Earnings call transcript: SmartFinancial Q2 2025 beats forecasts, stock rises

SmartFinancial Inc. (SMBK) reported its second-quarter 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.69 against a forecast of $0.64. The company’s revenue also exceeded projections, reaching $49.2 million compared to the anticipated $48.48 million. Following the announcement, SmartFinancial’s stock price rose by 2.91% in after-hours trading, reflecting positive market sentiment. According to InvestingPro, five analysts have recently revised their earnings estimates upward for the upcoming period, suggesting continued momentum. The company maintains strong financial health with an overall "GOOD" rating from InvestingPro’s comprehensive analysis system.

Key Takeaways

• SmartFinancial’s EPS and revenue both exceeded forecasts, marking a positive earnings surprise.
• The company’s stock price increased by 2.91% in after-hours trading.
• Strong performance was driven by net interest income and strategic regional focus.
• The company reported five consecutive quarters of positive operating leverage.
• Guidance indicates potential net interest margin expansion and continued growth focus.

Company Performance

SmartFinancial demonstrated robust performance in the second quarter of 2025, building on its strategic initiatives and regional market focus. The company reported a net income of $11.7 million, reflecting a consistent upward trend. Its focus on organic growth and talent recruitment has evidently paid off, with significant contributions from commercial and private banking sectors. The company’s strong foothold in Southeastern markets like Tennessee and Alabama continues to bolster its financial results.

Financial Highlights

• Revenue: $49.2 million, exceeding the forecast and showing strong sales momentum.
• Earnings per share: $0.69, surpassing the forecast by 7.81%.
• Net interest income: $40.3 million, contributing significantly to overall revenue.
• Tangible book value per share: $24.42 (excluding AOCI), $25.43 (including AOCI).

Earnings vs. Forecast

SmartFinancial’s actual EPS of $0.69 outperformed the forecasted $0.64, resulting in a 7.81% earnings surprise. This marks a positive deviation from expectations, suggesting effective cost management and revenue generation strategies. The revenue surprise was 1.49%, indicating strong market execution.

Market Reaction

Following the earnings release, SmartFinancial’s stock experienced a 2.91% increase in after-hours trading, closing at $36.07. This movement places the stock closer to its 52-week high of $37.72, reflecting investor confidence in the company’s performance and future outlook. The stock has demonstrated remarkable strength with a 34.55% return over the past year and maintains a relatively low beta of 0.7, indicating lower volatility compared to the broader market.

Outlook & Guidance

SmartFinancial’s forward guidance remains optimistic, with expectations of net interest margin expansion by 2-3 basis points per quarter. The company projects a Q3 margin between 3.3% and 3.35%, alongside potential rate cuts later in the year. The focus on organic growth and talent acquisition continues to drive strategic initiatives. With a market capitalization of $631.69 million and strong financial metrics, InvestingPro subscribers can access detailed analysis of SmartFinancial’s growth trajectory, including exclusive ProTips and comprehensive valuation models that help identify investment opportunities in the banking sector.

Executive Commentary

CEO Billy Carroll emphasized the company’s growth phase, stating, "We are successfully moving into the leveraging phase of growth for our company." Another executive highlighted the ongoing recruitment efforts, reinforcing the company’s commitment to expanding its talent pool.

Risks and Challenges

• Potential rate cuts could impact net interest margins.
• Economic uncertainties in key regional markets could affect growth.
• Competition in the Southeastern banking sector remains intense.
• Regulatory changes may pose compliance challenges.
• Talent acquisition and retention in a competitive market.

Q&A

During the earnings call, analysts inquired about SmartFinancial’s loan growth potential, which the company expects to remain in the high single to low double digits. Questions also focused on recruitment strategies, with management confirming a strong emphasis on deepening presence in existing markets. The company’s robust credit quality and stress-tested loan portfolio were noted as key strengths.

Full transcript - SmartFinancial Inc (SMBK) Q2 2025:

Ezra, Call Coordinator, SMART Financial: Hello, everyone, and welcome to the SMART Financial Second Quarter twenty twenty five Earnings Release and Conference Call. My name is Ezra, and I will be your coordinator today. We will be taking questions after the prepared remarks. I will now hand you over to the host, Nate Strolls, Director of Investor Relations to begin. Please go ahead.

