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SmartFinancial Inc (NASDAQ:NYSE:SMBK) presented its second quarter 2025 results on July 22, showcasing continued growth in key metrics and improved efficiency as the company leverages its existing infrastructure. The regional bank reported diluted operating earnings per share of $0.69, representing sequential improvement from the $0.67 reported in Q1 2025, as the company continues to benefit from margin expansion and strategic growth in attractive Southeastern markets.
Quarterly Performance Highlights
SmartFinancial reported total assets of $5.5 billion for Q2 2025, with quarterly annualized organic loan growth of 13% and deposit growth of 5%. The company achieved an operating return on average assets of 0.88% and an operating return on average tangible common equity of 11.5%. The efficiency ratio improved to 66%, down from 72% in the same quarter last year, reflecting the company’s focus on expense containment.
As shown in the following comprehensive overview of the quarter’s performance:
Net interest margin (FTE) continued its upward trajectory, reaching 3.29% in Q2 2025 compared to 2.97% in Q2 2024 and 3.21% in Q1 2025. This margin expansion has been a key driver of improved profitability, as the company optimizes its balance sheet and benefits from higher-yielding loans.
"We are successfully moving into the leveraging phase of growth for our company," CEO Billy Carroll had noted during the previous quarter’s earnings call, a strategy that continues to bear fruit in Q2 results.
Strategic Positioning and Growth Trajectory
SmartFinancial’s presentation emphasized its strategic focus on leveraging existing infrastructure investments to drive profitability and optimize efficiency. The company has evolved from a validation phase (2015-2019) through a scaling phase (2020-2022) to its current leveraging phase, where it aims to capitalize on previous investments while focusing on strategic, "needle-moving" M&A opportunities.
The company’s growth journey is illustrated in this timeline showing its asset growth from $1.0 billion in 2015 to $5.5 billion in 2025, representing a 19% CAGR:
SmartFinancial continues to focus on building density in attractive Southeast markets experiencing strong population growth. The company maintains a significant presence in Tennessee (60% of loans, 63% of deposits), Alabama (25% of loans, 28% of deposits), and Coastal regions (15% of loans, 9% of deposits).
The following map highlights the company’s market area and the strong migration trends benefiting these regions:
The loan portfolio has shown consistent organic growth, with a 13% CAGR since 2020. As of Q2 2025, total loans stood at $4.12 billion with a well-balanced composition across commercial real estate, construction and development, and consumer real estate segments.
The company’s loan growth and composition are detailed in the following chart:
Asset quality remains strong, with non-performing assets to total assets at just 0.19%, reflecting the company’s disciplined underwriting practices and the resilience of its target markets.
Liquidity and Capital Management
SmartFinancial emphasized its prudent liquidity management with $1.8 billion in untapped liquidity sources and $578 million in on-balance sheet liquidity. The company maintains a 1.6x liquidity to uninsured deposit ratio, positioning it well to navigate various market conditions.
The company’s robust liquidity position is illustrated in the following overview:
The loan-to-deposit ratio stands at 85%, comparing favorably to the peer average of 89%, while the combined loan and securities to deposit ratio is 98% versus the peer average of 105%. This conservative positioning provides flexibility for continued organic growth while maintaining strong liquidity buffers.
The margin inflection is clearly visible in the company’s net interest margin trend, which has steadily improved from 2.97% in Q2 2024 to 3.29% in Q2 2025:
From a capital perspective, SmartFinancial remains well-capitalized with strong regulatory ratios. The company has created $7.66 in tangible book value per share from 2020 to 2025, while maintaining a quarterly dividend of $0.08 per share.
Forward-Looking Statements
Looking ahead, SmartFinancial highlighted several key investment considerations, including its engaged management team, valuable deposit base, solid credit quality, stable markets experiencing population expansion, and growing business lines with revenue diversification.
The company’s investment highlights are summarized in the following slide:
Management’s strategic focus continues to be on leveraging existing infrastructure to drive profitability and optimize efficiency, while remaining alert to strategic M&A opportunities that could enhance the company’s Southeast franchise density.
Based on the previous quarter’s guidance, SmartFinancial anticipates reaching $50 million in revenue by Q4 2025, with projected margin expansion of 2-3 basis points quarterly. The company’s stock closed at $36.07 on July 21, 2025, with a slight decline of 0.55% ahead of the earnings presentation.
As SmartFinancial continues to execute on its strategic plan, the company appears well-positioned to benefit from the strong demographic trends in its Southeast markets while maintaining its focus on operational efficiency and prudent balance sheet management.
Full presentation:
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