8-K
SMARTFINANCIAL INC. (SMBK)
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 20, 2021
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<br>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 20, 2021, SmartFinancial, Inc. (“SmartFinancial”) issued a press release (the “Press Release”) reporting earnings results for its first quarter ending March 31, 2021. 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 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 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 21, 2021. 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 purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01 | | Financial Statements and Exhibits |
|---|---|---|
| | | |
| Exhibit No. | Description | |
| 99.1 | | Press release announcing first quarter 2021 financial results dated April 20, 2021 |
| 99.2 | | First quarter 2021 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 20, 2021 | |
| /s/ William Y. Carroll, Jr. | |
| William Y. Carroll, Jr. | |
| President & Chief Executive Officer |
Exhibit 99.1
1Q 2021
SmartFinancial Announces Results for the First Quarter 2021
KNOXVILLE, TN – April 20, 2021 - SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $9.8 million, or $0.65 per diluted common share, for the first quarter of 2021, compared to net income of $9.0 million, or $0.59 per diluted common share for the fourth quarter of 2020. Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $9.8 million, or $0.65 per diluted common share, in the first quarter of 2021, compared to $9.2 million, or $0.61 per diluted common share, in the fourth quarter of 2020.
Highlights for the First Quarter of 2021
| ● | Net income and operating earnings (non-GAAP) of $9.8 million, or $0.65 per diluted share |
|---|---|
| ● | Tangible book value per share (Non-GAAP) of $18.39, a 10.5% annualized quarter-over-quarter increase |
| --- | --- |
| ● | Organic loan growth of over $60 million, a 10.4% annualized quarter-over-quarter increase |
| --- | --- |
| ● | Originated 1,231 of Paycheck Protection Program (“PPP”) loans totaling $119.5 million |
| --- | --- |
| ● | Successfully completed a lift-out of an experienced banking team in the Gulf Coast Region |
| --- | --- |
| ● | Announced on April 14, 2021 the proposed acquisition of Sevier County Bancshares, Inc. |
| --- | --- |
Billy Carroll, President & CEO, stated: “We had an outstanding first quarter. Our team continues to build a great franchise and this quarter highlights their efforts. Organic loan growth coupled with PPP production has been strong to start the year. We are also very excited about what our Gulf Coast Region lift-out and the Sevier County Bank acquisition will do for our company’s growth and profitability.”
SmartFinancial's Chairman, Miller Welborn, concluded: “We are incredibly excited about where we are as a company. Our team continues to execute with precision and our latest quarterly results is a perfect example of their commitment to continually raise the bar. The goals and targets of our Strategic Plan are very clear and the progress we made during the first quarter of 2021 is impressive.”
Net Interest Income and Net Interest Margin
Net interest income was $26.3 million for the first quarter of 2021, compared to $26.5 million for the fourth quarter of 2020. Average earning assets totaled $3.1 billion, an increase of $110.0 million, primarily driven by an increase in average cash and cash equivalents of $68.0 million, an increase in average securities of $17.2 million and an increase in average loans of $27.1 million. Average interest-bearing liabilities increased $94.5 million, directly related to continued deposit growth.
The tax equivalent net interest margin was 3.48% for the first quarter of 2021, compared to 3.57% for the fourth quarter of 2020. The tax equivalent net interest margin was negatively impacted by a 13 basis point decrease in the average yield on interest-earning assets and offset by a 6 basis point decline in the rate on interest-bearing liabilities over the prior quarter. Lower market interest rates continue to negatively impact earning asset yields, but these declines have been largely mitigated by a lower cost of funds. The primary drivers of the yield decrease on interest-earning assets during the first quarter of 2021 was an overall decline in loan yields and a decrease in loan fees. The decrease of $612 thousand in loan fees during the quarter is attributable to $2.4 million of the PPP fee accretion and $454 thousand of other loan fees compared to $2.2 million of PPP fee accretion, and $1.3 million of other loan fees recognized in the fourth quarter of 2020. The decrease was offset by an increase of $867 thousand in acquired loan discount accretion. The Company continues to carry excess liquidity on the balance sheet that resulted from significant deposit growth during the first quarter of 2021 and the fourth quarter of 2020.
The yield on interest-bearing liabilities decreased to 0.54% for the first quarter of 2021 when compared to 0.60% for the fourth quarter of 2020. The cost of average interest-bearing deposits was 0.44% for the first quarter of 2021 compared to 0.50% for the fourth quarter of 2020, a decrease of 6 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, with average costs decreasing 14 basis points. The cost of total deposits for the first quarter of 2021 was 0.33%.
The following table presents selected interest rates and yields for the periods indicated:
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | | Three Months Ended | | | | ||
| | | Mar | | Dec | | Increase | |
| Selected Interest Rates and Yields | | 2021 | | 2020 | | (Decrease) | |
| Yield on loans | | 4.67 | % | 4.72 | % | (0.05) | % |
| Yield on earning assets, FTE | | 3.88 | % | 4.01 | % | (0.13) | % |
| Cost of interest-bearing deposits | | 0.44 | % | 0.50 | % | (0.06) | % |
| Cost of total deposits | | 0.33 | % | 0.38 | % | (0.05) | % |
| Cost of interest-bearing liabilities | | 0.54 | % | 0.60 | % | (0.06) | % |
| Net interest margin, FTE | | 3.48 | % | 3.57 | % | (0.09) | % |
Provision for Loan Loss and Credit Quality
The provision for loan losses during the first quarter of 2021 was $67 thousand, compared to no provision for the fourth quarter of 2020. At March 31, 2021, the allowance for loan losses was $18.4 million. The allowance for loan losses to total loans was 0.74% as of March 31, 2021, compared to 0.77% as of December 31, 2020. For the Company’s originated loans, the allowance for loan losses to originated loans, less PPP loans, was 0.93% as of March 31, 2021, compared to 0.96% as of December 31, 2020. The remaining discounts on the acquired loan portfolio totaled $13.0 million, or 3.60% of acquired loans as of March 31, 2021.
As of March 31, 2021, the Company had COVID related modified loans totaling $1.7 million, or 0.07%, of the loan portfolio, as compared to $17.2 million or 0.7%, of the loan portfolio on December 31, 2020.
The following table presents detailed information related to the provision for loan losses for the periods indicated (dollars in thousands):
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Three Months Ended | | | | | ||||
| | | | | Mar | | | Dec | | | | |
| | Provision for Loan Losses Rollforward | | | 2021 | | | 2020 | | | Change | |
| | Beginning balance | | $ | 18,346 | | $ | 18,817 | | $ | (471) | |
| | Charge-offs | | | (120) | | | (520) | | | 400 | |
| | Recoveries | | | 77 | | | 49 | | | 28 | |
| | Net charge-offs | | | (43) | | | (471) | | | 428 | |
| | Provision | | | 67 | | | - | | | 67 | |
| | Ending balance | | $ | 18,370 | | $ | 18,346 | | $ | 24 | |
| | | | | | | | | | | | |
| | Allowance for loan losses to total loans, gross | | | 0.74 | % | | 0.77 | % | | (0.03) | % |
The Company is not required to implement the provisions of the Current Expected Credit Losses (“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 0.25% as of March 31, 2021, an increase of one basis point from the 0.24% reported in the fourth quarter of 2020. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.29% as of March 31, 2021, as compared to 0.31% as of December 31, 2020.
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The following table presents detailed information related to credit quality for the periods indicated (dollars in thousands):
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Three Months Ended | | | | | ||||
| | | | | Mar | | | Dec | | | Increase | |
| | Credit Quality | | | 2021 | | | 2020 | | | (Decrease) | |
| | Nonaccrual loans | | $ | 4,739 | | $ | 5,633 | | $ | (894) | |
| | Loans past due 90 days or more and still accruing | | | 1,495 | | | 149 | | | 1,346 | |
| | Total nonperforming loans | | | 6,234 | | | 5,782 | | | 452 | |
| | Other real estate owned | | | 3,946 | | | 4,619 | | | (673) | |
| | Total nonperforming assets | | $ | 10,180 | | $ | 10,401 | | $ | (221) | |
| | | | | | | | | | | | |
| | Nonperforming loans to total loans, gross | | | 0.25 | % | | 0.24 | % | | 0.01 | % |
| | Nonperforming assets to total assets | | | 0.29 | % | | 0.31 | % | | (0.02) | % |
Noninterest Income
Noninterest income increased $715 thousand to $5.7 million for the first quarter of 2021 compared to $5.0 million for the fourth quarter of 2020. During the first quarter of 2021, the primary components of the changes in noninterest income were as follows:
| ● | Increase in investment services of $124 thousand, stemming from increased production; |
|---|---|
| ● | Increase in insurance commissions of $918 thousand, primarily due to commissions of $815 thousand from the placement of life insurance policies; |
| --- | --- |
| ● | Decrease in mortgage banking income of $192 thousand, related to continuing seasonality; and |
| --- | --- |
| ● | Decrease in other of $191 thousand, is primarily attributable to $465 thousand of non-recurring income recognized in the prior quarter, partially offset by an increase in the cash surrender value of bank owned life insurance income of $189 thousand. |
| --- | --- |
The following table presents detailed information related to noninterest income for the periods indicated (dollars in thousands):
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended | | | | ||||
| | | | Mar | | | Dec | | | Increase |
| Noninterest Income | | | 2021 | | | 2020 | | | (Decrease) |
| Service charges on deposit accounts | | $ | 1,009 | | $ | 1,032 | | $ | (23) |
| Mortgage banking income | | | 1,139 | | | 1,331 | | | (192) |
| Investment services | | | 531 | | | 407 | | | 124 |
| Insurance commissions | | | 1,466 | | | 548 | | | 918 |
| Interchange and debit card transaction fees | | | 839 | | | 760 | | | 79 |
| Other | | | 707 | | | 898 | | | (191) |
| Total noninterest income | | $ | 5,691 | | $ | 4,976 | | $ | 715 |
3
Noninterest Expense
Noninterest expense was $19.5 million for the first quarter of 2021 compared to $20.0 million for the fourth quarter of 2020. During the first quarter of 2021, the primary components of the changes in noninterest expense were as follows:
| ● | Salaries and employee benefits declined $647 thousand, primarily attributable to the deferral of salary cost related to the origination of PPP loans; |
|---|---|
| ● | Data processing and technology increased $197 thousand, primarily due to implementation of new contactless chip cards and tier pricing adjustments from our core system provider; |
| --- | --- |
| ● | Merger related and restructuring expense decreased $599 thousand: and |
| --- | --- |
●Other increased $578 thousand, primarily from an investment in a start-up fintech company.
The following table presents detailed information related to noninterest expense for the periods indicated (dollars in thousands):
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended | | | | ||||
| | | | Mar | | | Dec | | | Increase |
| Noninterest Expense | | | 2021 | | | 2020 | | | (Decrease) |
| Salaries and employee benefits | | $ | 10,869 | | $ | 11,516 | | $ | (647) |
| Occupancy and equipment | | | 2,341 | | | 2,256 | | | 85 |
| FDIC insurance | | | 371 | | | 297 | | | 74 |
| Other real estate and loan related expenses | | | 602 | | | 516 | | | 86 |
| Advertising and marketing | | | 190 | | | 181 | | | 9 |
| Data processing and technology | | | 1,379 | | | 1,182 | | | 197 |
| Professional services | | | 641 | | | 786 | | | (145) |
| Amortization of intangibles | | | 444 | | | 571 | | | (127) |
| Merger related and restructuring expenses | | | 103 | | | 702 | | | (599) |
| Other | | | 2,524 | | | 1,946 | | | 578 |
| Total noninterest expense | | $ | 19,464 | | $ | 19,953 | | $ | (489) |
Income Tax Expense
Income tax expense was $2.7 million for the first quarter of 2021, an increase of $165 thousand, compared to $2.5 million for the fourth quarter of 2020.
For the first quarter of 2021, the effective tax rate was 21.5% compared to 21.7% for the fourth quarter of 2020.
Balance Sheet Trends
Total assets at March 31, 2021 were $3.56 billion compared with $3.30 billion at December 31, 2020. The increase of $252.1 million is primarily attributable to increases in cash and cash equivalents of $75.0 million, securities available-for-sale of $35.3 million, loans of $104.9 million, which consisted of organic loan growth of $61.0 million and net increase in PPP loans of $49.3 million, and bank owned life insurance of $40.4 million.
Total liabilities increased to $3.19 billion at March 31, 2021 from $2.95 billion at December 31, 2020. The increase of $245.3 million was primarily from organic deposit growth of $243.0 million.
Shareholders' equity at March 31, 2021 totaled $364.1 million, an increase of $6.9 million, from December 31, 2020. The increase in shareholders' equity was primarily from net income of $9.8 million for the quarter ended March 31, 2021, which was offset by a net change in accumulated other comprehensive income of $1.1 million, repurchase of the Company's common stock of $1.2 million and $907 thousand of dividends paid. Tangible book value per share (Non-GAAP) was $18.39 at March 31, 2021, an increase from $17.92 at December 31, 2020. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 8.00% at March 31, 2021, compared with 8.41% at December 31, 2020.
4
The following table presents selected balance sheet information for the periods indicated (dollars in thousands):
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | Mar | | Dec | | Increase | | |||
| Selected Balance Sheet Information | | 2021 | | 2020 | | (Decrease) | | |||
| Total assets | | $ | 3,557,203 | | $ | 3,304,949 | | $ | 252,254 | |
| Total liabilities | | | 3,193,145 | | | 2,947,781 | | | 245,364 | |
| Total equity | | | 364,058 | | | 357,168 | | | 6,890 | |
| Securities available-for-sale, at fair value | | | 250,937 | | | 215,634 | | | 35,303 | |
| Loans | | | 2,487,129 | | | 2,382,243 | | | 104,886 | |
| Deposits | | | 3,048,213 | | | 2,805,215 | | | 242,998 | |
| Borrowings | | | 82,642 | | | 81,199 | | | 1,443 | |
Conference Call Information
SmartFinancial issued this earnings release for the first quarter of 2021 on Tuesday, April 20, 2021, and will host a conference call on Wednesday, April 21, 2021, at 10:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 6293687. A replay of the conference call will be available through April 20, 2022, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10154896. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 am ET prior to the conference call.
About SmartFinancial, Inc.
SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with 35 branches across East and Middle Tennessee, Alabama, and the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.
| | |
|---|---|
| Source | |
| SmartFinancial, Inc. | |
| | |
| Investor Contacts | |
| Billy Carroll | Ron Gorczynski |
| President & CEO | Executive Vice President, Chief Financial Officer |
| (865) 868-0613 billy.carroll@smartbank.com | (865) 437-5724 ron.gorczynski@smartbank.com |
| | |
| Media Contact | |
| Kelley Fowler | |
| Senior Vice President, Public Relations & Marketing | |
| (865) 868-0611 kelley.fowler@smartbank.com | |
| | |
5
Non-GAAP Financial Measures
Statements included in this earnings release include measures not recognized under U.S. generally accepted accounting principles (“GAAP”) and therefore are considered non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several Non-GAAP financial measures, including: (i) operating earnings, (ii) operating return on average assets, (iii) operating pre-tax pre-provision return on average assets (iv) operating return on average shareholder' equity, (v) return on average tangible common equity, (vi) operating return on average tangible common equity, (vii) operating efficiency ratio, (viii) operating noninterest income, (ix) operating pre-tax pre-provision earnings (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value; and ratios derived therefrom, in its analysis of the company's performance. Operating earnings excludes the following from net income: securities gains and losses, proceeds related to the termination of an Alabama Department of Economic and Community Affairs (“ADECA”) loan program, merger related and restructuring expenses. Operating return on average assets is the annualized operating earnings divided by average assets. Operating pre-tax pre-provision return on average assets is the annualized operating pre-tax pre-provision income earnings by average assets. Operating return on average shareholders' equity is the annualized operating earnings divided by average equity. Return on average tangible common equity is the annualized net income divided by average tangible common equity. Operating return on average tangible common equity is the annualized operating earnings divided by average tangible common equity (Non-GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Operating noninterest income excludes the following from noninterest income: securities gains and losses, proceeds related to the termination of the ADECA loan program. Operating pre-tax pre-provision earnings is net interest income plus operating noninterest income less operating noninterest expense. Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to salaries, merger related and restructuring expenses and certain franchise tax true-up expenses. Tangible common equity and average tangible common equity excludes goodwill and other intangible assets from shareholders' equity and average shareholders' equity, respectively. Tangible book value is tangible common equity divided by common shares outstanding. Tangible assets excludes goodwill and other intangibles from total assets. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.
6
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 effects of the COVID-19 pandemic on the Company’s business and financial results and conditions, are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) risks associated with our growth strategy, including a failure to implement our growth plans or an inability to manage our growth effectively; (2) claims and litigation arising from our business activities and from the companies we acquire, which may relate to contractual issues, environmental laws, fiduciary responsibility, and other matters; (3) the risk that cost savings and revenue synergies from recently completed acquisitions may not be realized or may take longer than anticipated to realize; (4) disruption from recently completed acquisitions with customer, supplier, employee, or other business relationships; (5) our ability to successfully integrate the businesses acquired as part of previous acquisitions with the business of SmartBank; (6) risks related to the proposed acquisition of Sevier County Bancshares, Inc. (“SCB”); (7) the risk that the anticipated benefits from the proposed acquisition of SCB may not be realized in the time frame anticipated; (8) changes in management’s plans for the future; (9) prevailing, or changes in, economic or political conditions, particularly in our market areas; (10) credit risk associated with our lending activities; (11) changes in interest rates, loan demand, real estate values, or competition; (12) changes in accounting principles, policies, or guidelines; (13) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19; (14) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic; (15) the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (16) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (17) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.
7
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Ending Balances | |||||||||||||
| | | Mar | Dec | Sep | Jun | Mar | |||||||||
| | | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | |||||
| Assets: | | | | | | | | ||||||||
| Cash and cash equivalents | | $ | 556,701 | | $ | 481,719 | | $ | 541,815 | | $ | 399,467 | | $ | 309,089 |
| Securities available-for-sale, at fair value | | 250,937 | | 215,634 | | 214,634 | | 219,631 | | 201,002 | |||||
| Other investments | | 14,728 | | 14,794 | | 14,829 | | 14,829 | | 14,113 | |||||
| Loans held for sale | | 7,870 | | 11,721 | | 11,292 | | 6,330 | | 6,045 | |||||
| Loans | | 2,487,129 | | 2,382,243 | | 2,404,057 | | 2,408,284 | | 2,139,247 | |||||
| Less: Allowance for loan losses | | (18,370) | | (18,346) | | (18,817) | | (16,254) | | (13,431) | |||||
| Loans, net | | 2,468,759 | | 2,363,897 | | 2,385,240 | | 2,392,030 | | 2,125,816 | |||||
| Premises and equipment, net | | 72,697 | | 72,682 | | 73,934 | | 73,868 | | 73,801 | |||||
| Other real estate owned | | 3,946 | | 4,619 | | 3,932 | | 5,524 | | 5,894 | |||||
| Goodwill and core deposit intangibles, net | | 86,350 | | 86,471 | | 86,710 | | 86,327 | | 86,503 | |||||
| Bank owned life insurance | | 71,586 | | 31,215 | | 31,034 | | 30,853 | | 30,671 | |||||
| Other assets | | 23,629 | | 22,197 | | 24,168 | | 37,126 | | 20,781 | |||||
| Total assets | | $ | 3,557,203 | | $ | 3,304,949 | | $ | 3,387,588 | | $ | 3,265,985 | | $ | 2,873,715 |
| Liabilities: | | | | | | ||||||||||
| Deposits: | | | | | | ||||||||||
| Noninterest-bearing demand | | $ | 777,968 | | $ | 685,957 | | $ | 669,733 | | $ | 645,650 | | $ | 431,781 |
| Interest-bearing demand | | 683,887 | | 649,129 | | 534,128 | | 479,212 | | 444,141 | |||||
| Money market and savings | | 1,073,941 | | 919,631 | | 871,098 | | 762,246 | | 730,392 | |||||
| Time deposits | | 512,417 | | 550,498 | | 577,064 | | 652,581 | | 735,616 | |||||
| Total deposits | | 3,048,213 | | 2,805,215 | | 2,652,023 | | 2,539,689 | | 2,341,930 | |||||
| Borrowings | | 82,642 | | 81,199 | | 319,391 | | 318,855 | | 131,603 | |||||
| Subordinated debt | | 39,367 | | 39,346 | | 39,325 | | 39,304 | | 39,283 | |||||
| Other liabilities | | 22,923 | | 22,021 | | 27,060 | | 24,649 | | 24,699 | |||||
| Total liabilities | | 3,193,145 | | 2,947,781 | | 3,037,799 | | 2,922,497 | | 2,537,515 | |||||
| Shareholders' Equity: | | | | | | ||||||||||
| Common stock | | 15,105 | | 15,107 | | 15,233 | | 15,217 | | 15,222 | |||||
| Additional paid-in capital | | 251,836 | | 252,693 | | 254,626 | | 254,396 | | 254,356 | |||||
| Retained earnings | | 96,034 | | 87,185 | | 78,918 | | 73,283 | | 67,869 | |||||
| Accumulated other comprehensive income (loss) | | 1,083 | | 2,183 | | 1,012 | | 592 | | (1,247) | |||||
| Total shareholders' equity | | 364,058 | | 357,168 | | 349,789 | | 343,488 | | 336,200 | |||||
| Total liabilities & shareholders' equity | | $ | 3,557,203 | | $ | 3,304,949 | | $ | 3,387,588 | | $ | 3,265,985 | | $ | 2,873,715 |
8
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 | ||||||||||
| | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | | |||||
| Interest income: | | | | | | | |||||||||
| Loans, including fees | $ | 28,018 | | $ | 28,594 | | $ | 28,621 | | $ | 28,663 | | $ | 26,434 | |
| Securities available-for-sale: | | | | | | ||||||||||
| Taxable | 724 | | 609 | | 546 | | 589 | | 679 | | |||||
| Tax-exempt | 259 | | 306 | | 364 | | 416 | | 283 | | |||||
| Federal funds sold and other earning assets | 291 | | 303 | | 327 | | 277 | | 602 | | |||||
| Total interest income | 29,292 | | 29,812 | | 29,858 | | 29,945 | | 27,998 | | |||||
| Interest expense: | | | | | | ||||||||||
| Deposits | 2,331 | | 2,580 | | 2,897 | | 3,366 | | 4,754 | | |||||
| Borrowings | 117 | | 142 | | 334 | | 249 | | 89 | | |||||
| Subordinated debt | 584 | | 584 | | 584 | | 584 | | 584 | | |||||
| Total interest expense | 3,032 | | 3,306 | | 3,815 | | 4,199 | | 5,427 | | |||||
| Net interest income | 26,260 | | 26,506 | | 26,043 | | 25,746 | | 22,571 | | |||||
| Provision for loan losses | 67 | | — | | 2,634 | | 2,850 | | 3,200 | | |||||
| Net interest income after provision for loan losses | 26,193 | | 26,506 | | 23,409 | | 22,896 | | 19,371 | | |||||
| Noninterest income: | | | | | | ||||||||||
| Service charges on deposit accounts | 1,009 | | 1,032 | | 892 | | 709 | | 770 | | |||||
| Gain (loss) on sale of securities, net | — | | — | | (9) | | 16 | | — | | |||||
| Mortgage banking | 1,139 | | 1,331 | | 1,029 | | 931 | | 584 | | |||||
| Investment services | 531 | | 407 | | 359 | | 363 | | 437 | | |||||
| Insurance commissions | 1,466 | | 548 | | 560 | | 473 | | 269 | | |||||
| Interchange and debit card transaction fees | 839 | | 760 | | 868 | | 508 | | 276 | | |||||
| Other | 707 | | 898 | | 422 | | 511 | | 482 | | |||||
| Total noninterest income | 5,691 | | 4,976 | | 4,121 | | 3,511 | | 2,818 | | |||||
| Noninterest expense: | | | | | | ||||||||||
| Salaries and employee benefits | 10,869 | | 11,516 | | 11,032 | | 10,357 | | 10,006 | | |||||
| Occupancy and equipment | 2,341 | | 2,256 | | 2,186 | | 1,996 | | 1,911 | | |||||
| FDIC insurance | 371 | | 297 | | 534 | | 180 | | 180 | | |||||
| Other real estate and loan related expense | 602 | | 516 | | 643 | | 346 | | 545 | | |||||
| Advertising and marketing | 190 | | 181 | | 253 | | 202 | | 198 | | |||||
| Data processing and technology | 1,379 | | 1,182 | | 1,131 | | 1,155 | | 1,008 | | |||||
| Professional services | 641 | | 786 | | 594 | | 868 | | 711 | | |||||
| Amortization of intangibles | 444 | | 571 | | 402 | | 405 | | 362 | | |||||
| Merger related and restructuring expenses | 103 | | 702 | | 290 | | 1,477 | | 2,096 | | |||||
| Other | 2,524 | | 1,946 | | 2,102 | | 1,820 | | 1,776 | | |||||
| Total noninterest expense | 19,464 | | 19,953 | | 19,167 | | 18,806 | | 18,793 | | |||||
| Income before income taxes | 12,420 | | 11,529 | | 8,363 | | 7,601 | | 3,396 | | |||||
| Income tax expense | 2,664 | | 2,499 | | 1,968 | | 1,427 | | 664 | | |||||
| Net income | $ | 9,756 | | $ | 9,030 | | $ | 6,395 | | $ | 6,174 | | $ | 2,732 | |
| Earnings per common share: | | | | | | ||||||||||
| Basic | $ | 0.65 | | $ | 0.60 | | $ | 0.42 | | $ | 0.41 | | $ | 0.19 | |
| Diluted | $ | 0.65 | | $ | 0.59 | | $ | 0.42 | | $ | 0.41 | | $ | 0.19 | |
| Weighted average common shares outstanding: | | | | | | ||||||||||
| Basic | 15,011,573 | | 15,109,298 | | 15,160,579 | | 15,152,768 | | 14,395,103 | | |||||
| Diluted | 15,111,947 | | 15,182,796 | | 15,210,611 | | 15,202,335 | | 14,479,679 | |
9
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended | |||||||||||||||||||||||
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2020 | |||||||||||||||||||
| | Average | | | Yield/ | Average | | | Yield/ | Average | | Yield/ | ||||||||||||||
| | | Balance | | Interest^1^ | | Cost^1^ | | Balance | | Interest^1^ | | Cost^1^ | | Balance | | Interest^1^ | | Cost^1^ | |||||||
| Assets: | | | | | | | | ||||||||||||||||||
| Loans, including fees^2^ | | $ | 2,428,499 | | $ | 27,943 | 4.67 | % | $ | 2,401,406 | | $ | 28,506 | 4.72 | % | $ | 1,982,997 | | $ | 26,389 | 5.35 | % | |||
| Loans held for sale | | | 7,913 | | | 75 | | 3.82 | % | | 10,191 | | | 88 | | 3.45 | % | | 4,294 | | | 45 | | 4.24 | % |
| Taxable securities | | 136,492 | | 724 | 2.15 | % | 119,936 | | 609 | 2.02 | % | 116,837 | | 679 | 2.34 | % | |||||||||
| Tax-exempt securities | | 90,849 | | 409 | 1.82 | % | 90,200 | | 456 | 2.01 | % | 70,397 | | 400 | 2.28 | % | |||||||||
| Federal funds sold and other earning assets | | 417,144 | | 291 | 0.28 | % | 349,167 | | 303 | 0.35 | % | 165,512 | | 602 | 1.46 | % | |||||||||
| Total interest-earning assets | | 3,080,897 | | 29,442 | 3.88 | % | 2,970,900 | | 29,962 | 4.01 | % | 2,340,037 | | 28,115 | 4.83 | % | |||||||||
| Noninterest-earning assets | | 275,272 | | | | | 255,477 | | | 216,498 | | | |||||||||||||
| Total assets | | $ | 3,356,169 | | | | | | | $ | 3,226,377 | | | $ | 2,556,535 | | | ||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities and Stockholders’ Equity: | | | | | | | | | |||||||||||||||||
| Interest-bearing demand deposits | | $ | 641,214 | | 256 | | 0.16 | % | $ | 570,326 | | 230 | 0.16 | % | $ | 389,500 | | 434 | 0.45 | % | |||||
| Money market and savings deposits | | 983,893 | | 821 | | 0.34 | % | 903,235 | | 774 | 0.34 | % | 664,983 | | 1,389 | 0.84 | % | ||||||||
| Time deposits | | 526,062 | | 1,254 | | 0.97 | % | 565,237 | | 1,576 | 1.11 | % | 680,830 | | 2,931 | 1.73 | % | ||||||||
| Total interest-bearing deposits | | 2,151,169 | | 2,331 | | 0.44 | % | 2,038,798 | | 2,580 | 0.50 | % | 1,735,313 | | 4,754 | 1.10 | % | ||||||||
| Borrowings^3^ | | 81,837 | | 117 | | 0.58 | % | 99,777 | | 142 | 0.57 | % | 51,921 | | 89 | 0.69 | % | ||||||||
| Subordinated debt | | 39,354 | | 584 | | 6.01 | % | 39,332 | | 584 | 5.90 | % | 39,269 | | 584 | 5.98 | % | ||||||||
| Total interest-bearing liabilities | | 2,272,360 | | 3,032 | | 0.54 | % | 2,177,907 | | 3,306 | 0.60 | % | 1,826,503 | | 5,426 | 1.19 | % | ||||||||
| Noninterest-bearing deposits | | 700,962 | | | | | | 670,820 | | | 373,125 | | | ||||||||||||
| Other liabilities | | 21,928 | | | | | | 23,624 | | | 27,215 | | | ||||||||||||
| Total liabilities | | 2,995,250 | | | | | | 2,872,351 | | | 2,226,843 | | | ||||||||||||
| Shareholders' equity | | 360,919 | | | | | | 354,026 | | | 329,692 | | | ||||||||||||
| Total liabilities and shareholders' equity | | $ | 3,356,169 | | | | | | | $ | 3,226,377 | | | $ | 2,556,535 | | | ||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income, taxable equivalent | | | | | $ | 26,410 | | | | | $ | 26,656 | | | $ | 22,689 | | ||||||||
| Interest rate spread | | | | | | 3.33 | % | | 3.41 | % | | 3.63 | % | ||||||||||||
| Tax equivalent net interest margin | | | | | | 3.48 | % | | 3.57 | % | | 3.90 | % | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Percentage of average interest-earning assets to average interest-bearing liabilities | | | | | | 135.58 | % | | 136.41 | % | | 128.12 | % | ||||||||||||
| Percentage of average equity to average assets | | | | | | 10.75 | % | | 10.97 | % | | 12.90 | % |
^1^Taxable equivalent
^2^Includes average balance of $312,582 and $296,337 in PPP loans for the quarters ended March 31, 2021 and December 31, 2020, respectively. No PPP loans are included in the average balance for the quarter end March 31, 2020.
^3^ Includes average balance of $18,092 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarter ended December 31, 2020. No PPPLF funding was used for the quarters ended March 31, 2021 and 2020.
10
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 | |||||||||||
| | | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | ||||||
| Composition of Loans: | | | | | | | | | | | ||||||
| Commercial real estate | | | | | | | | | | | ||||||
| owner occupied | | $ | 477,293 | | $ | 463,771 | | $ | 467,569 | | $ | 464,073 | | $ | 473,398 | |
| non-owner occupied | | 593,348 | | 549,205 | | 563,082 | | 552,958 | | 535,637 | | |||||
| Commercial real estate, total | | 1,070,641 | | 1,012,976 | | 1,030,651 | | 1,017,031 | | 1,009,035 | | |||||
| Commercial & industrial | | 686,010 | | 634,446 | | 644,498 | | 637,450 | | 377,173 | | |||||
| Construction & land development | | 285,973 | | 278,075 | | 275,172 | | 279,216 | | 253,445 | | |||||
| Consumer real estate | | 432,486 | | 443,930 | | 440,310 | | 459,861 | | 482,728 | | |||||
| Consumer and other | | 12,019 | | 12,816 | | 13,426 | | 14,726 | | 16,866 | | |||||
| Total loans | | $ | 2,487,129 | | $ | 2,382,243 | | $ | 2,404,057 | | $ | 2,408,284 | | $ | 2,139,247 | |
| | | | | | | | | | | | | | | | | |
| Asset Quality and Additional Loan Data: | | | | | | | | | | | ||||||
| Nonperforming loans | | $ | 6,234 | | $ | 5,782 | | $ | 2,248 | | $ | 3,776 | | $ | 3,069 | |
| Other real estate owned | | 3,946 | | 4,619 | | 3,932 | | 5,524 | | 5,894 | | |||||
| Total nonperforming assets | | $ | 10,180 | | $ | 10,401 | | $ | 6,180 | | $ | 9,300 | | $ | 8,963 | |
| Restructured loans not included in nonperforming loans | | $ | 250 | | $ | 257 | | $ | 8 | | $ | 9 | | $ | 9 | |
| Net charge-offs to average loans (annualized) | | 0.01 | % | 0.08 | % | 0.01 | % | — | % | — | % | |||||
| Allowance for loan losses to loans | | 0.74 | % | 0.77 | % | 0.78 | % | 0.67 | % | 0.63 | % | |||||
| Nonperforming loans to total loans, gross | | 0.25 | % | 0.24 | % | 0.09 | % | 0.16 | % | 0.14 | % | |||||
| Nonperforming assets to total assets | | 0.29 | % | 0.31 | % | 0.18 | % | 0.28 | % | 0.31 | % | |||||
| Acquired loan fair value discount balance | | $ | 12,951 | | $ | 14,467 | | $ | 15,141 | | $ | 16,187 | | $ | 17,237 | |
| Accretion income on acquired loans | | 1,636 | | 768 | | 960 | | 888 | | 1,841 | | |||||
| PPP net fees deferred balance | | | 7,351 | | | 4,190 | | | 6,348 | | | 8,582 | | | — | |
| PPP net fees recognized | | | 2,398 | | | 2,157 | | | 1,812 | | | 1,909 | | | — | |
| | | | | | | | | | | | | | | | | |
| Capital Ratios: | | | | | | | | | | | ||||||
| Equity to Assets | | 10.23 | % | 10.81 | % | 10.33 | % | 10.52 | % | 11.70 | % | |||||
| Tangible common equity to tangible assets (Non-GAAP)^1^ | | 8.00 | % | 8.41 | % | 7.97 | % | 8.09 | % | 8.96 | % | |||||
| | | | | | | | | | | | | | | | | |
| SmartFinancial, Inc.^2^ | | | | | | | | | | | ||||||
| Tier 1 leverage | | 8.55 | % | 8.69 | % | 8.78 | % | 8.83 | % | 10.28 | % | |||||
| Common equity Tier 1 | | 11.30 | % | 11.61 | % | 11.33 | % | 10.92 | % | 10.87 | % | |||||
| Tier 1 capital | | 11.30 | % | 11.61 | % | 11.33 | % | 10.92 | % | 10.87 | % | |||||
| Total capital | | 13.63 | % | 14.07 | % | 13.81 | % | 13.25 | % | 13.13 | % | |||||
| | | | | | | | | | | | | | | | | |
| SmartBank | | **** | Estimated^3^ | | | | | | | | | | ||||
| Tier 1 leverage | | 9.33 | % | 9.58 | % | 9.74 | % | 9.82 | % | 11.42 | % | |||||
| Common equity Tier 1 | | 12.32 | % | 12.79 | % | 12.57 | % | 12.14 | % | 12.05 | % | |||||
| Tier 1 risk-based capital | | 12.32 | % | 12.79 | % | 12.57 | % | 12.14 | % | 12.05 | % | |||||
| Total risk-based capital | | 13.07 | % | 13.57 | % | 13.37 | % | 12.82 | % | 12.62 | % |
^1^Total common equity less intangibles divided by total assets less intangibles. See reconciliation of Non-GAAP measures.
^2^All periods presented are estimated.
^3^ Current period capital ratios are estimated as of the date of this earnings release.
11
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 | ||||||||||
| | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | | |||||
| Selected Performance Ratios (Annualized): | | | | | | | |||||||||
| Return on average assets | | 1.18 | % | | 1.11 | % | | 0.76 | % | | 0.79 | % | | 0.43 | % |
| Return on average shareholders' equity | | 10.96 | % | | 10.15 | % | | 7.31 | % | | 7.31 | % | | 3.33 | % |
| Return on average tangible common equity¹ | | 14.41 | % | | 13.43 | % | | 9.72 | % | | 9.80 | % | | 4.41 | % |
| Noninterest income / average assets | | 0.69 | % | | 0.61 | % | | 0.49 | % | | 0.45 | % | | 0.44 | % |
| Noninterest expense / average assets | | 2.35 | % | | 2.46 | % | | 2.28 | % | | 2.41 | % | | 2.96 | % |
| Efficiency ratio | | 60.92 | % | | 63.38 | % | | 63.54 | % | | 64.28 | % | | 74.02 | % |
| | | | | | | | | | | | | | | | |
| Operating Selected Performance Ratios (Annualized): | | | | | | | | | | | |||||
| Operating return on average assets^1^ | | 1.19 | % | | 1.14 | % | | 0.79 | % | | 0.93 | % | | 0.67 | % |
| Operating PTPP return on average assets^1^ | | 1.52 | % | | 1.45 | % | | 1.35 | % | | 1.53 | % | | 1.37 | % |
| Operating return on average shareholders' equity^1^ | | 11.05 | % | | 10.34 | % | | 7.57 | % | | 8.58 | % | | 5.22 | % |
| Operating return on average tangible common equity^1^ | | 14.53 | % | | 13.69 | % | | 10.06 | % | | 11.51 | % | | 6.90 | % |
| Operating efficiency ratio^1^ | | 60.32 | % | | 60.86 | % | | 62.25 | % | | 58.95 | % | | 65.46 | % |
| Operating noninterest income / average assets^1^ | | 0.69 | % | | 0.56 | % | | 0.49 | % | | 0.45 | % | | 0.44 | % |
| Operating noninterest expense / average assets^1^ | | 2.34 | % | | 2.37 | % | | 2.25 | % | | 2.23 | % | | 2.63 | % |
| | | | | | | | | | | | | | | | |
| Selected Interest Rates and Yields: | | | | | | | | | | | |||||
| Yield on loans | | 4.67 | % | | 4.72 | % | | 4.71 | % | | 4.87 | % | | 5.35 | % |
| Yield on earning assets, FTE | | 3.88 | % | | 4.01 | % | | 3.88 | % | | 4.22 | % | | 4.83 | % |
| Cost of interest-bearing deposits | | 0.44 | % | | 0.50 | % | | 0.59 | % | | 0.71 | % | | 1.10 | % |
| Cost of total deposits | | 0.33 | % | | 0.38 | % | | 0.44 | % | | 0.54 | % | | 0.91 | % |
| Cost of interest-bearing liabilities | | 0.54 | % | | 0.60 | % | | 0.65 | % | | 0.77 | % | | 1.19 | % |
| Net interest margin, FTE | | 3.48 | % | | 3.57 | % | | 3.39 | % | | 3.63 | % | | 3.90 | % |
| | | | | | | | | | | | | | | | |
| Per Common Share: | | | | | | | |||||||||
| Net income, basic | $ | 0.65 | | $ | 0.60 | | $ | 0.42 | | $ | 0.41 | | $ | 0.19 | |
| Net income, diluted | 0.65 | | 0.59 | | 0.42 | | 0.41 | | 0.19 | | |||||
| Operating earnings, basic¹ | 0.65 | | 0.61 | | 0.44 | | 0.48 | | 0.30 | | |||||
| Operating earnings, diluted¹ | 0.65 | | 0.61 | | 0.44 | | 0.48 | | 0.30 | | |||||
| Book value | 24.10 | | 23.64 | | 22.96 | | 22.57 | | 22.09 | | |||||
| Tangible book value¹ | 18.39 | | 17.92 | | 17.27 | | 16.90 | | 16.40 | | |||||
| Common shares outstanding | 15,104,536 | | 15,107,214 | | 15,233,227 | | 15,216,932 | | 15,221,990 | |
¹See reconciliation of Non-GAAP measures
12
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended | ||||||||||||||
| | Mar | Dec | Sep | Jun | Mar | |||||||||||
| | | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | | |||||
| Operating Earnings: | | | | | | | ||||||||||
| Net income (GAAP) | | $ | 9,756 | | $ | 9,030 | | $ | 6,395 | | $ | 6,174 | | $ | 2,732 | |
| Noninterest income: | | | | | | | ||||||||||
| Securities gains (losses), net | | — | | — | | 9 | | (16) | | — | | |||||
| ADECA termination proceeds | | — | | (465) | | — | | — | | — | | |||||
| Noninterest expenses: | | | | | | | | | | | | |||||
| Merger related and restructuring expenses | | 103 | | 702 | | 290 | | 1,477 | | 2,096 | | |||||
| Income taxes: | | | | | | | | | | | | |||||
| Income tax effect of adjustments | | (27) | | (62) | | (77) | | (382) | | (548) | | |||||
| Operating earnings (Non-GAAP) | | $ | 9,832 | | $ | 9,205 | | $ | 6,617 | | $ | 7,253 | | $ | 4,280 | |
| Operating earnings per common share (Non-GAAP): | | | | | | | ||||||||||
| Basic | | $ | 0.65 | | $ | 0.61 | | $ | 0.44 | | $ | 0.48 | | $ | 0.30 | |
| Diluted | | 0.65 | | 0.61 | | 0.44 | | 0.48 | | 0.30 | | |||||
| | | | | | | | | | | | | | | | | |
| Operating Noninterest Income: | | | | | | | ||||||||||
| Noninterest income (GAAP) | | $ | 5,691 | | $ | 4,976 | | $ | 4,121 | | $ | 3,511 | | $ | 2,818 | |
| Securities gains (losses), net | | — | | — | | 9 | | (16) | | — | | |||||
| ADECA termination proceeds | | — | | (465) | | — | | — | | — | | |||||
| Operating noninterest income (Non-GAAP) | | $ | 5,691 | | $ | 4,511 | | $ | 4,130 | | $ | 3,495 | | $ | 2,818 | |
| Operating noninterest income (Non-GAAP)/average assets^1^ | | 0.69 | % | 0.56 | % | 0.49 | % | 0.45 | % | 0.44 | % | |||||
| | | | | | | | | | | | | | | | | |
| Operating Noninterest Expense: | | | | | | | ||||||||||
| Noninterest expense (GAAP) | | $ | 19,464 | | $ | 19,953 | | $ | 19,167 | | $ | 18,806 | | $ | 18,793 | |
| Merger related and restructuring expenses | | (103) | | (702) | | (290) | | (1,477) | | (2,096) | | |||||
| Operating noninterest expense (Non-GAAP) | | $ | 19,361 | | $ | 19,251 | | $ | 18,877 | | $ | 17,329 | | $ | 16,697 | |
| Operating noninterest expense (Non-GAAP)/average assets^2^ | | 2.34 | % | 2.37 | % | 2.25 | % | 2.23 | % | 2.63 | % | |||||
| | | | | | | | | | | | | | | | | |
| Operating Pre-tax Pre-provision ("PTPP") Earnings: | | | | | | | | | | | | | | | | |
| Net interest income (GAAP) | | $ | 26,260 | | $ | 26,506 | | $ | 26,043 | | $ | 25,746 | | $ | 22,571 | |
| Operating noninterest income | | | 5,691 | | | 4,511 | | | 4,130 | | | 3,495 | | | 2,818 | |
| Operating noninterest expense | | | (19,361) | | | (19,251) | | | (18,877) | | | (17,329) | | | (16,697) | |
| Operating PTPP earnings (Non-GAAP) | | $ | 12,590 | | $ | 11,766 | | $ | 11,296 | | $ | 11,912 | | $ | 8,692 | |
| | | | | | | | | | | | | | | | | |
| Non-GAAP Return Ratios: | | | | | | | ||||||||||
| Operating return on average assets (Non-GAAP)^3^ | | 1.19 | % | 1.14 | % | 0.79 | % | 0.93 | % | 0.67 | % | |||||
| Operating PTPP return on average assets (Non-GAAP)^4^ | | | 1.52 | % | | 1.45 | % | | 1.35 | % | | 1.53 | % | | 1.37 | % |
| Return on average tangible common equity (Non-GAAP)^5^ | | 14.41 | % | 13.43 | % | 9.72 | % | 9.80 | % | 4.41 | % | |||||
| Operating return on average shareholders' equity (Non-GAAP)^6^ | | 11.05 | % | 10.34 | % | 7.57 | % | 8.58 | % | 5.22 | % | |||||
| Operating return on average tangible common equity (Non-GAAP)^7^ | | 14.53 | % | 13.69 | % | 10.06 | % | 11.51 | % | 6.90 | % | |||||
| | | | | | | | | | | | | | | | | |
| Operating Efficiency Ratio: | | | | | | | ||||||||||
| Efficiency ratio (GAAP) | | 60.92 | % | 63.38 | % | 63.54 | % | 64.28 | % | 74.02 | % | |||||
| Adjustment for taxable equivalent yields | | (0.28) | % | (0.30) | % | (0.32) | % | (0.34) | % | (0.34) | % | |||||
| Adjustment for securities gains (losses) | | — | % | — | % | 0.02 | % | (0.04) | % | — | % | |||||
| Adjustment for merger related income and costs | | (0.32) | % | (2.22) | % | (0.99) | % | (4.95) | % | (8.21) | % | |||||
| Operating efficiency ratio (Non-GAAP) | | 60.32 | % | 60.86 | % | 62.25 | % | 58.95 | % | 65.46 | % |
^1^Operating noninterest income (Non-GAAP) is annualized and divided by average assets.
^2^Operating noninterest expense (Non-GAAP) is annualized and divided by average assets.
^3^Operating return on average assets (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average assets.
^4^Operating PTPP return on average assets (Non-GAAP) is the annualized operating PTPP earnings (Non-GAAP) divided by average assets.
^5^Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).
^6^Operating return on average shareholders’ equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average equity.
^7^Operating return on average tangible common equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).
13
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS
| | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended | ||||||||||||||
| | Mar | Dec | Sep | Jun | Mar | |||||||||||
| | | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | | |||||
| Tangible Common Equity: | | | | | | | ||||||||||
| Shareholders' equity (GAAP) | | $ | 364,058 | | $ | 357,168 | | $ | 349,789 | | $ | 343,488 | | $ | 336,200 | |
| Less goodwill and other intangible assets | | 86,350 | | 86,471 | | 86,710 | | 86,327 | | 86,503 | | |||||
| Tangible common equity (Non-GAAP) | | $ | 277,708 | | $ | 270,697 | | $ | 263,079 | | $ | 257,161 | | $ | 249,697 | |
| | | | | | | | | | | | | | | | | |
| Average Tangible Common Equity: | | | | | | | ||||||||||
| Average shareholders' equity (GAAP) | | $ | 360,919 | | $ | 354,026 | | $ | 347,907 | | $ | 339,861 | | $ | 329,692 | |
| Less average goodwill and other intangible assets | | 85,486 | | 86,561 | | 86,206 | | 86,484 | | 80,370 | | |||||
| Average tangible common equity (Non-GAAP) | | $ | 275,433 | | $ | 267,465 | | $ | 261,701 | | $ | 253,377 | | $ | 249,322 | |
| | | | | | | | | | | | | | | | | |
| Tangible Book Value per Common Share: | | | | | | | | | | | | | | | | |
| Book value per common share (GAAP) | | $ | 24.10 | | $ | 23.64 | | $ | 22.96 | | $ | 22.57 | | $ | 22.09 | |
| Adjustment due to goodwill and other intangible assets | | | (5.72) | | | (5.72) | | | (5.69) | | | (5.67) | | | (5.69) | |
| Tangible book value per common share (Non-GAAP)^1^ | | $ | 18.39 | | $ | 17.92 | | $ | 17.27 | | $ | 16.90 | | $ | 16.40 | |
| | | | | | | | | | | | | | | | | |
| Tangible Common Equity to Tangible Assets: | | | | | | | | | | | | | | | | |
| Total Assets | | $ | 3,557,203 | | $ | 3,304,949 | | $ | 3,387,588 | | $ | 3,265,985 | | $ | 2,873,715 | |
| Less goodwill and other intangibles | | | 86,350 | | | 86,471 | | | 86,710 | | | 86,327 | | | 86,503 | |
| Tangible Assets (Non-GAAP): | | $ | 3,470,853 | | $ | 3,218,478 | | $ | 3,300,878 | | $ | 3,179,658 | | $ | 2,787,212 | |
| Tangible common equity to tangible assets (Non-GAAP) | | | 8.00% | | | 8.41% | | | 7.97% | | | 8.09% | | | 8.96% | |
^1^Tangible book value per share is computed by dividing total stockholder's equity, less goodwill and other intangible assets by common shares outstanding.
14
Exhibit 99.2
| INVESTOR CALL<br>1Q 2021<br>April 21, 2021, 10:00am<br>Webcast: www.smartbank.com<br>(Investor Relations)<br>Audio Only: 888-317-6003<br>Confirmation #: 6293687<br>Miller Welborn<br>Chairman of the Board<br>Billy Carroll<br>President & CEO |
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| Legal Disclaimer<br>2<br>Forward-Looking Statements<br>This presentation may contain statements that are based on management’s current estimates or<br>expectations of future events or future results, and that may be deemed to constitute forward-<br>looking statements as defined under the Private Securities Litigation Reform Act of 1995. These<br>statements, including statements regarding the effects of the COVID-19 pandemic on<br>SmartFinancial’s business and financial results and conditions, are not historical in nature and can<br>generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,”<br>“may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks,<br>uncertainties, and other factors that may cause the actual results of SmartFinancial to differ<br>materially from future results expressed or implied by such forward-looking statements. Such<br>risks, uncertainties, and other factors include, among others, (1) the risk of litigation and<br>reputational risk associated with historic acquisition activity;(2) the risk that cost savings and<br>revenue synergies from recently completed acquisitions may not be realized or may take longer<br>than anticipated to realize;(3) disruption from recently completed acquisitions with customer,<br>supplier, employee, or other business relationships;(4) our ability to successfully integrate the<br>businesses acquired as part of previous acquisitions with the business of SmartBank;(5) risks<br>related to the proposed acquisition of Sevier County Bancshares (“SCB”);(6) the risk that the<br>anticipated benefits from the proposed acquisition of SCB may not be realized in the time frame<br>anticipated;(7) changes in management’s plans for the future;(8) prevailing, or changes in,<br>economic or political conditions, particularly in our market areas;(9) credit risk associated with our<br>lending activities;(10) changes in interest rates, loan demand, real estate values, or competition;<br>(11) changes in accounting principles, policies, or guidelines;(12) changes in applicable laws,<br>rules, or regulations, including changes to statutes, regulations or regulatory policies or practices<br>as a result of, or in response to, COVID-19;(13) adverse results from current or future litigation,<br>regulatory examinations or other legal and/or regulatory actions, including as a result of the<br>Company’s participation in and execution of government programs related to the COVID-19<br>pandemic;(14) the impact of the COVID-19 pandemic on the Company’s assets, business, cash<br>flows, financial condition, liquidity, prospects and results of operations;(15) potential increases in<br>the provision for loan losses resulting from the COVID-19 pandemic; and (16) other general<br>competitive, economic, political, and market factors, including those affecting our business,<br>operations, pricing, products, or services. These and other factors that could cause results to<br>differ materially from those described in the forward-looking statements can be found in<br>SmartFinancial’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and<br>current reports on Form 8-K, in each case filed with or furnished to the Securities and Exchange<br>Commission (the “SEC”) and available on the SEC’s website (www.sec.gov). Undue reliance<br>should not be placed on forward-looking statements. SmartFinancial disclaims any obligation to<br>update or revise any forward-looking statements contained in this release, which speak only as of<br>the date hereof, whether as a result of new information, future events, or otherwise.<br>Non-GAAP Financial Measures<br>Statements included in this presentation include Non-GAAP financial measures and should be read along with<br>the accompanying tables, which provide a reconciliation of Non-GAAP financial measures to GAAP financial<br>measures. SmartFinancial management uses several Non-GAAP financial measures, including:(i) operating<br>earnings, (ii) operating return on average assets, (iii) operating return on average shareholder equity, (iv)<br>return on average tangible common equity, (v) operating return on average tangible common equity, (vi)<br>operating efficiency ratio;(vii) tangible common equity;(viii) average tangible common equity;(ix) tangible<br>book value;(x) operating pre-tax pre-provision earnings;(xi) operating noninterest income;(xii) operating<br>noninterest expense;(xiii) tangible assets; and ratios derived therefrom, in its analysis of the company's<br>performance. Operating earnings excludes the following from net income: securities gains and losses,<br>proceeds related to the termination of an Alabama Department of Economic and Community Affairs<br>(“ADECA”) loan program, merger related and restructuring expenses, and the income tax effect of<br>adjustments. Operating return on average assets is the annualized operating earnings (Non-GAAP) divided by<br>average assets. Operating return on average shareholder equity is the annualized operating earnings (Non-<br>GAAP) divided by average equity. Return on average tangible common equity is the annualized net income<br>divided by average tangible common equity (Non-GAAP). Operating return on average tangible common<br>equity is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-<br>GAAP). The operating efficiency ratio includes an adjustment for taxable equivalent yields and excludes<br>securities gains and losses and merger related and restructuring expenses from the efficiency ratio. Tangible<br>common equity and average tangible common equity excludes goodwill and other intangible assets from<br>shareholders’ equity and average shareholders’ equity. Tangible book value excludes goodwill and other<br>intangible assets less shareholders’ equity divided by common shares outstanding. Operating pre-tax pre-<br>provision earnings is net interest income plus operating noninterest income (Non-GAAP) less operating<br>noninterest expense (Non-GAAP). Operating noninterest income excludes the following from noninterest<br>income: securities gains and losses, proceeds related to the termination of the ADECA loan program.<br>Operating noninterest expense excludes the following from noninterest expense: prior year adjustments to<br>salaries, merger related and restructuring expenses and certain franchise tax true-up expenses. Tangible<br>assets excludes goodwill and other intangibles from total assets. Management believes that Non-GAAP<br>financial measures provide additional useful information that allows investors to evaluate the ongoing<br>performance of the company and provide meaningful comparisons to its peers. Management believes these<br>non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and<br>allow investors and company management to view our operating results excluding the impact of items that are<br>not reflective of the underlying operating performance. Non-GAAP financial measures should not be<br>considered as an alternative to any measure of performance or financial condition as promulgated under<br>GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under<br>GAAP and all other relevant information when assessing the performance or financial condition of the<br>company. Non-GAAP financial measures have limitations as analytical tools, and investors should not<br>consider them in isolation or as a substitute for analysis of the results or financial condition as reported under<br>GAAP. |
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| Overview of SmartFinancial<br>3 Financial data as of or for the three months ended 3/31/21<br>Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix<br>SmartFinancial, Inc. (Nasdaq: SMBK) is a $3.6 billion<br>asset bank holding company headquartered in<br>Knoxville, Tennessee<br>▪ Operates one subsidiary bank, SmartBank, which was founded in<br>January 2007<br>▪ Located primarily in attractive, high-growth markets throughout<br>East/Mid Tennessee, Alabama and the Florida Panhandle<br>▪ 479 full-time equivalent employees<br>Balance Sheet (3/31/21)<br>▪ Assets: $3.6 billion<br>▪ Gross Loans: $2.5 billion<br>▪ Deposits: $3.0 billion<br>▪ Shareholders’ Equity / Tangible Common Equity (Non-GAAP):<br>$364.1 million / $277.7 million<br>Profitability (Q1 ’21)<br>▪ Net Income / Operating Earnings (Non-GAAP): $9.8 million / $9.8<br>million<br>▪ Operating Pre-Tax Pre-Provision Earnings (Non-GAAP): $12.6<br>million<br>▪ ROAA / Operating ROAA (Non-GAAP): 1.18% / 1.19%<br>▪ ROATCE / Operating ROATCE (Non-GAAP): 14.41% / 14.53%<br>▪ Efficiency Ratio / Operating Efficiency Ratio (Non-GAAP): 60.9% /<br>60.3%<br>Asset Quality<br>▪ Superior asset quality and proven credit culture<br>▪ NPAs / Total Assets of 0.29%<br>▪ Allowance / Total Loans: 0.74%<br>Regularly Quarterly Dividend<br>▪ Declared quarterly cash dividend of $0.06 per share<br>Footprint:<br>35 full service<br>branches<br>1 LPO |
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| Culture<br>We are building a culture where Associates thrive<br>and are empowered to be leaders. The core values<br>that we have established as a company help us<br>operate in unison and have become a critical part of<br>our culture. Our Associates are key to SmartBank’s<br>success.<br>POSITIONING STATEMENT<br>At SmartBank, delivering unparalleled value to our<br>Shareholders, Associates, Clients and the<br>Communities we serve drives every decision and<br>action we take. Exceptional value means being<br>there with smart solutions, fast responses and<br>deep commitment every single time. By doing this,<br>we will create the Southeast’s next, great community<br>banking franchise. 4 |
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| Sevier County Bank: A Multi-Generational Legacy<br>5<br>CRE<br>55%<br>Cons.<br>RE<br>20%<br>C&D<br>5%<br>C&I/Ag<br>9%<br>Cons./<br>Other<br>11%<br>NIB<br>13%<br>IB<br>Non-<br>Time<br>51%<br>Time<br>36%<br>▲ Founded in 1909, Sevier County Bank is a historic<br>community bank with a legacy of long-term client<br>relationships<br>▲ 2019 recapitalization accompanied by complimentary<br>management additions and organizational<br>improvements<br>▲ 2020 expansion into Richmond, VA with highly<br>experienced commercial lending team<br>▲ Customer oriented approach to business<br>▲ Strong cultural and philosophical alignment between<br>the two organizations<br>Company Overview<br>Key Metrics - 12/31/20 Loan and Deposit Mix<br>$424 mm<br>Total Assets<br>$246 mm<br>Gross Loans<br>$381 mm<br>Total Deposits<br>+$5 mm<br>Net Income<br>Contribution1<br>7<br>Branches<br>#4<br>DMS Sevier<br>County2<br>Source: S&P Global Market Intelligence<br>1) Net income contribution based on 2020 pre-tax, pre-provision income adjusted for 25% normalized tax rate and 63% expected cost synergies – See 8-K filing 4/14/2021<br>2) Deposit Market Share based on FDIC deposit data as of June 30, 2020 for Sevier County, TN<br>SMBK SVRH<br>TN / VA Branch Footprint |
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| Key Transaction Terms<br>6<br>▲ SVRH to merge into SMBK, followed by the merger of Sevier County Bank into SmartBank<br>▲ 100% stock consideration; cash election for shareholders with <20,000 shares (~10% of shares)1<br>▲ Tax-free reorganization at the corporate level<br>▲ Fixed exchange ratio<br>▲ SVRH shareholders will receive 0.4116 SMBK shares for each share of SVRH<br>▲ Aggregate deal value of $38.2 million2<br>▲ Implied value of $8.75 per SVRH share<br>▲ 1.28x SVRH’s tangible book value3<br>▲ 1,797,242 shares of SMBK common stock to be issued to SVRH shareholders<br>▲ Approximately 89% SMBK / 11% SVRH<br>▲ $2.0 million or approximately 5% of transaction value<br>▲ SVRH Executive Chairman John Presley to join the SMBK Board of Directors<br>▲ SVRH management to support SMBK to ensure a successful integration and client continuity<br>▲ Customary regulatory and stockholder approval for SVRH shareholders<br>▲ Anticipated closing in third quarter of 2021<br>1) Total SVRH shares outstanding of 4,366,477 including restricted stock units which will vest upon the change-in-control<br>2) Based on SMBK’s closing stock price of $21.25 as of 4/13/21<br>3) SVRH tangible book value per share based on SVRH’s 12/31/20 tangible common equity / 4,366,477 shares and restricted stock units outstanding – See 8-K filing 4/14/2021<br>Structure<br>Exchange<br>Ratio<br>Implied<br>Transaction Value<br>Pro Forma<br>Ownership<br>Governance<br>Approval and<br>Closing<br>Termination Fee |
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| 7<br>New Regional President and Commercial Banking Lift-Out Adds Top-Tier Talent to the Gulf Coast<br>Attractive Gulf Coast Market Area Robust Talent Expansion<br> -<br> 2.0<br> 4.0<br> 6.0<br> 8.0<br> 10.0<br> 12.0<br> 14.0<br> 16.0<br>Destin Mobile Pensacola Fairhope SMBK*<br>2021<br>-<br>2026 Av erage HHI Growth (%)<br>Metropolitan Statistical Area<br> -<br> 10,000<br> 20,000<br> 30,000<br> 40,000<br> 50,000<br> 60,000<br> 70,000<br> 80,000<br> 90,000<br> 100,000<br>Destin Mobile Pensacola Fairhope SMBK*<br>Av erage Household Income (HHI) ($)<br>Metropolitan Statistical Area<br>▲ Nate Sommer has joined SmartBank as the new Coastal Market<br>Regional President:<br>• Former regional bank Gulf Coast CEO<br>• 12+ years of Gulf Coast relationship and team management experience<br>• Based out of the new proposed Mobile, Alabama SmartBank office<br>▲ Nate is joined by seven other key members of his former team:<br>• Four seasoned commercial banking professionals<br>• Three long-tenured portfolio managers<br>▲ Significant business managed by the team:<br>• Large commercial and private bank loan book<br>• Strong treasury management relationships<br>• Experienced in utilization of derivatives to drive revenue<br>▲ Deep expertise in the areas of:<br>• Commercial Banking<br>• Commercial Real Estate<br>▲ Team to be augmented by new SmartBank Head of Capital Markets:<br>• Former Director of a regional bank Interest Rate Derivative Products group<br>• Provides in-house derivatives services for commercial banking clients<br>▲ Alabama’s Gulf Coast region is home to a growing economy fueled<br>by diverse manufacturing including maritime, aerospace, chemical,<br>healthcare, steel and other sectors<br>▲ Fairhope, AL MSA (Baldwin County) is among the nation’s fastest<br>growing areas in both manufacturing and tourism<br>▲ Destin, FL MSA is home to an extensive hospitality/tourism industry<br>with a substantial aerospace/defense presence<br>▲ Pensacola, FL has a thriving tourism industry, Northwest Florida’s<br>most diverse deep-water port and is home to Naval Air Station<br>Pensacola employing more than 16,000 military and 7,400 civilian<br>personnel<br>Source: S&P Global Market Intelligence, www.floridawesteda.com, www.visitpensacola.org, www.navymwrpensacola.com, www.flightworksalabama.com, www.airbusalabama.com, www.mobilechamber.com<br>*SMBK franchise weighted average by MSA<br>Building Strength in the Gulf Coast<br>• Business Banking<br>• Private Banking<br>• Government Banking |
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| First Quarter Financial Highlights |
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| Quarterly Highlights<br>9 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix<br>($ in thousands, except per share data) 1Q21 4Q20 Change<br>Net interest income 26,260 $ 26,506 $ (246) $<br>Provision for loan losses 67 - 67<br>Noninterest income 5,691 4,976 715<br>Noninterest expense 19,464 19,953 (489)<br>Income tax expense 2,664 2,499 165<br>Net income 9,756 9,030 726<br>Non-GAAP Reconciliations<br>Noninterest income - (465) 465<br>Noninterest expense 103 702 (599)<br>Income taxes (27) (62) 35<br>Operating earnings (Non-GAAP) 9,832 $ 9,205 $ 627 $<br>Operating Pre-Tax Pre-Provision Earnings 12,590 $ 11,766 $ 824 $<br>Non-GAAP Performance Metrics<br>Diluted operating earnings per share 0.65 $ 0.61 $ 0.04 $<br>Tangible book value per share 18.39 17.92 0.47<br>Operating return on average assets 1.19% 1.14% 0.05%<br>Operating PTPP return on average assets 1.52% 1.45% 0.07%<br>Operating return on average tangible common equity 14.5% 13.7% 0.8%<br>Operating efficiency ratio 60.3% 60.9% (0.5%) |
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| Performance Trends<br>10<br>$2,391 $2,390 $2,449<br>$2,874<br>$3,266<br>$3,388 $3,305<br>$3,557<br> $-<br> $500<br> $1,000<br> $1,500<br> $2,000<br> $2,500<br> $3,000<br> $3,500<br> $4,000<br>2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21<br>Assets Loans Deposits<br>Total Assets, Loans, and Deposits<br>($ in millions) |
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| Performance Trends<br>11 (1) Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix<br>0.67%<br>0.93%<br>0.79%<br>1.14% 1.19%<br>1.37%<br>1.53%<br>1.35%<br>1.45% 1.52%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>1.00%<br>1.20%<br>1.40%<br>1.60%<br>1.80%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>ROAA Operating ROAA ⁽¹⁾ Operating PTPP ROAA ⁽¹⁾<br>6.9%<br>11.5%<br>10.1%<br>13.7%<br>14.5%<br>0.0%<br>2.0%<br>4.0%<br>6.0%<br>8.0%<br>10.0%<br>12.0%<br>14.0%<br>16.0%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>ROATCE ⁽¹⁾ Operating ROATCE ⁽¹⁾<br>ROAA (%): Reported, Operating, Operating PTPP ROAA<br>ROATCE (%) |
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| Performance Trends<br>12 (1) Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix<br>$22.09<br>$22.57 $22.96<br>$23.64<br>$24.10<br>$16.40<br>$16.90 $17.27<br>$17.92<br>$18.39<br>$15.00<br>$17.00<br>$19.00<br>$21.00<br>$23.00<br>$25.00<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Book Value Tangible Book Value ⁽¹⁾<br>74.0%<br>64.3% 63.5% 63.4%<br>60.9%<br>45.0%<br>50.0%<br>55.0%<br>60.0%<br>65.0%<br>70.0%<br>75.0%<br>80.0%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Efficiency Ratio Operating Efficiency Ratio ⁽¹⁾<br>Book Value per Share<br>Efficiency Ratio (%) |
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| Net Interest Income<br>13<br>3.90% 3.63% 3.39% 3.57% 3.48%<br>5.35%<br>4.87% 4.71% 4.72% 4.67%<br>0.00%<br>1.00%<br>2.00%<br>3.00%<br>4.00%<br>5.00%<br>6.00%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Net Interest Margin (FTE) Loan Yield<br>Cost of Funds Interest Bearing Liabilities<br>Average Yields and Rates Net Interest Margin<br>Liquidity Funding Sources<br>($ in millions)<br>1Q21 4Q20 Change<br>Loans, less accretion & PPP fees 4.00% 4.23% (0.23%)<br>Accretion 0.27% 0.13% 0.14%<br>PPP Fees 0.40% 0.36% 0.04%<br>Loans including fees 4.67% 4.72% (0.05%)<br>Loans held for sale 3.82% 3.45% 0.37%<br>Taxable securities 2.15% 2.02% 0.13%<br>Tax-exempt securities (FTE) 1.82% 2.01% (0.19%)<br>Federal funds and other investments 0.28% 0.35% (0.07%)<br>Interest earning asset yields 3.88% 4.01% (0.13%)<br>Total interest-bearing deposits 0.44% 0.50% (0.06%)<br>Borrowings 0.58% 0.57% 0.01%<br>Subordinated debt 6.01% 5.90% 0.11%<br>Total interest-bearing liabilities 0.54% 0.60% (0.06%)<br>Net interest margin (FTE) 3.48% 3.57% (0.09%)<br>Cost of funds 0.41% 0.46% (0.05%)<br>($ in thousands)<br>Net interest income (FTE) 26,410 $ 26,656 $ (246) $<br>Average earning assets 3,080,897 2,970,900 109,997<br>1Q21 4Q20 Change<br>Cash and cash equivalents 556.7 $ 481.7 $ 75.0 $<br>Unpledged investment securities 133.3 120.4 12.9<br>Correspondent banks 69.6 69.6 -<br>FRB discount window 149.3 149.2 0.1<br>FHLB 32.8 35.5 (2.7)<br>Holding company line of credit 25.0 25.0 -<br>Total 966.7 $ 881.4 $ 85.3 $ |
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| Noninterest Income<br>14 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix<br>$2,818<br>$3,495<br>$4,130<br>$4,511<br>$5,691<br> $-<br> $500<br> $1,000<br> $1,500<br> $2,000<br> $2,500<br> $3,000<br> $3,500<br> $4,000<br> $4,500<br> $5,000<br> $5,500<br> $6,000<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Service charges on deposit accounts Mortgage banking income Insurance commissions<br>Investment services income Interchange fees Other noninterest income<br>Operating Noninterest Income (Non-GAAP)<br>($ in millions) |
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| Noninterest Income Strategic Goals<br>15<br>Enhanced CRM and synergy initiatives for increased revenues<br>Increased efficiency across all units<br>Digital innovation to enhance customer experience |
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| Noninterest Expense<br>16 Note: For a reconciliation of Non-GAAP financial measures to their most directly comparable GAAP measures, see the Appendix<br>Operating Noninterest Expense (Non-GAAP)<br>($ in millions)<br>$16,697 $17,329<br>$18,877 $19,251 $19,361<br> $-<br> $2,000<br> $4,000<br> $6,000<br> $8,000<br> $10,000<br> $12,000<br> $14,000<br> $16,000<br> $18,000<br> $20,000<br> $22,000<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Salaries & benefits Occupancy & equipment Data processing & technology Amortization of intangibles Professional services Other |
