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Section 1: 8-K (8-K)

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 28, 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)
(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))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of Exchange on which Registered
Common Stock, par value $1.00 per shareSMBKThe 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 2.02Results of Operations and Financial Condition.
 
On April 28, 2020, SmartFinancial, Inc. (SmartFinancial") issued a press release (the "Press Release") reporting earnings results for its first quarter ending March 31, 2020. A copy of the Press Release is attached hereto as Exhibit 99.1. 

In accordance with General Instructions B.2 of Form 8K, the information in Item 2.02 of this report (including Exhibit 99.1) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities 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 7.01Regulation FD Disclosure.

SmartFinancial is filing an investor slide presentation that it intends to review in conjunction with its earnings release conference call on April 29, 2020. The slides are attached hereto as Exhibit 99.2.

In accordance with General Instructions B.2 of Form 8K, the information in Item 7.01 of this report (including Exhibit 99.2) shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities 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 9.01Financial Statements and Exhibits
Exhibit No.  Description
Press release announcing first quarter 2020 financial results dated April 28, 2020
First quarter 2020 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 28, 2020 
 /s/ William Y. Carroll, Jr.
 William Y. Carroll, Jr.
 President & Chief Executive Officer



EXHIBIT INDEX 
Exhibit No. Description
   
 Press release announcing first quarter 2020 financial results dated April 28, 2020
First quarter 2020 investor presentation

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Section 2: EX-99.1 (EX-99.1)

Document

Exhibit 99.1
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1Q 2020
  
SmartFinancial Announces Results for the First Quarter 2020

KNOXVILLE, TN - April 28, 2020 - SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $2.7 million, or $0.19 per diluted common share, for the first quarter of 2020, compared to net income of $6.7 million, or $0.48 per diluted common share for the fourth quarter of 2019. Net operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $4.3 million, or $0.30 per diluted common share, in the first quarter of 2020, compared to $6.5 million, or $0.46 per diluted common share, in the fourth quarter of 2019.

Highlights for the First Quarter of 2020

Completed the acquisition of Progressive Financial Group, Inc. ("PFG")
Net income of $2.7 million and net operating earnings of $4.3 million (Non-GAAP)
Return on average assets of 0.43% and net operating annualized return on average assets (Non-GAAP) of 0.67%
Asset quality remains strong with nonperforming assets to total assets of 0.31%
Loan growth (excluding loans acquired from PFG) of $53.9 million, or 11.4% annualized
Tangible book value (Non-GAAP) per share of $16.40, a 8.0% year-over-year increase
Allowance for loan losses increased to $13.4 million, an increase 31.1%, in light of the current economic conditions

Billy Carroll, President & CEO, stated: “We are pleased to report another very solid quarter during what has proven to be a difficult and uncertain environment for many of our clients. Our team has worked extremely hard to assist clients that have been impacted due to COVID-19, including participation in the Small Business Administration’s Paycheck Protection Program (“PPP”). We mobilized our team to successfully process approximately 1,700 applications totaling over $239 million of loans through the month of April, in round one of the PPP program, as we look forward to our economy’s “restart”, we are well positioned for the future.”

SmartFinancial's Chairman, Miller Welborn, concluded: “I am extremely proud of this team as we stepped up to help our clients in this time of stress. All of our associates have shown incredible commitment to strengthen, not just our company’s financials, but our clients and communities as well. We also welcome Progressive Financial Group to the SmartFinancial family. This transaction is a great step forward in our growth strategy.”

SmartFinancial completed the acquisition of PFG and its wholly owned subsidiary Progressive Savings Bank on March 1, 2020, and this quarter includes one month results of the acquired company.

Net Interest Income and Net Interest Margin

Net interest income was $22.6 million for the first quarter of 2020, compared to $21.1 million for the fourth quarter of 2019. The tax equivalent net interest margin was 3.90% for the first quarter of 2020, compared to 3.84% for the fourth quarter of 2019. The tax equivalent average yield on interest-earning assets was 4.83% for the first quarter of 2020, a decrease from 4.92% for the fourth quarter of 2019. The yield on interest-bearing liabilities decreased to 1.20% for the first quarter of 2020 from 1.39% for the fourth quarter of 2019.

