Market Overview

SmartFinancial Announces Results for the Fourth Quarter 2019

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KNOXVILLE, Tenn., Jan. 21, 2020 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ((", SmartFinancial", or the ", Company", , NASDAQ:SMBK), today announced net income of $6.7 million, or $0.48 per diluted common share, for the fourth quarter of 2019, compared to net income of $6.0 million, or $0.42 per diluted common share, for the third quarter of 2019.  Net operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $6.5 million, or $0.46 per diluted common share, in the fourth quarter of 2019, compared to $6.0 million, or $0.43 per diluted common share, in the third quarter of 2019.

For the year ending December 31, 2019, net income is $26.5 million, or $1.89 per diluted common share, compared to net income of $18.1 million, or $1.45 per diluted common share, for the year ending December 31, 2018.  Net operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $23.6 million, or $1.68 per diluted common share, for the year ending December 31, 2019 compared to $19.5 million, or $1.56 per diluted common share, for the year ending December 31, 2018.

Highlights for Fourth Quarter of 2019

  • Return on average assets of 1.12% and net operating annualized return on average assets (Non-GAAP) of 1.08%
  • Asset quality remains outstanding with nonperforming assets to total assets of 0.21%
  • Loan growth of $32.7 million, or 7.0% annualized
  • Tangible book value (Non-GAAP) per share of $16.82, a 14.9% year-over-year increase
  • Announced the planned acquisition of Progressive Financial Group, Inc. ("PFG")
  • Initiation of a quarterly dividend

Billy Carroll, President & CEO, stated: "We posted a solid quarter and closed the books on another successful year where we made a number of outstanding foundational strides.  Our team continues to focus on steady growth of our performance metrics and we remain bullish on our opportunities to move the company forward and continuing growth of shareholder value."

SmartFinancial's Chairman, Miller Welborn, concluded:  "The consistency we are beginning to show in all areas of our company, especially our financial metrics, is very exciting to me. Our team continues to improve their execution of our strategy while maintaining a laser focus on growing long term shareholder value."

Net Interest Income and Net Interest Margin

Net interest income was $21.1 million for each of the fourth and third quarters of 2019 and $21.4 million for the fourth quarter of 2018. The tax equivalent net interest margin was 3.84% for the fourth quarter of 2019 compared to 3.91% for the third quarter of 2019.  The tax equivalent average yield on interest-earning assets was 4.92% for the fourth quarter of 2019, a decrease from 5.05% for the third quarter of 2019. The yield on interest-bearing liabilities decreased to 1.39% for the fourth quarter of 2019 from 1.47% for the third quarter of 2019.

The yield on average loans was 5.36% for the fourth quarter of 2019 compared to 5.48% for the third quarter of 2019.  The decrease in yield on average loans from the third to fourth quarters of 2019 was primarily due to the impact of three Federal rate decreases over these two quarters which effected the repricing of variable rate loans and new loan production.  During the fourth quarter of 2019, increased discount accretion was recorded on acquired loans (29 basis points in the fourth quarter of 2019 versus 26 basis points in the third quarter of 2019) with loan fees remaining stable quarter over quarter.  For the fourth quarter of 2019, the yield on average loans, excluding accretion, was 5.07%, a decrease of 15 basis points from the 5.22% reported in the third quarter of 2019.  The impact of the acquired loan discount accretion on the tax equivalent net interest margin was 25 basis points for the fourth quarter of 2019 and 23 basis points for the third quarter of 2019.

The cost of average interest-bearing deposits was 1.29% for the fourth quarter of 2019 compared to 1.37% for the third quarter of 2019.  The overall decrease of eight basis points in average interest-bearing deposits from the third to fourth quarter of 2019 was driven primarily by the three Federal rate decreases during the third and fourth quarters of 2019, creating a reduction of interest cost for all deposit classifications.

Provision for Loan Loss and Credit Quality

Provision for loan losses was $685 thousand in the fourth quarter of 2019, compared to $724 thousand in the third quarter of 2019 and $1.3 million in the fourth quarter of 2018. The allowance for loan losses was $10.2 million, or 0.54% of total loans, as of December 31, 2019, compared to $9.8 million, or 0.53% of total loans, as of September 30, 2019.  The increase in allowance for loan losses to total loans was due primarily to the increase in the loan originations and, to lesser extent, the reduction of acquired loan balances.

