Q2 2026 SmartFinancial Inc Earnings Call

July 21, 2026

Operator: Hello everyone. Thank you for joining us and welcome to the SmartFinancial Q2 2026 earnings release and conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand over to Nathan Strall, Director of Investor Relations to begin. Please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand over to Nate Strall, Director of Investor Relations, to begin.

Speaker #1: Please go ahead.

Speaker #2: Thanks, Erica. Good morning, everyone, and thank you for joining us for SMARTFINANCIAL Q2 2026 earnings webcast and conference call. During today's call, we will reference the slides and earnings release available in the Investor Relations section of our website, at smartbank.com.

Nathan Strall: Thanks, Erica. Good morning everyone, and thank you for joining us for SmartFinancial's Q2 2026 earnings webcast and conference call. During today's call, we will reference the slides and earnings release available in the investor relations section of our website at smartbank.com. Billy Carroll, our President and Chief Executive Officer will begin the call, followed by Ron Gorczynski, our Chief Financial Officer, who will provide additional commentary. We will be available after the call to answer your questions. Our comments today include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Factors that could cause these actual results to differ materially are described in our earnings release and SEC filings, which are available on our website. We undertake no obligation to update any forward-looking statements as a result of new information, future developments, or otherwise, except as required by law.

Speaker #2: Hillary Carroll, our President and Chief Executive Officer, will begin the call, followed by Ron Gorczynski, our Chief Financial Officer, who will provide additional commentary.

Speaker #2: We will be available after the call to answer your questions. Our comments today include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially.

Nathan Strall: We will be available after the call to answer your questions. Our comments today include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Factors that could cause these actual results to differ materially are described in our earnings release and SEC filings, which are available on our website. We undertake no obligation to update any forward-looking statements as a result of new information, future developments, or otherwise, except as required by law.

Speaker #2: Factors that could cause these actual results to differ materially are described in our earnings release and SEC filings, which are available on our website.

Speaker #2: We undertake no obligation to update any forward-looking statements as a result of new information, future developments, or otherwise, except as required by law. During today's call, we may reference non-GAAP financial measures related to the company's performance.

Nathan Strall: During today's call, we may reference non-GAAP financial measures related to the company's performance. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendices to the earnings release and investor presentation filed with the SEC on 20 July 2026. Now I'll turn it over to Billy Carroll.

Speaker #2: Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendices to the earnings release and investor presentation filed with the SEC on July 20, 2026.

Speaker #2: And now, I'll turn it over to Billy Carroll.

Speaker #3: Thanks, Nate. And good morning, everyone. Great to be with you, and thank you for joining us today and for your interest in SMBK. As usual, I'll open up our call with some commentary and hand it over to Ron to walk through the numbers in some greater detail.

Billy Carroll: Thanks, Nate. Good morning everyone. Great to be with you, thank you for joining us today and for your interest in SMBK. As usual, I will open up our call with some commentary and hand it over to Ron to walk through the numbers in some greater detail. After our prepared comments, we will open it up with Ron, Nate, Rhett Jordan, and myself available for Q&A. We followed a strong Q1 with an even better Q2 as our team continued to build outstanding organic momentum. The foundation we have worked so hard to build over the past several years is clearly demonstrating its strength as we continue to grow operating leverage. Our team's focus on this execution remains outstanding. The Q2 of 2026 was yet another clear example of that. Let me jump right into some of our highlights.

Speaker #3: After our prepared comments, we'll open it up with Ron, Nate, Rhett Miller, and myself available for Q&A. We followed a strong first quarter with an even better second quarter, as our team continued to build outstanding organic momentum.

Billy Carroll: We followed a strong Q1 with an even better Q2 as our team continued to build outstanding organic momentum. The foundation we have worked so hard to build over the past several years is clearly demonstrating its strength as we continue to grow operating leverage. Our team's focus on this execution remains outstanding. The Q2 of 2026 was yet another clear example of that. Let me jump right into some of our highlights.

Speaker #3: The foundation we have worked so hard to build over the past several years is clearly demonstrating its strength, as we continue to grow operating leverage.

Speaker #3: Our team's focus on this execution remains outstanding, and the second quarter of 2026 was yet another clear example of that. So, let me jump right into some of our highlights.

Speaker #3: First, and as I always say, one of the most important metrics to me: we continue to increase the tangible book value of our company, which is now at $28.22 per share, up from $26.86 at year-end.

Billy Carroll: First, as I always say, one of the most important metrics to me, we continue to increase the tangible book value of our company, which is now at $28.22 per share, up from $26.86 at year-end. For the quarter, we posted operating earnings of $16.3 million, or $0.96 per diluted share, with total revenue coming in at $55.9 million. We continue to execute with outstanding growth on both sides of the balance sheet, posting 15% annualized growth in loans and 6% annualized growth in core deposits. Our history of strong credit continues with only 23 basis points in non-performing assets, down 2 basis points from the prior quarter. I am very pleased with our credit performance and our extremely low level of NPAs. Operating non-interest expenses also came in on target at just under $34 million as we continue to exhibit our expense discipline.

Speaker #3: For the quarter, we posted operating earnings of $16.3 million, or $96 per diluted share, with total revenue coming in at $55.9 million. We continue to execute without standing growth on both sides of the balance sheet.

Billy Carroll: We continue to execute with outstanding growth on both sides of the balance sheet, posting 15% annualized growth in loans and 6% annualized growth in core deposits. Our history of strong credit continues with only 23 basis points in non-performing assets, down 2 basis points from the prior quarter. I am very pleased with our credit performance and our extremely low level of NPAs. Operating non-interest expenses also came in on target at just under $34 million as we continue to exhibit our expense discipline.

Speaker #3: Posting 15% annualized growth in loans and 6% annualized growth in core deposits. Our history of strong credit continues, with only 23 basis points in non-performing assets.

Speaker #3: Down 2 basis points from the prior quarter. I'm very pleased with our credit performance and our extremely low level of NPAs. And operating non-interest expenses also came in on target at just under $34 million, as we continue to exhibit our expense discipline.

Speaker #3: Looking at the first few pages in the deck, you'll see that we are continuing some very nice trends. We're building on our return metrics and, most importantly, growing total revenue, EPS, and TVV.

Billy Carroll: Looking at the first few pages in the deck, you will see our continuation of some very nice trends. We are building on our return metrics, and most importantly, growing total revenue, EPS, and TBV. All of those charts are great graphics to illustrate our execution. A couple of additional high-level comments from me. On growth, our balance sheet expansion continues. We are building a strong foundational sales culture led by our divisional and regional presidents, along with our collaborative credit leadership. The work of these teams has been outstanding and the energy and hustle they exhibit as they focus on new client acquisition is exciting to see. I continue to believe we are among a select top-of-class group of top-performing banks when it comes to pure organic growth.

Speaker #3: All of those charts are great graphics to illustrate our execution. So, a couple of additional high-level comments from me. On growth, our balance sheet expansion continues.

Speaker #3: We are building a strong foundational sales culture, led by our divisional and regional presidents along with our collaborative credit leadership. The work of these teams has been outstanding, and the energy and hustle they exhibit as they focus on new client acquisition is exciting to see.

Speaker #3: I continue to believe we are among a select top-of-class group of top-performing banks when it comes to pure organic growth. As I stated, we grew our loan book 15% annualized, quarter over quarter, as sales momentum stayed strong and balanced across all of our regions.

