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KNOXVILLE, TN – October 19, 2021 – SmartFinancial, Inc. (“SmartFinancial” or the “Company”; NASDAQ: SMBK), today announced net income of $9.6 million, or $0.61 per diluted common share, for the third quarter of 2021, compared to net income of $6.4 million, or $0.42 per diluted common share, for the third quarter of 2020, and compared to net income of $8.8 million, or $0.58 per diluted common share, for the second quarter of 2021.  Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $9.9 million, or $0.63 per diluted common share, in the third quarter of 2021, compared to $6.6 million, or $0.44 per diluted common share, in the third quarter of 2020, and compared to $9.1 million, or $0.60 per diluted common share, in the second quarter of 2021.

 

Highlights for the Third Quarter of 2021

 

  • Net organic loan growth of over $52 million, an 8.6% annualized quarter-over-quarter increase
  • Operating earnings (non-GAAP) of $0.63 per diluted share, a 43.2% increase from the prior-year-quarter
  • Tangible book value per share (Non-GAAP) of $19.03, a 7.3% annualized quarter-over-quarter increase
  • Completed the acquisition of Sevier County Bancshares (“SCB”)
  • Hired seasoned commercial banking team members in Dothan, Montgomery and Birmingham, Alabama and Tallahassee, Florida

 

Billy Carroll, President & CEO, stated: “Our company is continuing to perform at a very high level, and we are extremely pleased with our results and accomplishments this quarter.  In addition to our solid financial performance, we closed our SCB transaction and added several outstanding, seasoned bankers to our staff.  The momentum around our team is strong and I am very excited with the direction of our company.”

 

SmartFinancial’s Chairman, Miller Welborn, concluded: “The execution of our Strategic Plan is really coming together. All of our operating metrics are on target, and we are excited about our future.”

 

Net Interest Income and Net Interest Margin

 

Net interest income was $30.4 million for the third quarter of 2021, compared to $26.9 million for the second quarter of 2021. Average earning assets totaled $3.61 billion, an increase of $314.9 million. The growth was primarily driven by an increase in average cash and cash equivalents of $271.6 million and average loans and leases of $24.2 million. Average interest-bearing liabilities increased $212.2 million, related to continued core deposit growth and the acquisition of SCB.

 

The tax equivalent net interest margin was 3.35% for the third quarter of 2021, compared to 3.29% for the second quarter of 2021. The tax equivalent net interest margin was impacted by a 2 basis point increase 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 increase in yield on interest-earning assets was primarily driven by an increase of $1.7 million of loan discount accretion and Payroll Protection Program (“PPP”) fee accretion during the third quarter of 2021 when compared to the second quarter of 2021, offset by lower yielding excess liquidity.

 

The yield on interest-bearing liabilities decreased to 0.44% for the third quarter of 2021 when compared to 0.49% for the second quarter of 2021. The cost of average interest-bearing deposits was 0.34% for the third quarter of 2021 compared to 0.39% for the second 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 16 basis points during the period. The cost of total deposits for the third quarter of 2021 was 0.25% compared to 0.29% in the second quarter of 2021.

 

 

 

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

 

               
    Three Months Ended      
    Sep   Jun   Increase  
Selected Interest Rates and Yields   2021   2021   (Decrease)  
Yield on loans and leases    4.95 %  4.52 %  0.43 %
Yield on earning assets, FTE    3.67 %  3.65 %  0.02 %
Cost of interest-bearing deposits    0.34 %  0.39 %  (0.05) %
Cost of total deposits    0.25 %  0.29 %  (0.04) %
Cost of interest-bearing liabilities    0.44 %  0.49 %  (0.05) %
Net interest margin, FTE    3.35 %  3.29 %  0.06 %

 

Provision for Loan and Lease Losses and Credit Quality

 