Nonperforming loans as a percentage of total loans was 0.18% as of December 31, 2019, an increase of one basis point from the 0.17% reported in the third 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 0.21% as of December 31, 2019 as compared to 0.20% as of September 30, 2019.

Noninterest Income

Noninterest income was $2.8 million for the fourth quarter of 2019 compared to $2.2 million for the third quarter of 2019.  The increase of $644 thousand from the third quarter 2019 to the fourth quarter 2019 was primarily because of funds received from the Alabama Department of Economic and Community Affairs ("ADECA").  ADECA was a program that guaranteed 50% of a loans obligation for loan's approved and originated through the program.  In September 2019, the ADECA program was dissolved and in October 2019 total proceeds of $1.2 million was received, of which $720 thousand was recorded as noninterest income, and the remainder of the proceeds were held in reserve for potential future losses on specific identified loans that were covered in the program.

Noninterest Expense

Noninterest expense was $16.1 million for the fourth quarter of 2019, an increase of $1.4 million, compared to $14.7 million for the third quarter of 2019.  During the fourth quarter of 2019, the primary components of the increase in noninterest expense were as follows:

  • Increase of $1.2 million in salaries and employees benefits, which consisted of a $603 thousand prior year adjustment,  acquired SERP adjustment, year-end employee incentive accrual adjustments, and from increased hiring of associates;
  • Increase of $219 thousand in FDIC insurance due to a credit reported during the third quarter of 2019, and no expense recorded during the fourth quarter of 2019;
  • Increase of $257 thousand in data processing expenses, primarily from core processor credits that were utilized during the third quarter of 2019;
  • Increase of $354 thousand in merger related and restructuring expenses relating to the Progressive Financial Group Inc. acquisition; and
  • Decrease of $644 thousand in other expenses, which consisted of a benefit of $312 thousand relating to a prior year adjustment to franchise taxes from the 2018 income tax return true-up, and a current period benefit of $468 thousand relating to excess tax credits applied to franchise taxes (See Income Tax Expense below).

Income Tax Expense

Income tax expense was $473 thousand for the fourth quarter of 2019, a decrease of $1.5 million, compared to $1.9 million for the third quarter of 2019.  During the fourth quarter of 2019, the primary components of the decrease in income tax expense were as follows:

  • Tax benefit of $304 thousand relating to a prior year (2017) amended Federal tax return;
  • Adjustments relating to the true-up of 2018 Federal Tax return; and
  • Tax benefit of $1.1 million income tax benefit associated with a program the State of Tennessee manages for Community Investment loans.  The Bank strategically originated loans in this program to reduce its 2019 tax liability.  The benefit received from the loans approved under this program was first applied to the current year Tennessee income tax liability, and the excess benefit over the current tax liability was applied directly to the Company's Tennessee franchise tax liability.  The amount of the benefit received from this opportunity totaled $1.6 million, with a benefit of $1.1 million applied to income tax liability and the excess benefit of $468 thousand applied to franchise tax (as mentioned above in Noninterest Expense).

The overall effective tax rate was 6.6% for the fourth quarter of 2019 compared to 24.6% for the third quarter of 2019.

Balance Sheet Trends

Total assets at December 31, 2019 were $2.45 billion compared with $2.27 billion at December 31, 2018.  The year-over-year increase of $174.7 million is primarily from continued loan growth of $122.1 million.

Total liabilities increased to $2.14 billion at December 31, 2019 from $2.00 billion at December 31, 2018.  The year-over-year increase of $145.0 million was primarily from the increase of total deposits of $125.3 million and FHLB and other borrowings of $14.2 million.

Shareholders' equity at December 31, 2019 totaled $312.7 million, an increase of $29.7 million, from December 31, 2018.  The increase in shareholders' equity was primarily from net income of $26.5 million for the year 2019.  Tangible book value per share (Non-GAAP) was $16.82 at December 31, 2019, an increase from $14.64 at December 31, 2018.  Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 9.93% at December 31, 2019, compared with 9.29% at December 31, 2018.

Conference Call Information

SmartFinancial will issue its earnings release for the fourth quarter of 2019 on Tuesday, January 21, 2020, and will host a conference call on Wednesday, January 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, 1935532.  A replay of the conference call will be available through January 22, 2021, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10138335.  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 29 branches across Tennessee, Alabama, and the Florida Panhandle.  Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank's success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source
SmartFinancial, Inc.

