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Section 1: 8-K (8-K SMARTFINANCIAL 1ST QUARTER 2019 EARNINGS RELEASE)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of earliest event reported: April 24, 2019

SMARTFINANCIAL, INC.
(Exact Name of Registrant as Specified in its Charter)
 

Tennessee
 
333-203449
 
62-1173944
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 

5401 Kingston Pike, Suite 600
 
 
Knoxville, Tennessee
 
37919
(Address of Principal Executive Offices)
 
(Zip Code)
  
(865) 437-5700
(Registrant’s telephone number, including area code)
 
 
(Former Name or Former Address, if Changed Since Last Report) 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02
Results of Operations and Financial Condition.
 
On April 24, 2019, SmartFinancial, Inc. issued a press release reporting earnings results for its first quarter ending March 31, 2019. The information included in the press release is considered to be “furnished” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). SmartFinancial will include final financial statements and additional analysis for the quarter ended March 31, 2019 as part of its annual report on Form 10-K covering that period.

Item 7.01
Regulation FD Disclosure.

SmartFinancial is filing an investor slide presentation that it intends to review in conjunction with its earnings release conference call on April 25, 2019. The slides are included as Exhibit 99.2 to this report and shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01
Financial Statements and Exhibits
Exhibit No.
Description
99.1
Press release announcing first quarter 2019 financial results dated April 24, 2019

99.2
First quarter 2019 investor presentation






SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
SMARTFINANCIAL, INC.
 
 
Date: April 24, 2019
 
 
/s/ William Y. Carroll, Jr.
 
William Y. Carroll, Jr.
 
President & Chief Executive Officer





EXHIBIT INDEX 

Exhibit No.
 
Description
 
 
 
 
Press release announcing first quarter 2019 financial results dated April 24, 2019

 
First quarter 2019 investor presentation




(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
397645809_image001rgba01.jpg
 
1Q 2019
  
SmartFinancial Announces First Quarter 2019 Net Income of $4.7 million, a 39% Year over Year Increase
Net operating earnings (Non-GAAP) of $5.5 million for the quarter
 
Performance Highlights 

Return on average assets of 0.84 percent and net operating return on average assets (non-GAAP) of 0.98 percent.
Yield on earning assets, taxable equivalent, of 5.25 percent, an increase of 0.24 percentage points from a year ago.
Quarterly loan growth of $63.3 million or 14.5 percent annualized.
Noninterest expense to average assets of 2.77 percent, a decrease of 0.32 percentage points from a year ago.

KNOXVILLE, TN - April 24, 2019 - SmartFinancial, Inc. ("SmartFinancial"; NASDAQ: SMBK), today announced net income of $4.7 million for the first quarter of 2019, compared to $3.4 million a year ago. Diluted net income per share was $0.34 for the first quarter of 2019, compared to $0.30 during the first quarter of 2018.

Billy Carroll, President & CEO, stated: "This quarter we had very strong organic loan growth of over $60 million and had outstanding growth in earnings compared to the same quarter last year. Demand deposits increased significantly, while we were able to keep the costs of those deposits at very reasonable levels. As an organization we continue to improve on our efficiencies as we capture further economies of scale, highlighted by the further reduction in noninterest expense to average assets. Our team also did an outstanding job integrating the Foothills Bank acquisition during the quarter as we continue to build a great core bank."
 
SmartFinancial's Chairman, Miller Welborn, concluded: "We are looking forward to carrying the momentum from this strong start into the remainder of the year. Strong organic loan growth, supported by core demand deposit funding while maintaining stringent credit quality positions us well for the future. The opportunities we have for this company have never been greater. We are well on our way in creating one of the Southeast’s next great community banking franchises."
 
First Quarter 2019 compared to Fourth Quarter 2018

Net income was $4.7 million for the first quarter of 2019, a decrease from $6.4 million in the prior quarter primarily due to a change in tax expense. Diluted net income per share was $0.34 for the first quarter of 2019, compared to $0.47 during the fourth quarter of 2018. Net operating earnings (non-GAAP) totaled $5.5 million in the first quarter of 2019 compared to $5.9 million in the previous quarter. SmartFinancial completed the acquisition of Foothills Bancorp, Inc. and its wholly owned subsidiary Foothills Bank & Trust in November of 2018 and this quarter includes three full months of the results of the acquired company .

Net interest income to average assets of 3.73 percent for the quarter decreased from 3.89 percent in the fourth quarter of 2018, primarily due to lower accretion on acquired loans and higher deposit costs. Net interest income totaled $21.0 million in the first quarter of 2019, compared to $21.4 million in the fourth quarter of 2018. Net interest margin, taxable equivalent, decreased from 4.28 percent in the fourth quarter of 2018 to 4.10 percent in the first quarter of 2019 as earning asset yields decreased while the cost of interest-bearing liabilities increased.
 
Provision for loan losses was $797 thousand in the first quarter of 2019, compared to $1.3 million in the fourth quarter of 2018. The allowance for loan losses was $8.7 million, or 0.47 percent of total loans, as of March 31, 2019, compared to $8.3 million, or 0.46 percent of total loans, as of December 31, 2018.
 

397645809_image002rgba01.jpg



Nonperforming loans as a percentage of total loans was 0.12 percent as of March 31, 2019, which was a decrease from 0.16 percent in the prior quarter due to a reduction in impaired loan balances. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.18 percent as of March 31, 2019, compared to 0.24 percent as of December 31, 2018.
 
Noninterest income to average assets of 0.30 percent for the current period decreased slightly from 0.31 percent in the fourth quarter of 2018 due to higher average asset balances. Noninterest income totaled $1.7 million in the first quarter of 2019, compared to $1.7 million in the fourth quarter of 2018.

Noninterest expense to average assets of 2.77 percent for the quarter decreased from 2.85 percent in the fourth quarter of 2018. Noninterest expense totaled $15.6 million in the first quarter of 2019 compared to $15.7 million in the fourth quarter of 2018 and included $923 thousand in merger expenses compared to $1.3 million in the prior period. Income tax expense was $1.6 million in the first quarter of 2019 compared to a benefit of $307 thousand in the fourth quarter of 2018. The company's effective tax rate was 25.1 percent in the first quarter of 2019 compared to a benefit in the fourth quarter of 2018. The benefit in 2018 resulted from director options previously exercised.

First Quarter 2019 compared to First Quarter 2018

Net income totaled $4.7 million in the first quarter of 2019, or $0.34 per diluted share, compared to $3.4 million, or $0.30 per diluted share, in the first quarter of 2018. Net operating earnings (non-GAAP) totaled $5.5 million in the first quarter of 2019 compared to $3.8 million in the first quarter of 2018.

Net interest income to average assets of 3.73 percent for the quarter decreased from 3.93 percent in the first quarter of 2018. Net interest income totaled $21.0 million in the first quarter of 2019, compared to $16.8 million in the first quarter of 2018. Net interest income was positively impacted compared to the prior year due to increases in average loan and securities balances and increases in the yields of the loan and securities portfolios. Net interest margin, taxable equivalent, decreased from 4.35 percent in the first quarter of 2018 to 4.10 percent in the first quarter of 2019 as a result of increases in the cost of deposits and the subordinated debt issued in the third quarter of 2018.

