Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SmartFinancial Inc (SMBK, Financial) reported a net income of $8 million for the quarter, or $0.48 per diluted share.
- The company saw a 10% annualized quarter-over-quarter increase in tangible book value per share.
- Loan growth was strong at over 11% annualized, driven by new relationships and increased funding online.
- Net interest income continued to expand, contributing to total revenue of $40.4 million.
- The company maintained a low-risk profile with non-performing assets (NPAs) holding very low at 20 basis points.
Negative Points
- There was a contraction in deposits, primarily due to seasonality and tax payments.
- Non-interest expenses remained relatively high at $29.2 million for the quarter.
- The company experienced some lingering small trucking company credits in its Fountain equipment portfolio.
- The balance sheet remained relatively flat despite efforts to remix it.
- The total risk-based capital ratio decreased slightly by 17 basis points due to strong loan growth being funded with zero risk-weighted cash.
Q & A Highlights
Q: The bond yields of 3.60% that we saw this quarter, does that fully reflect the full benefit of some of the reinvestment you've done?
A: For the next couple of quarters, we're probably in the 3.60% to 3.65% range. We've managed to get pretty close to full benefit for Q2, so it will be like-kind yields going forward. (Ronald Gorczynski, CFO)
Q: Do you think we could see an inflection in deposit costs next quarter or maybe as we exit 2024?
A: We feel like rates might move down next, but the team has done a good job of holding deposit costs. We may leverage liquidity a bit more in Q3, but without a rate cut, we might not see an inflection yet. (William Carroll, CEO)
Q: What came in better than expected this quarter, and do you think some of those trends can continue?
A: Our loan yields and production came in heavier than expected, and our deposit costs slowed more than anticipated. Our loan and deposit mix also changed favorably. (Ronald Gorczynski, CFO)
Q: Have you quantified what each 25-basis-point rate cut looks like for you from a NIM perspective?
A: At this point, we're slightly liability-sensitive. Each 25-basis-point cut would add about $400,000 of income annually or 2 basis points to the NIM for the next quarter if it happened early. (Ronald Gorczynski, CFO)
Q: What are some notable underlying trends in loan growth, and how is the overall pipeline looking?
A: The pipeline is still strong, with good growth in commercial real estate and one- to four-family term debt. Our regional president structure is driving sales energy across all geographies. (William Carroll, CEO; Rhett Jordan, Chief Credit Officer)
Q: Can you set the table more specifically for the next couple of quarters on loan growth?
A: We expect 5% to 8% growth, similar to the first half of the year. We've added 10 new sales team members, mostly on the commercial side, which should help us hit our loan growth targets. (William Carroll, CEO)
Q: Where do you plan to target CRE and CND concentration ratios, and will they impact growth targets?
A: We like commercial real estate and will continue to use that bucket prudently. We may see ratios move up slightly but not significantly. (William Carroll, CEO; Rhett Jordan, Chief Credit Officer)
Q: What type of rate backdrop do you assume in the $50 million revenue target?
A: We're running our model in a flat-rate scenario, although we expect the next rate moves to be down. (William Carroll, CEO)
Q: Is there a minimum new loan yield going on the books today, and could it go higher in the third and fourth quarters?
A: New loan yields were 7.76% in Q2. They might be a bit lower in the coming quarters but should hold in the mid-7s level. (William Carroll, CEO)
Q: Have customer attitudes changed at all to the positive?
A: There's cautious optimism among clients. While some are seeing slight slowdowns, it's off a record 2023, so things are still relatively good. (William Carroll, CEO; Miller Welborn, Chairman)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
