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Section 1: 8-K (8-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 8, 2020

SMARTFINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Tennessee

   

001-37661

    

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)

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))

Securities registered pursuant to Section 12(b) of the Act.:

Title of each class

   

Trading
Symbol(s)

   

Name of each exchange on which registered

Common Stock, $1.00 par value

SMBK

The Nasdaq Stock Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act. 

Item 7.01 Regulation FD Disclosure.

On September 8, 2020, SmartFinancial, Inc. (the “Company”) prepared presentation materials (the “Investor Presentation”) that management intends to use from time to time thereafter in presentations about the Company’s operations and performance, as well as providing a mid-quarter update on the Company’s COVID-19 modified loans. The Company may use the Investor Presentation to current and potential investors, analysts, lender, business partners, customers, employees and others with an interest in the Company and its business.

A copy of the Investor Presentation is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated in this Item 7.01 by this reference. The Investor Presentation will also be available on the Company website at www.smartfinancial.com.  Materials on the Company’s website are not part of or incorporated by reference to this Current Report on Form 8-K.

The information contained in this Item 7.01, including the information set forth in the presentation materials furnished as Exhibit 99.1 to, and incorporated in, this Current Report, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in Exhibit 99.1 furnished pursuant to this Item 7.01 shall not be incorporated by reference into any registration statement or other documents pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act except as otherwise expressly stated in any such filing.

Item 9.01 Financial Statements and Exhibits

(d) EXHIBITS

99.1

104

    

Investor Presentation dated September 8, 2020

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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: September 8, 2020

 

By:

/s/ William Y. Carroll, Jr.

Name:

William Y. Carroll, Jr.

Title:

President & Chief Executive Officer

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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

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Raymond James U.S. Bank Conference September 9-10, 2020 Miller Welborn Chairman of the Board Billy Carroll President & CEO

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Legal Disclaimer 2 Forward-Looking Statements This presentation may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding the potential effects of the COVID-19 pandemic on the Company’s business and financial results and conditions, are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) the risk of litigation and reputational risk associated with historic acquisition activity;(2) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (3) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships;(4) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank;(5) risks related to the completed acquisition of Progressive Financial Group, Inc.(“PFG”);(6) the risk that the anticipated benefits from the completed acquisition of PFG may not be realized in the time frame anticipated;(7) changes in management’s plans for the future;(8) prevailing, or changes in, economic or political conditions, particularly in our market areas;(9) credit risk associated with our lending activities;(10) changes in interest rates, loan demand, real estate values, or competition;(11) changes in accounting principles, policies, or guidelines;(12) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to, COVID-19;(13) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic;(14) the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations;(15) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (16) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent 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). Undue reliance should not be placed on forward-looking statements. 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. 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. SmartFinancial management uses several Non-GAAP financial measures, including: (i) operating earnings, (ii) operating return on average assets, (iii) operating return on average shareholder equity, (iv) return on average tangible common equity, (v) operating return on average tangible common equity, (vi) operating efficiency ratio;(vii) tangible common equity;(viii) average tangible common equity;(ix) tangible book value;(x) operating pre-tax pre-provision earnings;(xi) operating noninterest income;(xii) operating noninterest expense; and ratios derived therefrom, in its analysis of the company's performance. Operating earnings excludes the following from net income: securities gains and losses, merger termination fee of $6.4 million in the second quarter of 2019, merger related and restructuring 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. Operating return on average assets is the annualized operating earnings divided by average assets. Operating return on average shareholder equity is the annualized operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Operating return on average tangible common equity is the annualized 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 and restructuring expenses from the efficiency ratio. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets from shareholders’ equity (GAAP) and average shareholders’ equity (GAAP). Tangible book value excludes goodwill and other intangible assets less shareholders’ equity (GAAP) divided by common shares outstanding. Operating pre-tax pre-provision earnings is net interest income (GAAP) plus operating noninterest income (Non-GAAP) less operating noninterest expense (Non-GAAP). Operating noninterest income excludes the following from noninterest income: securities gains and losses, expenses related to the termination of the ADECA loan program and the merger termination fee of $6.4 million in the second quarter of 2019. Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to salaries, merger related and restructuring expenses and certain franchise tax true- up expenses. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance. 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.

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Markets 3

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SmartBank History 4

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Leadership 5

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Culture 6 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. 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.

