SmartFinancial, Inc. Q3 FY2025 earnings call

Key Highlights

• Tangible Book Value: Increased to $26 per share including AOCI and $26.63 excluding, with 26% annualized QoQ growth.
• Operating Earnings: Posted $14.5M or $0.86 per diluted share, hitting the $50M quarterly revenue target early.
• Balance Sheet: Loans grew 10% annualized, deposits 15% annualized; loan-to-deposit ratio at 84%.
• Credit Quality: Nonperforming assets at 22 basis points, net charge-offs 10 basis points annualized.
• Expenses: Operating noninterest expenses $32.6M, operating efficiency ratio improved to 64% from 66%.
• Hiring & Culture: Added great bankers, named to Fortune's best workplaces list; focus on recruiting and culture.
• Strategic Initiatives: Sub-debt issuance, sale of insurance operations with reinvestment, and tech-focused initiatives.

SmartFinancial, Inc. reported operating earnings of $14.5 million or $0.86 per diluted share for the third quarter, marking the sixth consecutive quarter of positive operating leverage. Total operating revenue was $50.8 million. Loans grew at a 10% annualized rate, while deposits increased by 15% annualized. Nonperforming assets stood at 22 basis points. Operating noninterest expenses were $32.6 million. Tangible book value increased to $26 per share including AOCI and $26.63 excluding AOCI, with a 26% annualized quarter-over-quarter growth.

Forward-Looking Statements

• Fourth Quarter Margin: Projected to be in the 3.3% to 3.35% range.
• Fourth Quarter Expenses: Non-interest income (excluding insurance) expected to be ~$7M, non-interest expense $32.5M to $33M.
• 2026 Margin Expansion: Anticipated 5-7 basis points quarterly margin expansion.
• Deposits & Fees: Continued focus on deposit growth and diversifying fee revenue from mortgage, TM, and other business lines.

Q: Brett Rabatin asked about hires in geographies, Alabama growth outlook, margin guidance, and tech initiatives.

A: William Carroll and Ronald Gorczynski discussed hiring across all zones, margin projection for Q4, and tech initiatives aimed at efficiency.

Q: Russell Gunther inquired about expense and margin outlook.

A: William and Ronald discussed continuing operating leverage and margin expansion projections for 2026.

Q: Catherine Mealor asked about deposit beta and fee growth.

A: Ronald and William talked about deposit beta targeting around 40% and fee growth from mortgage, treasury management, and other segments.

Q: Steve Moss questioned loan pipeline and hiring.

A: William and Ronald discussed optimism in the loan pipeline and selective hiring to maintain culture fit.

Q: Stephen Scouten asked about broker deposits, NIM trajectory, and M&A strategy.

A: Ronald and William addressed broker deposit paydown plans, NIM trajectory projections, and M&A focus on strategic opportunities