Billy Carroll: As I stated, we grew our loan book 15% annualized quarter-over-quarter as sales momentum stayed strong and balanced across all of our regions. Our average portfolio yield, including fees and accretion, held up well at 6.07%. Regarding deposits, again, core deposits were up 6% annualized. Even with some expected Q2 seasonality, we continue to drive nice core deposit growth. It is important to note how we are building this bank with core relationships as we have a keen focus on both sides of the balance sheet. A couple of other key highlights noted in the release bullets include crossing the $6 billion in asset mark, another nice milestone for our team as we grow strategically and profitably. As I mentioned, our tangible book value per share grew at 13% annualized for the quarter.

Speaker #3: Our average portfolio yield, including fees and accretion, held up well at 6.07%. Regarding deposits, again, core deposits were up 6% annualized. Even with some expected Q2 seasonality, we continue to drive nice core deposit growth.

Speaker #3: It's important to note how we're building this bank with core relationships, as we have a keen focus on both sides of the balance sheet.

Speaker #3: A couple of other key highlights noted in the release bullets include crossing the $6 billion in asset mark, another nice milestone for our team, as we grow strategically and profitably.

Speaker #3: And, as I mentioned, our tangible book value per share grew at 13% annualized for the quarter. But in addition to great numbers, I'm also very proud of our great place to work recertification.

Billy Carroll: In addition to great numbers, I'm also very proud of our Great Place to Work recertification. It is great to be recognized for the outstanding culture we are building and the tireless work of our associates in these efforts. As you can see, we are gaining operating leverage but also gaining momentum, and we're balancing that with appropriate investment in our franchise. We will keep investing in people, technology, and strategically in facilities, but do so while maintaining positive leverage. We are seeing some nice opportunities right now with the disruption taking place in the Southeast, and we want to take advantage of that. The franchise we've built is positioned to effectively compete for business against larger regional players, but also nimble enough to flex down when we need to. It's a pretty nice position to be in.

Speaker #3: It is great to be recognized for the outstanding culture we are building and the tireless work of our associates in these efforts. As you can see, we are gaining operating leverage, but also gaining momentum.

Speaker #3: And we're balancing that with appropriate investment in our franchise. We will keep investing in people, technology, and strategically in facilities, but do so while maintaining positive leverage.

Speaker #3: We are seeing some nice opportunities right now with the disruption taking place in the Southeast, and we want to take advantage of that. The franchise we've built is positioned to effectively compete for business against larger regional players, but it's also nimble enough to flex down when we need to.

Speaker #3: It's a pretty nice position to be in. Gaining share and getting deeper in these great markets continues to be our primary focus. So, all in all, a very nice way to wrap the first half of 2026.

Billy Carroll: Gaining share and getting deeper in these great markets continues to be our primary focus. All in all, a very nice way to wrap the H1 of 2026. I'm going to stop there and hand it over to Ron to dive into some details for us. Ron?

Speaker #3: So, I'm going to stop there and hand it over to Ron to dive into some details for us. Ron?

Speaker #4: Thanks, Billy. And good morning, everyone. I'll start by highlighting some key deposit results. During the quarter, we continued our momentum and climbed relationship expansion and new account growth.

Ron Gorczynski: Thanks, Billy, and good morning, everyone. I'll start by highlighting some key deposit results. During the quarter, we continued our momentum in client relationship expansion and new account growth. Non-broker deposits grew to $83 million, while new deposit production costs increased 8 basis points to 2.90%. While our deposit growth was strong, loan growth of $165 million exceeded deposit production, resulting in the use of $106 million of short-term broker deposits. Seasonal activity reduced non-interest-bearing deposits to 17% of total deposits, reflecting normal Q2 activity, including cash use for tax payments. We also experienced some portfolio mix shift as clients continued to optimize balances between interest-bearing and non-interest-bearing accounts. Even with these dynamics, interest-bearing deposit costs rose just 2 basis points to 2.62%, and liquidity remains strong with a loan-to-deposit ratio of 87%.

Speaker #4: Non-brokered deposits grew $83 million, while new deposit production costs increased 8 basis points to 2.90%. While our deposit growth was strong, loan growth of $165 million exceeded deposit production, resulting in the use of $106 million of short-term brokered deposits.

Speaker #4: Seasonal activity reduced non-interest-bearing deposits to 17% of total deposits, reflecting normal Q2 activity, including cash use or tax payments. We also experienced some portfolio mix shift as clients continued to optimize balances between interest-bearing and non-interest-bearing accounts.

Speaker #4: Even with these dynamics, interest-bearing deposit costs rose just 2 basis points to 2.62%, and liquidity remained strong with a loan-to-deposit ratio of 87%. Looking ahead, we expect competition for deposits to remain elevated, which may continue to pressure funding costs in the near term.

Ron Gorczynski: Looking ahead, we expect competition for deposits to remain elevated, which may continue to pressure funding costs in the near term. Turning to our margin, net interest income was $48.1 million, up $2.2 million from the Q1, and our net interest margin expanded to 3.52%, compared with 3.48% last quarter. The margin improvement was driven by asset yields outpacing the modest increase in funding costs. Loan yields increased 5 basis points, assisted by new production coming on above the portfolio yield, continued loan portfolio repricing activity, and higher loan fees from certain loan prepayments. Excluding loan prepayment fees, our normalized net interest margin was 3.48% for the quarter, in line with our expectations. New loan production remained steady with a weighted average yield of 6.40% for the quarter.

Speaker #4: Turning to our margin, net interest income was $48.1 million, up $2.2 million from the first quarter, and our net interest margin expanded to 3.52% compared with 3.48% last quarter.

Speaker #4: The margin improvement was driven by asset yields outpacing the modest increase in funding costs. Loan yields increased 5 basis points, assisted by new production coming on above the portfolio yield, continued loan portfolio repricing activity, and higher loan fees from certain loan prepayments.

Speaker #4: Excluding loan prepayment fees, our normalized net interest margin was 3.48% for the quarter, in line with our expectations. New loan production remained steady, with a weighted average yield of 6.40% for the quarter.

Speaker #4: Overall, our margin story continues to be about disciplined pricing, good balance sheet management, and the benefit of loan pricing in this rate environment. Looking ahead, we expect continued improvement in asset yields to support modest margin expansion over time.

Ron Gorczynski: Overall, our margin story continues to be about disciplined pricing, good balance sheet management, and the benefit of loan pricing in this rate environment. Looking ahead, we expect continued improvement in asset yields to support modest margin expansion over time. However, near-term deposit cost pressure may reduce Q3 margin by a few basis points, which would result in a forecasted margin in the 3.45% range. Turning to credit, our provision for credit losses was $1.9 million, down from $3.2 million last quarter. After a $392,000 reduction in the liability for unfunded commitments, total provision expense was $1.5 million, primarily from loan growth. As a reminder, the higher provision last quarter was driven by CECL modeling changes that we discussed on our prior earnings call. Our allowance to loans ratio remains stable at 97 basis points, which we believe is appropriate for the portfolio and current environment.

Speaker #4: However, near-term deposit cost pressure may reduce Q3 margin by a few basis points, which would result in a forecasted margin in the 3.45% range.

Speaker #4: Turning to credit, our provision for credit losses was $1.9 million, down from $3.2 million last quarter. After a $392,000 reduction in the liability for unfunded commitments, total provision expense was $1.5 million, primarily from loan growth.