Nate Strolls, Director of Investor Relations, SMART Financial: Thanks, Ezra. Good morning, everyone, and thank you for joining us for Smart Financial’s second 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 Gorsinski, our Chief Financial Officer, who will provide some additional commentary. We will be available to answer your questions at the end of the call.

Our comments include forward looking statements. These statements are subject to risks and uncertainties, and the actual results could vary materially. We list these factors that might cause the 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 developments 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 07/21/2025 with the SEC. And now I’ll turn it over to Billy Carroll to open our call.

Billy Carroll, President and Chief Executive Officer, SMART Financial: Thanks, Nate, and good morning, everyone. Great to be with you, and thank you for joining us today and for your interest in SMBK. 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, Rhett, Miller, and myself available for q and a. So let’s jump in.

Another very nice quarter for us as we execute on what we’ve been messaging. You’ve heard us talk about execution over the last several quarters, and that’s what we’re doing. Our team has a keen focus on hitting the targets we’ve set out for our company this year in regard to revenue, returns and prudent expense growth. As you’ll hear on this call, our company is performing very well and we’re remaining bullish on where we’re headed. For the quarter, we posted net income GAAP and operating of $11,700,000 or $0.69 per diluted share.

I continue to be proud of our performance, and I’m excited to watch us gain operating leverage. This is five consecutive quarters of positive leverage. Jumping into the highlights, I’ll be referring to the first few pages in our deck. First, and in my opinion, one of the most important metrics, we continue to increase the tangible book value of our company moving up to $24.42 per share including the impacts of AOCI and $25.43 including that impact. That’s growth of over 13% annualized quarter over quarter.

Our balance sheet growth was strong. On the loan side, we grew at a 13% annualized pace for Q2, a little ahead of our expectations as our market teams are continuing to add outstanding new relationships. On the deposit side, growth was sound at 5% quarter over quarter annualized. I continue to be very pleased with the deposit side of our balance sheet as we add outstanding new relationships there as well. We also continue to hold our noninterest bearing percentage.

The second quarter is usually a little soft with some seasonality, but we held up well, and Ron will provide more details 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 pleased to see these numbers continue at exceptionally low levels. Total revenue came in at $49,200,000 as net interest income continued to expand as we had anticipated. We also had another very nice noninterest income quarter.

Noninterest expenses also came in on target again at $32,600,000 Looking at the charts on Pages four and five, you’ll see nice trends. We’re building on our return metrics and most importantly, total revenue, EPS and as I mentioned earlier, tangible book value. All of those charts are great graphics to illustrate our execution, and I’m looking forward to and expecting these trends to continue. So a couple of additional high level comments from me on growth. Our growth was a direct result of the focus of our sales teams.

We’ve hired well over the last several years, and we’ve also built an outstanding foundational process that includes aggressively going after new client relationships, growing existing ones along with a diligent prospecting process. As I stated, we grew our loan book at 13% annualized for the quarter as sales momentum stayed strong and balanced across all of our regions. Our average portfolio yield including fees and accretion was up to 6.07% and our new loan production continues to come onto the books accretive to our total portfolio yield levels. In regard to deposits, mentioned a moment ago, I’m very proud of where we’ve done what we’ve done on the deposit front. Our loan to deposit ratio is 85%, which is still a nice spot for us.

This strong position gives us continued flexibility to leverage our strong balance sheet. Our balance sheet pipelines continue to feel good. I’ll discuss this a little more in my closing comments, but all in all, a really nice way to wrap up the first half of twenty twenty five. I’m going to stop there and hand it over to Ron to let him dive into some details for us. Ron?

Ron Gorsinski, Chief Financial Officer, SMART Financial: Well, thanks, Billy, and good morning, everyone. I’ll start by highlighting some key deposit results. Our deposit growth during the quarter was affected by typical seasonal outflows, including tax payments and the utilization of public funds. As a result, net balance non brokered deposit growth was $14,000,000 Offsetting these outflows was $116,000,000 of new non brokered production generated at a weighted average cost of 3.24%. Total interest bearing costs rose by three basis points to 2.95% and were 2.96% for the month of June.

