added
This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made.
Removed
The acquisition of Sunbelt was completed on September 1, 2022, Fountain was completed on May 3, 2021, and the merger with SCB was completed on September 1, 2021, and while these integration efforts are substantially complete, we continue to manage the acquired businesses through the transition.
Added
Further, we may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility.
Removed
The success of this transition will depend on, among other things, our ability to realize anticipated costs savings and to manage the acquired assets and operations in a manner that permits growth opportunities and does not materially disrupt our existing customer relationships or result in decreased revenues resulting from any loss of customers.
Added
Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures. ​ Our organic loan and lease growth may be limited by regulatory constraints.
Removed
We may encounter a number of difficulties, including, among others: ● the loss of key employees; ● disruption of operations and business; ● inability to maintain and increase competitive presence; ● loan and deposit attrition, customer loss and revenue loss, including as a result of any decision we may make to close one or more locations; ● possible inconsistencies in standards, control procedures and policies; ● unexpected problems with costs, operations, personnel, technology and credit; and/or ● problems with the assimilation of new operations, sites or personnel, which could divert resources from regular banking operations.
Added
As of December 31, 2024, the Company’s percentage with respect to the above CLD guideline was 75.64%, within the recommended 100% limit, and with respect to the above CRE guideline, its percentage was 303.46%, exceeding the 300% level.
Removed
Recently proposed changes to the Federal Home Loan Bank system, however, could adversely impact the Company’s access to Federal Home Loan Bank borrowings or increase the cost of such borrowings. We anticipate we will continue to rely primarily on deposits, loan and lease repayments, and cash flows from our investment securities to provide liquidity.
Added
Difficulty in integrating an acquired business or company may cause us not to realize expected revenue increases, cost savings, increases in geographic or product presence, or other anticipated benefits from any acquisition.
Added
The integration could result in higher than expected deposit attrition (run-off), loss of key employees, disruption of the Company’s business or the business of the acquired company, or otherwise adversely affect the Company’s ability to maintain relationships with customers and employees or achieve the anticipated benefits of the acquisition.
Added
The acquired companies may also have legal contingencies, beyond those that we are aware of, that could result in unexpected costs. The Company may need to make additional investment in equipment and personnel to manage higher asset levels and loan balances as a result of any significant acquisition, which may adversely impact earnings.
Added
Declines in the businesses or industries of our customers could cause increased credit losses and decreased loan balances, which could adversely affect our financial results.
Added
In 2022 and 2023, in response to growing signs of inflation, the Federal Reserve increased interest rates rapidly, but subsequently lowered the federal funds rate in September, November, and December of 2024 and indicated that the rate is likely to be held steady in 2025, or decreased, contingent upon improving inflationary conditions .

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe structure of our information security program is designed around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, regulatory guidance, the Federal Financial Institutions Examination Council (“FFIEC”), and other industry standards. In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness.
Biggest changeOur objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information. ​ The structure of our information security program is designed around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, regulatory guidance, the Federal Financial Institutions Examination Council (“FFIEC”) guidelines.
The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions. 35 Table of Contents ​ We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology.
The Information Security Program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions. We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology.
We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls. We also employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats.
We leverage people, processes, and technology as part of our efforts to manage and 34 Table of Contents maintain cybersecurity controls. We also employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats.
Our Information Security Officer and our Chief Technology Officer provide quarterly reports to the Information Technology Steering Committee regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Information Technology Steering Committee reviews and approves our information security and technology budgets and strategies annually.
Our Information Security Officer and our Chief Technology Officer provide quarterly reports to the Information Technology Steering Committee regarding the information security program and the technology program, key enterprise 35 Table of Contents cybersecurity initiatives, and other matters relating to cybersecurity processes. The Information Technology Steering Committee reviews and approves our information security and technology budgets and strategies annually.
The Information Technology Steering and Audit Committees are responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material 36 Table of Contents cybersecurity issues and risks.
The Information Technology Steering and Audit Committees are responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
Our Information Security Officer is primarily responsible for this cybersecurity component and is a key member of the risk management organization, reporting directly to the Chief Risk Officer and as discussed below, periodically to our Information Technology Steering Committee, Audit Committee and to our board of directors. ​ Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information.
Our Information Security Officer is primarily responsible for this cybersecurity component and is a key member of the risk management organization, reporting directly to the Chief Risk Officer and as discussed below, periodically to our Information Technology Steering Committee, Audit Committee and to our board of directors.
Our Information Security Officer and our Chief Technology Officer, along with key members of their teams, regularly collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices.
In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness. Our Information Security Officer and our Chief Technology Officer, along with key members of their teams, regularly collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices.
In particular, our Information Security Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management. Our board of directors has approved management committees including the Information Technology Steering Committee, which focuses on technology impact, and the Risk Management Committee, which focuses on business impact and cyber security awareness.
Our board of directors has approved management committees including the Information Technology Steering Committee, which focuses on technology impact, and the Risk Management Committee, which focuses on business impact and cyber security awareness. These committees provide oversight and governance of the technology program and the information security program.
These committees provide oversight and governance of the technology program and the information security program. These committees are chaired by department managers and include the Information Security Officer and Chief Technology Officer as well as their direct reports and other key departmental managers from throughout the entire company.
These committees are chaired by department managers and include the Information Security Officer and Chief Technology Officer as well as their direct reports and other key departmental managers from throughout the entire company. These committees generally meet quarterly to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks.
We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below, and to the Information Technology Steering Committee.
We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program. ​ We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below, and to the Information Technology Steering Committee.
These committees generally meet quarterly to provide oversight of the risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks. More frequent meetings occur from time to time in accordance with the Incident Response Plan in order to facilitate timely informing and monitoring efforts.
More frequent meetings occur from time to time in accordance with the Incident Response Plan in order to facilitate timely informing and monitoring efforts.
The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience. The department, as a whole, consists of information security professionals with varying degrees of education and experience. Individuals within the department are generally subject to professional education and certification requirements.
The department, as a whole, consists of information security professionals with varying degrees of education and experience. Individuals within the department are generally subject to professional education and certification requirements. In particular, our Information Security Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management.
For further discussion of risks from cybersecurity threats, see the section captioned “Our Information Systems May Experience Failure, Interruption or Breach In Security” in Item 1A. Risk Factors. Governance Our Information Security Officer is accountable for managing our enterprise information security department and delivering our information security program.
Please see Part I, Item 1A Risk Factors for further discussion of the risks associated with an interruption or breach in our information systems or infrastructure. Governance Our Information Security Officer has 24 years of experience working for financial institutions and has served in the role of Chief Information Officer and Chief Information Security Officer.
Removed
We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program.
Added
He is a certified and active Certified Information Security Manager (“CISM”) professional. Our Information Security Officer is accountable for managing our enterprise information security department and delivering our information security program. The responsibilities of this department include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business resilience.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES The Company’s executive offices are located at 5401 Kingston Pike, #600, Knoxville, Tennessee 37919. This property is owned by SmartBank and also serves as a branch location for the Bank’s customers. At December 31, 2023, we conducted branch banking operations in 42 offices in 3 states.
Biggest changeITEM 2. PROPERTIES The Company’s executive offices are located at 5401 Kingston Pike, #600, Knoxville, Tennessee 37919. This property is owned by SmartBank and also serves as a branch location for the Bank’s customers. At December 31, 2024, we conducted branch banking operations in 42 offices in 3 states.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS At December 31, 2023, neither SmartFinancial, nor SmartBank, was involved in any material litigation. SmartBank is periodically involved as a plaintiff or defendant in various legal actions in the ordinary course of its business.
Biggest changeITEM 3. LEGAL PROCEEDINGS At December 31, 2024, neither SmartFinancial, nor SmartBank, was involved in any material litigation. SmartBank is periodically involved as a plaintiff or defendant in various legal actions in the ordinary course of its business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends from SmartBank are the Company’s primary source of funds to pay dividends on its common stock. Additional information regarding restrictions on the ability of SmartBank to pay dividends to the Company and for the Company to 37 Table of Contents pay dividends to its shareholders is contained in “Part I – Item 1.
Biggest changeAdditional information regarding restrictions on the ability of SmartBank to pay dividends to the Company and for the Company to pay dividends to its shareholders is contained in “Part I – Item 1.
The performance graph compares the cumulative five-year shareholder return on the Company’s common stock, assuming an investment of $100 on December 31, 2018, and reinvestment of dividends thereafter, to that of the common stocks of United States companies reported in the Russell 3000 Index and the common stocks of the S&P SmallCap Bank Index.
The performance graph compares the cumulative five-year shareholder return on the Company’s common stock, assuming an investment of $100 on December 31, 2019, and reinvestment of dividends thereafter, to that of the common stocks of United States companies reported in the Russell 3000 Index and the common stocks of the S&P SmallCap Bank Index.
Notes: 1) The lines represent monthly index levels derived from compounded daily returns that include all dividends. 2) The indexes are reweighted daily, using the market capitalization on the previous day. 3) If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. 4) The index level for all series was set to $100.00 on 12/31/2018. ​ 39 Table of Contents ITEM 6.
Notes: 1) The lines represent monthly index levels derived from compounded daily returns that include all dividends. 2) The indexes are reweighted daily, using the market capitalization on the previous day. 3) If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. 4) The index level for all series was set to $100.00 on 12/31/2019. ​ ​ 38 Table of Contents ​ ITEM 6.
The following table summarizes the Company’s repurchase activity during the quarter ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum ​ ​ ​ ​ ​ ​ ​ ​ ​ Number (or ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar Value) of ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares That May ​ ​ ​ ​ ​ ​ ​ Total Number of Shares ​ Yet Be Purchased ​ ​ Total Number of ​ Weighted ​ Purchased as Part of ​ Under the Plans ​ ​ Shares ​ Average Price Paid ​ Publicly Announced ​ or Programs (in Period Repurchased Per Share Plans or Programs thousands) October 1, 2023 to October 31, 2023 ​ — ​ $ — ​ — ​ $ 4,484 November 1, 2023 to November 30, 2023 — ​ ​ — ​ — ​ ​ 4,484 December 1, 2023 to December 31, 2023 — ​ ​ — ​ — ​ ​ 4,484 Total ​ — ​ $ — ​ — ​ $ 4,484 ​ ​ 38 Table of Contents Stock Performance Graph The following performance graph and related information are neither “soliciting material” nor “filed’ with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent the Company specifically incorporates it by reference to such filing.
The following table summarizes the Company’s repurchase activity during the quarter ended December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum ​ ​ ​ ​ ​ ​ ​ ​ ​ Number (or ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar Value) of ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares That May ​ ​ ​ ​ ​ ​ ​ Total Number of Shares ​ Yet Be Purchased ​ ​ Total Number of ​ Weighted ​ Purchased as Part of ​ Under the Plans ​ ​ Shares ​ Average Price Paid ​ Publicly Announced ​ or Programs (in Period Repurchased Per Share Plans or Programs thousands) October 1, 2024 to October 31, 2024 ​ — ​ $ — ​ — ​ $ 1,546 November 1, 2024 to November 30, 2024 — ​ ​ — ​ — ​ ​ 1,546 December 1, 2024 to December 31, 2024 — ​ ​ — ​ — ​ ​ 1,546 Total ​ — ​ $ — ​ — ​ $ 1,546 ​ ​ 37 Table of Contents Stock Performance Graph The following performance graph and related information are neither “soliciting material” nor “filed’ with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent the Company specifically incorporates it by reference to such filing.
Business – Supervision and Regulation – Payment of Dividends”. Equity Compensation Plan Information For information relating to compensation plans under which our equity securities are authorized for issuance, see Part III Items 11 and 12.
Business – Supervision and Regulation – Payment of Dividends”. 36 Table of Contents Equity Compensation Plan Information For information relating to compensation plans under which our equity securities are authorized for issuance, see Part III Items 11 and 12.
As of December 31, 2023, we have purchased $5.5 million of the authorized $10.0 million and may purchase up to an additional $4.5 million in the Company’s outstanding common stock pursuant to the plan.
As of December 31, 2024, we have purchased $8.5 million of the authorized $10.0 million and may purchase up to an additional $1.5 million in the Company’s outstanding common stock pursuant to the plan.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information SmartFinancial’s common stock is listed on the New York Stock Exchange under the symbol “SMBK”. As of March 8, 2024, there were approximately 4,670 holders of record of SmartFinancial’s common stock and 17,058,114 shares outstanding.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information SmartFinancial’s common stock is listed on the New York Stock Exchange under the symbol “SMBK”. As of March 10, 2025, there were approximately 7,142 holders of record of SmartFinancial’s common stock and 17,018,018 shares outstanding.
The index primarily includes banks and, to a lesser extent, insurance underwriters and specialty lenders providing a broad range of financial services, including retail banking, loans, and money transmissions. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Symbol Total Returns Index For: 2018 2019 2020 2021 2022 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Smart Financial ​ $ 100.00 ​ ​ 129.74 ​ $ 100.79 ​ $ 153.55 ​ $ 155.97 ​ $ 140.85 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Russell 3000 ​ $ 100.00 ​ $ 131.02 ​ $ 158.39 ​ $ 199.03 ​ $ 160.80 ​ $ 202.54 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ S&P SmallCap Bank ​ $ 100.00 ​ $ 125.46 ​ $ 113.94 ​ $ 158.62 ​ $ 139.85 ​ $ 140.55 ​ Definition: 1) The Russell 3000 Index is a market-capitalization-weighted equity index which tracks the performance of the 3,000 largest U.S.-traded stocks. 2) The S&P SmallCap Bank Index is a market-capitalization-weighted index which tracks the performance of NYSE and NASDAQ-listed banks, insurance underwriters and specialty lenders in S&P's coverage universe with $250M to $1B market capitalization as of most recent pricing data.
The index primarily includes banks and, to a lesser extent, insurance underwriters and specialty lenders providing a broad range of financial services, including retail banking, loans, and money transmissions. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Symbol Total Returns Index For: 2019 2020 2021 2022 2023 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Smart Financial ​ $ 100.00 ​ ​ 77.69 ​ $ 118.35 ​ $ 120.40 ​ $ 108.57 ​ $ 139.02 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Russell 3000 ​ $ 100.00 ​ $ 120.89 ​ $ 151.91 ​ $ 122.73 ​ $ 154.59 ​ $ 191.39 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ S&P SmallCap Bank ​ $ 100.00 ​ $ 90.82 ​ $ 126.43 ​ $ 111.47 ​ $ 112.03 ​ $ 132.44 ​ Definitions: 1) The Russell 3000 Index is a market-capitalization-weighted equity index which tracks the performance of the 3,000 largest U.S.-traded stocks. 2) The S&P SmallCap Bank Index is a market-capitalization-weighted index which tracks the performance of NYSE and NASDAQ-listed banks, insurance underwriters and specialty lenders in S&P's coverage universe with $250M to $1B market capitalization as of most recent pricing data.
