SMBK 8-K
Smartfinancial Inc. (SMBK)
8-K
2020-04-28
For: 2020-04-28
View Original
Added on
April 04, 2026
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 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 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 7.01 | Regulation FD Disclosure. | ||||
SmartFinancial is filing an investor slide presentation that it intends to review in conjunction with its earnings release conference call on April 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 9.01 | Financial 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 | ||||||||
Exhibit 99.1
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
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.
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 [email protected] (865) 437-5724 [email protected]
Media Contact
Kelley Fowler
Senior Vice President, Public Relations & Marketing
(865) 868-0611 [email protected]
Non-GAAP Financial 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.
| 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 | ||||||||||||||||||||||||||||||||
| Mar | Dec | Sep | Jun | Mar | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||||||||||||
| Selected Performance Ratios (Annualized): | ||||||||||||||||||||||||||||||||
| Return on average assets | 0.43 | % | 1.12 | % | 1.01 | % | 1.56 | % | 0.84 | % | ||||||||||||||||||||||
| Return on average shareholders' equity | 3.33 | % | 8.65 | % | 7.80 | % | 12.34 | % | 6.71 | % | ||||||||||||||||||||||
| Return on average tangible common equity (Non-GAAP)¹ | 4.41 | % | 11.55 | % | 10.52 | % | 16.78 | % | 9.26 | % | ||||||||||||||||||||||
| Noninterest income / average assets | 0.44 | % | 0.47 | % | 0.37 | % | 1.44 | % | 0.30 | % | ||||||||||||||||||||||
| Noninterest expense / average assets | 2.96 | % | 2.68 | % | 2.48 | % | 2.88 | % | 2.77 | % | ||||||||||||||||||||||
| Efficiency ratio | 74.02 | % | 67.04 | % | 63.03 | % | 57.53 | % | 68.65 | % | ||||||||||||||||||||||
| Operating Selected Performance Ratios (Annualized): | ||||||||||||||||||||||||||||||||
| Net operating return on average assets (Non-GAAP)¹ | 0.67 | % | 1.08 | % | 1.02 | % | 0.96 | % | 0.98 | % | ||||||||||||||||||||||
| Net operating return on average shareholders' equity (Non-GAAP)¹ | 5.22 | % | 8.34 | % | 7.87 | % | 7.58 | % | 7.81 | % | ||||||||||||||||||||||
| Net operating return on average tangible common equity (Non-GAAP)¹ | 6.90 | % | 11.12 | % | 10.61 | % | 10.31 | % | 10.79 | % | ||||||||||||||||||||||
| Operating efficiency ratio (Non-GAAP)¹ | 65.46 | % | 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 loans | 5.35 | % | 5.36 | % | 5.48 | % | 5.53 | % | 5.62 | % | ||||||||||||||||||||||
| Yield on earning assets, FTE | 4.83 | % | 4.92 | % | 5.05 | % | 5.17 | % | 5.25 | % | ||||||||||||||||||||||
| Cost of interest-bearing deposits | 1.10 | % | 1.29 | % | 1.37 | % | 1.42 | % | 1.32 | % | ||||||||||||||||||||||
| Cost of total deposits | 0.91 | % | 1.06 | % | 1.13 | % | 1.18 | % | 1.10 | % | ||||||||||||||||||||||
| Cost of interest-bearing liabilities | 1.20 | % | 1.39 | % | 1.47 | % | 1.54 | % | 1.45 | % | ||||||||||||||||||||||
| Net interest margin, FTE | 3.90 | % | 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, diluted | 0.19 | 0.48 | 0.42 | 0.65 | 0.34 | |||||||||||||||||||||||||||
| Net operating earnings, basic (Non-GAAP)¹ | 0.30 | 0.46 | 0.43 | 0.40 | 0.40 | |||||||||||||||||||||||||||
| Net operating earnings, diluted (Non-GAAP)¹ | 0.30 | 0.46 | 0.43 | 0.40 | 0.39 | |||||||||||||||||||||||||||
| Book value | 22.09 | 22.33 | 21.93 | 21.47 | 20.82 | |||||||||||||||||||||||||||
| Tangible book value (Non-GAAP)¹ | 16.40 | 16.82 | 16.37 | 15.86 | 15.18 | |||||||||||||||||||||||||||
| Common shares outstanding | 15,221,990 | 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 | ||||||||||||||||||||||||||||||||
| Mar | Dec | Sep | Jun | Mar | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||||||||||||
| Composition of Loans: | ||||||||||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||||||
| owner occupied | $ | 473,398 | $ | 429,269 | $ | 422,363 | $ | 415,502 | $ | 416,152 | ||||||||||||||||||||||
| non-owner occupied | 535,637 | 476,038 | 468,099 | 464,160 | 472,790 | |||||||||||||||||||||||||||
| Commercial real estate, total | 1,009,035 | 905,307 | 890,462 | 879,662 | 888,942 | |||||||||||||||||||||||||||
| Commercial & industrial | 377,173 | 337,075 | 341,207 | 334,258 | 341,471 | |||||||||||||||||||||||||||
| Construction & land development | 253,445 | 227,626 | 219,751 | 204,731 | 187,009 | |||||||||||||||||||||||||||
| Consumer real estate | 482,728 | 417,481 | 402,463 | 402,270 | 408,878 | |||||||||||||||||||||||||||
| Consumer and other | 16,866 | 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 owned | 5,894 | 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 | $ | 9 | $ | 61 | $ | 61 | $ | 62 | $ | 62 | ||||||||||||||||||||||
| Net charge-offs (recoveries) to average loans (annualized) | — | % | 0.01 | % | 0.01 | % | — | % | 0.08 | % | ||||||||||||||||||||||
| Allowance for loan losses to loans | 0.63 | % | 0.54 | % | 0.53 | % | 0.50 | % | 0.47 | % | ||||||||||||||||||||||
| Nonperforming loans to total loans, gross | 0.14 | % | 0.18 | % | 0.17 | % | 0.15 | % | 0.12 | % | ||||||||||||||||||||||
| Nonperforming assets to total assets | 0.31 | % | 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 loans | 1,841 | 1,375 | 1,246 | 1,374 | 1,881 | |||||||||||||||||||||||||||
| Capital Ratios: | ||||||||||||||||||||||||||||||||
| Equity to Assets | 11.70 | % | 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 leverage | 10.27 | % | 10.34 | % | 10.02 | % | 9.92 | % | 9.29 | % | ||||||||||||||||||||||