Our loan to deposit ratio ticked up to approximately 85% with our deposit composition remaining stable and having noninterest bearing deposits at 90 of total deposits. Importantly, we saw very little account attrition or client loss throughout the quarter. Rather, we saw a continuation of last quarter’s trend whereby clients continue to utilize excess deposit funding for projects and working capital. While deposit balance drawdowns are impactful, we expect to recoup balances as project investments slow and those seasonal outflows return. Our net interest margin increased to 3.29%, representing an improvement of eight basis points over the previous quarter as higher loan yields more than offset the three basis point increase in deposit costs.

The average rate on new loan production was 7.11% resulting in a quarterly portfolio yield of 6.07%. As a result, net interest income expanded by $2,100,000 totaling $40,300,000 for the current quarter. Looking forward, we are maintaining our previous quarter’s guidance of two to three basis points of margin expansion per quarter for the second half of twenty twenty five. Although we anticipate an increase in overall deposit portfolio costs, primarily due to higher cost of new production, our new loan originations along with the amortization maturities of lower yielding loans are expected to have a positive contribution in our margin expansion. Taking these into account and considering current market conditions, we are forecasting a third quarter margin in the 3.3% to 3.35% range.

Our quarterly provision expense for credit losses reached $2,400,000 mainly from higher loan growth. Net charge offs to average loans stayed at 0.01% annualized. Asset quality remained solid with non performing assets at 0.19% of total assets and the allowance for credit losses remained steady at 0.96% of total loans. Operating non interest income rose by $300,000 to $8,900,000 exceeding our projections. Consistent with the previous quarter, this positive variance was largely attributable to higher than expected insurance and mortgage banking revenues as well as sustained robust performance from our Capital Markets Group.

Moving on to operating expenses. We maintained our focus on expense containment, recording operating expenses of $32,600,000 the low end of our guided range and a modest increase from the prior quarter. The majority of this increase was attributable to the recognition of the first full quarter of merit increases and additional accruals for incentive based compensation related to strong associate performance. Overall, we are satisfied that expenses remain at the lower end of our projected guidance range. For the third quarter, non interest income is projected to be approximately $9,000,000 and non interest expense is expected to be in the range of 33,800,000.0 and 34,000,000 Salary benefit expenses are anticipated to range from 20,500,000.0 to $21,000,000 reflecting an increase from the previous quarter due to higher levels of variable compensation and anticipated costs associated with new hires.

I’ll conclude with capital. The company’s consolidated TCE ratio increased to 7.7% and our total risk based capital ratio remained well above regulatory well capitalized standards at 11.1%. Overall, we believe our capital levels remain optimally balanced to continue to support growth while maximizing returns on equity. With that said, I’ll turn it back over to Billy.

Billy Carroll, President and Chief Executive Officer, SMART Financial: 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 are seeing the inflection in the movement of our numbers and now as we have clear vision of our return targets. We’re building a great franchise.

We’re in arguably some of the most attractive markets in the country and have put together a team that is rapidly moving us forward. You’ve you’ve heard me say before, I believe we’re one of the Southeast’s brightest stories, outstanding markets, strong experienced bankers coupled with just as experienced and strong operational and support teams along with some great complementary business lines. We expect the 2025 to have a similar look to the first half as we focused on continued growth in our EPS line and hitting our near term revenue and return targets that are clearly in sight. As I mentioned, pipelines are solid, and I think we can continue growing at that mid to high single digit pace. A couple of comments on talent 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 looking forward should be primarily talent related along with some appropriate investment in our platform. We’ve we’ve either added or are in the process of adding 10 new revenue producing team members during the first half of the year, primarily in commercial banking, private banking, and treasury management. I believe we are 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.

On the culture front, we’ve been recertified as a great place to work this year, and our associates have created an outstanding positive energy around this company. So to summarize, I love where we are sitting. We are executing, growing our revenue line, EPS and book value while staying prudent on expense growth. We remain optimistic around our margin as new production stays strong and as we see the tailwind coming with 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 coupled with a great sales energy.

I appreciate the work of our Smart Financial, Smart Bank team and the efforts of our 600 plus associates, And I’m very proud of what we’ve got going on here at SMBK. So I’m gonna stop there, and we’ll open it up for questions.

Ezra, Call Coordinator, SMART Financial: Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. Our first question comes from Stefan Skalton with Piper Sandler. Stefan, your line is open. Please go ahead.

Stefan Skalton, Analyst, Piper Sandler: Thanks. Good morning. Great quarter, guys. So Billy, talking about the loan growth and sounds like pipelines are still solid, kind of talking about mid single digits. What do you think keeps you at a level, like, in this kind of low double digit range we’ve been seemingly operating at lately?

