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KNOXVILLE, TN – July 20, 2021 – SmartFinancial, Inc. (“SmartFinancial” or the “Company”; NASDAQ: SMBK), today announced net income of $8.8 million, or $0.58 per diluted common share, for the second quarter of 2021, compared to net income of $6.2 million, or $0.41 per diluted common share, for the second quarter of 2020, and compared to net income of $9.8 million, or $0.65 per diluted common share, for the first quarter of 2021.  Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $9.1 million, or $0.60 per diluted common share, in the second quarter of 2021, compared to $7.3 million, or $0.48 per diluted common share, in the second quarter of 2020, and compared to $9.8 million, or $0.65 per diluted common share, in the first quarter of 2021.

Highlights for the Second Quarter of 2021

  • Net organic loan growth of over $87 million, a 16.3% annualized quarter-over-quarter increase
  • Operating earnings (non-GAAP) of $9.1 million, or $0.60 per diluted share
  • Tangible book value per share (Non-GAAP) of $18.69, a 6.5% annualized quarter-over-quarter increase
  • Announced the $38.1 million proposed acquisition of Sevier County Bancshares
  • Announced and completed the acquisition of Fountain Equipment Finance (“Fountain”)
  • Hired three seasoned commercial banking team members in Auburn, Alabama

Billy Carroll, President & CEO, stated: “Our team continues to execute at a very high level, as evidenced by another nice quarter.  Growth has continued to be very strong, and our sales team are capitalizing on our outstanding markets.  We are also extremely excited to open SmartBank Auburn and continue to organically build out our Alabama footprint.”

SmartFinancial’s Chairman, Miller Welborn, concluded: “Another incredibly solid quarter by our team. Our Board could not be more excited about the trajectory of our company. We continue to execute our growth strategy for loans, deposits and earnings and remain extremely bullish on our Company’s future.”

Net Interest Income and Net Interest Margin

Net interest income was $26.9 million for the second quarter of 2021, compared to $26.3 million for the first quarter of 2021. Average earning assets totaled $3.3 billion, an increase of $218.2 million. The growth was primarily driven by an increase in average cash and cash equivalents of $114.0 million, average securities of $26.9 million and average loans and leases of $79.9 million of which $35.7 million of the increase is related to the acquisition of Fountain during the second quarter.  Average interest-bearing liabilities increased $157.3 million, directly related to continued core deposit growth.

The tax equivalent net interest margin was 3.29% for the second quarter of 2021, compared to 3.48% for the first quarter of 2021. The tax equivalent net interest margin was impacted by a 23 basis point decrease in the average yield on interest-earning assets and offset by a 5 basis point decline in the rate on interest-bearing liabilities over the prior quarter.  The decrease in yield on interest-earning assets was primarily driven by a decreased level of loan discount accretion and Payroll Protection Program (“PPP”) fee accretion and additional excess liquidity from the significant deposit growth experienced during the first six months of 2021.  We recognized $1.1 million less of loan discount accretion and PPP fee accretion during the second quarter of 2021 when compared to the first quarter of 2021. However, the interest-earning yield compression was partially offset by the acquisition of Fountain, resulting in a positive margin impact of 13 basis points.

The lower yields on interest-earning assets continue to be mitigated, in part, by a lower cost of funds.  The yield on interest-bearing liabilities decreased to 0.49% for the second quarter of 2021 when compared to 0.54% for the first quarter of 2021. The cost of average interest-bearing deposits was 0.39% for the second quarter of 2021 compared to 0.44% for the first quarter of 2021, a decrease of 5 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, which decreased 14 basis points during the period.  The cost of total deposits for the second quarter of 2021 was 0.29% compared to 0.33% in the first quarter of 2021.

The following table presents selected interest rates and yields for the periods indicated:

 

Three Months Ended    
Jun Mar Increase
Selected Interest Rates and Yields 2021 2021 (Decrease)
Yield on loans and leases  4.52 %  4.67 %  (0.15) %
Yield on earning assets, FTE  3.65 %  3.88 %  (0.23) %
Cost of interest-bearing deposits  0.39 %  0.44 %  (0.05) %
Cost of total deposits  0.29 %  0.33 %  (0.04) %
Cost of interest-bearing liabilities  0.49 %  0.54 %  (0.05) %
Net interest margin, FTE  3.29 %  3.48 %  (0.19) %

 

Provision for Loan and Lease Losses and Credit Quality

 

At June 30, 2021, the allowance for loan and lease losses was $18.3 million.  The allowance for loan and lease losses to total loans and leases was 0.74% as of June 30, 2021 and March 31, 2021, respectively.  For the Company’s originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.86% as of June 30, 2021, compared to 0.93% as of March 31, 2021.  The remaining discounts on the acquired loan and lease portfolio totaled $13.0 million, or 3.61% of acquired loans and leases as of June 30, 2021.

