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Section 1: 8-K (8-K)

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: July 21, 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 class

   

Trading
Symbol(s)

   

Name of Exchange on which Registered

Common Stock, par value $1.00 per share

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 2.02

    

Results of Operations and Financial Condition.

On July 21, 2020, SmartFinancial, Inc. (SmartFinancial") issued a press release (the "Press Release") reporting earnings results for its second quarter ending June 30, 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 7.01

    

Regulation FD Disclosure.

SmartFinancial is filing an investor slide presentation that it intends to review in conjunction with its earnings release conference call on July 22, 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 9.01

Financial Statements and Exhibits

Exhibit No.

    

Description

99.1

Press release announcing second quarter 2020 financial results dated July 21, 2020

99.2

Second 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: July 21, 2020

 

 

/s/ William Y. Carroll, Jr.

 

William Y. Carroll, Jr.

 

President & Chief Executive Officer


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

Graphic

2Q 2020

SmartFinancial Announces Results for the Second Quarter 2020

KNOXVILLE, TN – July 21, 2020 - SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $6.2 million, or $0.41 per diluted common share, for the second quarter of 2020, compared to net income of $2.7 million, or $0.19 per diluted common share for the first quarter of 2020.  Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $7.3 million, or $0.48 per diluted common share, in the second quarter of 2020, compared to $4.3 million, or $0.30 per diluted common share, in the first quarter of 2020.

Highlights for the Second Quarter of 2020

Net income of $6.2 million and operating earnings of $7.3 million (Non-GAAP)
Diluted earnings per share increased 115.8% for the quarter and diluted operating earnings per share (Non-GAAP) increased 60.0% for the quarter
Total assets grew to over $3 billion
Completed the integration of Progressive Financial Group (“PFG”)
Tangible book value (Non-GAAP) per share of $16.90, a 6.6% year-over-year increase
Originated approximately 2,800 Paycheck Protection Program (“PPP”) loans totaling $292.8 million  

Billy Carroll, President & CEO, stated: "We are extremely pleased to report another very solid quarter.  While finalizing our Progressive Financial Group integration and conversion, we reported outstanding increases in revenue, in particular our non-interest income performance.  Our team also continues to focus on our tremendous asset quality and have worked with many new and existing clients to secure PPP funding, creating a number of great opportunities for our bank.  The outlook for our company remains very strong."

SmartFinancial's Chairman, Miller Welborn, concluded: “We have closed another great quarter for our company. Our team has continued to successfully execute our Strategic Plan. We have strengthened our Balance Sheet, served our clients and our shareholders well and continued to increase the book value of our stock.”

Net Interest Income and Net Interest Margin

Net interest income increased $3.1 million to $25.7 million for the second quarter of 2020, compared to $22.6 million for the first quarter of 2020, primarily attributable to the full quarter effects of the Company’s March 1, 2020 acquisition of PFG (the “PFG Acquisition”) and participation in the PPP. Average earning assets increased $532.0 million, which reflects a $376.1 million increase in average loans, a $21.1 million increase in securities and a $134.8 million increase in other earning assets. Average interest-bearing liabilities increased $353.8 million, driven by an increase of $168.5 million in average interest-bearing deposits and an increase of $185.2 million in borrowings.

The tax equivalent net interest margin was 3.63% for the second quarter of 2020, compared to 3.90% for the first quarter of 2020. The tax equivalent net interest margin was impacted by a 61 basis point decline in the average yield on interest-earning assets offset by a 43 basis point decline in the rate on interest-bearing liabilities over the last quarter. The tax equivalent net interest margin, less discount accretion was 3.50% for the second quarter of 2020, a decrease from 3.58% for the first quarter of 2020.

The tax equivalent average yield on interest-earning assets was 4.22% for the second quarter of 2020, a decrease from 4.83% for the first quarter of 2020. The yield on average loans was 4.87% for the second quarter of 2020, compared to 5.35% for the first quarter of 2020. Offsetting the effects of the Federal Reserve rate cuts included in yield on average loans for the second quarter of 2020 was $1.9 million of PPP fee accretion and $888 thousand of discount accretion on acquired loans, compared to $1.8 million of discount accretion recognized in the first quarter of 2020. Additionally, increases in liquidity positions negatively impacted the net interest margin with lower yields earned on the excess cash position.