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| Attractive Deposit Mix<br>17<br>Noninterest Demand<br>26%<br>Interest-Bearing Demand<br>22%<br>Money Market and<br>Savings<br>35%<br>Time Deposits<br>17%<br>Deposit Composition (3/31/21)<br>$2,342<br>$2,540<br>$2,652<br>$2,805<br>$3,048<br> $-<br> $500<br> $1,000<br> $1,500<br> $2,000<br> $2,500<br> $3,000<br> $3,500<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Noninterest Demand Interest-Bearing Demand<br>Money Market and Savings Time Deposits<br>Historical Deposit Composition<br>($ in millions)<br>0.00%<br>0.50%<br>1.00%<br>1.50%<br>2.00%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Cost of Deposits Fed Funds Target<br>Cost of Interest Bearing Liabilities<br>Historical Cost of Deposits |
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| Overview of Loan Portfolio<br>18<br>Loan Composition (3/31/21) Historical Loan Composition<br>($ in millions)<br>CRE Ratios<br>C&I<br>28%<br>C&D<br>12%<br>CRE, Owner Occupied<br>19%<br>CRE, Non Owner<br>Occupied<br>24%<br>Consumer RE<br>17%<br>$2,139<br>$2,408 $2,404 $2,382<br>$2,487<br> $-<br> $500<br> $1,000<br> $1,500<br> $2,000<br> $2,500<br> $3,000<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>C&D CRE, Owner Occupied CRE, Non Owner Occupied Consumer RE<br>274.6%<br>89.5%<br>0%<br>100%<br>200%<br>300%<br>400%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>CRE C&D |
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| Asset Quality<br>19<br>Credit Quality<br>▪ COVID-19 modified loans declined to 0.07% of the<br>total loan portfolio<br>▪ COVID-19 modified loans in the hospitality and<br>restaurant segments declined to 0.00% of the total<br>loan portfolio<br>▪ Asset quality remains strong with nonperforming<br>assets to total assets of 0.29%<br>▪ Credit quality remains strong with classified loans /<br>total loans of 0.39%<br>$15,821<br>$9,005<br>$6,089<br>$9,606<br>$11,756<br>0.74%<br>0.37%<br>0.25%<br>0.40% 0.47%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>1.00%<br>1.20%<br>1.40%<br>1.60%<br>1.80%<br> $-<br> $5,000<br> $10,000<br> $15,000<br> $20,000<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Total Delinquent and Nonaccrual Loans<br>Total Delinquent and Nonaccrual Loans / Total Loans<br>Delinquent and Nonaccruals / Total Loans<br>($ in thousands)<br>0.39%<br>0.27% 0.29%<br>0.44%<br>0.39%<br>0.00% 0.00% 0.01%<br>0.08%<br>0.01%<br>0.00%<br>0.05%<br>0.10%<br>0.15%<br>0.20%<br>0.25%<br>0.30%<br>0.35%<br>0.40%<br>0.45%<br>0.50%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Classified Loans / Total Loans Net Chargeoffs<br>$8,963 $9,300<br>$6,180<br>$10,401 $10,180<br>0.00%<br>0.50%<br>1.00%<br>1.50%<br> $-<br> $5,000<br> $10,000<br> $15,000<br> $20,000<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Nonperforming Loans OREO Nonperforming Assets / Total Assets<br>Nonperforming Assets<br>($ in thousands) |
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| Paycheck Protection Program<br>20<br>2020 PPP Vintage<br>($ in thousands)<br>2021 PPP Vintage<br>($ in thousands)<br>Source: Company information<br>Note: As of March 31, 2021<br>PPP Forgiven, 27%<br>PPP Remaining Balance, 73%<br>Originated O/S Balance Forgiven<br># of Loans 2,957 2,479 478<br>Total Loan Balance 300,789 $ 218,767 $ 82,022 $<br>Total Fees 10,068 $ 1,908 $<br># of Loans 1,231<br>Total Loan Balance 119,526 $<br>Total Fees 5,565 $<br>Originated<br>2020 PPP Forgiveness |
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| Reserve Reconciliation<br>21<br>0.00%<br>0.30%<br>0.60%<br>0.90%<br> $-<br> $5<br> $10<br> $15<br> $20<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Allowance for Loan Losses Acquired Loan Fair Value Discounts Allowance for Loan Losses / Total Loans<br>Total Reserves<br>($ in millions)<br>($ in thousands) 1Q20 2Q20 3Q20 4Q20 1Q21<br>Allowance for Loan Losses - Originated 12,412 $ 14,590 $ 16,704 $ 16,464 $ 16,412 $<br>Allowance for Loan Losses - Acquired 1,019 1,664 2,113 1,882 1,958<br>Acquired Loan Fair Value Discounts 17,237 16,187 15,141 14,467 12,951<br>Total Reserves 30,668 $ 32,441 $ 33,958 $ 32,813 $ 31,321 $<br>Originated Loans 1,621,128 $ 1,639,805 $ 1,673,985 $ 1,708,686 $ 1,802,436 $<br>SBA PPP Loans - 292,774 300,788 288,893 338,164<br>Acquired Loans 518,119 475,705 429,284 384,664 346,529<br>Total Loans 2,139,247 $ 2,408,284 $ 2,404,057 $ 2,382,243 $ 2,487,129 $<br>Allowance / Total Loans 0.63% 0.67% 0.78% 0.77% 0.74%<br>Allowance / Total Loans, less PPP Loans - 0.77% 0.89% 0.88% 0.85%<br>Allowance / Originated Loans, less PPP Loans 0.77% 0.89% 1.00% 0.96% 0.93%<br>Allowance / Acquired Loans 0.20% 0.35% 0.49% 0.49% 0.46%<br>Discount / Acquired Loans 3.33% 3.40% 3.53% 3.76% 3.60%<br>Total Reserves / Total Loans 1.43% 1.35% 1.41% 1.38% 1.26%<br>Total Reserves / Total Loans, less PPP Loans 1.43% 1.53% 1.61% 1.57% 1.46% |
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| Current Capital Position<br>22<br>CET1 Ratio (%)<br>Basel III Regulatory Capital Minimum To Be Considered “Well Capitalized”<br>Note: Data as of the three months ended each respective quarter<br>8.96%<br>8.09% 7.97% 8.41% 8.00%<br>0.0%<br>4.0%<br>8.0%<br>12.0%<br>16.0%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>TCE / TA (%)<br>10.28%<br>8.83% 8.78% 8.69% 8.55%<br>0.0%<br>4.0%<br>8.0%<br>12.0%<br>16.0%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Leverage Ratio (%)<br>Well Cap.<br>5%<br>10.87% 10.92% 11.33% 11.61% 11.30%<br>0.0%<br>4.0%<br>8.0%<br>12.0%<br>16.0%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Well Cap.<br>6.5%<br>13.13% 13.25% 13.81% 14.07% 13.63%<br>0.0%<br>4.0%<br>8.0%<br>12.0%<br>16.0%<br>1Q20 2Q20 3Q20 4Q20 1Q21<br>Total Risk-Based Capital Ratio (%)<br>Well Cap.<br>10% |
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| Appendix |
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| Non-GAAP Reconciliation<br>24<br>1. Operating return on average assets (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average assets.<br>2. Operating PTPP return on average assets (Non-GAAP) is the annualized operating PTPP earnings (Non-GAAP) divided by average assets.<br>3. Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).<br>4. Operating return on average shareholders’ equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average shareholder equity.<br>5. Operating return on average tangible common equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average tangible common equity (Non-GAAP).<br>6. Note: “ADECA” represents a program administered by the Alabama Department of Economic and Community Affairs<br>($ in thousands, except per share data) 1Q21 4Q20 3Q20 2Q20 1Q20<br>Operating Earnings<br>Net income (GAAP) $ 9,756 $ 9,030 $ 6,395 $ 6,174 2,732 $<br>Noninterest income:<br>Securities (gains) losses - - 9 (16) -<br>ADECA termination proceeds - (465) - - -<br>Noninterest expenses:<br>Merger related and restructuring expenses 103 702 290 1,477 2,096<br>Income taxes:<br>Income tax effect of adjustments (27) (62) (77) (382) (548)<br> Operating earnings (Non-GAAP) $ 9,832 $ 9,205 $ 6,617 $ 7,253 4,280 $<br>Operating earnings per common share:<br>Basic $ 0.65 $ 0.61 $ 0.44 $ 0.48 $ 0.30<br>Diluted 0.65 0.61 0.44 0.48 0.30<br>Operating Noninterest Income<br>Noninterest income (GAAP) $ 5,691 $ 4,976 $ 4,121 $ 3,511 2,818 $<br>Securities (gain) losses - - 9 (16) -<br>ADECA termination proceeds - (465) - - -<br>Operating noninterest income (Non-GAAP) $ 5,691 $ 4,511 $ 4,130 $ 3,495 2,818 $<br>Operating Noninterest Expense<br>Noninterest expense (GAAP) $ 19,464 $ 19,953 $ 19,167 $ 18,806 18,793 $<br>Merger related and restructuring charges (103) (702) (290) (1,477) (2,096)<br>Operating noninterest expense (Non-GAAP) $ 19,361 $ 19,251 $ 18,877 $ 17,329 16,697 $<br>Operating Pre-Tax Pre-Provison ("PTPP") Earnings<br>Net interest income (GAAP) $ 26,260 $ 26,506 $ 26,043 25,746 $ 22,571 $<br>Operating noninterest income (Non-GAAP) 5,691 4,511 4,130 3,495 2,818<br>Operating noninterest expense (Non-GAAP) (19,361) (19,251) (18,877) (17,329) (16,697)<br> Operating PTPP earnings (Non-GAAP) $ 12,590 $ 11,766 $ 11,296 11,912 $ 8,692 $<br>Non-GAAP Return Ratios<br>Operating return on average assets (Non-GAAP)(1) 1.19% 1.14% 0.79% 0.93% 0.67%<br>Operating PTPP return on average assets (Non-GAAP)(2) 1.52% 1.45% 1.35% 1.53% 1.37%<br>Return on average tangible common equity (Non-GAAP)(3) 14.41% 13.43% 9.72% 9.80% 4.41%<br>Operating return on average shareholders' equity (Non-GAAP)(4) 11.05% 10.34% 7.57% 8.58% 5.22%<br>Operating return on average tangible common equity (Non-GAAP)(5) 14.53% 13.69% 10.06% 11.51% 6.90%<br>Operating Efficiency Ratio<br>Efficiency ratio (GAAP) 60.92% 63.38% 63.54% 64.28% 74.02%<br>Adjustment for taxable equivalent yields (0.28%) (0.30%) (0.32%) (0.34%) (0.34%)<br>Adjustment for securities gains (losses) -- 0.02% (0.04%) -<br>Adjustment for merger expenses (0.32%) (2.22%) (0.99%) (4.95%) (8.21%)<br>Operating efficiency ratio (Non-GAAP) 60.32% 60.86% 62.25% 58.95% 65.46% |
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| Non-GAAP Reconciliation<br>25<br>1. Book value per share is computed by dividing total stockholders’ equity by common shares outstanding. Tangible book value per share is computed by dividing total stockholders’<br>equity, less goodwill and other intangible assets by common shares outstanding<br>($ in thousands, except per share data) 1Q21 4Q20 3Q20 2Q20 1Q20<br>Tangible Common Equity:<br>Shareholders' equity (GAAP) $ 364,058 $ 357,168 $ 349,789 $ 343,488 336,200 $<br>Less goodwill and other intangible assets 86,350 86,471 86,710 86,327 86,503<br>Tangible Common Equity (Non-GAAP) $ 277,708 $ 270,697 $ 263,079 $ 257,161 249,697 $<br>Average Tangible Common Equity:<br>Average shareholders' equity (GAAP) $ 360,919 $ 354,026 $ 347,907 $ 339,861 329,692 $<br>Less goodwill and other intangible assets 85,486 86,561 86,206 86,484 80,370<br>Average Tangible Common Equity (Non-GAAP) $ 275,433 $ 267,465 $ 261,701 $ 253,377 249,322 $<br>Tangible Book Value per Common Share:<br>Book value per common share (GAAP) $ 24.10 $ 23.64 $ 22.96 $ 22.57 $ 22.09<br>Adjustment due to goodwill and other intangible assets (5.72) (5.72) (5.69) (5.67) (5.69)<br>Tangible book value per common share (Non-GAAP)(1) $ 18.39 $ 17.92 $ 17.27 $ 16.90 $ 16.40<br>Tangible Common Equity to Tangible Assets:<br>Total Assets $3,557,203 $3,304,909 $3,387,588 $3,265,985 $2,873,715<br>Less goodwill and other intangibles 86,350 86,471 86,710 86,327 86,503<br>Tangible Assets (Non-GAAP): $3,470,833 $3,218,478 $3,300,878 $3,179,658 $2,787,212<br>Tangible common equity to tangible assets (Non-GAAP): 8.00% 8.41% 7.97% 8.09% 8.96% |
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| Investor Contact<br>26<br>Billy Carroll<br>President & CEO<br>865.868.0613<br>billy.carroll@smartbank.com<br>Miller Welborn<br>Chairman<br>423.385.3067<br>miller.welborn@smartbank.com<br>5401 Kingston Pike, Suite 600<br>Knoxville, TN 37919 |
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