Earnings call transcript: SmartFinancial Inc beats Q1 2025 earnings expectations

SmartFinancial Inc (SMBK), a $489.1 million market cap regional bank, reported strong financial results for the first quarter of 2025, surpassing analyst expectations with earnings per share (EPS) of 67 cents, compared to the forecasted 54.5 cents. The company’s revenue also exceeded expectations, coming in at $46.8 million against a forecast of $46.24 million. Following the announcement, SmartFinancial’s stock price experienced a modest increase of 1.39%, reflecting positive investor sentiment. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation.

Key Takeaways

• SmartFinancial exceeded both EPS and revenue forecasts for Q1 2025.
• The company maintained stable expenses, with a focus on growth and efficiency.
• Strong performance was noted in Southeast markets, bolstering loan and deposit production.
• The stock price rose by 1.39% following the earnings announcement.
• Guidance for 2025 remains optimistic, with anticipated revenue growth by Q4.

Company Performance

SmartFinancial demonstrated robust performance in Q1 2025, with net income reaching $11.3 million. Trading at an attractive P/E ratio of 13.25x and delivering revenue growth of 11.36% over the last twelve months, the company maintained a strong net interest margin of 3.21% and reported a tangible book value of $23.61 per share, reflecting a 9% annualized growth. The loan portfolio yield was 5.97%, and new loan production yield stood at 7.29%, indicating effective management of loan growth and pricing strategies. InvestingPro data reveals six additional key insights about SMBK’s financial health and growth prospects.

Financial Highlights

• Revenue: $46.8 million, surpassing expectations and reflecting strong market demand.
• Earnings per share: 67 cents, beating the forecast of 54.5 cents.
• Net interest margin: 3.21%, highlighting efficient interest income management.
• Loan portfolio yield: 5.97%, with new loan production yield at 7.29%.

Earnings vs. Forecast

SmartFinancial’s actual EPS of 67 cents exceeded the forecasted 54.5 cents by approximately 22.9%, marking a significant positive surprise for investors. The revenue also surpassed expectations by $640,000, reinforcing the company’s strong market position and operational efficiency.

Market Reaction

Following the earnings release, SmartFinancial’s stock price increased by 1.39%, closing at $28.34. Despite a recent three-month decline noted by InvestingPro, the stock has delivered an impressive 45.75% return over the past year. This movement positions the stock within its 52-week range, which has seen a low of $19.89 and a high of $37.72. The positive market response reflects investor confidence in the company’s financial health and future prospects, supported by its stable 1.13% dividend yield.

Outlook & Guidance

SmartFinancial’s forward guidance remains optimistic, with expectations of mid to high single-digit loan growth. The company anticipates reaching $50 million in revenue by Q4 2025, alongside a projected 2-3 basis points of margin expansion quarterly. The effective tax rate is expected to range between 18-19%.

Executive Commentary

CEO Billy Carroll highlighted the company’s strategic growth phase, stating, "We are successfully moving into the leveraging phase of growth for our company." He also emphasized the strength of the company’s markets, noting, "Our markets just continue to be really strong." Carroll described SmartFinancial as "one of the brightest stories in the Southeast." For a comprehensive analysis of SMBK’s growth potential and market position, investors can access the detailed Pro Research Report available exclusively on InvestingPro, which provides in-depth analysis of over 1,400 US stocks.

Risks and Challenges

• Economic Uncertainty: Potential macroeconomic pressures could impact growth.
• Tariff Impacts: Although minimal, potential tariffs could affect future operations.
• Expense Management: Maintaining flat expenses while pursuing growth could be challenging.
• Competitive Pressures: The need to maintain competitive pricing and credit standards.
• Regulatory Changes: Potential changes in banking regulations could affect operations.

Q&A

During the earnings call, analysts focused on the company’s growth strategy and market conditions. Questions addressed the potential impacts of tariffs and economic uncertainty, with management expressing confidence in continued organic growth and exploring opportunities for deposit-based mergers and acquisitions.

Full transcript - SmartFinancial Inc (SMBK) Q1 2025:

Ezra, Conference Call Coordinator: Hello, everyone, and welcome to the Smart Financial First Quarter twenty twenty five Earnings Release and Conference Call. My name is Ezra, and I will be your coordinator today. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2. We will now I will now hand over to Nathan Straw, Director of Investor Relations to begin.

Nathan, please go ahead.

Nathan Straw, Director of Investor Relations, SMART Financial: Thank you, Ezra. Good morning, everyone, and thank you for joining us for SMART Financial’s first quarter twenty twenty five earnings conference call. During today’s call, we will reference the slides and press release that are available in the Investor Relations section on our website, smartbank.com. Billy Carroll, our President and Chief Executive Officer, will begin our call followed by Ron Burgitski, our Chief Financial Officer, who will provide some additional commentary. We will be available to answer your questions at the end of our call.

Our comments include forward looking statements. These statements are subject to risks and uncertainties, and the actual results could vary materially. We list the factors that might cause these results to differ materially in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward looking statements because of new information, early development or otherwise, except as may be required by law. During the call, we will reference non GAAP financial measures related to the company’s performance.