Graphic


The yield on interest-bearing liabilities decreased to 0.77% for the second quarter of 2020 from 1.20% for the first quarter of 2020. The cost of average interest-bearing deposits was 0.71% for the second quarter of 2020 compared to 1.10% for the first quarter of 2020, a decrease of 39 basis points. This decrease was a result of the Company’s efforts deployed to reduce deposit rates in reaction to the Federal Reserve rate cuts.

Provision for Loan Loss and Credit Quality

Provision for loan losses was $2.9 million in the second quarter of 2020, compared to $3.2 million in the first quarter of 2020.  At June 30, 2020, the allowance for loan losses was $16.3 million.  The allowance for loan losses to total loans was 0.67% as of June 30, 2020, compared to 0.63% as of March 31, 2020.  For the Company’s originated loans, the allowance for loan losses to originated loans, less PPP loans, was 0.89% as of June 30, 2020, compared to 0.77% as of March 31, 2020.  The remaining discounts on the acquired loan portfolio totaled $16.2 million, or 3.40% of acquired loans as of June 30, 2020.  The elevated provision for loan losses was due to the continued economic conditions facing the U.S. economy related to the challenges being faced with the worldwide 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 0.16% as of June 30, 2020, an increase of two basis points from the 0.14% reported in the first quarter of 2020.  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 0.28% as of June 30, 2020, as compared to 0.31% as of March 31, 2020. 

Noninterest Income

Noninterest income increased $693 thousand to $3.5 million for the second quarter of 2020 compared to $2.8 million for the first quarter of 2020.  During the second quarter of 2020, the primary components of the changes in noninterest income were as follows:

Increase in mortgage banking income of $347 thousand, as volume increased during the second quarter;
Increase in insurance commissions income of $204 thousand, due to a full quarter of revenue from the PFG Acquisition;
Increase in interchange and debit card transaction fees of $232 thousand, related to a full quarter of activity from the PFG Acquisition; and
Decrease in investment services income of $74 thousand.

Noninterest Expense

Noninterest expense was $18.8 million for the second and first quarters of 2020.  Even though noninterest expense remained constant between the second and first quarters of 2020, the primary changes within noninterest expense were as follows:

Salaries and employee benefits increased $351 thousand. The increase is attributable to the full quarter of salaries and benefits from the PFG Acquisition, annual salary increases, and other employee benefit accruals.  These increases were offset by deferred salary cost related to the origination of PPP loans; and
Decrease of $619 thousand in merger related and restructuring expenses relating to the PFG Acquisition.

Graphic

2


Income Tax Expense

Income tax expense was $1.4 million for the second quarter of 2020, an increase of $763 thousand, compared to $664 thousand for the first quarter of 2020.

For the second quarter of 2020, the effective tax rate was 18.8% compared to 19.6% for the first quarter of 2020.

Balance Sheet Trends

Total assets at June 30, 2020, were $3.27 billion compared with $2.45 billion at December 31, 2019.  The increase of $816.9 million is primarily attributable to assets acquired from the PFG Acquisition of approximately $307.2 million, increase in cash and cash equivalents of $215.5 million and the origination of $292.8 million of PPP loans.

Total liabilities increased to $2.92 billion at June 30, 2020 from $2.14 billion at December 31, 2019.  The increase of $786.1 million was primarily from deposit growth of $220.5 million, acquired deposits from the PFG Acquisition in the amount of $272.0 million, and an increase in borrowings of $287.2 million.

Shareholders' equity at June 30, 2020, totaled $343.5 million, an increase of $30.7 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, net income of $8.9 million for the six months ended June 30, 2020 and a net change in accumulated other comprehensive income of $424 thousand, which was offset by the repurchase of the Company's common stock of $2.1 million and $1.5 million of dividends paid. Tangible book value per share (Non-GAAP) was $16.90 at June 30, 2020, an increase from $16.82 at December 31, 2019.  Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 8.09% at June 30, 2020, compared with 9.93% at December 31, 2019.