 

The following table presents detailed information related to the provision for loan and lease losses for the periods indicated (dollars in thousands):

 

Three Months Ended      
Jun Mar
Provision for Loan and Lease Losses Rollforward 2021 2021 Change
Beginning balance $  18,370 $  18,346 $  24
Charge-offs  (153)  (120)  (33)
Recoveries  98  77  21
Net charge-offs  (55)  (43)  (12)
Provision  (5)  67  72
Ending balance $  18,310 $  18,370 $  (60)
Allowance for loan losses to total loans and leases, gross  0.74 %  0.74 %  – %

 

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 and lease losses under the incurred loss model.

Nonperforming loans and leases as a percentage of total loans and leases was 0.15% as of June 30, 2021, a decrease of 10 basis points from the 0.25% reported in the first quarter of 2021.  Total nonperforming assets (which include nonaccrual loans and leases, loans and leases past due 90 days or more and still accruing, other real estate owned and other repossessed assets) as a percentage of total assets was 0.18% as of June 30, 2021, as compared to 0.29% as of March 31, 2021.

The following table presents detailed information related to credit quality for the periods indicated (dollars in thousands):

 

Three Months Ended      
Jun Mar Increase
Credit Quality 2021 2021 (Decrease)
Nonaccrual loans and leases $  3,694 $  4,739 $  (1,045)
Loans and leases past due 90 days or more and still accruing  64  1,495  (1,431)
Total nonperforming loans and leases  3,758  6,234  (2,476)
Other real estate owned  2,499  3,946  (1,447)
Other repossessed assets  199  –  199
Total nonperforming assets $  6,456 $  10,180 $  (3,724)
Nonperforming loans and leases to total loans and leases, gross  0.15 %  0.25 %  (0.10) %
Nonperforming assets to total assets  0.18 %  0.29 %  (0.11) %

 

Noninterest Income

Noninterest income decreased $548 thousand to $5.1 million for the second quarter of 2021 compared to $5.7 million for the first quarter of 2021.  During the second quarter of 2021, the primary components of the changes in noninterest income were as follows:

  • Decrease in insurance commissions of $909 thousand, primarily due from larger commissions recognized in the prior quarter from the placement of life insurance policies;
  • Increase in other of $237 thousand, is primarily attributable to $155 thousand of new fee income from the acquisition of Fountain and an increase in the cash surrender value of bank owned life insurance (“BOLI”) income of $57 thousand.

 

The following table presents detailed information related to noninterest income for the periods indicated (dollars in thousands):

 

Three Months Ended      
Jun Mar Increase
Noninterest Income 2021 2021 (Decrease)
Service charges on deposit accounts $  1,048 $  1,009 $  39
Mortgage banking income  1,105  1,139  (34)
Investment services  567  531  36
Insurance commissions  557  1,466  (909)
Interchange and debit card transaction fees  922  839  83
Other  944  707  237
Total noninterest income $  5,143 $  5,691 $  (548)

 

Noninterest Expense

Noninterest expense increased $1.3 million to $20.8 million for the second quarter of 2021 compared to $19.5 million for the first quarter of 2021. During the second quarter of 2021, the primary components of the changes in noninterest expense were as follows:

  • Salaries and employee benefits increased $1.3 million, primarily due to the additional headcount from both the Fountain acquisition and hiring of the Gulf Coast Team, and from a reduction in deferred salary cost that was recognized in the prior quarter relating to the PPP loan originations;
  • Data processing and technology increased $130 thousand, primarily from continued infrastructure build;
  • Professional services increased $208 thousand, primarily from additional services performed during the quarter;
  • Merger related and restructuring expense increased $269 thousand: and
  • Other decreased $502 thousand, primarily from an investment in a start-up fintech company recognized in the prior quarter.

 

The following table presents detailed information related to noninterest expense for the periods indicated (dollars in thousands):

 

Three Months Ended      
Jun Mar Increase
Noninterest Expense 2021 2021 (Decrease)
Salaries and employee benefits $  12,203 $  10,869 $  1,334
Occupancy and equipment  2,294  2,341  (47)
FDIC insurance  371  371  –
Other real estate and loan related expenses  506  602  (96)
Advertising and marketing  230  190  40
Data processing and technology  1,509  1,379  130
Professional services  849  641  208
Amortization of intangibles  441  444  (3)
Merger related and restructuring expenses  372  103  269
Other  2,022  2,524  (502)
Total noninterest expense $  20,797 $  19,464 $  1,333

 

Income Tax Expense

 

Income tax expense was $2.5 million for the second quarter of 2021, a decrease of $194 thousand, compared to $2.7 million for the first quarter of 2021.

For the second quarter of 2021, the effective tax rate was 22.0% compared to 21.5% for the first quarter of 2021.

 

Balance Sheet Trends

Total assets at June 30, 2021 were $3.65 billion compared with $3.30 billion at December 31, 2020.  The increase of $349.4 million is primarily attributable to increases in cash and cash equivalents of $191.8 million, securities available-for-sale of $35.2 million, loans and leases of $86.1 million and bank owned life insurance of $40.8 million. The increase in loans and leases consisted of organic loan growth of $143.1 million and leases acquired from Fountain of $53.7 million, offset by $110.0 million in net PPP loan activity of $138.4 in originations and $248.4 million in forgiveness.