Provision for loan losses was $797 thousand in the first quarter of 2019, compared to $689 thousand in the first quarter of 2018. The allowance for loan losses was $8.7 million, or 0.47 percent of total loans, as of March 31, 2019, compared to $6.5 million, or 0.47 percent of total loans, as of March 31, 2018.
 
Nonperforming loans as a percentage of total loans was 0.12 percent as of March 31, 2019, a decrease from 0.14 percent in the first quarter of 2018. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.18 percent as of March 31, 2019, compared to 0.26 percent as of March 31, 2018.
 
Noninterest income to average assets of 0.30 percent for the quarter decreased from 0.34 percent in the first quarter of 2018 due to higher average asset balances. Noninterest income totaled $1.7 million in the first quarter of 2019, compared to $1.5 million in the first quarter of 2018.

Noninterest expense to average assets of 2.77 percent for the quarter decreased from 3.09 percent in the first quarter of 2018. Noninterest expense totaled $15.6 million in the first quarter of 2019, compared to $13.2 million in the first quarter of 2018 and included $923 thousand in merger expenses compared to $498 thousand a year ago. The increases in noninterest expense over the prior year in salaries and employee benefits and occupancy expense were primarily due to the acquisitions of Tennessee Bancshares, Inc. in the second quarter of 2018 and Foothills Bancorp, Inc. in the fourth quarter of 2018. The company's effective tax rate was 25.1 percent in the first quarter of 2019 compared to 21.6 percent in the first quarter of 2018 where the rate was positively impacted due the benefits from options exercised.

Conference Call Information

SmartFinancial will host a conference call on Thursday, April 25, 2019 at 10:00 a.m. ET to discuss first quarter 2019 results and other matters. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 2152022. A replay of the conference call will be available through April 25, 2020, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10130759. Conference call materials (earnings release & conference call presentation will be published on the company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile by 9:00 a.m. ET the morning of the conference call.

397645809_image002rgba01.jpg



About SmartFinancial, Inc.

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with 29 branches across Tennessee, Alabama, and the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source
SmartFinancial, Inc.
 
Investor Contacts
Billy Carroll                        Ron Gorczynski
President & CEO                        Executive Vice President, Chief Administrative Officer
(865) 868-0613 [email protected]        (865) 437-5724 [email protected]
 
Media Contact
Kelley Fowler
Senior Vice President, Public Relations & Marketing
(865) 868-0611    [email protected]
 
Non-GAAP Financial Matters
Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) net operating return on average assets, (iii) net operating return on average shareholder equity, (iv) return on average average tangible common equity, (v) net operating return on average tangible common equity, (vi) operating efficiency ratio; (vii) tangible common equity; and (viii) average tangible common equity in its analysis of the company's performance. Net operating earnings available to common shareholders excludes the following from net income available to common shareholders: securities gains and losses, merger related expenses, the effect of the December, 2017 tax law change on deferred tax assets, tax benefit from director options previously exercised, and the income tax effect of adjustments. Net operating return on average equity is the annualized net operating earnings divided by average assets. Net operating return on average equity is the annualized net operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Net operating return on average tangible common equity is the annualized net operating earnings divided by average tangible common equity (non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related expenses from the efficiency ratio. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets. Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.



397645809_image002rgba01.jpg



FORWARD LOOKING STATEMENTS

Certain of the statements made in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” and “estimate,” and similar expressions, are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking, including statements pertaining to the intent, belief, or current expectations of SmartFinancial’s management regarding the company’s strategic direction, plans, objectives, prospects, or future results or financial performance. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of SmartFinancial to differ materially from any results, performance, or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) the risk that the recent announcement of the termination of our agreement and plan of merger with Entegra Financial Corp. (the “Entegra Merger Agreement”) could have adverse effects on the market price of our common stock; (2) the risk that the termination of the Entegra Merger Agreement or the announcement of the same could have an adverse effect on our business generally, including our ability to retain customers, retain or hire key personnel, or maintain relationships with customers or suppliers; (3) reputational risk from the announcement of the termination of the Entegra Merger Agreement.; (4) the fact that we have incurred significant costs and expenses related to the Entegra Merger Agreement and the transactions that were contemplated by the Entegra Merger Agreement; (5) the risk of litigation related to the termination of the Entegra Merger Agreement or the abandonment of the transactions that were contemplated by the Entegra Merger Agreement; (6) potential changes to, or the risk that we may not be able to execute on, our business strategy as a result of the termination of the Entegra Merger Agreement; (7) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize, (8) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships, (9) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank, (10) changes in management’s plans for the future, (11) prevailing, or changes in, economic or political conditions, particularly in our market areas, (12) credit risk associated with our lending activities, (13) changes in interest rates, loan demand, real estate values, or competition, (14) changes in accounting principles, policies, or guidelines, (15) changes in applicable laws, rules, or regulations, and (16) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. Certain additional factors which could affect the forward-looking statements can be found in SmartFinancial’s annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.


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SmartFinancial, Inc. and Subsidiary
 
 
 
 
Condensed Consolidated Financial Information (unaudited)
 
 
 
 
(In thousands except per share data)
 
 
 
 
 
 
As of and for the three months ending
 
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
Selected Performance Ratios (Annualized)
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
0.84
%
 
1.17
%
 
0.85
%
 
0.81
%
 
0.80
%
Net operating return on average assets (Non-GAAP)
 
0.98
%
 
1.07
%
 
0.98
%
 
1.00
%
 
0.89
%
Return on average shareholder equity
 
6.71
%
 
9.42
%
 
6.86
%
 
6.76
%
 
6.25
%
Net operating return on average shareholder equity (Non-GAAP)
 
7.81
%
 
8.65
%
 
7.88
%
 
8.33
%
 
6.97
%
Return on average tangible common equity (Non-GAAP)
 
9.26
%
 
13.06
%
 
9.45
%
 
8.96
%
 
8.10
%
Net operating return on average tangible common equity (Non-GAAP)
 
10.79
%
 
12.00
%
 
10.84
%
 
11.04
%
 
9.04
%
Net interest income / average assets
 
3.73
%
 
3.89
%
 
3.70
%
 
4.03
%
 
3.93
%
Yield on earning assets, TE
 
5.25
%
 
5.35
%
 
5.03
%
 
5.34
%
 
5.01
%
Cost of interest-bearing liabilities
 
1.45
%
 
1.34
%
 
1.15
%
 
1.00
%
 
0.82
%
Net interest margin, TE
 
4.10
%
 
4.28
%
 
4.11
%
 
4.54
%
 
4.35
%
Noninterest income / average assets
 
0.30
%
 
0.31
%
 
0.36
%
 
0.33
%
 
0.34
%
Noninterest expense / average assets
 
2.77
%
 
2.85
%
 
2.90
%
 
3.15
%
 
3.09
%
Efficiency ratio
 
68.65
%
 
67.80
%
 
71.33
%
 
72.34
%
 
72.39
%
Operating efficiency ratio (Non-GAAP)
 