At September 30, 2021, the allowance for loan and lease losses was $19.3 million.  The allowance for loan and lease losses to total loans and leases was 0.73% as of September 30, 2021, compared to 0.74% as of June 30, 2021.  For the Company’s originated loans and leases, the allowance for loan and lease losses to originated loans and leases, less PPP loans, was 0.76% as of September 30, 2021, compared to 0.86% as of June 30, 2021.  The remaining discounts on the acquired loan and lease portfolio totaled $13.0 million, or 2.48% of acquired loans and leases as of September 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        
        Sep     Jun        
  Provision for Loan and Lease Losses Rollforward     2021     2021     Change  
  Beginning balance   $  18,310   $  18,370   $  (60)  
  Charge-offs      (239)      (153)      (86)  
  Recoveries      75      98      (23)  
  Net charge-offs      (164)      (55)      (109)  
  Provision      1,149      (5)      (1,154)  
  Ending balance   $  19,295   $  18,310   $  985  
                       
  Allowance for loan losses to total loans and leases, gross      0.73 %    0.74 %    (0.01) %

 

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 0.13% as of September 30, 2021, a decrease of 2 basis points from the 0.15% reported in the second 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 0.14% as of September 30, 2021, as compared to 0.18% as of June 30, 2021.

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

 

                       
      Three Months Ended        
        Sep     Jun     Increase  
  Credit Quality     2021     2021     (Decrease)  
  Nonaccrual loans and leases   $  3,567   $  3,694   $  (127)  
  Loans and leases past due 90 days or more and still accruing      –      64      (64)  
  Total nonperforming loans and leases      3,567      3,758      (191)  
  Other real estate owned      2,415      2,499      (84)  
  Other repossessed assets      77      199      (122)  
  Total nonperforming assets   $  6,059   $  6,456   $  (397)  
                       
  Nonperforming loans and leases to total loans and leases, gross      0.13 %    0.15 %    (0.02) %
  Nonperforming assets to total assets      0.14 %    0.18 %    (0.04) %

 

Noninterest Income

 

Noninterest income increased $1.2 million to $6.3 million for the third quarter of 2021 compared to $5.1 million for the second quarter of 2021.  During the third quarter of 2021, the primary components of the changes in noninterest income were as follows:

 

  • Increase in service charges on deposit accounts, related to the SCB acquisition, deposit growth and transaction volume;
  • Increase in insurance commissions due to improved activity;
  • Increase in interchange and debit card transaction fees, related to increased volume, deposit growth and the SCB acquisition; and
  • Increase in other, includes $469 thousand in SWAP fee income from newly created capital markets program and $159 thousand in income from the Company’s bank owned life insurance program.

 

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

 

                   
    Three Months Ended      
      Sep     Jun     Increase
Noninterest Income     2021     2021     (Decrease)
Service charges on deposit accounts   $  1,220   $  1,048   $  172
Gain (loss) on sale of securities, net      45      –      45
Mortgage banking income      994      1,105      (111)
Investment services      448      567      (119)
Insurance commissions      745      557      188
Interchange and debit card transaction fees      1,078      922      156
Other      1,779      944      835
Total noninterest income   $  6,309   $  5,143   $  1,166

 

 

Noninterest Expense

 

Noninterest expense increased $2.5 million to $23.3 million for the third quarter of 2021 compared to $20.8 million for the second quarter of 2021. During the third quarter of 2021, the primary components of the changes in noninterest expense were as follows:

 

  • Increase in salaries and employee benefits, primarily due to the hiring of additional talent from both the SCB acquisition and the Auburn, Dothan, Montgomery and Birmingham, Alabama and Tallahassee, Florida teams;
  • Increase in occupancy and equipment expense from the SCB acquisition and expansion in Alabama;
  • Increase in FDIC insurance from continued asset growth; and
  • Increase in data processing and technology, primarily from continued infrastructure build.

 

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

 

                   
    Three Months Ended      
      Sep     Jun     Increase
Noninterest Expense     2021     2021     (Decrease)
Salaries and employee benefits   $  13,594   $  12,203   $  1,391
Occupancy and equipment      2,536      2,294      242
FDIC insurance      525      371      154
Other real estate and loan related expenses      407      506      (99)
Advertising and marketing      235      230      5
Data processing and technology      1,753      1,509      244
Professional services      810      849      (39)
Amortization of intangibles      711      441      270
Merger related and restructuring expenses      464      372      92
Other      2,274      2,022      252
Total noninterest expense   $  23,309   $  20,797   $  2,512

 

Income Tax Expense

 

Income tax expense was $2.6 million for the third quarter of 2021, an increase of $163 thousand, compared to $2.5 million for the second quarter of 2021.

