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 quarter-over-quarter, with strong new client relationships and funding on lines; core deposit growth over 5% after adjusting for funding repositioning.

• Credit quality remained solid, with nonperforming assets at 0.26% of total assets and low charge-offs, despite a slight uptick due to isolated equipment finance credits.

• Total assets reached $4.91 billion at September 30, 2024, with $3.7 billion in loans and $4.3 billion in deposits.

Financial highlights

• Net interest income was $35.0 million in Q3 2024, up 7% sequentially and 13% year-over-year; net interest margin expanded to 3.11%.

• Noninterest income increased to $9.14 million, up 20% sequentially, driven by higher investment services, insurance commissions, and capital markets fees.

• Noninterest expense rose to $30.85 million, mainly due to higher salaries, incentive accruals, and franchise growth.

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

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

Outlook and guidance

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

• The newly established REIT subsidiary is expected to lower the effective tax rate to approximately 20% in future periods.

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

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

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