64.25
%
 
61.72
%
 
67.17
%
 
66.92
%
 
69.62
%
Pre-tax pre-provision income / average assets
 
1.23
%
 
1.35
%
 
1.16
%
 
1.21
%
 
1.18
%
 
 
 
 
 
 
 
 
 
 
 
Per Common Share
 
 
 
 
 
 
 
 
 
 
Net income, basic
 
$
0.34

 
$
0.48

 
$
0.34

 
$
0.32

 
$
0.30

Net income, diluted
 
0.34

 
0.47

 
0.34

 
0.32

 
0.30

Net operating earnings, basic (Non-GAAP)
 
0.40

 
0.44

 
0.39

 
0.40

 
0.34

Net operating earnings, diluted (Non-GAAP)
 
0.39

 
0.43

 
0.39

 
0.39

 
0.34

Book value
 
20.82

 
20.31

 
19.74

 
19.48

 
18.60

Tangible book value (Non-GAAP)
 
15.18

 
14.64

 
14.38

 
14.09

 
14.09

 
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
13,952

 
13,934

 
12,750

 
12,705

 
11,234

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SmartFinancial, Inc. and Subsidiary
 
 
 
 
Condensed Consolidated Financial Information (unaudited)
 
 
 
 
(In thousands except per share data)
 
 
 
 
 
 
As of and for the three months ending
 
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
Composition of Loans
 
 
 
 
 
 
 
 
 
 
Real estate commercial
 
 
 
 
 
 
 
 
 
 
owner occupied
 
$
416,152

 
$
372,030

 
$
364,164

 
$
360,294

 
$
288,666

non-owner occupied
 
476,234

 
487,997

 
400,275

 
385,536

 
375,028

Total real estate commercial
 
892,386

 
860,027

 
764,439

 
745,830

 
663,694

Commercial & financial
 
341,015

 
308,254

 
289,732

 
279,341

 
256,333

Real estate construction & development
 
186,427

 
187,895

 
166,089

 
179,361

 
142,702

Real estate residential
 
408,661

 
407,254

 
351,948

 
355,755

 
299,148

Other loans
 
12,080

 
13,809

 
12,986

 
15,148

 
12,380

Total loans
 
$
1,840,569

 
$
1,777,239

 
$
1,585,194

 
$
1,575,434

 
$
1,374,257

 
 
 
 
 
 
 
 
 
 
 
Asset Quality Data and Ratios
 
 
 
 
 
 
 
 
 
 
Nonperforming loans
 
$
2,158

 
$
2,856

 
$
2,604

 
$
1,730

 
$
1,930

Foreclosed assets
 
2,066

 
2,495

 
4,230

 
3,524

 
2,665

Total nonperforming assets
 
$
4,224

 
$
5,351

 
$
6,834

 
$
5,254

 
$
4,595

Restructured loans not included in nonperforming loans
 
$
32

 
$
116

 
$
369

 
$
660

 
$
40

Net charge-offs to average loans (annualized)
 
0.08
%
 
0.04
%
 
0.06
%
 
0.02
%
 
0.02
%
Allowance for loan losses to loans
 
0.47
%
 
0.46
%
 
0.45
%
 
0.45
%
 
0.47
%
Nonperforming loans to total loans, gross
 
0.12
%
 
0.16
%
 
0.16
%
 
0.11
%
 
0.14
%
Nonperforming assets to total assets
 
0.18
%
 
0.24
%
 
0.33
%
 
0.25
%
 
0.26
%
Acquisition accounting discounts on loans
 
$
19,954

 
$
21,528

 
$
19,500

 
$
20,748

 
$
16,323

Accretion income on all acquired loans
 
1,881

 
2,755

 
1,208

 
2,583

 
1,274

 
 
 
 
 
 
 
 
 
 
 
Capital Ratios
 
 
 
 
 
 
 
 
 
 
Equity to Assets
 
12.34
%
 
12.44
%
 
12.27
%
 
12.00
%
 
11.87
%
Tangible common equity to tangible assets (Non-GAAP)
 
9.31
%
 
9.29
%
 
9.25
%
 
8.98
%
 
9.26
%
SmartFinancial, Inc.:
 
Estimated1

 
Estimated1

 
Estimated1

 
 
 
 
Tier 1 leverage
 
9.29
%
 
9.47
%
 
9.26
%
 
9.82
%
 
9.59
%
Common equity Tier 1
 
10.72
%
 
10.81
%
 
10.88
%
 
10.83
%
 
10.84
%
Tier 1 capital
 
10.72
%
 
10.81
%
 
10.88
%
 
10.83
%
 
10.84
%
Total capital
 
13.14
%
 
13.29
%
 
13.57
%
 
11.25
%
 
11.27
%
SmartBank:
 
Estimated2

 
 
 
 
 
 
 
 
Tier 1 leverage
 
10.60
%
 
11.17
%
 
10.55
%
 
10.43
%
 
10.17
%
Common equity Tier 1
 
12.23
%
 
12.31
%
 
11.99
%
 
11.41
%
 
11.12
%
Tier 1 risk-based capital
 
12.23
%
 
12.31
%
 
11.99
%
 
11.41
%
 
11.12
%
Total risk-based capital
 
12.67
%
 
12.75
%
 
12.40
%
 
11.83
%
 
11.56
%
1 Effective 9/30/18 the company files the FRY-9SP which does not include capital ratios.
2 Ratios will be finalized with the filing of the Quarterly Call Report.




SmartFinancial, Inc. and Subsidiary
 
 
 
 
Condensed Consolidated Financial Information (unaudited)
 
 
(In thousands)
 
 
 
 
BALANCE SHEET
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balances
 
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
Assets
 
 
 
 
 
 
 
 
 
 
Cash & cash equivalents
 
$
132,994

 
$
115,822

 
$
130,104

 
$
170,235

 
$
96,710

Securities available-for-sale
 
198,273

 
201,688

 
173,039

 
156,577

 
156,210

Restricted investments, at cost
 
12,398

 
11,499

 
10,736

 
8,273

 
7,808

Total loans
 
1,840,569

 
1,777,239

 
1,585,194

 
1,575,434

 
1,374,257

Allowance for loan losses
 
(8,704
)
 
(8,275
)
 
(7,156
)
 
(7,074
)
 
(6,477
)
Loans, net
 
1,831,865

 
1,768,964

 
1,578,038

 
1,568,361

 
1,367,780

Bank premises and equipment, net
 
56,583

 
56,012

 
51,138

 
52,203

 
44,202

Foreclosed assets
 
2,066

 
2,495

 
4,230

 
3,524

 
2,665

Goodwill and core deposit intangible, net
 
78,690

 
79,034

 
68,254

 
68,449

 
50,660

Cash surrender value of life insurance
 
24,539

 
24,381

 
22,088

 
21,944

 
21,797

Other assets
 
16,909

 
14,514

 
13,320

 
12,666

 
12,593

Total assets
 
$
2,354,317

 
$
2,274,409

 
$
2,050,946

 
$
2,062,232

 
$
1,760,425

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 

 
 