   
Investor Contacts  
Billy Carroll  Ron Gorczynski
President & CEO  Executive Vice President, Chief 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  
   

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) 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) tangible common equity; (viii) average tangible common equity; (ix) tangible book value; 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, 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. Net operating return on average equity is the annualized net operating earnings divided by average assets. Net operating return on average equity is the annualized net operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Net operating return on average tangible common equity is the annualized net operating earnings divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets.  Tangible book value excludes intangible assets and goodwill.  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.  These statements 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 proposed acquisition of PFG, including the risk that the proposed acquisition does not close when expected or at all because conditions to closing are not satisfied on a timely basis or at all, or the terms of the proposed transaction need to be modified to satisfy such conditions; (8) the risk that the anticipated benefits from the proposed 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; and (15) 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.

                 
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   Twelve Months Ended
    Dec   Sep   Jun   Mar   Dec   Dec   Dec
    2019   2019   2019   2019   2018   2019   2018
Selected Performance Ratios (Annualized):                            
Return on average assets   1.12 %   1.01 %   1.56 %   0.84 %   1.17 %   1.13 %   0.92 %
Return on average shareholders' equity   8.65 %   7.80 %   12.34 %   6.71 %   9.44 %   8.89 %   7.47 %
Return on average tangible common equity (Non-GAAP)¹   11.55 %   10.52 %   16.78 %   9.26 %   13.09 %   12.04 %   10.09 %
Noninterest income / average assets   0.47 %   0.37 %   1.44 %   0.30 %   0.31 %   0.65 %   0.34 %
Noninterest expense / average assets   2.68 %   2.48 %   2.88 %   2.77 %   2.84 %   2.70 %   3.00 %
Efficiency ratio   67.04 %   63.03 %   57.53 %   68.65 %   67.71 %   63.66 %   70.84 %
                             
Operating Selected Performance Ratios (Annualized):                            
Net operating return on average assets (Non-GAAP)¹   1.08 %   1.02 %   0.96 %   0.98 %   1.07 %   1.01 %   0.99 %
Net operating return on average shareholders' equity (Non-GAAP)¹   8.34 %   7.87 %   7.58 %   7.81 %   8.65 %   7.91 %   8.05 %
Net operating return on average tangible common equity (Non-GAAP)¹   11.12 %   10.61 %   10.31 %   10.79 %   12.00 %   10.71 %   10.88 %
Operating efficiency ratio (Non-GAAP)¹   64.95 %   62.42 %   65.56 %   64.25 %   61.72 %   64.29 %   66.15 %
Operating noninterest income / average assets (Non-GAAP)   0.35 %   0.37 %   0.34 %   0.33 %   0.32 %   0.35 %   0.36 %
Operating noninterest expense / average assets (Non-GAAP)   2.56 %   2.47 %   2.57 %   2.60 %   2.76 %   2.55 %   2.84 %
                             
Selected Interest Rates and Yields:                            
Yield on loans   5.36 %   5.48 %   5.53 %   5.62 %   5.81 %   5.49 %   5.72 %
Yield on earning assets, FTE   4.92 %   5.05 %   5.17 %   5.25 %   5.36 %   5.10 %   5.32 %
Cost of interest-bearing deposits   1.29 %   1.37 %   1.42 %   1.32 %   1.21 %   1.35 %   1.04 %
Cost of total deposits   1.06 %   1.13 %   1.18 %   1.10 %   1.00 %   1.12 %   0.86 %
Cost of interest-bearing liabilities   1.39 %   1.47 %   1.54 %   1.45 %   1.33 %   1.46 %   1.10 %
Net interest margin, FTE   3.84 %   3.91 %   3.94 %   4.10 %   4.28 %   3.95 %   4.43 %
                             
Per Common Share:                            
Net income, basic   $ 0.48     $ 0.43     $ 0.65     $ 0.34     $ 0.48     $ 1.90     $ 1.46  
Net income, diluted   0.48     0.42     0.65     0.34     0.47     1.89     1.45  
Net operating earnings, basic (Non-GAAP)¹   0.46     0.43     0.40     0.40     0.44     1.69     1.57  
Net operating earnings, diluted (Non-GAAP)¹   0.46     0.43     0.40     0.39     0.43     1.68     1.56  
Book value   22.33     21.93     21.47     20.82     20.31     22.33     20.31  
Tangible book value (Non-GAAP)¹   16.82     16.37     15.86     15.18     14.64     16.82     14.64  
Common shares outstanding   14,008,233     13,957,973     13,953,209     13,951,590     13,933,504     14,008,233     13,933,504  
                             