Speaker #4: As a reminder, the higher provision last quarter was driven by CECL modeling changes that we discussed on our prior earnings call. Our allowance-to-loans ratio remained stable at 97 basis points, which we believe is appropriate for the portfolio and current environment.

Speaker #4: As Billy had mentioned, our asset quality metrics remained strong, with non-performing assets at just 0.23% of total assets, while net charge-offs were limited to 5 basis points.

Ron Gorczynski: As Billy had mentioned, our asset quality metrics remain strong with non-performing assets of just 0.23% of total assets, while net charge-offs were limited to 5 basis points. We remain confident in the quality of our loan portfolio and in the discipline our bankers and credit team continue to demonstrate as we grow. Operating non-interest income was stable at $7.9 million for the quarter. Higher mortgage banking income and stronger interchange and debit card fees helped offset lower capital markets revenue. On expenses, operating non-interest expenses increased slightly to $34 million, the low end of our guidance. This increase was primarily driven by salary and benefit expenses, reflecting stronger production-related variable compensation and a full quarter's expense from our annual merit increases. FDIC insurance expense also returned to its normalized run rate. Our operating efficiency ratio remains in the low 60% range.

Speaker #4: We remain confident in the quality of our loan portfolio and in the discipline our bankers and credit team continue to demonstrate as we grow.

Speaker #4: Operating non-interest income was stable at $7.9 million for the quarter. Higher mortgage banking income and stronger interchange and debit card fees helped offset lower capital markets revenue.

Speaker #4: On expenses, operating non-interest expenses increased slightly to $34 million, the low end of our guidance. This increase was primarily driven by salary and benefit expenses, reflecting stronger production-related variable compensation and a full quarter's expense from our annual merit increases.

Speaker #4: FDIC insurance expense also returned to its normalized run rate. Our operating efficiency ratio remained in the low 60% range. We do expect some expense growth as we invest in our expanding markets, including some branch facility expansion, but we will continue to manage the broader expense base carefully and remain focused on improving efficiency over time.

Ron Gorczynski: We do expect some expense growth as we invest in our expanding markets, including some branch facility expansion, but we will continue to manage the broader expense base carefully and remain focused on improving efficiency over time. For Q3, we expect non-interest income to be approximately $8 million and non-interest expense, which is expected to be in the range of $34.5 to 35 million. Salary and benefit expenses are expected to range from $21 to 21.5 million, reflecting both stronger production levels and related incentive compensation and additional new hires. As always, incentive-based compensation accruals will move with performance and may vary throughout the year. I'll wrap up with capital. Our capital position remains strong with a consolidated TCE ratio of 8% and total risk-based capital ratio of 12.7%, well above well-capitalized standards.

Speaker #4: For the third quarter, we expect non-interest income to be approximately $8 million, and non-interest expense is expected to be in the range of $34.5 million to $35 million.

Speaker #4: Salary and benefit expenses are expected to range from $21 to $21.5 million, reflecting both stronger production levels and related incentive compensation and additional new hires.

Speaker #4: As always, incentive-based compensation approvals will move with performance and may vary throughout the year. I'll wrap up with capital. Our capital position remains strong with a consolidated TC ratio of 8% and total risk-based capital ratio of 12.7%, well above well-capitalized standards.

Speaker #4: This position provides flexibility to support growth, maintain balancing strength, and continues building long-term shareholder value. With that said, I'll turn it back over to Billy.

Ron Gorczynski: This position provides flexibility to support growth, maintain balancing strength, and continues building long-term shareholder value. With that said, I'll turn it back over to Billy.

Speaker #3: Thanks, Ron. As you can tell from Ron's comments, our trends continue to have a nice trajectory. We are successfully executing on the leveraging phase of growth for our company, and on return metrics, we've moved through the 1% ROA target and feel good about seeing that 13%-plus number on ROE.

Billy Carroll: Thanks, Ron. As you can tell from Ron's comments, our trends continue to have a nice trajectory. We are successfully executing on the leveraging phase of growth for our company. On return metrics, we've moved through the 1% ROA target and feel good about seeing that 13%+ number on ROE. You've heard me discuss on our last couple of calls our internal four by four challenge of hitting a $4 EPS run rate by Q4 of 2026. Basically hitting $1 per share EPS by Q4 of this year. This quarter has been an excellent step toward reaching this target. We've still got a little bit of work to do as higher funding might pressure margin a bit more than expected. I really like our chances of accomplishing this goal.

Speaker #3: You've heard me discuss on our last couple of calls our internal 4x4 challenge of hitting a $4 EPS run rate by the fourth quarter of 2026.

Speaker #3: So basically hitting $1 per share EPS by Q4 of this year. This quarter has been an excellent step toward reaching this target. We've still got a little bit of work to do as higher funding might pressure margin a bit more than expected by our really like our chances, of accomplishing this goal.

Speaker #3: The second half of 2026 will probably look a lot like the first half, with a focus on organic growth and increasing share in our markets.

Billy Carroll: The H2 of 2026 will probably look a lot like the H1, with focus on organic growth and increasing share in our markets. Pipelines are very solid, and I think we can continue growing at a high single-digit+ pace or possibly a little better. Talent acquisition continues to be a high priority for our company. The current market disruption is opening the door, and over the last few months, we've added some great bank talent in Nashville, Tennessee; Huntsville, Alabama; Tallahassee, Florida; and Columbus, Georgia. We're seeing this opportunity throughout our footprint. Speaking of specifically on Columbus, we're thrilled with what that team is doing right out of the gate, and we're not even in our permanent facility yet. We're very bullish on this new market. We will continue to look for these organic growth opportunities and remain very focused on recruiting.

Speaker #3: Pipelines are very solid, and I think we can continue growing at a high single-digit-plus pace, or possibly a little better. Talent acquisition continues to be a high priority for our company.

Speaker #3: The current market disruption is opening the door, and over the last few months we've added some great bank talent in Nashville, Tennessee; Huntsville, Alabama; Tallahassee, Florida; and Columbus, Georgia.

Speaker #3: We're seeing this opportunity throughout our footprint. And speaking of specifically on Columbus, we're thrilled with what that team is doing right out of the gate and we're not even in our permanent facility yet.

Speaker #3: We're very bullish on this new market, so we will continue to look for these organic growth opportunities and remain very focused on recruiting. I believe we have a lot to offer talented bankers as we continue to be one of the brightest banking stories in the Southeast.

Billy Carroll: I believe we have a lot to offer talented bankers as we continue to be one of the brightest banking stories in the southeast. Outstanding markets that grow, paired with strong, experienced bankers and a very focused team. To summarize, we've had a very solid H1 of 2026, and we're very well-positioned. We are executing, growing revenue, EPS, and book value while staying prudent on expense growth. We remain optimistic about our ability to add balance sheet growth and still have a nice tailwind coming from rate resets in our loan portfolio over the coming quarters. Credit continues to be very sound. On goal setting, we are executing on this year's four by four initiative as we have clear line of sight to a $4+ earnings per share target.

Speaker #3: Outstanding markets that are growing, paired with strong, experienced bankers and a very focused team. To summarize, we've had a very solid first half of 2026, and we're very well positioned.