Conference Call Information

SmartFinancial issued this earnings release for the second quarter of 2020 on Tuesday, July 21, 2020, and will host a conference call on Wednesday, July 22, 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, 5925756.  A replay of the conference call will be available through July 22, 2021, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10146072.  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 36 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   [email protected]

(865) 437-5724 [email protected]

Media Contact

Kelley Fowler

Senior Vice President, Public Relations & Marketing

(865) 868-0611    [email protected]

Graphic

3


Non-GAAP Financial Measures

Statements included in this earnings release 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) operating earnings, (ii) operating return on average assets, (iii) operating pre-tax pre-provision return on average assets (iv) operating return on average shareholder' equity, (v) return on average tangible common equity, (vi) operating return on average tangible common equity, (vii) operating efficiency ratio, (viii) operating noninterest income, (ix) operating pre-tax pre-provision income (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value, (xiv) tax equivalent net interest margin, (xv) tax equivalent yield in earning assets; and ratios derived therefrom, in its analysis of the company's performance. 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.  Operating return on average assets is the annualized operating earnings divided by average assets.  Operating pre-tax pre-provision return on average assets is the annualized operating pre-tax pre-provision income divided by average assets. Operating return on average shareholders' 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. 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 pre-tax pre-provision income is net interest expense plus operating noninterest income less operating noninterest expense.  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.  Tax equivalent net interest margin is the annualized net interest income plus tax equivalent income divided by average interest earning assets. Tax equivalent yield in earning assets is the annualized interest income plus tax equivalent income divided by average interest earning assets. 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.

4


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) risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; (2) claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; (3) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (4) 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; (6) risks related to the completed acquisition of PFG; (7) the risk that the anticipated benefits from the completed acquisition of PFG may not be realized in the time frame anticipated; (8) changes in management’s plans for the future; (9) prevailing, or changes in, economic or political conditions, particularly in our market areas; (10) credit risk associated with our lending activities; (11) changes in interest rates, loan demand, real estate values, or competition; (12) changes in accounting principles, policies, or guidelines; (13) 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; (14) 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; (15) the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (16) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (17) 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.

5


SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands except share and per share data)

As of and for The

As of and for The

Three Months Ended

    

    

Six Months Ended

Jun

    

Mar

    

Dec

    

Sep

    

Jun

    

Jun

    

Jun

2020

2020

2019

2019

2019

2020

2019

Selected Performance Ratios (Annualized):

  

 

  

 

  

 

  

 

  

  

  

Return on average assets

0.79

%

0.43

%

1.12

%

1.01

%

1.56

%

0.63

%

1.21

%

Return on average shareholders' equity

7.31

%

3.33

%

8.65

%

7.80

%

12.34

%

5.41

%

9.59

%

Return on average tangible common equity¹

9.80

%

4.41

%

11.55

%

10.52

%

16.78

%

7.23

%

13.14

%

Noninterest income / average assets

0.45

%

0.44

%

0.47

%

0.37

%

1.44

%

0.45

%

0.88

%

Noninterest expense / average assets

2.41

%

2.96

%

2.68

%

2.48

%

2.88

%

2.66

%

2.82

%

Efficiency ratio

64.28

%

74.02

%

67.04

%

63.03

%

57.53

%

68.81

%

62.39

%

Operating Selected Performance Ratios (Annualized):

  

  

  

  

  

  

  

Operating return on average assets1

0.93

%

0.67

%

1.08

%

1.02

%

0.96

%

0.82

%

0.97

%

Operating PTPP return on average assets1

1.53

%

1.37

%

1.31

%

1.47

%

1.33

%

1.46

%

1.38

%

Operating return on average shareholders' equity1

8.58

%

5.22

%

8.34

%

7.87

%

7.58

%

7.00

%

7.69

%

Operating return on average tangible common equity1

11.51

%

6.90

%

11.12

%

10.61

%

10.31

%

9.36

%

10.54

%

Operating efficiency ratio1

58.95

%

65.46

%

64.95

%

62.42

%

65.56

%

61.98

%

64.91

%

Operating noninterest income / average assets1

0.45

%

0.44

%

0.35

%

0.37

%

0.34

%

0.45

%

0.32

%

Operating noninterest expense / average assets1

2.23

%

2.63

%

2.56

%

2.47

%

2.57

%

2.41

%

2.59

%

Selected Interest Rates and Yields:

  

  

  

  

  

  

  