Do you think that Yeah. You know, upside potential is still there, especially if these new hires come to fruition?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Hey, Steven. Yeah. I I do. You know, we have. You know, the last few quarters, we’ve been able to kind of bring it in at that lower double digit, level.

I still think that is very feasible. I I hedge a little bit just because, you know, we’ve we’ve seen, you know, we’ve seen a lot of payoffs and pay downs around our space. We’ve been pretty fortunate that we have not been hit with kind of some of those unanticipated payoffs or pay downs. So, you know, I I I hedge a little bit just in the anticipation that you get a few if you get a little bit more of that than we anticipate, that could drop us down into the high singles. But I still think we’re we’re at that kind of that high singles, possibly low doubles if we get it.

You mentioned the new, new production team members we’re continuing to add. So, I like our ability to grow. I think we’ve got the ability to continue to grow both sides of this balance sheet at a nice level. But but I I still lean a little bit more toward high singles, but, but, yeah, we could we could potentially do do low doubles as well.

Stefan Skalton, Analyst, Piper Sandler: Got it. And and with the new hires, is there any, sort of geographic bent towards where those folks are coming from or any verticals that you’re targeting more so than others? Or just give us a feel for, you know, where those people are coming, where they’re gonna be produced?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Spread, spread out really throughout throughout our our our our really our our whole platform. You know, we’re just seeing some great opportunities, with some bankers that that, you know, that we’ve been some that we’ve recruited for a while. Some opportunities have just kinda popped up. And, but, you know, it it’s really not in any one specific region. We’ve added really throughout, Tennessee, Alabama, and our, Gulf Coast region over the course of the the last few months.

As as I mentioned in my commentary, we’ve also got we’re in the process of adding some other really nice team members, as well. So, things have have have been good, and we’ve we’ve been able to continue to attract the opportunity to add some great talent to the team. But it’s pretty well spread out throughout the whole company.

Stefan Skalton, Analyst, Piper Sandler: Got it. And then from a forward financial perspective, I mean, you guys have basically hit the guidance and kind of the the bogey of operating revenue that you had laid out, you know, a number of quarters back, which is truly impressive. And, you know, not to not to, like, you know, say you hit it and move right past it, but in a way, like, what what’s the next bogey for you guys? What’s the next target? And and how do you get there?

Is it is it more just like, hey. We’re in great markets. We got really good people. Let’s just deepen ourselves in the markets we’re in, or do you start thinking about, you know, de novo expansion through team list outs? Or what’s kind of the path to the to the next leg up from here after reaching this this important milestone?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yeah. Great great question. And and, yeah, it it has been. We’ve we we’re not knocking on the door of of the targets that we have set out, to hit in ’25. So as I’ve mentioned, you know, those targets are clearly in our sight, and we feel like we can hit and get those surpassed here in the near term.

I think the next thing for us and and and you said it. I’ve and I’ve I’ve said this on on calls in the past. I think for us, you know, when you look at the way we built this company, and and we built it from Tennessee to Alabama to this Gulf Coast region, we’ve got a phenomenal, we’ve got a phenomenal footprint. We just need to get deeper. You know?

And and and by design, we built the company kind of, as y’all heard me say, kinda kinda mile wide inch deep because we wanted to get into these regions. We had these opportunities that we wanted to take advantage of. Well, now we just need to get deeper. You know, we’re you know, not that we wouldn’t look at a at at a market expansion, but that’s that’s that that would be secondary. And if it would be, it would be something that would make some sense to us.

I think we just need to double down, get deeper on what we’re doing. To your point, we’re already starting our 2026 planning. We’re doing that now with their team and, you know, kinda looking at where we want to where we want to to position that next set of goals for us. And so we’ll be we’ll be coming out with those over the next couple of quarters as we finalize, Air ’26 forecast. But, as I said, I love what we’re setting.

We can we can really move the, again, the revenue, the EPS, the tangible book, those pieces, those those that’s what’s driving the stock price. And and that’s what we want our investors to understand. That’s where our focus is. And I think everything you’ll see us do is gonna be focused around those metrics moving forward.