Added
Subject to the approval of the board of directors and applicable regulatory requirements, the Company expects to continue its policy of paying regular cash dividends on a quarterly basis. Dividends from SmartBank are the Company’s primary source of funds to pay dividends on its common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

61 edited+9 added−15 removed54 unchanged
Biggest changeThe increase in the individually evaluated loans and lease, is primarily from $2.9 million that was recognized on purchase credit-deteriorated (“PCD”) loans previously classified as purchased credit impaired (“PCI”) with a corresponding adjustment to the gross carrying amount of the loans from the implementation of FASB ASU 2016-13 on January 1, 2023, for more information see Note 1—Summary of Significant Accounting Policies to our audited consolidated financial statements. 50 Table of Contents The following table presents information related to credit losses on loans and lease by loan segment for each of the years in the three year period ended December 31, (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of Net (charge-offs) ​ ​ ​ Provision for ​ Net (charge-offs) ​ Average ​ Recoveries to ​ ​ ​ Credit Losses ​ Recoveries ​ Loans ​ Average Loans ​ For the year ended December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ $ 906 ​ $ 6 ​ $ 1,657,874 ​ ​ - % Consumer real estate ​ ​ 1,059 ​ ​ 44 ​ ​ 624,972 ​ ​ 0.01 ​ Construction and land development ​ ​ (380) ​ ​ 25 ​ ​ 367,421 ​ ​ 0.01 ​ Commercial and industrial ​ ​ 1,637 ​ ​ (188) ​ ​ 602,413 ​ ​ (0.03) ​ Leases ​ ​ 347 ​ ​ (345) ​ ​ 67,318 ​ ​ (0.51) ​ Consumer and other ​ ​ 186 ​ ​ (220) ​ ​ 14,525 ​ ​ (1.51) ​ Total ​ $ 3,755 ​ $ (678) ​ $ 3,334,523 ​ ​ (0.02) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ $ 1,034 ​ ​ 6 ​ $ 1,498,235 ​ ​ - % Consumer real estate ​ ​ 43 ​ ​ 531 ​ ​ 520,447 ​ ​ 0.10 ​ Construction and land development ​ ​ 1,177 ​ ​ - ​ ​ 360,660 ​ ​ - ​ Commercial and industrial ​ ​ 339 ​ ​ (123) ​ ​ 493,236 ​ ​ (0.02) ​ Leases ​ ​ 879 ​ ​ 84 ​ ​ 61,960 ​ ​ 0.14 ​ Consumer and other ​ ​ 546 ​ ​ (534) ​ ​ 13,973 ​ ​ (3.82) ​ Total ​ $ 4,018 ​ $ (36) ​ $ 2,948,511 ​ ​ - ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate ​ $ 2,119 ​ ​ 83 ​ $ 1,213,311 ​ ​ 0.01 % Consumer real estate ​ ​ 11 ​ ​ (28) ​ ​ 456,529 ​ ​ (0.01) ​ Construction and land development ​ ​ (194) ​ ​ - ​ ​ 293,190 ​ ​ - ​ Commercial and industrial ​ ​ (1,053) ​ ​ (273) ​ ​ 526,586 ​ ​ (0.05) ​ Leases ​ ​ 455 ​ ​ (125) ​ ​ 39,408 ​ ​ (0.32) ​ Consumer and other ​ ​ 295 ​ ​ (284) ​ ​ 11,553 ​ ​ (2.46) ​ Total ​ $ 1,633 ​ $ (627) ​ $ 2,540,577 ​ ​ (0.02) ​ ​ Investment Portfolio Our investment portfolio is the second largest component of our interest earning assets.
Biggest changeThe following table sets forth, based on management’s best estimate, the allocation of the allowance for credit losses on loans and leases to categories of loans and leases and loan and lease balances by category and the percentage of loans and leases in each category to total loans and leases and allowance for credit losses as a percentage of total loans and leases within each loan and lease category as of December 31 for each of the past two years (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of Loans ​ ​ ​ ​ Ratio of Allowance ​ ​ ​ Amount of ​ in Each Category ​ ​ Total ​ Allocated to Loans in ​ ​ ​ Allowance Allocated ​ to Total Loans ​ ​ Loans ​ Each Category ​ December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ $ 6,972 ​ ​ 27.5 % ​ $ 1,080,404 ​ ​ 0.65 % Owner occupied ​ ​ 8,341 ​ ​ 22.2 ​ ​ ​ 867,678 ​ ​ 0.96 ​ Consumer real estate ​ ​ 8,355 ​ ​ 19.0 ​ ​ ​ 741,836 ​ ​ 1.13 ​ Construction and land development ​ ​ 4,168 ​ ​ 9.3 ​ ​ ​ 361,735 ​ ​ 1.15 ​ Commercial and industrial ​ ​ 8,552 ​ ​ 19.9 ​ ​ ​ 775,620 ​ ​ 1.10 ​ Leases ​ ​ 919 ​ ​ 1.7 ​ ​ ​ 64,878 ​ ​ 1.42 ​ Consumer and other ​ ​ 116 ​ ​ 0.4 ​ ​ ​ 14,189 ​ ​ 0.82 ​ Total ​ $ 37,423 ​ ​ 100.0 % ​ $ 3,906,340 ​ ​ 0.96 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ $ 6,887 ​ ​ 27.2 % ​ $ 940,789 ​ ​ 0.73 % Owner occupied ​ ​ 8,377 ​ ​ 23.2 ​ ​ ​ 798,416 ​ ​ 1.05 ​ Consumer real estate ​ ​ 7,249 ​ ​ 18.9 ​ ​ ​ 649,867 ​ ​ 1.12 ​ Construction and land development ​ ​ 4,874 ​ ​ 9.5 ​ ​ ​ 327,185 ​ ​ 1.49 ​ Commercial and industrial ​ ​ 6,924 ​ ​ 18.8 ​ ​ ​ 645,918 ​ ​ 1.07 ​ Leases ​ ​ 640 ​ ​ 2.0 ​ ​ ​ 68,752 ​ ​ 0.93 ​ Consumer and other ​ ​ 115 ​ ​ 0.4 ​ ​ ​ 13,535 ​ ​ 0.85 ​ Total ​ $ 35,066 ​ ​ 100.0 % ​ $ 3,444,462 ​ ​ 1.02 ​ ​ The allowance associated with the individually evaluated loans and leases were approximately $3.9 million at December 31, 2024, compared to $3.5 million at December 31, 2023. 49 Table of Contents The following table presents information related to credit losses on loans and lease by loan segment for each of the years in the three year period ended December 31, (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of Net (charge-offs) ​ ​ ​ Provision for ​ Net (charge-offs) ​ Average ​ Recoveries to ​ ​ ​ Credit Losses ​ Recoveries ​ Loans ​ Average Loans ​ Year Ended December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ $ 126 ​ $ - ​ $ 992,390 ​ ​ - % Owner occupied ​ ​ (113) ​ ​ 36 ​ ​ 828,270 ​ ​ - ​ Consumer real estate ​ ​ 1,102 ​ ​ 4 ​ ​ 680,895 ​ ​ - ​ Construction and land development ​ ​ (265) ​ ​ (441) ​ ​ 317,890 ​ ​ (0.14) ​ Commercial and industrial ​ ​ 2,397 ​ ​ (769) ​ ​ 707,125 ​ ​ (0.11) ​ Leases ​ ​ 1,583 ​ ​ (1,304) ​ ​ 67,389 ​ ​ (1.94) ​ Consumer and other ​ ​ 236 ​ ​ (235) ​ ​ 13,599 ​ ​ (1.73) ​ Total ​ $ 5,066 ​ $ (2,709) ​ $ 3,607,558 ​ ​ (0.08) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ $ 577 ​ $ - ​ $ 886,701 ​ ​ - % Owner occupied ​ ​ 329 ​ ​ 6 ​ ​ 771,173 ​ ​ - ​ Consumer real estate ​ ​ 1,059 ​ ​ 44 ​ ​ 624,972 ​ ​ 0.01 ​ Construction and land development ​ ​ (380) ​ ​ 25 ​ ​ 367,421 ​ ​ 0.01 ​ Commercial and industrial ​ ​ 1,637 ​ ​ (188) ​ ​ 602,413 ​ ​ (0.03) ​ Leases ​ ​ 347 ​ ​ (345) ​ ​ 67,318 ​ ​ (0.51) ​ Consumer and other ​ ​ 186 ​ ​ (220) ​ ​ 14,525 ​ ​ (1.51) ​ Total ​ $ 3,755 ​ $ (678) ​ $ 3,334,523 ​ ​ (0.02) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ $ 83 ​ $ - ​ $ 824,555 ​ ​ - % Owner occupied ​ ​ 951 ​ ​ 6 ​ ​ 673,680 ​ ​ - ​ Consumer real estate ​ ​ 43 ​ ​ 531 ​ ​ 520,447 ​ ​ 0.10 ​ Construction and land development ​ ​ 1,177 ​ ​ - ​ ​ 360,660 ​ ​ - ​ Commercial and industrial ​ ​ 339 ​ ​ (123) ​ ​ 493,236 ​ ​ (0.02) ​ Leases ​ ​ 879 ​ ​ 84 ​ ​ 61,960 ​ ​ 0.14 ​ Consumer and other ​ ​ 546 ​ ​ (534) ​ ​ 13,973 ​ ​ (3.82) ​ Total ​ $ 4,018 ​ $ (36) ​ $ 2,948,511 ​ ​ - ​ ​ Investment Portfolio Our investment portfolio is the second largest component of our interest earning assets.
Goodwill has an indefinite useful life and is evaluated for impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. As of December 31, 2023, there was approximately $96.1 million in goodwill.
Goodwill has an indefinite useful life and is evaluated for impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. As of December 31, 2024, there was approximately $96.1 million in goodwill.
Financial Statements and Supplementary Data – Note 15 – Regulatory Matters.” The table below (dollars in thousands) summarizes the capital requirements applicable to the Company and Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company and Bank’s capital ratios as of December 31, 2023 and 2022.
Financial Statements and Supplementary Data – Note 15 – Regulatory Matters.” The table below (dollars in thousands) summarizes the capital requirements applicable to the Company and Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company and Bank’s capital ratios as of December 31, 2024 and 2023.
At December 31, 2023, and 2022, our capital ratios, including our Company and Bank’s capital ratios, exceeded regulatory minimum capital requirements. From time to time we may be required to support the capital needs the Bank. For more information regarding our capital, leverage and total capital ratios, see “Part II – Item 8.
At December 31, 2024, and 2023, our capital ratios, including our Company and Bank’s capital ratios, exceeded regulatory minimum capital requirements. From time to time we may be required to support the capital needs the Bank. For more information regarding our capital, leverage and total capital ratios, see “Part II – Item 8.
Loan fee income for the years ended December 31, 2023, 2022 and 2021, respectively, includes $38 thousand, $1.9 million and $9.1 million accretion of loan fees on PPP loans. 2 Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0% in 2023, 2022 and 2021.
Loan fee income for the years ended December 31, 2024, 2023 and 2022, respectively, includes $43 thousand, $38 thousand and $1.9 million accretion of loan fees on PPP loans. 2 Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0% in 2024, 2023 and 2022.
In addition to our banking services, we offer insurance products through SBK Insurance, Inc., formally known as Rains Insurance Agency, Inc. and loans and leases for heavy equipment through Fountain, both are subsidiaries of the Bank.
In addition to our banking services, we offer insurance products through SBK Insurance, Inc., formally known as Rains Insurance Agency, Inc. and loans and leases for heavy equipment through Fountain Equipment Finance, LLC, both are subsidiaries of the Bank.
As of December 31, 2023 the Bank provides a comprehensive suite of commercial and consumer banking services to clients through 42 full-service bank branches in select markets in East and Middle Tennessee, Alabama and Florida.
As of December 31, 2024 the Bank provides a comprehensive suite of commercial and consumer banking services to clients through 42 full-service bank branches in select markets in East and Middle Tennessee, Alabama and Florida.
The Company and Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of December 31, 2023 and 2022. As of December 31, 2023, the FDIC categorized the Bank as well-capitalized under the prompt corrective action framework.
The Company and Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of December 31, 2024 and 2023. As of December 31, 2024, the FDIC categorized the Bank as well-capitalized under the prompt corrective action framework.
The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. ​ Based upon our evaluation of the loan portfolio, we believe the allowance for credit losses on loans to be adequate to absorb our estimate of expected future credit losses on loans outstanding at December 31, 2023.
The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. ​ Based upon our evaluation of the loan portfolio, we believe the allowance for credit losses on loans and leases to be adequate to absorb our estimate of expected future credit losses on loans outstanding at December 31, 2024.
Principal paydowns/maturities on lower yielding securities as well as the 51 Table of Contents decision to sell a portion of the bank’s AFS securities also played a role in a decrease in the net unrealized loss change over the period. ​ The following table presents the contractual maturity of the Company’s securities by contractual maturity date and average yields based on amortized cost (for all obligations on a fully taxable basis) at December 31, 2023 (dollars in thousands) .
Principal paydowns/maturities on lower yielding securities as well as the decision to sell a portion of the bank’s AFS securities also played a role in a decrease in the net unrealized loss change over the period. ​ The following table presents the contractual maturity of the Company’s securities by contractual maturity date and average yields based on amortized cost (for all obligations on a fully taxable basis) at December 31, 2024 (dollars in thousands) .
While the Company’s primary focus is on establishing customer relationships to attract core deposits, at times, the Company uses brokered deposits and other wholesale deposits to supplement its funding sources. As of December 31, 2023, brokered deposits represented approximately 0.52% of total deposits.
While the Company’s primary focus is on establishing customer relationships to attract core deposits, at times, the Company uses brokered deposits and other wholesale deposits to supplement its funding sources. As of December 31, 2024, brokered deposits represented approximately 4.52% of total deposits.
Our net interest margin can also be adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments. 2023 compared to 2022 Net interest income, taxable equivalent, decreased to $130.5 million in 2023 from $138.2 million in 2022.
Our net interest margin can also be adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments. 2024 compared to 2023 Net interest income, taxable equivalent, increased to $138.5 million in 2024 from $130.5 million in 2023.
While our policies and procedures used to estimate the allowance for credit losses as well as the resultant provision for credit losses charged to operations are considered adequate by management, they are necessarily approximate and imprecise.
While our policies and procedures used to estimate the allowance for credit losses as well as the resultant provision for credit losses 48 Table of Contents charged to operations are considered adequate by management, they are necessarily approximate and imprecise.
At December 31, 2023, $8.0 million was outstanding under the line of credit, and $27.0 million of the line of credit remained available to the Company. Capital Requirements The Company and Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets.
At December 31, 2024, $4.0 million was outstanding under the line of credit, and $31.0 million of the line of credit remained available to the Company. Capital Requirements The Company and Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets.
Our available-for-sale (“AFS”) investment portfolio is carried at fair market value and our held-to-maturity investment portfolio is carried at amortized cost, and consists primarily of Federal agency bonds, mortgage-backed securities, state and municipal securities and other debt securities. Our investment portfolio decreased from $769.8 million at December 31, 2022, to $689.6 million at December 31, 2023.
Our available-for-sale (“AFS”) investment portfolio is carried at fair market value and our held-to-maturity investment portfolio is carried at amortized cost, and consists primarily of Federal agency bonds, mortgage-backed securities, state and municipal securities and other debt securities. Our investment portfolio decreased from $689.6 million at December 31, 2023, to $609.0 million at December 31, 2024.
Income tax expense was $11.9 million in 2022 with an effective tax rate of 21.7%, compared to $9.5 million in 2021 with an effective tax rate of 21.5%. Net Interest Income and Yield Analysis The management of interest income and expense is fundamental to our financial performance.