Yield on loans

4.87

%

5.35

%

5.36

%

5.48

%

5.53

%

5.09

%

5.58

%

Yield on earning assets, FTE

4.22

%

4.83

%

4.92

%

5.05

%

5.17

%

4.50

%

5.23

%

Cost of interest-bearing deposits

0.71

%

1.10

%

1.29

%

1.37

%

1.42

%

0.90

%

1.37

%

Cost of total deposits

0.54

%

0.91

%

1.06

%

1.13

%

1.18

%

0.71

%

1.14

%

Cost of interest-bearing liabilities

0.77

%

1.20

%

1.39

%

1.47

%

1.54

%

0.97

%

1.49

%

Net interest margin, FTE

3.63

%

3.90

%

3.84

%

3.91

%

3.94

%

3.75

%

4.04

%

Per Common Share:

  

 

  

 

  

 

  

 

  

  

  

Net income, basic

$

0.41

$

0.19

$

0.48

$

0.43

$

0.65

$

0.60

$

0.99

Net income, diluted

 

0.41

 

0.19

 

0.48

 

0.42

 

0.65

 

0.60

 

0.99

Operating earnings, basic¹

 

0.48

 

0.30

 

0.46

 

0.43

 

0.40

 

0.78

 

0.80

Operating earnings, diluted¹

 

0.48

 

0.30

 

0.46

 

0.43

 

0.40

 

0.78

 

0.79

Book value

 

22.57

 

22.09

 

22.33

 

21.93

 

21.47

 

22.57

 

21.47

Tangible book value¹

 

16.90

 

16.40

 

16.82

 

16.37

 

15.86

 

16.90

 

15.86

Common shares outstanding

 

15,216,932

 

15,221,990

 

14,008,233

 

13,957,973

 

13,953,209

 

15,216,932

 

13,953,209

¹See reconciliation of Non-GAAP measures

6


SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

As of and for The Three Months Ended

 

    

Jun

    

Mar

    

Dec

    

Sep

    

Jun

 

2020

2020

2019

2019

2019

 

Composition of Loans:

 

  

 

  

 

  

Commercial real estate

 

  

 

  

 

  

owner occupied

$

464,073

$

473,398

$

429,269

$

422,363

$

415,502

non-owner occupied

 

552,958

 

535,637

 

476,038

 

468,099

 

464,160

Commercial real estate, total

 

1,017,031

 

1,009,035

 

905,307

 

890,462

 

879,662

Commercial & industrial

 

637,450

 

377,173

 

337,075

 

341,207

 

334,258

Construction & land development

 

279,216

 

253,445

 

227,626

 

219,751

 

204,731

Consumer real estate

 

459,861

 

482,728

 

417,481

 

402,463

 

402,270

Consumer and other

 

14,726

 

16,866

 

9,903

 

10,796

 

11,981

Total loans

$

2,408,284

$

2,139,247

$

1,897,392

$

1,864,679

$

1,832,902

Asset Quality and Additional Loan Data:

 

  

 

  

 

  

Nonperforming loans

$

3,776

$

3,069

$

3,350

$

3,166

$

2,838

Other real estate owned

 

5,524

 

5,894

 

1,757

 

1,561

 

1,814

Total nonperforming assets

$

9,300

$

8,963

$

5,107

$

4,727

$

4,652

Restructured loans not included in nonperforming loans

$

9

$

9

$

61

$

61

$

62

Net charge-offs to average loans (annualized)

 

%  

 

%  

 

0.01

%  

 

0.01

%  

 

%

Allowance for loan losses to loans

 

0.67

%  

 

0.63

%  

 

0.54

%  

 

0.53

%  

 

0.50

%

Nonperforming loans to total loans, gross

 

0.16

%  

 

0.14

%  

 

0.18

%  

 

0.17

%  

 

0.15

%

Nonperforming assets to total assets

 

0.28

%  

 

0.31

%  

 

0.21

%  

 

0.20

%  

 

0.19

%

Acquired loan fair value discount balance

$

16,187

$

17,237

$

15,348

$

16,784

$

18,571

Accretion income on acquired loans

 

888

 

1,841

 

1,375

 

1,246

 

1,374

PPP net fees deferred balance

8,582

PPP net fees recognized

1,909

Capital Ratios:

 

  

 

  

 

  

Equity to Assets

 

10.52

%  

 

11.70

%  

 

12.77

%  

 

12.80

%  

 

12.53

%

Tangible common equity to tangible assets (Non-GAAP)1

 

8.09

%  

 

8.96

%  

 

9.93

%  

 

9.88

%  

 

9.57

%

SmartFinancial, Inc.2

 

  

 

  

 

  

Tier 1 leverage

 

