SmartFinancial Announces Results for the Second Quarter 2024

KNOXVILLE, Tenn., July 22, 2024 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NYSE: SMBK), today announced net income of $8.0 million, or $0.48 per diluted common share, for the second quarter of 2024, compared to net income of $8.8 million, or $0.52 per diluted common share, for the second quarter of 2023, and compared to prior quarter net income of $9.4 million, or $0.55 per diluted common share. Operating earnings1, which excludes non-recurring income, net of tax adjustments, totaled $7.8 million, or $0.46 per diluted common share, in the second quarter of 2024, compared to $8.8 million, or $0.52 per diluted common share, in the second quarter of 2023, and compared to $8.4 million, or $0.49 per diluted common share, in the first quarter of 2024.

Highlights for the Second Quarter of 2024

• Operating earnings1 of $7.8 million, or $0.46 per diluted common share
• Net organic loan and lease growth of $97 million with 11% annualized quarter-over-quarter increase
• Quarter-over-quarter net tax equivalent interest margin expansion of 12 basis points to 2.97%
• 10% annualized quarter-over-quarter increase in tangible book value per common share1
• 136,195 shares repurchased at a weighted average price of $21.57
• Credit quality remains solid with nonperforming assets to total assets of 0.20%

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1 Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliations

Billy Carroll, President & CEO, stated: “Our Company continued to gain momentum with a very nice second quarter highlighted by solid growth in operating revenue and a 10% annualized increase in tangible book value per share quarter over quarter. We also took advantage of our liquidity position, growing loans at an 11% quarterly annualized pace. Margin inflection accelerated during the quarter, and we look forward to seeing that trend continue. The sales energy around our Company is very strong and our outlook for the second half of 2024 remains bullish as we gain further operating leverage.”

SmartFinancial's Chairman, Miller Welborn, concluded: “The Board of Directors was pleased to see operating leverage expansion and strong loan growth during the second quarter. The Company’s markets continue to provide great organic growth opportunities that we look forward to winning. We continue to strategically progress towards our longer-term financial objectives and this quarter’s margin expansion and expense control is a good demonstration of our team’s ability to execute our plan. We are confident in our team and look forward to continued improvement as the year progresses.”

Net Interest Income and Net Interest Margin

Net interest income was $32.8 million for the second quarter of 2024, compared to $31.7 million for the prior quarter. Average earning assets totaled $4.5 billion for the current and prior quarters. The categories of average earnings assets changed quarter-over-quarter, primarily from an increase in average loans and leases of $46.2 million, offset by a decrease in average securities of $40.8 million and average interest-earning cash of $7.5 million. Average interest-bearing liabilities decreased by $19.8 million from the prior quarter, attributable to a decrease in average deposits of $21.3 million, offset by an increase in average borrowings of $1.4 million.

The tax equivalent net interest margin was 2.97% for the second quarter of 2024, compared to 2.85% for the prior quarter. The tax equivalent net interest margin was positively impacted by the increased yield on interest-earning assets, quarter-over-quarter, coupled with a slower rise on the cost of interest-bearing liabilities, quarter-over-quarter. The yield on loans and leases, excluding loan fees, on a fully tax equivalent basis (“FTE”) was 5.80% for the second quarter, compared to 5.71% for the prior quarter.

The cost of total deposits for the second quarter of 2024 was 2.56% compared to 2.52% in the prior quarter. The cost of interest-bearing liabilities increased to 3.29% for the second quarter of 2024, compared to 3.23% for the prior quarter. The cost of average interest-bearing deposits was 3.23% for the second quarter of 2024, compared to 3.16% for the prior quarter, an increase of 7 basis points.

The following table presents selected interest rates and yields for the periods indicated:

Provision for Credit Losses on Loans and Leases and Credit Quality

At June 30, 2024, the allowance for credit losses was $34.7 million. The allowance for credit losses to total loans and leases was 0.97% as of June 30, 2024, compared to 0.98% as of March 31, 2024.

The following table presents detailed information related to the provision for credit losses for the periods indicated (dollars in thousands):

Nonperforming loans and leases as a percentage of total loans and leases was 0.19% as of June 30, 2024, an increase of 1 basis point from the 0.18% reported in the first quarter of 2024. Total nonperforming assets (which include nonaccrual loans and leases, loans and leases past due 90 days or more and still accruing, other real estate owned and other repossessed assets) as a percentage of total assets was 0.20% as of June 30, 2024, and 0.18% on March 31, 2024.