The yield on average loans was 5.35% for the first quarter of 2020, compared to 5.36% for the fourth quarter of 2019. During the first quarter of 2020, increased discount accretion was recorded on acquired loans (37 basis points in the first quarter of 2020, versus 29 basis points in the fourth quarter of 2019) with loan fees remaining stable quarter over quarter. For the first quarter of 2020, the yield on average loans, excluding accretion, was 4.98%, a decrease of 9 basis points from the 5.07% reported in the fourth quarter of 2019. The decrease in yield on average loans from the fourth quarter of 2019, compared to the
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first quarter of 2020, was due to market competition and, to a lesser extent, the two emergency interest rate cuts by the Federal Reserve in March of 2020. The impact of the acquired loan discount accretion on the tax equivalent net interest margin was 32 basis points for the first quarter of 2020 and 25 basis points for the fourth quarter of 2019.

The cost of average interest-bearing deposits was 1.10% for the first quarter of 2020 compared to 1.29% for the fourth quarter of 2019. The overall decrease of 19 basis points in average interest-bearing deposits from the fourth quarter of 2019 to the first quarter of 2020 was primarily from the Company's actions to reduce deposit rates in light of the interest rate cuts.

Provision for Loan Loss and Credit Quality

Provision for loan losses was $3.2 million in the first quarter of 2020, compared to $685 thousand in the fourth quarter of 2019. The allowance for loan losses to originated loans was $12.4 million, or 0.77%, as of March 31, 2020, compared to $10.0 million, or 0.66% as of December 31, 2019, an increase of over 24%. The allowance for loan losses to total loans was $13.4 million, or 0.63%, as of March 31, 2020, compared to $10.2 million, or 0.54% as of December 31, 2019. The remaining discounts on the acquired loan portfolio totaled $17.2 million, or 3.33% as of March 31, 2020. The increase in the provision for loan losses in the first quarter of 2020 was the result of the deterioration in the qualitative factors, such as unemployment and GDP, in our loan loss allowance methodology which was caused by the unstable economic conditions facing the U.S. economy related to the challenges being faced with the world wide COVID-19 pandemic.

The company is not required to implement the provisions of the CECL accounting standard until January 1, 2023, and is continuing to account for the allowance for loan losses under the incurred loss model.
Nonperforming loans as a percentage of total loans was 0.14% as of March 31, 2020, a decrease of four basis points from the 0.18% reported in the fourth quarter of 2019. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.31% as of March 31, 2020, as compared to 0.21% as of December 31, 2019. The ten basis point increase is primarily attributable to the addition of other real estate owned from the PFG acquisition.
Noninterest Income

Noninterest income was $2.8 million for the first quarter of 2020 and the fourth quarter of 2019. During the first quarter of 2020, the primary components of the changes in noninterest income were as follows:

Increase in mortgage banking income of $210 thousand;
Increase in investment services income of $176 thousand, stemming from additional production and personnel hires during 2019;
Addition of insurance commissions income of $269 thousand, new non-interest income source from the acquisition of PFG;
Increase in interchange and debit card transaction fees of $113 thousand, primarily related to the acquisition of PFG; and
Decrease in other non-interest income of $787 thousand, primarily from $720 thousand in non-recurring income recorded during the fourth quarter of 2019.