Speaker #3: We are executing, growing revenue, EPS, and book value while staying prudent on expense growth. We remain optimistic about our ability to add balance sheet growth and still have a nice tailwind coming from rate resets in our loan portfolio over the coming quarters.

Speaker #3: Credit continues to be very sound, and on goal setting, we are executing on this year's 4x4 initiative, as we have clear line of sight to a $4-plus earnings per share target.

Speaker #3: Our future is bright, and I appreciate the work of our smart financial, smart bank team, and all the efforts of our associates. I'm very proud of what we have going on here at SMBK.

Billy Carroll: Our future is bright, and I appreciate the work of our SmartFinancial SmartBank team and all the efforts of our associates. I'm very proud of what we have going on here at SMBK. We'll stop there and open it up for questions.

Speaker #3: We'll stop there and open it up for questions.

Speaker #1: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brett Rabatin from Hovde Group. Your line is open. Please go ahead.

Speaker #1: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Brett Rabichon.

Speaker #1: From StoneX Group, your line is open. Please go ahead.

Speaker #2: Hey, good morning. Good morning, guys. I wanted to start on—hey, wanted to start on just, obviously, a really strong balance sheet growth this quarter.

Brett Rabatin: Hey, good morning. Good morning, guys.

Billy Carroll: Hey, Brett.

Brett Rabatin: Wanted to start on this obviously really strong balance sheet growth this quarter. Wanted to start on the deposit side and just if I heard you correctly, Ron, I think you said 2.9% cost of new deposits. Was that the right number? Just wanted to get a little more color around the narrative that everyone's talking about with deposit costs possibly increasing from here, just how you guys see that affecting possibly your growth and what you're seeing in terms of new funding.

Speaker #2: Wanted to start on the deposit side, and just to confirm—Ron, I think you said 2.9% cost of new deposits. Was that the right number?

Speaker #2: And then just wanted to get a little more color around the narrative that everyone's talking about with deposit costs possibly increasing from here, just how you guys see that affecting possibly your growth and what you're seeing in terms of new funding.

Speaker #4: Yeah. Ron, do you want to start with the spot yield question?

Billy Carroll: Yeah. Ron, you want to start with the spot yield question?

Speaker #5: Yeah, yeah, Brett. Our production for Q2 was 2.90%. Less brokered, we were always modeling a 1 to 2 basis point increase in our costs going forward.

Ron Gorczynski: Yeah. Brett, our production for Q2 was 2.90%. Less brokered, we were always modeling a 1 to 2 basis point increase in our cost going forward. I think the lower guidance, possibly lower guidance this quarter is, we did lay in some brokered funding to support our strong loan growth. While brokered funding does carry a higher cost, we view it as a disciplined and temporary tool for our funding. For the most part, going forward, we're looking about 1.5 to 2 basis points per month, at least for Q3. Then we think we'll back that up as we can increase our deposit production and wean off the brokerage side of it.

Speaker #5: I think the lower guidance, possibly lower guidance this quarter, is we did lay in some brokered funding support to our strong loan growth. While brokered funding does carry a higher cost, we view it as a disciplined and temporary tool for our funding.

Speaker #5: So, for the most part, we're still looking—going forward, we're looking at about 1.5 to 2 basis points per month, at least for Q3.

Speaker #5: And then we think we'll back that up as we can increase our deposit production and wean off the brokered side of it.

Speaker #4: I'll also add, Brett, like I said, I'll tell you, just pure deposit production has really been pretty solid for us.

Billy Carroll: I'll also add, Brett, like I said, I'll tell you, the deposit, just pure deposit production has really been pretty solid for us. A little bit of a gap. I alluded to it too. We get a little bit of seasonality in Q2. We do think when you look at our trends historically, we make up a lot of that gap in the H2 of the year. Yeah, I think we're optimistically hoping we can come in at a pretty good clip as some of that seasonality, then that balance growth ticks back up. Yeah, I think you alluded to other comments that you've heard on growth. I think it is. Obviously, with rates staying a little bit higher, deposit growth pressure has been probably a little more prevalent than we had originally thought. It's not anything that we don't feel like we can manage.

Speaker #4: There's a little bit of a gap. I alluded to it, too. We get a little bit of seasonality in Q2. We do think, when you look at our trends historically, we make up a lot of that gap in the second half of the year.

Speaker #4: So yeah, I think we're optimistically hoping we can come in at a pretty good clip as some of that seasonality and that balance growth fix back up.

Speaker #4: But yeah, and I think you alluded to other comments that you've heard on growth. I think it is. I mean, obviously, with rates staying a little bit higher, deposit growth pressure has been probably a little more prevalent than we had originally thought.

Speaker #4: But it's not anything that we don't feel like we can manage. As Ron said, margin might just be a little flatter as you look out for the next quarter.

Billy Carroll: As Ron said, margin might just be a little flatter as you look out for the next quarter, still feel good about our ability to expand that going forward.

Speaker #4: But we still feel good about our ability to expand that going forward.

Speaker #2: Okay, that's helpful. And then, just Billy, you kind of talked about feeling pretty comfortable being a high single-digit grower, and possibly better. But obviously, the last two quarters in particular have been a lot stronger than that.

Brett Rabatin: Okay. That's helpful. Then just, Billy, you've kind of talked about feeling pretty comfortable being a high single-digit grower and possibly better, but obviously the last two quarters in particular have been a lot stronger than that. Does the pipeline suggest you could continue to have that, and maybe you're just being a little cautious with payoffs or lending competition on rate possibly being a factor? Maybe if you could just give any thoughts on double versus high single.

Speaker #2: Does the pipeline suggest you could continue to have that and maybe you're just being a little cautious with payoffs or lending competition on rate possibly being a factor or maybe if you could just give any thoughts on double versus high single?

Speaker #4: Yeah. Miller says the same. Yeah. No. Miller says the sandbag a little bit, but I really we do build we try to build in some payoffs and paydowns into those modeling assumptions.

Billy Carroll: Oh, yeah, you're right. Miller says I sandbag a little bit, but really, we try to build in some payoffs, some paydowns into those modeling assumptions. One of the things we have been really good at is especially a lot of this back book repricing. I think we've built in a little lower percentage of that retention. We're getting a lot of retention in that back book reprice. So teams are doing a really nice job elevating those yields at renewal. We're keeping most of that business. Yeah, rate competition is still tough. Right now, we're just looking at pipelines before the call just to kind of refresh our numbers, and we feel good about the pipelines. I'll tell you. I alluded to it. The sales teams and credit teams, I said that too.

Speaker #4: And one of the things we have been really good at is especially a lot of this backbook repricing. I think we've built in a little less a little lower percentage of that retention.

Speaker #4: We're getting a lot of retention in that backbook reprice. And so teams are doing a really nice job elevating those yields at renewal. And we're keeping a lot and we're keeping most of that business.

Speaker #4: Yeah, I mean, rate competition is still tough. Right now, we're just looking at pipelines before the call, just to kind of refresh our numbers.

Speaker #4: And we feel good about the pipelines. I'll tell you, our and I alluded to it. I mean, the sales teams and credit teams, I said that too.

Speaker #4: I think a lot of the credit for this goes to our credit team—the collaboration that we're working together on and trying to get these deals in and through the pipeline.

Billy Carroll: I think a lot of the credit of this goes to our credit team, the collaboration that we're working together and trying to get these deals in and through the pipeline. I feel really good about our ability to keep doing that. Yeah, I still think we could be at that plus/minus 10% number, just depending on payoffs and paydowns.