You may see the reconciliation of these measures in the appendices of the earnings release and investor presentation filed on 04/21/2025 with the SEC. And now I’ll turn it over to Billy Carroll to open our call. Thanks, Nate, and good morning, everyone. Great to be with you, and thank you for joining us today and for your interest in SMDK. I’ll open our call today with some commentary and hand it over to Ron to walk through the numbers in some greater detail.

After our prepared comments, we’ll open it up with Ron, Nate, Brett Miller, myself available for q and a. So let’s jump right in. Another very nice quarter for us as we kick off 2025 and continue executing on what we’ve been messaging. The start of the year has been a bit more volatile than than, any of us would prefer. And while the uncertainty is making it a little more difficult to plan longer term, we’re not letting that deter us from our objectives.

As you’ll hear on this call, this company is continuing to execute, and we’re remaining very bullish on where we’re headed. For the quarter, we posted net income GAAP and operating of $11,300,000 or 67¢ per diluted share. I continue to be very proud of the way our team is performing, and I’m excited to watch us gain operating leverage as we’ve anticipated. Jumping into the highlights, I’ll be referring to the first few pages in our deck. First and and, in my opinion, one of the most important metrics, we continue to increase the tangible book value of our company, moving up to $23.61 per share, including the impacts of AOCI and $24.76 excluding that impact.

That’s over 9% annualized quarter over quarter excluding the AOCI movement. Looking at the graph on the lower right on page five, you’ll see the value increase we continue to deliver for our shares. On balance sheet growth, we had a very solid start of the year. On the loan side, we grew at 9% annualized at a 9% annualized pace for q one, right on top of our expectations as our market teams are continuing to add outstanding new relationships. On the deposit side of the balance sheet, growth was also sound at 10% quarter over quarter annualized.

While we did have some mix shift, which is common for the first quarter of the year, I was pleased with the team’s focus on bringing in new deposit clients. Ron will provide some more detail on that in a moment. Our history of strong credit continues with the metric at just 19 basis points in NPAs. Credit is always a focus for our company, and I’m proud to see these numbers continue at exceptionally low levels. Total revenue came in at $46,800,000 as net interest income continued to expand as we had anticipated.

We also had another very nice noninterest income quarter. Noninterest expenses held to the same level as last quarter at just over $32,000,000. I feel we continue to continue to hold expense growth to very reasonable levels during 2025. That operating leverage we’ve talked about is happening as we continue to grow the revenue line with manageable investment on the expense there. Looking at charts on pages four and five, you’ll see very nice trends.

All of those charts are great graphics to illustrate what we’ve been messaging, and I look forward and and are expecting to see those trends continue. So just a couple of additional high level comments from me on growth. We have executed well over the last several quarters, and it is a direct result of the outstanding work of our sales teams. In regard to loans, a nice start nice start to the year, particularly after posting outsized growth in q four. As I stated, we grew our loan book at 9% annualized quarter over quarter.

The sales momentum in our in our company is very good, and it’s balanced across all regions. Our average portfolio yield, including fees and accretion, was 5.97%, down just slightly from q four, but still very solid after absorbing the fourth quarter fed rate cuts. And new loan production continues to come onto the books accretive to our total portfolio yield levels. In regard to deposits, I mentioned it a moment ago, I’m very pleased with the deposit growth we’ve seen, particularly during a quarter where we normally see some seasonality. Our loan to deposit ratios held from year end at 83%, which is a nice spot for us, and the strong position gives us continued flexibility to leverage that strong deposit base.

Our balance sheet pipelines, continue to fill solid. I’m holding to our past guidance of mid to high single digits on growth as we look forward, And I also think we can pace deposits organically to fund this growth. So all in all, a very nice way to start the year. I’m gonna stop there. I’m gonna hand it over to Ron and let him dive into some additional details.

Ron? Thanks, Billy, and good morning, everyone. I’ll start by highlighting some key deposit results. During the quarter, we achieved nonbroker deposit growth of a hundred 14,000,000, over 10% on an annualized basis, resulting in a loan to deposit ratio of 83%. The weighted average cost of non broker production was 3.39%.

Total interest bearing costs decreased 10 basis points to 2.92% and were 2.96% for the month of March. The composition of our deposit portfolio remained largely stable with a minor reduction in noninterest bearing deposits. As noted on the last call, there were some transitory noninterest bearing deposits included in our year end totals. Coupled with a few clients utilizing some excess cash liquidity throughout the quarter, we finished with an average noninterest bearing to total average deposit ratio of seven of 19%. Net net interest margin was 3.21%, slightly down from last quarter, but in line with our previous guidance.

Our loan portfolio experienced a favorable 7.29% rate average yield on new loan originations. However, the impact of those originations were offset by the full effect of the prior quarter rate cuts, resulting in a decrease to our loan total loan portfolio yield of seven basis points to 5.97%. Additionally, we experienced an elevation in our liquidity levels from our deposit growth, which also impacted our margin. Despite having two fewer days in the quarter, net interest income increased by $455,000 with our average interest earning assets growing over $185,000,000 which was primarily driven by our net balance loan growth during the quarter. With our sustained low loan to deposit ratio, we remain in an advantageous position to fund our loan production.