Noninterest Expense

Noninterest expense was $18.8 million for the first quarter of 2020, an increase of $2.7 million, compared to $16.1 million for the fourth quarter of 2019. During the first quarter of 2020, the primary components of the increase in noninterest expense were as follows:
Salaries and employee benefits decreased $272 thousand. During the first quarter of 2020, after adjusting for the non-recurring items of $603 thousand from the prior quarter, the salaries and employee benefits increased $331 thousand, which is attributable to the additional salaries from the PFG acquisition;
Increase of $180 thousand in FDIC insurance due to the utilization of FDIC credits during the fourth quarter of 2019;
Increase of $292 thousand in other real estate and loan related expenses, due to elevated activity in the first quarter of 2020;
Increase of $1.7 million in merger related and restructuring expenses relating to the acquisition of PFG; and
Increase of $619 thousand in other expenses during the first quarter of 2020, which is a result of a prior period franchise tax credit of $312 thousand recognized during the fourth quarter of 2019, as well as a franchise tax credit of $468 thousand associated with the origination of State of Tennessee community investment loans.


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Income Tax Expense

Income tax expense was $664 thousand for the first quarter of 2020, an increase of $191 thousand, compared to $473 thousand for the fourth quarter of 2019.
For the first quarter of 2020, the effective tax rate was 19.6% and included an NOL carryforward that was available and utilized as part of the Coronavirus Aid, Relief and Economic Security ("CARES") Act. The effective tax rate for the fourth quarter of 2019 was 6.6% and included tax benefits associated with the originations of State of Tennessee Community Investment loans and a tax benefit relating to a prior year amended tax return.

Balance Sheet Trends

Total assets at March 31, 2020, were $2.87 billion compared with $2.45 billion at December 31, 2019. The first quarter increase of $424.6 million is primarily from the acquisition of PFG of approximately $307.2 million and organic loan growth of $99.0 million.

Total liabilities increased to $2.54 billion at March 31, 2020 from $2.14 billion at December 31, 2019. The first quarter increase of $401.1 million was primarily from organic deposit growth of $22.7 million, acquired deposits from the acquisition of PFG in the amount of $272.0 million, and an increase of FHLB and other borrowings of $100.0 million.

Shareholders' equity at March 31, 2020, totaled $336.2 million, an increase of $23.5 million, from December 31, 2019. The increase in shareholders' equity was primarily from the issuance of common stock for the acquisition of PFG of $24.5 million and net income of $2.7 million for the first quarter ended 2020, which was offset by the repurchase of the Company's common stock of $2.0 million and a net change in accumulated other comprehensive income of $1.4 million. Tangible book value per share (Non-GAAP) was $16.40 at March 31, 2020, a decrease from $16.82 at December 31, 2019. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 8.96% at March 31, 2020, compared with 9.93% at December 31, 2019.

Conference Call Information

SmartFinancial will issue its earnings release for the first quarter of 2020 on Tuesday, April 28, 2020, and will host a conference call on Wednesday, April 29, 2020, at 10:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 6458361. A replay of the conference call will be available through April 29, 2022, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10142762. Conference call materials (earnings release & conference call presentation) will be published on the company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile ), at 9:00 am ET prior to the conference call.

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 35 branches across East and Middle 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 Financial Officer
(865) 868-0613 billy.carroll@smartbank.com  (865) 437-5724 ron.gorczynski@smartbank.com
Media Contact
Kelley Fowler
Senior Vice President, Public Relations & Marketing
(865) 868-0611 kelley.fowler@smartbank.com




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Non-GAAP Financial Measures

Statements included in this presentation include measures not recognized under U.S. generally accepted accounting principles ("GAAP") and therefore are considered 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, (ii) net operating return on average assets, (iii) net operating return on average shareholder' equity, (iv) return on average tangible common equity, (v) net operating return on average tangible common equity, (vi) operating efficiency ratio, (vii) operating noninterest income, (viii) operating noninterest expense, (ix) tangible common equity, (x) average tangible common equity, (xi) tangible book value (xii) tax equivalent net interest margin; and ratios derived therefrom, in its analysis of the company's performance. Net operating earnings excludes the following from net income: securities gains and losses, expenses related to the termination of an Alabama Department of Economic and Community Affairs ("ADECA") loan program, merger termination fee of $6.4 million in the second quarter of 2019, merger related and restructuring expenses. Net operating return on average assets is the annualized net operating earnings divided by average assets. Net operating return on average shareholders' 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 and restructuring expenses from the efficiency ratio. 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. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets from shareholders' equity and average shareholders' equity, respectively. Tangible book value is tangible common equity divided by common shares outstanding. 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.



Forward-Looking Statements

This news release 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 related to the termination of our agreement and plan of merger with Entegra Financial Corp. (the “Entegra Merger Agreement”) or the abandonment of the transactions that were contemplated by the Entegra Merger Agreement; (2) reputational risk resulting from the termination of the Entegra Merger Agreement; (3) 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; (4) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (5) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (6) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (7) risks related to the completed acquisition of PFG; (8) the risk that the anticipated benefits from the completed acquisition of PFG may not be realized in the time frame anticipated; (9) changes in management’s plans for the future; (10) prevailing, or changes in, economic or political conditions, particularly in our market areas; (11) credit risk associated with our lending activities; (12) changes in interest rates, loan demand, real estate values, or competition; (13) changes in accounting principles, policies, or guidelines; (14) 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; (15) 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; (16) the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (17) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (18) 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.





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SmartFinancial, Inc. and Subsidiary  
Condensed Consolidated Financial Information - (unaudited)  
(dollars in thousands except share and per share data)  
 As of and for The Three Months Ended
 MarDecSepJunMar
20202019201920192019
Selected Performance Ratios (Annualized):
Return on average assets0.43 %1.12 %1.01 %1.56 %0.84 %
Return on average shareholders' equity3.33 %8.65 %7.80 %12.34 %6.71 %
Return on average tangible common equity (Non-GAAP)¹4.41 %11.55 %10.52 %16.78 %9.26 %
Noninterest income / average assets0.44 %0.47 %0.37 %1.44 %0.30 %
Noninterest expense / average assets2.96 %2.68 %2.48 %2.88 %2.77 %
Efficiency ratio74.02 %67.04 %63.03 %57.53 %68.65 %
Operating Selected Performance Ratios (Annualized):
Net operating return on average assets (Non-GAAP)¹0.67 %1.08 %1.02 %0.96 %0.98 %
Net operating return on average shareholders' equity (Non-GAAP)¹5.22 %8.34 %7.87 %7.58 %7.81 %
Net operating return on average tangible common equity (Non-GAAP)¹6.90 %11.12 %10.61 %10.31 %10.79 %
Operating efficiency ratio (Non-GAAP)¹65.46 %64.95 %62.42 %65.56 %64.25 %
Operating noninterest income / average assets (Non-GAAP)1
0.44 %0.35 %0.37 %0.34 %0.33 %
Operating noninterest expense / average assets (Non-GAAP)1
2.63 %2.56 %2.47 %2.57 %2.60 %
Selected Interest Rates and Yields:
Yield on loans5.35 %5.36 %5.48 %5.53 %5.62 %
Yield on earning assets, FTE4.83 %4.92 %5.05 %5.17 %5.25 %