¹See reconciliation of Non-GAAP measures                            

 

         
SmartFinancial, Inc. and Subsidiary        
Condensed Consolidated Financial Information - (unaudited)        
(In thousands)        
    As of and for The Three Months Ended
    Dec   Sep   Jun   Mar   Dec
    2019   2019   2019   2019   2018
Composition of Loans:                    
Commercial real estate                    
owner occupied   $ 429,269     $ 422,363     $ 415,502     $ 416,152     $ 372,030  
non-owner occupied   476,038     468,099     464,160     472,790     487,997  
Commercial real estate, total   905,307     890,462     879,662     888,942     860,027  
Commercial & industrial   337,075     341,207     334,258     341,471     308,254  
Construction & land development   227,626     219,751     204,731     187,009     187,895  
Consumer real estate   423,337     405,531     406,357     410,981     407,254  
Consumer and other   9,903     10,796     11,981     12,166     13,809  
Total loans   $ 1,903,248     $ 1,867,747     $ 1,836,989     $ 1,840,569     $ 1,777,239  
                     
Asset Quality and Additional Loan Data:                    
Nonperforming loans   $ 3,350     $ 3,166     $ 2,838     $ 2,282     $ 3,280  
Other real estate owned   1,757     1,561     1,814     2,066     2,495  
Total nonperforming assets   $ 5,107     $ 4,727     $ 4,652     $ 4,348     $ 5,775  
Restructured loans not included in nonperforming loans   $ 61     $ 61     $ 62     $ 62     $ 116  
Net charge-offs (recoveries) to average loans (annualized)   0.01 %   0.01 %   %   0.08 %   0.04 %
Allowance for loan losses to loans   0.54 %   0.53 %   0.50 %   0.47 %   0.47 %
Nonperforming loans to total loans, gross   0.18 %   0.17 %   0.15 %   0.12 %   0.18 %
Nonperforming assets to total assets   0.21 %   0.20 %   0.19 %   0.18 %   0.25 %
Purchase accounting discount balance   $ 15,348     $ 16,784     $ 18,571     $ 19,954     $ 21,528  
Accretion income on acquired loans   1,375     1,246     1,374     1,717     2,343  
                     
Capital Ratios:                    
Equity to Assets   12.77 %   12.80 %   12.53 %   12.34 %   12.44 %
Tangible common equity to tangible assets (Non-GAAP)3   9.93 %   9.88 %   9.57 %   9.31 %   9.29 %
                     
SmartFinancial, Inc.1                    
Tier 1 leverage   10.34 %   10.02 %   9.92 %   9.29 %   9.47 %
Common equity Tier 1   11.61 %   11.54 %   11.21 %   10.61 %   10.81 %
Tier 1 capital   11.61 %   11.54 %   11.21 %   10.61 %   10.81 %
Total capital   14.02 %   13.98 %   13.65 %   13.01 %   13.29 %
                     
SmartBank   Estimated2                
Tier 1 leverage   11.41 %   11.22 %   10.92 %   10.96 %   11.17 %
Common equity Tier 1   12.81 %   12.71 %   12.37 %   12.18 %   12.31 %
Tier 1 risk-based capital   12.81 %   12.71 %   12.37 %   12.18 %   12.31 %
Total risk-based capital   13.31 %   13.19 %   12.82 %   12.62 %   12.74 %

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


                 
SmartFinancial, Inc. and Subsidiary                
Condensed Consolidated Financial Information - (unaudited)            
(dollars in thousands)                    
    Ending Balances
    Dec   Sep   Jun   Mar   Dec
    2019   2019   2019   2019   2018
                     
Assets:                    
Cash and cash equivalents   $ 183,971     $ 170,934     $ 199,534     $ 132,994     $ 115,822  
Securities available-for-sale, at fair value   178,348     171,507     174,114     198,273     201,688  
Other investments   12,913     12,913     12,905     12,398     11,499  
Loans held for sale   5,856     3,068     4,087     2,103     1,979  
Loans   1,897,392     1,864,679     1,832,902     1,838,466     1,775,260  
 Less: Allowance for loan losses   (10,243 )   (9,792 )   (9,097 )   (8,704 )   (8,275 )
 Loans, net   1,887,149     1,854,887     1,823,805     1,829,762     1,766,985  
Premises and equipment, net   59,433     58,386     56,589     56,583     56,012  
Other real estate owned   1,757     1,561     1,814     2,066     2,495  
Goodwill and core deposit intangibles, net   77,193     77,534     78,348     78,690     79,034  
Bank owned life insurance   24,949     24,796     24,695     24,540     24,381  
Other assets   17,554     14,899     15,366     16,572     14,514  
Total assets   $ 2,449,123     $ 2,390,485     $ 2,391,257     $ 2,353,981     $ 2,274,409  
                     