Speaker #4: I feel really good about our ability to keep doing that. And but yeah, I still think we can be at that plus minus 10% number just depending on payoffs and paydowns.

Speaker #2: And it's all across the markets too, isn't it?

Brett Rabatin: It's all across the markets too, isn't it?

Billy Carroll: Yeah, it is.

Speaker #4: Yeah. Yeah, it is. Yeah, it's yeah, it's pretty it's pretty equally balanced, across our zones. I'll tell you, all of our markets, all of our teams are executing really well right now.

Brett Rabatin: The entire footprint.

Billy Carroll: Yeah. It's pretty equally balanced across our zones. I'll tell you, all of our markets, all of our teams are executing really well right now.

Speaker #2: Okay. Great. That's two growth this quarter, guys. Thanks so much.

Brett Rabatin: Okay, great. Nice to see a great quarter, guys. Thanks so much.

Speaker #3: Thanks, Brett.

Ron Gorczynski: Thanks, Brett.

Speaker #4: Thanks, Brett.

Billy Carroll: Thanks, Brett.

Speaker #1: Your next question comes from the line of Russell Gunther, with Stephen. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Russell Gunther with Stephens. Your line is open. Please go ahead.

Speaker #2: Hey, good morning, gentlemen.

Russell Gunther: Hey, good morning, gentlemen.

Ron Gorczynski: Morning, Russell.

Speaker #4: I wanted to follow up. Good morning. On the margin discussion, maybe the flip side to Brett's question, just get some help for where directionally you'd expect loan yields to head from here.

Russell Gunther: I wanted to follow up.

Billy Carroll: Yeah, morning.

Russell Gunther: on the margin discussion, maybe the flip side to Brett's question, just get some help for where directionally you'd expect loan yields to head from here. Level set us in terms of where new production came on in Q2, kind of where that pipeline yield sits today would be helpful.

Speaker #4: Level set us in terms of where new production came on to Q2, and kind of where that pipeline yield sits today would be helpful.

Speaker #5: Yeah. Ron, do you want to take that? Yeah. We've been—yeah, I think, good question. We've been consistently, in the new production, bringing on about the 640 range.

Billy Carroll: Yeah. Ron, you want to take that?

Ron Gorczynski: Yeah. Good question. We've been consistently in the six, new production bringing on about the 640 range. We believe that will continue. Basically, due to the portfolio churn, we think we should be able to increase our portfolio yields probably three to four basis points quarterly from here on for the next few quarters. Even though Q3 may be flat, we see further expansion as we look into the future. We're in a good spot with our loan book.

Speaker #5: We think—we believe—that will continue. Basically, due to the portfolio churn, we think we should be able to increase our portfolio yields probably three to four basis points quarterly from here on, for the next few quarters.

Speaker #5: That's even though Q3 may be flat, we see further expansion as we look into the future. So we're in a good spot with our loan book.

Speaker #4: That's helpful, Ron. Thank you. And then for my follow-up—guys, I appreciate the near-term expense outlook. But perhaps, kind of more intermediate term, as you think about balancing franchise investment and talent—which it sounds like you've made some great strides in—as well as potentially tech, how should we think about a normalized core expense growth rate for SmartBank with that goal of delivering positive operating leverage?

Russell Gunther: That's helpful, Ron. Thank you. For my follow-up, guys, appreciate the near-term expense outlook. Perhaps kind of more intermediate term as you guys think about balancing franchise investment and talent, which sounds like you've made some great strides in, as well as potentially tech. How should we think about a normalized core expense growth rate for SmartBank with that goal of delivering positive operating leverage?

Speaker #5: Yeah. Ron, do you want to maybe talk a little bit about the expense growth forecast, or share your thoughts over the next few quarters?

Billy Carroll: Yeah. Ron, do you want to maybe talk a little bit about just kind of expense growth forecast or thoughts over the next few quarters, and I'll add some color to it.

Speaker #5: And I'll add some color to it. Yeah. For Q3, we did see an uptick. Variable compensation due to our production is always there. We have also layered in some new hires to support growth.

Ron Gorczynski: Yeah. For Q3, we did see an uptick. Variable compensation due to our production is always there. We do have layered in some new hires and support growth, and we see that incrementally throughout Q3. We do have some seasonality in our expenses, primarily occupancy, going through the hot summer months here down in our footprint. Normal forecasting ebbs and flows due to franchise growth. We're looking to keep our expenses within a $35 million plus or minus range over the next quarter or two. Again, that's all subject to our production-related comp. We watch expenses pretty tightly here.

Speaker #5: And we see that incrementally throughout Q3. We do have some seasonality in our expenses. Primarily occupancy, going through the hot summer months here, down in our footprint.

Speaker #5: And then normal forecasting ebbs and flows due to franchise growth. We’re looking to keep our expenses within a $35 million, plus or minus, range.

Speaker #5: Over the next quarter or two. But again, that's all subject to our production-related comp. But we watch expenses pretty tightly here.

Speaker #4: Yeah. And I'll just add, Russell, this is something I know Ron and I spend a lot of time talking about it. And we communicate it with our team.

Billy Carroll: Yeah. I'll just add, Russell, this is something I know Ron and I spend a lot of time talking about it, and we communicate it with our team. I think the key to it now is to kind of keep a fairly tight band on that while continuing to make the appropriate investments, like we said. Yeah, I think we can do that over the next several quarters as we get a new branch or two in the system, and then add a couple of revenue-producing hires in some of our zones. Feel really good about our ability to do that. We also have, again, I think Nate put a nice slide in the deck on our repricing.

Speaker #4: I think the key to it now is to kind of keep a fairly tight band on that while continuing to make the appropriate investments, like we said.

Speaker #4: Yeah, I think we can do that over the next several quarters. As we get a new branch or two in the system and then add a couple of revenue-producing hires in some of our zones.

Speaker #4: So, I feel really good about our ability to do that. We also have, again, and Nate put a nice slide in the deck on our repricing.

Speaker #4: I do think we've still got some we've still got some nice tailwind coming second half, especially as you look into Q4 with rate resets on the backbook.

Billy Carroll: I do think we've still got some nice tailwind coming H2, especially as you look into Q4 with rate resets on the back book, and then into the first part of 2027. We think the revenue side's going to continue to keep pace and allow us to keep that positive leverage going.

Speaker #4: And then into the first part of '27. So, we think the revenue side is going to continue to keep pace and allow us to keep that positive leverage going.

Speaker #2: That's great, guys. I appreciate all the help. Thanks for taking my question.

Russell Gunther: That's great, guys. I appreciate all the help. Thanks for taking my question.

Speaker #4: Thanks, Russell.

Ron Gorczynski: Thanks, Russell.

Speaker #1: Your next question comes from the line of Catherine Miller, with KBW. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Catherine Mealor with KBW. Your line is open. Please go ahead.

Speaker #6: Thanks. Good morning.

Catherine Mealor: Thanks. Good morning.

Speaker #4: Hey, Catherine.

Billy Carroll: Hey, Kathryn.

Speaker #2: Good morning, Catherine.

Ron Gorczynski: Good morning, Catherine.

Catherine Mealor: I know you spoke to this, the loan fees that were in loan yields this quarter, can you repeat what that impact was?