Cost of interest-bearing deposits1.10 %1.29 %1.37 %1.42 %1.32 %
Cost of total deposits0.91 %1.06 %1.13 %1.18 %1.10 %
Cost of interest-bearing liabilities1.20 %1.39 %1.47 %1.54 %1.45 %
Net interest margin, FTE3.90 %3.84 %3.91 %3.94 %4.10 %
Per Common Share:
Net income, basic$0.19  $0.48  $0.43  $0.65  $0.34  
Net income, diluted0.19  0.48  0.42  0.65  0.34  
Net operating earnings, basic (Non-GAAP)¹0.30  0.46  0.43  0.40  0.40  
Net operating earnings, diluted (Non-GAAP)¹0.30  0.46  0.43  0.40  0.39  
Book value22.09  22.33  21.93  21.47  20.82  
Tangible book value (Non-GAAP)¹16.40  16.82  16.37  15.86  15.18  
Common shares outstanding15,221,990  14,008,233  13,957,973  13,953,209  13,951,590  
¹See reconciliation of Non-GAAP measures
SmartFinancial, Inc. and Subsidiary  
Condensed Consolidated Financial Information - (unaudited)  
(dollars in thousands)  
 As of and for The Three Months Ended
 MarDecSepJunMar
20202019201920192019
Composition of Loans:
Commercial real estate
owner occupied$473,398  $429,269  $422,363  $415,502  $416,152  
non-owner occupied535,637  476,038  468,099  464,160  472,790  
Commercial real estate, total1,009,035  905,307  890,462  879,662  888,942  
Commercial & industrial377,173  337,075  341,207  334,258  341,471  
Construction & land development253,445  227,626  219,751  204,731  187,009  
Consumer real estate482,728  417,481  402,463  402,270  408,878  
Consumer and other16,866  9,903  10,796  11,981  12,166  
Total loans$2,139,247  $1,897,392  $1,864,679  $1,832,902  $1,838,466  
Asset Quality and Additional Loan Data:
Nonperforming loans$3,069  $3,350  $3,166  $2,838  $2,282  
Other real estate owned5,894  1,757  1,561  1,814  2,066  
Total nonperforming assets$8,963  $5,107  $4,727  $4,652  $4,348  
Restructured loans not included in nonperforming loans$ $61  $61  $62  $62  
Net charge-offs (recoveries) to average loans (annualized)— %0.01 %0.01 %— %0.08 %
Allowance for loan losses to loans0.63 %0.54 %0.53 %0.50 %0.47 %
Nonperforming loans to total loans, gross0.14 %0.18 %0.17 %0.15 %0.12 %
Nonperforming assets to total assets0.31 %0.21 %0.20 %0.19 %0.18 %
Purchase accounting discount balance$17,237  $15,348  $16,784  $18,571  $19,954  
Accretion income on acquired loans1,841  1,375  1,246  1,374  1,881  
Capital Ratios:
Equity to Assets11.70 %12.77 %12.80 %12.53 %12.34 %
Tangible common equity to tangible assets (Non-GAAP)1
8.96 %9.93 %9.88 %9.57 %9.31 %
SmartFinancial, Inc.2
Tier 1 leverage10.27 %10.34 %10.02 %9.92 %9.29 %
Common equity Tier 110.85 %11.61 %11.54 %11.21 %10.61 %
Tier 1 capital10.85 %11.61 %11.54 %11.21 %10.61 %
Total capital13.10 %14.02 %13.98 %13.65 %13.01 %
SmartBank
Estimated3
Tier 1 leverage11.41 %11.41 %11.22 %10.92 %10.96 %
Common equity Tier 112.02 %12.81 %12.71 %12.37 %12.18 %
Tier 1 risk-based capital12.02 %12.81 %12.71 %12.37 %12.18 %
Total risk-based capital12.60 %13.31 %13.19 %12.82 %12.62 %

