SmartFinancial (NYSE:SMBK) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.
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The full earnings call is available at https://events.q4inc.com/attendee/980529382
Summary
SmartFinancial reported Q1 2026 operating earnings of $13.7 million, or $0.81 per diluted share, with total operating revenue of $53.8 million, showing growth from the previous quarter.
The company experienced 14% annualized loan growth and 7% annualized growth in core deposits, maintaining strong credit performance with low non-performing assets.
SmartFinancial’s net interest income increased to $45.9 million with a net interest margin improvement to 3.48%, supported by a reduction in funding costs.
The company adjusted its allowance for credit losses with a new model, resulting in a provisioning increase, and hired a new Director of Private Banking and Wealth Management.
Management expressed confidence in achieving a $4 EPS run rate by Q4 2026 and emphasized ongoing organic growth and strategic recruitment efforts, particularly in key markets like Nashville.
Full Transcript
Clare (Moderator)
Hello everyone and thank you for joining the SmartFinancial first quarter 2026 earnings release and Conference Call. My name is Clare and I’ll be coordinating your call today. During the presentation you can register a question by pressing STAR followed by one on your telephone keypad. If you change your mind, please press STAR followed by two on your telephone keypad. I will now hand over to Nate Strohl, Director of Investor Relations to begin. Please go ahead.
Nate Strohl (Director of Investor Relations)
Thanks Claire and good morning everyone and thank you for joining us for SmartFinancial’s first quarter 2026 earnings call. During today’s call we will reference the slides and press release that are available in the Investor Relations section on our website smartbank.com Billy Carroll, our president and CEO, will begin our call followed by Ron Gorzinski, our CFO will provide some additional commentary. We will be available to answer your questions at the end of our call. Our comments include forward looking statements. These statements are subject to risks and uncertainties and actual results could vary materially. We list the factors that might cause these results to differ materially in our press release and in our SEC filings which are available on our website. We do not assume any obligation to update any forward looking statements because of new information or early developments or otherwise, except as may be required by law. During the call we will reference non-GAAP financial measures related to the company’s performance. You may see the reconciliation of these measures in the appendices of the earnings release and investor presentation filed on April 20, 2026 with the SEC. And now I’ll turn it over to Billy Carroll to open our call.
Billy Carroll (President and Chief Executive Officer)
Thanks Nate and good morning everyone. Great to be with you and thank you for joining us today and for your interest and SmartBank. As usual, I’ll open up our call with some commentary and hand it over to Ron to walk through some numbers in greater detail. After our prepared comments, we’ll open it up with Ron, Nate, Rhett Miller and myself available for Q&A. It was a great start to the year for our company with another very busy quarter as we continue to execute on our strategy of leveraging the great foundation we’ve built over the last several years. Our team’s focus on this execution continues to be outstanding and this first quarter of 2026 was yet another example of that. So let me jump right into some of our highlights. First, and in my opinion one of the most important metrics we continue to increase the tangible book value of our company, which is now up to $27.33 per share, up from $26.86 at year end. For the quarter we posted operating earnings of $13.7 million or $0.81 per diluted share, with total operating revenue coming in at 53.8 million, higher than the 53.3 million in the prior quarter. Even with two fewer days, we continue to execute on outstanding growth on both sides of the balance sheet, posting 14% annualized growth in loans and 7% annualized growth in core deposits. Our history of strong credit continues with only 25 basis points in non performing assets. I’m very pleased with our credit performance and our extremely low level of non-performing assets and operating non interest expenses also came in on target at $32.9 million as we continue to exhibit expense discipline. Looking at the first few pages in the deck you’ll see our continuation of some very nice trends. We’re building a we’re building our return metrics and most importantly growing total revenue, earnings per share and tangible book value. All of those charts are great graphics to illustrate our execution. I’m looking forward to and expecting these trends to continue. So a couple of additional high level comments for me on growth. Our balance sheet expansion is a direct result of the focus of our sales teams. Our continued evolution as an outstanding organic growth company is one of the things I’ve been most proud of and I believe something that sets us apart from many other banks. We have hired well and we have built an outstanding process on prospecting and bringing in new client relationships. I would argue that we are in a top a small top of class group when it comes to pure organic growth. As I stated, we grew our loan book 14% annualized quarter over quarter as sales momentum stays strong and balanced across all of our regions. Our average portfolio yield including fees and accretion held up well at 6.02%. Regarding deposits, again, core deposits were up 7% annualized excluding when excluding brokered CD payoffs. Plus we absorbed a large seasonal withdrawal early in the year. So all in all a very nice deposit quarter. It’s important to recognize how we’re building this bank with core relationships as we have intense focus on both sides of the balance sheet. A couple of other highlights noted in our release Bullets included an allowance for credit loss model change that bumped their provisioning during the quarter. So we accomplished these results while adding an outsized provision adjustment with the new ACL model that better suits our company. Ron’s going to discuss this a little bit more in a moment. We also had a senior team addition with a new Director of Private Banking and Wealth Management from an in market regional bank that I believe is going to elevate this the work that we’re doing in this area even further. We don’t talk a lot about our wealth and investments platform, but this business line has steadily grown over the last several years as we’ve added some outstanding private bankers and new financial advisors. This focus on assisting high net worth clientele is becoming a great business driver for us and with our strategy we can go toe to toe with any regional or national player. So all in all a very nice way to start 2026. I’m going to stop there, hand it over to Ron and let him dive into some details.