 
 

 
 

 
 

Noninterest-bearing demand deposits
 
$
329,095

 
$
319,861

 
$
301,197

 
$
301,318

 
$
276,249

Interest-bearing demand deposits
 
331,629

 
311,482

 
267,146

 
246,942

 
278,965

Money market and savings deposits
 
698,431

 
641,945

 
570,172

 
632,518

 
491,243

Time deposits
 
635,175

 
648,675

 
568,796

 
535,879

 
453,276

Total deposits
 
1,994,330

 
1,921,964

 
1,707,311

 
1,716,658

 
1,499,733

Securities sold under agreement to repurchase
 
7,070

 
11,756

 
16,786

 
18,635

 
15,968

Federal funds purchased and other borrowings
 
8,605

 
11,243

 
25,324

 
72,040

 
30,000

Subordinated debt
 
39,198

 
39,177

 
39,158

 

 

Accrued expenses and other liabilities
 
14,633

 
7,258

 
10,724

 
7,413

 
5,775

Total liabilities
 
2,063,836

 
1,991,398

 
1,799,304

 
1,814,745

 
1,551,476

Stockholders' equity:
 
 
 
 
 
 
 
 
 
 
Common stock
 
13,952

 
13,934

 
12,750

 
12,705

 
11,234

Additional paid-in capital
 
232,241

 
231,852

 
208,999

 
208,513

 
174,981

Retained earnings
 
44,722

 
39,991

 
33,559

 
29,235

 
25,303

Accumulated other comprehensive loss
 
(434
)
 
(2,765
)
 
(3,666
)
 
(2,966
)
 
(2,569
)
Total stockholders' equity
 
290,481

 
283,011

 
251,642

 
247,487

 
208,949

Total liabilities and stockholders' equity
 
$
2,354,317

 
$
2,274,409

 
$
2,050,946

 
$
2,062,232

 
$
1,760,425





SmartFinancial, Inc. and Subsidiary
 
 
 
 
Condensed Consolidated Financial Information (unaudited)
 
 
(In thousands, except per share data)
 
 
 
 
INCOME STATEMENT
 
 
 
 
 
 
 
 
 
 
 
 
Three months ending
 
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
Interest Income
 
 
 
 
 
 
 
 
 
 
Loans, including fees
 
$
24,975

 
$
25,017

 
$
21,572

 
$
21,652

 
$
18,228

Securities

 
1,395

 
1,248

 
969

 
974

 
908

Federal funds sold and other earning assets

 
573

 
506

 
527

 
367

 
242

Total interest income
 
26,943

 
26,771

 
23,068

 
22,993

 
19,378

Interest Expense
 
 
 
 
 
 
 
 
 
 
Deposits
 
5,251

 
4,680

 
3,969

 
3,238

 
2,401

Repurchase agreements
 
8

 
9

 
11

 
11

 
13

Subordinated debt
 
584

 
584

 
19

 

 

FHLB and other borrowings
 
103

 
62

 
209

 
207

 
153

Total interest expense
 
5,946

 
5,335

 
4,208

 
3,455

 
2,567

Net interest income
 
20,997

 
21,436

 
18,860

 
19,538

 
16,811

Provision for loan losses
 
797

 
1,329

 
302

 
617

 
689

Net interest income after provision for loan losses
 
20,200

 
20,105

 
18,559

 
18,921

 
16,122

Noninterest income
 
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
 
654

 
657

 
624

 
557

 
578

Gain (loss) on securities
 

 
2

 

 
(1
)
 

Gain on sale of loans and other assets
 
282

 
288

 
493

 
327

 
325

Interchange and debit card transaction fees
 
175

 
162

 
144

 
121

 
146

Other noninterest income
 
587

 
606

 
570

 
579

 
406

Total noninterest income
 
1,698

 
1,715

 
1,831

 
1,583

 
1,455

Noninterest expense
 
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
8,398

 
7,871

 
7,934

 
7,649

 
7,176

Occupancy expense
 
1,640

 
1,610

 
1,638

 
1,522

 
1,533

FDIC premiums
 
179

 
209

 
158

 
317

 
102

Foreclosed asset expense
 
62

 
262

 
79

 
245

 
189

Marketing
 
295

 
245

 
228

 
215

 
185

Data processing
 
615

 
372

 
407

 
600

 
526

Professional expenses
 
797

 
908

 
922

 
918

 
898

Amortization of other intangibles
 
344

 
312

 
248

 
229

 
188

Service contracts
 
567

 
577

 
507

 
492

 
479

Merger expense
 
923

 
1,322

 
838

 
1,123

 
498

Other noninterest expense
 
1,760

 
2,008

 
1,800

 
1,968

 
1,448

Total noninterest expense
 
15,579

 
15,696

 
14,759

 
15,278

 
13,222

Earnings before income taxes
 
6,319

 
6,124

 
5,630

 
5,226

 
4,355

Income tax expense (benefit)
 
1,588

 
(307
)
 
1,305

 
1,295

 
940

Net income
 
$
4,731

 
$
6,431

 
$
4,325

 
$
3,931

 
$
3,415

 
 
 
 
 
 
 
 
 
 
 
NET INCOME PER COMMON SHARE
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.34

 
$
0.48

 
$
0.34

 
$
0.32

 
$
0.30

Diluted
 
0.34

 
0.47

 
0.34

 
0.32

 
0.30

 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
 
13,942

 
13,535

 
12,719

 
12,201

 
11,211

Diluted
 
14,018

 
13,617

 
12,818

 
12,320

 
11,324





SmartFinancial, Inc. and Subsidiary
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Financial Information (unaudited)
 
 
 
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
YIELD ANALYSIS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
Three Months Ended December 31, 2018
 
Three Months Ended March 31, 2018
 
 
Average
 
 
 
Yield/
 
Average
 
 
 
Yield/
 
Average
 
 
 
Yield/
 
 
Balance
 
Interest1
 
Cost1
 
Balance
 
Interest1
 
Cost1
 
Balance
 
Interest1
 
Cost1
Assets
 
 

 
 

 
 

 
 
 
 
 
 
 
 

 
 

 
 

Loans
 
$
1,802,014

 
$
24,977

 
5.62
%
 
$
1,708,450

 
$
25,019

 
5.81
%
 
$
1,352,319

 
$
18,230

 
5.47
%
Taxable securities
 
147,346

 
971

 
2.67
%
 
145,950

 
901

 
2.45
%
 
151,573

 
872

 
2.33
%
Tax-exempt securities
 
53,492

 
537

 
4.07
%
 
43,177

 
439

 
4.03
%
 
6,366

 
55

 
3.50
%
Federal funds sold and other earning assets
 
86,688

 
573

 
2.68
%
 
96,356

 
506

 
2.08
%
 
58,869

 
242

 
1.67
%
Total interest-earning assets
 
2,089,540

 
27,058

 
5.25
%
 
1,993,933

 
26,865

 
5.35
%
 
1,569,127

 
19,399

 
5.01
%
Noninterest-earning assets
 
193,698

 
 
