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SmartFinancial, Inc. (NASDAQ:SMBK): Solid Quarterly Performance Amidst Challenging Environment
Published on September 24, 2024 | Ticker: SMBK

SmartFinancial, Inc. (NASDAQ:SMBK), a regional bank holding company, has reported its second-quarter 2024 financial results, showcasing resilience and strategic execution in a dynamic market landscape. The company's net income for the quarter stood at $8 million, or $0.48 per diluted share, while on an operating basis, it recorded $7.8 million, or $0.46 per diluted share.

Key Highlights

One of the most notable highlights for the quarter was the continued growth in the company's tangible book value, which increased by 10% on an annualized basis, reaching $21.66 per share, including the impacts of AOCI, and $23.18 excluding that impact. This consistent value creation underscores SmartFinancial's commitment to delivering long-term shareholder value.

The company's loan growth for the quarter was impressive, with an 11% annualized increase, driven by continued growth in new relationships and an increase in online funding. This robust loan growth was achieved while maintaining a low-risk profile, as evidenced by the company's non-performing asset ratio of just 20 basis points.

Financials

SmartFinancial's total revenue for the quarter came in at $40.4 million, with net interest income continuing to expand as the company navigates the inflection point in its margin. Non-interest expenses were relatively steady at $29.2 million, showcasing the company's disciplined approach to cost management and the operating leverage it is beginning to realize.

The company's regional sales teams have been instrumental in driving new client growth, with the addition of over 10 new sales team members so far this year. This strategic focus on expanding its sales force and enhancing its operating platform has positioned SmartFinancial for continued success.

Geographic Performance

Geographically, the company's loan and deposit growth has been well-diversified across its footprint, with all of its major market segments contributing at a comparable rate. Additionally, the company's newer markets are gradually increasing their production, further diversifying the sources of growth.

Deposit and Securities Portfolio

On the deposit front, SmartFinancial experienced some contraction during the quarter, primarily due to seasonality and the roll-off of $15 million in wholesale funding. However, the company's overall deposit composition remained consistent, with non-interest-bearing deposits accounting for over 20% of the total. The company's focus on leveraging deposits has resulted in a loan-to-deposit ratio of 83%.

Regarding the company's securities portfolio, SmartFinancial has been actively managing its reinvestment strategy, with the weighted average yield on the portfolio increasing by 66 basis points to 3.60% during the quarter. This proactive approach to portfolio management has contributed to the expansion of the company's net interest margin.

Outlook

Looking ahead, SmartFinancial is forecasting a quarterly operating revenue run rate of over $42 million and a net interest margin in the range of 3.05% for the third quarter. This guidance reflects the company's confidence in its ability to continue delivering strong financial performance.

Capital Position

The company's capital position remains solid, with a consolidated TCE ratio of 7.7% and a total risk-based capital ratio that, while decreasing slightly due to strong loan growth, still positions SmartFinancial as well-capitalized for its future growth and earnings outlook.

Management Strategy

SmartFinancial's management team has emphasized the company's focus on leveraging its operating platform, reinvigorated sales emphasis, and strategic market positioning to drive continued success. The company's regional president structure and accountability measures have been instrumental in fostering a sales-driven culture and delivering on its growth objectives.

Conclusion

SmartFinancial's second-quarter 2024 results demonstrate the company's ability to navigate a challenging environment and execute on its strategic initiatives. With a strong balance sheet, disciplined cost management, and a renewed focus on sales and client relationships, SmartFinancial is well-positioned to capitalize on the opportunities ahead and deliver long-term value for its shareholders.

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