Liabilities:                    
Deposits:                    
  Noninterest-bearing demand   $ 364,155     $ 365,024     $ 357,220     $ 329,095     $ 319,861  
  Interest-bearing demand   380,234     351,474     333,705     331,629     311,482  
  Money market and savings   623,284     634,934     648,132     698,431     641,945  
  Time deposits   679,541     646,641     673,243     635,175     648,676  
  Total deposits   2,047,214     1,998,073     2,012,300     1,994,330     1,921,964  
Securities sold under agreements to repurchase   6,184     4,368     8,219     7,070     11,756  
FHLB & other borrowings   25,439     25,460     15,460     8,605     11,243  
Subordinated debt   39,261     39,240     39,219     39,198     39,177  
Other liabilities   18,278     17,304     16,448     14,297     7,258  
Total liabilities   2,136,376     2,084,445     2,091,646     2,063,500     1,991,398  
Shareholders' Equity:                    
Common stock   14,008     13,958     13,953     13,952     13,933  
Additional paid-in capital   232,732     232,573     232,386     232,241     231,852  
Retained earnings   65,839     59,806     53,843     44,722     39,991  
Accumulated other comprehensive income (loss)   168     (297 )   (571 )   (434 )   (2,765 )
Total shareholders' equity   312,747     306,040     299,611     290,481     283,011  
Total liabilities & shareholders' equity   $ 2,449,123     $ 2,390,485     $ 2,391,257     $ 2,353,981     $ 2,274,409  
                                         

 

                 
SmartFinancial, Inc. and Subsidiary                
Condensed Consolidated Financial Information - (unaudited)                
(dollars in thousands, except share and per share data)                
    Three Months Ended   Twelve Months Ended
    Dec   Sep   Jun   Mar   Dec   Dec   Dec
    2019   2019   2019   2019   2018   2019   2018
Interest income:                            
Loans, including fees   $ 25,398     $ 25,515     $ 25,278     $ 24,975     $ 25,018     $ 101,002     $ 86,469  
Securities available-for-sale:                            
 Taxable   698     748     871     971     900     3,289     3,512  
 Tax-exempt   345     338     411     424     347     1,518     587  
Federal funds sold and other earning assets   587     743     743     573     506     2,646     1,642  
Total interest income   27,028     27,344     27,303     26,943     26,771     108,455     92,210  
                             
Interest expense:                            
Deposits   5,271     5,605     5,788     5,251     4,680     21,915     14,288  
Securities sold under agreements to repurchase   5     5     6     8     9     23     45  
FHLB advances and other borrowings   65     10     117     103     51     296     630  
Subordinated debt   584     584     590     584     584     2,341     603  
Total interest expense   5,924     6,204     6,501     5,946     5,324     24,575     15,566  
Net interest income   21,104     21,140     20,802     20,997     21,447     83,880     76,644  
Provision for loan losses   685     724     393     797     1,329     2,599     2,936  
Net interest income after provision for loan losses   20,419     20,416     20,409     20,200     20,118     81,281     73,708  
                             
Noninterest income:                            
Service charges on deposit accounts   773     767     707     654     663     2,902     2,416  
Gain on sale of securities, net       1     33         2     34     1  
Mortgage banking   374     518     392     282     251     1,566     1,433  
Interchange and debit card transaction fees   163     148     143     175     162     628     573  
Merger termination fee           6,400             6,400      
Other   1,530     762     741     587     602     3,785     2,161  
Total noninterest income   2,840     2,196     8,416     1,698     1,680     15,315     6,584  
                             
