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SMARTFINANCIAL INC. (SMBK)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered another quarter of positive operating leverage: diluted EPS $0.69 (+4% QoQ; +44% YoY) with net income $11.7M; NIM (FTE) expanded 8 bps QoQ to 3.29% and operating revenue rose to $49.2M .
  • Versus Wall Street consensus (S&P Global): EPS beat ($0.69 vs $0.64), while revenue missed on SPGI’s bank “revenue” definition ($46.83M actual vs $48.48M), reflecting higher provision expense amid strong loan growth; estimates based on SPGI measures, see table below.*
  • Guidance shifted higher: CFO now targets Q3 NIM in the 3.30%–3.35% range (prior Q1 guide ~3.25%), noninterest income ~$9M, and noninterest expense $33.8–$34.0M; salary and benefits $20.5–$21.0M; assumes 25 bp cuts in Sep and Dec with 1–2 bps margin lift from rate cuts .
  • Catalysts: sustained loan growth (+13% annualized QoQ), margin inflection, stable credit (NPAs/Assets 0.19%), and continued TBV accretion ($24.42); dividend maintained at $0.08/share (payable Aug 25) .

What Went Well and What Went Wrong

  • What Went Well

    • Five consecutive quarters of positive operating leverage amid rising NIM and EPS; “we are successfully moving into the leveraging phase of growth” .
    • Strong loan growth (+$132M net organic, 13% annualized QoQ) with new originations averaging ~7.11% yields; total revenue growth to ~$49.2M (operating) .
    • Asset quality stable: NPAs/Assets 0.19%; ACL/loans steady at 0.96%; net charge-offs 0.01% annualized; TBV per share rose to $24.42 .

  • What Went Wrong

    • SPGI “revenue” miss driven by higher provision ($2.41M vs $0.98M in Q1) despite strong NII and fee trends; consensus expected higher SPGI revenue .*
    • Deposit costs edged up (+3 bps QoQ to 2.95% interest-bearing deposits; total deposits cost 2.39%), pressuring liability side; noninterest expense increased modestly on incentives .
    • Competitive loan pricing environment acknowledged; management “sticking to structure and pricing” but notes pressure could temper yields over time .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Net Interest Income ($M)37.783 38.238 40.343
Noninterest Income ($M)9.030 8.597 8.898
Provision for Credit Losses ($M)2.135 0.979 2.411
Net Income ($M)9.640 11.254 11.705
Diluted EPS ($)0.57 0.67 0.69
NIM (FTE, %)3.24 3.21 3.29
Efficiency Ratio (GAAP, %)68.98 68.96 66.14
Operating Revenue (Non-GAAP, $M)46.749 46.835 49.245

Segment (Loan Composition, EOP)

Loan Category ($M)Q4 2024Q1 2025Q2 2025
CRE – Non-owner occupied1,080.404 1,117.392 1,114.133
CRE – Owner occupied867.678 885.396 958.989
Consumer real estate741.836 784.602 803.270
Construction & land dev.361.735 357.393 391.155
Commercial & industrial775.620 768.454 778.754
Leases64.878 64.208 62.495
Consumer & other14.189 14.762 15.266
Total loans & leases3,906.340 3,992.207 4,124.062