The effective tax rate was 22.0% for the third and second quarters of 2021, respectively.

 

Balance Sheet Trends

 

Total assets at September 30, 2021 were $4.38 billion compared with $3.30 billion at December 31, 2020.  The increase of $1.08 billion is primarily attributable to increases in cash and cash equivalents of $609.4 million, securities available-for-sale of $123.7 million, loans and leases of $270.4 million, bank owned life insurance of $47.9 million and goodwill and intangibles of $14.5 related to the SCB acquisition.

 

Total liabilities increased to $3.96 billion at September 30, 2021 from $2.95 billion at December 31, 2020.  The increase of $1.01 billion million was primarily from organic deposit growth of $561.4 million and deposits of $432.7 million from the SCB acquisition.

 

Shareholders’ equity at September 30, 2021 totaled $424.7 million, an increase of $67.6 million, from December 31, 2020.  The increase in shareholders’ equity was primarily from the issuance of $42.3 million of common stock for the acquisition of SCB and net income of $28.1 million for the nine months ended September 30, 2021, which was offset by repurchase of the Company’s common stock of $1.2 million and $2.7 million of dividends paid.  Tangible book value per share (Non-GAAP) was $19.03 at September 30, 2021, compared to $17.92 at December 31, 2020.  Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 7.47% at September 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):

 

                     
    Sep   Dec   Increase  
Selected Balance Sheet Information   2021   2020   (Decrease)  
Total assets   $  4,384,031   $  3,304,949   $  1,079,082  
Total liabilities      3,959,311      2,947,781      1,011,530  
Total equity      424,720      357,168      67,552  
Securities available-for-sale, at fair value      339,343      215,634      123,709  
Loans and leases      2,652,663      2,382,243      270,420  
Deposits      3,799,272      2,805,215      994,057  
Borrowings      88,748      81,199      7,549  

 

Conference Call Information

 

SmartFinancial issued this earnings release for the third quarter of 2021 on Tuesday, October 19, 2021, and will host a conference call on Wednesday, October 20, 2021, at 10:00 a.m. ET.  To access this interactive teleconference, dial (844) 200-6205 or (646) 904-5544 and enter the confirmation number, 289025.  A replay of the conference call will be available through December 22, 2021, by dialing (866) 813-9403 or (929) 458-6194 and entering the confirmation number, 781192.  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 branches across Tennessee, Alabama, and the Florida Panhandle.  Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

 

   
Source  
SmartFinancial, Inc.  
   
Investor Contacts  
Billy Carroll  
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 shareholders’ 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 acquisition of Sevier County Bancshares, Inc. (“SCB”); (7) the risk that the anticipated benefits from the 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
    Sep   Jun   Mar   Dec   Sep
    2021   2021   2021   2020   2020
Assets:                              
Cash and cash equivalents   $  1,091,160   $  673,515   $  556,701   $  481,719   $  541,815
Securities available-for-sale, at fair value      339,343      250,817      250,937      215,634      214,634
Other investments      14,972      14,584      14,728      14,794      14,829
Loans held for sale      3,418      4,334      7,870      11,721      11,292
Loans and leases      2,652,663      2,468,318      2,487,129      2,382,243      2,404,057
Less: Allowance for loan and lease losses      (19,295)      (18,310)      (18,370)      (18,346)      (18,817)
Loans and leases, net      2,633,368      2,450,008      2,468,759      2,363,897      2,385,240
Premises and equipment, net      85,346      72,314      72,697      72,682      73,934
Other real estate owned      2,415      2,499      3,946      4,619      3,932
Goodwill and other intangibles, net      104,930      90,966      86,350      86,471      86,710
Bank owned life insurance      79,145      72,013      71,586      31,215      31,034
Other assets      29,934      23,306      23,629      22,197      24,168
Total assets   $  4,384,031   $  3,654,356   $  3,557,203   $  3,304,949   $  3,387,588
Liabilities:                              
Deposits:                              
Noninterest-bearing demand   $  977,180   $  807,560   $  777,968   $  685,957   $  669,733
Interest-bearing demand      847,007      702,470      683,887      649,129      534,128
Money market and savings      1,389,393      1,140,029      1,073,941      919,631      871,098
Time deposits      585,692      489,413      512,417      550,498      577,064
Total deposits      3,799,272      3,139,472      3,048,213      2,805,215      2,652,023
Borrowings      88,748      78,834      82,642      81,199      319,391
Subordinated debt      41,909      39,388      39,367      39,346      39,325
Other liabilities      29,382      23,269      22,923      22,021      27,060
Total liabilities      3,959,311      3,280,963      3,193,145      2,947,781      3,037,799
Shareholders’ Equity:                              
Common stock      16,801      15,110      15,105      15,107      15,233
Additional paid-in capital      292,760      252,039      251,836      252,693      254,626
Retained earnings      112,600      103,906      96,034      87,185      78,918
Accumulated other comprehensive income      2,559      2,338      1,083      2,183      1,012
Total shareholders’ equity      424,720      373,393      364,058      357,168      349,789
Total liabilities & shareholders’ equity   $  4,384,031   $  3,654,356   $  3,557,203   $  3,304,949   $  3,387,588