Looking ahead, we anticipate two to three basis points of margin expansion quarterly throughout 2025. While we expect our overall deposit portfolio cost to increase throughout the year, primarily from higher cost of new production, our new loan production, coupled with the amortization and maturities of our lower yielding fixed and adjustable rate loans, will drive margin expansion. With these factors and given current market conditions, we are forecasting a second quarter twenty twenty five margin in the 3.25 range. Our quarterly provision expense for credit loss totaled 979,000, primarily due to increased loan growth. Net charge off to average loans were point 101% on an annualized basis.

Overall, the bank’s asset quality remained strong with nonperforming assets total assets at 0.19%, and the allowance for credit losses remained steady at 0.996% of total loans. Operating noninterest income for the quarter totaled $8,600,000 which was above our guidance. The outperformance was primarily driven by stronger than forecasted insurance and mortgage banking revenues, along with continued strong activity from our capital markets group. Operating expenses were $32,300,000 unchanged from the previous quarter. There were slight positive and negative movements within several expense categories, but overall, we were pleased that we held expenses flat quarter over quarter.

Noninterest income growth and expense containment continue to be primary objectives as we focus on fully leveraging our infrastructure. For the second quarter, we are forecasting noninterest income in the low to mid $8,000,000 range and noninterest expense in the range of 32,500,000.0 to $33,000,000 with salary and benefit expenses in the range of 19,500,000.0 to 20,000,000 It is important to note that accrual for incentive based compensation will fluctuate based on performance and may vary throughout the year. Our effective corporate tax rate for the quarter was approximately 17% Despite some fluctuations since the establishment of our real estate investment trust, we anticipate our tax rate will stabilize and are forecasting an effective tax rate between 18 to 19% going forward. I will conclude with capital. The company’s consolidated TCE ratio increased to 7.6%, and our total risk based capital ratio remained well above regulatory well capitalized standards at 11.2%.

Overall, we believe our capital ratios remain optimally balanced to continue to support growth while maximizing returns on equity. With that said, I’ll turn it back over to Billy. Thanks, Ron. I want to reiterate again the value proposition with our company, drawing your attention back to page seven of our deck. We are successfully moving into the leveraging phase of growth for our company.

We’re seeing the inflection and the movement in our numbers, and we have clear vision of our return targets after absorbing the investments we’ve made. We’re building a great franchise. We’re in arguably some of the best and most attractive markets in the country and have put together a team that is rapidly moving us forward. You’ve heard me say before, and I believe this, we are one of the brightest stories in the Southeast. Outstanding markets, strong experienced bankers, coupled with a just as experienced and strong operational and support team, along with some great complementary business lines.

We expect the rest of 2025 to have a similar look as we focus on continued growth in our EPS line in hitting our near term revenue and return targets. I also wanted to make some comments on Talend acquisition. One of the areas where we are focusing and one that I continue to be very excited about is our ability to recruit outstanding new team members. The majority of the expense growth in our company in the coming year should come primarily from talent related expenses along with some appropriate investment in our platform. On adding revenue producing team members, we have brought on five over the last couple of months with this specific group, targeted with just private banking and treasury management areas.

We focus here to complement on some of the cup we focus here to complement some of the commercial banking talent we added in 2024. We’re always looking to add revenue producing associates that fit with their culture, and we have several currently in our talent pipeline. I believe we’re included in a very small handful of banks that have built a culture where outstanding regional bankers want to work. We will continue to look for these organic growth opportunities and remain very focused on recruiting. So to summarize, I love what we’re saying.

We are executing, growing that revenue line while staying prudent on expense growth even while dealing with a little bit of uncertainty in the economy. We remain optimistic around our margin as new production stays strong and as we see the tailwind coming from the rate resets in our loan portfolio over the next couple of years. Credit continues to be very sound, and we’re seeing great new client acquisitions with sales energy that is outstanding. All said, a great way to start the year for our company as we continue to build a profitable and attractive franchise. I also wanna take an opportunity to welcome our newest board member, Kelly Shoemaker.

Kelly is the CFO at Auburn University, brings a great skill set to our board and gives us great perspective throughout Alabama and the entire Southeast. So, Kelly, welcome. I also appreciate the work of our smart financial and smart bank team and the efforts of our over 600 associates. I’m very proud of the work that we have going on here at SMDK. So we’ll stop there and open it up for questions.

Ezra, Conference Call Coordinator: Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. Please ensure your device is unmuted locally. And if you change your mind or your question has already been answered, please press Our first question comes from Stefan Stouten with Piper Sandler. Stefan, your line is now open.

Please go ahead.

Nathan Straw, Director of Investor Relations, SMART Financial: Great. Thanks so much. Appreciate the time this morning, guys. Really good quarter. It feels like things are all kind of moving in the right direction now, which obviously is a little bit different from what the market is trying to tell us.

Can you talk a little bit about what you’re seeing at a ground level with your customers, kind of what customer sentiment looks like and why you would continue to have beliefs around that ability to hit that loan growth kind of strength to your markets a little bit more would be great, Bill. Yeah. Steven, I’ll start, and then I’ll I’ll let Brett chime in and see if we can stay, you know, say try to stay pretty close to clients, hearing a little bit of the volatility that we’ve experienced. But, you know, overall, you know, again, it kinda goes back to to markets. You know, our our our markets just continue to be really strong.