Income tax expense was $7.6 million in 2023 with an effective tax rate of 21.1%, compared to $11.9 million in 2022 with an effective tax rate of 21.7%. Net Interest Income and Yield Analysis The management of interest income and expense is fundamental to our financial performance.
Income Taxes 2023 compared to 2022 In 2023, income tax expense totaled $7.6 million compared to $11.9 million in 2022. The effective tax rate was approximately 21.1% for 2023 compared to 21.7% in 2022.
Income Taxes 2024 compared to 2023 In 2024, income tax expense totaled $9.3 million compared to $7.6 million in 2023. The effective tax rate was approximately 20.5% for 2024 compared to 21.1% in 2023. 2023 compared to 2022 In 2023, income tax expense totaled $7.6 million compared to $11.9 million in 2022.
Nonperforming loans and leases as a percentage of gross loans and leases, net of deferred fees, was 0.24% as of December 31, 2023, and 0.09% as of December 31, 2022, respectively. Total nonperforming assets as a percentage of total assets as of December 31, 2023, totaled 0.20% compared to 0.10% as of December 31, 2022.
Nonperforming loans and leases as a percentage of gross loans and leases, net of deferred fees, was 0.20% as of December 31, 2024, and 0.24% as of December 31, 2023, respectively. Total nonperforming assets as a percentage of total assets as of December 31, 2024, totaled 0.19% compared to 0.20% as of December 31, 2023.
The primary components of the changes in noninterest expense were as follows: ● Increase in salary and employee benefits, related to the Sunbelt acquisition completed September 1, 2022 and overall franchise growth; ● Increase in occupancy and equipment, due to ongoing infrastructure and facilities added to accommodate growth in operations; ● Increase in FDIC insurance, related to continued asset growth; ● Increase in data processing and technology, primarily from continued infrastructure build and overall growth; and 45 Table of Contents ● Increases in other, primarily related to a Community Reinvestment Act donation of a former branch location and accruals in respect of pending litigation. 2022 compared to 2021 Noninterest expense increased $14.9 million to $106.3 million in 2022, compared to $91.4 million in 2021.
The primary components of the changes in noninterest expense were as follows: ● Increase in salary and employee benefits, related to the Sunbelt acquisition completed September 1, 2022 and overall franchise growth; ● Increase in occupancy and equipment, due to ongoing infrastructure and facilities added to accommodate growth in operations; ● Increase in FDIC insurance, related to continued asset growth; ● Increase in data processing and technology, primarily from continued infrastructure build and overall growth; and ● Increases in other, primarily related to a Community Reinvestment Act donation of a former branch location and accruals in respect of pending litigation.
The Company uses an eight-quarter forecast and a four-quarter reversion period. Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation. The qualitative categories and the measurements used to quantify the risks within each of these categories are subjectively selected by management but measured by objective measurements period over period.
Management considers the need to qualitatively adjust expected credit losses for information not already captured in the loss estimation. The qualitative categories and the measurements used to quantify the risks within each of these categories are subjectively selected by management but measured by objective measurements period over period.
The Company had total net loans and leases outstanding of approximately $3.41 billion at December 31, 2023, and $3.23 billion at December 31, 2022. The year over year increase of $179.1 million, or 5.5%, was related to organic loan growth throughout all markets.
The Company had total net loans and leases outstanding of approximately $3.87 billion at December 31, 2024, and $3.41 billion at December 31, 2023. The year-over-year increase of $459.5 million, or 13.5%, was related to organic loan growth throughout all markets.
As of December 31, 2023, and 2022, our allowance for credit losses was $35.1 million and $23.3 million, respectively, which our management deemed to be adequate at each of the respective dates. Our allowance for credit losses as a percentage of total loans was 1.02% and 0.72% at December 31, 2023, and 2022, respectively.
As of December 31, 2024, and 2023, our allowance for credit losses was $37.4 million and $35.1 million, respectively, which our management deemed to be adequate at each of the respective dates. Our allowance for credit losses as a percentage of total loans was 0.96% and 1.02% at December 31, 2024, and 2023, respectively.
Loan fees included in loan income were $5.3 million, $4.1 million, and $11.1 million for 2023, 2022, and 2021, respectively.
Loan fees included in loan income were $3.0 million, $5.3 million, and $4.1 million for 2024, 2023, and 2022, respectively.
Borrowings and Subordinated Debt Other than deposits, the Company uses short-term borrowings and long-term debt to provide both funding and, to a lesser extent, regulatory capital using debt at the Company level which can be downstreamed as Tier 1 capital to the Bank. Total borrowings at December 31, 2023 and 2022, was $13.1 million and $41.9 million, respectively.
Borrowings and Subordinated Debt Other than deposits, the Company uses short-term borrowings and long-term debt to provide both funding and, to a lesser extent, regulatory capital using debt at the Company level which can be down streamed as Tier 1 capital to the Bank. Total borrowings at December 31, 2024 and 2023, were $8.1 million and $13.1 million, respectively.
The cost of average interest-bearing deposits increased from 0.60% for 2022, to 2.59% for 2023, primarily due to the impact of rising Federal Reserve rates, and such increases significantly contributing to the increase in interest expense in 2023. 2022 compared to 2021 Net interest income, taxable equivalent, increased to $138.2 million in 2022 from $114.0 million in 2021.
The cost of average interest-bearing deposits increased from 2.59% for 2023, to 3.15% for 2024, primarily due to the impact of rising Federal Reserve rates, and such increases significantly contributing to the increase in interest expense in 2024. 2023 compared to 2022 Net interest income, taxable equivalent, decreased to $130.5 million in 2023 from $138.2 million in 2022.
The taxable-equivalent adjustment was $377 thousand, $665 thousand and $602 thousand for 2023, 2022 and 2021, respectively. ​ ​ 43 Table of Contents ​ Rate and Volume Analysis Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates.
The taxable-equivalent adjustment was $374 thousand, $377 thousand and $665 thousand for the years ended December 31, 2024, 2023 and 2022, respectively. ​ ​ 42 Table of Contents ​ Rate and Volume Analysis Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates.
The $28.8 million reduction in borrowings, was primarily the reduction of $24.6 million in secured borrowing and the repayment of $4.5 million on a line of credit. Short-term borrowings, included in borrowings, totaled $5.1 million at December 31, 2023 and $4.8 million at December 31, 2022 and consisted entirely of securities sold under repurchase agreements.
The $5.0 million reduction in borrowings was primarily the repayment of $4.0 million on a line of credit. Short-term borrowings, included in borrowings, totaled $4.1 million at December 31, 2024 and $5.1 million at December 31, 2023 and consisted entirely of securities sold under repurchase agreements.
Net interest income, taxable equivalent, decreased by $7.7 million between the years ended December 31, 2023 and 2022 and increased by $24.2 million between the years ended December 31, 2022 and 2021.
Net interest income, taxable equivalent, increased by $8.0 million between the years ended December 31, 2024 and 2023 and decreased by $7.7 million between the years ended December 31, 2023 and 2022.
The Company believes its deposit product offerings are properly structured to attract and retain core low-cost deposit relationships. The average cost of deposits was 2.00% in 2023 compared to 0.44% in 2022. Total deposits as of December 31, 2023, were $4.3 billion, which was an increase of $190.8 million from December 31, 2022.
The Company believes its deposit product offerings are properly structured to attract and retain core low-cost deposit relationships. The average cost of deposits was 2.51% in 2024 compared to 2.00% in 2023. 51 Table of Contents Total deposits as of December 31, 2024, were $4.7 billion, which was an increase of $418.6 million from December 31, 2023.
Income tax expense was $7.6 million in 2023 with an effective tax rate of 21.1%, compared to $11.9 million in 2022 with an effective tax rate of 21.7%. 2022 compared to 2021 Net income was $43.0 million, or $2.55 per diluted common share in 2022, compared to $34.8 million, or $2.22 per diluted common share in 2021.
Income tax expense was $9.3 million in 2024 with an effective tax rate of 20.5%, compared to $7.6 million in 2023 with an effective tax rate of 21.1%. 2023 compared to 2022 Net income was $28.6 million, or $1.69 per diluted common share in 2023, compared to $43.0 million, or $2.55 per diluted common share in 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Selected Financial Data Set forth below is certain selected financial data related to the Company’s operations for 2023, 2022 and 2021: (dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ ​ 2022 ​ ​ ​ 2021 ​ Balance Sheet: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,829,387 ​ ​ $ 4,637,498 ​ ​ $ 4,611,579 ​ Loans and leases ​ ​ 3,444,462 ​ ​ ​ 3,253,627 ​ ​ ​ 2,693,397 ​ Allowance for credit losses ​ ​ (35,066) ​ ​ ​ (23,334) ​ ​ ​ (19,352) ​ Total securities ​ ​ 689,646 ​ ​ ​ 769,842 ​ ​ ​ 559,422 ​ Goodwill and other intangibles, net ​ ​ 107,148 ​ ​ ​ 109,772 ​ ​ ​ 105,852 ​ Total deposits ​ ​ 4,267,854 ​ ​ ​ 4,077,100 ​ ​ ​ 4,021,938 ​ Borrowings ​ ​ 13,078 ​ ​ ​ 41,860 ​ ​ ​ 87,585 ​ Subordinated debt ​ ​ 42,099 ​ ​ ​ 42,015 ​ ​ ​ 41,930 ​ Shareholders' equity ​ ​ 459,886 ​ ​ ​ 432,452 ​ ​ ​ 429,430 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income Statement: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ $ 218,043 ​ ​ $ 158,834 ​ ​ $ 125,232 ​ Interest expense ​ ​ 87,963 ​ ​ ​ 21,333 ​ ​ ​ 11,838 ​ Net interest income ​ ​ 130,080 ​ ​ ​ 137,501 ​ ​ ​ 113,394 ​ Provision for loan and lease losses ​ ​ 3,029 ​ ​ ​ 4,018 ​ ​ ​ 1,633 ​ Net interest income after provision for loan and lease losses ​ ​ 127,051 ​ ​ ​ 133,483 ​ ​ ​ 111,761 ​ Noninterest income ​ ​ 22,325 ​ ​ ​ 27,715 ​ ​ ​ 23,949 ​ Noninterest expense ​ ​ 113,150 ​ ​ ​ 106,290 ​ ​ ​ 91,391 ​ Income before income taxes ​ ​ 36,226 ​ ​ ​ 54,908 ​ ​ ​ 44,319 ​ Income tax expense ​ ​ 7,633 ​ ​ ​ 11,886 ​ ​ ​ 9,529 ​ Net income ​ $ 28,593 ​ ​ $ 43,022 ​ ​ $ 34,790 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per Share Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per common share - basic ​ $ 1.70 ​ ​ $ 2.57 ​ ​ $ 2.23 ​ Weighted average common shares outstanding - basic ​ ​ 16,805,068 ​ ​ ​ 16,740,450 ​ ​ ​ 15,572,537 ​ Earnings per common share - diluted ​ $ 1.69 ​ ​ $ 2.55 ​ ​ $ 2.22 ​ Weighted average common shares outstanding - diluted ​ ​ 16,911,185 ​ ​ ​ 16,871,369 ​ ​ ​ 15,699,215 ​ Common dividends per share ​ $ 0.32 ​ ​ $ 0.28 ​ ​ $ 0.24 ​ Book value per share ​ $ 27.07 ​ ​ $ 25.59 ​ ​ $ 25.56 ​ Common shares outstanding at end of period ​ ​ 16,988,879 ​ ​ ​ 16,900,805 ​ ​ ​ 16,802,990 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average assets ​ ​ 0.60 % ​ ​ 0.92 % ​ ​ 0.91 % Return on average shareholders' equity ​ ​ 6.45 % ​ ​ 10.16 % ​ ​ 8.97 % Tax equivalent net interest margin ​ ​ 2.97 % ​ ​ 3.20 % ​ ​ 3.24 % Interest rate spread ​ ​ 2.32 % ​ ​ 3.01 % ​ ​ 3.12 % Noninterest income to average assets ​ ​ 0.47 % ​ ​ 0.59 % ​ ​ 0.62 % Noninterest expense to average assets ​ ​ 2.38 % ​ ​ 2.27 % ​ ​ 2.38 % Efficiency ratio ​ ​ 74.24 % ​ ​ 64.33 % ​ ​ 66.54 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Credit Quality Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (charge-offs) to average loans and leases ​ ​ (0.02) % ​ ​ - % ​ ​ (0.02) % Allowance for loan and leases to total loans and leases ​ ​ 1.02 % ​ ​ 0.72 % ​ ​ 0.72 % Nonperforming loans and leases to total loans and leases, gross ​ ​ 0.24 % ​ ​ 0.09 % ​ ​ 0.12 % Nonperforming assets to total assets ​ ​ 0.20 % ​ ​ 0.10 % ​ ​ 0.11 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios 1 : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 leverage ​ ​ 8.27 % ​ ​ 7.95 % ​ ​ 7.45 % Common equity Tier 1 ​ ​ 10.16 % ​ ​ 9.65 % ​ ​ 10.56 % Tier 1 capital ​ ​ 10.16 % ​ ​ 9.65 % ​ ​ 10.56 % Total capital ​ ​ 11.80 % ​ ​ 11.40 % ​ ​ 12.55 % 1 Capital Ratios are for SmartFinancial, Inc. 40 Table of Contents Business Overview The following is a discussion of our financial condition and results of our operations for the years ended December 31, 2023, 2022 and 2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Selected Financial Data Set forth below is certain selected financial data related to the Company’s operations for 2024, 2023 and 2022: (dollars in thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ ​ 2022 ​ Balance Sheet: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 5,275,904 ​ ​ $ 4,829,387 ​ ​ $ 4,637,498 ​ Loans and leases ​ ​ 3,906,340 ​ ​ ​ 3,444,462 ​ ​ ​ 3,253,627 ​ Allowance for credit losses ​ ​ (37,423) ​ ​ ​ (35,066) ​ ​ ​ (23,334) ​ Total securities ​ ​ 608,987 ​ ​ ​ 689,646 ​ ​ ​ 769,842 ​ Goodwill and other intangibles, net ​ ​ 104,723 ​ ​ ​ 107,148 ​ ​ ​ 109,772 ​ Total deposits ​ ​ 4,686,483 ​ ​ ​ 4,267,854 ​ ​ ​ 4,077,100 ​ Borrowings ​ ​ 8,135 ​ ​ ​ 13,078 ​ ​ ​ 41,860 ​ Subordinated debt ​ ​ 39,684 ​ ​ ​ 42,099 ​ ​ ​ 42,015 ​ Shareholders' equity ​ ​ 491,461 ​ ​ ​ 459,886 ​ ​ ​ 432,452 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income Statement: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ $ 251,119 ​ ​ $ 218,043 ​ ​ $ 158,834 ​ Interest expense ​ ​ 113,769 ​ ​ ​ 87,963 ​ ​ ​ 21,333 ​ Net interest income ​ ​ 137,350 ​ ​ ​ 130,080 ​ ​ ​ 137,501 ​ Provision for loan and lease losses ​ ​ 5,153 ​ ​ ​ 3,029 ​ ​ ​ 4,018 ​ Net interest income after provision for loan and lease losses ​ ​ 132,197 ​ ​ ​ 127,051 ​ ​ ​ 133,483 ​ Noninterest income ​ ​ 34,152 ​ ​ ​ 22,325 ​ ​ ​ 27,715 ​ Noninterest expense ​ ​ 120,890 ​ ​ ​ 113,150 ​ ​ ​ 106,290 ​ Income before income taxes ​ ​ 45,459 ​ ​ ​ 36,226 ​ ​ ​ 54,908 ​ Income tax expense ​ ​ 9,318 ​ ​ ​ 7,633 ​ ​ ​ 11,886 ​ Net income ​ $ 36,141 ​ ​ $ 28,593 ​ ​ $ 43,022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per Share Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per common share - basic ​ $ 2.16 ​ ​ $ 1.70 ​ ​ $ 2.57 ​ Weighted average common shares outstanding - basic ​ ​ 16,768,956 ​ ​ ​ 16,805,068 ​ ​ ​ 16,740,450 ​ Earnings per common share - diluted ​ $ 2.14 ​ ​ $ 1.69 ​ ​ $ 2.55 ​ Weighted average common shares outstanding - diluted ​ ​ 16,875,456 ​ ​ ​ 16,911,185 ​ ​ ​ 16,871,369 ​ Common dividends per share ​ $ 0.32 ​ ​ $ 0.32 ​ ​ $ 0.28 ​ Book value per share ​ $ 29.04 ​ ​ $ 27.07 ​ ​ $ 25.59 ​ Common shares outstanding at end of period ​ ​ 16,925,672 ​ ​ ​ 16,988,879 ​ ​ ​ 16,900,805 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average assets ​ ​ 0.73 % ​ ​ 0.60 % ​ ​ 0.92 % Return on average shareholders' equity ​ ​ 7.63 % ​ ​ 6.45 % ​ ​ 10.16 % Tax equivalent net interest margin ​ ​ 3.04 % ​ ​ 2.97 % ​ ​ 3.20 % Interest rate spread ​ ​ 2.32 % ​ ​ 2.32 % ​ ​ 3.01 % Noninterest income to average assets ​ ​ 0.69 % ​ ​ 0.47 % ​ ​ 0.59 % Noninterest expense to average assets ​ ​ 2.45 % ​ ​ 2.38 % ​ ​ 2.27 % Efficiency ratio ​ ​ 70.49 % ​ ​ 74.24 % ​ ​ 64.33 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Credit Quality Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (charge-offs) to average loans and leases ​ ​ (0.08) % ​ ​ (0.02) % ​ ​ - % Allowance for loan and leases to total loans and leases ​ ​ 0.96 % ​ ​ 1.02 % ​ ​ 0.72 % Nonperforming loans and leases to total loans and leases, gross ​ ​ 0.20 % ​ ​ 0.24 % ​ ​ 0.09 % Nonperforming assets to total assets ​ ​ 0.19 % ​ ​ 0.20 % ​ ​ 0.10 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios 1 : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 leverage ​ ​ 8.29 % ​ ​ 8.27 % ​ ​ 7.95 % Common equity Tier 1 ​ ​ 9.76 % ​ ​ 10.16 % ​ ​ 9.65 % Tier 1 capital ​ ​ 9.76 % ​ ​ 10.16 % ​ ​ 9.65 % Total capital ​ ​ 11.10 % ​ ​ 11.80 % ​ ​ 11.40 % 1 Capital Ratios are for SmartFinancial, Inc. 39 Table of Contents Business Overview The following is a discussion of our financial condition and results of our operations for the years ended December 31, 2024, 2023 and 2022.
