On July 22, 2024, SmartFinancial Inc (SMBK, Financial) released its 8-K filing for the second quarter of 2024. SmartFinancial Inc operates as a bank holding company for SmartBank, offering various banking and financial services to individuals and corporate customers. The principal business of the Bank consists of attracting deposits from the general public and investing those funds, together with funds generated from operations and from principal and interest payments on loans, mainly in commercial loans, commercial and residential real estate loans, consumer loans, and residential and commercial construction loans. The primary source of revenue is interest income from earning assets, namely loans and securities.
Performance Overview
SmartFinancial Inc reported net income of $8.0 million, or $0.48 per diluted common share, for the second quarter of 2024. This compares to net income of $8.8 million, or $0.52 per diluted common share, for the same period in 2023, and $9.4 million, or $0.55 per diluted common share, for the prior quarter. Despite a slight decline in net income year-over-year and quarter-over-quarter, the company exceeded the analyst estimate of $0.39 earnings per share.
Financial Achievements
Net interest income for the second quarter of 2024 was $32.8 million, up from $31.7 million in the prior quarter. The tax equivalent net interest margin improved to 2.97% from 2.85% in the previous quarter, driven by an increased yield on interest-earning assets and a slower rise in the cost of interest-bearing liabilities. The yield on loans and leases, excluding loan fees, on a fully tax equivalent basis was 5.80%, compared to 5.71% in the prior quarter.
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.”
Income Statement Highlights
Noninterest income decreased by $776 thousand to $7.6 million for the second quarter of 2024, primarily due to a $1.3 million pre-tax gain on the sale of a former branch building in the prior quarter. Noninterest expense increased by $648 thousand to $29.2 million, mainly due to higher salaries and employee benefits related to incentive accruals for production performance.
Balance Sheet Trends
Total assets at June 30, 2024, were $4.89 billion, up from $4.83 billion at December 31, 2023. This increase was primarily driven by a $129.7 million rise in loans and leases, offset by a $59.8 million decrease in securities and a $9.4 million decrease in cash and cash equivalents. Total liabilities increased to $4.42 billion from $4.37 billion, mainly due to organic deposit growth of $48.8 million.
| Selected Balance Sheet Information | Jun 2024 | Dec 2023 | Increase (Decrease) |
|---|---|---|---|
| Total assets | $4,891,009 | $4,829,387 | $61,622 |
| Total liabilities | $4,418,544 | $4,369,501 | $49,043 |
| Total equity | $472,465 | $459,886 | $12,579 |
| Securities | $629,817 | $689,646 | $(59,829) |
| Loans and leases | $3,574,158 | $3,444,462 | $129,696 |
| Deposits | $4,316,656 | $4,267,854 | $48,802 |
| Borrowings | $12,732 | $13,078 | $(346) |
Credit Quality
At June 30, 2024, the allowance for credit losses was $34.7 million, representing 0.97% of total loans and leases, compared to 0.98% at March 31, 2024. Nonperforming loans and leases as a percentage of total loans and leases increased slightly to 0.19% from 0.18% in the prior quarter.
Conclusion
SmartFinancial Inc's performance in the second quarter of 2024 demonstrates solid growth in key financial metrics, despite some challenges. The company's ability to exceed analyst estimates for earnings per share highlights its strong operational capabilities and strategic focus. Investors will be keen to see how SmartFinancial Inc continues to leverage its strengths in the coming quarters.
Explore the complete 8-K earnings release (here) from SmartFinancial Inc for further details.