You know, we’re we’re talking to a lot of clients, you know, staying plugged in. Obviously, you’ve got got, you know, a lot of conversation going on around tariffs, which, you know, do are we are we are we gonna have them or are we not? You know, it it’s really a a back and forth. But as we talk to our clients, their business their businesses all seem to be doing well. Now I think it’s I I do think they’re gonna continue to watch and, you know, be cautious.

But, you know, I still feel good about our prospects to grow at, you know, at the pace that that that we’ve given. You know, it’s it it really is one of those things that that we, you know, we feel pretty excited about where we are. A lot of it is continuing to add, you know, business coming from these team members that we’ve added over the course of the last several years. So we’re bringing in business that’s seasoned. We’re bringing in businesses that have been around for a long time.

And I think all those things bode well for us and our ability to continue to grow. But but, Reg, you might you might give some color. I know as you guys have talked a little bit with our pricing numbers and our production team members about, you know, you know, client, you know, client take on the current environment. You wanna give some color there? Sure.

If we did, as as the the the billing comment as the the tariff matter unfolded, we reached out to clients that were either in specific industries that we felt like might have a a higher impact or that, you know, that we were aware had some degree of international components in their receivables, suppliers, etcetera. And the overall feedback we’ve gotten has been really optimistic and positive in regard to expected impact. Most of them are are providing us commentary that that they’re not seeing any degree of decline in in order volume. They’re not expecting any significant changes in in pricing in the near term either from the supply side or certainly nothing that they don’t feel like they would be able to to continue to, for like, better word, pass through in their normal operations of business. So we don’t we don’t, at this point in time, feel like it’s a a major deterrent for our client base.

So we don’t have a lot that that would have been directly impacted. And so it it it seems at this point in time to be I think there’s a little bit of a wait and see perspective from a lot of them. But but thus far, with what we have gotten feedback on, it it seems it really not. And, Noah, I’ll make a comment. Yeah.

Steven, this is Miller. I I also wanna add, this isn’t secondhand information or anecdotal information that we’re gleaning from other people. I can’t stress enough about how hands on our market leaders are and our executive team is in visiting these different markets and how many different clients, current clients, prospective clients we have been in front of on a continual basis. And we do that all the time. It’s not just this past quarter.

I mean, we are very visible in our markets and and have, I believe, firsthand real time knowledge of where these markets are, and they are all performing pretty dead gun strong. That’s great. That’s helpful color, guys. And then how should we think about expectations around maybe levering up the balance sheet from here? I mean, a lot of room in the loan to deposit ratio in theory, but just kinda wonder what your level of comfort is of taking that, you know, appreciably higher kind of the securities book balance there and just kind of the the moving parts around balance sheet trends where you see the mix going.

Yeah. It’s a good question, Steve. You know, we we’ve got some space. You know, I think we’re the the words that we use around here, like, it it it’s really it’s just good, strong, prudent growth. You know, I do think, you know, we are seeing we’re seeing competition.

We’re seeing some different structure and rate competition. We we’ve kinda held and struck our guns on, you know, on on on rates and structure. We’ve seen we’ve we’ve seen a little bit of pressure in some of those areas. And I think as we go through the year, especially if growth is a little bit softer, you know, I I I think, you know, we could we could see us actually, I think we’ve tried to hedge kind of that that mid to high singles as far as their growth goes. I think we’ve got a team that could really produce.

But at the same time, we wanna make sure that we’re putting on if we’re putting on business that’s getting us the right return level, that it’s structured with the appropriate loan and credit structures we want. So, again, I I I really like where we’re sitting because we’re getting growth. We’re getting it the way we want it. And and we do have the ability to to kinda keep our foot on the accelerator a little bit if we want to. But at the same time, I think we can get the growth that we want and continue to hold to the to the return targets that we want that we set out to do.

And, Brian, I don’t know if you wanna talk a bit about just kind of the utilization of the kind of the cash and and what you’re thinking there. Yeah. I think at this point, we’re we’re pretty solid on our investment percentage of assets. We are setting out a little extra cash as as I I said, probably about a hundred 50 a hundred 50,000,000 more that we could lend out of the cash portfolio. So we we’ll probably see some mix shift going forward on the balance sheet, but nothing drastic.

We’re we’re in a pretty good position, as Billy said, to fund our loan growth. So not much more. Okay. Extremely helpful there. And then just last thing for me, obviously, volatility for the industry has has taken stock prices down significantly.

Your stocks, you know, back down to about one twenty a 10, give or take. How do you think about share repurchases at these levels? And can can you remind me what your authorization might look like today and and just kind of the priority of that versus other potential capital actions? Yeah. We’re on Yeah.

For the authorization, we have about $1,500,000 left to to purchase. So we’re on the backside of it. Once we get near that level, we’ll probably get you know, we’ll start talking about repurchasing more over that. Yeah. And and just for us, I mean, traditionally, when we’ve looked at that, obviously, we’re you know, the whole the whole sector is kind of in a, I think, in a in a pretty good spot from valuation standpoint with a lot of upside potential.

But we typically not look to buy back until we get a little bit closer to that book value. A number that’s been traditionally that’s that’s probably kind of where we are. So probably kinda stay here right now, but we are positioned to do some purchases if we need to. Great. Thanks for all the color.