8.83

%  

 

10.28

%  

 

10.34

%  

 

10.02

%  

 

9.92

%

Common equity Tier 1

 

10.92

%  

 

10.87

%  

 

11.61

%  

 

11.54

%  

 

11.21

%

Tier 1 capital

 

10.92

%  

 

10.87

%  

 

11.61

%  

 

11.54

%  

 

11.21

%

Total capital

 

13.25

%  

 

13.13

%  

 

14.02

%  

 

13.98

%  

 

13.65

%

SmartBank

 

Estimated3

 

  

 

  

Tier 1 leverage

 

9.82

%  

 

11.42

%  

 

11.41

%  

 

11.22

%  

 

10.92

%

Common equity Tier 1

 

12.14

%  

 

12.05

%  

 

12.81

%  

 

12.71

%  

 

12.37

%

Tier 1 risk-based capital

 

12.14

%  

 

12.05

%  

 

12.81

%  

 

12.71

%  

 

12.37

%

Total risk-based capital

 

12.82

%  

 

12.62

%  

 

13.31

%  

 

13.19

%  

 

12.82

%

1Total common equity less intangibles divided by total assets less intangibles. See reconciliation of Non-GAAP measures.

2All periods presented are estimated.

3 Current period capital ratios are estimated as of the date of this earnings release.

7


SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

Ending Balances

Jun

    

Mar

    

Dec

    

Sep

    

Jun

2020

2020

2019

2019

2019

Assets:

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

399,467

$

309,089

$

183,971

$

170,934

$

199,534

Securities available-for-sale, at fair value

 

219,631

 

201,002

 

178,348

 

171,507

 

174,114

Other investments

 

14,829

 

14,113

 

12,913

 

12,913

 

12,905

Loans held for sale

 

6,330

 

6,045

 

5,856

 

3,068

 

4,087

Loans

 

2,408,284

 

2,139,247

 

1,897,392

 

1,864,679

 

1,832,902

Less: Allowance for loan losses

 

(16,254)

 

(13,431)

 

(10,243)

 

(9,792)

 

(9,097)

Loans, net

 

2,392,030

 

2,125,816

 

1,887,149

 

1,854,887

 

1,823,805

Premises and equipment, net

 

73,868

 

73,801

 

59,433

 

58,386

 

56,589

Other real estate owned

 

5,524

 

5,894

 

1,757

 

1,561

 

1,814

Goodwill and core deposit intangibles, net

 

86,327

 

86,503

 

77,193

 

77,534

 

78,348

Bank owned life insurance

 

30,853

 

30,671

 

24,949

 

24,796

 

24,695

Other assets

 

37,126

 

20,781

 

17,554

 

14,899

 

15,366

Total assets

$

3,265,985

$

2,873,715

$

2,449,123

$

2,390,485

$

2,391,257

Liabilities:

 

  

 

  

 

  

 

  

 

  

Deposits:

 

  

 

  

 

  

 

  

 

  

Noninterest-bearing demand

$

645,650

$

431,781

$

364,155

$

365,024

$

357,220

Interest-bearing demand

 

479,212

 

444,141

 

380,234

 

351,474

 

333,705

Money market and savings

 

762,246

 

730,392

 

623,284

 

634,934

 

648,132

Time deposits

 

652,581

 

735,616

 

679,541

 

646,641

 

673,243

Total deposits

 

2,539,689

 

2,341,930

 

2,047,214

 

1,998,073

 

2,012,300

Borrowings

 

318,855

 

131,603

 

31,623

 

29,828

 

23,679

Subordinated debt

 

39,304

 

39,283

 

39,261

 

39,240

 

39,219

Other liabilities

 

24,649

 

24,699

 

18,278

 

17,304

 

16,448

Total liabilities

 

2,922,497

 

2,537,515

 

2,136,376

 

2,084,445

 

2,091,646

Shareholders' Equity:

 

  

 

  

 

  

 

  

 

  

Common stock

 

15,217

 

15,222

 

14,008

 

13,958

 

13,953

Additional paid-in capital

 

254,396

 

254,356

 

232,732

 

232,573

 

232,386

Retained earnings

 

73,283

 

67,869

 

65,839

 

59,806

 

53,843

Accumulated other comprehensive income (loss)

 

592

 

(1,247)

 

168

 

(297)

 

(571)

Total shareholders' equity

 