Total liabilities increased to $3.28 billion at June 30, 2021 from $2.95 billion at December 31, 2020.  The increase of $333.1 million was primarily from organic deposit growth of $334.3 million.

Shareholders’ equity at June 30, 2021 totaled $373.4 million, an increase of $16.2 million, from December 31, 2020.  The increase in shareholders’ equity was primarily from net income of $18.5 million for the six months ended June 30, 2021 and a net change in accumulated other comprehensive income of $155 thousand, which was offset by repurchase of the Company’s common stock of $1.2 million and $1.8 million of dividends paid. Tangible book value per share (Non-GAAP) was $18.69 at June 30, 2021, an increase from $18.39 at March 31, 2021.  Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 7.93% at June 30, 2021, compared with 8.41% at December 31, 2020.

 

 

The following table presents selected balance sheet information for the periods indicated (dollars in thousands):

 

Jun Dec Increase
Selected Balance Sheet Information 2021 2020 (Decrease)
Total assets $  3,654,356 $  3,304,949 $  349,407
Total liabilities  3,280,963  2,947,781  333,182
Total equity  373,393  357,168  16,225
Securities available-for-sale, at fair value  250,817  215,634  35,183
Loans and leases  2,468,318  2,382,243  86,075
Deposits  3,139,472  2,805,215  334,257
Borrowings  78,834  81,199  (2,365)

 

Conference Call Information

SmartFinancial issued this earnings release for the second quarter of 2021 on Tuesday, July 20, 2021, and will host a conference call on Wednesday, July 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, 5194560.  A replay of the conference call will be available through July 21, 2022, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10158581.  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  
President & CEO  
(865) 868-0613   billy.carroll@smartbank.com  
   
Ron Gorczynski  
Executive Vice President, Chief Financial Officer  
(865) 437-5724   ron.gorczynski@smartbank.com  
   
Media Contact  
Kelley Fowler  
Senior Vice President, Public Relations & Marketing  
(865) 868-0611    kelley.fowler@smartbank.com  
   

 

Non-GAAP Financial Measures

Statements included in this 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; (xiv) tangible assets; and ratios derived therefrom, in its analysis of the company’s performance. Operating earnings excludes the following from net income: securities gains and losses, 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.

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.

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

 

Ending Balances
Jun Mar Dec Sep Jun
2021 2021 2020 2020 2020
Assets:      
Cash and cash equivalents $  673,515 $  556,701 $  481,719 $  541,815 $  399,467
Securities available-for-sale, at fair value  250,817  250,937  215,634  214,634  219,631
Other investments  14,584  14,728  14,794  14,829  14,829
Loans held for sale  4,334  7,870  11,721  11,292  6,330
Loans and leases  2,468,318  2,487,129  2,382,243  2,404,057  2,408,284
Less: Allowance for loan losses  (18,310)  (18,370)  (18,346)  (18,817)  (16,254)
Loans and leases, net  2,450,008  2,468,759  2,363,897  2,385,240  2,392,030
Premises and equipment, net  72,314  72,697  72,682  73,934  73,868
Other real estate owned  2,499  3,946  4,619  3,932  5,524
Goodwill and core deposit intangibles, net  90,966  86,350  86,471  86,710  86,327
Bank owned life insurance  72,013  71,586  31,215  31,034  30,853
Other assets  23,306  23,629  22,197  24,168  37,126
Total assets $  3,654,356 $  3,557,203 $  3,304,949 $  3,387,588 $  3,265,985
Liabilities:  
Deposits:  
Noninterest-bearing demand $  807,560 $  777,968 $  685,957 $  669,733 $  645,650
Interest-bearing demand  702,470  683,887  649,129  534,128  479,212
Money market and savings  1,140,029  1,073,941  919,631  871,098  762,246
Time deposits  489,413  512,417  550,498  577,064  652,581
Total deposits  3,139,472  3,048,213  2,805,215  2,652,023  2,539,689
Borrowings  78,834  82,642  81,199  319,391  318,855
Subordinated debt  39,388  39,367  39,346  39,325  39,304
Other liabilities  23,269  22,923  22,021  27,060  24,649
Total liabilities  3,280,963  3,193,145  2,947,781  3,037,799  2,922,497
Shareholders’ Equity:  
Common stock  15,110  15,105  15,107  15,233  15,217
Additional paid-in capital  252,039  251,836  252,693  254,626  254,396
Retained earnings  103,906  96,034  87,185  78,918  73,283
Accumulated other comprehensive income  2,338  1,083  2,183  1,012  592
Total shareholders’ equity  373,393  364,058  357,168  349,789  343,488
Total liabilities & shareholders’ equity $  3,654,356 $  3,557,203 $  3,304,949 $  3,387,588 $  3,265,985

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands except share and per share data)

 

