SmartFinancial (SMBK) Q3 2024 earnings summary

Executive summary

• Net income for Q3 2024 was $9.1 million ($0.54 per diluted share), up from $2.1 million ($0.12) in Q3 2023 and $8.0 million ($0.48) in Q2 2024, with strong operating leverage and a tax strategy boost.

• Tangible book value per share increased to $22.67 (including AOCI) and $23.69 (excluding AOCI), representing a 19% annualized quarter-over-quarter increase including AOCI.

• Loan growth exceeded 16% annualized for the quarter, with net organic loan and lease growth of $144 million and continued expansion in new client relationships.

• Core deposit growth was over 5% after adjusting for strategic funding repositioning, with total deposits reaching $4.3B and overall deposit costs declining to 2.54%.

• Asset quality remained strong, with nonperforming assets at 0.26% of total assets and low charge-offs.

Financial highlights

• Total revenue reached $44.1 million, with net interest income rising to $35.0 million and noninterest income increasing to $9.1 million, driven by investment services and capital markets fees.

• Noninterest expense was $30.8 million, slightly above guidance due to higher salaries, incentive accruals, and franchise growth.

• Net interest margin (tax equivalent) expanded to 3.11% from 2.97% in the prior quarter, with the weighted average yield on new loan originations at 7.40%.

• Allowance for credit losses was $35.6 million (0.96% of loans/leases) at September 30, 2024.

• Operating efficiency ratio improved to 69.3% from 72.1% in Q2 2024.

Outlook and guidance

• Management expects continued margin expansion into 2025, with net interest margin forecasted in the 3.1%-3.15% range for Q4 and into next year.

• Noninterest income projected in the mid- to high-$7 million range and noninterest expense between $31-$31.5 million for Q4.

• The newly established REIT subsidiary is expected to lower the effective tax rate to approximately 20% going forward.

• Loan growth guidance remains mid to high single digits for the next few quarters, with optimism for continued strong pipelines.

• Expense growth expected in the 5%-7% range, primarily from selective talent additions.