Noninterest expense:                            
Salaries and employee benefits   10,278     9,072     8,984     8,398     7,871     36,635     30,630  
Occupancy and equipment   1,749     1,635     1,658     1,640     1,610     6,716     6,303  
FDIC insurance (credit)       (219 )   180     179     209     140     786  
Other real estate and loan related expense   253     335     242     490     738     1,320     2,913  
Advertising and marketing   166     263     259     295     246     983     873  
Data processing   530     273     577     615     372     1,995     1,906  
Professional services   652     573     489     662     707     2,375     2,694  
Amortization of intangibles   340     341     342     344     312     1,368     976  
Software as service contracts   500     560     568     567     577     2,195     2,054  
Merger related and restructuring expenses   427     73     1,796     923     1,322     3,219     3,781  
Other   1,157     1,802     1,714     1,466     1,697     6,205     6,041  
Total noninterest expense   16,052     14,708     16,809     15,579     15,661     63,151     58,957  
Income before income taxes   7,206     7,904     12,016     6,319     6,137     33,445     21,335  
Income tax expense   473     1,941     2,895     1,588     (307 )   6,897     3,233  
Net income   $ 6,733     $ 5,963     $ 9,121     $ 4,731     $ 6,444     $ 26,548     $ 18,102  
                             
Earnings Per Common Share:                            
Basic   $ 0.48     $ 0.43     $ 0.65     $ 0.34     $ 0.48     $ 1.9     $ 1.46  
Diluted   $ 0.48     $ 0.42     $ 0.65     $ 0.34     $ 0.47     $ 1.89     $ 1.45  
Weighted average common shares outstanding:                            
Basic   13,965,877     13,955,859     13,951,643     13,942,016     13,534,806     13,953,497     12,423,618  
Diluted   14,066,269     14,053,432     14,046,500     14,018,163     13,616,616     14,046,366     12,517,640  

 

                     
SmartFinancial, Inc. and Subsidiary                    
Condensed Consolidated Financial Information - (unaudited)                    
(In thousands)                        
YIELD ANALYSIS                        
    Three Months Ended
    December 31, 2019   September 30, 2019   December 31, 2018
    Average       Yield/   Average       Yield/   Average       Yield/
    Balance   Interest1   Cost1   Balance   Interest1   Cost1   Balance   Interest1   Cost1
Assets:                                    
Loans, including fees   $ 1,881,501     $ 25,398     5.36 %   $ 1,846,196     $ 25,515     5.48 %   $ 1,708,916     $ 25,019     5.81 %
Taxable securities   116,278     698     2.38 %   118,955     748     2.49 %   171,133     900     2.09 %
Tax-exempt securities   59,048     461     3.09 %   56,598     448     3.14 %   43,177     440     4.04 %
Federal funds sold and other earning assets   133,681     587     1.74 %   135,444     743     2.18 %   67,036     506     2.99 %
Total interest-earning assets   2,190,508     27,144     4.92 %   2,157,193     27,454     5.05 %   1,990,262     26,865     5.36 %
Noninterest-earning assets   190,083             191,940             193,952          
Total assets   $ 2,380,591             $ 2,349,133             $ 2,184,214          
                                     
Liabilities and Stockholders' Equity:                                    
Interest-bearing demand deposits   $ 351,901     486     0.55 %   $ 343,827     511     0.59 %   $ 289,207     562     0.77 %
Money market and savings deposits   632,555     1,695     1.06 %   637,290     1,829     1.14 %   624,231     1,696     1.08 %
Time deposits   633,867     3,090     1.93 %   640,679     3,265     2.02 %   616,296     2,422     1.56 %
Total interest-bearing deposits   1,618,323     5,271     1.29 %   1,621,796     5,605     1.37 %   1,529,734     4,680     1.21 %
Securities sold under agreement to repurchase   5,321     5     0.35 %   6,490     5     0.31 %   10,661     9     0.33 %
Federal funds purchased and other borrowings   25,549     65     1.00 %   6,820     10     0.58 %   4,070     51     4.97 %
Subordinated debt   39,248     584     5.90 %   39,226     584     5.91 %   39,178     584     5.91 %
Total interest-bearing liabilities   1,688,441     5,924     1.39 %   1,674,332     6,204     1.47 %   1,583,643     5,324     1.33 %
Noninterest-bearing deposits   363,542             353,315             320,412          
Other liabilities   19,836             18,286             9,275          
Total liabilities   2,071,819             2,045,933             1,913,330          
Stockholders' equity   308,772             303,200             270,884          
Total liabilities and stockholders' equity   $ 2,380,591             $ 2,349,133             $ 2,184,214          
                                     
Net interest income, taxable equivalent       $ 21,220             $ 21,250             $ 21,541      
Interest rate spread           3.52 %           3.58 %           4.03 %
Tax equivalent net interest margin           3.84 %           3.91 %           4.28 %
                                     