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Second Quarter Financial Highlights

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Quarterly Highlights 8 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix ($ in thousands, except per share data) 2Q20 1Q20 Change Assets 3,265,985 $ 2,873,715 $ 392,270 $ Gross Loans 2,408,284 2,139,247 269,037 Deposits 2,539,689 2,341,930 197,759 Net interest income 25,746 $ 22,571 $ 3,175 $ Provision for loan losses 2,850 3,200 (350) Noninterest income 3,511 2,818 693 Noninterest expense 18,806 18,793 13 Income tax expense 1,427 664 763 Net income 6,174 2,732 3,442 Non-GAAP Reconciliations Noninterest income (16) 0 (16) Noninterest expense 1,477 2,096 (619) Income taxes (382) (548) 166 Operating earnings (Non-GAAP) 7,253 $ 4,280 $ 2,973 $ Operating Pre-Tax Pre-Provision Earnings (Non-GAAP) 11,912 $ 8,692 $ 3,220 $ Non-GAAP Performance Metrics Diluted net operating earnings per share 0.48 $ 0.30 $ 0.18 $ Tangible book value per share 16.90 $ 16.40 $ 0.50 $ Operating return on average assets 0.93% 0.67% 0.26% Operating PTPP return on average assets 1.53% 1.37% 0.16% Operating return on average tangible common equity 11.51% 6.90% 4.61% Operating efficiency ratio 58.95% 65.46% (6.51%)

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Operating PTPP Earnings 9 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix $6,967 $6,770 $8,786 $8,039 $7,772 $8,700 $7,890 $8,692 $11,912 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Operating PTPP Earnings (Non-GAAP) ($ in thousands) Operating PTPP Earnings, Less Accretion & PPP Fees Accretion PPP fees

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Performance Trends 10 $2,062 $2,051 $2,274 $2,354 $2,391 $2,390 $2,449 $2,874 $3,266 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Total Assets, Loans and Deposits ($ in millions) Assets Loans Deposits

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Performance Trends 11 1.56 % 1.01 % 1.12 % 0.43 % 0.79 % 0.67 % 0.93 % 1.47 % 1.31 % 1.37 % 1.53 % —% 0.20 % 0.40 % 0.60 % 0.80 % 1.00 % 1.20 % 1.40 % 1.60 % 1.80 % 2Q19 3Q19 4Q19 1Q20 2Q20 ROAA (%): Reported, Operating, Operating PTPP ROAA ROAA Operating ROAA ⁽¹⁾ Operating PTPP ROAA ⁽¹⁾ 16.8 % 10.5 % 11.6 % 4.4 % 9.8 % 6.9 % 11.5 % —% 2.0 % 4.0 % 6.0 % 8.0 % 10.0 % 12.0 % 14.0 % 16.0 % 18.0 % 2Q19 3Q19 4Q19 1Q20 2Q20 ROATCE (%) ROATCE Operating ROATCE ⁽¹⁾ (1) Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix

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Performance Trends 12 57.5 % 63.0 % 67.0 % 74.0 % 64.3 % 45.0 % 50.0 % 55.0 % 60.0 % 65.0 % 70.0 % 75.0 % 80.0 % 2Q19 3Q19 4Q19 1Q20 2Q20 Efficiency Ratio (%) Efficiency Ratio Operating Efficiency Ratio ⁽¹⁾ $21.47 $21.93 $22.33 $22.09 $22.57 $15.86 $16.37 $16.82 $16.40 $16.90 $15.00 $18.00 $21.00 $24.00 2Q19 3Q19 4Q19 1Q20 2Q20 Book Value per Share Book Value Tangible Book Value ⁽¹⁾ (1) Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix

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Net Interest Income 13 3.94% 3.91% 3.84% 3.90% 3.63% 5.53% 5.48% 5.36% 5.35% 4.87% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2Q19 3Q19 4Q19 1Q20 2Q20 Net Interest Margin Net Interest Margin (FTE) Loan Yield Cost of Funds Interest Bearing Liabilities ($mm) 2Q20 1Q20 Change Cash and cash equivalents $ 399.5 309.1 $ 90.4 $ Unpledged investment securities 140.2 105.3 34.9 Overnight Fed funds 69.6 69.6 - FRB discount window 165.6 95.8 69.8 FHLB 52.0 52.0 - Holding company line of credit 25.0 25.0 - Total 851.9 $ 656.8 $ 195.1 $ Liqudity Funding Sources 2Q20 1Q20 Change Loans, less accretion, less PPP fees 4.39% 4.98% (0.59%) Accretion 0.15% 0.37% (0.22%) PPP Fees 0.33% 0.00% 0.33% Loans including fees 4.87% 5.35% (0.48%) Loans held for sale 4.28% 4.24% 0.04% Taxable securities 1.94% 2.34% (0.40%) Tax-exempt securities (FTE) 2.66% 2.28% 0.38% Federal funds and other investments 0.37% 1.46% (1.09%) Interest earning asset yields 4.22% 4.83% (0.61%) Total interest-bearing deposits 0.71% 1.10% (0.39%) Borrowings 0.42% 0.69% (0.27%) Subordinated debt 5.98% 5.98% - Total interest-bearing liabilities 0.77% 1.20% (0.43%) Net interest margin (FTE) 3.63% 3.90% (0.27%) Net interest margin (FTE - Less accretion) 3.50% 3.58% (0.08%) Cost of funds 0.61% 0.99% (0.38%) ($ in thousands) Net interest income (FTE) 25,900 $ 22,688 $ 3,212 $ Average earning assets 2,872,027 2,340,037 531,990 Average Yields and Rates

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Operating Noninterest Income (Non-GAAP) 14 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix $1,983 $2,195 $2,120 $2,818 $3,495 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 2Q19 3Q19 4Q19 1Q20 2Q20 Operating Noninterest Income (Non-GAAP) ($ in thousands) Other noninterest income Interchange fees Investment services income Insurance commissions Mortgage banking income Service charges on deposit accounts

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Operating Noninterest Expense (Non-GAAP) 15 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix $15,013 $14,635 $15,334 $16,697 $17,329 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 2Q19 3Q19 4Q19 1Q20 2Q20 Operating Noninterest Expense (Non-GAAP) ($ in thousands) Other Professional services Amortization of intangibles Data processing Occupancy Salaries & benefits

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Attractive Deposit Mix 16 Noninterest demand 25% Interest-bearing demand 19% Money market and savings 30% Time deposits 26% Deposit Compostion (6/30/20) $2,012 $1,998 $2,047 $2,342 $2,540 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2Q19 3Q19 4Q19 1Q20 2Q20 Historical Deposit Compostion ($mm) Noninterest demand Interest-bearing demand Money market and savings Time deposits 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 2Q19 3Q19 4Q19 1Q20 2Q20 Historical Cost of Deposits Cost of Total Deposits Fed Funds Target Cost of Interest Bearing Deposits

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Overview of Loan Portfolio 17 C&I 26% C&D 12% CRE, Owner Occupied 19% CRE, Non Owner Occupied 23% Consumer RE 19% Other <1% Loan Composition (6/30/20) 273.0% 91.7% 0% 100% 200% 300% 400% 2Q19 3Q19 4Q19 1Q20 2Q20 CRE Ratios CRE C&D $1,833 $1,865 $1,897 $2,139 $2,408 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2Q19 3Q19 4Q19 1Q20 2Q20 Historical Loan Composition ($mm) C&I C&D CRE, Owner Occupied CRE, Non Owner Occupied Consumer RE Other

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Asset Quality 18 • NPAs increased due to the acquisition of ORE assets from PFG in Q1 2020 • Delinquencies remain at low levels • Asset quality remains strong with nonperforming assets to total assets of 0.28% • Credit quality remains strong with classified loans / total loans of 0.27% • Disciplined credit culture remains strong, driven by our conservative underwriting standards $4,652 $4,727 $5,107 $8,963 $9,300 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% $0 $5,000 $10,000 $15,000 $20,000 2Q19 3Q19 4Q19 1Q20 2Q20 Nonperforming Assets ($ in thousands) Nonperforming Loans OREO Nonperforming Assets / Total Assets