1Total common equity less intangibles divided by total assets less intangibles.
2All periods presented are estimated.
3 Current period capital ratios are estimated as of the date of this earnings release.





SmartFinancial, Inc. and Subsidiary  
Condensed Consolidated Financial Information - (unaudited) 
(dollars in thousands)  
 Ending Balances
 MarDecSepJunMar
20202019201920192019
Assets:     
Cash and cash equivalents$309,089  $183,971  $170,934  $199,534  $132,994  
Securities available-for-sale, at fair value201,002  178,348  171,507  174,114  198,273  
Other investments14,113  12,913  12,913  12,905  12,398  
Loans held for sale6,045  5,856  3,068  4,087  2,103  
Loans2,139,247  1,897,392  1,864,679  1,832,902  1,838,466  
 Less: Allowance for loan losses(13,431) (10,243) (9,792) (9,097) (8,704) 
 Loans, net2,125,816  1,887,149  1,854,887  1,823,805  1,829,762  
Premises and equipment, net73,801  59,433  58,386  56,589  56,583  
Other real estate owned5,894  1,757  1,561  1,814  2,066  
Goodwill and core deposit intangibles, net86,503  77,193  77,534  78,348  78,690  
Bank owned life insurance30,671  24,949  24,796  24,695  24,540  
Other assets20,781  17,554  14,899  15,366  16,572  
Total assets$2,873,715  $2,449,123  $2,390,485  $2,391,257  $2,353,981  
Liabilities:     
Deposits:
  Noninterest-bearing demand $431,781  $364,155  $365,024  $357,220  $329,095  
  Interest-bearing demand 444,141  380,234  351,474  333,705  331,629  
  Money market and savings 730,392  623,284  634,934  648,132  698,431  
  Time deposits735,616  679,541  646,641  673,243  635,175  
  Total deposits2,341,930  2,047,214  1,998,073  2,012,300  1,994,330  
Securities sold under agreements to repurchase6,164  6,184  4,368  8,219  7,070  
FHLB & other borrowings125,439  25,439  25,460  15,460  8,605  
Subordinated debt39,283  39,261  39,240  39,219  39,198  
Other liabilities24,699  18,278  17,304  16,448  14,297  
Total liabilities2,537,515  2,136,376  2,084,445  2,091,646  2,063,500  
Shareholders' Equity:
Common stock15,222  14,008  13,958  13,953  13,952  
Additional paid-in capital254,356  232,732  232,573  232,386  232,241  
Retained earnings67,869  65,839  59,806  53,843  44,722  
Accumulated other comprehensive income (loss)(1,247) 168  (297) (571) (434) 
Total shareholders' equity336,200  312,747  306,040  299,611  290,481  
Total liabilities & shareholders' equity$2,873,715  $2,449,123  $2,390,485  $2,391,257  $2,353,981  





SmartFinancial, Inc. and Subsidiary  
Condensed Consolidated Financial Information - (unaudited) 
(dollars in thousands, except share and per share data)  
 Three Months Ended
 MarDecSepJunMar
20202019201920192019
Interest income:
Loans, including fees$26,434  $25,398  $25,515  $25,278  $24,975  
Securities available-for-sale:
 Taxable679  698  748  871  971  
 Tax-exempt283  345  338  411  424  
Federal funds sold and other earning assets602  587  743  743  573  
Total interest income27,998  27,028  27,344  27,303  26,943  
Interest expense:
Deposits4,754  5,271  5,605  5,788  5,251  
Securities sold under agreements to repurchase     
FHLB advances and other borrowings84  65  10  117  103  
Subordinated debt584  584  584  590  584  
Total interest expense5,427  5,924  6,204  6,501  5,946  
Net interest income22,571  21,104  21,140  20,802  20,997  
Provision for loan losses3,200  685  724  393  797  
Net interest income after provision for loan losses19,371  20,419  20,416  20,409  20,200  
Noninterest income:
Service charges on deposit accounts770  773  767  707  654  
Gain on sale of securities, net—  —   33  —  
Mortgage banking584  374  518  392  282  
Investment services437  261  260  255  169  
Insurance commissions269  —  —  —  —  
Interchange and debit card transaction fees
276  163  148  143  175  
Merger termination fee—  —  —  6,400  —  
Other 482  1,269  502  486  418  
Total noninterest income2,818  2,840  2,196  8,416  1,698  
Noninterest expense:
Salaries and employee benefits10,006  10,278  9,072  8,984  8,398  
Occupancy and equipment1,911  1,749  1,635  1,658  1,640  
FDIC insurance (credit)180  —  (219) 180  179  
Other real estate and loan related expense545  253  335  242  490  
Advertising and marketing198  166  263  259  295  
Data processing538  530  273  577  615  
Professional services711  652  573  489  662  
Amortization of intangibles362  340  341  342  344  
Software as service contracts470  500  560  568  567  
Merger related and restructuring expenses2,096  427  73  1,796  923  
Other 1,776  1,157  1,802  1,714  1,466  
Total noninterest expense18,793  16,052  14,708  16,809  15,579  
Income before income taxes3,396  7,206  7,904  12,016  6,319  
Income tax expense664  473  1,941  2,895  1,588  
Net income$2,732  $6,733  $5,963  $9,121  $4,731  
Earnings Per Common Share:
Basic$0.19  $0.48  $0.43  $0.65  $0.34  
Diluted$0.19  $0.48  $0.42  $0.65  $0.34  
Weighted average common shares outstanding:
Basic14,395,103  13,965,877  13,955,859  13,951,643  13,942,016  
Diluted14,479,679  14,066,269  14,053,432  14,046,500  14,018,163  