| Common equity Tier 1 | 10.85 | % | 11.61 | % | 11.54 | % | 11.21 | % | 10.61 | % | ||||||||||||||||||||||
| Tier 1 capital | 10.85 | % | 11.61 | % | 11.54 | % | 11.21 | % | 10.61 | % | ||||||||||||||||||||||
| Total capital | 13.10 | % | 14.02 | % | 13.98 | % | 13.65 | % | 13.01 | % | ||||||||||||||||||||||
| SmartBank | Estimated3 | |||||||||||||||||||||||||||||||
| Tier 1 leverage | 11.41 | % | 11.41 | % | 11.22 | % | 10.92 | % | 10.96 | % | ||||||||||||||||||||||
| Common equity Tier 1 | 12.02 | % | 12.81 | % | 12.71 | % | 12.37 | % | 12.18 | % | ||||||||||||||||||||||
| Tier 1 risk-based capital | 12.02 | % | 12.81 | % | 12.71 | % | 12.37 | % | 12.18 | % | ||||||||||||||||||||||
| Total risk-based capital | 12.60 | % | 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 | ||||||||||||||||||||||||||||||||
| Mar | Dec | Sep | Jun | Mar | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 309,089 | $ | 183,971 | $ | 170,934 | $ | 199,534 | $ | 132,994 | ||||||||||||||||||||||
| Securities available-for-sale, at fair value | 201,002 | 178,348 | 171,507 | 174,114 | 198,273 | |||||||||||||||||||||||||||
| Other investments | 14,113 | 12,913 | 12,913 | 12,905 | 12,398 | |||||||||||||||||||||||||||
| Loans held for sale | 6,045 | 5,856 | 3,068 | 4,087 | 2,103 | |||||||||||||||||||||||||||
| Loans | 2,139,247 | 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, net | 2,125,816 | 1,887,149 | 1,854,887 | 1,823,805 | 1,829,762 | |||||||||||||||||||||||||||
| Premises and equipment, net | 73,801 | 59,433 | 58,386 | 56,589 | 56,583 | |||||||||||||||||||||||||||
| Other real estate owned | 5,894 | 1,757 | 1,561 | 1,814 | 2,066 | |||||||||||||||||||||||||||
| Goodwill and core deposit intangibles, net | 86,503 | 77,193 | 77,534 | 78,348 | 78,690 | |||||||||||||||||||||||||||
| Bank owned life insurance | 30,671 | 24,949 | 24,796 | 24,695 | 24,540 | |||||||||||||||||||||||||||
| Other assets | 20,781 | 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 deposits | 735,616 | 679,541 | 646,641 | 673,243 | 635,175 | |||||||||||||||||||||||||||
| Total deposits | 2,341,930 | 2,047,214 | 1,998,073 | 2,012,300 | 1,994,330 | |||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 6,164 | 6,184 | 4,368 | 8,219 | 7,070 | |||||||||||||||||||||||||||
| FHLB & other borrowings | 125,439 | 25,439 | 25,460 | 15,460 | 8,605 | |||||||||||||||||||||||||||
| Subordinated debt | 39,283 | 39,261 | 39,240 | 39,219 | 39,198 | |||||||||||||||||||||||||||
| Other liabilities | 24,699 | 18,278 | 17,304 | 16,448 | 14,297 | |||||||||||||||||||||||||||
| Total liabilities | 2,537,515 | 2,136,376 | 2,084,445 | 2,091,646 | 2,063,500 | |||||||||||||||||||||||||||
| Shareholders' Equity: | ||||||||||||||||||||||||||||||||
| Common stock | 15,222 | 14,008 | 13,958 | 13,953 | 13,952 | |||||||||||||||||||||||||||
| Additional paid-in capital | 254,356 | 232,732 | 232,573 | 232,386 | 232,241 | |||||||||||||||||||||||||||
| Retained earnings | 67,869 | 65,839 | 59,806 | 53,843 | 44,722 | |||||||||||||||||||||||||||
| Accumulated other comprehensive income (loss) | (1,247) | 168 | (297) | (571) | (434) | |||||||||||||||||||||||||||
| Total shareholders' equity | 336,200 | 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 | ||||||||||||||||||||||||||||||||
| Mar | Dec | Sep | Jun | Mar | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||||||||||
| Loans, including fees | $ | 26,434 | $ | 25,398 | $ | 25,515 | $ | 25,278 | $ | 24,975 | ||||||||||||||||||||||
| Securities available-for-sale: | ||||||||||||||||||||||||||||||||
| Taxable | 679 | 698 | 748 | 871 | 971 | |||||||||||||||||||||||||||
| Tax-exempt | 283 | 345 | 338 | 411 | 424 | |||||||||||||||||||||||||||
| Federal funds sold and other earning assets | 602 | 587 | 743 | 743 | 573 | |||||||||||||||||||||||||||
| Total interest income | 27,998 | 27,028 | 27,344 | 27,303 | 26,943 | |||||||||||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||||||||||
| Deposits | 4,754 | 5,271 | 5,605 | 5,788 | 5,251 | |||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 5 | 5 | 5 | 6 | 8 | |||||||||||||||||||||||||||
| FHLB advances and other borrowings | 84 | 65 | 10 | 117 | 103 | |||||||||||||||||||||||||||
| Subordinated debt | 584 | 584 | 584 | 590 | 584 | |||||||||||||||||||||||||||
| Total interest expense | 5,427 | 5,924 | 6,204 | 6,501 | 5,946 | |||||||||||||||||||||||||||
| Net interest income | 22,571 | 21,104 | 21,140 | 20,802 | 20,997 | |||||||||||||||||||||||||||
| Provision for loan losses | 3,200 | 685 | 724 | 393 | 797 | |||||||||||||||||||||||||||
| Net interest income after provision for loan losses | 19,371 | 20,419 | 20,416 | 20,409 | 20,200 | |||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 770 | 773 | 767 | 707 | 654 | |||||||||||||||||||||||||||
| Gain on sale of securities, net | — | — | 1 | 33 | — | |||||||||||||||||||||||||||
| Mortgage banking | 584 | 374 | 518 | 392 | 282 | |||||||||||||||||||||||||||
| Investment services | 437 | 261 | 260 | 255 | 169 | |||||||||||||||||||||||||||
| Insurance commissions | 269 | — | — | — | — | |||||||||||||||||||||||||||
| 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 income | 2,818 | 2,840 | 2,196 | 8,416 | 1,698 | |||||||||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 10,006 | 10,278 | 9,072 | 8,984 | 8,398 | |||||||||||||||||||||||||||
| Occupancy and equipment | 1,911 | 1,749 | 1,635 | 1,658 | 1,640 | |||||||||||||||||||||||||||
| FDIC insurance (credit) | 180 | — | (219) | 180 | 179 | |||||||||||||||||||||||||||
| Other real estate and loan related expense | 545 | 253 | 335 | 242 | 490 | |||||||||||||||||||||||||||
| Advertising and marketing | 198 | 166 | 263 | 259 | 295 | |||||||||||||||||||||||||||
| Data processing | 538 | 530 | 273 | 577 | 615 | |||||||||||||||||||||||||||