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COVID-19 Update Modified Loans 19 • Modified loans decreased from $615.7 million at June 30, 2020 to $359.4 million at August 31, 2020 • Represents 14.9% of the loan portfolio, a decrease from 25.6% at June 30, 2020 • 5 Loans ($4.9 million) are on a 2nd modification • Senior Management reviewed all loan commitments at or above $1 million with the individual Relationship Managers: • 561 loans reviewed totaling $1.49 billion in commitments • 50.5% of the bank’s full committed portfolio • Review committee made up of CEO, CCO, CLO, Regional Presidents, Regional Credit Officer, and applicable Relationship Managers Industries with Modifications O/S Balance % of Total Loan Portfolio % of Total Modified Loans 2nd Modification O/S Balance Hospitality 103,630 $ 4.3% 28.8% 2,442 $ Restuarants 60,882 2.5% 16.9% 1,749 CRE Retail 34,870 1.4% 9.7% - Religious Organizations 28,551 1.2% 7.9% - Lessors of Nonresidential Buildings 16,522 0.7% 4.6% - Amusement 15,403 0.6% 4.3% Overnight Rentals 12,477 0.5% 3.5% 658 Manufacturing 11,587 0.5% 3.2% - Construction 7,545 0.3% 2.1% - Medical 4,961 0.2% 1.4% - Transportation 2,480 0.1% 0.7% - All Other Miscellaneous Industries 60,480 2.5% 16.7% 3 Total Modifications 359,388 14.9% 100.0% 4,852 $ Total Loan Portfolio 2,408,886 $ 100.0% ($ in thousands) Source: Company information Note: As of August 31, 2020

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COVID-19 Update Modified Loans 20 Source: Company information Note: As of August 31, 2020 30.5% 54.7% 14.1% 0.7% 9.7% 1.6% 0.03% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0% 65.0% September October November December Remaining COVID Modification Maturities % Number of Remaining Modified Loans Total O/S Balance of Modifications / Total Loan Portfolio • Since June 30, 2020, $256.3 million of modified loans have reached the deferral expiration date and have not requested an extension • Majority of the remaining modifications are expected to expire during the fourth quarter of 2020

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COVID-19 Update Modified Hospitality Loans 21 Source: Company information Note: As of August 31, 2020 ($ in thousands) Region O/S Balance % Exposure by Region Average LTV Alabama 25,648 $ 24.7% 35.0% FL Panhandle 1,558 1.4% 42.5% Northeast TN 50,318 48.6% 47.8% Middle TN 15,226 14.7% 51.7% Southeast TN 10,880 10.5% 38.7% Total Modifications 103,630 100.0% 43.6% Total Hotel Portfolio 149,859 $ % Modified of Total 69.2% Modified Hospitality Loans By Region ($ in thousands, except # of loans) Product # of Loans O/S Balance Average LTV C & I 2 240 $ 2.3% CRE NOO 27 102,159 46.7% C & D 2 1,230 43.3% Total 31 103,629 $ 41.6% Modified Hospitality Loans by Product 46.7% 43.3% 10.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% September October November Remaining Hospitality Modification Expiration by Month Alabama 25% FL Panhandle 1% Northeast TN 49% Middle TN 15% Southeast TN 10% % Exposure by Region Alabama FL Panhandle Northeast TN Middle TN Southeast TN

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COVID-19 Update Modified Restaurant Loans 22 Source: Company information Note: As of August 31, 2020 ($ in thousands) Region O/S Balance % Exposure by Region Alabama 2,183 $ 3.6% FL Panhandle 18,765 30.8% Northeast TN 23,646 38.8% Middle TN 4,794 7.9% Southeast TN 11,494 19.0% Total Modifications 60,882 100.0% Total Restaurant Portfolio 84,147 $ % Modified of Total 72.4% Modified Restaurant Loans by Region ($ in thousands, except # of loans) Category # of Loans O/S Balance Full-Service 51 40,325 $ Limited-Service 9 8,638 Drinking Places 4 7,913 Other 5 4,006 Total 69 60,882 $ Modified Loans by Restaurant Type Alabama 3% FL Panhandle 31% Northeast TN 39% Middle TN 8% Southeast TN 19% % Exposure by Region Alabama FL Panhandle Northeast TN Middle TN Southeast TN 63.8% 27.5% 5.8% 2.9% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% September October November December Remaining Restaurant Modification Expiration by Month

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Paycheck Protection Program 23 Client, 67.8% Non-Client, 32.2% Total PPP Loans: Client vs. Non-Client ($ in thousands) Industry Loan Amount Professional Services 42,479 $ Restaurants 39,318 Manufacturing 23,048 Medical 20,974 Construction 17,017 All Other Industries 150,860 Total 293,696 $ Total PPP Loans: Top Industries Source: Company information Note: As of July 14, 2020 State Loan Amount Loan Count Client Loan Amount Non-Client Loan Amount Alabama 61,256 $ 551 54,491 $ 6,765 $ Florida 18,211 202 10,954 7,257 Georgia 793 32 515 278 Tennessee 210,849 2,017 142,882 67,967 Other 2,587 25 1,243 1,344 Total 293,696 $ 2,827 210,085 $ 83,611 $ Total PPP Loans SBA Fee Loan Count Loan Amount Fee Amount 1% 10 36,953 $ 370 $ 3% 155 110,505 3,322 5% 2,662 146,238 7,324 Total 2,827 293,696 $ 11,016 $ Gross PPP Fees