The primary reason for the 0.06% decline in the effective tax rate was due to lower earnings, largely from the $6.8 million pre-tax loss on the sale of available-for-sale securities during the year. 2022 compared to 2021 In 2022, income tax expense totaled $11.9 million compared to $9.5 million in 2021.
The effective tax rate was approximately 21.1% for 2023 compared to 21.7% in 2022. The primary reason for the 0.06% decline in the effective tax rate was due to lower earnings, largely from the $6.8 million pre-tax loss on the sale of available-for-sale securities during the year.
This increase is related to organic deposit growth. As of December 31, 2023, the Company had outstanding time deposits under $250,000 of $324.8 million, time deposits over $250,000 of $225.7 million, and a time deposit fair value 52 Table of Contents adjustment of $106 thousand.
This increase is related to organic deposit growth. As of December 31, 2024, the Company had outstanding time deposits under $250,000 of $541.8 million, time deposits over $250,000 of $302.8 million, and a time deposit fair value adjustment of $39 thousand.
The primary components of the changes in noninterest income were as follows: ● Increase in service charges on deposit accounts, related to deposit growth and transaction volume; ● Increase in loss on sale of securities, associated with a $6.8 million pre-tax loss on the sale of $159.6 million in available-for-sale securities, reinvesting into higher yielding assets; ● Increase in investment services, stemming from increased production; ● Increase in insurance commissions, driven by the addition of Sunbelt and organic growth; and ● Decrease in other, primarily related to decreased fees from capital market activity. ​ 2022 compared to 2021 Noninterest income increased $3.8 million to $27.7 million in 2022, compared to $23.9 million in 2021.
The primary components of the changes in noninterest income were as follows: ● During 2023, loss on sale of securities, associated with a $6.8 million pre-tax loss on the sale of $159.6 million in available-for-sale securities, reinvesting into higher yielding assets; ● Increase in investment services, stemming from increased production; ● Increase in insurance commissions, driven by organic growth; and ● Increase in other, primarily related to $1.3 million pre-tax gain on the sale of a former branch building, income on bank owned life insurance, and fees from capital market activity. ​ 2023 compared to 2022 Noninterest income decreased $5.4 million to $22.3 million in 2023, compared to $27.7 million in 2022.
The following table provides a summary of noninterest income for the periods presented (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ 2023 - 2022 ​ December 31, ​ ​ 2022 - 2021 ​ 2023 2022 ​ Change 2021 ​ ​ Change Service charges on deposit accounts ​ $ 6,511 ​ $ 5,853 ​ $ 658 ​ $ 4,650 ​ $ 1,203 Gain (loss) on sale of securities ​ (6,801) ​ 144 ​ ​ (6,945) ​ 45 ​ ​ 99 Mortgage banking ​ 1,040 ​ 1,552 ​ ​ (512) ​ 4,040 ​ ​ (2,488) Investment services ​ ​ 5,105 ​ ​ 4,144 ​ ​ 961 ​ ​ 2,167 ​ ​ 1,977 Insurance commissions ​ ​ 4,684 ​ ​ 3,595 ​ ​ 1,089 ​ ​ 3,285 ​ ​ 310 Interchange and debit card transaction fees, net ​ 5,457 ​ 5,435 ​ ​ 22 ​ 4,284 ​ ​ 1,151 Other ​ 6,329 ​ 6,992 ​ ​ (663) ​ 5,478 ​ ​ 1,514 Total noninterest income ​ $ 22,325 ​ $ 27,715 ​ $ (5,390) ​ $ 23,949 ​ $ 3,766 ​ 44 Table of Contents 2023 compared to 2022 Noninterest income decreased $5.4 million to $22.3 million in 2023, compared to $27.7 million in 2022.
The following table provides a summary of noninterest income for the periods presented (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2023 - 2022 ​ 2024 2023 ​ Change 2022 ​ ​ Change Service charges on deposit accounts ​ $ 6,862 ​ $ 6,511 ​ $ 351 ​ $ 5,853 ​ $ 658 Gain (loss) on sale of securities ​ 64 ​ (6,801) ​ ​ 6,865 ​ 144 ​ ​ (6,945) Mortgage banking ​ 1,579 ​ 1,040 ​ ​ 539 ​ 1,552 ​ ​ (512) Investment services ​ ​ 5,945 ​ ​ 5,105 ​ ​ 840 ​ ​ 4,144 ​ ​ 961 Insurance commissions ​ ​ 5,696 ​ ​ 4,684 ​ ​ 1,012 ​ ​ 3,595 ​ ​ 1,089 Interchange and debit card transaction fees, net ​ 5,277 ​ 5,457 ​ ​ (180) ​ 5,435 ​ ​ 22 Other ​ 8,729 ​ 6,329 ​ ​ 2,400 ​ 6,992 ​ ​ (663) Total noninterest income ​ $ 34,152 ​ $ 22,325 ​ $ 11,827 ​ $ 27,715 ​ $ (5,390) ​ 43 Table of Contents 2024 compared to 2023 Noninterest income increased $11.8 million to $34.2 million in 2024, compared to $22.3 million in 2023.
The following table summarizes the average balances outstanding and average interest rates for each major category of deposits for 2023, 2022 and 2021 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ Average % of Average Average % of Average Average % of Average ​ ​ Balance ​ Total ​ Rate ​ Balance ​ Total ​ Rate ​ Balance ​ Total ​ Rate Noninterest-bearing demand ​ $ 958,078 22.8 % — ​ $ 1,120,555 27.0 % — ​ $ 841,746 25.5 % — ​ Interest-bearing demand ​ 959,639 22.8 % 2.11 % 945,414 22.8 % 0.66 % 737,251 22.3 % 0.19 % Money market and savings ​ 1,768,869 42.0 % 2.85 % 1,576,170 37.9 % 0.58 % 1,191,916 36.1 % 0.29 % Time deposits ​ 520,799 12.4 % 2.61 % 513,416 12.4 % 0.55 % 533,994 16.2 % 0.74 % Total average deposits ​ $ 4,207,385 100.0 % 2.00 % $ 4,155,555 100.0 % 0.44 % $ 3,304,907 100.0 % 0.27 % ​ During 2023, average deposits increased in all categories, except for noninterest-bearing demand deposits.
The following table summarizes the average balances outstanding and average interest rates for each major category of deposits for 2024, 2023 and 2022 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ 2022 ​ Average % of Average Average % of Average Average % of Average ​ ​ Balance ​ Total ​ Rate ​ Balance ​ Total ​ Rate ​ Balance ​ Total ​ Rate Noninterest-bearing demand ​ $ 883,923 20.3 % — ​ $ 958,078 22.8 % — ​ $ 1,120,555 27.0 % — ​ Interest-bearing demand ​ 932,598 21.4 % 2.26 % 959,639 22.8 % 2.11 % 945,414 22.8 % 0.66 % Money market and savings ​ 1,913,673 44.0 % 3.35 % 1,768,869 42.0 % 2.85 % 1,576,170 37.9 % 0.58 % Time deposits ​ 623,652 14.3 % 3.86 % 520,799 12.4 % 2.61 % 513,416 12.4 % 0.55 % Total average deposits ​ $ 4,353,846 100.0 % 2.51 % $ 4,207,385 100.0 % 2.00 % $ 4,155,555 100.0 % 0.44 % ​ During 2024, average deposits increased in money market and savings and time deposits, with decreases in noninterest-bearing demand and interest-bearing demand deposits.
Receipts in excess of that amount are recorded as recoveries to the allowance for loan and lease losses until prior charge-offs have been fully recovered.
Receipts in excess of that amount are recorded as recoveries to the allowance for loan and lease losses until prior charge-offs have been fully recovered. 46 Table of Contents Assets acquired as a result of foreclosure are recorded at estimated fair value in other real estate owned.
Summary of Average Balances, Interest and Rates The following table presents (dollars in thousands) , for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ Average ​ Yield/ Average ​ Yield/ Average ​ Yield/ ​ ​ Balance ​ Interest ​ Cost ​ Balance ​ Interest ​ Cost ​ Balance ​ Interest ​ Cost Assets: ​ ​ ​ ​ ​ ​ ​ Loans and leases, including fees 1 ​ $ 3,334,523 ​ $ 186,479 5.59 % $ 2,948,511 ​ $ 136,381 4.63 % $ 2,540,577 ​ $ 118,582 4.67 % Taxable securities ​ 713,637 ​ 16,665 2.34 % 688,428 ​ 11,799 1.71 % 207,459 ​ 3,813 1.84 % Tax-exempt securities 2 ​ 64,816 ​ 1,795 2.77 % 100,566 ​ 2,831 2.82 % 92,708 ​ 1,817 1.96 % Federal funds sold and other earning assets ​ 272,864 ​ 13,481 4.94 % 577,593 ​ 8,488 1.47 % 680,909 ​ 1,622 0.24 % Total interest-earning assets ​ 4,385,840 ​ 218,420 4.98 % 4,315,098 ​ 159,499 3.70 % 3,521,653 ​ 125,834 3.57 % Noninterest-earning assets ​ 370,436 ​ ​ 373,026 ​ ​ 317,457 ​ ​ Total assets ​ $ 4,756,276 ​ ​ $ 4,688,124 ​ ​ $ 3,839,110 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and Shareholders' Equity: ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 959,639 ​ 20,214 2.11 % $ 945,414 ​ 6,278 0.66 % $ 737,251 ​ 1,378 0.19 % Money market and savings deposits ​ 1,768,869 ​ 50,468 2.85 % 1,576,170 ​ 9,137 0.58 % 1,191,916 ​ 3,501 0.29 % Time deposits ​ 520,799 ​ 13,578 2.61 % 513,416 ​ 2,813 0.55 % 533,994 ​ 3,970 0.74 % Total interest-bearing deposits ​ 3,249,307 ​ 84,260 2.59 % 3,035,000 ​ 18,228 0.60 % 2,463,161 ​ 8,849 0.36 % Borrowings ​ 17,824 ​ 936 5.25 % 32,986 ​ 602 1.83 % 83,105 ​ 540 0.65 % Subordinated debt ​ 42,055 ​ 2,767 6.58 % 41,970 ​ 2,503 5.96 % 40,221 ​ 2,449 6.09 % Total interest-bearing liabilities ​ 3,309,186 ​ 87,963 2.66 % 3,109,956 ​ 21,333 0.69 % 2,586,487 ​ 11,838 0.46 % Noninterest-bearing deposits ​ 958,078 ​ ​ 1,120,555 ​ ​ 841,746 ​ ​ Other liabilities ​ 46,052 ​ ​ 34,361 ​ ​ 23,189 ​ ​ Total liabilities ​ 4,313,316 ​ ​ 4,264,872 ​ ​ 3,451,422 ​ ​ Shareholders' equity ​ 442,960 ​ ​ 423,252 ​ ​ 387,688 ​ ​ Total liabilities and shareholders’ equity ​ $ 4,756,276 ​ ​ $ 4,688,124 ​ ​ $ 3,839,110 ​ ​ Net interest income, taxable equivalent ​ ​ $ 130,457 ​ ​ $ 138,166 ​ ​ $ 113,996 ​ Interest rate spread ​ ​ 2.32 % ​ 3.01 % ​ 3.12 % Tax equivalent net interest margin ​ ​ 2.97 % ​ 3.20 % ​ 3.24 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of average interest-earning assets to average interest-bearing liabilities ​ ​ ​ 132.54 % ​ 138.75 % ​ 136.16 % Percentage of average equity to average assets ​ ​ 9.31 % ​ 9.03 % ​ 10.10 % ​ 1 Loans include PPP loans with an average balance of $2.8 million, $14.1 million and $196.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.