 
 
 
183,333

 
 
 
 
 
166,035

 
 
 
 
Total assets
 
$
2,283,238

 
 
 
 
 
$
2,177,266

 
 
 
 
 
$
1,735,162

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing demand deposits
 
$
306,164

 
$
474

 
0.63
%
 
$
266,311

 
$
422

 
0.63
%
 
$
249,846

 
$
320

 
0.52
%
Money market and savings deposits
 
665,018

 
1,978

 
1.21
%
 
646,750

 
1,697

 
1.04
%
 
526,093

 
870

 
0.67
%
Time deposits
 
637,767

 
2,799

 
1.78
%
 
616,008

 
2,561

 
1.65
%
 
454,660

 
1,211

 
1.08
%
Total interest-bearing deposits
 
1,608,949

 
5,251

 
1.32
%
 
1,529,069

 
4,680

 
1.21
%
 
1,230,599

 
2,401

 
0.79
%
Securities sold under agreement to repurchase
 
7,971

 
8

 
0.41
%
 
10,661

 
9

 
0.33
%
 
16,186

 
12

 
0.31
%
Federal funds purchased and other borrowings
 
10,217

 
103

 
4.09
%
 
4,001

 
62

 
6.15
%
 
26,655

 
153

 
2.32
%
Subordinated debt
 
39,184

 
584

 
6.04
%
 
39,177

 
584

 
5.91
%
 


 


 


Total interest-bearing liabilities
 
1,666,321

 
5,946

 
1.45
%
 
1,582,908

 
5,335

 
1.34
%
 
1,273,440

 
2,566

 
0.82
%
Noninterest-bearing deposits
 
320,134

 
 
 
 
 
320,311

 
 
 
 
 
231,355

 
 
 
 
Other liabilities
 
10,707

 
 
 
 
 
17,900

 
 
 
 
 
8,656

 
 
 
 
Total liabilities
 
1,997,162

 
 
 
 
 
1,921,119

 
 
 
 
 
1,513,451

 
 
 
 
Stockholders’ equity
 
286,076

 
 
 
 
 
256,147

 
 
 
 
 
221,711

 
 
 
 
Total liabilities and stockholders’ equity
 
$
2,283,238

 
 
 
 
 
$
2,177,266

 
 
 
 
 
$
1,735,162

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income, taxable equivalent
 
 
 
$
21,112

 
 
 
 
 
$
21,530

 
 
 
 
 
$
16,823

 
 
Interest rate spread
 
 
 
 
 
3.80
%
 
 
 
 
 
4.01
%
 
 
 
 
 
4.19
%
Tax equivalent net interest margin
 
 
 
 
 
4.10
%
 
 
 
 
 
4.28
%
 
 
 
 
 
4.35
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of average interest-earning assets to average interest-bearing liabilities
 
 
 
 
 
125.40
%
 
 
 
 
 
125.97
%
 
 
 
 
 
123.22
%
Percentage of  average equity to average assets
 
 
 
 
 
12.53
%
 
 
 
 
 
11.76
%
 
 
 
 
 
12.78
%
 
 
 

 
 

 
 

 
 
 
 
 
 
 
 

 
 

 
 

1 Taxable equivalent




SmartFinancial, Inc. and Subsidiary
 
 
 
 
Condensed Consolidated Financial Information (unaudited)
 
 
 
 
(In thousands)
 
 
 
 
NON-GAAP RECONCILIATIONS
 
Three months ending
 
 
March 31, 2019
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
Operating Earnings
 
 
 
 
 
 
 
 
 
 
Net income (GAAP)
 
$
4,731

 
$
6,444

 
$
4,324

 
$
3,931

 
$
3,415

Securities (gains) losses
 

 
(2
)
 

 
1

 

Merger expenses
 
923

 
1,322

 
838

 
1,123

 
498

Tax benefit from director options previously exercised
 

 
(1,600
)
 

 

 

Income tax effect of adjustments
 
(145
)
 
(256
)
 
(196
)
 
(211
)
 
(103
)
Net operating earnings (Non-GAAP)
 
$
5,509

 
$
5,908

 
$
4,966

 
$
4,844

 
$
3,810

Net operating earnings per common share (Non-GAAP):
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.40

 
$
0.44

 
$
0.39

 
$
0.40

 
$
0.34

Diluted
 
0.39

 
0.43

 
0.39

 
0.39

 
0.34

 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Return Ratios
 
 
 
 
 
 
 
 
 
 
Net operating return on average assets (Non-GAAP)1
 
0.98
 %
 
1.07
 %
 
0.98
 %
 
1.00
 %
 
0.89
 %
Net operating return on average shareholder equity (Non-GAAP)2
 
7.81
 %
 
8.65
 %
 
7.88
 %
 
8.33
 %
 
6.97
 %
Return on average tangible common equity (Non-GAAP)3
 
9.26
 %
 
13.06
 %
 
9.45
 %
 
8.96
 %
 
8.10
 %
Net operating return on average tangible common equity (Non-GAAP)4
 
10.79
 %
 
12.00
 %
 
10.84
 %
 
11.04
 %
 
9.04
 %
 
 
 
 
 
 
 
 
 
 
 
Operating Efficiency Ratio
 
 
 
 
 
 
 
 
 
 
Efficiency ratio (GAAP)
 
68.65
 %
 
67.71
 %
 
71.34
 %
 
72.31
 %
 
72.39
 %
Adjustment for taxable equivalent yields
 
(0.49
)%
 
(0.45
)%
 
(0.18
)%
 
(0.11
)%
 
(0.06
)%
Adjustment for securities gains (losses)
 
 %
 
0.01
 %
 
 %
 
(0.01
)%
 
 %
Adjustment for merger expenses
 
(3.91
)%
 
(5.55
)%
 
(3.99
)%
 
(5.28
)%
 
(2.71
)%
Operating efficiency ratio (Non-GAAP)
 
64.25
 %
 
61.72
 %
 
67.17
 %
 
66.92
 %
 
69.62
 %
 
 
 
 
 
 
 
 
 
 
 
Tangible Common Equity
 
 
 
 
 
 
 
 
 
 
Stockholders' equity (GAAP)
 
$
290,481

 
$
283,011

 
$
251,642

 
$
247,487

 
$
208,949

Less goodwill and other intangible assets
 
78,690

 
79,034

 
68,254

 
68,449

 
50,660

Tangible common equity (Non-GAAP)
 
$
211,791

 
$
203,977

 
$
183,388

 
$
179,036

 
$
158,289

 
 
 
 
 
 
 
 
 
 
 
Average Tangible Common Equity
 
 
 
 
 
 
 
 
 
 
Average stockholders' equity (GAAP)
 
$
286,076

 
$
270,884

 
$
250,063

 
$
233,285

 
$
221,711

Less average goodwill and other intangible assets
 
78,913

 
75,547

 
68,389

 
57,251

 
50,780

Average tangible common equity (Non-GAAP)
 
$
207,163

 
$
195,337

 
$
181,674

 
$
176,034

 
$
170,931


1 Net operating return on average assets (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average assets.
2 Net operating return on average equity (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average equity.
3 Return on average tangible common equity (non-GAAP) is the annualized net income divided by average tangible common equity (non-GAAP).
4 Net operating return on average tangible common equity (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average tangible common equity (non-GAAP).