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Reserve Reconciliation 24 0.00% 0.30% 0.60% 0.90% $0 $5 $10 $15 $20 2Q19 3Q19 4Q19 1Q20 2Q20 Total Reserves ($mm) Allowance for Loan Losses Acquired Loan Fair Value Discounts Allowance for Loan Losses / Total Loans ($ in thousands) 2Q19 3Q19 4Q19 1Q20 2Q20 Allowance for Loan Losses - Originated 8,979 $ 9,674 $ 9,969 $ 12,412 $ 14,590 $ Allowance for Loan Losses - Acquired 118 118 274 1,019 1,664 Acquired Loan Fair Value Discounts 15,871 16,784 15,348 17,237 16,187 Total Reserves 24,968 $ 26,576 $ 25,591 $ 30,668 $ 32,441 $ Originated Loans 1,349,686 $ 1,433,524 $ 1,521,364 $ 1,621,128 $ 1,639,805 $ SBA PPP Loans - - - - 292,774 Acquired Loans 483,216 431,155 376,028 518,119 475,705 Total Loans 1,832,902 $ 1,864,679 $ 1,897,392 $ 2,139,247 $ 2,408,284 $ Allowance / Total Loans 0.50% 0.53% 0.54% 0.63% 0.67% Allowance / Total Loans, less PPP Loans - - - - 0.77% Allowance / Originated Loans, less PPP Loans 0.67% 0.67% 0.66% 0.77% 0.89% Allowance / Acquired Loans 0.02% 0.03% 0.07% 0.20% 0.35% Discount / Acquired Loans 3.28% 3.89% 4.08% 3.33% 3.40% Total Reserves / Total Loans 1.36% 1.43% 1.35% 1.43% 1.35% Total Reserves / Total Loans, less PPP Loans 1.36% 1.43% 1.35% 1.43% 1.53%

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Current Capital Position 25 Note: Data as of the three months ended each respective quarter Basel III Regulatory Capital Minimum To Be Considered “Well Capitalized” 9.57% 9.88% 9.93% 8.96% 8.09% 0.0% 4.0% 8.0% 12.0% 16.0% 2Q19 3Q19 4Q19 1Q20 2Q20 TCE / TA (%) 9.92% 10.02% 10.34% 10.28% 8.83% 0.0% 4.0% 8.0% 12.0% 16.0% 2Q19 3Q19 4Q19 1Q20 2Q20 Leverage Ratio (%) 11.21% 11.54% 11.61% 10.87% 10.92% 0.0% 4.0% 8.0% 12.0% 16.0% 2Q19 3Q19 4Q19 1Q20 2Q20 CET1 Ratio (%) 13.65% 13.98% 14.02% 13.13% 13.25% 0.0% 4.0% 8.0% 12.0% 16.0% 2Q19 3Q19 4Q19 1Q20 2Q20 Total Risk-Based Capital Ratio (%)