Congrats on a great start to the year. Thank you. Thanks, Steven.

Ezra, Conference Call Coordinator: Our next question comes from Catherine Miller with KBW. Catherine, your line is now open. Please go

Catherine Miller, Analyst, KBW: ahead. Thanks. Good morning.

Nathan Straw, Director of Investor Relations, SMART Financial: Good morning, Catherine.

Catherine Miller, Analyst, KBW: I want to start maybe just on the margin and just to see how we should be thinking about if we start if we do start to see the Fed cut rates at the June meeting, how that could impact your guide? I’m assuming the two to three bits of NIM expansion per quarter. Just kind of curious what that means in terms of the the Fed backdrop and if that is better or worse if we see more or less cuts.

Nathan Straw, Director of Investor Relations, SMART Financial: Ron, do you wanna take that? Yeah. Good morning, Catherine. Being slightly liability sensitive, you know, we’re we’re we’re pretty much matched. We see for Fed cuts, you know, we will benefit from it, slightly.

We’re we don’t have material movements for many of these, you know, either down or up. So we’re pretty good positioned. You know, we’ve we gave guidance on thinking it’s gonna be a, you know, probably in the September range that we’d have a rate cut. But I think we’re I think we’ll be pretty much neutral, but benefit on the way on the rate cut down.

Catherine Miller, Analyst, KBW: Great. Okay. So if we get earlier cuts in September, there could be a little bit of maybe upside of that two to three bits expansion.

Nathan Straw, Director of Investor Relations, SMART Financial: I probably. Yes. Yes. It will be if we get it

Ezra, Conference Call Coordinator: earlier than September. Correct. Okay. Okay. Great.

Nathan Straw, Director of Investor Relations, SMART Financial: And

Catherine Miller, Analyst, KBW: then you may have just talked about it in the beginning, but I I might have missed it. In terms of new loan pricing, can you talk about what that looks like today? I thought we’ve heard anecdotally that’s become a lot more competitive over the past few months. I’m just kinda curious what you’re seeing on on loan pricing today.

Nathan Straw, Director of Investor Relations, SMART Financial: Yeah. I’ll Ron, where where did we what did we I guess, what would we have new production for the quarter? For the quarter, it was $7.29. Yeah. And then and then, Red, I think we I think as we look on the pipeline, you and I spoke about this, we we’re still coming in around that 7% number, Catherine.

That’s kind of what we’ve got in the pipeline currently. Now that’s obviously a mix of fixed and float, but but but coming or fixed and float, but coming in at around seven. You know, we we feel pretty good about that 7% plus minus number a little bit. We are seeing yeah. We’re seeing some we’re seeing some some a little bit more competitive pressure in in in in the market.

You know, as as I as I spoke with our last question, we’ve been able to kinda hold and stick our guns on the the pricing structure that we want, and it’s not really deterred us from getting to growth. So we’re gonna try to keep we’re gonna try to keep keep holding that pace at that plus minus seven. But I I you know, it was surprising to see as we continue through the year, you know, with folks really pushing and stretching for some growth that we could see that number kind of kind of come down a little bit. So I think we’re we’re okay in in the 7% ish range here near term, but, you know, TBD on what that looks like as the year You you’re dead on the we are hearing and seeing some competitors really, really pushing some pricing and, getting off of competitive out there.

Catherine Miller, Analyst, KBW: But then on the deposit side, it feels like that’s become that continues to be a better score. So maybe your your net margin for new incremental growth is is still kinda kinda where are new deposits coming on about right now?

Nathan Straw, Director of Investor Relations, SMART Financial: Yeah. Ryan, what, where do we come in? The CDs the CDs were were coming in around the $3.03 $53.60 ish. Money market’s probably very similar. Other than that, we’ve been quite fortunate.

We’ve been pretty stable. We’re we’re looking at two to three basis points of its, again, growth in the deposit costs quarter over quarter. But, you know, depending of the market movement or competitors, we’re seeing really pretty relaxed at this point, the uptick.

Catherine Miller, Analyst, KBW: Great. Okay. So still new production for both loans and deposits combined. It’s still kind of coming on higher than your current three twenty margin, which which is great. And I can understand the the the outlook for the margin and continue.

Nathan Straw, Director of Investor Relations, SMART Financial: Yeah. Net. Yeah. Net. K.

Great. Yeah. No. You’re you’re right, Catherine. Yeah.

Net net net, we’re we’re kind we’re still coming in accretive to where we are today on this.

Ezra, Conference Call Coordinator: Okay. That’s

Catherine Miller, Analyst, KBW: all that. Thank you.

Nathan Straw, Director of Investor Relations, SMART Financial: Thank you. Thanks.

Ezra, Conference Call Coordinator: Our next question comes from Russell Gunther with Stephens. Russell, your line is now open. Please go ahead.

Nathan Straw, Director of Investor Relations, SMART Financial: Hey. Good morning, guys. Russell, good focus hey. I wanted wanted to spend a minute on expenses. It trends really good, and you guys gave us a near term look at how that’s expected to go.

But maybe just bigger picture, as you think about the rest of the year, how are you expecting the trajectory to progress? And then is there anything underlying the the strong results in terms of the specific expense save initiative? And if not, is that something contemplated in how you’re thinking about the overall growth rate for the year? Yeah. I’ll let me start with just some just some kinda high level comments.

And then, Ron, if you wanna maybe dive into that a little a little more detail. Yeah. You know, Russell, for us, you know, what and and I think, Ron and both kind of said it in our comments. Yeah. I think for us, you know, we have really, really focused on trying to get this expense line to be to be fairly stable.

Obviously, we’re gonna have some growth, but I do think all of that is manageable. You know, when you look back last year, you know, we still had, you know, some new branch some new branches that were coming online. We were adding some staff to staff those and some of that. So when you look at the growth that we had last year, was a little more, but a lot of that was just kind of new there’s some net new branches, net new teams that we needed to add. I think for us now, you know, we’re we’re really not looking to do any of that.

I think most of, you know, the investments that we’ve made in all these markets with the teams has been done. You know, we are seeing incremental growth that we had as I as I alluded to as we continue to recruit recruit some new team members, particularly on the revenue producing side, you know, we’ll see a little bit of growth there. You know, our tech spend is is relatively stable with, you know, with with with a little bit of new potentially coming on. But but all in all, I think that’s the reason it gives us some confidence that that these that our expense growth can be fairly stable as we look at over the next couple of quarters. But, Ron, I mean, you why don’t you dive in and go a little bit deeper on any of those specific lines?

Yeah. I’m actually gonna go back to last quarter. We gave guidance that we should see, you know, expense growth in the two and a half to 3% range, and our guidance still stands. I mean, we’re we’re able to to control our expenses, without impeding our growth. So we’re we’re in a good shape.

We’re not looking at, really gonna hold our expenses within that band. So, again, going forward, we’ll, we should be able to achieve that. Got it. Okay. Got it.

Super helpful, and I appreciate the context. And then just switching gears, last one for me. And you touched around it broadly, but as we think about, you know, the potential impact from tariffs, you know, lot of good granularity in your deck around the loan portfolios. But would love to get a sense for anything that you’re paying closer attention to today that may have borrowers with some outside exposure to the the tariff volatility that’s going on and if you could size up what that exposure would be. Thank you.

Yeah. And and, Ron, I’ll I’ll ask you to kinda chime in as well. I don’t think you know, I I think we’ve we’ve kinda looked at it fairly broadly, Russell. I don’t think there’s any particular area that we’re focusing on more than others. You know, we do we I would say probably if there’s an area that we have, we’ve still got, you know, a little bit of the the we got a little bit of trust and get exposure through our fountain subsidiary that those are those are typically smaller credits.

We also have you know, we’ve we’ve done a lot with our our dealer floor plan. We got some auto got a little bit of auto exposure both on dealer side as well as the manufacturing side. We’re staying close to those, you know, those suppliers getting getting getting kinda getting their take on the way they see these tariffs playing out. Those are the first two that come to mind to me, Brad. I don’t know if there’s anything that you wanna add add to that or if there’s anything that you think might might more go extra attention.

No. I think those are certainly two of the primary ones that we have on the radar screen. And then just the other side of that is is, as I mentioned earlier, clients that we know, you know, have any degree of primary supply chains we’re seeing for clients that are international in format. We are we’re staying in touch with them just to see if and when they start seeing any changes coming either from their supply side or from their client order volume. That and then and then I guess on the on the backside, we’re also just keeping an eye on any impacts the tariffs could have on, you know, I call it broader broader scale scenarios like construction materials, things of that nature that could impact some some construction costs, things of that nature down the road.

But, also, the thing is good to add here is that we, being a stronger credit bank as we are and always being a credit first bank, I don’t know that we’re looking at these any stronger than we do every quarter in every segment of the bank. I mean, we’re we’re we’re highly engaged in the credit process and the credit of our client base. Well, I appreciate you, h, for taking a stab at the question, and that’s it for me. Thank you. Alright.

Thank you, Ross. Our

Ezra, Conference Call Coordinator: next question comes from Brett Rabatin with Hovde Group. Brett, your line is now open. Please go ahead.

Nathan Straw, Director of Investor Relations, SMART Financial: Hey, guys. Good morning. Wanted to Alright. Good morning. Start with fee income.

And if I heard the guidance correctly, it was low to mid eights for for two q. And within that, I wanted to see maybe your thoughts on investment services and and insurance and and where those where those businesses might trend kinda given their 1Q performance and any anything else that that might be keeping the fee income fairly flattish from here. Yeah. Right. I’ll take it.

Sam, I know just kinda high level, obviously, you know, with an investment side, you know, a little more with a little more fee based business, you get a little bit of get a little bit of an AUM drop with market held back. You know? So so, you know, some of that some of that recurring fee might be a little bit lower. Q one is typically a pretty strong quarter for our insurance group. We’ve we’ve got to particularly contingency revenue payouts occurred there in q one.

So we had a little bit more there. So those those two items probably help bolster the first quarter a little bit more, Brett, than normal. But, Ron, anything else that you wanna anything else that you wanna touch on? Yeah. The only other item that, you know, we should see an uptick going forward is our mortgage banking revenue.

We are looking at hiring lenders in that space. So that’s probably one that will be more variable going forward. Other than that, we just have built a steady cash flow here on our income. Okay. That’s helpful.

