SmartFinancial(SMBK) - 2025 Q3 - Quarterly Results

Executive Summary & Highlights Third Quarter 2025 Financial Performance SmartFinancial reported significant Q3 2025 net income and operating earnings growth, reflecting improved operational performance Key Financial Performance (Q3 2025 vs. Prior Periods) | Metric | Q3 2025 | Q3 2024 | Q2 2025 | | :-------------------------- | :------ | :------ | :------ | | Net Income | $13.7M | $9.1M | $11.7M | | Diluted EPS | $0.81 | $0.54 | $0.69 | | Operating Earnings | $14.5M | $9.1M | $11.7M | | Operating Diluted EPS | $0.86 | $0.54 | $0.69 | Strategic Highlights and Management Commentary SmartFinancial achieved its $50 million quarterly revenue target early, demonstrating strong operational execution, organic growth, and strategic balance sheet enhancements - Achieved over $50 million in quarterly operating revenue, ahead of schedule[3][6] - Demonstrated sixth consecutive quarter of positive operating leverage[3] - Reported 10% annualized organic loan growth and 15% annualized deposit growth quarter-over-quarter[3][6] - Tangible book value per common share rose 26% quarter over quarter annualized[3][6] - Strategic actions included a $4.0 million pre-tax gain from the sale of SBK Insurance (SBKI), repositioning $85 million of available-for-sale securities (resulting in a $3.9 million pre-tax loss), and a $100 million subordinated debt issuance to retire existing debt and fund growth[3][6] Financial Performance Analysis Net Interest Income and Net Interest Margin Net interest income increased from earning asset growth, but net interest margin slightly decreased due to rising liability costs Net Interest Income and Margin Trends | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :-------------------------------- | :------ | :------ | :----------- | | Net Interest Income | $42.4M | $40.3M | +$2.1M | | Tax Equivalent Net Interest Margin | 3.25% | 3.29% | (0.04)% | | Yield on Loans and Leases (FTE) | 6.05% | 5.99% | +0.06% | | Cost of Interest-Bearing Liabilities | 3.07% | 2.99% | +0.08% | - Average earning assets totaled $5.23 billion, an increase of $271.4 million from the prior quarter, primarily from an increase in average loans and leases of $121.0 million and average interest-earning cash of $152.6 million[4] - Average interest-bearing liabilities increased by $249.4 million from the prior quarter, primarily attributable to an increase in average interest-bearing deposits of $207.4 million and average subordinated debt of $45.4 million[4] Provision for Credit Losses and Credit Quality Allowance for credit losses decreased, provision for credit losses significantly reduced, though nonperforming assets increased slightly Credit Quality Indicators | Metric | Sep 30, 2025 | Jun 30, 2025 | Change (QoQ) | | :------------------------------------------------ | :----------- | :----------- | :----------- | | Allowance for Credit Losses | $39.1M | $39.8M | -$0.7M | | Allowance for Credit Losses to Total Loans & Leases | 0.93% | 0.96% | (0.03)% | | Provision for Credit Losses | $351K | $1,747K | -$1,396K | | Nonperforming Loans & Leases to Total Loans & Leases | 0.24% | 0.19% | +0.05% | | Total Nonperforming Assets to Total Assets | 0.22% | 0.19% | +0.03% | Noninterest Income Noninterest income slightly decreased quarter-over-quarter, primarily from securities losses and reduced commissions, partially offset by an SBKI sale gain Noninterest Income (Q3 2025 vs. Q2 2025) | Category | Q3 2025 (in thousands) | Q2 2025 (in thousands) | Change (QoQ) (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :-------------------------- | | Total Noninterest Income | $8,637 | $8,898 | $(261) | | Loss on sale of securities | $(3,715) | $(4) | $(3,711) | | Gain on sale of SBKI | $3,955 | $0 | $3,955 | | Insurance commissions | $1,049 | $1,554 | $(505) | Noninterest Expense Noninterest expense increased quarter-over-quarter, mainly driven by restructuring expenses incurred in the third quarter Noninterest Expense (Q3 2025 vs. Q2 2025) | Category | Q3 2025 (in thousands) | Q2 2025 (in thousands) | Change (QoQ) (in thousands) | | :------------------------ | :--------------------- | :--------------------- | :-------------------------- | | Total Noninterest Expense | $33,869 | $32,569 | $1,300 | | Restructuring expenses | $1,310 | $0 | $1,310 | Income Tax Expense Income tax expense increased in the third quarter of 2025 compared to the prior quarter Income Tax Expense (Q3 2025 vs. Q2 2025) | Metric | Q3 2025 (in thousands) | Q2 2025 (in thousands) | Change (QoQ) (in thousands) | | :--------------- | :--------------------- | :--------------------- | :-------------------------- | | Income Tax Expense | $3,285 | $2,556 | $729 | Balance Sheet Trends Assets Total assets increased significantly since December 31, 2024, primarily due to growth in loans and leases, cash and cash equivalents, and securities Asset Trends (Sep 30, 2025 vs. Dec 31, 2024) | Metric | Sep 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | Increase (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------------- | | Total Assets | $5,784,983 | $5,275,904 | $509,079 | | Loans and leases | $4,222,369 | $3,906,340 | $316,029 | | Cash and cash equivalents | $557,127 | $387,570 | $169,557 | | Securities | $634,459 | $608,987 | $25,472 | Liabilities Total liabilities increased since December 31, 2024, mainly driven by substantial growth in total deposits and an increase in subordinated debt Liability Trends (Sep 30, 2025 vs. Dec 31, 2024) | Metric | Sep 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | Increase (in thousands) | | :---------------- | :-------------------------- | :-------------------------- | :---------------------- | | Total Liabilities | $5,246,501 | $4,784,443 | $462,058 | | Total Deposits | $5,050,897 | $4,686,483 | $364,414 | | Subordinated Debt | $138,604 | $39,684 | $98,920 | - Deposit growth was primarily driven by increases in money market deposits (+$178.8 million), other time deposits (+$174.4 million), and interest-bearing demand deposits (+$92.7 million)[19] Shareholders' Equity Shareholders' equity increased since December 31, 2024, primarily due to net income and a positive change in accumulated other comprehensive loss, partially offset by dividends paid Shareholders' Equity Trends (Sep 30, 2025 vs. Dec 31