 

 

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands except share and per share data)

 

                                         
  Three Months Ended   Nine Months Ended
  Sep   Jun   Mar   Dec   Sep   Sep   Sep
  2021   2021   2020   2020   2020   2021   2020
Interest income:                                        
Loans and leases, including fees $  31,674   $  28,323   $  28,018   $  28,594   $  28,621   $  88,015   $  83,718
Securities available-for-sale:                                        
Taxable    832      916      724      609      546      2,472      1,813
Tax-exempt    331      304      259      306      364      894      1,064
Federal funds sold and other earning assets    474      309      291      303      327      1,074      1,206
Total interest income    33,311      29,852      29,292      29,812      29,858      92,455      87,801
Interest expense:                                        
Deposits    2,153      2,248      2,331      2,580      2,897      6,733      11,016
Borrowings    121      123      117      142      334      360      674
Subordinated debt    655      584      584      584      584      1,823      1,751
Total interest expense    2,929      2,955      3,032      3,306      3,815      8,916      13,441
Net interest income    30,382      26,897      26,260      26,506      26,043      83,539      74,360
Provision for loan and lease losses    1,149      (5)      67      —      2,634      1,211      8,683
Net interest income after provision for loan and lease losses    29,233      26,902      26,193      26,506      23,409      82,328      65,677
Noninterest income:                                        
Service charges on deposit accounts    1,220      1,048      1,009      1,032      892      3,278      2,370
Gain (loss) on sale of securities, net    45      —      —      —      (9)      45      6
Mortgage banking    994      1,105      1,139      1,331      1,029      3,238      2,544
Investment services    448      567      531      407      359      1,546      1,159
Insurance commissions    745      557      1,466      548      560      2,768      1,302
Interchange and debit card transaction fees    1,078      922      839      760      868      2,839      1,652
Other    1,779      944      707      898      422      3,429      1,417
Total noninterest income    6,309      5,143      5,691      4,976      4,121      17,143      10,450
Noninterest expense:                                        
Salaries and employee benefits    13,594      12,203      10,869      11,516      11,032      36,666      31,395
Occupancy and equipment    2,536      2,294      2,341      2,256      2,186      7,170      6,093
FDIC insurance    525      371      371      297      534      1,266      894
Other real estate and loan related expense    407      506      602      516      643      1,514      1,535
Advertising and marketing    235      230      190      181      253      654      653
Data processing and technology    1,753      1,509      1,379      1,182      1,131      4,642      3,293
Professional services    810      849      641      786      594      2,300      2,172
Amortization of intangibles    711      441      444      571      402      1,597      1,169
Merger related and restructuring expenses    464      372      103      702      290      939      3,863
Other    2,274      2,022      2,524      1,946      2,102      6,822      5,699
Total noninterest expense    23,309      20,797      19,464      19,953      19,167      63,570      56,766
Income before income taxes    12,233      11,248      12,420      11,529      8,363      35,901      19,361
Income tax expense    2,633      2,470      2,664      2,499      1,968      7,767      4,059
Net income $  9,600   $  8,778   $  9,756   $  9,030   $  6,395   $  28,134   $  15,302
Earnings per common share:                                        
Basic $  0.62   $  0.59   $  0.65   $  0.60   $  0.42   $  1.85   $  1.03
Diluted $  0.61   $  0.58   $  0.65   $  0.59   $  0.42   $  1.84   $  1.02
Weighted average common shares outstanding:                                        
Basic    15,557,528      15,003,657      15,011,573      15,109,298      15,160,579      15,192,919      14,903,757
Diluted    15,691,126      15,126,184      15,111,947      15,182,796      15,210,611      15,312,755      14,965,455