The cost of average interest-bearing deposits increased from 0.60% for 2022, to 2.59% for 2023, primarily due to the impact of rising Federal Reserve rates, and such increases significantly contributing to the increase in interest expense in 2023. 41 Table of Contents Summary of Average Balances, Interest and Rates The following table presents (dollars in thousands) , for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ Yield/ ​ Average ​ ​ ​ Yield/ ​ Average ​ ​ ​ Yield/ ​ ​ Balance Interest Cost Balance Interest Cost Balance Interest Cost ​ Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and leases, including fees 1,2 ​ $ 3,607,558 ​ $ 214,310 ​ 5.94 % $ 3,334,523 ​ $ 186,479 ​ 5.59 % $ 2,948,511 ​ $ 136,381 4.63 % Taxable Securities ​ ​ 580,001 ​ 20,151 3.47 % ​ 713,637 ​ 16,665 2.34 % 688,428 ​ 11,799 1.71 % Tax-exempt securities 3 ​ 63,679 ​ 1,780 2.80 % 64,816 ​ 1,795 2.77 % 100,566 ​ 2,831 2.82 % Federal funds and other earning assets ​ 300,081 ​ 16,000 5.33 % 272,864 ​ 13,481 4.94 % 577,593 ​ 8,488 1.47 % Total interest-earning assets ​ 4,551,319 ​ 252,241 5.54 % 4,385,840 ​ 218,420 4.98 % 4,315,098 ​ 159,499 3.70 % Noninterest-earning assets ​ 388,267 ​ ​ 370,436 ​ ​ 373,026 ​ ​ Total assets ​ $ 4,939,586 ​ ​ ​ ​ ​ ​ $ 4,756,276 ​ ​ ​ ​ ​ ​ $ 4,688,124 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and Shareholders' Equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ $ 932,598 ​ 21,074 2.26 % $ 959,639 ​ 20,214 2.11 % $ 945,414 ​ 6,278 0.66 % Money market and savings deposits ​ 1,913,673 ​ 64,116 3.35 % 1,768,869 ​ 50,468 2.85 % 1,576,170 ​ 9,137 0.58 % Time deposits ​ 623,652 ​ 24,070 3.86 % 520,799 ​ 13,578 2.61 % 513,416 ​ 2,813 0.55 % Total interest-bearing deposits ​ 3,469,923 ​ 109,260 3.15 % 3,249,307 ​ 84,260 2.59 % 3,035,000 ​ 18,228 0.60 % Borrowings ​ 21,719 ​ 1,075 4.95 % 17,824 ​ 936 5.25 % 32,986 ​ 602 1.83 % Subordinated debt ​ 41,184 ​ 3,434 8.34 % 42,055 ​ 2,767 6.58 % 41,970 ​ 2,503 5.96 % Total interest-bearing liabilities ​ 3,532,826 ​ 113,769 3.22 % 3,309,186 ​ 87,963 2.66 % 3,109,956 ​ 21,333 0.69 % Noninterest-bearing deposits ​ 883,923 ​ ​ 958,078 ​ ​ 1,120,555 ​ ​ Other liabilities ​ 48,949 ​ ​ 46,052 ​ ​ 34,361 ​ ​ Total liabilities ​ 4,465,698 ​ ​ 4,313,316 ​ ​ 4,264,872 ​ ​ Shareholders' equity ​ 473,888 ​ ​ 442,960 ​ ​ 423,252 ​ ​ Total liabilities and shareholders’ equity ​ $ 4,939,586 ​ ​ $ 4,756,276 ​ ​ $ 4,688,124 ​ ​ Net interest income, taxable equivalent ​ ​ $ 138,472 ​ ​ $ 130,457 ​ ​ $ 138,166 ​ Interest rate spread ​ ​ 2.32 % ​ 2.32 % ​ 3.01 % Tax equivalent net interest margin ​ ​ 3.04 % ​ 2.97 % ​ 3.20 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of average interest-earning assets to average interest-bearing liabilities ​ ​ ​ 128.83 % ​ 132.54 % ​ 138.75 % Percentage of average equity to average assets ​ ​ 9.59 % ​ 9.31 % ​ 9.03 % ​ ​ 1 Yields related to tax-exempt loans exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 21.0%.
Long-term debt totaled $42.1 million at December 31, 2023 and $42.0 million at December 31, 2022 and consisted entirely of subordinated debt. For more information regarding our borrowings and subordinated debt, see “Part II – Item 8.
Long-term debt totaled $39.7 million at December 31, 2024 and $42.1 million at December 31, 2023 and consisted entirely of subordinated debt. The $2.4 million reduction in long-term debt is related to the redemption of $2.5 million of sub-debt during 2024. For more information regarding our borrowings and subordinated debt, see “Part II – Item 8.
There have been no conditions or events since December 31, 2023, that management believes would change this classification. ​ 54 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum to be ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ well ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ capitalized under ​ ​ ​ ​ ​ ​ ​ ​ Minimum for ​ prompt ​ ​ ​ ​ ​ ​ ​ ​ capital ​ corrective action ​ ​ ​ ​ Actual ​ adequacy purposes ​ provisions 1 ​ ​ Amount Ratio Amount Ratio Amount Ratio ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SmartFinancial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Capital (to Risk Weighted Assets) ​ $ 448,050 11.80 % $ 303,658 8.00 % ​ N/A N/A ​ Tier 1 Capital (to Risk Weighted Assets) ​ 385,795 10.16 % 227,744 6.00 % ​ N/A N/A ​ Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ 385,795 10.16 % 170,808 4.50 % ​ N/A N/A ​ Tier 1 Capital (to Average Assets) 2 ​ 385,795 8.27 % 186,672 4.00 % ​ N/A N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SmartBank: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Capital (to Risk Weighted Assets) ​ $ 456,134 12.02 % $ 303,680 8.00 % $ 379,600 10.00 % Tier 1 Capital (to Risk Weighted Assets) ​ 427,559 11.26 % 227,760 6.00 % 303,680 8.00 % Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ 427,559 11.26 % 170,820 4.50 % 246,740 6.50 % Tier 1 Capital (to Average Assets) 2 ​ 427,559 9.18 % 186,363 4.00 % 232,954 5.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SmartFinancial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Capital (to Risk Weighted Assets) ​ $ 425,957 11.40 % $ 298,966 8.00 % N/A N/A ​ Tier 1 Capital (to Risk Weighted Assets) ​ 360,608 9.65 % 224,224 6.00 % N/A N/A ​ Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ 360,608 9.65 % 168,168 4.50 % N/A N/A ​ Tier 1 Capital (to Average Assets) ​ 360,608 7.95 % 181,387 4.00 % N/A N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SmartBank: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Capital (to Risk Weighted Assets) ​ $ 426,947 11.44 % $ 298,476 8.00 % $ 373,094 10.00 % Tier 1 Capital (to Risk Weighted Assets) ​ 403,613 10.82 % 223,857 6.00 % 298,476 8.00 % Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ 403,613 10.82 % 167,892 4.50 % 242,511 6.50 % Tier 1 Capital (to Average Assets) ​ 403,613 8.90 % 181,383 4.00 % 226,729 5.00 % ​ 1 The prompt corrective action provisions are applicable at the Bank level only. 2 Average assets for the above calculations were based on the most recent quarter. ​ Contractual Obligations ​ The following tables present, as of December 31, 2023, our significant fixed and determinable contractual obligations (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023, payments due in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ More ​ ​ ​ ​ Less than 1 to 3 3 to 5 than 5 ​ ​ ​ ​ 1 year ​ years ​ years ​ years ​ Total Operating leases ​ $ 1,488 ​ $ 2,718 ​ $ 2,275 ​ $ 5,369 ​ $ 11,850 Time deposits ​ 474,114 ​ 59,492 ​ 16,862 ​ — ​ 550,468 Securities sold under agreement to repurchase ​ 5,078 ​ — ​ — ​ — ​ 5,078 FHLB advances and other borrowings ​ 8,000 ​ — ​ — ​ — ​ 8,000 Subordinated debt ​ — ​ — ​ 40,000 ​ 2,500 ​ 42,500 Total ​ $ 488,680 ​ $ 62,210 ​ $ 59,137 ​ $ 7,869 ​ $ 617,896 ​ 55 Table of Contents Off-Balance Sheet Arrangements At December 31, 2023, we had $717.0 million of pre-approved but unused lines of credit and $7.6 million of standby letters of credit.
There have been no conditions or events since December 31, 2024, that management believes would change this classification. ​ 53 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum to be ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ well ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ capitalized under ​ ​ ​ ​ ​ ​ ​ ​ Minimum for ​ prompt ​ ​ ​ ​ ​ ​ ​ ​ capital ​ corrective action ​ ​ ​ ​ Actual ​ adequacy purposes ​ provisions 1 ​ ​ Amount Ratio Amount Ratio Amount Ratio ​ December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SmartFinancial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Capital (to Risk Weighted Assets) ​ $ 470,635 11.10 % $ 339,044 8.00 % ​ N/A N/A ​ Tier 1 Capital (to Risk Weighted Assets) ​ 413,616 9.76 % 254,283 6.00 % ​ N/A N/A ​ Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ 413,616 9.76 % 190,712 4.50 % ​ N/A N/A ​ Tier 1 Capital (to Average Assets) 2 ​ 413,616 8.29 % 199,585 4.00 % ​ N/A N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SmartBank: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Capital (to Risk Weighted Assets) ​ $ 478,368 11.30 % $ 338,774 8.00 % $ 423,467 10.00 % Tier 1 Capital (to Risk Weighted Assets) ​ 445,159 10.51 % 254,080 6.00 % 338,774 8.00 % Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ 445,159 10.51 % 190,560 4.50 % 275,253 6.50 % Tier 1 Capital (to Average Assets) 2 ​ 445,159 8.94 % 199,214 4.00 % 249,017 5.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SmartFinancial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Capital (to Risk Weighted Assets) ​ $ 448,050 11.80 % $ 303,658 8.00 % N/A N/A ​ Tier 1 Capital (to Risk Weighted Assets) ​ 385,795 10.16 % 227,744 6.00 % N/A N/A ​ Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ 385,795 10.16 % 170,808 4.50 % N/A N/A ​ Tier 1 Capital (to Average Assets) ​ 385,795 8.27 % 186,672 4.00 % N/A N/A ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SmartBank: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Capital (to Risk Weighted Assets) ​ $ 456,134 12.02 % $ 303,680 8.00 % $ 379,600 10.00 % Tier 1 Capital (to Risk Weighted Assets) ​ 427,559 11.26 % 227,760 6.00 % 303,680 8.00 % Common Equity Tier 1 Capital (to Risk Weighted Assets) ​ 427,559 11.26 % 170,820 4.50 % 246,740 6.50 % Tier 1 Capital (to Average Assets) ​ 427,559 9.18 % 186,363 4.00 % 232,954 5.00 % ​ 1 The prompt corrective action provisions are applicable at the Bank level only. 2 Average assets for the above calculations were based on the most recent quarter. ​ Contractual Obligations ​ The following tables present, as of December 31, 2024, our significant fixed and determinable contractual obligations (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2024, payments due in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ More ​ ​ ​ ​ Less than 1 to 3 3 to 5 than 5 ​ ​ ​ ​ 1 year ​ years ​ years ​ years ​ Total Operating leases ​ $ 1,725 ​ $ 3,144 ​ $ 2,862 ​ $ 7,650 ​ $ 15,381 Time deposits ​ 772,344 ​ 61,190 ​ 11,106 ​ — ​ 844,640 Securities sold under agreement to repurchase ​ 4,135 ​ — ​ — ​ — ​ 4,135 FHLB advances and other borrowings ​ 4,000 ​ — ​ — ​ — ​ 4,000 Subordinated debt ​ — ​ — ​ 40,000 ​ — ​ 40,000 Total ​ $ 782,204 ​ $ 64,334 ​ $ 53,968 ​ $ 7,650 ​ $ 908,156 ​ 54 Table of Contents Off-Balance Sheet Arrangements At December 31, 2024, we had $828.8 million of pre-approved but unused lines of credit and $23.2 million of standby letters of credit.
The primary components of the changes in noninterest income were as follows: ● Increase in service charges on deposit accounts, related to the SCB acquisition, deposit growth and transaction volume; ● Decrease in mortgage banking income, related to increased secondary market interest rates driving lower volume; ● Increase in investment services, stemming from increased production; ● Increase in interchange and debit card transaction fees, related to increased volume, deposit growth and the SCB acquisition; and ● Increase in other, primarily related to increased fee income from capital markets activity. ​ Noninterest Expense The following table provides a summary of noninterest expense for the periods presented (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ 2023 - 2022 ​ December 31, ​ ​ 2022 - 2021 ​ 2023 2022 ​ Change ​ 2020 Change Salaries and employee benefits ​ $ 65,749 ​ $ 63,420 ​ $ 2,329 ​ $ 51,656 ​ $ 11,764 Occupancy and equipment ​ 13,451 ​ 12,034 ​ 1,417 ​ 10,196 ​ 1,838 FDIC insurance ​ 3,156 ​ 2,672 ​ 484 ​ 1,833 ​ 839 Other real estate and loan related expense ​ 2,397 ​ 2,446 ​ (49) ​ 2,098 ​ 348 Advertising and marketing ​ 1,342 ​ 1,293 ​ 49 ​ 830 ​ 463 Data processing and technology ​ 9,235 ​ 7,283 ​ 1,952 ​ 6,364 ​ 919 Professional services ​ 3,443 ​ 3,790 ​ (347) ​ 3,147 ​ 643 Amortization of intangibles ​ 2,624 ​ 2,607 ​ 17 ​ 2,256 ​ 351 Merger related and restructuring expenses ​ 110 ​ 562 ​ (452) ​ 3,701 ​ (3,139) Other ​ 11,643 ​ 10,183 ​ 1,460 ​ 9,310 ​ 873 Total noninterest expense ​ $ 113,150 ​ $ 106,290 ​ $ 6,860 ​ $ 91,391 ​ $ 14,899 ​ 2023 compared to 2022 Noninterest expense increased $6.9 million to $113.2 million in 2023, compared to $106.3 million in 2022.
The primary components of the changes in noninterest income were as follows: ● Increase in service charges on deposit accounts, related to deposit growth and transaction volume; ● Increase in loss on sale of securities, associated with a $6.8 million pre-tax loss on the sale of $159.6 million in available-for-sale securities, reinvesting into higher yielding assets; ● Increase in investment services, stemming from increased production; ● Increase in insurance commissions, driven by the acquisition of Sunbelt Group, LLC (“Sunbelt”) and organic growth; and ● Decrease in other, primarily related to decreased fees from capital market activity. ​ Noninterest Expense The following table provides a summary of noninterest expense for the periods presented (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2023 - 2022 ​ 2024 2023 ​ Change ​ 2022 Change Salaries and employee benefits ​ $ 72,100 ​ $ 65,749 ​ $ 6,351 ​ $ 63,420 ​ $ 2,329 Occupancy and equipment ​ 13,617 ​ 13,451 ​ 166 ​ 12,034 ​ 1,417 FDIC insurance ​ 3,390 ​ 3,156 ​ 234 ​ 2,672 ​ 484 Other real estate and loan-related expense ​ 2,823 ​ 2,397 ​ 426 ​ 2,446 ​ (49) Advertising and marketing ​ 1,321 ​ 1,342 ​ (21) ​ 1,293 ​ 49 Data processing and technology ​ 9,930 ​ 9,235 ​ 695 ​ 7,283 ​ 1,952 Professional services ​ 4,207 ​ 3,443 ​ 764 ​ 3,790 ​ (347) Amortization of intangibles ​ 2,425 ​ 2,624 ​ (199) ​ 2,607 ​ 17 Merger-related and restructuring expenses ​ — ​ 110 ​ (110) ​ 562 ​ (452) Other ​ 11,077 ​ 11,643 ​ (566) ​ 10,183 ​ 1,460 Total noninterest expense ​ $ 120,890 ​ $ 113,150 ​ $ 7,740 ​ $ 106,290 ​ $ 6,860 ​ 2024 compared to 2023 Noninterest expense increased $7.7 million to $120.9 million in 2024, compared to $113.2 million in 2023.