| Professional services | 711 | 652 | 573 | 489 | 662 | |||||||||||||||||||||||||||
| Amortization of intangibles | 362 | 340 | 341 | 342 | 344 | |||||||||||||||||||||||||||
| Software as service contracts | 470 | 500 | 560 | 568 | 567 | |||||||||||||||||||||||||||
| Merger related and restructuring expenses | 2,096 | 427 | 73 | 1,796 | 923 | |||||||||||||||||||||||||||
| Other | 1,776 | 1,157 | 1,802 | 1,714 | 1,466 | |||||||||||||||||||||||||||
| Total noninterest expense | 18,793 | 16,052 | 14,708 | 16,809 | 15,579 | |||||||||||||||||||||||||||
| Income before income taxes | 3,396 | 7,206 | 7,904 | 12,016 | 6,319 | |||||||||||||||||||||||||||
| Income tax expense | 664 | 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: | ||||||||||||||||||||||||||||||||
| Basic | 14,395,103 | 13,965,877 | 13,955,859 | 13,951,643 | 13,942,016 | |||||||||||||||||||||||||||
| Diluted | 14,479,679 | 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, 2020 | December 31, 2019 | March 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 securities | 116,837 | 679 | 2.34 | % | 116,278 | 698 | 2.38 | % | 147,188 | 971 | 2.68 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Tax-exempt securities | 70,397 | 400 | 2.28 | % | 59,048 | 461 | 3.09 | % | 53,650 | 539 | 4.07 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Federal funds sold and other earning assets | 165,512 | 602 | 1.46 | % | 133,681 | 587 | 1.74 | % | 86,688 | 573 | 2.68 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 2,340,037 | 28,115 | 4.83 | % | 2,190,508 | 27,144 | 4.92 | % | 2,089,540 | 27,058 | 5.25 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 216,498 | 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 deposits | 664,983 | 1,389 | 0.84 | % | 632,555 | 1,695 | 1.06 | % | 665,018 | 2,029 | 1.24 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Time deposits | 680,830 | 2,931 | 1.73 | % | 633,867 | 3,090 | 1.93 | % | 637,767 | 2,800 | 1.78 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,735,313 | 4,754 | 1.10 | % | 1,618,323 | 5,271 | 1.29 | % | 1,608,949 | 5,251 | 1.32 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Securities sold under agreement to repurchase | 5,601 | 5 | 0.36 | % | 5,321 | 5 | 0.35 | % | 7,971 | 8 | 0.41 | % | ||||||||||||||||||||||||||||||||||||||||||||
| FHLB and other borrowings | 46,320 | 84 | 0.73 | % | 25,549 | 65 | 1.00 | % | 10,217 | 103 | 4.09 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Subordinated debt | 39,269 | 584 | 5.98 | % | 39,248 | 584 | 5.90 | % | 39,184 | 584 | 6.04 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,826,503 | 5,427 | 1.20 | % | 1,688,441 | 5,924 | 1.39 | % | 1,666,321 | 5,946 | 1.45 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 373,125 | 363,542 | 320,134 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 27,215 | 19,836 | 10,707 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities | 2,226,843 | 2,071,819 | 1,997,162 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders' equity | 329,692 | 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 | ||||||||||||||||||||||||||||||||
| Mar | Dec | Sep | Jun | Mar | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||||||||||||
| Operating Earnings: | ||||||||||||||||||||||||||||||||
| Net income (GAAP) | $ | 2,732 | $ | 6,733 | $ | 5,963 | $ | 9,121 | $ | 4,731 | ||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||
| Securities gains | — | — | (1) | (33) | — | |||||||||||||||||||||||||||
| ADECA termination proceeds | — | (720) | — | — | — | |||||||||||||||||||||||||||
| Merger termination fee | — | — | — | (6,400) | — | |||||||||||||||||||||||||||
| Noninterest expenses: | ||||||||||||||||||||||||||||||||
| Salaries - prior year adjustment | — | 603 | — | — | — | |||||||||||||||||||||||||||
| Merger related and restructuring expenses | 2,096 | 427 | 73 | 1,796 | 923 | |||||||||||||||||||||||||||
| Other - prior year franchise tax true-up | — | (312) | — | — | — | |||||||||||||||||||||||||||
| Income taxes: | ||||||||||||||||||||||||||||||||
| Tax benefit - prior year amended return | — | (304) | — | — | — | |||||||||||||||||||||||||||
| Income tax effect of adjustments | (548) | 60 | (19) | 1,119 | (145) | |||||||||||||||||||||||||||
| Net operating earnings (Non-GAAP) | $ | 4,280 | $ | 6,487 | $ | 6,016 | $ | 5,603 | $ | 5,509 | ||||||||||||||||||||||
| Net operating earnings per common share (Non-GAAP): | ||||||||||||||||||||||||||||||||
| Basic | $ | 0.30 | $ | 0.46 | $ | 0.43 | $ | 0.40 | $ | 0.40 | ||||||||||||||||||||||
| Diluted | 0.30 | 0.46 | 0.43 | 0.40 | 0.39 | |||||||||||||||||||||||||||
| Operating Noninterest Income: | ||||||||||||||||||||||||||||||||
| Noninterest income (GAAP) | $ | 2,818 | $ | 2,840 | $ | 2,196 | $ | 8,416 | $ | 1,698 | ||||||||||||||||||||||
| Securities (gains) losses | — | — | (1) | (33) | — | |||||||||||||||||||||||||||
| ADECA termination proceeds | — | (720) | — | — | — | |||||||||||||||||||||||||||
| Merger termination fee | — | — | — | (6,400) | — | |||||||||||||||||||||||||||
| Operating noninterest income (Non-GAAP) | $ | 2,818 | $ | 2,120 | $ | 2,195 | $ | 1,983 | $ | 1,698 | ||||||||||||||||||||||
Operating noninterest income (Non-GAAP)/average assets1 | 0.44 | % | 0.35 | % | 0.37 | % | 0.34 | % | 0.33 | % | ||||||||||||||||||||||
| Operating Noninterest Expense: | ||||||||||||||||||||||||||||||||
| Noninterest expense (GAAP) | $ | 18,793 | $ | 16,052 | $ | 14,708 | $ | 16,809 | $ | 15,579 | ||||||||||||||||||||||
| Salaries - prior year adjustment | — | (603) | — | — | — | |||||||||||||||||||||||||||
| Merger related and restructuring expenses | (2,096) | (427) | (73) | (1,796) | (923) | |||||||||||||||||||||||||||