Percentage of average interest-earning assets to average interest-bearing liabilities           129.74 %           128.84 %           125.68 %
Percentage of average equity to average assets           12.97 %           12.91 %           12.40 %
                                     

 1 Taxable equivalent

         
SmartFinancial, Inc. and Subsidiary        
Condensed Consolidated Financial Information - (unaudited)        
(In thousands)        
YIELD ANALYSIS        
    Twelve Months Ended
    December 31, 2019   December 31, 2018
    Average       Yield/   Average       Yield/
    Balance   Interest1   Cost1   Balance   Interest1   Cost1
Assets:                        
Loans, including fees   $ 1,840,821     $ 101,002     5.49 %   $ 1,511,724     $ 86,479     5.72 %
Taxable securities   129,705     3,289     2.54 %   143,281     3,512     2.46 %
Tax-exempt securities   56,458     1,972     3.49 %   19,734     767     3.90 %
Federal funds sold and other earning assets   110,380     2,646     2.40 %   65,244     1,642     2.52 %
Total interest-earning assets   2,137,364     108,909     5.10 %   1,739,983     92,400     5.32 %
Noninterest-earning assets   201,976             222,734          
Total assets   $ 2,339,340             $ 1,962,717          
                         
Liabilities and Stockholders' Equity:                        
Interest-bearing demand deposits   $ 333,100     1,883     0.57 %   $ 242,859     1,290     0.53 %
Money market and savings deposits   651,855     7,827     1.20 %   601,808     5,579     0.93 %
Time deposits   635,451     12,205     1.92 %   536,964     7,419     1.39 %
Total interest-bearing deposits   1,620,406     21,915     1.35 %   1,381,631     14,288     1.04 %
Securities sold under agreement to repurchase   6,750     23     0.34 %   15,046     45     0.30 %
Federal funds purchased and other borrowings   14,776     296     2.00 %   17,806     630     3.55 %
Subordinated debt   39,216     2,341     5.97 %   9,882     603     6.12 %
Total interest-bearing liabilities   1,681,148     24,575     1.46 %   1,424,365     15,566     1.10 %
Noninterest-bearing deposits   343,611             285,729          
Other liabilities   15,852             10,172          
Total liabilities   2,040,611             1,720,266          
Stockholders' equity   298,729             242,451          
Total liabilities and stockholders' equity   $ 2,339,340             $ 1,962,717          
                         
Net interest income, taxable equivalent       $ 84,334             $ 76,834      
Interest rate spread           3.63 %           4.22 %
Tax equivalent net interest margin           3.95 %           4.43 %
                         
Percentage of average interest-earning assets to average interest-bearing liabilities           127.14 %           122.16 %
Percentage of average equity to average assets           12.77 %           12.35 %
                         

 1 Taxable equivalent

                 
SmartFinancial, Inc. and Subsidiary                
Condensed Consolidated Financial Information - (unaudited)                    
(In thousands)                
NON-GAAP RECONCILIATIONS            
    Three Months Ended   Twelve Months Ended
    Dec   Sep   Jun   Mar   Dec   Dec   Dec
    2019   2019   2019   2019   2018   2019   2018
Operating Earnings:                            
Net income (GAAP)   $ 6,733     $ 5,963     $ 9,121     $ 4,731     $ 6,444     $ 26,548     $ 18,102  
  Noninterest income:                            
  Securities gains       (1 )   (33 )       (2 )   (34 )   (1 )
  ADECA termination proceeds   (720 )                   (720 )    
  Merger termination fee           (6,400 )           (6,400 )    
  Noninterest expenses:                            
  Salaries - prior year adjustment   603                     603      
  Merger related and restructuring expenses   427     73     1,796     923     1,322     3,219     3,781  
  Other - prior year franchise tax true-up   (312 )                   (312 )    
  Income taxes:                            
  Tax benefit - prior year amended return   (304 )                   (304 )    
  Tax benefit from director options                   (1,600 )       (1,600 )
Income tax effect of adjustments   60     (19 )   1,119     (145 )   (257 )   1,015     (766 )
Net operating earnings (Non-GAAP)   $ 6,487     $ 6,016     $ 5,603     $ 5,509     $ 5,907     $ 23,615     $ 19,516  
Net operating earnings per common share (Non-GAAP):                            
Basic   $ 0.46     $ 0.43     $ 0.4     $ 0.4     $ 0.44     $ 1.69     $ 1.57  
Diluted   0.46     0.43     0.4     0.39     0.43     1.68     1.56  
                             
