On Tuesday, Piper Sandler maintained a Neutral rating on SmartFinancial (NYSE: NYSE:SMBK) shares, with a steady price target of $28.00. The firm highlighted SmartFinancial's earnings per share (EPS) which surpassed both Piper Sandler's own estimate and the consensus, by $0.03 and $0.08 respectively. This outperformance was partially attributed to a lower than expected tax rate, which contributed an additional $0.05 to the EPS.
The net interest income (NII) exceeded expectations by $0.07, counterbalancing higher expenses that impacted EPS by a negative $0.07. SmartFinancial's net interest margin (NIM) experienced a quarter-over-quarter increase of 14 basis points, reaching 3.11%, which was above Piper Sandler's estimate of 3.05%.
This rise was primarily due to an increase in the average yield on loans, which went up by 15 basis points from the last quarter to 5.95%, while the total cost of deposits decreased by 2 basis points to 2.54%.
The company also reported robust loan growth at 16% on a last quarter annualized basis, significantly outpacing Piper Sandler's projection of 7.5%. Meanwhile, total deposits saw a modest rise of 0.5% on a last quarter annualized basis, falling short of the anticipated 4% growth.
Credit trends at SmartFinancial showed some signs of weakening, with non-performing assets (NPAs) making up 0.44% of loans. Net charge-offs (NCOs) saw a notable increase of 10 basis points from the last quarter to 0.15% of loans. This marks the largest quarter-over-quarter rise observed in several quarters, yet the overall levels remain exceptionally low.
In other recent news, SmartFinancial has reported a robust second quarter performance for 2024, with a net income of $8 million, or $0.48 per diluted share. The company has seen a significant rise, including an over 11% annualized increase in loans and a 10% boost in tangible book value per share.
Despite a slight dip in deposits, SmartFinancial remains optimistic about its future, projecting further margin expansion and aiming for a $50 million operating revenue target by Q3 2025.
Moreover, SmartFinancial repurchased over 136,000 shares and remains well-capitalized, adding over 10 new sales team members. The company anticipates its securities yield percentage to remain around 360-365 basis points for the next few quarters, with a 3-4 basis point increase in deposit costs expected quarter over quarter.
Loan growth, particularly in the commercial and residential real estate sectors, is strong with continued growth expected.
Despite signs of a market slowdown and the impact of inflation and upcoming political events, SmartFinancial is well-positioned for potential changes in interest rates. The bank retains about 80% of time deposits, repricing between 2.75% and low 4%. Executives expressed confidence in the company's loan and deposit growth and sales energy. These are the recent developments within the company.
InvestingPro Insights
SmartFinancial's recent performance, as highlighted in Piper Sandler's analysis, is further illuminated by real-time data from InvestingPro. The company's market capitalization stands at $510.26 million, with a P/E ratio of 19.87, indicating investor confidence in its earnings potential. This is supported by an InvestingPro Tip noting that analysts predict the company will be profitable this year, aligning with the positive EPS surprise mentioned in the article.
The company's revenue growth of 34.61% in the most recent quarter showcases its strong momentum, which is consistent with the robust loan growth reported. Moreover, SmartFinancial's operating income margin of 27.71% for the last twelve months demonstrates its ability to manage expenses effectively, despite the higher expenses noted in the earnings report.
An InvestingPro Tip reveals that SmartFinancial has raised its dividend for 5 consecutive years, reflecting a commitment to shareholder returns. This is particularly noteworthy given the current dividend yield of 1.06%. The company's price total return of 54.37% over the past six months also indicates significant market appreciation, which correlates with another InvestingPro Tip highlighting a large price uptick over the last six months.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for SmartFinancial, providing deeper insights into the company's financial health and market position.
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