Ron Gorzinski (Chief Financial Officer)
Ron thanks Billy and good morning everyone. I’ll start by highlighting some key deposit results during the quarter. Our momentum remains strong with non broker deposits increasing by 95 million driven by two factors, new deposit generation at a cost of 2.82% which was 22 basis higher than the previous quarter and seasonal inflows. Given the strength in core funding, we took the opportunity to pay down the remaining 52 million in broker deposits which carried an average rate of 4.35%. And as we noted on the last call, our year end totals included some transitory non-interest bearing deposits. As those deposits rolled off and put some and put and clients put some excess liquidity to work. Non interest bearing deposits were over 18% of total deposits at quarter end. Overall interest bearing deposits declined by 19 basis points to 2.60 and were 2.58% in March. We continue to maintain a robust liquidity profile as demonstrated by our loan-to-deposit ratio of 87%. Net Interest Income for the quarter was 45.9 million which was 782,000 higher than the previous quarter even though this quarter had two fewer days. Our Net Interest Margin also improved by 10 basis points to 3.48%. This increase was mainly driven by an 18 basis point reduction in funding costs which more than offset a 3 basis point decline in asset yields. The reduction in funding costs resulted from the full quarter effects of the prior quarter’s federal rate cuts, the previously mentioned paydowns of higher cost brokered funding and new deposit generation and CD renewals at lower rates. The decline in asset yields was caused by a 6 basis point reduction in loan yields mainly due to the impact of the rate cuts mentioned above and the pay downs and payoffs of higher rate loans. This reduction was slightly offset by our strategic utilization of balance sheet cash. The rate average yield on new loan production for the quarter was 6.40% and 6.45% for March. Looking forward, we anticipate that our margin will stabilize and remain relatively flat for the second quarter before increasing slightly in the second half of the year. Turning to credit, our provision expense for the quarter was 4.1 million, which includes 926,000 attributable to an increase in our unfunded commitments liability. As mentioned during the last earnings call, we’ve updated our Current Expected Credit Loss allowance model enabling broader capabilities such as economic forecasting tailored to loan segments and stronger qualitative adjustments. Details about this model update will be included in our first quarter 10-Q filing. Due to the changes in our modeling approach and quarterly activities, the allowance for credit losses increased to 44 million, representing 0.97% of total loans compared to 0.94% in the previous quarter and our liability for unfunded commitments totaled 4.5 million, up from 3.6 million. Looking forward, we anticipate that the allowance will remain within the 97.98basis point range contingent on prevailing market and credit conditions. Furthermore, our asset quality metrics remain robust with non-performing assets accounting for just 0.25% of total assets and net charge offs were limited to 2 basis points. Operating non interest income was 7.9 million, down slightly from the last quarter but exceeding expectations. Higher investment services fees offset lower mortgage banking and capital markets revenue which was lower primarily due to seasonality. Other income sources met or modestly surpassed expectations. Operating non interest expenses for the quarter increased slightly to 32.9 million, which was modestly below our guidance. Salary and benefit expenses were higher, mainly due to variable compensation on stronger than anticipated production as well as our annual merit increase adjustments that started in March. We also reduced our Federal Deposit Insurance Corporation insurance accrual by 275,000 this quarter, but expect this expense to return to normal levels in future periods. Our operating efficiency ratio for the first quarter remained around 60% plus level, showing our continued focus on improving margins and controlling costs. For the second quarter, non interest income is projected to be approximately 7.8 million and non interest expense is expected to be in the range of 34 to 34.5 million. Salary and benefit expenses are anticipated to range from 20.5 to 21 million, slightly elevated from …
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