Three Months Ended Six Months Ended
Jun Mar Dec Sep Jun Jun Jun
2021 2021 2020 2020 2020 2021 2020
Interest income:
Loans and leases, including fees $  28,323 $  28,018 $  28,594 $  28,621 $  28,663 $  56,341 $  55,097
Securities available-for-sale:
Taxable  916  724  609  546  589  1,640  1,268
Tax-exempt  304  259  306  364  416  563  699
Federal funds sold and other earning assets  309  291  303  327  277  600  879
Total interest income  29,852  29,292  29,812  29,858  29,945  59,144  57,943
Interest expense:
Deposits  2,248  2,331  2,580  2,897  3,366  4,579  8,120
Borrowings  123  117  142  334  249  241  339
Subordinated debt  584  584  584  584  584  1,167  1,167
Total interest expense  2,955  3,032  3,306  3,815  4,199  5,987  9,626
Net interest income  26,897  26,260  26,506  26,043  25,746  53,157  48,317
Provision for loan and lease losses  (5)  67  —  2,634  2,850  62  6,049
Net interest income after provision for loan and lease losses  26,902  26,193  26,506  23,409  22,896  53,095  42,268
Noninterest income:
Service charges on deposit accounts  1,048  1,009  1,032  892  709  2,057  1,479
Gain (loss) on sale of securities, net  —  —  —  (9)  16  —  16
Mortgage banking  1,105  1,139  1,331  1,029  931  2,244  1,515
Investment services  567  531  407  359  363  1,098  801
Insurance commissions  557  1,466  548  560  473  2,023  742
Interchange and debit card transaction fees  922  839  760  868  508  1,761  784
Other  944  707  898  422  511  1,652  993
Total noninterest income  5,143  5,691  4,976  4,121  3,511  10,835  6,330
Noninterest expense:
Salaries and employee benefits  12,203  10,869  11,516  11,032  10,357  23,072  20,363
Occupancy and equipment  2,294  2,341  2,256  2,186  1,996  4,635  3,906
FDIC insurance  371  371  297  534  180  741  360
Other real estate and loan related expense  506  602  516  643  346  1,108  892
Advertising and marketing  230  190  181  253  202  419  400
Data processing and technology  1,509  1,379  1,182  1,131  1,155  2,889  2,163
Professional services  849  641  786  594  868  1,490  1,578
Amortization of intangibles  441  444  571  402  405  886  767
Merger related and restructuring expenses  372  103  702  290  1,477  475  3,573
Other  2,022  2,524  1,946  2,102  1,820  4,547  3,598
Total noninterest expense  20,797  19,464  19,953  19,167  18,806  40,262  37,600
Income before income taxes  11,248  12,420  11,529  8,363  7,601  23,668  10,998
Income tax expense  2,470  2,664  2,499  1,968  1,427  5,134  2,091
Net income $  8,778 $  9,756 $  9,030 $  6,395 $  6,174 $  18,534 $  8,907
Earnings per common share:
Basic $  0.59 $  0.65 $  0.60 $  0.42 $  0.41 $  1.24 $  0.60
Diluted $  0.58 $  0.65 $  0.59 $  0.42 $  0.41 $  1.23 $  0.60
Weighted average common shares outstanding:
Basic  15,003,657  15,011,573  15,109,298  15,160,579  15,152,768  15,007,593  14,773,935
Diluted  15,126,184  15,111,947  15,182,796  15,210,611  15,202,335  15,118,924  14,842,486

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

YIELD ANALYSIS

 

Three Months Ended
June 30, 2021 March 31, 2021 June 30, 2020
Average Yield/ Average Yield/ Average Yield/
Balance Interest1 Cost1 Balance Interest1 Cost1 Balance Interest1 Cost1
Assets:
Loans and leases, including fees2 $  2,508,388 $  28,256  4.52 % $  2,428,499 $  27,943  4.67 % $  2,359,101 $  28,590  4.87 %
Loans held for sale  5,315  67  5.03 %  7,913  75  3.82 %  6,868  73  4.28 %
Taxable securities  164,935  916  2.23 %  136,492  724  2.15 %  122,135  589  1.94 %
Tax-exempt securities  89,296  453  2.04 %  90,849  409  1.82 %  86,227  570  2.66 %
Federal funds sold and other earning assets  531,125  309  0.23 %  417,144  291  0.28 %  297,696  277  0.37 %
Total interest-earning assets  3,299,059  30,001  3.65 %  3,080,897  29,442  3.88 %  2,872,027  30,099  4.22 %
Noninterest-earning assets  286,211  275,272  260,089
Total assets $  3,585,270 $  3,356,169 $  3,132,116
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits $  688,756  304  0.18 % $  641,214  256  0.16 % $  453,795  148  0.13 %
Money market and savings deposits  1,117,290  905  0.32 %  983,893  821  0.34 %  748,673  614  0.33 %
Time deposits  502,755  1,039  0.83 %  526,062  1,254  0.97 %  701,390  2,604  1.49 %
Total interest-bearing deposits  2,308,801  2,248  0.39 %  2,151,169  2,331  0.44 %  1,903,858  3,366  0.71 %
Borrowings3  81,525  123  0.61 %  81,837  117  0.58 %  237,143  249  0.42 %
Subordinated debt  39,375  584  5.95 %  39,354  584  6.01 %  39,290  584  5.98 %
Total interest-bearing liabilities  2,429,701  2,955  0.49 %  2,272,360  3,032  0.54 %  2,180,291  4,199  0.77 %
Noninterest-bearing deposits  768,399  700,962  587,322
Other liabilities  17,845  21,928  24,642
Total liabilities  3,215,945  2,995,250  2,792,255
Shareholders’ equity  369,325  360,919  339,861
Total liabilities and shareholders’ equity $  3,585,270 $  3,356,169 $  3,132,116
Net interest income, taxable equivalent $  27,046 $  26,410 $  25,900
Interest rate spread  3.16 %  3.33 %  3.44 %
Tax equivalent net interest margin  3.29 %  3.48 %  3.63 %
Percentage of average interest-earning assets to average interest-bearing liabilities  135.78 %  135.58 %  131.73 %
Percentage of average equity to average assets  10.30 %  10.75 %  10.85 %

