SmartFinancial(SMBK) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income of $11.7 million or $0.69 per diluted share for Q2 2025, indicating strong performance [6] - Tangible book value increased to $24.42 per share, representing over 13% annualized growth quarter over quarter [7] - Total revenue for the quarter was $49.2 million, with net interest income expanding as anticipated [9] Business Line Data and Key Metrics Changes - Loan growth was at a 13% annualized pace for Q2, exceeding expectations, while deposit growth was 5% quarter over quarter annualized [8] - Noninterest income rose by $300,000 to $8.9 million, driven by higher insurance and mortgage banking revenues [16] Market Data and Key Metrics Changes - The average portfolio yield, including fees and accretion, was up to 6.07%, with new loan production contributing positively [12] - The loan to deposit ratio was maintained at 85%, with noninterest bearing deposits comprising 90% of total deposits [14] Company Strategy and Development Direction - The company aims to deepen its presence in existing markets rather than pursuing new market expansions, focusing on organic growth [33][81] - Talent acquisition remains a priority, with plans to add 10 new revenue-producing team members in commercial banking, private banking, and treasury management [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in EPS and revenue, with solid pipelines and a focus on operational efficiency [20][22] - The company anticipates margin expansion of 2 to 3 basis points per quarter for the second half of 2025, despite expected increases in deposit costs [15][47] Other Important Information - The company maintained a strong credit quality with non-performing assets at just 0.19% of total assets [16] - Operating expenses were recorded at $32.6 million, at the low end of the guided range, with a modest increase attributed to merit increases and incentive compensation [17] Q&A Session Summary Question: Loan growth and future potential - Management believes maintaining a high single-digit growth rate is feasible, with potential for low double-digit growth if new hires are effective [25][28] Question: Geographic focus for new hires - New hires are spread across various regions, including Tennessee, Alabama, and the Gulf Coast, with no specific geographic concentration [29][30] Question: Future revenue targets and growth strategy - The company is focused on deepening its market presence and achieving set targets for 2025, with ongoing planning for 2026 [31][34] Question: Margin expectations and deposit costs - The company expects to see margin expansion despite rising deposit costs, with a forecasted margin of 3.3% to 3.35% for Q3 [15][47] Question: Credit quality and stress testing - Management reported no signs of weakness in credit quality and has conducted stress testing on lower-yielding loans maturing in Q4 [71][75] Question: Recruitment and market expansion - The company is focused on organic growth and recruitment within existing markets, with no immediate plans for major market expansions [81][82]