The following table summarizes the maturities of time deposits of $250,000 or more as of December 31, 2023 (in thousands) : ​ ​ ​ ​ ​ December 31, ​ ​ 2023 Three months or less ​ $ 106,715 Three to six months ​ 39,985 Six to twelve months ​ 47,087 More than twelve months ​ 31,892 Total ​ $ 225,679 ​ As of December 31, 2023 and 2022, $1.76 billion and $1.65 billion, respectively, of our deposit portfolio was uninsured.
The following table summarizes the maturities of time deposits of $250,000 or more as of December 31, 2024 (in thousands) : ​ ​ ​ ​ ​ December 31, ​ ​ 2024 Three months or less ​ $ 78,805 Three to six months ​ 67,145 Six to twelve months ​ 118,809 More than twelve months ​ 38,076 Total ​ $ 302,835 ​ As of December 31, 2024 and 2023, $2.08 billion and $1.76 billion, respectively, of our deposit portfolio was uninsured.
The following is an analysis of the changes in net interest income comparing the changes attributable to rates and those attributable to volumes (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 Compared to 2022 ​ 2022 Compared to 2021 ​ ​ Increase (decrease) due to ​ Increase (decrease) due to ​ ​ Rate ​ Volume ​ Net ​ Rate ​ Volume ​ Net Interest-earning assets: ​ ​ ​ ​ ​ ​ Loans and leases ​ $ 32,246 ​ $ 17,852 ​ $ 50,098 ​ $ (1,241) ​ $ 19,040 ​ $ 17,799 Taxable Securities ​ 4,471 ​ 395 ​ 4,866 ​ (99,688) ​ 107,674 ​ 7,986 Tax-exempt securities ​ 58 ​ (1,094) ​ (1,036) ​ (6,776) ​ 7,790 ​ 1,014 Federal funds and other earning assets ​ 9,232 ​ (4,239) ​ 4,993 ​ 6,971 ​ (105) ​ 6,866 Total interest-earning assets ​ 46,007 ​ 12,914 ​ 58,921 ​ (100,734) ​ 134,399 ​ 33,665 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ 13,842 ​ 94 ​ 13,936 ​ 4,511 ​ 389 ​ 4,900 Money market and savings deposits ​ 40,214 ​ 1,117 ​ 41,331 ​ 4,508 ​ 1,128 ​ 5,636 Time deposits ​ 10,724 ​ 41 ​ 10,765 ​ (1,004) ​ (153) ​ (1,157) Total interest-bearing deposits ​ 64,780 ​ 1,252 ​ 66,032 ​ 8,015 ​ 1,364 ​ 9,379 Borrowings ​ 656 ​ (322) ​ 334 ​ 405 ​ (343) ​ 62 Subordinated debt ​ 259 ​ 5 ​ 264 ​ (52) ​ 106 ​ 54 Total interest-bearing liabilities ​ 65,695 ​ 935 ​ 66,630 ​ 8,368 ​ 1,127 ​ 9,495 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ (19,688) ​ $ 11,979 ​ $ (7,709) ​ $ (109,102) ​ $ 133,272 ​ $ 24,170 ​ Changes in net interest income are attributed to either changes in average balances (volume change) or changes in average rates (rate change) for earning assets and sources of funds on which interest is received or paid.
The following is an analysis of the changes in net interest income comparing the changes attributable to rates and those attributable to volumes (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 Compared to 2023 ​ 2023 Compared to 2022 ​ ​ Increase (decrease) due to ​ Increase (decrease) due to ​ ​ Rate ​ Volume ​ Net ​ Rate ​ Volume ​ Net Interest-earning assets: ​ ​ ​ ​ ​ ​ Loans and leases ​ $ 12,563 ​ $ 15,268 ​ $ 27,831 ​ $ 32,246 ​ $ 17,852 ​ $ 50,098 Taxable Securities ​ 5,707 ​ (2,221) ​ 3,486 ​ 4,471 ​ 395 ​ 4,866 Tax-exempt securities ​ 15 ​ (30) ​ (15) ​ 58 ​ (1,094) ​ (1,036) Federal funds and other earning assets ​ 1,184 ​ 1,335 ​ 2,519 ​ 9,232 ​ (4,239) ​ 4,993 Total interest-earning assets ​ 19,469 ​ 14,352 ​ 33,821 ​ 46,007 ​ 12,914 ​ 58,921 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing demand deposits ​ 1,430 ​ (570) ​ 860 ​ 13,842 ​ 94 ​ 13,936 Money market and savings deposits ​ 9,516 ​ 4,132 ​ 13,648 ​ 40,214 ​ 1,117 ​ 41,331 Time deposits ​ 7,812 ​ 2,680 ​ 10,492 ​ 10,724 ​ 41 ​ 10,765 Total interest-bearing deposits ​ 18,758 ​ 6,242 ​ 25,000 ​ 64,780 ​ 1,252 ​ 66,032 Borrowings ​ (172) ​ 311 ​ 139 ​ 656 ​ (322) ​ 334 Subordinated debt ​ 724 ​ (57) ​ 667 ​ 259 ​ 5 ​ 264 Total interest-bearing liabilities ​ 19,310 ​ 6,496 ​ 25,806 ​ 65,695 ​ 935 ​ 66,630 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income ​ $ 159 ​ $ 7,856 ​ $ 8,015 ​ $ (19,688) ​ $ 11,979 ​ $ (7,709) ​ Changes in net interest income are attributed to either changes in average balances (volume change) or changes in average rates (rate change) for earning assets and sources of funds on which interest is received or paid.
Financial Statements and Supplementary Data – Note 9 – Borrowings and Line of Credit.” Based on the 53 Table of Contents values of loans pledged as collateral, we had $469.9 million of additional borrowing availability with the FHLB as of December 31, 2023.
Financial Statements and Supplementary Data – Note 9 – Borrowings and Line of Credit.” Based on the values of loans pledged as collateral, we had $306.6 million of additional borrowing availability with the FHLB as of December 31, 2024. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.
As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of December 31, 2023, we had $98.0 million of unsecured federal funds lines with no funds advanced. In addition, we have access to the Federal Reserve’s discount window in the amount $283.0. million with no borrowings outstanding as of December 31, 2023.
As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of December 31, 2024, we had $96.0 million of unsecured federal funds lines with no funds advanced.
The following table is a summary of our loans and leases that were past due at least 30 days but not more than 89 days and 90 days or more past due as of December 31, 2023, and 2022 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accruing Loans ​ ​ Accruing Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30-89 Days ​ ​ 90 Days or More ​ ​ Total Accruing ​ ​ ​ ​ ​ Past Due ​ ​ Past Due ​ ​ Past Due Loans ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ Percentage of ​ ​ ​ Total ​ ​ ​ ​ Loans in ​ ​ ​ ​ ​ Loans in ​ ​ ​ ​ ​ Loans in ​ ​ ​ Loans ​ ​ Amount ​ Category ​ ​ ​ Amount ​ Category ​ ​ ​ Amount ​ Category ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate $ 1,739,205 ​ $ 322 ​ 0.02 % ​ $ - ​ - % ​ $ 322 ​ 0.02 % Consumer real estate ​ 649,867 ​ ​ 2,229 ​ 0.34 ​ ​ ​ - ​ - ​ ​ ​ 2,229 ​ 0.34 ​ Construction and land development ​ 327,185 ​ ​ 631 ​ 0.19 ​ ​ ​ - ​ - ​ ​ ​ 631 ​ 0.19 ​ Commercial and industrial ​ 645,918 ​ ​ 1,286 ​ 0.20 ​ ​ ​ - ​ - ​ ​ ​ 1,286 ​ 0.20 ​ Leases ​ 68,752 ​ ​ 1,340 ​ 1.95 ​ ​ ​ 72 ​ 0.10 ​ ​ ​ 1,412 ​ 2.05 ​ Consumer and other ​ 13,535 ​ ​ 89 ​ 0.66 ​ ​ ​ 98 ​ 0.72 ​ ​ ​ 187 ​ 1.38 ​ Total $ 3,444,462 ​ $ 5,897 ​ 0.17 ​ ​ $ 170 ​ - ​ ​ $ 6,067 ​ 0.18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate $ 1,627,761 ​ $ 54 ​ - % ​ $ - ​ - % ​ $ 54 ​ - % Consumer real estate ​ 587,977 ​ ​ 594 ​ 0.10 ​ ​ ​ - ​ - ​ ​ ​ 594 ​ 0.10 ​ Construction and land development ​ 402,501 ​ ​ - ​ - ​ ​ ​ - ​ - ​ ​ ​ - ​ - ​ Commercial and industrial ​ 551,867 ​ ​ 203 ​ 0.04 ​ ​ ​ - ​ - ​ ​ ​ 203 ​ 0.04 ​ Leases ​ 67,427 ​ ​ 1,108 ​ 1.64 ​ ​ ​ 143 ​ 0.21 ​ ​ ​ 1,251 ​ 1.86 ​ Consumer and other ​ 16,094 ​ ​ 107 ​ 0.66 ​ ​ ​ - ​ - ​ ​ ​ 107 ​ 0.66 ​ Total $ 3,253,627 ​ $ 2,066 ​ 0.06 ​ ​ $ 143 ​ - ​ ​ $ 2,209 ​ 0.07 ​ ​ The following table is a summary of our nonaccrual loans and leases as of December 31, 2023, and 2022 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ December 31, 2022 ​ ​ ​ ​ Nonaccrual Loans ​ ​ ​ ​ ​ Nonaccrual Loans ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ Total ​ ​ ​ ​ Loans in ​ ​ ​ Total ​ ​ ​ ​ Loans in ​ ​ ​ Loans ​ ​ Amount ​ Category ​ ​ ​ Loans ​ ​ Amount ​ Category ​ Commercial real estate $ 1,739,205 ​ $ 2,044 ​ 0.12 % ​ $ 1,627,761 ​ $ - ​ - % Consumer real estate ​ 649,867 ​ ​ 2,647 ​ 0.41 ​ ​ ​ 587,977 ​ ​ 1,665 ​ 0.28 ​ Construction and land development ​ 327,185 ​ ​ 620 ​ 0.19 ​ ​ ​ 402,501 ​ ​ 920 ​ 0.23 ​ Commercial and industrial ​ 645,918 ​ ​ 2,480 ​ 0.38 ​ ​ ​ 551,867 ​ ​ 180 ​ 0.03 ​ Leases ​ 68,752 ​ ​ 140 ​ 0.20 ​ ​ ​ 67,427 ​ ​ 28 ​ 0.04 ​ Consumer and other ​ 13,535 ​ ​ - ​ - ​ ​ ​ 16,094 ​ ​ 15 ​ 0.09 ​ Total $ 3,444,462 ​ $ 7,931 ​ 0.23 ​ ​ $ 3,253,627 ​ $ 2,808 ​ 0.09 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses to nonaccrual loans ​ ​ ​ ​ 424.75% ​ ​ ​ ​ ​ ​ ​ ​ 830.98% ​ ​ ​ 48 Table of Contents ​ Potential Problem Loans and Leases At December 31, 2023, substandard or problem loans and leases amounted to approximately $12.7 million or 0.37% of total loans and leases outstanding.
The following table is a summary of our loans and leases that were past due at least 30 days but not more than 89 days and 90 days or more past due as of December 31, 2024, and 2023 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accruing Loans ​ ​ Accruing Loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30-89 Days ​ ​ 90 Days or More ​ ​ Total Accruing ​ ​ ​ ​ ​ Past Due ​ ​ Past Due ​ ​ Past Due Loans ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ Percentage of ​ ​ ​ Total ​ ​ ​ ​ Loans in ​ ​ ​ ​ ​ Loans in ​ ​ ​ ​ ​ Loans in ​ ​ ​ Loans ​ ​ Amount ​ Category ​ ​ ​ Amount ​ Category ​ ​ ​ Amount ​ Category ​ December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied $ 1,080,404 ​ $ 378 ​ 0.03 ​ ​ $ - ​ - ​ ​ $ 378 ​ 0.03 ​ Owner occupied ​ 867,678 ​ ​ 411 ​ 0.05 ​ ​ ​ - ​ - ​ ​ ​ 411 ​ 0.05 ​ Consumer real estate ​ 741,836 ​ ​ 2,748 ​ 0.37 ​ ​ ​ - ​ - ​ ​ ​ 2,748 ​ 0.37 ​ Construction and land development ​ 361,735 ​ ​ 523 ​ 0.14 ​ ​ ​ - ​ - ​ ​ ​ 523 ​ 0.14 ​ Commercial and industrial ​ 775,620 ​ ​ 1,745 ​ 0.22 ​ ​ ​ 144 ​ 0.02 ​ ​ ​ 1,889 ​ 0.24 ​ Leases ​ 64,878 ​ ​ 1,453 ​ 2.24 ​ ​ ​ - ​ - ​ ​ ​ 1,453 ​ 2.24 ​ Consumer and other ​ 14,189 ​ ​ 118 ​ 0.83 ​ ​ ​ 18 ​ 0.13 ​ ​ ​ 136 ​ 0.96 ​ Total $ 3,906,340 ​ $ 7,376 ​ 0.19 ​ ​ $ 162 ​ - ​ ​ $ 7,538 ​ 0.19 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied $ 940,789 ​ $ - ​ - % ​ $ ​ ​ - % ​ $ - ​ - % Owner occupied ​ 798,416 ​ ​ 322 ​ 0.04 ​ ​ ​ ​ ​ - ​ ​ ​ 322 ​ 0.04 ​ Consumer real estate ​ 649,867 ​ ​ 2,229 ​ 0.34 ​ ​ ​ - ​ - ​ ​ ​ 2,229 ​ 0.34 ​ Construction and land development ​ 327,185 ​ ​ 631 ​ 0.19 ​ ​ ​ - ​ - ​ ​ ​ 631 ​ 0.19 ​ Commercial and industrial ​ 645,918 ​ ​ 1,286 ​ 0.20 ​ ​ ​ - ​ - ​ ​ ​ 1,286 ​ 0.20 ​ Leases ​ 68,752 ​ ​ 1,340 ​ 1.95 ​ ​ ​ 72 ​ 0.10 ​ ​ ​ 1,412 ​ 2.05 ​ Consumer and other ​ 13,535 ​ ​ 89 ​ 0.66 ​ ​ ​ 98 ​ 0.72 ​ ​ ​ 187 ​ 1.38 ​ Total $ 3,444,462 ​ $ 5,897 ​ 0.17 ​ ​ $ 170 ​ - ​ ​ $ 6,067 ​ 0.18 ​ ​ The following table is a summary of our nonaccrual loans and leases as of December 31, 2024, and 2023 (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ December 31, 2023 ​ ​ ​ ​ Nonaccrual Loans ​ ​ ​ ​ ​ Nonaccrual Loans ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ Total ​ ​ ​ ​ Loans in ​ ​ ​ Total ​ ​ ​ ​ Loans in ​ ​ ​ Loans ​ ​ Amount ​ Category ​ ​ ​ Loans ​ ​ Amount ​ Category ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied $ 1,080,404 ​ $ 514 ​ 0.05 % ​ $ 940,789 ​ $ 571 ​ 0.06 % Owner occupied ​ 867,678 ​ ​ 906 ​ 0.10 ​ ​ ​ 798,416 ​ ​ 1,473 ​ 0.18 ​ Consumer real estate ​ 741,836 ​ ​ 1,995 ​ 0.27 ​ ​ ​ 649,867 ​ ​ 2,647 ​ 0.41 ​ Construction and land development ​ 361,735 ​ ​ 39 ​ 0.01 ​ ​ ​ 327,185 ​ ​ 620 ​ 0.19 ​ Commercial and industrial ​ 775,620 ​ ​ 1,820 ​ 0.23 ​ ​ ​ 645,918 ​ ​ 2,480 ​ 0.38 ​ Leases ​ 64,878 ​ ​ 2,433 ​ 3.75 ​ ​ ​ 68,752 ​ ​ 140 ​ 0.20 ​ Consumer and other ​ 14,189 ​ ​ 2 ​ 0.01 ​ ​ ​ 13,535 ​ ​ - ​ - ​ Total $ 3,906,340 ​ $ 7,709 ​ 0.20 ​ ​ $ 3,444,462 ​ $ 7,931 ​ 0.23 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses to nonaccrual loans ​ ​ ​ ​ 485.45% ​ ​ ​ ​ ​ ​ ​ ​ 424.75% ​ ​ ​ 47 Table of Contents Potential Problem Loans and Leases At December 31, 2024, substandard or problem loans and leases amounted to approximately $11.7 million or 0.30% of total loans and leases outstanding.
