SmartFinancial (SMBK) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $8.0 million ($0.48 per diluted share), down from $8.8 million ($0.52) in Q2 2023; operating net income was $7.8 million ($0.46 per share), with the difference due to a property sale gain.

• Tangible book value per share increased to $21.66 (including AOCI) and $23.18 (excluding AOCI), a 10% annualized quarter-over-quarter rise and up 9% year-over-year.

• Annualized organic loan growth was 11.1% quarter-over-quarter, with net loans and leases up $130.1 million year-to-date and $97 million quarter-over-quarter.

• Deposit contraction was expected after robust Q1 growth, mainly due to seasonality, tax payments, and a $15 million brokered deposit maturity; deposits grew $48.8 million since year-end 2023.

• Operating leverage improved, with revenue growth outpacing expenses and management expressing confidence in continued margin expansion for H2 2024.

Financial highlights

• Total revenue reached $40.4 million; net interest income rose to $32.8 million, up $1.2 million year-over-year and 3% sequentially.

• Noninterest income for Q2 2024 was $7.6 million, up $0.5 million year-over-year but down 9% from 1Q24.

• Noninterest expenses were steady at $29.2 million.

• Net interest margin (NIM) expanded by 12 basis points to 2.97%.

• Weighted average yield on new loan originations was 7.84%; yield on loans and leases (FTE) was 5.80%.

Outlook and guidance

• Management expects continued margin expansion and operating leverage in H2 2024, targeting a NIM of 3.05% for Q3.

• Forecasting Q3 noninterest income in the mid-$7 million range and noninterest expense around $30.5 million.

• Targeting a quarterly operating revenue run rate above $42 million, with a long-term goal of $50 million by Q3 2025, requiring $200 million balance sheet growth and NIM in the 3.35%-3.40% range.

• Strategic focus remains on leveraging infrastructure investments and organic growth in Southeast markets.

• Management expects capital and liquidity levels to remain above regulatory minimums.