(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

exhibit992investor
First Quarter 2019 Earnings Release April 25, 2019


 
Legal Disclaimer Forward-Looking Statements Certain of the statements in this presentation may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” and “estimate,” and similar expressions, are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking, including statements pertaining to the intent, belief, or current expectations of management of SmartFinancial, Inc. (“SmartFinancial”) regarding the company’s strategic direction, plans, objectives, prospects, or future results or financial performance. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of SmartFinancial to differ materially from any results, performance, or achievements expressed or implied by such forward- looking statements. Such risks, uncertainties, and other factors include, among others, (1) the risk that the recent announcement of the termination of SmartFinancial’s agreement and plan of merger with Entegra Financial Corp. (the “Entegra Merger Agreement”) could have adverse effects on the market price of SmartFinancial’s common stock; (2) the risk that the termination of the Entegra Merger Agreement or the announcement of the same could have an adverse effect on SmartFinancial’s business generally, including its ability to retain customers, retain or hire key personnel, or maintain relationships with customers or suppliers; (3) reputational risk from the announcement of the termination of the Entegra Merger Agreement.; (4) the fact that SmartFinancial has incurred significant costs and expenses related to the Entegra Merger Agreement and the transactions that were contemplated by the Entegra Merger Agreement; (5) the risk of litigation related to the termination of the Entegra Merger Agreement or the abandonment of the transactions that were contemplated by the Entegra Merger Agreement; (6) potential changes to, or the risk that SmartFinancial may not be able to execute on, SmartFinancial’s business strategy as a result of the termination of the Entegra Merger Agreement; (7) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize, (8) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships, (9) SmartFinancial’s ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank, (10) changes in management’s plans for the future, (11) prevailing, or changes in, economic or political conditions, particularly in our market areas, (12) credit risk associated with our lending activities, (13) changes in interest rates, loan demand, real estate values, or competition, (14) changes in accounting principles, policies, or guidelines, (15) changes in applicable laws, rules, or regulations, and (16) other general competitive, economic, political, and market factors, including those affecting SmartFinancial’s business, operations, pricing, products, or services. Certain additional factors which could affect the forward-looking statements can be found in SmartFinancial’s annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise. Non-GAAP Financial Measures Statements included in this presentation include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The non-GAAP financial measures used in this presentation include: (i) tangible common equity, (ii) tangible book value per share, (iii) net interest income excluding purchase accounting adjustments, (iv) operating efficiency ratio, (v) net operating return on average assets, (vi) net operating earnings per share, and (vii) net operating return on average tangible common equity. Tangible common equity excludes total preferred stock, preferred stock paid in capital, goodwill, and other intangible assets, and tangible book value per share reflects the per share value of tangible common equity. Net interest income excluding purchase accounting adjustments adjusts net interest income to exclude the impact of purchase accounting. The operating efficiency ratio excludes securities gains and losses and merger related expenses from the efficiency ratio. Net operating earnings excludes securities gains and losses and merger related expenses, and the effect of the December, 2017 tax law change on deferred tax assets, and the income tax effect of adjustments, and operating return on average assets is net operating income divided by GAAP total average assets. Net operating earnings per share is net operating income divided by GAAP total average assets. Net operating return on tangible common equity is net operating income divided by tangible common equity. Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. 2


 
Overview of SmartFinancial ▪ SmartFinancial, Inc. (Nasdaq: SMBK) is a $2.4 billion Branch Footprint asset bank holding company headquartered in Knoxville, Tennessee Nashville Knoxville Greensboro ▪ Jonesboro Operates one subsidiary bank, SmartBank, which was founded 40 in January 2007 ARKANSAS ▪ TENNESSEE NORTH CAROLINA Located primarily in attractive, high-growth marketsMemphis Chattanooga throughout East Tennessee, Alabama and Florida ▪ 77 385 full-time employees Huntsville SOUTH ▪ ~$276 million market capitalization(1) 85 CAROLINA ▪ Balance Sheet (03/31/19) Atlanta Birmingham 20 ▪ Assets: $2.4 billion Tuscaloosa GEORGIA ▪ Gross Loans: $1.8 billion ▪ Deposits: $2.0 billion MISSISSIPPI ALABAMA Columbus ▪ Jackson 16 Tangible Common Equity (Non-GAAP): $211.8 million Montgomery ▪ Profitability (Q1 ’19) Savannah ▪ 65 Net Income / Net Operating Earnings (Non-GAAP): $4.7 million 75 95 / $5.5 million ▪ ROAA / Net Operating ROAA (Non-GAAP): 0.84% / 0.98% Mobile 10 ▪ ROATCE / Net Operating ROATCE (Non-GAAP)Baton: 9 Rouge.26% / 10.79% ▪ Tallahassee SMBK Branch Efficiency Ratio / Operating Efficiency Ratio (NonNew-GAAP) Orleans: 68.7% FLORIDA / 64.3% ▪ Asset Quality ▪ Superior asset quality and proven credit culture ▪ NPAs / Assets of 0.18% ▪ NCOs / Average Loans of 0.08% Financial data as of or for the three months ended 03/31/19 (1) Pricing data as of 04/23/19 Note: For a reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures see Appendix 3


 
Culture We are building a culture where Associates thrive and are empowered to be leaders. The core values that we have established as a company help us operate in unison and have become a critical part of our culture. Our Associates are key to SmartBank’s success. Core Values Act with Integrity Delivering Be Enthusiastic Exhibiting Creating Exceptional, reate Positivity over-the-top C “WOW” Professional & Enthusiasm Demonstrate Accountability Experiences Knowledgeable and Positivity Embrace Change Service Positioning Statement At SmartBank, delivering unparalleled value to our Shareholders, Associates, Clients and the Communities we serve drives every decision and action we take. Exceptional value means being there with smart solutions, fast responses and deep commitment every single time. By doing this, we will create the Southeast’s next, great community banking franchise. 4


 
Disciplined Acquisition Strategy ▪ SmartFinancial has adhered to a disciplined set of merger criteria including: ▪ 3 years (+/-) of initial TBV-per-share dilution ▪ Meaningful EPS accretion in the first full year of operations ▪ Conservative loan marks ▪ Franchise additive ▪ SmartFinancial is committed to balancing organic growth with thoughtful acquisitions and will not make acquisitions simply for the sake of growth ▪ Moving Forward ▪ Positioned extremely well to move forward given progress made over the last several months planning to be a larger institution ▪ The company is Moving Forward with several major initiatives that were planned: ▪ Centralization of operational areas ▪ Centralization of finance group ▪ Bank-wide organization chart planning to gain efficiencies ▪ Core data processing decision (contract up in 2020) ▪ Continued hiring of bank talent in our growth markets ▪ Evaluation of new M&A opportunities ▪ Approved share repurchase plan in place to utilize as appropriate 5