 

1 Taxable equivalent

2 Includes average balance of $266,114, $312,582 and $208,814 in PPP loans for the quarters ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

3 Includes average balance of $108,082 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarter ended June 30, 2020.  No PPPLF funding was used for the quarters ended June 30, 2021 and March 31, 2021.

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

YIELD ANALYSIS

 

Six Months Ended
June 30, 2021 June 30, 2020
Average Yield/ Average Yield/
Balance Interest1 Cost1 Balance Interest1 Cost1
Assets:
Loans and leases, including fees2 $  2,468,665 $  56,200  4.59 % $  2,172,158 $  54,979  5.09 %
Loans held for sale  6,607  141  4.31 %  5,581  118  4.26 %
Taxable securities  150,792  1,640  2.19 %  119,474  1,268  2.13 %
Tax-exempt securities  90,068  862  1.93 %  78,306  970  2.49 %
Federal funds sold and other earning assets  474,449  600  0.26 %  226,726  879  0.78 %
Total interest-earning assets  3,190,581  59,443  3.76 %  2,602,245  58,214  4.50 %
Noninterest-earning assets  280,772  238,749
Total assets $  3,471,353 $  2,840,994
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits $  665,116  560  0.17 % $  421,288  583  0.28 %
Money market and savings deposits  1,050,961  1,726  0.33 %  707,003  2,003  0.57 %
Time deposits  514,344  2,293  0.90 %  693,382  5,534  1.61 %
Total interest-bearing deposits  2,230,421  4,579  0.41 %  1,821,673  8,120  0.90 %
Borrowings3  81,680  241  0.59 %  144,532  339  0.47 %
Subordinated debt  39,364  1,167  5.98 %  39,279  1,167  5.97 %
Total interest-bearing liabilities  2,351,465  5,987  0.51 %  2,005,484  9,626  0.97 %
Noninterest-bearing deposits  734,867  481,432
Other liabilities  19,876  22,812
Total liabilities  3,106,208  2,509,728
Shareholders’ equity  365,145  331,266
Total liabilities and shareholders’ equity $  3,471,353 $  2,840,994
Net interest income, taxable equivalent $  53,456 $  48,588
Interest rate spread  3.25 %  3.53 %
Tax equivalent net interest margin  3.38 %  3.75 %
Percentage of average interest-earning assets to average interest-bearing liabilities  135.68 %  129.76 %
Percentage of average equity to average assets  10.52 %  11.66 %

 

1 Taxable equivalent

2 Includes average balance of $289,220 and $106,213 in PPP loans for the six months ended June 30, 2021 and 2020, respectively.

3 Includes average balance of $54,041 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the six months ended June 30, 2020.  No PPPLF funding was used for the six months ended June 30, 2021.

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

YIELD ANALYSIS

 

Year Ended
December 31, 2020 December 31, 2019
Average Yield/ Average Yield/
Balance Interest1 Cost1 Balance Interest1 Cost1
Assets:
Loans, including fees2 $  2,289,612 $  111,992  4.89 % $  1,836,963 $  100,831  5.49 %
Loans held for sale  7,360  320  4.34 %  3,858  171  4.43 %
Taxable securities  122,900  2,423  1.97 %  129,705  3,289  2.54 %
Tax-exempt securities  83,765  1,941  2.32 %  56,458  1,972  3.49 %
Federal funds sold and other earning assets  308,843  1,509  0.49 %  110,380  2,646  2.40 %
Total interest-earning assets  2,812,480  118,185  4.20 %  2,137,364  108,909  5.10 %
Noninterest-earning assets  250,955  201,976
Total assets $  3,063,435 $  2,339,340
Liabilities and Stockholders’ Equity:
Interest-bearing demand deposits $  481,050  1,013  0.21 % $  333,100  1,883  0.57 %
Money market and savings deposits  788,006  3,482  0.44 %  651,855  7,827  1.20 %
Time deposits  641,647  9,102  1.42 %  635,451  12,205  1.92 %
Total interest-bearing deposits  1,910,703  13,597  0.71 %  1,620,406  21,915  1.35 %
Borrowings3  177,204  816  0.46 %  21,526  319  1.48 %
Subordinated debt  39,301  2,334  5.94 %  39,216  2,341  5.97 %
Total interest-bearing liabilities  2,127,208  16,747  0.79 %  1,681,148  24,575  1.46 %
Noninterest-bearing deposits  571,282  343,611
Other liabilities  23,775  15,852
Total liabilities  2,722,265  2,040,611
Shareholders’ equity  341,170  298,729
Total liabilities and shareholders’ equity $  3,063,435 $  2,339,340
Net interest income, taxable equivalent $  101,438 $  84,334
Interest rate spread  3.41 %  3.64 %
Tax equivalent net interest margin  3.61 %  3.95 %
Percentage of average interest-earning assets to average interest-bearing liabilities  132.21 %  127.14 %
Percentage of average equity to average assets  11.14 %  12.77 %