The yield on earning assets increased from 3.57% for 2021, to 3.70% for 2022, primarily due to the Company’s deployment of excess cash and cash equivalents into loans and leases and securities during 2022 and higher yields on cash deposits in the Federal 42 Table of Contents Reserve System, offset by lower Paycheck Protection Program (“PPP”) fee accretion in loan yields.
The yield on earning assets increased from 4.98% for 2023, to 5.54% for 2024, primarily due to the Company’s deployment of excess cash and cash equivalents into loans and leases and securities during 2024 and higher yields on cash deposits in the Federal Reserve System.
Our investment to asset ratio has decreased from 16.7% at December 31, 2022, to 14.3% at December 31, 2023 primarily due to the strategic decision to sell a portion of AFS securities prior to their scheduled maturity. ​ Net unrealized losses in our AFS securities portfolio were $33.0 million as of December 31, 2023, compared to $45.3 million at December 31, 2022.
Our investment to asset ratio has decreased from 14.3% at December 31, 2023, to 11.5% at December 31, 2024 primarily due to deploying principal cash flow away from the investment portfolio. 50 Table of Contents Net unrealized losses in our AFS securities portfolio were $30.4 million as of December 31, 2024, compared to $33.0 million at December 31, 2023.
We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts. The Company has a revolving line of credit for an aggregate amount of $35.0 million, with a maturity date of February 1, 2025.
The Company has a revolving line of credit for an aggregate amount of $35.0 million, with a maturity date of February 1, 2025. On January 21,2025, the maturity date was extended to May 1, 2025.
Executive Summary The following is a summary of the Company’s financial highlights and significant events during 2023: ● Net income totaled $28.6 million, or $1.69 per diluted common share, during the year ended of 2023 compared to $43.0 million, or $2.55 per diluted common share, for the same period in 2022. ● Net loans and leases growth of $179.1 million from December 31, 2022, with a record high net loans and leases of $3.4 billion at December 31, 2023. ● Total deposits growth of $190.8 million from December 31, 2022, with a record high total deposits of $4.3 billion at December 31, 2023. ● Return on average assets was 0.60% for the year ended December 31, 2023, compared to 0.92% for the year ended December 31, 2022. ● On January 1, 2023, the Company adopted ASU 2016-13, which resulted in a $8.7 million, or 37.1%, increase in the allowance for credit losses (“ACL”) at the adoption date, with initial adoption entry being recorded through retained earnings, net of tax. ● During the third quarter of 2023, the Company sold $159.6 million in available-for-sale securities, as part of a balance sheet optimization transaction that resulted in a $5.0 million loss, net of tax. ● During the fourth quarter of 2023, the Company voluntarily withdrew the listing of its common stock from Nasdaq and transferred the listing to the New York Stock Exchange. ​ 41 Table of Contents Analysis of Results of Operations 2023 compared to 2022 Net income was $28.6 million, or $1.69 per diluted common share in 2023, compared to $43.0 million, or $2.55 per diluted common share in 2022.
Executive Summary The following is a summary of the Company’s financial highlights and significant events during 2024: ● Net income totaled $36.1 million, or $2.14 per diluted common share, during the year ended of 2024 compared to $28.6 million, or $1.69 per diluted common share, for the same period in 2023. ● Net loans and leases growth of $459.5 million from December 31, 2023, with a record high net loans and leases of $3.9 billion at December 31, 2024. ● Total deposits growth of $418.6 million from December 31, 2023, with a record high total deposits of $4.7 billion at December 31, 2024. ● Return on average assets was 0.73% for the year ended December 31, 2024, compared to 0.60% for the year ended December 31, 2023. ● During the fourth quarter of 2024, the Company established a Real Estate Investment Trust (“REIT”) subsidiary as a tax savings strategy. ​ Analysis of Results of Operations 2024 compared to 2023 Net income was $36.1 million, or $2.14 per diluted common share in 2024, compared to $28.6 million, or $1.69 per diluted common share in 2023.
The Company uses an average of Fannie Mae and Federal Open Market Committee projections of the national unemployment rate to determine the best estimate of expected credit losses. For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors using a straight-line approach.
For the contractual term that extends beyond the reasonable and supportable forecast period, the Company reverts to the long term mean of historical factors using a straight-line approach. The Company uses an eight-quarter forecast and a four-quarter reversion period. Since adoption, the procedure for estimating probability of default expectations remains unchanged.
The Federal Reserve discount window line is collateralized by a pool of commercial real estate loans and commercial and industrial loans totaling $379.8 million as of December 31, 2023. At December 31, 2023, we had no FHLB advances outstanding. For more information regarding the FHLB advances, see “Part II – Item 8.
In addition, we have access to the Federal Reserve’s discount window in the amount of $427.8 million with no borrowings outstanding as of 52 Table of Contents December 31, 2024. The Federal Reserve discount window line is collateralized by a pool of commercial real estate loans and commercial and industrial loans totaling $537.4 million as of December 31, 2024.
The tax equivalent net interest margin for 2022 was 3.20% compared to 3.24% for 2021. Noninterest income to average assets was 0.59% for 2022, decreasing from 0.62% for 2021. Noninterest expense to average assets decreased to 2.27% in 2022, down from 2.38% in 2021.
The tax equivalent net interest margin for 2024 was 3.04% compared to 2.97% for 2023. Noninterest income to average assets was 0.69% for 2024, increasing from 0.47% for 2023. Noninterest expense to average 40 Table of Contents assets increased to 2.45% in 2024, up from 2.38% in 2023.
Treasury ​ $ 150,066 ​ 1.47 % ​ $ — ​ - % ​ $ — ​ - % ​ $ — ​ - % ​ $ 150,066 ​ 1.47 % ​ U.S.
Treasury ​ $ — ​ - % ​ $ — ​ - % ​ $ — ​ - % ​ $ — ​ - % ​ $ — ​ - % ​ U.S.
Management continues to evaluate the economic conditions for applicable changes and at December 31, 2023, there was no impairment of goodwill.
The Company performs its annual goodwill impairment test as of December 31, of each year, and for 2024 the results of the qualitive assessment provided no indication of potential impairment. Management will continue to evaluate the economic conditions at future reporting periods for applicable changes.
At December 31, 2023, and 2022, the total participated portions of loans of this nature totaled $0 and $24.6 million, respectively. ​ 46 Table of Contents The following tables summarize the composition of our loan and lease portfolio for the periods presented (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ % of ​ ​ ​ December 31, ​ Gross ​ ​ December 31, ​ Gross ​ ​ ​ 2023 ​ Total ​ ​ 2022 ​ Total Commercial real estate ​ $ 1,739,205 ​ 50.4 % ​ $ 1,627,761 ​ 50.0 % Consumer real estate ​ 649,867 ​ 18.9 % ​ 587,977 ​ 18.1 % Construction and land development ​ 327,185 ​ 9.5 % ​ 402,501 ​ 12.4 % Commercial and industrial ​ 645,918 ​ 18.8 % ​ 551,867 ​ 17.0 % Leases ​ ​ 68,752 ​ 2.0 % ​ ​ 67,427 ​ 2.1 % Consumer and other ​ 13,535 ​ 0.4 % ​ 16,094 ​ 0.4 % Total loans and leases ​ 3,444,462 ​ 100.0 % ​ 3,253,627 ​ 100.0 % Less: Allowance for credit losses ​ (35,066) ​ ​ ​ ​ (23,334) ​ ​ ​ Loans and leases, net ​ $ 3,409,396 ​ ​ ​ ​ $ 3,230,293 ​ ​ ​ ​ Loan and Lease Portfolio Maturities The following table sets forth the maturity distribution of our loans and leases, including the interest rate sensitivity for loans and leases maturing after one year (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rate Structure for Loans and Leases ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maturing Over One Year ​ ​ One Year ​ One through ​ ​ Five through ​ Over Fifteen ​ ​ ​ ​ Fixed ​ Floating ​ ​ or Less ​ Five Years ​ ​ Fifteen Years ​ Years ​ Total ​ Rate ​ Rate Commercial real estate-mortgage $ 79,384 $ 1,006,897 ​ $ 645,817 $ 7,107 $ 1,739,205 $ 1,037,145 $ 622,676 Consumer real estate-mortgage ​ 35,182 ​ 209,964 ​ ​ 194,688 ​ 210,033 ​ 649,867 ​ 275,745 ​ 338,940 Construction and land development ​ 108,323 ​ 118,096 ​ ​ 70,426 ​ 30,340 ​ 327,185 ​ 110,813 ​ 108,049 Commercial and industrial ​ 165,621 ​ 369,484 ​ ​ 105,017 ​ 5,796 ​ 645,918 ​ 364,619 ​ 115,678 Leases ​ ​ 2,345 ​ ​ 66,255 ​ ​ 152 ​ ​ — ​ ​ 68,752 ​ ​ 66,407 ​ ​ — Consumer and other ​ 6,561 ​ 6,451 ​ ​ 474 ​ 49 ​ 13,535 ​ 6,655 ​ 319 Total loans and leases ​ $ 397,416 ​ $ 1,777,147 ​ $ 1,016,574 ​ $ 253,325 ​ $ 3,444,462 ​ $ 1,861,384 ​ $ 1,185,662 ​ Past Due, Nonaccrual, and Loan Modifications for Loans and Leases Loans and leases are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date.
Loans secured by real estate, consisting of commercial or residential property, are the principal component of our loan and lease portfolio. ​ 45 Table of Contents The following tables summarize the composition of our loan and lease portfolio for the periods presented (dollars in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of ​ ​ ​ ​ ​ % of ​ ​ ​ December 31, ​ Gross ​ ​ December 31, ​ Gross ​ ​ ​ 2024 ​ Total ​ ​ 2023 ​ Total Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ $ 1,080,404 ​ 27.5 % $ ​ 940,789 ​ 27.2 % Owner occupied ​ ​ 867,678 ​ 22.2 % ​ ​ 798,416 ​ 23.2 % Consumer real estate ​ 741,836 ​ 19.0 % ​ 649,867 ​ 18.9 % Construction and land development ​ 361,735 ​ 9.3 % ​ 327,185 ​ 9.5 % Commercial and industrial ​ 775,620 ​ 19.9 % ​ 645,918 ​ 18.8 % Leases ​ ​ 64,878 ​ 1.7 % ​ ​ 68,752 ​ 2.0 % Consumer and other ​ 14,189 ​ 0.4 % ​ 13,535 ​ 0.4 % Total loans and leases ​ 3,906,340 ​ 100.0 % ​ 3,444,462 ​ 100.0 % Less: Allowance for credit losses ​ (37,423) ​ ​ ​ ​ (35,066) ​ ​ ​ Loans and leases, net ​ $ 3,868,917 ​ ​ ​ ​ $ 3,409,396 ​ ​ ​ ​ Loan and Lease Portfolio Maturities The following table sets forth the maturity distribution of our loans and leases, including the interest rate sensitivity for loans and leases maturing after one year (in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rate Structure for Loans and Leases ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maturing Over One Year ​ ​ One Year ​ One through ​ ​ Five through ​ Over Fifteen ​ ​ ​ ​ Fixed ​ Floating ​ ​ or Less ​ Five Years ​ ​ Fifteen Years ​ Years ​ Total ​ Rate ​ Rate Commercial real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ $ 72,684 ​ $ 745,248 ​ $ 231,178 ​ $ 31,294 ​ $ 1,080,404 ​ $ 555,845 ​ $ 451,875 Owner occupied ​ ​ 24,565 ​ ​ 445,600 ​ ​ 373,646 ​ ​ 23,867 ​ ​ 867,678 ​ ​ 453,957 ​ ​ 389,156 Consumer real estate-mortgage ​ 44,261 ​ 238,674 ​ ​ 94,051 ​ 364,850 ​ 741,836 ​ 273,809 ​ 423,766 Construction and land development ​ 77,534 ​ 189,195 ​ ​ 47,811 ​ 47,195 ​ 361,735 ​ 105,139 ​ 179,062 Commercial and industrial ​ 292,381 ​ 386,606 ​ ​ 73,857 ​ 22,776 ​ 775,620 ​ 345,696 ​ 137,543 Leases ​ ​ 2,132 ​ ​ 62,597 ​ ​ 149 ​ ​ — ​ ​ 64,878 ​ ​ 62,746 ​ ​ — Consumer and other ​ 8,703 ​ 4,932 ​ ​ 513 ​ 41 ​ 14,189 ​ 5,069 ​ 417 Total loans and leases ​ $ 522,260 ​ $ 2,072,852 ​ $ 821,205 ​ $ 490,023 ​ $ 3,906,340 ​ $ 1,802,261 ​ $ 1,581,819 ​ Past Due, Nonaccrual, and Loan Modifications for Loans and Leases Loans and leases are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date.
Over this period, average loan and lease balances increased by $407.9 million and average securities increased by $488.8 million, offset by a decrease in interest-earning cash and federal funds sold of $103.3 million. Average interest-bearing deposits increased by $571.8 million, average noninterest-bearing deposits increased $278.8 million and average borrowings decreased $50.1 million.
Average earning assets increased from $4.4 billion in 2023 to $4.6 billion in 2024, primarily from organic loan and lease growth. Over this period, average loan and lease balances increased by $273.0 million and interest-earning cash increased by $27.2 million, offset by a decrease in average securities of $134.8 million.