SmartFinancial, Inc. and Subsidiary     
Condensed Consolidated Financial Information - (unaudited)    
(dollars in thousands)      
YIELD ANALYSIS      
Three Months Ended
 March 31, 2020December 31, 2019March 31, 2019
Average Yield/Average Yield/Average Yield/
 Balance
Interest1
Cost1
Balance
Interest1
Cost1
Balance
Interest1
Cost1
Assets:         
Loans, including fees$1,987,291  $26,434  5.35 %$1,881,501  $25,398  5.36 %$1,802,014  $24,975  5.62 %
Taxable securities116,837  679  2.34 %116,278  698  2.38 %147,188  971  2.68 %
Tax-exempt securities70,397  400  2.28 %59,048  461  3.09 %53,650  539  4.07 %
Federal funds sold and other earning assets165,512  602  1.46 %133,681  587  1.74 %86,688  573  2.68 %
Total interest-earning assets2,340,037  28,115  4.83 %2,190,508  27,144  4.92 %2,089,540  27,058  5.25 %
Noninterest-earning assets216,498    190,083  193,698    
Total assets$2,556,535    $2,380,591  $2,283,238    
Liabilities and Stockholders’ Equity:      
Interest-bearing demand deposits$389,500  434  0.45 %$351,901  486  0.55 %$306,164  422  0.56 %
Money market and savings deposits664,983  1,389  0.84 %632,555  1,695  1.06 %665,018  2,029  1.24 %
Time deposits680,830  2,931  1.73 %633,867  3,090  1.93 %637,767  2,800  1.78 %
Total interest-bearing deposits1,735,313  4,754  1.10 %1,618,323  5,271  1.29 %1,608,949  5,251  1.32 %
Securities sold under agreement to repurchase5,601   0.36 %5,321   0.35 %7,971   0.41 %
FHLB and other borrowings46,320  84  0.73 %25,549  65  1.00 %10,217  103  4.09 %
Subordinated debt39,269  584  5.98 %39,248  584  5.90 %39,184  584  6.04 %
Total interest-bearing liabilities1,826,503  5,427  1.20 %1,688,441  5,924  1.39 %1,666,321  5,946  1.45 %
Noninterest-bearing deposits373,125    363,542  320,134    
Other liabilities27,215    19,836  10,707    
Total liabilities2,226,843    2,071,819  1,997,162    
Shareholders' equity329,692    308,772  286,076    
Total liabilities and shareholders' equity$2,556,535    $2,380,591  $2,283,238    
Net interest income, taxable equivalent $22,688   $21,220   $21,112   
Interest rate spread  3.63 %3.52 %  3.80 %
Tax equivalent net interest margin  3.90 %3.84 %  4.10 %
Percentage of average interest-earning assets to average interest-bearing liabilities  128.12 %129.74 %  125.40 %
Percentage of  average equity to average assets  12.90 %12.97 %  12.53 %
      
1 Taxable equivalent

















SmartFinancial, Inc. and Subsidiary  
Condensed Consolidated Financial Information - (unaudited)  
(dollars in thousands)  
NON-GAAP RECONCILIATIONS
Three Months Ended
 MarDecSepJunMar
20202019201920192019
Operating Earnings:
Net income (GAAP)$2,732  $6,733  $5,963  $9,121  $4,731  
  Noninterest income:
    Securities gains—  —  (1) (33) —  
    ADECA termination proceeds—