| Other - prior year franchise tax true-up | — | 312 | — | — | — | |||||||||||||||||||||||||||
| Operating noninterest expense (Non-GAAP) | $ | 16,697 | $ | 15,334 | $ | 14,635 | $ | 15,013 | $ | 14,656 | ||||||||||||||||||||||
Operating noninterest expense (Non-GAAP)/average assets2 | 2.63 | % | 2.56 | % | 2.47 | % | 2.57 | % | 2.60 | % | ||||||||||||||||||||||
| Non-GAAP Return Ratios: | ||||||||||||||||||||||||||||||||
Net operating return on average assets (Non-GAAP)3 | 0.67 | % | 1.08 | % | 1.02 | % | 0.96 | % | 0.98 | % | ||||||||||||||||||||||
Return on average tangible common equity (Non-GAAP)4 | 4.41 | % | 11.55 | % | 10.52 | % | 16.78 | % | 9.26 | % | ||||||||||||||||||||||
Net operating return on average shareholder equity (Non-GAAP)5 | 5.22 | % | 8.34 | % | 7.87 | % | 7.58 | % | 7.81 | % | ||||||||||||||||||||||
Net operating return on average tangible common equity (Non-GAAP)6 | 6.90 | % | 11.12 | % | 10.61 | % | 10.31 | % | 10.79 | % | ||||||||||||||||||||||
| Operating Efficiency Ratio: | ||||||||||||||||||||||||||||||||
| Efficiency ratio (GAAP) | 74.02 | % | 67.04 | % | 63.03 | % | 57.53 | % | 68.65 | % | ||||||||||||||||||||||
| Adjustment for taxable equivalent yields | (0.45) | % | (0.45) | % | (0.37) | % | (0.50) | % | (0.49) | % | ||||||||||||||||||||||
| Adjustment for securities gains (losses) | — | % | — | % | — | % | 0.14 | % | — | % | ||||||||||||||||||||||
| Adjustment for merger related income and costs | (8.10) | % | (1.64) | % | (0.24) | % | 8.39 | % | (3.91) | % | ||||||||||||||||||||||
| Operating efficiency ratio (Non-GAAP) | 65.46 | % | 64.95 | % | 62.42 | % | 65.56 | % | 64.25 | % | ||||||||||||||||||||||
1Operating noninterest income (Non-GAAP) is annualized and divided by average assets. 2Operating noninterest expense (Non-GAAP) is annualized and divided by average assets. 3Net operating return on average assets (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average assets. 4Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP). 5Net operating return on average equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average equity. 6Net 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) | ||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||
| NON-GAAP RECONCILIATIONS | ||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||||||
| Mar | Dec | Sep | Jun | Mar | ||||||||||||||||||||||||||||
| 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||||||||||||
| Tangible Common Equity: | ||||||||||||||||||||||||||||||||
| Shareholders' equity (GAAP) | $ | 336,200 | $ | 312,747 | $ | 306,040 | $ | 299,611 | $ | 290,481 | ||||||||||||||||||||||
| Less goodwill and other intangible assets | 86,503 | 77,193 | 77,534 | 78,348 | 78,690 | |||||||||||||||||||||||||||
| Tangible common equity (Non-GAAP) | $ | 249,697 | $ | 235,554 | $ | 228,506 | $ | 221,263 | $ | 211,791 | ||||||||||||||||||||||
| Average Tangible Common Equity: | ||||||||||||||||||||||||||||||||
| Average shareholders' equity (GAAP) | $ | 329,692 | $ | 308,772 | $ | 303,200 | $ | 296,570 | $ | 286,076 | ||||||||||||||||||||||
| Less average goodwill and other intangible assets | 80,370 | 77,400 | 78,222 | 78,564 | 78,913 | |||||||||||||||||||||||||||
| Average tangible common equity (Non-GAAP) | $ | 249,322 | $ | 231,372 | $ | 224,978 | $ | 218,006 | $ | 207,163 | ||||||||||||||||||||||
First Quarter 2020 Earnings Release April 29, 2020
Legal Disclaimer Forward-Looking Statements This presentation may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward- looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding the potential effects of the COVID-19 pandemic on the Company’s business and financial results and conditions, are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) the risk of litigation and reputational risk associated with historic acquisition activity; (2) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (3) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (4) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (5) risks related to the completed acquisition of Progressive Financial Group, Inc. (“PFG”); (6) the risk that the anticipated benefits from the completed acquisition of PFG may not be realized in the time frame anticipated; (7) changes in management’s plans for the future; (8) prevailing, or changes in, economic or political conditions, particularly in our market areas; (9) credit risk associated with our lending activities; (10) changes in interest rates, loan demand, real estate values, or competition; (11) changes in accounting principles, policies, or guidelines; (12) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19; (13) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic; (14) the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (15) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (16) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise. Non-GAAP Financial Measures Statements included in this presentation include Non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures, including: (i) 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; (x) operating pre-tax pre-provision earnings; (xi) operating noninterest income; (xii) operating noninterest expense; (xiii) net interest income – excluding purchase accounting adjustments; 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 assets 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 from shareholders’ equity (GAAP) and average shareholders’ equity (GAAP). Tangible book value excludes intangible assets and goodwill less shareholders’ equity (GAAP) divided by common shares outstanding. Operating pre-tax pre- provision earnings is net interest income (GAAP) plus operating noninterest income (Non-GAAP) less operating noninterest expense (Non-GAAP). Operating noninterest income excludes the following from noninterest income: securities gains and losses, expenses related to the termination of the ADECA loan program and the merger termination fee of $6.4 million in the second quarter of 2019. Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to salaries, merger related and restructuring expenses and certain franchise tax true-up expenses. Net interest income – excluding purchase accounting adjustments includes taxable equivalent adjustments and excludes purchase accounting adjustments from net interest income. 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. 2