 

1 Taxable equivalent

2 Includes average balance of $201,470 in PPP loans for the twelve months ended December 31, 2020.

3 Includes average balance of $91,190 in PPPLF funding for the twelve months ended December 31, 2020.

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

 

  As of and for The Three Months Ended
  Jun Mar Dec Sep Jun
2021 2021 2020 2020 2020
Composition of Loans and Leases:
Commercial real estate:
owner occupied $  492,750 $  477,293 $  463,771 $  467,569 $  464,073
non-owner occupied  669,741  593,348  549,205  563,082  552,958
Commercial real estate, total  1,162,491  1,070,641  1,012,976  1,030,651  1,017,031
Commercial & industrial  496,114  686,010  634,446  644,498  637,450
Construction & land development  300,704  285,973  278,075  275,172  279,216
Consumer real estate  444,640  432,486  443,930  440,310  459,861
Leases  53,038  —  —  —  —
Consumer and other  11,331  12,019  12,816  13,426  14,726
Total loans and leases $  2,468,318 $  2,487,129 $  2,382,243 $  2,404,057 $  2,408,284
Asset Quality and Additional Loan Data:
Nonperforming loans and leases $  3,758 $  6,234 $  5,782 $  2,248 $  3,776
Other real estate owned  2,499  3,946  4,619  3,932  5,524
Other repossessed assets  199  —  —  —  —
Total nonperforming assets $  6,456 $  10,180 $  10,401 $  6,180 $  9,300
Restructured loans and leases not included in nonperforming loans and leases $  219 $  250 $  257 $  8 $  9
Net charge-offs to average loans and leases (annualized)  0.01 %  0.01 %  0.08 %  0.01 %  — %
Allowance for loan and leases losses to loans and leases  0.74 %  0.74 %  0.77 %  0.78 %  0.67 %
Nonperforming loans and leases to total loans and leases, gross  0.15 %  0.25 %  0.24 %  0.09 %  0.16 %
Nonperforming assets to total assets  0.18 %  0.29 %  0.31 %  0.18 %  0.28 %
Acquired loan and lease fair value discount balance $  12,982 $  12,951 $  14,467 $  15,141 $  16,187
Accretion income on acquired loans and leases  761  1,636  768  960  888
PPP net fees deferred balance  6,651  7,351  4,190  6,348  8,582
PPP net fees recognized  2,132  2,398  2,157  1,812  1,909
Capital Ratios:
Equity to Assets  10.22 %  10.23 %  10.81 %  10.33 %  10.52 %
Tangible common equity to tangible assets (Non-GAAP)1  7.93 %  8.00 %  8.41 %  7.97 %  8.09 %
SmartFinancial, Inc.2
Tier 1 leverage  8.10 %  8.55 %  8.69 %  8.78 %  8.83 %
Common equity Tier 1  10.66 %  11.29 %  11.61 %  11.33 %  10.92 %
Tier 1 capital  10.66 %  11.29 %  11.61 %  11.33 %  10.92 %
Total capital  12.83 %  13.62 %  14.07 %  13.81 %  13.25 %
SmartBank     Estimated3
Tier 1 leverage  8.76 %  9.33 %  9.58 %  9.74 %  9.82 %
Common equity Tier 1  11.53 %  12.31 %  12.79 %  12.57 %  12.14 %
Tier 1 capital  11.53 %  12.31 %  12.79 %  12.57 %  12.14 %
Total capital  12.22 %  13.05 %  13.57 %  13.37 %  12.82 %

 

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

2All periods presented are estimated.

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

 

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands except share and per share data)

 