Speaker #6: I wanted to ask you—I know you stated this—but the loan fees that were in loan yields this quarter, can you repeat what that impact was?

Speaker #5: Yeah. We had a specific relationship that it was an acquired loan that we had a credit mark embedded in the amount. So when it paid off, we accreted that through the income.

Ron Gorczynski: Yeah. We had a specific relationship that it was an acquired loan that we had a credit mark embedded in the amount. When it paid off, we accreted that through the income. Isolated, a decent amount. It equated to about $500,000 or four to $500,000.

Speaker #5: Isolated, but a decent amount accredited to about 500,000 or 4 to 500,000.

Speaker #6: Okay. Perfect. And so do you.

Catherine Mealor: Okay, perfect.

Billy Carroll: 4 basis points.

Speaker #5: Oh, I'm sorry. Four patients. I apologize.

Ron Gorczynski: Oh, I'm sorry. 4 basis points.

Catherine Mealor: basically you-

Ron Gorczynski: I apologize.

Speaker #6: Okay. Four basis points. And that's four bps to the NIM, or four bps to loan yields?

Catherine Mealor: Okay. Yeah, four basis points. That's four bps to the NIM or four bps to loan yields?

Speaker #5: It was to loan yield.

Ron Gorczynski: It was to loan yield.

Speaker #6: Okay. Perfect. So, the way I think about that is, you strip that out, but then you've got kind of core expansion next quarter. You're kind of stable at this level.

Catherine Mealor: Okay, perfect. The way to think about that is you strip that out, you've got kind of core expansion. Next quarter, you're kind of stable at this level into next quarter. Is that a fair way to think about it?

Speaker #6: Into next quarter. Is that kind of a fair way to think about it?

Speaker #5: Yes.

Ron Gorczynski: Yes.

Speaker #4: Yeah.

Billy Carroll: Yes.

Speaker #6: Okay. Perfect. And this is a bigger picture question. I mean, you're well on your way to your $1 EPS target in the fourth quarter.

Catherine Mealor: Okay, perfect. This is a bigger picture question. You're well on your way to your $1 EPS target in Q4. You've hit a 1.1 ROA, and you're at this 13 ROE. You've been such a great story of profitability improvement over the past year and a half, and you've hit all these targets. Is the path from here that we're just kind of stable at these profitability levels, but with really strong 10% balance sheet growth? Do you see other ways to improve profitability levels over the course of the year?

Speaker #6: You've hit a 1.1 ROA, and you're at the 13 ROE. Is the way to think about you've been such a great story of profitability improvement over the past year and a half, and you've hit all these targets.

Speaker #6: Is the path from here that we’re just kind of stable at these profitability levels, but with really strong 10% balance sheet growth? Or do you see other ways to improve profitability levels over the course of the year?

Speaker #4: Yeah. Oh, I think we can continue to improve, especially as you look out. Especially, Catherine, as you look out into '27. So, as we look, it's obviously tougher to forecast, not knowing exactly what rates are going to do.

Billy Carroll: I think we can continue to improve, especially, Catherine, as you look out into 2027. As we look, it is obviously tougher to forecast, not knowing exactly what rates are going to do. From our standpoint, over the next 4 quarters or so, we think we can continue to expand that ROA number up. I think we are going to continue to pick up some EPS growth, continue to move those ROA targets a little bit higher. We feel like as we look ahead and think about, already starting to think a little bit about 2027, that we still got some room to move up. As long as the team, as we talked about, hold expenses within a reasonable range and pick up the repricing plus the new growth, we can expand these return targets a little bit here in the near term.

Speaker #4: But from our standpoint, over the next four quarters or so, we think we can continue to expand that ROA number up. I think we're going to continue to pick up some EPS growth, continue to move those ROA targets a little bit higher.

Speaker #4: And so we feel like as we look ahead and think about, already starting to think a little bit about '27, that we’ve still got some room to move up.

Speaker #4: And as long as we continue to as we talked about hold expenses within a reasonable range and pick up the repricing plus the new growth, we can expand these return targets a little bit here in the near term.

Speaker #6: Great. Okay. Thank you. Great quarterfest.

Catherine Mealor: Great. Okay, thank you. Great quarter, guys.

Speaker #4: Thank you.

Speaker #2: Thank you, Catherine.

Billy Carroll: Thanks, Catherine.

Ron Gorczynski: Thank you.

Speaker #1: The next question comes from the line of Stephen Scooton, with Piper Sandler. Your line is open. Please go ahead.

Operator: The next question comes from the line of Stephen Scouten with Piper Sandler. Your line is open. Please go ahead.

Speaker #7: Yeah. Good morning, everyone. Kind of following up a little bit on Catherine's question there. The positive momentum over the last couple of years has been tremendous.

Stephen Scouten: Yeah, good morning, everyone. Kind of following up a little bit on Catherine's question there. The positive momentum over the last couple of years has been tremendous, and I think you said earlier, Billy, you feel like you're even gaining momentum today. Is there anything out there that would give you pause about something that would maybe derail that momentum? Are you getting to a point where capacity becomes strained at any point? What would kind of stop this positive momentum, if anything?

Speaker #7: And I think you said earlier, Bill, you feel like you're even gaining momentum today. So, I mean, is there anything out there that would give you pause about something that would maybe derail that momentum? Or are you getting to a point where capacity becomes strained at any point?

Speaker #7: Or what would kind of stop this positive momentum, if anything?

Speaker #4: Oh, Steve, that's a good question. I really yeah, obviously, something outside of our control, being some sort of a macro level event. I know.

Billy Carroll: Oh, Stephen, that's a good question. Obviously, something outside of our control being some sort of a macro level event.

Stephen Scouten: That's a gloom and doom question.

Billy Carroll: I know. Yeah, Stephen, let's get positive. We got to stay positive.

Speaker #4: Yeah, Steven, let's get positive. We've got to stay positive.

Speaker #2: I didn't mean it negatively. No.

Stephen Scouten: I didn't mean it negatively, no.

Speaker #4: No. From a from my standpoint, I think the biggest thing would be we're hoping to continue to grow margin a little bit. Ron alluded to it.

Billy Carroll: From my standpoint, I think the biggest thing would be, we're hoping to continue to grow margin a little bit. Ron alluded to it. We've hit it a couple of times here. I think if rates stay up and funding becomes a little more challenging, maybe a little bit heavier fight on NIM. That may hurt us, even though we're positioned very well from an A/L standpoint, very neutral. Obviously, if rates stay up, your funding cost pressures probably something that could nip at us a little bit. I really feel good about the team's ability to keep growing. I talked about the disruption. We've kind of got this thing built.

Speaker #4: We've hit on it a couple of times here. I think for rates to stay up, funding becomes a little more challenging—maybe a little bit heavier fight on NIM.

Speaker #4: That may hurt us, even though we're positioned very well from an AL standpoint. Very neutral. I mean, but obviously, if rates stay up, funding cost pressures are probably something that could nip at us a little bit.

Speaker #4: I really feel good about the team's ability to keep growing. I talked about the disruption. We've kind of got this thing built right now, and we're really just starting to hit on most of our cylinders.

Billy Carroll: Right now and really just starting to hit on most of our cylinders. We've still got some gaps that we want to close, still working on some technology initiatives and things like that. I don't think any of that would impede us from hitting our growth targets.