Operating Noninterest Income:                            
  Noninterest income (GAAP)   $ 2,840     $ 2,196     $ 8,416     $ 1,698     $ 1,680     $ 15,315     $ 6,584  
  Securities (gains) losses       (1 )   (33 )       (2 )   (34 )   (1 )
  ADECA termination proceeds   (720 )                   (726 )    
  Merger termination fee           (6,400 )           (6,400 )    
 Operating noninterest income (Non-GAAP)   $ 2,120     $ 2,195     $ 1,983     $ 1,698     $ 1,678     $ 8,155     $ 6,583  
                             
Operating Noninterest Expense:                            
  Noninterest expense (GAAP)   $ 16,052     $ 14,708     $ 16,809     $ 15,579     $ 15,661     $ 63,151     $ 58,957  
  Salaries - prior year adjustment   (603 )                   (603 )    
  Merger related and restructuring expenses   (427 )   (73 )   (1,796 )   (923 )   (1,322 )   (3,219 )   (3,781 )
  Other - prior year franchise tax true-up   312                     312      
Operating noninterest expense (Non-GAAP)   $ 15,334     $ 14,635     $ 15,013     $ 14,656     $ 14,339     $ 59,641     $ 55,176  
                             
Non-GAAP Return Ratios:                            
Net operating return on average assets (Non-GAAP)1   1.08 %   1.02 %   0.96 %   0.98 %   1.07 %   1.01 %   0.99 %
Return on average tangible common equity (Non-GAAP)2   11.55 %   10.52 %   16.78 %   9.26 %   13.09 %   12.04 %   10.09 %
Net operating return on average shareholder equity (Non-GAAP)3   8.34 %   7.87 %   7.58 %   7.81 %   8.65 %   7.91 %   8.05 %
Net operating return on average tangible common equity (Non-GAAP)4   11.12 %   10.61 %   10.31 %   10.79 %   12.00 %   10.71 %   10.88 %
                             
Operating Efficiency Ratio:                            
Efficiency ratio (GAAP)   67.04 %   63.03 %   57.53 %   68.65 %   67.71 %   63.66 %   70.84 %
Adjustment for taxable equivalent yields   (0.45 )%   (0.37 )%   (0.50 )%   (0.49 )%   (0.45 )%   0.08 %   (0.21 )%
Adjustment for securities gains (losses)   %   %   0.14 %   %   0.01 %   (0.01 )%   %
Adjustment for merger related income and costs   (1.64 )%   (0.24 )%   8.39 %   (3.91 )%   (5.55 )%   0.56 %   (4.47 )%
Operating efficiency ratio (Non-GAAP)   64.95 %   62.42 %   65.56 %   64.25 %   61.72 %   64.29 %   66.15 %
                             
1 Net operating return on average assets (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average assets.        
2 Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).
3 Net operating return on average equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average equity.
4 Net operating return on average tangible common equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).

 

                 
SmartFinancial, Inc. and Subsidiary                
Condensed Consolidated Financial Information - (unaudited)                    
(In thousands)                
NON-GAAP RECONCILIATIONS            
    Three Months Ended   Twelve Months Ended
    Dec   Sep   Jun   Mar   Dec   Dec   Dec
    2019   2019   2019   2019   2018   2019   2018
Tangible Common Equity:                            
Shareholders' equity (GAAP)   $ 312,747     $ 306,040     $ 299,611     $ 290,481     $ 283,011     $ 312,747     $ 283,011  
Less goodwill and other intangible assets   77,193     77,534     78,348     78,690     79,034     77,193     79,034  
Tangible common equity (Non-GAAP)   $ 235,555     $ 228,506     $ 221,263     $ 211,791     $ 203,977     $ 235,555     $ 203,977  
                             
Average Tangible Common Equity:                            
Average shareholders' equity (GAAP)   $ 308,772     $ 303,200     $ 296,570     $ 286,076     $ 270,884     $ 298,729     $ 242,451  
Less average goodwill and other intangible assets   77,400     78,222     78,564     78,913     75,547     78,270     63,075  
Average tangible common equity (Non-GAAP)   $ 231,372     $ 224,978     $ 218,006     $ 207,163     $ 195,337     $ 220,459     $ 179,376  
                                                         

 

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