The following table presents detailed information related to credit quality for the periods indicated (dollars in thousands):

Noninterest Income

Noninterest income decreased $776 thousand to $7.6 million for the second quarter of 2024 compared to $8.4 million for the prior quarter. The current quarter decrease was primarily associated with the $1.3 million pre-tax gain on the sale of a former branch building in the prior quarter, offset by a $283 thousand pre-tax gain on the sale of a bank property in the current quarter.

The following table presents detailed information related to noninterest income for the periods indicated (dollars in thousands):

Noninterest Expense

Noninterest expense increased $648 thousand to $29.2 million for the second quarter of 2024 compared to $28.6 million for the prior quarter. The current quarter increase was primarily related to an increase in salaries and employee benefits related to incentive accruals for production performance.

The following table presents detailed information related to noninterest expense for the periods indicated (dollars in thousands):

Income Tax Expense

Income tax expense was $2.3 million for the second quarter of 2024, a decrease of $299 thousand, compared to $2.6 million for the prior quarter.

The effective tax rate was 22.56% for the second quarter of 2024 and 21.94% for the prior quarter.

Balance Sheet Trends

Total assets at June 30, 2024 were $4.89 billion compared to $4.83 billion at December 31, 2023. The $61.6 million increase is primarily attributable to increases loans and leases of $129.7 million, offset by a decrease in securities of $59.8 million and cash and cash equivalents of $9.4 million.

Total liabilities increased to $4.42 billion at June 30, 2024 from $4.37 billion at December 31, 2023. The increase of $49.0 million was primarily from organic deposit growth of $48.8 million.

Shareholders' equity at June 30, 2024, totaled $472.5 million, an increase of $12.6 million, from December 31, 2023. The increase in shareholders' equity was primarily driven by net income of $17.4 million for the six months ended June 30, 2024, offset by dividends paid of $2.7 million and repurchase of the Company’s stock of $3.0 million. Tangible book value per share1 was $21.66 at June 30, 2024, compared to $20.76 at December 31, 2023. Tangible common equity1 as a percentage of tangible assets1 was 7.66% at June 30, 2024, compared with 7.47% at December 31, 2023.

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1 Non-GAAP measure. See “Non-GAAP Financial Measures” for more information and see the Non-GAAP reconciliation

The following table presents selected balance sheet information for the periods indicated (dollars in thousands):

Conference Call Information

SmartFinancial issued this earnings release for the second quarter of 2024 on Monday, July 22, 2024, and will host a conference call on Tuesday, July 23, 2024, at 10:00 a.m. ET. To access this interactive teleconference, dial (833) 470-1428 or (404) 975-4839 and entering the access code, 533803. A replay of the conference call will be available through August 22, 2024, by dialing (866) 813-9403 or (929) 458-6194 and entering the access code, 897395. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 a.m. ET prior to the conference call.

About SmartFinancial, Inc.

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with branches across Tennessee, Alabama, and Florida. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Non-GAAP Financial Measures

Statements included in this earnings release include measures not recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore are considered Non-GAAP financial measures (“Non-GAAP”) and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures and ratios derived therefrom in its analysis of the Company's performance, including:

Operating earnings, operating noninterest income, operating noninterest expense and operating PPNR exclude non-operating related income and expense items, respectively. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets from shareholders' equity and average shareholders' equity, respectively. Tangible book value per common share is tangible common equity divided by common shares outstanding. Tangible assets excludes goodwill and other intangibles from total assets. A detailed reconciliation of these items and ratios derived therefrom is available in the Non-GAAP reconciliations.

Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management also believes these Non-GAAP financial measures enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance.

Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others,

These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
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SmartFinancial, Inc. and Subsidiary
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SmartFinancial, Inc. and Subsidiary
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YIELD ANALYSIS

1 Yields computed on tax-exempt loans on a tax equivalent basis include $257 thousand, $0 thousand, and $0 thousand of taxable equivalent income for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.

2 Yields computed on tax-exempt instruments on a tax equivalent basis include $94 thousand, $93 thousand, and $95 thousand of taxable equivalent income for the quarters ended June 30, 2024, March 31, 2024, and June 30, 2023, respectively.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS

1Yields computed on tax-exempt loans on a tax equivalent basis included $257 thousand and $0 thousand of taxable equivalent income for the six months ended June 30, 2024, and 2023, respectively.

2Yields computed on tax-exempt instruments on a tax equivalent basis included $187 thousand and $188 thousand of taxable equivalent income for the six months ended June 30, 2024, and 2023, respectively.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
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1Borrowers that have experienced financial difficulty.
2Total common equity less intangibles divided by total assets less intangibles. See reconciliation of Non-GAAP measures.
3All periods presented are estimated.
4Current period capital ratios are estimated as of the date of this earnings release.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands except share and per share data)

¹Non-GAAP measure. See reconciliation of Non-GAAP measures.

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS