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    SMBK
    Earnings call· Jun 2026(Q2 FY26)

    SMARTFINANCIAL INC. SMBK

    Jul 21, 2026 Source

    Executive summary

    SmartFinancial Q2 FY26 — Strong Organic Growth and Profitability Expansion

    SmartFinancial delivered a strong Q2 FY26, building on organic momentum with significant loan and core deposit growth. The company achieved operating earnings of $0.96 per share and expanded tangible book value, while maintaining strong credit quality and expense discipline. Management remains optimistic about continued profitability improvement and balance sheet expansion, leveraging market disruption in the Southeast.

    Highlights

    5

    • Operating earnings of $16.3 million or $0.96 per diluted share.

    • Loan growth of 15% annualized.

    • Core deposits up 6% annualized.

    • Tangible book value per share grew 13% annualized to $28.22.

    • Nonperforming assets at only 23 basis points.

    Concerns

    3

    • Near-term deposit cost pressure may reduce Q3 margin by a few basis points, forecasting 3.45% range.

    • Loan growth of $165 million exceeded deposit production, resulting in $106 million short-term brokered deposits.

    • Seasonal activity reduced noninterest-bearing deposits to 17% of total deposits.

    Guidance & targets

    10
    CategoryTargetConfidence
    Q3 FY26 Net Interest Margin
    3.45% range
    high materiality
    Medium
    Q3 FY26 Noninterest Income
    approximately $8 million
    medium materiality
    Medium
    Q3 FY26 Operating Noninterest Expenses
    $34.5 million to $35 million
    medium materiality
    Medium
    Q3 FY26 Salary and Benefit Expenses
    $21 million to $21.5 million
    medium materiality
    Medium
    Full-year FY26 EPS Run Rate
    $4 EPS run rate
    high materiality
    High
    Loan Portfolio Yield
    increase our portfolio yields probably 3 to 4 basis points quarterly
    medium materiality
    Medium
    Loan Growth Pace
    high single-digit plus pace or possibly a little better
    high materiality
    High
    Loan Growth Linked Quarter
    3% plus/minus, maybe 3.5% on a quarter-over-quarter basis
    high materiality
    High
    Effective Tax Rate
    about 19.5%
    medium materiality
    High
    Noninterest Expense Range
    $35 million plus or minus range
    medium materiality
    Medium

    Operational metrics

    28
    Tangible book value per share
    $28.22up from $26.86 at year-end
    Q2 FY26
    Operating earnings
    $16.3 million
    Q2 FY26
    Operating EPS
    $0.96
    Q2 FY26
    Total revenue
    $55.9 million
    Q2 FY26
    Nonperforming assets ratio
    0.23%down 2 basis points from the prior quarter
    Q2 FY26
    Operating noninterest expenses
    $34 million
    Q2 FY26

    low end of our guidance

    Total assets
    $6 billion
    Q2 FY26

    crossing the $6 billion in asset mark

    Non-broker deposits growth
    $83 million
    Q2 FY26
    New deposit production cost (non-brokered)
    2.90%increased 8 basis points
    Q2 FY26
    Short-term brokered deposits used
    $106 million
    Q2 FY26

    resulting in the use of $106 million of short-term brokered deposits

    Noninterest-bearing deposits as % of total
    17%
    Q2 FY26

    reduced due to seasonal activity

    Interest-bearing deposit cost
    2.62%rose just 2 basis points
    Q2 FY26
    Loan-to-deposit ratio
    87%
    Q2 FY26
    Loan portfolio yield (including fees and accretion)
    6.07%
    Q2 FY26
    Normalized net interest margin (excluding loan prepayment fees)
    3.58%
    Q2 FY26

    in line with our expectations

    New loan production weighted average yield
    6.40%
    Q2 FY26
    Provision for credit losses
    $1.9 milliondown from $3.2 million last quarter
    Q2 FY26
    Total provision expense (after unfunded commitments)
    $1.5 million
    Q2 FY26

    primarily from loan growth, after a $392,000 reduction in liability for unfunded commitments

    Operating noninterest income
    $7.9 million
    Q2 FY26

    stable

    Operating efficiency ratio
    low 60%
    Q2 FY26
    Consolidated TCE ratio
    8%
    Q2 FY26
    Total risk-based capital ratio
    12.7%
    Q2 FY26

    well above well-capitalized standards

    Loan prepayment fees impact on NIM
    4 basis points
    Q2 FY26

    equated to about $500,000 or $400,000 to $500,000

    Expected quarterly increase in portfolio yields
    3 to 4 basis points
    next few quarters
    Expected monthly increase in deposit costs
    1.5 to 2 basis points
    going forward
    Loan growth linked quarter
    3.5%
    Q2 FY26

    Implied from 15% annualized growth

    Investment securities as % of assets
    10% to 12%
    going forward

    expected range

    On-balance sheet cash
    $75 million to $100 million
    Q2 FY26

    heavy with the late quarter brokered entrance

    Industry KPIs

    13
    MetricValueDetails
    Loans15%%
    Deposits6%%
    Rotce ROE13% plus%
    Cet1 ratio8%%
    Capital returns—
    Fee income lines$7.9 millionUSD
    Allowance reserves97 basis pointsbps
    Net interest income$48.1 millionUSD
    Net interest margin3.52%%
    Net charge offs npls5 basis pointsbps
    Total operating expenses$34 millionUSD
    Provision for credit losses$1.9 millionUSD
    Efficiency ratio operating leveragelow 60%%

    Risks & headwinds

    4
    Deposit cost pressureQ3 FY26

    may reduce third quarter margin by a few basis points

    Mitigation: Expect to increase deposit production and wean off brokered funding.

    Seasonality impacting noninterest-bearing depositsQ2 FY26

    reduced noninterest-bearing deposits to 17% of total deposits

    Mitigation: Expect to make up gap in second half of the year.

    Competition for depositsnear term

    remain elevated

    Mitigation: Disciplined pricing, good balance sheet management.

    Higher funding costs impacting NIMnear term

    might pressure margin a bit more than expected

    Mitigation: Well-positioned from an AL standpoint, very neutral.

    What to watch in Q3 FY26

    5

    Net Interest Margin (NIM)

    Q3 FY26
    Current3.52%
    Target3.45% range

    Why it matters

    Management guided for a slight reduction due to deposit cost pressure; verification will show if they managed funding costs effectively.

    However, near-term deposit cost pressure may reduce third quarter margin by a few basis points, which would result in a forecasted margin in the 3.45% range.

    Q&A highlights

    5

    Inquired about the 2.9% cost of new deposits and how rising deposit costs might impact growth and funding.

    Management confirmed the 2.9% cost for new non-brokered deposits and noted the use of brokered deposits to support loan growth. They expect deposit costs to increase by 1.5 to 2 basis points per month but anticipate making up the gap in the second half due to seasonality.

    “our production for Q2 was 2.90% less broker, we were always modeling a 1 to 2 basis point increase in our cost going forward.”

    asked by Brett Rabatin · answered by Ronald Gorczynski

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Organic Momentum

    SmartFinancial continued its strong organic growth in Q2 FY26, with 15% annualized loan growth and 6% annualized core deposit growth. This momentum is attributed to a strong sales culture and collaborative credit leadership, driving new client acquisition across all regions. The company believes it is among top-performing banks for pure organic growth, with pipelines remaining solid and balanced across its zones.

    02

    Profitability and Efficiency

    The company achieved operating earnings of $0.96 per diluted share and expanded its net interest margin to 3.52%, driven by asset yields outpacing funding costs. Operating noninterest expenses were managed at $34 million, at the low end of guidance, contributing to operating leverage. Management aims to continue improving return metrics, including ROA and ROE, beyond current levels, with a target of a $4 EPS run rate by Q4 FY26.

    03

    Credit Quality

    Asset quality remains robust with nonperforming assets at a low 23 basis points of total assets, down 2 basis points from the prior quarter. Net charge-offs were limited to 5 basis points, and the allowance to loans ratio remained stable at 97 basis points, deemed appropriate for the current environment. The provision for credit losses was $1.9 million, down from $3.2 million last quarter, primarily due to loan growth.

    04

    Strategic Investments and Market Opportunity

    SmartFinancial is strategically investing in people, technology, and facilities to capitalize on market disruption🌐 in the Southeast. Recent talent acquisitions in Nashville, Huntsville, Tallahassee, and Columbus, Georgia, highlight this strategy. The company is particularly bullish on the new Columbus market, where the team is performing well even before moving into a permanent facility, indicating strong organic growth opportunities.

    05

    Deposit Dynamics

    While non-broker deposits grew by $83 million, loan growth of $165 million outpaced deposit production, necessitating the use of $106 million in short-term brokered deposits. Noninterest-bearing deposits decreased to 17% of total deposits due to seasonal activity and client mix shifts, though interest-bearing deposit costs rose only 2 basis points. Management expects continued deposit competition but aims to increase deposit production and reduce reliance on brokered funding.

    AI-generated summary of the company’s earnings call. Not investment advice.