Overview of SmartFinancial . SmartFinancial, Inc. (Nasdaq: SMBK) is a $2.9 billion asset bank holding company headquartered Branch Footprint in Knoxville, Tennessee . Operates one subsidiary bank, SmartBank, which was founded Nashville in January 2007 Knoxville . Located primarily in attractive, high-growth markets Greensboro throughout East/Mid Tennessee, Alabama and theJonesboro Florida 40 Panhandle ARKANSAS . 483 full-time employees TENNESSEE NORTH CAROLINA Memphis Chattanooga . Balance Sheet (3/31/20) LITTLE ROCK 77 . Assets: $2.9 billion Huntsville . Gross Loans: $2.1 billion 85 SOUTH . Deposits: $2.3 billion CAROLINA . Shareholders’ Equity / Tangible Common Equity (Non-GAAP): Atlanta $336.2 million / $249.7 million Birmingham 20 Tuscaloosa . Profitability (Q1 ’20) GEORGIA . Net Income / Net Operating Earnings (Non-GAAP)MISSISSIPPI: $2.7 million ALABAMA / $4.3 million Jackson Columbus 16 . Operating Pre-Tax Pre-Provision Earnings (Non-GAAP): Montgomery $8.7 million Savannah . ROAA / Net Operating ROAA (Non-GAAP): 0.43% / 0.67% 75 . ROATCE / Net Operating ROATCE (Non-GAAP): 4.41% / 6.90% 65 95 . Efficiency Ratio / Operating Efficiency Ratio (Non-GAAP): 74.0% / 65.5% Mobile Baton Rouge 10 . Asset Quality SMBK Branch . Superior asset quality and proven credit culture Tallahassee . NPAs / Total Assets of 0.31% New Orleans FLORIDA . Reserves / Loans: 0.63% . Regularly Quarterly Dividend . Declared quarterly cash dividend of $0.05 per share Financial data as of or for the three months ended 3/31/20 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 3
Culture We are building a culture where Associates thrive and are empowered to be leaders. The core values that we have established as a company help us operate in unison and have become a critical part of our culture. Our Associates are key to SmartBank’s success. Core Values Act with Integrity Delivering Be Enthusiastic Exhibiting Creating Exceptional, Over-The-Top Create Positivity “WOW” Professional & Enthusiasm emonstrate Accountability Experiences Knowledgeable D and Positivity Embrace Change Service Positioning Statement At SmartBank, delivering unparalleled value to our Shareholders, Associates, Clients and the Communities we serve 9 drives every decision and action we take. Exceptional value means being there with smart solutions, fast responses and deep commitment every single time. By doing this, we will create the Southeast’s next, great community banking franchise. 4
Approach and Actions Taken in Response to COVID-19 COVID-19 Actions • Established Senior Executive meetings to discuss potential scenarios • Increased associate communications regarding precautions and preparedness activities • Enacted cancellation of non-essential business travel for all associates • Increased updates to Board on a regular basis • Created Pandemic Response Team, comprised of Senior Executives and Functional Leaders from across the Company • Executed Business Continuity Plan to protect welfare of our associates and to mitigate disruption • Operational activities: o Business continuity, IT testing, remote work capabilities implemented o Enhanced liquidity monitoring and analysis o Increased operational liquidity to support client needs 5
Supporting Associates, Clients and Communities Associates Clients Communities • Implemented work-at-home • Branch offices remained open • Formed a Community strategy for those associates • Provided relief to commercial and Engagement Roundtable made up whose jobs can be performed consumer clients with deferring of individuals representing all remotely principal and/or interest footprints across the company, • Established social distancing payments led by the Director of Community practices for associates who Development & CRA Officer, to • Continue to provide liquidity to assist with identifying needs of remained on site, as well as split- our clients team rotations each community affected by • Helping clients apply for the COVID-19 • Granted 80 hours of Emergency Paycheck Protection Program • Paid Leave available to associates Spent an extensive amount of (“PPP”) that provided potentially time educating the underserved with child and/or elder care forgivable emergency relief loans issues, as well as medical related and minority small business issues • Provide credit card clients the community on the SBA loan option to skip a payment program, in particular PPP • Adjusted branch operations to • “drive-thru only” and lobby visits • Potentially waive CD penalties Assisted several non-client by appointment and service charges, such as community service organizations NSF’s, cashier checks, etc. with SBA PPP loans • Provided routine information to • our associates with up-to-date • Waiving late fees on loans Served as Committee member for Chattanooga on their Small information on COVID-19 and • Suspended foreclosures and safe work space, as well as Business Grant and Loan repossessions program, which was created to weekly recap messages from the President & CEO assist victims impacted by COVID- 19 6