As of and for The As of and for The
Three Months Ended Six Months Ended  
Jun Mar Dec Sep Jun Jun Jun
2021 2021 2020 2020 2020 2021 2020
Selected Performance Ratios (Annualized):
Return on average assets  0.98 %  1.18 %  1.11 %  0.76 %  0.79 %  1.08 %  0.63 %
Return on average shareholders’ equity  9.53 %  10.96 %  10.15 %  7.31 %  7.31 %  10.24 %  5.41 %
Return on average tangible common equity¹  12.54 %  14.41 %  13.43 %  9.72 %  9.80 %  13.46 %  7.23 %
Noninterest income / average assets  0.58 %  0.69 %  0.61 %  0.49 %  0.45 %  0.63 %  0.45 %
Noninterest expense / average assets  2.33 %  2.35 %  2.46 %  2.28 %  2.41 %  2.34 %  2.66 %
Efficiency ratio  64.91 %  60.92 %  63.38 %  63.54 %  64.28 %  62.92 %  68.81 %
Operating Selected Performance Ratios (Annualized):
Operating return on average assets1  1.01 %  1.19 %  1.14 %  0.79 %  0.93 %  1.10 %  0.82 %
Operating PTPP return on average assets1  1.30 %  1.52 %  1.45 %  1.35 %  1.53 %  1.41 %  1.46 %
Operating return on average shareholders’ equity1  9.83 %  11.05 %  10.34 %  7.57 %  8.58 %  10.43 %  7.00 %
Operating return on average tangible common equity1  12.93 %  14.53 %  13.69 %  10.06 %  11.51 %  13.72 %  9.36 %
Operating efficiency ratio1  63.46 %  60.32 %  60.86 %  62.25 %  58.95 %  61.89 %  61.98 %
Operating noninterest income / average assets1  0.58 %  0.69 %  0.56 %  0.49 %  0.45 %  0.63 %  0.45 %
Operating noninterest expense / average assets1  2.29 %  2.34 %  2.37 %  2.25 %  2.23 %  2.31 %  2.41 %
Selected Interest Rates and Yields:
Yield on loans and leases  4.52 %  4.67 %  4.72 %  4.71 %  4.87 %  4.59 %  5.09 %
Yield on earning assets, FTE  3.65 %  3.88 %  4.01 %  3.88 %  4.22 %  3.76 %  4.50 %
Cost of interest-bearing deposits  0.39 %  0.44 %  0.50 %  0.59 %  0.71 %  0.41 %  0.90 %
Cost of total deposits  0.29 %  0.33 %  0.38 %  0.44 %  0.54 %  0.31 %  0.71 %
Cost of interest-bearing liabilities  0.49 %  0.54 %  0.60 %  0.65 %  0.77 %  0.51 %  0.97 %
Net interest margin, FTE  3.29 %  3.48 %  3.57 %  3.39 %  3.63 %  3.38 %  3.75 %
Per Common Share:
Net income, basic $  0.59 $  0.65 $  0.60 $  0.42 $  0.41 $  1.24 $  0.60
Net income, diluted  0.58  0.65  0.59  0.42  0.41  1.23  0.60
Operating earnings, basic¹  0.60  0.65  0.61  0.44  0.48  1.25  0.78
Operating earnings, diluted¹  0.60  0.65  0.61  0.44  0.48  1.25  0.78
Book value  24.71  24.10  23.64  22.96  22.57  24.71  22.57
Tangible book value¹  18.69  18.39  17.92  17.27  16.90  18.69  16.90
Common shares outstanding  15,109,736  15,104,536  15,107,214  15,233,227  15,216,932  15,109,736  15,216,932

 

¹See reconciliation of Non-GAAP measures

 

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

NON-GAAP RECONCILIATIONS

Three Months Ended Six Months Ended
Jun Mar Dec Sep Jun Jun Jun
2021 2021 2020 2020 2020 2021 2020
Operating Earnings:
Net income (GAAP) $  8,778 $  9,756 $  9,030 $  6,395 $  6,174 $  18,534 $  8,907
Noninterest income:
Securities gains (losses), net  —  —  —  9  (16)  —  (16)
ADECA termination proceeds  —  —  (465)  —  —  —  —
Noninterest expenses:
Merger related and restructuring expenses  372  103  702  290  1,477  475  3,573
Income taxes:
Income tax effect of adjustments  (96)  (27)  (62)  (77)  (382)  (123)  (931)
Operating earnings (Non-GAAP) $  9,054 $  9,832 $  9,205 $  6,617 $  7,253 $  18,886 $  11,533
Operating earnings per common share (Non-GAAP):
Basic $  0.60 $  0.65 $  0.61 $  0.44 $  0.48 $  1.25 $  0.78
Diluted  0.60  0.65  0.61  0.44  0.48  1.25  0.78
Operating Noninterest Income:
Noninterest income (GAAP) $  5,143 $  5,691 $  4,976 $  4,121 $  3,511 $  10,835 $  6,330
Securities gains (losses), net  —  —  —  9  (16)  —  (16)
ADECA termination proceeds  —  —  (465)  —  —  —  —
Operating noninterest income (Non-GAAP) $  5,143 $  5,691 $  4,511 $  4,130 $  3,495 $  10,835 $  6,314
Operating noninterest income (Non-GAAP)/average assets1  0.58 %  0.69 %  0.56 %  0.49 %  0.45 %  0.63 %  0.45 %
Operating Noninterest Expense:
Noninterest expense (GAAP) $  20,797 $  19,464 $  19,953 $  19,167 $  18,806 $  40,262 $  37,600
Merger related and restructuring expenses  (372)  (103)  (702)  (290)  (1,477)  (475)  (3,573)
Operating noninterest expense (Non-GAAP) $  20,425 $  19,361 $  19,251 $  18,877 $  17,329 $  39,787 $  34,027
Operating noninterest expense (Non-GAAP)/average assets2  2.29 %  2.34 %  2.37 %  2.25 %  2.23 %  2.31 %  2.41 %
Operating Pre-tax Pre-provision (“PTPP”) Earnings:
Net interest income (GAAP) $  26,897 $  26,260 $  26,506 $  26,043 $  25,746 $  53,157 $  48,317
Operating noninterest income  5,143  5,691  4,511  4,130  3,495  10,835  6,314
Operating noninterest expense  (20,425)  (19,361)  (19,251)  (18,877)  (17,329)  (39,787)  (34,027)
Operating PTPP earnings (Non-GAAP) $  11,615 $  12,590 $  11,766 $  11,296 $  11,912 $  24,205 $  20,604
Non-GAAP Return Ratios:
Operating return on average assets (Non-GAAP)3  1.01 %  1.19 %  1.14 %  0.79 %  0.93 %  1.10 %  0.82 %
Operating PTPP return on average assets (Non-GAAP)4  1.30 %  1.52 %  1.45 %  1.35 %  1.53 %  1.41 %  1.46 %
Return on average tangible common equity (Non-GAAP)5  12.54 %  14.41 %  13.43 %  9.72 %  9.80 %  13.46 %  7.23 %
Operating return on average shareholders’ equity (Non-GAAP)6  9.83 %  11.05 %  10.34 %  7.57 %  8.58 %  10.43 %  7.00 %
Operating return on average tangible common equity (Non-GAAP)7  12.93 %  14.53 %  13.69 %  10.06 %  11.51 %  13.72 %  9.36 %
Operating Efficiency Ratio:
Efficiency ratio (GAAP)  64.91 %  60.92 %  63.38 %  63.54 %  64.28 %  62.92 %  68.81 %
Adjustment for taxable equivalent yields  (0.30) %  (0.28) %  (0.30) %  (0.32) %  (0.34) %  (0.31) %  (0.34) %
Adjustment for securities gains (losses)  — %  — %  — %  0.02 %  (0.04) %  — %  (0.02) %
Adjustment for merger related income and costs  (1.15) %  (0.32) %  (2.22) %  (0.99) %  (4.95) %  (0.72) %  (6.46) %
Operating efficiency ratio (Non-GAAP)  63.46 %  60.32 %  60.86 %  62.25 %  58.95 %  61.89 %  61.98 %