And then I wanted to go back to the the mid to high single digit loan growth and, you know, just looking at the first quarter, a lot of the growth was in commercial real estate. You know, I wanted to see what the appetite was for for c and d from here. And and then just, you know, any any thoughts on the c and I book and if if, you know, there’s any visibility of pull through with that or if the that’s the one area that’s hard to predict with the with the tariffs and whatnot. Yeah. I’ll let Brett kinda chime in on just kind of kind of the way our our production pipeline is looking from a from a split standpoint.

But over overall, you know, I I we still are maintaining a fairly balanced approach to to our growth. And and I think and and Rex can give you some some details on on pipelines and where we think it’s come. But it’s probably gonna mirror kind of where we are from a percentage as it sits today. I think there’s one particular sector that we’re leaning into any heavier. Obviously, you know, we look to grow that C and I book as as much as we can.

But we’ve had some good opportunities with some real estate. We’ve been able to take those over the last couple of quarters too. But, Ray, anything on the kind of pipelines and how you see the pipelines breaking down? No, Billy. You get it.

I heard you look at our pipeline as it sits today, just the mix of what’s out there. It’s very similar to, I would say, what we have been seeing for the past several quarters. It’s a very it’s diverse geographically. It’s diverse across our our our product mix as, you know, as broken down into deck. Nothing that really that I’ve seen in our pipeline is still is going to swing us one way or another in regards to some mix.

We’ve got we do have some c and d in the in the in the pipeline, but it is it’s pretty spread across the footprint. We’re still continuing to see good good demand supply and demand metrics across our our market areas for for for both, you know, for housing and for and for development on the commercial side as well. So, I mean, it’s it’s still a pretty it’s still in line with what we have have historically been seeing for the past couple of quarters. Okay. Great.

Appreciate all the color, guys. Thanks, Brett. Alright.

Ezra, Conference Call Coordinator: Our next question comes from Steve Moss with Raymond James. Steve, your line is now open. Please go ahead.

Nathan Straw, Director of Investor Relations, SMART Financial: Hi. Good morning, guys. Hey, Steve. Good morning. I wanna ask about the morning.

I wanna ask about the on the revenue side, you guys have talked about $50,000,000 by the fourth quarter twenty five. I guess just given where the margin is, the loan growth you guys have had and you’re seeing some shaking out where it is, it seems like the third quarter is probably a reasonable proxy point in your estimation these days. I’ll let Ron answer that. I mean, we’re trying to we’re try we’re still we’re still holding in terms of our department, Steve. Yeah.

Chris, I I I will say, you know, our our our trends, you know, our trends are good. I yeah. I the the the caveat is just kind of what happens. You basically can get into the second half with growth and, you know, the you know, with with rates. So, yeah, there’s still a little bit.

But kind of based on what we have built in their forecast, we still think kind of that fourth quarter number is and that’s really kind of what we said. We we’ve reiterated it, you know, on these calls, and we’ve reiterated it, you know, in our around our our team. But, again, this was a year that that we really wanted to kinda get, you know, get these get these numbers where where we needed them to be, you know, leveraging everything that we built over the course of the last built and bought over the course of the last several years. And so, you know, all of that is playing out, and we’re just kinda keeping our head down, grinding through. And, you know, hopefully, we get there a little bit faster, but we’re still holding their guidance.

Okay. Figured I’d ask. In terms of on the credit front here, I take it that we’re are we pretty much through the charge off on the Fountain portfolio? You know, charge off in slightly the last two quarters and, you know, obviously, starting to impact the provision expense here. Yeah.

Yeah. Rick Rick can kinda speak to that. I think we we’re we’re getting closer, but you wanna you wanna dive into into what we’re seeing in time. Yeah. You know, done with might be a a strong statement, but I certainly think we have seen it we have seen it slow down as you see in the in the numbers.

You know, we were we were certainly seeing a a a direct slowdown, and we’re optimistic prior to some of what we’ve been talking about a little bit earlier on potential impact depending on the the longevity, duration, the the size and such of the of the the tariffs and how those might impact just the the supply chain and and smaller transportation operators. So we we don’t believe it will be at a pace like we saw last year. But I I do believe we’ll still have a few stragglers here and there I know we’ll be dealing with this as the year goes on. But but we we don’t anticipate it to be in line with what we saw last year. Yeah.

Teams done a good job. You know, Brett and and our our pound team have done a really nice job of trying to manage through that. And and you’re going it it’s still all relatively small in the overall scheme of things, but but, you know, that is yeah. We’re still working through a couple of those. Maybe a little bit more, but but, hopefully, that is coming to an end here relatively quickly.

Got it. Appreciate that. And then, you know, one other thing, maybe just on the m and a m and a front here, just kinda curious if you guys have any updated thoughts around doing a deal. You know, it seems like

Christopher Marinac, Analyst, Janney Montgomery Scott: organic growth is going pretty

Nathan Straw, Director of Investor Relations, SMART Financial: well for me that’s on the back burner, but I just wanna take your temperature there. Yeah. You know, it it it is interesting. And, obviously, with the with the valuation, you know, pullbacks that may have changed some different folks’ thoughts. But for us, you know, we’re still we’re still just kinda head down focusing on our our organic strategy.