343,488

 

336,200

 

312,747

 

306,040

 

299,611

Total liabilities & shareholders' equity

$

3,265,985

$

2,873,715

$

2,449,123

$

2,390,485

$

2,391,257

8


SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands, except share and per share data)

Three Months Ended

 

Six Months Ended

Jun

    

Mar

    

Dec

    

Sep

    

Jun

    

Jun

    

Jun

2020

2020

2019

2019

2019

2020

2019

Interest income:

  

 

  

 

  

 

  

 

  

Loans, including fees

$

28,663

$

26,434

$

25,398

$

25,515

$

25,278

$

55,097

$

50,253

Securities available-for-sale:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Taxable

 

589

 

679

 

698

 

748

 

871

 

1,268

 

1,842

Tax-exempt

 

416

 

283

 

345

 

338

 

411

 

699

 

836

Federal funds sold and other earning assets

 

277

 

602

 

587

 

743

 

743

 

879

 

1,315

Total interest income

 

29,945

 

27,998

 

27,028

 

27,344

 

27,303

 

57,943

 

54,246

Interest expense:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Deposits

 

3,366

 

4,754

 

5,271

 

5,605

 

5,788

 

8,120

 

11,039

Borrowings

 

249

 

89

 

70

 

15

 

123

 

339

 

235

Subordinated debt

 

584

 

584

 

584

 

584

 

590

 

1,167

 

1,173

Total interest expense

 

4,199

 

5,427

 

5,924

 

6,204

 

6,501

 

9,626

 

12,447

Net interest income

 

25,746

 

22,571

 

21,104

 

21,140

 

20,802

 

48,317

 

41,799

Provision for loan losses

 

2,850

 

3,200

 

685

 

724

 

393

 

6,049

 

1,190

Net interest income after provision for loan losses

 

22,896

 

19,371

 

20,419

 

20,416

 

20,409

 

42,268

 

40,609

Noninterest income:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Service charges on deposit accounts

 

709

 

770

 

773

 

767

 

707

 

1,479

 

1,361

Gain on sale of securities, net

 

16

 

 

 

1

 

33

 

16

 

33

Mortgage banking

 

931

 

584

 

374

 

518

 

392

 

1,515

 

674

Investment services

 

363

 

437

 

261

 

260

 

255

 

801

 

424

Insurance commissions

 

473

 

269

 

 

 

 

742

 

Interchange and debit card transaction fees

 

508

 

276

 

163

 

148

 

143

 

784

 

318

Merger termination fee

 

 

 

 

 

6,400

 

 

6,400

Other

 

511

 

482

 

1,269

 

502

 

486

 

993

 

904

Total noninterest income

 

3,511

 

2,818

 

2,840

 

2,196

 

8,416

 

6,330

 

10,114

Noninterest expense:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Salaries and employee benefits

 

10,357

 

10,006

 

10,278

 

9,072

 

8,984

 

20,363

 

17,382

Occupancy and equipment

 

1,996

 

1,911

 

1,749

 

1,635

 

1,658

 

3,906

 

3,298

FDIC insurance

 

180

 

180

 

 

(219)

 

180

 

360

 

359

Other real estate and loan related expense

 

346

 

545

 

253

 

335

 

242

 

892

 

732

Advertising and marketing

 

202

 

198

 

166

 

263

 

259

 

400

 

554

Data processing

 

594

 

538

 

530

 

273

 

577

 

1,132

 

1,192

Professional services

 

868

 

711

 

652

 

573

 

489

 

1,578

 

1,151

Amortization of intangibles

 

405

 

362

 

340

 

341

 

342

 

767

 

686

Software as service contracts

 

561

 

470

 

500

 

560

 

568

 

1,031

 

1,136

Merger related and restructuring expenses

 

1,477

 

2,096

 

427

 

73

 

1,796

 

3,573

 

2,719

Other

 

1,820

 

1,776

 

1,157

 

1,802

 

1,714

 

3,598

 

3,179

Total noninterest expense

 

18,806

 

18,793

 

16,052

 

14,708

 

16,809

 

37,600

 

32,388

Income before income taxes

 

7,601

 

3,396

 

7,206

 

7,904

 

12,016

 

10,998

 

18,335

Income tax expense

 

1,427

 

664

 

473

 

1,941

 

2,895

 

2,091

 