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Appendix

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Non-GAAP Reconciliations 27 1. Operating return on average assets (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average assets. 2. Operating PTPP return on average assets (Non-GAAP) is the annualized operating PTPP earnings (Non-GAAP) divided by average assets. 3. Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP). 4. Operating return on average shareholder equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average shareholder equity. 5. Operating return on average tangible common equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP). 6. Note: “ADECA” represents a program administered by the Alabama Department of Economic and Community Affairs ($ in thousands, except per share data) 2Q20 1Q20 4Q19 3Q19 2Q19 Operating Earnings: Net income (GAAP) $ 6,174 2,732 $ 6,733 $ 5,963 $ 9,121 $ Noninterest income: Securities (gains) losses (16) - - (1) (33) ADECA termination proceeds - - (720) - - Merger termination fee - - - - (6,400) Noninterest expenses: Salaries - prior year adjustment - - 603 - - Merger related and restructuring expenses 1,477 2,096 427 73 1,796 Other - prior year franchise tax true-up - - (312) - - Income taxes: Tax benefit - prior year amended return - - (304) - - Income tax effect of adjustments (382) (548) 60 (19) 1,119 Operating earnings (Non-GAAP) $ 7,253 4,280 $ 6,487 $ 6,016 $ 5,603 $ Operating earnings per common share: Basic $ 0.48 $ 0.30 $ 0.46 $ 0.43 $ 0.40 Diluted 0.48 0.30 0.46 0.43 0.40 Operating Noninterest Income: Noninterest income (GAAP) $ 3,511 2,818 $ 2,840 $ 2,196 $ 8,416 $ Securities (gain) losses (16) - - (1) (33) ADECA termination proceeds - - (720) - - Merger termination fee - - - - (6,400) Operating noninterest income (Non-GAAP) $ 3,495 2,818 $ 2,120 $ 2,195 $ 1,983 $ Operating Noninterest Expense: Noninterest expense (GAAP) $ 18,806 18,793 $ 16,052 $ 14,708 $ 16,809 $ Salaries - prior year adjustment - - (603) - - Merger related and restructuring charges (1,477) (2,096) (427) (73) (1,796) Other - prior year franchise tax true-up - - 312 - - Operating noninterest expense (Non-GAAP) $ 17,329 16,697 $ 15,334 $ 14,635 $ 15,013 $ Operating Pre-Tax Pre-Provison ("PTPP") Earnings: Net interest income (GAAP) 25,746 $ 22,571 $ 21,104 $ 21,140 $ 20,802 $ Operating noninterest income (Non-GAAP) 3,495 2,818 2,120 2,195 1,983 Operating noninterest expense (Non-GAAP) (17,329) (16,697) (15,334) (14,635) (15,013) Operating PTPP earnings (Non-GAAP) 11,912 $ 8,692 $ 7,890 $ 8,700 $ 7,772 $ Non-GAAP Return Ratios: Operating return on average assets (Non-GAAP)¹ 0.93% 0.67% 1.08% 1.02% 0.96% Operating PTPP return on average assets (Non-GAAP)² 1.53% 1.37% 1.31% 1.47% 1.33% Return on average tangible common equity (Non-GAAP)³ 9.80% 4.41% 11.55% 10.52% 16.78% Operating return on average shareholder equity (Non-GAAP)⁴ 8.58% 5.22% 8.34% 7.87% 7.58% Operating return on average tangible common equity (Non-GAAP)⁵ 11.51% 6.90% 11.12% 10.61% 10.31% Operating Efficiency Ratio: Efficiency ratio (GAAP) 64.28% 74.02% 67.04% 63.03% 57.53% Adjustment for taxable equivalent yields (0.34%) (0.34%) (0.33%) (0.30%) (0.23%) Adjustment for securities gains (losses) (0.04%) --- 0.07% Adjustment for merger expenses (4.95%) (8.21%) (1.76%) (0.31%) 8.32% Operating efficiency ratio (Non-GAAP) 58.95% 65.46% 64.95% 62.42% 65.56%

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Non-GAAP Reconciliations 28 ($ in thousands) 2Q20 1Q20 4Q19 3Q19 2Q19 Tangible Common Equity Shareholders' equity (GAAP) $ 343,488 336,200 $ 312,747 $ 306,040 $ 299,611 $ Less goodwill and other intangible assets 86,327 86,503 77,193 77,534 78,348 Tangible Common Equity (Non-GAAP) $ 257,161 249,697 $ 235,554 $ 228,506 $ 221,263 $ Average Tangible Common Equity Average shareholders' equity (GAAP) $ 339,861 329,692 $ 308,772 $ 303,200 $ 296,570 $ Less goodwill and other intangible assets 86,484 80,370 77,400 78,222 78,564 Average Tangible Common Equity (Non-GAAP) $ 253,377 249,322 $ 231,372 $ 224,978 $ 218,006 $ Tangible Book Value per Common Share Book value per common share (GAAP) $ 22.57 $ 22.09 $ 22.33 $ 21.93 $ 21.47 Adjustment due to goodwill and other intangible assets (5.67) (5.69) (5.51) (5.56) (5.61) Tangible book value per common share (Non-GAAP)¹ $ 16.90 $ 16.40 $ 16.82 $ 16.37 $ 15.86 1. Book value per share is computed by dividing total stockholders’ equity by common shares outstanding. Tangible book value per share is computed by dividing total stockholders’ equity, less goodwill and other intangible assets by common shares outstanding

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Investor Contact 29 Billy Carroll President & CEO 865.868.0613 [email protected] Miller Welborn Chairman 423.385.3067 [email protected] 5401 Kingston Pike, Suite 600 Knoxville, TN 37919

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