You know, that’s that’s where we are. That’s where we we wanna be. Obviously, we’re you know, when deals pop up, we, you know, we get we get called or asked about them. But but, you know, there’s nothing really that we think is gonna really greatly deter us from just kinda hitting hitting this organic stride that we’ve got going over the next little bit. That’s where that’s that’s one a.

Obviously, we’d it’ll look for anything that, you know, made a lot of sense. But for us, it really is is primarily focused on adding adding talent and growing organically Yeah. I would say organic is probably one a and one b. Yeah.

Yeah. Based on what currency is, it’d be hard to do a deal. But we’re always looking and always interested, but it’s it’s organic today. Got it. Well, I appreciate all the color here, guys.

Thank you very much. Nice quarter. Thanks. Thanks.

Ezra, Conference Call Coordinator: You very much. Just as a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now. Our next question comes from Christopher Marinac with Janney Montgomery Scott. Christopher, your line is now open. Please go ahead.

Nathan Straw, Director of Investor Relations, SMART Financial: Hey. Thanks for hosting us

Christopher Marinac, Analyst, Janney Montgomery Scott: all this morning. I just had a quick question on equipment financing and and finance leasing. And just curious on that business line, would you do more there? And are you happy so far with the results looking back on the transaction several quarters ago?

Nathan Straw, Director of Investor Relations, SMART Financial: Yeah. That’s a great question, Chris. I’ll and I’ll I’ll stop. I’ll be Rick kind of oversees that line for us. I’ll let him chime in too.

But the short answer is yes. I mean, it’s been a it’s been a great it’s been a great little business line that that we added. You know, when we bought it when we bought the one, you know, and it’s we we kept it, and we we we’ve been able to grow it from, you know, you know, mid 50,000,000 outstanding out of to about $1.40, you know, over the last last little bit. And and so the growth that we’ve had, the yields that we’ve had, it has been a really, really good transaction. And so we really like it, still like it.

Yeah. You said a little couple little bumps with some with some of the trucking business, you know, as we kinda look back last year. But even factoring that into the equation, this has been a very, very good acquisition for us. So, yeah, we like it. You know, we’ve we’ve we’ve been a little more selective in the trucking the trucking credits that we’ve added over the course of the last one, but we pulled back in that area in that particular segment.

But but overall, been very pleased with it. Don’t know, Rick. Any any color as to kind of add in and talk a little bit about that kind of where we see the growth coming moving forward? Yeah. No, Billy.

I think you I think you Billy, I mean, for purposes of the the general question, Chris, I I would say, yes. Absolutely. I mean, I go back to Billy’s point. I mean, we did we have grown the portfolio segment considerably. We have added some talent there as well, and and we’ll continue just like we do on the bank side.

When we find a a very seasoned, very, very strong producer in that space, we will we will look to bring them on board. We have we made some adjustments, tweaks here and there on some some credit profiles, kind of what our general metrics are for for for credit standards and what we book new. Yes. It is a a somewhat concentrated lot of business, and we do have concentrations in transportation, construction predominantly. I think that would be expected in the close of finance segment.

But, you know, when I think about would I would I continue would I have done the transaction again or would I continue to seek to grow it, you know, I kinda look at that as a bottom line factor in Absolutely. It’s still a profitable line of business where the bank continues to be, and we have we have a very positive outlook for it. Great. Thanks for all that background.

Christopher Marinac, Analyst, Janney Montgomery Scott: I appreciate it. Just a quick follow-up on M and A, just going a little deeper than prior questions. Would you ever consider doing a deposit kind of based acquisition where the the lending market may not be attractive to you, but the deposits would be and might be smaller institutions, you know, smaller than you’ve looked at in the past? And is that at all a possibility as the next, you know, several years develop?

Nathan Straw, Director of Investor Relations, SMART Financial: Yeah. And and, yeah, I think we would. You know? Obviously, you know, deposits in today’s world, as we all know, the deposit the deposit piece of these equations is is is really important. We’ve got some great you know, the good thing about it, the folks that we’ve added over the last several years are great generators on both sides of the balance sheet.

And I think that’s what gives us a lot of confidence in our ability to grow. We’re not just hiring lenders. We’re hiring really good bankers. And so what we’ve been able to do there but, obviously, the the the lending opportunities could you know, we could probably put a little more, you know, gas on that fire. So, yeah, if we had the opportunity to to do something like that, that would probably be sense of attractive where, again, you know, as we’ve said, we’re really not looking to do much of that.

You know, right now, we’re kind of just, you know, funding organically as we grow. But, you know, if the right situation presented itself, it’d be something we could entertain. Great. Thank you, Bill. And thank you, Biller too.

Appreciate it. Thanks, Chris. Thanks, Chris. Appreciate it.

Ezra, Conference Call Coordinator: Thank you very much. That concludes our q and a session. I will now hand back over to mister Bellburn, chairman of the board to close the call.

Nathan Straw, Director of Investor Relations, SMART Financial: Thanks, Ezra. And thanks everybody for joining us today. We appreciate your time. We appreciate your interest and support of SMBK, and we look forward to talking to you again in the near future. Have a great day.

Ezra, Conference Call Coordinator: Thank you very much, mister, and thank you to everyone for joining. This concludes today’s conference call. You may now disconnect your line.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.