The Company purchased $130.6 million of securities during the year ended December 31, 2023, which was offset by $211.5 million of sales, maturities and prepayments received during the same period. New purchases were focused on higher yielding mortgage-backed securities to provide cash flow and liquidity.
The $80.7 million decrease is primarily related to the strategic decision not to reinvest the full proceeds of scheduled maturities back into the investment portfolio. The Company purchased $131.4 million of securities during the year ended December 31, 2024, which was offset by $210.5 million of sales, maturities, and prepayments received during the same period.
The primary components of the changes in noninterest expense were as follows: ● Increase in salary and employee benefits, related to the Fountain acquisition completed May 3, 2021 and overall franchise growth from talent hired in Auburn, Dothan, Montgomery and Birmingham Alabama, and Tallahassee, Florida in late 2021, and to a lesser extent, the Sunbelt acquisition completed September 1, 2022; ● Increase in occupancy and equipment, due to ongoing infrastructure and facilities added to accommodate growth in operations; ● Increase in FDIC insurance, related to continued asset growth; ● Increase in data processing and technology, primarily from continued infrastructure build and overall growth; ● Increase in professional services, related to more services performed during the year; and ● Increases in other, primarily related to continued franchise growth.
The primary components of the changes in noninterest expense were as follows: ● Increase in salary and employee benefits, primarily related to incentive accruals for production performance and overall employee benefits; ● Increase in data processing and technology, primarily from continued infrastructure build and overall growth; and ● Increases in professional services, primarily related to increases in legal fees, audit/accounting fees, and other professional services fees. 44 Table of Contents 2023 compared to 2022 Noninterest expense increased $6.9 million to $113.2 million in 2023, compared to $106.3 million in 2022.
Government agencies ​ ​ — ​ - ​ ​ ​ — ​ - ​ ​ ​ 42,989 ​ 1.84 ​ ​ ​ 6,347 ​ 2.01 ​ ​ ​ 49,336 ​ 1.86 ​ ​ State and political subdivisions ​ — ​ - ​ ​ 750 ​ 1.32 ​ ​ 4,504 ​ 2.17 ​ ​ 47,426 ​ 2.17 ​ ​ 52,680 ​ 2.13 ​ ​ Other debt securities ​ — ​ - ​ ​ — ​ - ​ ​ — ​ - ​ ​ — ​ - ​ ​ — ​ - ​ ​ Mortgage-backed securities ​ — ​ - ​ ​ — ​ - ​ ​ 4,834 ​ 2.14 ​ ​ 24,320 ​ 2.12 ​ ​ 29,154 ​ 2.12 ​ ​ Total securities ​ $ 150,066 ​ 1.47 ​ ​ $ 750 ​ 1.32 ​ ​ $ 52,327 ​ 1.90 ​ ​ $ 78,093 ​ 2.13 ​ ​ $ 281,236 ​ 1.73 ​ ​ ​ 1 Based on amortized cost, taxable equivalent basis.
Government agencies ​ ​ — ​ - ​ ​ ​ — ​ - ​ ​ ​ 41,871 ​ 1.84 ​ ​ ​ 6,241 ​ 2.01 ​ ​ ​ 48,112 ​ 1.86 ​ ​ State and political subdivisions ​ — ​ - ​ ​ 731 ​ 1.32 ​ ​ 8,724 ​ 1.97 ​ ​ 42,197 ​ 2.18 ​ ​ 51,652 ​ 2.14 ​ ​ Other debt securities ​ — ​ - ​ ​ — ​ - ​ ​ — ​ - ​ ​ — ​ - ​ ​ — ​ - ​ ​ Mortgage-backed securities ​ — ​ - ​ ​ — ​ - ​ ​ 4,764 ​ 2.14 ​ ​ 22,131 ​ 2.12 ​ ​ 26,895 ​ 2.12 ​ ​ Total securities ​ $ — ​ - ​ ​ $ 731 ​ 1.32 ​ ​ $ 55,359 ​ 1.89 ​ ​ $ 70,569 ​ 2.15 ​ ​ $ 126,659 ​ 2.03 ​ ​ ​ 1 Based on amortized cost, taxable equivalent basis.
Treasury ​ $ — ​ - % ​ $ 57,040 ​ 1.25 % ​ $ 27,267 ​ 1.32 % ​ $ — ​ - % ​ $ 84,307 ​ 1.27 % ​ U.S.
Treasury ​ $ — ​ - % ​ $ 83,330 ​ 1.27 % ​ $ — ​ - % ​ $ — ​ - % ​ $ 83,330 ​ 1.27 % ​ U.S.
Removed
Average earning assets increased from $3.5 billion in 2021 to $4.3 billion in 2022, primarily from organic loan and lease growth, the acquisition of Fountain completed May 3, 2021 and the acquisition of SCB completed September 1, 2021.
Added
Average interest-bearing deposits increased by $220.6 million, average noninterest-bearing deposits decreased $74.2 million and average borrowings increased by $3.9 million. The tax equivalent net interest margin increased to 3.04% for 2024, compared to 2.97% for 2023.
Removed
The tax equivalent net interest margin decreased to 3.20% for 2022, compared to 3.24% for 2021.
Added
The taxable-equivalent adjustment was $748, $0 and $0 for the years ended December 31, 2024, 2023 and 2022, respectively. 2 Loans include Paycheck Protection Program (“PPP”) loans with an average balance of $1.6 million, $2.8 million and $14.1 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Removed
The cost of average interest-bearing deposits increased from 0.36% for 2021, to 0.60% for 2022, primarily due to the impact of rising Federal Reserve rates and to a lesser extent increased pricing competition.
Added
The current methodology for assessing the appropriate allowance includes: (1) a collective quantified reserve determined by non-discounted cash flow analysis for the loan portfolio, (2) a collective quantified reserve determined by the open-pool methodology for the bank’s lease portfolio, (3) collective qualitative factors to adjust expected credit losses for information not already captured in the loss estimation, (4) individual allowances on collateral-dependent loans where the bank may be inadequately protected by current paying capacity of the borrower.
Removed
The effective tax rate was approximately 21.7% for 2022 compared to 21.5% in 2021.
Added
At December 31, 2024, 45% of the allowance is attributable to the collective qualitative factors, a slight decline from 46% at December 31, 2023. Management considers forward-looking information in estimating expected credit losses.
Removed
Loans secured by real estate, consisting of commercial or residential property, are the principal component of our loan and lease portfolio. Loan Participation Agreements The Bank occasionally enters into loan participation agreements with other banks in the ordinary course of business to diversify credit risk.
Added
The Company uses an average of Fannie Mae and Federal Open Market Committee projections of the national unemployment rate as a regression tool to determine the best estimate of probability of default expectations.
Removed
For certain sold participation loans, the Bank has retained effective control of the loans, typically by restricting the participating institutions from pledging or selling their share of the loan without permission from the Bank. Generally accepted accounting principles (“GAAP”) requires the participated portion of these loans to be recorded as secured borrowings.
Added
There are factors beyond our control, such as conditions in the local and national economy, local real estate market or a particular industry or borrower which may negatively impact, materially, our asset quality and the adequacy of our allowance for credit losses and, thus, the resulting provision for credit losses.
Removed
The participated portions of these loans are included in the Commercial Real Estate totals below with a corresponding liability reflected in other borrowings.
Added
New purchases were focused on higher yielding mortgage-backed securities to provide cash flow, liquidity and to support interest rate risk objectives.
Removed
Prior to January 1, 2023, t he Company designated loan modifications as Troubled Debt Restructurings ("TDRs") when for economic and legal reasons related to the borrower’s financial difficulties, it granted a concession to the borrower that it 47 Table of Contents would not otherwise consider.
Added
Government agencies ​ ​ — ​ - ​ ​ ​ 119 ​ 6.20 ​ ​ ​ 38,798 ​ 6.29 ​ ​ ​ — ​ - ​ ​ ​ 38,917 ​ 6.29 ​ ​ State and political subdivisions ​ 480 ​ 2.00 ​ ​ 3,707 ​ 2.95 ​ ​ 5,379 ​ 3.30 ​ ​ 8,711 ​ 3.96 ​ ​ 18,277 ​ 3.50 ​ ​ Other debt securities ​ 999 ​ 4.18 ​ ​ 6,921 ​ 6.78 ​ ​ 32,901 ​ 5.05 ​ ​ 500 ​ 4.50 ​ ​ 41,321 ​ 5.31 ​ ​ Mortgage-backed securities ​ — ​ - ​ ​ 15,718 ​ 3.51 ​ ​ 114,646 ​ 3..60 ​ ​ 200,475 ​ 3.49 ​ ​ 330,839 ​ 3.53 ​ ​ Total securities ​ $ 1,479 ​ 3.65 ​ ​ $ 109,795 ​ 2.00 ​ ​ $ 191,724 ​ 4.39 ​ ​ $ 209,686 ​ 3.51 ​ ​ $ 512,684 ​ 3.52 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S.
Removed
The Company adopted ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures ” (“ASU 2022-02”) effective January 1, 2023.
Added
At December 31, 2024, we had no FHLB advances outstanding. For more information regarding the FHLB advances, see “Part II – Item 8.
Removed
The amendments in ASU 2022-02 eliminated the recognition and measure of TDRs and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty, see Note 1 - Summary of Significant Accounting Policies and Note 5 – Loans and Leases and Allowance for Credit Losses to our audited consolidated financial statements for additional information. ​ Assets acquired as a result of foreclosure are recorded at estimated fair value in other real estate owned.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+0 added−0 removed14 unchanged
Biggest changeFor changes up or down in rates from our static interest rate forecast over the next 12 months, limits in the decline in net interest income are as follows: ​ ​ ​ ​ ​ Estimated % Change in Net Interest Income Over 12 Months December 31, 2023: ​ Instantaneous, Parallel Change in Prevailing Interest Rates Equal to: ​ ​ 100 basis points increase (3.70)% 200 basis points increase (7.47)% 100 basis points decrease 3.89% 200 basis points decrease ​ 6.30% ​ Economic Value of Equity.
Biggest changeFor changes up or down in rates from our static interest rate forecast over the next 12 months, limits in the decline in net interest income are as follows: ​ ​ ​ ​ ​ Estimated % Change in Net Interest Income Over 12 Months December 31, 2024: ​ Instantaneous, Parallel Change in Prevailing Interest Rates Equal to: ​ ​ 100 basis points increase (1.01)% 200 basis points increase (2.01)% 100 basis points decrease 0.49% 200 basis points decrease ​ 0.90% ​ ​ ​ ​ ​ ​ Estimated % Change in Net Interest Income Over 12 Months December 31, 2024: ​ 12-month RAMP, Parallel Change in Prevailing Interest Rates Equal to: ​ ​ 100 basis points increase (0.62)% 200 basis points increase (1.33)% 100 basis points decrease 0.39% 200 basis points decrease ​ 0.81% ​ ​ 56 Table of Contents Economic Value of Equity.
The model measures the impact on net interest income relative to a flat-rate case scenario of hypothetical fluctuations in interest rates over the next 12-24 months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet.
The model measures the impact on net interest income relative to a flat-rate case scenario of hypothetical fluctuations in interest rates 55 Table of Contents over the next 12-24 months. These simulations incorporate assumptions regarding balance sheet growth and mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet.
We utilize an independent third party earnings simulation model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model quantifies the effects of 56 Table of Contents various interest rate scenarios on projected net interest income and net income over the next 12-24 months.
We utilize an independent third party earnings simulation model as the primary quantitative tool in measuring the amount of interest rate risk associated with changing market rates. The model quantifies the effects of various interest rate scenarios on projected net interest income and net income over the next 12-24 months.
We also periodically monitor simulations based on various rate scenarios such as non-parallel shifts in market interest rates over time.
We also periodically monitor simulations based on various rate scenarios such as non-parallel shifts or 12-month RAMP in market interest rates over time.
Additionally, debt securities are subject to prepayment and call provisions that could accelerate their payoff prior to stated maturity. We attempt to price our deposit products to meet our asset/liability objectives consistent with local market conditions. Our ALCO is responsible for monitoring our ongoing liquidity needs. Our regulators also monitor our liquidity and capital resources on a periodic basis.
Additionally, debt securities are subject to prepayment and call provisions that could accelerate their payoff prior to stated maturity. We attempt to price our deposit products to meet our asset/liability objectives consistent with local market conditions. Our ALCO is responsible for monitoring our ongoing liquidity needs.
Inflation does affect operating expenses in that personnel expenses and the cost of supplies and outside services tend to increase more during periods of high inflation. ​ 58 Table of Contents
However, the frequency and magnitude of interest rate fluctuations do not necessarily coincide with changes in the general inflation rate. Inflation does affect operating expenses in that personnel expenses and the cost of supplies and outside services tend to increase more during periods of high inflation. ​ 58 Table of Contents
Impact of Inflation and Changing Prices As a financial institution, we have an asset and liability make-up that is distinctly different from that of an entity with substantial investments in plant and inventory, because the major portions of a commercial bank’s assets are monetary in nature. As a result, our performance may be significantly influenced by changes in interest rates.
Our regulators also monitor our liquidity and capital resources on a periodic basis. 57 Table of Contents Impact of Inflation and Changing Prices As a financial institution, we have an asset and liability make-up that is distinctly different from that of an entity with substantial investments in plant and inventory, because the major portions of a commercial bank’s assets are monetary in nature.
For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates.
In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates.
To help monitor our related risk, we have established the following policy limits regarding simulated changes in our economic value of equity: ​ ​ ​ ​ ​ Current Estimated Instantaneous Rate Change December 31, 2023: ​ ​ Instantaneous, Parallel Change in Prevailing Interest Rates Equal to: 100 basis points increase (2.09)% 200 basis points increase (4.71)% 100 basis points decrease ​ 1.54% 200 basis points decrease ​ 0.99% ​ At December 31, 2023, our model results indicated that we were within these policy limits. 57 Table of Contents Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by changes in interest rates.
To help monitor our related risk, we have established the following policy limits regarding simulated changes in our economic value of equity: ​ ​ ​ ​ ​ Current Estimated Instantaneous Rate Change December 31, 2024: ​ ​ Instantaneous, Parallel Change in Prevailing Interest Rates Equal to: 100 basis points increase (3.13)% 200 basis points increase (1.52)% 100 basis points decrease ​ 3.13% 200 basis points decrease ​ 4.77% ​ At December 31, 2024, our model results indicated that we were within these policy limits.
Although we, and the banking industry, are more affected by changes in interest rates than by inflation in the prices of goods and services, inflation is a factor that may influence interest rates. However, the frequency and magnitude of interest rate fluctuations do not necessarily coincide with changes in the general inflation rate.
As a result, our performance may be significantly influenced by changes in interest rates. Although we, and the banking industry, are more affected by changes in interest rates than by inflation in the prices of goods and services, inflation is a factor that may influence interest rates.
Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income.
Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates.
The ability of many borrowers to service their debts also may decrease during periods of rising interest rates.
Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates.
In addition, certain assets, such as adjustable rate mortgage loans, have features (generally referred to as interest rate caps and floors) which limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments.
Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable rate mortgage loans, have features (generally referred to as interest rate caps and floors) which limit changes in interest rates.

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