First Quarter Financial Highlights
Continuing Increase in Operating Pre-Tax Pre-Provision Earnings $10,000 GAAP) - $7,500 $5,000 Provision Provision (Non Earnings ($000) - $2,500 Tax Pre Tax - $0 Operating Operating Pre 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Operating PTPP Earnings, Less Accretion Accretion ($ in thousands) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Operating Pre-Tax Pre-Provision Earnings (Non-GAAP) $5,542 $6,967 $6,770 $8,786 $8,039 $7,772 $8,700 $7,890 $8,692 Less: Accretion $1,274 $2,583 $1,208 $2,755 $1,881 $1,374 $1,246 $1,375 $1,841 Operating Pre-Tax Pre-Provision Earnings, Less Accretion $4,268 $4,384 $5,562 $6,031 $6,158 $6,398 $7,454 $6,515 $6,851 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 8
Performance Trends ROAA (%) ROATCE (%) . Net Operating Earnings (Non-GAAP) of $4.3 million for the quarter 1.56 % 16.8 % 1.12 % 1.02 % 1.08 % 11.6 % . ROAA of 0.43% for the quarter and 0.98 % 1.01 % 10.6 % 11.1 % 0.96 % 10.8 % 10.3 % 10.5 % Net Operating ROAA (Non-GAAP) of 0.84 % 9.3 % 0.67 % 0.67% 6.9 % 0.43 % 4.4 % . ROATCE (Non-GAAP) of 4.4% for the quarter and Operating ROATCE (Non-GAAP) of 6.9% (1) . Efficiency Ratio of 74.0% for the Reported Operating quarter and Operating Efficiency Ratio (Non-GAAP) of 65.5% Net Interest Margin (%) Efficiency Ratio (%) 4.10 % . Net Interest Margin (fully taxable 74.0 % 3.94 % 3.91 % 3.84 % 3.90 % equivalent “FTE”) of 3.90%, up 6 3.76 % 68.7 % 3.68 % 3.68 % 3.59 % 3.58 % 67.0 % basis points from the prior quarter 64.3 % 65.6 % 65.0 % 65.5 % 63.0 % 62.4 % . Nonperforming Assets were 0.31% 57.5 % of Total Assets Reported Operating (1) (1) Operating profitability (Non-GAAP) figures exclude gain on sale of securities, merger termination fees, merger-related and restructuring expenses and non-operating items; net interest margin excludes purchase accounting adjustments Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 9
Balance Sheet Trends Total Assets ($mm) Loans ($mm) $3,000 $2,874 $2,200 $2,139 $2,600 $2,000 $2,354 $2,391 $2,390 $2,449 $1,897 $1,838 $1,833 $1,865 $2,200 $1,800 $1,800 $1,600 $1,400 $1,400 $1,000 $1,200 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 Total Deposits ($mm) Book Value Per Share $2,342 $22.33 $22.09 $22.50 $21.93 $2,400 $21.47 $20.82 $2,200 $20.00 $2,047 $1,994 $2,012 $1,998 $16.40 $2,000 $17.50 $16.82 $15.86 $16.37 $15.18 $1,800 $15.00 $1,600 $12.50 $1,400 $10.00 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 Book Value Tangible Book Value (Non-GAAP) Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 10
Net Interest Income . Net Interest Margin (FTE) increased 6 bps quarter-to-quarter to 3.90% . Compared quarter-to-quarter, Earning Asset Yields have decreased 9 basis points; the Average Cost of Interest-Bearing Liabilities have decreased 19 basis points . Excluding the effect of purchase accounting adjustments, the Net Interest Margin (FTE) decreased 1 basis point quarter-to-quarter ($ in thousands) 1Q20 4Q19 1Q19 Average Yields and Rates 1Q20 4Q19 1Q19 Net Interest Income (FTE) $22,688 $21,220 $21,112 Loans, less accretion 4.98% 5.07% 5.20% Average Earning Assets $2,340,037 $2,190,508 $2,089,540 Accretion 0.37% 0.29% 0.42% Loans 5.35% 5.36% 5.62% Taxable securities 2.34% 2.38% 2.68% Tax-exempt securities (FTE) 2.28% 3.09% 4.07% Net Interest Margin Federal funds and other investments 1.46% 1.74% 2.68% 4.50% Earning Asset Yields 4.83% 4.92% 5.25% 4.25% 4.00% Total Interest-Bearing Deposits 1.10% 1.29% 1.32% 3.75% Securities sold under agreement to repurchase 0.36% 0.35% 0.41% 3.50% Federal funds purchased and other borrowings 0.73% 1.00% 4.09% Subordinated debt 5.98% 5.90% 6.04% 3.25% Total Interest-Bearing Liabilities 1.20% 1.39% 1.45% 3.00% 1Q19 2Q19 3Q19 4Q19 1Q20 Net Interest Margin (FTE) 3.90% 3.84% 4.10% Net Interest Margin (FTE) Net Interest Margin (FTE - ex Purchase Acct. Adj.) 3.58% 3.59% 3.76% Net Interest Margin (FTE - ex Purchase Accounting Adj.) (Non-GAAP) Cost of Funds 0.99% 1.15% 1.21% Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 11
Operating (Non-GAAP) Noninterest Income . Added insurance commission income stream from acquisition of Progressive Financial Group, Inc. . Investment services income increased from additional production . Mortgage banking income increased over 56% from the prior quarter . Consistent increases in service charges on deposit accounts ($ in thousands) Operating (Non-GAAP) Noninterest Income $3,000 $2,400 Other Noninterest Income $1,800 Insurance Commissions Investment Services Income $1,200 Mortgage Banking Income Service Charges on Deposit Accounts $600 $0 1Q19 2Q19 3Q19 4Q19 1Q20 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 12
Operating (Non-GAAP) Noninterest Expense . Operating Efficiency Ratio (Non-GAAP) remained stable quarter-to-quarter at 65% . Salary and benefits remained stable . Continued investment in infrastructure ($ in thousands) Operating (Non-GAAP) Noninterest Expense $20,000 $15,000 Other Amortization of Intangibles $10,000 Data Processing Occupancy $5,000 Salaries & Benefits $0 1Q19 2Q19 3Q19 4Q19 1Q20 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 13
Attractive Deposit Mix Deposit Composition (3/31/20) Historical Deposit Composition ($mm) $2,500 $2,342 Noninterest $2,047 Time Demand $1,994 $2,012 $1,998 $2,000 Deposits 19% $736 31% $635 $673 $647 $680 Interest- bearing $1,500 Money Demand Market and 19% $730 Savings $623 31% $1,000 $698 $648 $635 $444 Historical Cost of Deposits $380 $500 $332 $334 $351 3.00% $432 2.50% $329 $357 $365 $364 2.00% 2.50% 2.50% $0 1Q19 2Q19 3Q19 4Q19 1Q20 1.50% 2.00% 1.75% Noninterest Demand Interest-bearing Demand 1.00% 1.10% 1.18% 1.13% Money Market and Savings Time Deposits 1.06% 0.91% 0.50% 0.25% 0.00% 1Q19 2Q19 4Q19 1Q20 3Q19 Cost of Deposits Fed Funds Target 14
