SMARTFINANCIAL INC. Q1 FY2025 earnings call

• Billy Carroll noted a strong quarter with continued increase in tangible book value, loan growth at 9% annualized, and deposit growth. He highlighted the work of sales teams and the balanced sales momentum across regions.
• Ron Gorczynski detailed deposit results, net interest margin, loan portfolio yield, noninterest income, operating expenses, tax rate expectations, and capital ratios. He mentioned anticipation of margin expansion of 2-3 basis points per quarter.
• William Carroll emphasized the company's growth leveraging phase, talent acquisition efforts (hiring 5 revenue-producing team members recently), and welcomed new Board member Kelly Shewmaker.

For the quarter, SmartFinancial posted net income GAAP and operating of $11.3 million or $0.67 per diluted share. Loan book grew at a 9% annualized pace quarter-over-quarter. Non-brokered deposit growth was $114 million, over 10% annualized, resulting in a loan-to-deposit ratio of 83%. Total revenue was $46.8 million. Tangible book value moved up to $23.61 per share including AOCI and $24.76 excluding AOCI. Net interest margin was 3.21%. Operating noninterest income for the quarter totaled $8.6 million. The company's consolidated TCE ratio increased to 7.6%, and total risk-based capital ratio was 11.2%.

• Expect mid- to high single-digit loan growth.
• Anticipate margin expansion of 2 to 3 basis points per quarter throughout 2025, with a second quarter 2025 margin range of 3.25%.
• Forecast noninterest income in the low to mid $8 million range for Q2, noninterest expense in $32.5 million to $33 million range.
• Effective tax rate expected to stabilize between 18% to 19%.
• Capital ratios remain optimally balanced to support growth.

• Tariff volatility could impact borrowers, particularly those with international exposure.
• Competition in pricing and structure for loans and deposits.
• Potential Fed rate cuts affecting margin, dependent on the number and timing of cuts.

Q: Stephen Scouten asked about customer sentiment and belief in hitting loan growth strength.

A: Billy Carroll and others noted strong market performance, positive client feedback on tariffs, and visibility in markets.

Q: Catherine Mealor inquired about margin and Fed rate cuts.

A: Ron Gorczynski said the bank is slightly liability sensitive, would benefit slightly from Fed cuts.

Q: Russell Gunther asked about expense trends and tariff impact on borrowers.

A: Ron Gorczynski said expense growth guidance remains 2.5% to 3%, and William Carroll/Rhett Jordan discussed monitoring borrowers with tariff exposure.

Q: Brett Rabatin asked about fee income and loan growth sectors.

A: William Carroll/Ron Gorczynski mentioned factors like AUM and insurance payouts affecting fee income, and balanced approach to loan growth sectors.

Q: Christopher Marinac asked about equipment financing and M&A.

A: William Carroll/Rhett Jordan said equipment financing has been good, and M&A is focused on organic growth but open to attractive opportunities.