Miller, Executive Team Member, SMART Financial: Yeah. I think you know we’re a branch like model, and I would say these single office locations that we have in most of our markets, we have made a lot of progress, but we’ve got the opportunity to double or triple the size of most all of those markets in the coming near future.

Stefan Skalton, Analyst, Piper Sandler: Got it. That’s a good reminder. Great. Congrats on all the success.

Russell Gunther, Analyst, Stephens Inc.: Keep up the good work. Appreciate it.

Miller, Executive Team Member, SMART Financial: Thanks, Steve.

Ezra, Call Coordinator, SMART Financial: Our next question comes from Catherine Mealor with KBW. Catherine, your line is now open. Please go ahead.

Catherine Mealor, Analyst, KBW: Thanks. Good morning, everyone.

Miller, Executive Team Member, SMART Financial: Good morning, Catherine.

Catherine Mealor, Analyst, KBW: I wanted to just dig into the margin a little bit. And I know you mentioned that deposit costs will probably come up a little bit moving forward just as growth picks up. Can you talk a little bit about where new deposit costs are coming on an average and then on the other side where new deposit I mean excuse me where new loan yields are coming and just kind of where that incremental margin is coming on right now?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Ron, you want to jump in and dive into those details? Sure.

Ron Gorsinski, Chief Financial Officer, SMART Financial: For the second quarter, our total deposits cost came in at $2.39 Excuse me. That includes non interest bearing. Overall, our new production for June was a little escalated. It came in at $3.62, but we did have a larger relationship that we paid a little bit higher interest rates too. So I think new production overall should be in that 3.5030.6% range.

As far as the loans for the quarter, we’re at 7.11% and for June, just slightly north of 7%, 7.02%. So we’re still maintaining the higher level above 7% for our loan side.

Catherine Mealor, Analyst, KBW: Okay. That’s great. And then in your guidance, where you still think we’ll have two to three bps of NIM expansion every quarter, What are you assuming for rate cuts within that? And I assume if we get rate cuts, that’s going to make that number better.

Ron Gorsinski, Chief Financial Officer, SMART Financial: Yes, correct. We’re at this point, we’re assuming a 25 basis point in September and then one in December, which really doesn’t affect the guidance. It’s so late in the year. And yes, being liability sensitive, we do expect to get probably around this point, one to two basis points of additional lift from the rate cut. So we’re in a really good spot with our margin at this point going forward.

We’re going to our margin will expand naturally with or without the rate cuts.

Catherine Mealor, Analyst, KBW: Great. Okay. Very helpful. Thank you. And then you may have mentioned it earlier, but I might have missed it.

Can you remind us your expectations for expense growth in the back half of the year?

Ron Gorsinski, Chief Financial Officer, SMART Financial: Yes. We are looking to to increase it to sorry about that. We’re increasing it to about the 38 33,800,000.0 to 34,000,000 band. That’s for q three and pretty much the same guidance for q four. Again, heavier lift was in the salary range going forward, but still keeping it tight for Q3 and Q4.

Catherine Mealor, Analyst, KBW: Okay. Great. And maybe one more just on that. You talked, Billy, about how you had five quarters of positive operating leverage. Is that still a focus as we go into 2026?

As we look at 2026, is it fair to keep continue to look at revenue growth being faster than your expense growth?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yes. Yeah. Absolutely. You know, as as we said a little bit in the in the call, you know, when you look at the way this this balance sheet is positioned, you know, our ability, our continued ability to grow organically in these markets, Miller alluded to getting deeper. We’re in so many just great markets where where we we we’ve got relatively small share.

We’ve got some really nice share in several markets. We’ve got some expansion markets where we’ve got phenomenal share growth opportunities. And so, you know, our our whole focus is gonna be getting deeper. So I think, you know, that that that in itself is gonna generate, I think, you know, out out pay outsized growth, layer in on top of that, Catherine, what Ron has alluded to with with kind of the repricing of the loan book. So, you know, for us, we think we can hold these expense levels very reasonable.

As we said, a lot of it’s just going to be talent related from a hiring standpoint, and then just continue to see that operating leverage continue over the next few quarters.

Catherine Mealor, Analyst, KBW: Great. Okay, awesome. Thank you so much. Great quarter.

Billy Carroll, President and Chief Executive Officer, SMART Financial: Thank you, Nancy. Thanks, Catherine.

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

Russell Gunther, Analyst, Stephens Inc.: Hey. Good morning, guys. Just to quickly circle back to the loan growth discussion, you really do have to go back to the ’24 to see a mid single digit result out of you guys. So hear you loud and clear on that kind of high single digit, maybe low double. And to that end, could

Billy Carroll, President and Chief Executive Officer, SMART Financial: you just give us a

Russell Gunther, Analyst, Stephens Inc.: sense for where commercial pipelines stand today versus the linked quarter? And what, if any, sentiment shift you’re getting from your commercial borrowers?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yeah. I’ll I’ll make a couple of comments, and I’ll ask Brett to to to jump in and talk a bit about kind of what he’s seen kinda coming through the pipeline. But, you know, pipelines continue to be pretty solid. I would say they are probably at or or as good as, the levels that we’ve seen over the last couple of quarters. You know?

And, again, it goes back I alluded to it in my comments. The focus that we have, on the sales side of the house is is I I think it’s as good as it’s ever been in our company. Team members, get it. Our our our division, present leadership structure that we we moved to this year has really worked well. There’s just and when we got great team members, but there’s also just a real intensive focus on on on bringing in new clients.

And so, that said, our pipelines are as good. And then, Rhett, maybe you can have some color on kind of what you’re seeing, what those pipelines are looking like a little bit, maybe any other color that you’ve got on that side.

Rhett, Executive Team Member, SMART Financial: Yeah. I mean, Bill, to Millie’s point, I mean, pipeline today really is positioned as strong as it has been pretty much throughout the course of the year. So it’s, here at the at the middle part of the year, we’ve still got basically a similar amount and opportunity, sitting in our pipeline that we started the year off with. You’ve seen the results in growth we’ve seen thus far. As far as the format of that pipeline, the best way I know to put it is, we look at the the mix of what’s in the pipeline, both geographically with product type, etcetera, and it is tracking extremely near the way our portfolio mix sets today.

So the type of deals in the pipeline, the location of the deals in the pipeline, there’s nothing in there that would give any indication that it would change any degree of concentration within our portfolio at all. So we are continuing to see a very broad mix across every market and every product type we generate business in.

Russell Gunther, Analyst, Stephens Inc.: Great. Thank you, guys. And then you spoke about, continuing to leverage the current platform organically, as well as continuing to recruit top talent. So could we get a sense for sort of where the recruitment pipeline stands today? And then as you work to get, you know, deeper, versus that mile wide inch deep, are there any particular markets where you’re more focused than others?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yeah. Yeah. Yeah. I think, yeah, we’re we’re focused everywhere. Obviously, we we said it a second ago, you know, when you look at our our company, we we’ve got a number of markets where, you know, where we’ve either grown, you know, from a legacy standpoint or where we’ve where we’ve acquired really good banks with larger legacy footprints.

Then we’ve had a lot of these expansion markets that we’ve seen. So the expansion markets are where our market share numbers have really tremendous upside. So we’re gonna probably focus a little more of the recruitment in in those markets. And in in in you take a look at whether it’s Nashville MSA, Birmingham MSA, for example. You look down in our coastal region with with with markets like a Mobile, Alabama, great growth opportunities that that we see.

There are others as well. But just those in itself, I mean, those markets, we’ve just got tremendous opportunity to to to bring in. We’ve already added some great bankers to look to bring in some additional bankers to our team in those markets. So, you know, when you look at at just markets like those that I mentioned, my gosh, the market share upside and just those by themselves, could could fuel a lot of growth for us. So, yeah, I think that’s probably where our focus is gonna be, but we’ll look to figure out where we’ll add add talent wherever it fits.

Yeah. This is Miller, and

Miller, Executive Team Member, SMART Financial: I would I would add that we are ABR, always be recruiting, and we are consistently on it. The executive team spends a ton of time in the markets recruiting bankers. Our division presidents are all over at recruiting. That’s as big a focus as new clients and new relationships. It’s great bankers we want on our team.

Russell Gunther, Analyst, Stephens Inc.: Excellent. Alright. Thank you both. And then last one for me would just be, back to the revenue target. I appreciate kind of waiting a quarter or two to to get the ’26 outlook, but you did get where you needed to go perhaps a quarter earlier than, you otherwise might have.

We’re still shy of the 1% ROA target, so it would be helpful to get your sense as to whether that’s something you still think you will be able to achieve in the back half of this year.

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yeah. Yeah. Think we’ll we’ll be we’ll be close, Russell. I think we’ll be real close on the one. I think, you know, when you when you take a look when you take a look at at the numbers again, a little more on the expense side.

If you take a look at the PPNR numbers, you know, the the little more little more in reserve that we put in just because of growth, this year. So I think if you normalize the growth a little bit, I think that, you know, we should you should see that that number kind of just move up into the mid nineties pretty easily over the next quarter or so, and then we’ll be knocking on the door of that one. We’ve we’ve we’ve kinda targeted, as you’ve heard us talk about, kind of the one in 12 on the ROA and the ROE. We’re we’re we’re we’re pretty much there on the ROE. The ROA is maybe a couple of basis points behind that.

But as we continue to execute, I think that one that the one we’ll move through that pretty quickly over the next several quarters.

Russell Gunther, Analyst, Stephens Inc.: All right. Very good, guys. I appreciate you taking my questions. Thank you.

Billy Carroll, President and Chief Executive Officer, SMART Financial: Thanks, Russell.

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

Thomas, Analyst Representative, Raymond James: Hey, good morning guys. This is Thomas on for Steve. Thanks for taking my call. Most of my questions have been asked and answered at this point, but I mean maybe just on credit, credit metrics remain really strong here. Are you seeing any signs of weakness whatsoever?

It looks like you have some maybe some lower yielding fixed rate loans maturing in the fourth quarter this year at looks like $4.40 based on the slide deck. Have you stress tested those for the rate shock? And and, you know, what do you just broadly speaking credit front, what are you thinking?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yeah. And and, I was I’ll let Rhett’s Rhett’s like the Maytag repairman over here. So I will we’ll give him an opportunity to talk a little bit. But, now credit’s good, but I’ll let him talk a little bit about what he’s seeing on on that side. Any potential weakness.

I don’t think we’re seeing much there. But and then maybe also just talk about I know I know their team has done a lot of stress testing, on on the loans as these renewals are coming up with with different rates. But comment on that, Rick.

Rhett, Executive Team Member, SMART Financial: Sure. Yeah. Thomas, we have, we have first question as far as, the book itself. We really have not seen any signs of weakness in any particular sectors, as we’re getting information in from our clients, both, you know, prior year end and year to date. Still can see still seeing consistent performance, throughout our existing book, in pretty much every every area.

So, we are not forecasting or looking at anything specific right now that we have identified as, I would say, a primary area of concern. As it relates to, those low those lower yielding assets that are gonna be maturing, we have we started a project, to do some forward looking, stress testing, performance stress testing on that book really about eighteen months, almost two years ago. And we have consistently done that sort of looking out in the six to twelve month window, of those maturities. And, you know, thus far, with what we’re looking at, you know, obviously, in a few cases, you may have a few that will show some tighter coverage numbers than they than they were at origination, but nothing that is any indication of, inability to service, a modified transaction. And, and so we’re very optimistic about that, and still feel like the the the book is positioned well to absorb any absorb those rate increases for the borrower, which also benefits the bank.

Thomas, Analyst Representative, Raymond James: Okay, great. That’s great to hear. That’s all from me. Congrats on another great quarter, knocking the cover off the ball again, guys. Appreciate it.

Stefan Skalton, Analyst, Piper Sandler: Thanks,

Ezra, Call Coordinator, SMART Financial: Our next question comes from Christopher Marinac with Janney Montgomery Scott. Your line is now open. Please go ahead.

Nate Strolls, Director of Investor Relations, SMART Financial0: Hey, thanks. Good morning. I wanted to ask about recruiting across state lines and pushing this geography, whether it’s in the Carolinas or other states.

Rhett, Executive Team Member, SMART Financial: I know you’ve got a

Nate Strolls, Director of Investor Relations, SMART Financial0: lot to do in your existing footprint as you’ve talked about a few times today. Just curious on recruiting people or dislocations you see in other markets that could be an opportunity as time passes?

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yes. Obviously, as you see a little bit of change going on, obviously, M and A comes into play in some of that. I think we, you know, we’ve we’ve we’ve demonstrated our ability to really execute on some nice lift outs when we’ve seen a little bit of market disruption. So, Chris, I think for us, a lot of it is just kinda waiting and watching. I think we’re all and Miller alluded to this.