 

1Operating noninterest income (Non-GAAP) is annualized and divided by average assets.

2Operating noninterest expense (Non-GAAP) is annualized and divided by average assets.

3Operating return on average assets (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average assets.

4Operating PTPP return on average assets (Non-GAAP) is the annualized operating PTPP earnings (Non-GAAP) divided by average assets.

5Return on average tangible common equity (Non-GAAP) is the annualized net income divided by average tangible common equity (Non-GAAP).

6Operating return on average shareholders’ equity (Non-GAAP) is the annualized operating earnings (Non-GAAP) divided by average equity.

7Operating return on average tangible common equity (Non-GAAP) is the annualized 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 Six Months Ended
Jun Mar Dec Sep Jun Jun Jun
2021 2021 2020 2020 2020 2021 2020
Tangible Common Equity:
Shareholders’ equity (GAAP) $  373,393 $  364,058 $  357,168 $  349,789 $  343,488 $  373,393 $  343,488
Less goodwill and other intangible assets  90,966  86,350  86,471  86,710  86,327  90,966  86,327
Tangible common equity (Non-GAAP) $  282,427 $  277,708 $  270,697 $  263,079 $  257,161 $  282,427 $  257,161
Average Tangible Common Equity:
Average shareholders’ equity (GAAP) $  369,325 $  360,919 $  354,026 $  347,907 $  339,861 $  365,145 $  331,266
Less average goodwill and other intangible assets  88,551  86,424  86,561  86,206  86,484  87,494  83,427
Average tangible common equity (Non-GAAP) $  280,774 $  274,495 $  267,465 $  261,701 $  253,377 $  277,651 $  247,839
Tangible Book Value per Common Share:
Book value per common share (GAAP) $  24.71 $  24.10 $  23.64 $  22.96 $  22.57 $  24.71 $  22.57
Adjustment due to goodwill and other intangible assets  (6.02)  (5.71)  (5.72)  (5.69)  (5.67)  (6.02)  (5.67)
Tangible book value per common share (Non-GAAP)1 $  18.69 $  18.39 $  17.92 $  17.27 $  16.90 $  18.69 $  16.90
Tangible Common Equity to Tangible Assets:
Total Assets $  3,654,356 $  3,557,203 $  3,304,949 $  3,387,588 $  3,265,985 $  3,654,356 $  3,265,985
Less goodwill and other intangibles  90,966  86,350  86,471  86,710  86,327  90,966  86,327
Tangible Assets (Non-GAAP): $  3,563,390 $  3,470,853 $  3,218,478 $  3,300,878 $  3,179,658 $  3,563,390 $  3,179,658
Tangible common equity to tangible assets (Non-GAAP) 7.93% 8.00% 8.41% 7.97% 8.09% 7.93% 8.09%

 

 

 

1Tangible book value per share is computed by dividing total stockholder’s equity, less goodwill and other intangible assets by common shares outstanding.