 
First Quarter Financial Highlights


 
Performance Trends ▪ Net Operating Earnings (Non-GAAP) of $5.5 ROAA (%) ROATCE (%) million for the quarter, up 45% from a year 1.17 % 13.08 % 1.07 % 1.00 % 0.98 % 0.98 % 12.00 % 11.04 % earlier 0.89 % 10.84 % 10.79 % 0.85 % 0.84 % 0.80 % 0.81 % 9.45 % 9.26 % 9.04 % 8.96 % 8.10 % ▪ ROAA of 0.84% for the quarter and Net Operating ROAA (Non-GAAP) of 0.98% ▪ ROATCE (Non-GAAP) of 9.26% for the quarter and Operating ROATCE (Non-GAAP) of 10.79% Reported Operating (1)(2) ▪ Efficiency Ratio of 68.7% for the quarter and Operating Efficiency Ratio (Non-GAAP) of 64.3% Net Interest Margin (%) Efficiency Ratio (%) ▪ 4.54 % 72.4 % 72.3 % Net Interest Margin (fully taxable equivalent 71.3 % 4.35 % 4.28 % 69.6 % 68.7 % 67.7 % 4.03 % 4.11 % 4.10 % 66.9 % 67.2 % “FTE”) of 4.10%, down 18 basis points from 3.94 % 3.85 % 64.3 % 3.74 % 3.73 % the prior quarter 61.7 % ▪ Nonperforming Assets were 0.18% of Total Assets ▪ Quarterly loan growth of $63.3 million or Reported Operating (1)(2) 14.5% annualized (1) Operating profitability (non-GAAP) figures exclude gain on sale of securities, merger-related expenses and nonrecurring items (2) Operating net interest margin (non-GAAP) excludes purchase accounting adjustments Note: For a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 7


 
Balance Sheet Trends Total Assets ($mm) Net Loans ($mm) 2,500 2,354 2,000 1,832 2,274 1,769 2,051 2,062 1,568 1,578 2,000 1,600 1,721 1,760 1,317 1,368 1,500 1,200 1,000 800 500 400 0 0 YE 2017 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 YE 2017 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Total Deposits ($mm) Book Value Per Share 2,400 $22.50 $20.82 1,994 $20.31 2,000 1,922 $19.74 $20.00 $19.48 1,717 1,707 $18.46 $18.60 1,600 1,439 1,500 $17.50 1,200 $15.18 $14.64 $15.00 $14.38 $13.90 $14.09 $14.09 800 $12.50 400 0 $10.00 YE 2017 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 YE 2017 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Book Value Tangible Book Value(1) (1) For a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP measures, see the Appendix 8


 
Earnings Profile – First Quarter 2019 ▪ Net Operating Diluted EPS (Non- GAAP) increased 15% year over 1Q19 4Q18 1Q18 year (“YoY”) Total Interest Income $26,943 $26,771 $19,378 Total Interest Expense 5,946 5,335 2,567 ▪ Earnings Before Income Taxes increased 45% YoY Net Interest Income 20,997 21,436 16,811 Total Noninterest Income 1,698 1,715 1,455 ▪ Net Interest Income increased 25% Total Revenue 22,695 23,151 18,266 YoY primarily due to higher average Provision for Loan Losses 797 1,329 689 earning asset balances and higher Total Noninterest Expense 15,579 15,696 13,222 earning asset yields Earnings Before Income Taxes 6,319 6,124 4,355 ▪ Increases in Noninterest Expense Income Tax Expense (Benefit) 1,588 (307) 940 primarily driven by higher salary Net Income $4,731 $6,431 $3,415 and occupancy expense from Net Income Per Share: completed acquisitions, as well as Diluted Net Income Per Share $0.34 $0.47 $0.30 merger expenses Net Operating Earnings Per Share (Non-GAAP): ▪ Total Revenue increased 24% YoY Diluted Operating Earnings Per Share $0.39 $0.43 $0.34 Note: For a reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 9


 
Net Interest Income ▪ Net Interest Margin (FTE) decreased quarter to quarter primarily due to lower accretion on acquired loans ▪ Compared to a year ago, Earning Asset Yields are up 24 basis points; the Average Cost of Interest-bearing Liabilities is up 63 basis points ▪ Excluding the effect of purchase accounting adjustments, the Net Interest Margin (FTE) decreased 1 basis point quarter to quarter, primarily due to the higher cost of interest-bearing deposits 1Q19 4Q18 1Q18 Average Yields and Rates 1Q19 4Q18 1Q18 Net Interest Income $20,997 $21,436 $16,811 Average Earning Assets $2,089,540 $1,993,933 $1,569,127 Loans 5.62% 5.81% 5.47% Taxable securities 2.67% 2.45% 2.33% Tax-exempt securities 4.07% 4.03% 3.50% Net Interest Margin Federal Funds and Other Investments 2.68% 2.08% 1.67% Earning Asset Yields 5.25% 5.35% 5.01% 4.75% 4.50% Total Interest-bearing Deposits 1.32% 1.21% 0.79% 4.25% Securities Sold Under Agreement to Repurchase 0.41% 0.37% 0.31% 4.00% Federal funds purchased and other borrowings 4.09% 6.15% 2.32% Subordinated Debt 6.04% 5.91% 0.00% 3.75% Total Interest-bearing Liabilities 1.45% 1.34% 0.82% 3.50% 1Q18 2Q18 3Q18 4Q18 1Q19 Net Interest Margin (FTE) 4.10% 4.28% 4.35% Net Interest Margin (FTE) Net Interest Margin (FTE - ex Purchase Accounting Adj.) (Non-GAAP) Cost of Funds 1.21% 1.10% 0.69% Note: For a reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 10


 
Noninterest Income ▪ Consistent increases in service charges on deposit accounts, and other noninterest income components ▪ Noninterest Income trending upward, though 4Q18 and 1Q19 reported decreased gain on sale of loans and other assets Noninterest Income $2,000,000 $1,500,000 (Loss) Gain on Securities $1,000,000 Other Noninterest Income Gain on Sale of Loans and Other Assets Service Charges on Deposit Accounts $500,000 $0 1Q18 2Q18 3Q18 4Q18 1Q19 11


 
Noninterest Expense ▪ Efficiency Ratio remained under 70% for the second consecutive quarter while Operating Efficiency Ratio (Non-GAAP) was 64.3% ▪ Salary increases are primarily due to the addition of associates from two completed acquisitions for periods presented, as well as infrastructure builds ▪ Merger expense of $923 thousand in the quarter Noninterest Expense $20,000,000 72.0% 70.0% Merger expense $15,000,000 68.0% Other 66.0% Amortization of Intangibles $10,000,000 64.0% Data Processing Occupancy 62.0% $5,000,000 Salaries & Benefits 60.0% Operating Efficiency Ratio $0 58.0% 1Q18 2Q18 3Q18 4Q18 1Q19 Note: For a reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 12