Speaker #4: We've still got some gaps that we want to close and are still working on some technology initiatives and things like that. But I don't think any of that will impede us from hitting our growth targets.

Speaker #2: Yeah, I think you live in the Southeast like the rest of us, Steven. And it's just hard to argue that every one of the markets is doing well.

Miller Welborn: Yeah. I think you live in the Southeast like the rest of us, Stephen, and it's just hard to argue that every one of the markets is doing well, the economy's doing good, and our folks are outworking everybody else out there. I just think it's barring some crazy macro event, we're going to continue the progress we're making and excited about it.

Speaker #2: The economy is doing well, and our folks are outworking everybody else out there. I just think that, barring some crazy macro event, we're going to continue the progress we're making, and I'm excited about it.

Speaker #7: Yeah, no, that's a really good answer. And I think the idea of just kind of starting to hit on the cylinders—not that you're already firing on all cylinders—is kind of the best conveyance of the continual momentum there.

Ron Gorczynski: Yeah.

Stephen Scouten: No, that's a really good answer. I think the idea of just starting to hit on the cylinders, not that you're already firing on all cylinders is kind of the best conveyance of the continual momentum there. I appreciate that. This question probably gets answered by that statement alone, but the stock has been performing so well given your trends. Does M&A start to come back on the table at any point in time, just given the relative strength of your currency now and maybe accelerate that trajectory even further? Add some cylinders to the engine, if you will?

Speaker #7: So, I appreciate that. And this question probably gets answered by that statement alone, but the stock has been performing so well, given your trends.

Speaker #7: I mean, does M&A start to come back on the table at any point in time, just given the relative strength of your currency now, and maybe accelerate that trajectory even further?

Speaker #7: Add some cylinders to the engine, if you will.

Speaker #4: Yeah. Right now, as we alluded to, we're still very focused on this organic strategy. Obviously, with the valuation lift, it's something that I think we could start to think about a little more as we look into our quarters.

Ron Gorczynski: Yeah. Right now, as we alluded to, we're still very focused on this organic strategy. Obviously, with the valuation lift, it's something that I think we could start to think about a little more as we look into our quarters. Right now, we're pretty well singularly focused right now on this organic strategy. As we get into doing some planning out for 2027, then obviously something that we would consider. Watch the markets. I think we're always looking to see what's happening out there, but something that we've got. It's a card that we could play now more so than before, especially with valuations. We still like this organic strategy as 1A.

Speaker #4: But right now, we're pretty well singularly focused on this organic strategy. And as we get into doing some planning for '27, then obviously that's something that we would consider, watching the markets.

Speaker #4: I think we're always looking to see what's happening out there. But something that we've got is a card that we could play, now more so than before, especially with valuations.

Speaker #4: But we still like this organic strategy as one A.

Speaker #2: Yeah. That would have to be pretty special to make us a lot better, not just bigger.

Billy Carroll: It'd have to be pretty special to make us a lot better, not just bigger.

Speaker #7: Yep, makes a lot of sense. Okay, appreciate it. And congrats again on a great quarter—great couple of years, obviously. Thanks.

Stephen Scouten: Yep. Makes a lot of sense. Okay. Appreciate it, and congrats again on a great quarter. Great couple of years, obviously. Thanks.

Speaker #4: Thank you, Steve.

Ron Gorczynski: Thank you, Steve.

Speaker #3: Thanks.

Billy Carroll: Thanks. Erica, are you there?

Speaker #2: Erica, you there?

Speaker #1: Yes. Your next question comes from the line of Steve Moss with Raymond James. Your line is open. Please go ahead.

Operator: Yes. Your next question comes from the line of Steve Moss with Raymond James. Your line is open. Please go ahead.

Speaker #7: Hey, good morning, guys.

Steve Moss: Hey, good morning, guys.

Speaker #2: Hey, Steve.

Ron Gorczynski: Thanks, Steve.

Speaker #7: Maybe just starting hey, starting here on just going back to the margin dynamics here. I guess maybe first with the securities book, is this kind of as low as you guys think it'll go, or could we see a little more runoff in the book given deposit competition here?

Billy Carroll: Hi, Steve.

Billy Carroll: Maybe just starting here on just going back to the margin dynamics here. I guess maybe first with the securities book. Is this as low as you guys think it'll go, or could we see a little more runoff in the book given deposit competition here?

Speaker #4: Yeah, I think our book is stabilized. It could drift slightly lower, but we're in a good spot. Basically, your percent of investments on the balance sheet are assets that we use a lot for pledging.

Ron Gorczynski: I think our book is stabilized. It could drift slightly lower, we're in a good spot. Basically, your percent of investments on balance sheet assets, and we use a lot for pledging. We're going to stay within a 10% to 12% range of the assets. Not much less. We still have on-balance sheet cash. We're probably $75 to $100 million heavy with the late quarter brokered entrants. We still can use some balance sheet cash going forward.

Speaker #4: We're going to stay within a 10 to 12 percent range of the assets, so not much less. But we still have on-balance sheet cash—we're probably $75 to $100 million heavy with the late quarter brokered entrants.

Speaker #4: So we still have some we still can use some balance sheet cash going forward.

Speaker #7: Okay. Great. And then Ron, did I hear you correctly flagged loan yields for Q3 and then just given the backbook repricing probably 6 or 7 bips in the fourth quarter?

Steve Moss: Okay, great. Ron, did I hear you correctly? Flattish loan yields for Q3, just given the back book repricing probably six or seven basis points in Q4?

Speaker #4: Yes. In the fourth quarter, yeah.

Ron Gorczynski: Yes. In Q4, yes.

Speaker #7: Okay. And so then, kind of like probably close to mid-350s type margin in the fourth quarter.

Steve Moss: Okay. kind of like a probably close to mid-350s type margin in Q4?

Speaker #4: No. Our base is about 348. So we're probably targeting probably closer to the 350 plus or minus.

Ron Gorczynski: No. Our base is about 348, so we're probably targeting closer to the ±350.

Speaker #7: Okay. Got you. Great. And then in terms of just kind of maybe just one more circling back to the loan pipeline here. Good growth across the board.

Steve Moss: Okay. Got it, yeah. Great. Maybe just one more circling back to the loan pipeline here. Good growth across the board, and I hear you guys geographically it's very strong. Going forward, is the pipeline mix more tilted towards C&I, or is it still kind of balanced? Just kind of curious what the pipeline color is there.

Speaker #7: I hear you—geographically, it's very strong. Going forward, is the pipeline mix more tilted towards CNI, or is it still kind of balanced?

Speaker #7: Just kind of curious what the pipeline color is there.

Speaker #2: Yeah. Steve, we were actually talking about that. Rhett, why don't you give some color on that? I know we talked about geography mix and type composition.

Billy Carroll: Yeah. Steve, we were actually talking about that earlier. Rhett, why don't you give some color on that? I know we talked about geography mix and type composition. You want to give him some color there?

Speaker #2: You want to give him some color there.

Speaker #4: Sure, Steve. If you've noticed on the chart in the package, our portfolio continues to just be stable with regard to the mix of the portfolio as a whole, and the pipeline really is a good representation of that same trend.

Rhett Jordan: Sure, Steve. If you noticed on the chart in the package, our portfolio continues to just be stable with regard to the mix of the portfolio as a whole. The pipeline really is a good representation of that same trend. We've got a good mix of geographies across our footprint as well as product type. We're really expecting the throughput from the pipeline to kind of keep that same trend going where it will stay pretty consistent in forward-looking quarters.