4,483

Net income

$

6,174

$

2,732

$

6,733

$

5,963

$

9,121

$

8,907

$

13,852

Earnings per common share:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Basic

$

0.41

$

0.19

$

0.48

$

0.43

$

0.65

$

0.60

$

0.99

Diluted

$

0.41

$

0.19

$

0.48

$

0.42

$

0.65

$

0.60

$

0.99

Weighted average common shares outstanding:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Basic

 

15,152,768

 

14,395,103

 

13,965,877

 

13,955,859

 

13,951,643

 

14,773,935

 

13,946,856

Diluted

 

15,202,335

 

14,479,679

 

14,066,269

 

14,053,432

 

14,046,500

 

14,842,486

 

14,036,790

9


SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information - (unaudited)

(dollars in thousands)

YIELD ANALYSIS

Three Months Ended

 

June 30, 2020

March 31, 2020

June 30, 2019

 

    

Average

    

    

Yield/

    

Average

    

    

Yield/

    

Average

    

  

    

Yield/

 

Balance

Interest1

Cost1

Balance

Interest1

Cost1

Balance

Interest1

Cost1

 

Assets:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Loans, including fees2

$

2,359,101

$

28,590

 

4.87

%  

$

1,982,997

$

26,389

 

5.35

%  

$

1,828,884

$

25,233

 

5.53

%

Loans held for sale

6,868

73

4.28

%  

4,294

45

4.24

%  

3,755

45

4.81

%  

Taxable securities

 

122,135

 

589

 

1.94

%  

 

116,837

 

679

 

2.34

%  

 

136,859

 

871

 

2.55

%

Tax-exempt securities

 

86,227

 

570

 

2.66

%  

 

70,397

 

400

 

2.28

%  

 

56,475

 

527

 

3.75

%

Federal funds sold and other earning assets

 

297,696

 

277

 

0.37

%  

 

165,512

 

602

 

1.46

%  

 

102,253

 

743

 

2.91

%

Total interest-earning assets

 

2,872,027

 

30,099

 

4.22

%  

 

2,340,037

 

28,115

 

4.83

%  

 

2,128,226

 

27,419

 

5.17

%

Noninterest-earning assets

 

260,089

 

 

 

216,498

 

  

 

  

 

215,010

 

  

 

  

Total assets

$

3,132,116

$

2,556,535

 

  

 

  

$

2,343,236

 

  

 

  

Liabilities and Stockholders’ Equity:

 

  

 

  

  

 

  

 

  

 

  

 

  

 

  

 

  

Interest-bearing demand deposits

$

453,795

 

148

0.13

%  

$

389,500

 

434

 

0.45

%  

$

329,556

 

464

 

0.57

%

Money market and savings deposits

 

748,673

 

614

0.33

%  

 

664,983

 

1,389

 

0.84

%  

 

673,502

 

2,272

 

1.35

%

Time deposits

 

701,390

 

2,604

1.49

%  

 

680,830

 

2,931

 

1.73

%  

 

629,480

 

3,052

 

1.94

%

Total interest-bearing deposits

 

1,903,858

 

3,366

0.71

%  

 

1,735,313

 

4,754

 

1.10

%  

 

1,632,538

 

5,788

 

1.42

%

Borrowings3

 

237,143

 

249

0.42

%  

 

51,921

 

89

 

0.69

%  

 

23,685

 

123

 

2.08

%

Subordinated debt

 

39,290

 

584

5.98

%  

 

39,269

 

584

 

5.98

%  

 

39,205

 

590

 

6.03

%

Total interest-bearing liabilities

 

2,180,291

 

4,199

0.77

%  

 

1,826,503

 

5,427

 

1.20

%  

 

1,695,428

 

6,501

 

1.54

%

Noninterest-bearing deposits

 

587,322

 

 

373,125

 

  

 

  

 

336,871

 

  

 

  

Other liabilities

 

24,642

 

 

27,215

 

  

 

  

 

14,367

 

  

 

  

Total liabilities

 

2,792,255

 

 

2,226,843

 

  

 

  

 

2,046,666

 

  

 

  

Shareholders' equity

 

339,861

 

 

329,692

 

  

 

  

 

296,570

 

  

 

  

Total liabilities and shareholders' equity

$

3,132,116

$

2,556,535

 

  

 

  

$

2,343,236

 

  

 

  

Net interest income, taxable equivalent