 
Attractive Deposit Mix Deposit Composition (03/31/19) Historical Deposit Composition ($mm) $2,500 Noninterest Demand Time 16% Deposits $1,994 $1,922 32% Interest- $2,000 bearing $1,717 $1,707 Demand $635 17% $1,500 $649 Money $1,500 $536 Market and $569 Savings $454 35% $1,000 $698 $642 $633 $570 $491 Historical Cost of Deposits 3.00% $500 $311 $332 $279 $247 $267 2.50% $329 2.00% 2.50% 2.50% $276 $301 $301 $320 2.25% $0 1.50% 2.00% 1.75% 1Q18 2Q18 3Q18 4Q18 1Q19 1.00% 1.10% Noninterest Demand Interest-bearing Demand 0.50% 0.91% 1.00% 0.67% 0.79% Money Market and Savings Time Deposits 0.00% 1Q18 2Q18 3Q18 4Q18 1Q19 Cost of Deposits Fed Funds Target 13


 
Overview of Loan Portfolio Loan Composition (03/31/19) Historical Loan Composition ($mm) Other $2,500 1% Residential RE 22% CRE, Non $2,000 Owner $1,841 Occupied C&I $1,777 18% 26% $1,585 $1,575 $409 $408 $1,500 CRE, $1,374 Owner C&D $356 $352 Occupied 10% $299 $476 23% $488 $1,000 $386 $400 $375 $416 Historical CRE Ratios $360 $364 $372 $500 $289 $188 $186 $143 $179 $166 400% $256 $279 $290 $308 $341 300% 269.7% $0 1Q18 2Q18 3Q18 4Q18 1Q19 200% C&I C&D 100% 75.4% CRE, Owner Occupied CRE, Non Owner Occupied 0% Residential RE Other 1Q18 2Q18 3Q18 4Q18 1Q19 C&D CRE 14


 
Asset Quality ▪ Superior asset quality, with Nonperforming Assets at 0.18% of Total Assets compared to the Nonperforming Assets Southeast Peer Median (1) of 0.91% $7,000 0.91% 1.00% ▪ 0.70% Remaining fair value discounts on acquired $3,500 0.18% 0.40% loans are 2.3x the current Allowance For Loan $0 0.10% Losses 1Q18 2Q18 3Q18 4Q18 1Q19* ▪ Acquisitions are marked conservatively for Foreclosed Assets potential losses Nonperforming Loans Nonperforming Assets/ Total Assets (SMBK) ▪ (1) Proven credit culture, with Net Charge-Offs to Nonperforming Assets/ Total Assets (SE Peer Median) Average Loans of 0.08% compared to the Southeast Peer Median (1) of 0.04% Loan Discounts Net Charge-Offs/ Average Loans $30 0.80% 0.15% 0.60% $20 0.10% 0.08% 0.40% $10 0.20% 0.05% $0 0.00% 0.04% 1Q18 2Q18 3Q18 4Q18 1Q19 0.00% Allowance for Loan Losses (GAAP) -0.05% Net Acquisition Accounting Fair Falue Discounts to Loans 1Q18 2Q18 3Q18 4Q18 1Q19* Allowance for Loan Losses/ Loans SMBK SE Peer Median(1) Source: S&P Global Market Intelligence (1) Publicly traded banks between $1.5B and $3B in assets headquartered in the Southeast (AL, AR, FL, GA, LA, MS, NC, SC, TN and WV) *Reflects partial results for reporting financial institutions in peer group 15


 
Appendix


 
Non-GAAP Reconciliations 1Q19 4Q18 3Q18 2Q18 1Q18 Net interest income - ex purchase acct. adj. Net interest income (GAAP) $ 20,997 $ 21,436 $ 18,861 $ 19,538 $ 16,811 Taxable equivalent adjustment 115 93 16 22 12 Net interest income TEY 21,112 21,529 18,877 19,560 16,823 Purchase accounting adjustments 1,881 2,755 1,208 2,583 1,274 Net interest income - ex purchase acct. adj. (Non-GAAP) $ 19,231 $ 18,774 $ 17,669 $ 16,977 $ 15,549 Tangible Common Equity Shareholders' equity (GAAP) $ 290,481 $ 283,011 $ 251,642 $ 247,487 $ 208,949 Less goodwill and other intangible assets 78,690 79,034 68,254 68,449 50,660 Tangible Common Equity (Non-GAAP) $ 211,791 $ 203,977 $ 183,388 $ 179,036 $ 158,289 Non-GAAP Return Ratios Net operating return on average assets (Non-GAAP)(1) 0.98% 1.07% 0.98% 1.00% 0.89% Return on average tangible common equity (Non-GAAP)(2) 9.26% 13.08% 9.45% 8.96% 8.10% Net operating return on average shareholder equity (Non-GAAP)(3) 7.81% 8.65% 7.88% 8.33% 6.97% Net operating return on average tangible common equity (Non-GAAP)(4) 10.79% 12.00% 10.84% 11.04% 9.04% (1) Net operating return on average assets (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average assets. (2) Return on average tangible common equity (non-GAAP) is the annualized net income divided by average tangible common equity (non-GAAP). (3) Net operating return on average shareholder equity (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average shareholder equity. 17 (4) Net operating return on average tangible common equity (non-GAAP) is the annualized net operating earnings (non-GAAP) divided by average tangible common equity (non-GAAP).


 
Non-GAAP Reconciliations 1Q19 4Q18 3Q18 2Q18 1Q18 Operating Earnings Net income (GAAP) $ 4,731 $ 6,444 $ 4,324 $ 3,931 $ 3,415 Securities (gains) losses - (2) - 1 - Merger costs 923 1,322 838 1,123 498 Tax charge related to change in tax law and tax benefit - (1,600) - - - Income tax effect of adjustments (145) (0) (196) (211) (103) Net operating earnings (Non-GAAP) $ 5,509 $ 5,908 $ 4,966 $ 4,844 $ 3,810 Net operating earnings per common share: Basic $0.40 $0.44 $0.39 $0.40 $0.34 Diluted $0.39 $0.43 $0.39 $0.39 $0.34 Operating Efficiency Ratio Efficiency ratio (GAAP) 68.65% 67.71% 71.34% 72.31% 72.39% Adjustment for taxable equivalent yields (0.49%) (0.45%) (0.18%) (0.11%) (0.06%) Adjustment for securities gains (losses) - 0.01% - (0.01%) - Adjustment for merger expenses (3.91%) (5.55%) (3.99%) (5.28%) (2.71%) Operating efficiency ratio (Non-GAAP) 64.25% 61.72% 67.17% 66.92% 69.62% 18


 
Investor Contacts Billy Carroll Miller Welborn President & CEO Chairman (865) 868-0613 (423) 385-3067 [email protected] [email protected] SmartFinancial, Inc. 5401 Kingston Pike, Suite 600 Knoxville, TN 37919 19


 


 
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