SmartFinancial, Inc. ((SMBK)) has held its Q1 earnings call. Read on for the main highlights of the call.
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SmartFinancial, Inc. opened 2026 with a broadly upbeat tone as management highlighted a strong start to the year driven by healthy organic loan and core deposit growth, widening net interest margin and solid net interest income. Executives acknowledged some manageable headwinds, mainly model-driven provisioning, seasonal fee softness and competitive funding pressure, but reiterated confidence in disciplined pricing and liquidity management.
Tangible Book Value Increased
Tangible book value per share climbed to $27.33 from $26.86 at year-end, adding $0.47 in just one quarter and marking roughly 1.8% growth. Management framed this as evidence that capital continues to build even as the bank invests for expansion, supporting shareholder value and providing flexibility for future balance sheet growth.
Solid Operating Earnings and Revenue
SmartFinancial delivered operating earnings of $13.7 million, or $0.81 per diluted share, alongside total operating revenue of $53.8 million. Revenue rose about $0.5 million, or 0.9%, from the prior quarter despite two fewer days, indicating underlying business momentum and resilience in core banking income streams.
Strong Loan and Deposit Growth
Loans increased at a 14% annualized pace quarter over quarter, while core nonbrokered deposits grew 7% annualized excluding brokered CD payoffs. Net new nonbrokered deposits of $95 million underscored SmartFinancial’s ability to grow relationships organically, an important differentiator as competition for funding intensifies across the Southeast.
Net Interest Income and Margin Improvement
Net interest income rose to $45.9 million, up about $0.78 million or 1.7% from the prior quarter, reflecting both volume growth and better funding dynamics. Net interest margin expanded 10 basis points to 3.48% as an 18 basis point reduction in funding costs more than offset a modest compression in asset yields.
New Production Yields and Loan Repricing
New loan production carried an average yield of 6.40% for the quarter and 6.45% in March, still attractive even as market rates drift lower. Management noted that 88% of loans coming up for repricing or renewal are being renewed and are resetting about 120 basis points higher, supporting earnings power despite some pressure on new deal pricing.
Disciplined Funding and Liquidity Management
The company paid down $52 million of higher-cost brokered deposits with an average rate of 4.35%, helping to lower overall funding costs without sacrificing balance sheet strength. SmartFinancial finished the quarter with a loan-to-deposit ratio around 86%–87% and noninterest-bearing deposits above 18% of total, highlighting a comfortable liquidity profile.
Strong Credit Quality and Capital Position
Credit metrics remained clean, with nonperforming assets at about 0.25% of total assets and net charge-offs running at just 2 basis points. The allowance for credit losses increased to $44 million, or 0.97% of loans, while tangible common equity of roughly 8% and total risk-based capital of 12.7% kept the bank well above regulatory well-capitalized levels.
Organic Growth Strategy and Talent Additions
Management emphasized that growth remains largely organic, supported by targeted hiring to deepen capabilities in key segments. A notable addition was a senior director for private banking and wealth management aimed at expanding high-net-worth services, particularly as the bank builds out presence in attractive markets like Nashville and Columbus, Ga.
Near-Term Guidance and Efficiency Targets
For the second quarter, SmartFinancial guided to operating noninterest income of about $7.8 million and noninterest expense between $34.0 million and $34.5 million. Leadership expects net interest margin to hold roughly flat in Q2 before improving modestly later in 2026 and is targeting an efficiency ratio trending toward 60% by year-end.
Allowance Model Change Increased Provisioning
An update to the CECL allowance model broadened the forecasting horizon and qualitative overlays, leading to higher provisioning in the period. Provision expense totaled $4.1 million and pushed the allowance for credit losses to 0.97% of loans, a 3 basis point increase that management portrayed as proactive rather than a reaction to emerging deterioration.
Deposit Competition and Funding Cost Risk
Executives flagged rising competitive intensity across the Southeast on both loan and deposit pricing, which could challenge future funding costs. While funding costs declined by 18 basis points this quarter, management was clear that funding trends represent the primary risk to net interest margin and will be closely monitored as peers vie for deposits.
Some Yield Compression on Assets
Asset yields saw slight pressure, with overall yields down 3 basis points and loan yields slipping about 6 basis points during the quarter. Management tied this to the impact of prior rate cuts and payoffs of higher-rate loans and acknowledged that new-production yields are modestly below prior peaks, though still supportive of solid returns.
Higher Operating Expenses from Compensation
Operating noninterest expenses increased to $32.9 million, driven largely by higher salaries and benefits. Leadership attributed the rise to variable incentive payouts tied to strong production and to annual merit increases, noting that full-year costs will depend on the pace of future hiring and performance-based compensation.
Seasonal and Segment Revenue Pressures
Operating noninterest income slipped slightly to $7.9 million, with softer results in mortgage banking and capital markets. Management pointed to normal seasonal patterns as the main driver of the decline rather than structural issues and indicated that these fee lines should normalize with activity levels later in the year.
Increased Liability for Unfunded Commitments
The liability for unfunded commitments rose to $4.5 million from $3.6 million in the prior quarter, a roughly 25% jump. This increase contributed about $926,000 to provision expense, reflecting both growing credit line usage potential and a more conservative stance amid continued loan growth.
Forward-Looking Guidance and Earnings Ambitions
Looking ahead, management expects net interest margin to stay around current levels in Q2 before edging higher in the back half of 2026, supported by loan repricing and disciplined funding. The bank aims to keep allowance levels around 0.97%–0.98% of loans, maintain solid capital and liquidity metrics and ultimately reach an internal target of a $1.00 quarterly EPS run rate by the fourth quarter of 2026.
SmartFinancial’s latest earnings call painted a picture of a growing regional bank balancing expansion with prudent risk management and capital discipline. Investors heard a message of steady momentum, manageable headwinds and clear profitability targets, positioning the company as a name to watch as it moves toward its 2026 earnings goals.