Overview of Loan Portfolio Loan Composition (3/31/20) Historical Loan Composition ($mm) $2,500 Other <1% Consumer RE $2,139 22% $2,000 CRE, Non $1,865 $1,897 $1,838 $1,833 $483 Owner C&I Occupied 18% $417 25% $409 $402 $402 $1,500 $536 CRE, $476 Owner C&D $473 $464 $468 Occupied 12% 22% $1,000 $473 $416 $416 $422 $429 Historical CRE Ratios $500 $253 $187 $205 $220 $228 400% $341 $334 $341 $337 $377 300% 274% $0 200% 1Q19 2Q19 3Q19 4Q19 1Q20 C&I C&D 100% 87% CRE, Owner Occupied CRE, Non Owner Occupied 0% 1Q19 2Q19 3Q19 4Q19 1Q20 Consumer RE Other CRE C&D 15
Segments Impacted by COVID-19 ($ in thousands) Total Avg. Loan Commitments O / S Balance Size % of Portfolio Industry ($) ($) ($) (%) Restaurants/Bars $ 91,328 $ 86,990 $ 518 4.1 % Hospitality / Lodging 185,053 143,831 2,438 6.7 Attraction / Amusement 40,846 37,886 1,994 1.8 Retail CRE 82,171 78,599 595 3.7 1-4 Vacation Rental 43,842 35,421 403 1.7 Other 2,136,279 1,756,520 174 82.1 Total $ 2,579,519 $ 2,139,247 $ 202 100.0 % Key Portfolio Management Fundamentals Restaurants/Bars Hospitality / 4.1% Lodging 6.7% Attraction / Amusement . Well-Diversified Portfolio 1.8% Retail CRE . Good Equity in Real Estate Loan Transactions 3.7% 1-4 Vacation Rental . Strong Market Knowledge 1.7% . Conservatively Structured Loan Profiles . Granularity in Loan Portfolio 16
COVID-19 Modified Loans ($ in thousands) COVID-19 Modified Loans April 2020 Modified Loans Avg. Loan % of Modified Size Portfolio Industry ($) ($) (%) Restaurants $ 70,781 $ 885 3.0 % Hospitality / Lodging 120,761 4,164 5.1 Attraction / Amusement 4,163 833 0.2 Retail CRE 20,002 1,250 0.8 1-4 Vacation Retail 7,057 470 0.3 Other 286,915 531 12.1 Total Modified Loans $ 509,679 $ 744 21.4 % Portfolio Total $ 2,381,944 Source: Company information Note: As of April 24, 2020 17
Paycheck Protection Program Funded Dollars State ($ in thousands) Tennessee $ 151,905 Alabama 51,795 Florida 19,314 Georgia 8,370 Other 7,962 Total $ 239,346 PPP Loan Stratification Table as of 4/24/20 Funded Application Dollars Average SBA Fee Count ($ in thousands) ($ in thousands) 1% 7 $ 22,020 $ 3,146 3% 142 102,038 719 5% 1,536 115,288 75 Total 1,685 $ 239,346 $ 3,939 18
Asset Quality . Superior asset quality, with Nonperforming Assets at 0.31% of Total Assets compared to the Nonperforming Assets ($ in thousands) Southeast Peer Median (1) of 0.66% $12,000 1.00% 0.66% . Remaining fair value discounts on acquired $8,000 0.70% loans are 1.3x the current Allowance For Loan $4,000 0.31%0.40% Losses $0 0.10% 1Q19 2Q19 3Q19 4Q19* 1Q20 . Allowance for loan losses to loans is 0.63% at Foreclosed Assets 1Q20 Nonperforming Loans . Proven credit culture, with Net Charge-Offs to Nonperforming Assets/ Total Assets (SMBK) Average Loans of 0.00% compared to the Nonperforming Assets/ Total Assets (SE Peer Median)(1) Southeast Peer Median (1) of 0.08% Loan Discounts ($ in thousands) Net Charge-Offs/ Average Loans $30 0.90% 0.15% $20 0.60% 0.10% 0.08% $10 0.30% 0.05% $0 0.00% 1Q19 2Q19 3Q19 4Q19 1Q20 0.00% 0.00% Allowance for Loan Losses (GAAP) (0.05%) Net Acquisition Accounting Fair Falue Discounts to Loans 1Q19 2Q19 3Q19 4Q19* 1Q20 Allowance for Loan Losses/ Loans SMBK SE Peer Median (1) Source: S&P Global Market Intelligence (1) Major-exchange (NYSE, NYSEAM, NASDAQ) traded banks between $1.5B and $3B in assets headquartered in the Southeast (AL, AR, FL, GA, LA, MS, NC, SC, TN and WV) as of 12/31/19 19 * Peer median data held constant from 4Q19 due to unavailable 4Q19 data as of SMBK reporting date
Reserve Reconciliation ($ in thousands) 1Q19 2Q19 3Q19 4Q19 1Q20 Allowance for Loan Losses (GAAP) - Originated $ 8,704 $ 8,979 $ 9,674 $ 9,969 $ 12,412 Allowance for Loan Losses (GAAP) - Acquired -- 118 118 274 1,019 Loan Discounts 19,954 15,871 16,784 15,348 17,237 Total Reserves $ 28,658 $ 24,968 $ 26,576 $ 25,591 $ 30,668 Originated Loans $ 1,290,392 $ 1,349,686 $ 1,433,524 $ 1,521,364 $ 1,621,128 Acquired Loans 548,074 483,216 431,155 376,028 518,119 Total Loans $ 1,838,466 $ 1,832,902 $ 1,864,679 $ 1,897,392 $ 2,139,247 Allowance / Total Loans 0.47% 0.50% 0.53% 0.54% 0.63% Allowance / Originated Loans 0.67% 0.67% 0.67% 0.66% 0.77% Allowance / Acquired Loans 0.00% 0.02% 0.03% 0.07% 0.20% Discount / Acquired Loans 3.64% 3.28% 3.89% 4.08% 3.33% Total Reserves / Total Loans 1.56% 1.36% 1.43% 1.35% 1.43% Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 20
Current Capital Position TCE / TA (%) Leverage Ratio (%) 16.0% 16.0% 12.0% 9.9% 12.0% 9.6% 9.9% 10.3% 10.3% 9.3% 9.0% 9.3% 9.9% 10.0% 8.0% 8.0% 4.0% 4.0% 0.0% 0.0% 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 CET1 Ratio (%) Total Risk-Based Capital Ratio (%) 16.0% 16.0% 13.7% 14.0% 14.0% 13.0% 13.1% 11.2% 11.5% 11.6% 12.0% 12.0% 10.6% 10.9% 8.0% 8.0% 4.0% 4.0% 0.0% 0.0% 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 Basel III Regulatory Capital Minimum To Be Considered “Well Capitalized” Note: Data as of the three months ended each respective quarter 21
Strong Liquidity Position Cash and Cash Equivalents ($mm) Bank Funding Sources ($mm) $350.0 $309.1 Liquidity Amount Available $280.0 Sources ($mm) $199.5 $210.0 $170.9 $184.0 Unpledged Investment Securities $ 105.3 $140.0 $133.0 $70.0 Overnight Fed Funds 69.6 $0.0 1Q19 2Q19 3Q19 4Q19 1Q20 FRB Discount Window 95.8 Loans / Deposits (%) 100.0% FHLB 52.0 96.0% 93.3% Holding Company Line of Credit 25.0 92.2% 92.7% 91.4% 92.0% 91.1% 88.0% Total Funding: $ 347.7 84.0% 80.0% 1Q19 2Q19 3Q19 4Q19 1Q20 22