Speaker #4: We've got a good mix of geographies across our footprint, as well as product type. So we're really expecting the throughput from the pipeline to kind of keep that same trend going.

Speaker #4: It will stay pretty consistent in the forward-looking quarters.

Speaker #7: Okay. Great. Appreciate that there. And so just thinking about loan pipelines, good. I know we talked about sandbagging a little bit here earlier. It seems like this mid-3 and a half percent type loan growth, link quarter, is sustainable here for the second half.

Steve Moss: Okay, great. Appreciate that there. Just thinking about loan pipeline's good. I know we talked about sandbagging a little bit here earlier. It seems like this mid 3.5% type loan growth linked quarter is sustainable here for the H2.

Speaker #4: Yeah, I think so. Yeah, I think we're right there. Again, plus-minus, we always try to hedge a little bit on some paydowns. But when we look at pipelines, Steve, we feel good about where that's—it's the reason we really like this organic strategy.

Billy Carroll: Yeah, I think so. I think we're right there. Again, plus or minus, we always try to hedge a little bit on some paydowns. When we look at pipelines, Steve, we feel good about where. That's the reason we really like this organic strategy. Just keep doing what's working. We're going to keep supporting our teams to help bring those clients on. Yeah, I think we can get in that. I think we can stay in that 3% plus or minus, maybe three and a half.

Speaker #4: Just keep doing what's working. And so we're going to keep supporting our teams to help bring those clients on. But yeah, I think we can get in that I think we can stay in that 3% plus minus, maybe 3 and a half on a quarter over quarter basis.

Steve Moss: On a quarter-over-quarter basis. Okay. Great. Last one from me, just curious on what the effective tax rate here you guys are expecting going forward. Yeah.

Speaker #7: Okay, great. And last one from me—just curious what effective tax rate you guys are expecting going forward.

Speaker #4: Yeah. Hold on.

Ron Gorczynski: Yeah. Thanks, Steve. Good question. Going forward, about 19.5%. Q2, we had to do some catch-up from the Q1. Again, going forward, 19.5.

Speaker #3: Yeah. Thanks, Steve. Good question. Going forward, about 19.5%. Second quarter, we had to do some catch-up from the first quarter.

Speaker #3: So again, going forward, 19 and a half.

Speaker #7: Right. Guys made too much money. So, nice problem to have. Great quarter, guys.

Steve Moss: Right. Well, you guys made too much money, so nice problem to have. Great quarter, guys.

Speaker #3: Had to pay the fee. Thanks, Steve.

Ron Gorczynski: Gotta pay to stream. Thanks, Steve.

Speaker #2: We keep working on it.

Billy Carroll: We'll keep working on it, Steve. Thank you.

Speaker #4: Steve, thank you.

Speaker #1: Your next question comes from Christopher Marinek with Brin Capital. Your line is open. Please go ahead.

Operator: Your next question comes from Christopher Marinac with Brean Capital. Your line is open. Please go ahead.

Speaker #2: Hey, good morning. I wanted to ask about the reserve level, and is there flexibility, given the low charge-offs, within your seasonal modeling and kind of framework over many years for the reserve to incrementally fall in the future, or would you just assume to keep it right where it is?

Christopher Marinac: Hey, good morning. Wanted to ask about the reserve level, is there flexibility given the low charge-offs within your CECL modeling and kind of framework over many years for the reserve to kind of incrementally fall in the future, or would you just assume keep it right where it is?

Speaker #4: The seasonal model question. That question is so easy, Chris. I'm going to let Ron take that.

Billy Carroll: The CECL model question. That question is so easy, Chris. I'm going to let Ron take that one.

Speaker #2: Go ahead, Ron.

Ron Gorczynski: Go ahead, Ron.

Speaker #3: Yeah. We probably don't see where it's going to go lower. Again, we've been targeting 97, 98 basis points. And with our qualitative factors, so I think we're very comfortable where it's at.

Ron Gorczynski: We probably don't see where it's going to go lower. Again, we've been targeting 97, 98 basis points and with our qualitative factors. I think we're very comfortable where it's at and everyone seems to like that range. Yeah, I don't envision it going lower from here at this point. At least not in the near future.

Speaker #3: And everyone seems to like that range. So yeah, I don't envision it going lower from here at this point. At least not in the near future.

Speaker #2: No, that's great, Ron. I appreciate that. And Billy, back to you for a second. As you've had success in markets like Columbus, are you seeing other new entrants in that same market?

Christopher Marinac: No, that's great, Ron. I appreciate that. Billy, back to you for a second. As you've had success in markets like Columbus, are you seeing other new entrants in that same market? Are you pretty much alone in your entry there?

Speaker #2: Are you pretty much alone in your entry there?

Billy Carroll: I think we have not seen new entrants. We've seen folks flexing into that zone a little bit more down there. Again, it's a good zone. As we've gotten to know that market well over the last year, we're very excited about the team that we have and the opportunities that we have. I think Columbus is probably a lot like several other zones that we're in. These markets that are strong, we're just seeing increased presence and folks trying to recruit and add bankers. I like our chances. I like our teams. I think we've got a good path ahead in really just about all of our zones, really all of our zones. We're really excited about what we've got going on in Columbus. I agree.

Speaker #4: I think we have not seen new entrants. We've seen folks flexing into that zone a little bit more. Down there again, it's just a really—it's a good zone.

Speaker #4: And we've gotten to know that market well over the last year. We're very excited about the team that we have and the opportunities that we have.

Speaker #4: But I think Columbus is probably a lot like several other zones that we're in. In these markets that are strong, we're just seeing increased presence and folks trying to recruit and add bankers.

Speaker #4: But I like our chances. I like our teams. And I think we've got a good path ahead on and really, just about all of our zones, really all of our zones.

Speaker #4: But we're really excited about what we've got going on in Columbus.

Speaker #2: I agree that Liftout and that team models, fits, and mimics a lot of our other markets and culture. And it's just been a good fit.

Billy Carroll: That lift out and that team models and fits and mimics a lot of our other markets and culture. Yeah. It's just been a good fit.

Speaker #7: Sounds good. Thank you both. I appreciate you taking our questions this morning.

Christopher Marinac: Sounds good. Thank you both. I appreciate you taking our questions this morning.

Speaker #4: Thank you, Chris.

Billy Carroll: Thank you, Chris.

Speaker #3: Thank you.

Ron Gorczynski: Thank you.

Speaker #1: There are no time. I will now turn the call back to Miller Welburn. Chairman of the board for closing remarks.

Operator: There are no further questions at this time. I will now turn the call back to Miller Welborn, Chairman of the Board, for closing remarks.

Speaker #2: Thanks so much. I appreciate everybody joining us today. Thanks for listening in. Thanks for caring about the franchise we're building. And we hope you have a great day.

Miller Welborn: Thanks so much. I appreciate everybody joining us today. Thanks for listening in. Thanks for caring about the franchise we're building. We hope you have a great day.

Speaker #1: This concludes today's call. Thank you for attending. You may now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining SmartFinancial Q2 2026 Earnings Release and Conference Call. The line will disconnect automatically.

Q2 2026 SmartFinancial Inc Earnings Call

Request DemoDemo

SmartFinancial

Earnings