I think, you know, the the thing is we’ve really shifted to a a stronger organic model over the last few years. Recruiting has really ramped up as far as kind of importance in our company. So Miller said, you know, he, myself, our our division presidents, we’re all out, you know, just continuing to drip on on talent that we think would be good culture fits for our company. And so I think that is first and foremost in the markets where we are. I I really don’t I don’t see us looking to do any, what I would call, major market moves from from that standpoint like we did, you know, several years back when we had the opportunity with all those Alabama MSAs.

That was such a unique opportunity that gave us an op gave us a chance to really just fill in the density piece that was missing in our footprint. And so, yeah, that was a big lift for us as we’ve talked about. It was a huge lift for us to all those de novo markets in a real, real short period of time. But for us, I think a lot of it and, again, I said it earlier, it’s just getting deeper. I think we need to be focused on getting deeper in these great zones where we are.

You know, we’re always gonna take a look at at, you know, at at opportunities, but but we’ve got plenty on airplay, I think, in front of us now. So the recruiting, think, you will see us probably just stay really close to the zones where we are today.

Miller, Executive Team Member, SMART Financial: Yeah. If you think about it, Chris, the the markets we’re in, these college towns, schools fixing to start back third quarter. There’s this football season starting back. The businesses in these zones we’re in are all very optimistic about the third and fourth quarters that they have ahead. And, you know, just people are excited about being in business, and I I just think it’s, they want to be in a market If we get some bankers that want to move here or we’re glad to have them.

But we love where we are, and we love doubling and tripling down on where we are.

Nate Strolls, Director of Investor Relations, SMART Financial0: Sounds good. Thank you both for that. And then just one curiosity, do you see the average loan size in the portfolio kind of pushing higher as the next several quarters develop? It’s not just a near term question. Kind of curious kind of where that’s going to go over time.

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yeah. And and I’ll I’ll ask, Brett. I don’t I don’t have the the stat in front of me on loan size. I think just as we’ve gotten bigger, our loan size has moved up in some, but but I don’t think it’s really moved up materially, Brett. Definitely.

Would you comment on that?

Rhett, Executive Team Member, SMART Financial: Yeah. I would say not from an average perspective. I mean, we certainly do. As we continue to get larger, we you know, it just provided us the opportunity to look at the engaged in some larger transactions. But I would say from an average perspective, I don’t really see that number moving considerably.

Nate Strolls, Director of Investor Relations, SMART Financial0: Yeah.

Billy Carroll, President and Chief Executive Officer, SMART Financial: We still focus, Chris. I you know, I think yeah. We still do a lot of really nice work focusing on singles and doubles. I think when you look at a lot of these these really nice solid tier two MSAs that we’re in, we’re growing a lot, some of our larger ones. But, you know, we’re in a lot of these great tertiary MSAs where where we’re just hit we’re we’re still kinda just hitting singles and doubles.

And, it’s it’s it’s nice. And and I like building the company that way. I think it’s it’s it’s it’s more sustainable. It’s less, less impact to to swings and, you know, whipsaw effects. And and so, but, to Rhett’s point, yeah, we’re doing some larger credits.

So it might move

Rhett, Executive Team Member, SMART Financial: up a little bit, but

Billy Carroll, President and Chief Executive Officer, SMART Financial: I don’t think the average is moving up a ton. Payoffs and

Rhett, Executive Team Member, SMART Financial: paydowns don’t sting as much either.

Billy Carroll, President and Chief Executive Officer, SMART Financial: That’s true. That’s true.

Nate Strolls, Director of Investor Relations, SMART Financial0: Good stuff. Thanks everybody. I appreciate you taking this morning.

Billy Carroll, President and Chief Executive Officer, SMART Financial: Yes. Thank you, Chris. Thanks, Chris.

Ezra, Call Coordinator, SMART Financial: Thank you very much. We currently have no further questions. So I’ll hand back over to Miller for any closing remarks.

Miller, Executive Team Member, SMART Financial: Thank you, Ezra, and thank you all for being on the call today and for supporting Smart Bank as we work hard every day to grow this bank for our shareholders. Have a great day.

Ezra, Call Coordinator, SMART Financial: Thank you very much, Miller, and thank you to all our speakers on today’s call. We appreciate everyone for joining. That concludes our call. You may now disconnect your lines.

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