KPIs and Balance Sheet

KPIQ4 2024Q1 2025Q2 2025
ROAA (Operating, %)0.64 0.87 0.88
ROATCE (Operating, %)8.70 9.94 11.53
TBV per share ($)22.85 23.61 24.42
NPAs / Assets (%)0.19 0.19 0.19
ACL / Loans (%)0.96 0.96 0.96
Net charge-offs (annualized, %)0.02 0.01 0.01
Deposits ($M)4,686.483 4,808.659 4,872.120
Loans ($M)3,906.340 3,992.207 4,124.062
L/D ratio commentary“~83%” (management) “~83%” (management) “~85%” (management)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIM (FTE)Q3 2025~3.25% (guide given in Q1 call for Q2; directional 2–3 bps/quarter) 3.30%–3.35% Raised
Margin expansion cadence2H 20252–3 bps per quarter Maintain 2–3 bps per quarter; rate cuts add 1–2 bps Maintained / refined
Noninterest incomeQ3 2025Low–mid $8M (Q2 view) ~$9M Raised
Noninterest expenseQ3 2025$32.5–$33.0M (Q2 view) $33.8–$34.0M Raised
Salary & benefitsQ3 2025$19.5–$20.0M (Q2 view) $20.5–$21.0M Raised
Effective tax rate2025 onward18%–19% 18%–19% (stabilizing) Maintained
Rate cuts assumption2H 2025Discussed potential earlier cuts benefit 25 bp in Sep and Dec; liability-sensitive adds 1–2 bps Specified
DividendQ3 2025$0.08/share (Q1 declaration) $0.08/share declared, payable Aug 25 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Margin expansion/NIMNIM rose to 3.24% in Q4; Q1 guide 2–3 bps/quarter expansion Q2 NIM 3.29%; Q3 guide 3.30%–3.35% Strengthening
Loan growthQ4: +20% annualized; Q1: +9% annualized Q2: +13% annualized; pipelines strong across markets Sustained
Deposit costs/compositionQ1 interest-bearing deposit cost 2.92%; noninterest-bearing ~19% Q2 interest-bearing deposit cost 2.95%; minimal attrition; net non-broker growth $14M Slight upward pressure, stable mix
Talent/recruitingQ1 added 5 (PB/TM) ~10 new revenue producers added 1H; focus TN/AL/Gulf Coast Accelerating
Tariffs/macro watchQ1: monitoring tariffs; clients resilient Continued caution; no material weakness seen; stress-testing renewals Stable/monitored
Asset qualityNPAs/Assets 0.19% Q4–Q2; NCOs low NPAs/Assets 0.19%; ACL 0.96%; NCOs 0.01% Stable
Capital & TBVTBVPS rising; TCE/TA ~7.5–7.7% TBVPS $24.42; TCE/TA 7.71% Improving

Management Commentary

  • CEO: “We are successfully moving into the leveraging phase of growth… building total revenue, EPS, and tangible book value” .
  • CEO on growth: “Loan book grew at 13% annualized… sales momentum stayed strong and balanced across all regions” .
  • CFO: “NIM increased to 3.29%… average rate on new loan production was 7.11%… forecasting a third quarter margin in the 3.3%–3.35% range” .
  • CEO on culture and talent: “We’ve either added or are in the process of adding 10 new revenue-producing team members… one of the Southeast’s brightest stories” .

Q&A Highlights

  • Loan growth sustainability: Management sees high-single-digit to low-double-digit potential; pipelines broad-based across markets and products .
  • Margin and rate path: Liability-sensitive balance sheet; base case 25 bp cuts in Sep & Dec with 1–2 bps incremental NIM lift; margin expansion expected regardless .
  • Expense trajectory: Q3 noninterest expense guided to $33.8–$34.0M with talent-related increases; operating leverage remains focus .
  • ROA goal: “Knocking on the door” of ~1% ROA over next several quarters; reserve build for growth moderates as growth normalizes .
  • Credit: No sector weakness observed; stress tests on fixed-rate loans maturing 4Q show manageable coverage; net charge-offs minimal .
  • Share repurchase/M&A: ~$1.5M authorization remaining; repurchases considered closer to BV; organic growth prioritized over M&A, though deposit-centric deals could be evaluated .

Estimates Context

MetricConsensus (Q2 2025)Actual (Q2 2025)Beat/Miss
EPS ($)0.6417*0.69 Bold beat
Revenue ($)48,480,400*46,830,000*Bold miss

Notes:

  • SPGI “revenue” for banks typically equals net interest income + noninterest income − provision for credit losses; for Q2 this is $40.343M + $8.898M − $2.411M = $46.830M .
  • EPS and revenue consensus counts: EPS (# est.) = 6*; Revenue (# est.) = 5*; Target price consensus ~$39.96*; forward Q3 2025 EPS consensus ~0.722*; revenue ~$51.06M*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin inflection intact with guide raised for Q3; incremental NIM expansion plus rate-cut tailwinds can support EPS upside if deposit cost control persists .
  • Revenue miss on SPGI definition was provision-driven; underlying operating revenue and NII trends are robust; watch provision trajectory as loan growth remains strong .
  • Asset quality and capital remain solid (NPAs/Assets 0.19%, ACL 0.96%, TCE/TA 7.71%); credit normalization risk appears low near-term per stress tests and commentary .
  • Talent additions and market density strategy likely to sustain mid-to-high single-digit loan growth, supporting revenue scale and operating leverage into 2H’25 .
  • Short-term: Positive setup for Q3 on margin/fee guidance; watch competitive loan pricing and deposit costs. Medium-term: Path to ~1% ROA and continued TBV accretion under stable credit and disciplined expense management .
  • Dividend maintained ($0.08/share, payable Aug 25) adds yield while franchise compounding continues; share repurchase optionality nearer BV provides capital deployment flexibility .