Earnings Profile – First Quarter 2020 . Net Interest Income increased over ($ in thousands, expect per share data) 1Q20 4Q19 1Q19 7% year-over-year (“YoY”) due to higher average earning asset Total Interest Income $27,998 $27,028 $26,943 Total Interest Expense 5,427 5,924 5,946 balances Net Interest Income 22,571 21,104 20,997 Total Noninterest Income 2,818 2,840 1,698 Total Revenue 25,389 23,944 22,695 . Noninterest Income increased over Provision for Loan Losses 3,200 685 797 65% YoY with all components Total Noninterest Expense 18,793 16,052 15,579 reporting increases Earnings Before Income Taxes 3,396 7,206 6,319 Income Tax Expense 664 473 1,588 Net Income $2,732 $6,733 $4,731 . Total Revenue increased over 11% Net Income Per Share: YoY due to overall growth of the Diluted Net Income Per Share $0.19 $0.48 $0.34 Company Net Operating Earnings Per Share (Non-GAAP): Diluted Operating Earnings Per Share $0.30 $0.46 $0.39 . Increases in Noninterest Expense primarily driven by merger charges and increased provision expense due to COVID-19 and deteriorating economic conditions Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix 23
Appendix
Non-GAAP Reconciliations ($ in thousands) 1Q20 4Q19 3Q19 2Q19 1Q19 Net interest income - ex purchase acct. adj. Net interest income (GAAP) $ 22,571 $ 21,104 $ 21,140 $ 20,802 $ 20,997 Taxable equivalent adjustment 117 116 110 116 115 Net interest income TEY 22,688 21,220 21,250 20,918 21,112 Purchase accounting adjustments 1,841 1,375 1,246 1,374 1,881 Net interest income - ex purchase acct. adj. (Non-GAAP) $ 20,847 $ 19,845 $ 20,004 $ 19,544 $ 19,231 Operating Noninterest Income Noninterest income (GAAP) $ 2,818 $ 2,840 $ 2,196 $ 8,416 $ 1,698 Securities (gain) losses - - (1) (33) - ADECA termination proceeds - (720) - - - Merger termination fee - - - (6,400) - Operating noninterest income (Non-GAAP) $ 2,818 $ 2,120 $ 2,195 $ 1,983 $ 1,698 Operating Noninterest Expense Noninterest expense (GAAP) $ 18,793 $ 16,052 $ 14,708 $ 16,809 $ 15,579 Salaries - prior year adjustment - (603) - - - Merger related and restructuring charges (2,096) (427) (73) (1,796) (923) Other - prior year franchise tax true-up - 312 - - - Operating noninterest expense (Non-GAAP) $ 16,697 $ 15,334 $ 14,635 $ 15,013 $ 14,656 Tangible Common Equity Shareholders' equity (GAAP) $ 336,200 $ 312,747 $ 306,040 $ 299,611 $ 290,481 Less goodwill and other intangible assets 86,503 77,193 77,534 78,348 78,690 Tangible Common Equity (Non-GAAP) $ 249,697 $ 235,554 $ 228,506 $ 221,263 $ 211,791 Average Tangible Common Equity Average shareholders' equity (GAAP) $ 329,692 $ 308,772 $ 303,200 $ 296,570 $ 286,076 Less goodwill and other intangible assets 80,370 77,400 78,222 78,564 78,913 Average Tangible Common Equity (Non-GAAP) $ 249,322 $ 231,372 $ 224,978 $ 218,006 $ 207,163 Non-GAAP Return Ratios Net operating return on average assets (Non-GAAP)(1) 0.67% 1.08% 1.02% 0.96% 0.98% Return on average tangible common equity (Non-GAAP)(2) 4.41% 11.55% 10.52% 16.78% 9.26% Net operating return on average shareholder equity (Non-GAAP) (3) 5.22% 8.34% 7.87% 7.58% 7.81% Net operating return on average tangible common equity (Non-GAAP) (4) 6.90% 11.12% 10.61% 10.31% 10.79% (1) Net operating return on average assets (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average assets. (2) Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP). (3) Net operating return on average shareholder equity (Non-GAAP) is the annualized net operating earnings (Non-GAAP) divided by average shareholder equity. 25 (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). Note: “ADECA” represents a program administered by the Alabama Department of Economic and Community Affairs
Non-GAAP Reconciliations ($ in thousands, except per share data) 1Q20 4Q19 3Q19 2Q19 1Q19 Operating Earnings Net income (GAAP) $ 2,732 $ 6,733 $ 5,963 $ 9,121 $ 4,731 Noninterest income: Securities (gains) losses - - (1) (33) - ADECA termination proceeds - (720) - - - Merger termination fee - - - (6,400) - Noninterest expenses: Salaries - prior year adjustment - 603 - - - Merger related and restructuring expenses 2,096 427 73 1,796 923 Other - prior year franchise tax true-up - (312) - - - Income taxes: Tax benefit - prior year amended return - (304) - - - Tax benefit from director options - - - - - Income tax effect of adjustments (548) 60 (19) 1,119 (145) Net operating earnings (Non-GAAP) $ 4,280 $ 6,487 $ 6,016 $ 5,603 $ 5,509 Net operating earnings per common share: Basic $0.30 $0.46 $0.43 $0.40 $0.40 Diluted $0.30 $0.46 $0.43 $0.40 $0.39 Operating Efficiency Ratio Efficiency ratio (GAAP) 74.0% 67.0% 63.0% 57.5% 68.7% Adjustment for taxable equivalent yields (0.45%) (0.45%) (0.37%) (0.50%) (0.49%) Adjustment for securities gains (losses) - - - 0.14% - Adjustment for merger expenses (8.10%) (1.64%) (0.24%) 8.39% (3.91%) Operating efficiency ratio (Non-GAAP) 65.5% 65.0% 62.4% 65.6% 64.3% Note: “ADECA” represents a program administered by the Alabama Department of Economic and Community Affairs 26
Non-GAAP Reconciliations ($ in thousands, except per share data) 1Q20 4Q19 3Q19 2Q19 1Q19 4Q18 3Q18 2Q18 1Q18 Operating Pre-Tax Pre-Provison Income Net interest income (GAAP) $ 22,571 $ 21,104 $ 21,140 $ 20,802 $ 20,997 $ 21,447 $ 18,860 $ 19,538 $ 16,811 Operating noninterest income (Non-GAAP) 2,818 2,120 2,195 1,983 1,698 1,678 1,831 1,583 1,455 Operating noninterest expense (Non-GAAP) (16,697) (15,334) (14,635) (15,013) (14,656) (14,339) (13,921) (14,154) (12,724) Operating Pre-Tax Pre-Provison Earnings (Non-GAAP) $ 8,692 $ 7,890 $ 8,700 $ 7,772 $ 8,039 $ 8,786 $ 6,770 $ 6,967 $ 5,542 Note: “ADECA” represents a program administered by the Alabama Department of Economic and Community Affairs 27
Investor Contacts Billy Carroll Miller Welborn President & CEO Chairman (865) 868-0613 (423) 385-3067 [email protected] [email protected] SmartFinancial, Inc. 5401 Kingston Pike, Suite 600 Knoxville, TN 37919 28