 

 

 

 

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

YIELD ANALYSIS

 

                                                   
    Three Months Ended  
    September 30, 2021   June 30, 2021   September 30, 2020  
    Average         Yield/   Average         Yield/   Average         Yield/  
    Balance   Interest1   Cost1   Balance   Interest1   Cost1   Balance   Interest1   Cost1  
Assets:                                                  
Loans and leases, including fees2   $  2,532,604   $  31,623    4.95 % $  2,508,388   $  28,256    4.52 % $  2,410,173   $  28,508    4.71 %
Loans held for sale      3,987      51    5.09 %    5,315      67    5.03 %    8,048      113    5.57 %
Taxable securities      187,032      832    1.77 %    164,935      916    2.23 %    132,642      546    1.64 %
Tax-exempt securities      87,621      477    2.16 %    89,296      453    2.04 %    88,129      515    2.32 %
Federal funds sold and other earning assets      802,712      474    0.23 %    531,125      309    0.23 %    438,785      327    0.30 %
Total interest-earning assets      3,613,956      33,457    3.67 %    3,299,059      30,001    3.65 %    3,077,777      30,009    3.88 %
Noninterest-earning assets      323,067                286,211                262,764            
Total assets   $  3,937,023             $  3,585,270             $  3,340,541            
                                                   
Liabilities and Stockholders’ Equity:                                                  
Interest-bearing demand deposits   $  763,613      414    0.21 % $  688,756      304    0.18 % $  509,999      199    0.16 %
Money market and savings deposits      1,233,533      854    0.27 %    1,117,290      905    0.32 %    833,022      704    0.34 %
Time deposits      524,327      885    0.67 %    502,755      1,039    0.83 %    615,714      1,994    1.29 %
Total interest-bearing deposits      2,521,473      2,153    0.34 %    2,308,801      2,248    0.39 %    1,958,735      2,897    0.59 %
Borrowings3      80,188      121    0.60 %    81,525      123    0.61 %    319,265      334    0.42 %
Subordinated debt      40,211      654    6.47 %    39,375      584    5.95 %    39,311      584    5.91 %
Total interest-bearing liabilities      2,641,872      2,928    0.44 %    2,429,701      2,955    0.49 %    2,317,311      3,815    0.65 %
Noninterest-bearing deposits      877,831                768,399                649,489            
Other liabilities      24,522                17,845                25,834            
Total liabilities      3,544,225                3,215,945                2,992,634            
Shareholders’ equity      392,798                369,325                347,907            
Total liabilities and shareholders’ equity   $  3,937,023             $  3,585,270             $  3,340,541            
                                                   
Net interest income, taxable equivalent         $  30,529             $  27,046             $  26,194      
Interest rate spread                3.23 %              3.16 %              3.22 %
Tax equivalent net interest margin                3.35 %              3.29 %              3.39 %
                                                   
Percentage of average interest-earning assets to average interest-bearing liabilities                136.80 %              135.78 %              132.82 %
Percentage of average equity to average assets                9.98 %              10.30 %              10.41 %

 

1 Taxable equivalent

2 Includes average balance of $128,408, $266,114 and $295,045 in PPP loans for the quarters ended September 30, 2021, June 30, 2021, and September 30, 2020, respectively.

3 Includes average balance of $237,780 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarter ended September 30, 2020.  No PPPLF funding was used for the quarters ended September 30, 2021, and June 30, 2021.

 

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

YIELD ANALYSIS

 

                                     
    Nine Months Ended
    September 30, 2021   September 30, 2020  
    Average         Yield/   Average         Yield/  
    Balance   Interest1   Cost1   Balance   Interest1   Cost1  
Assets:                                    
Loans and leases, including fees2   $  2,489,843   $  87,823      4.72 % $  2,252,075   $  83,487    4.95 %
Loans held for sale      5,724      192      4.49 %    6,409      231    4.81 %
Taxable securities      163,005      2,472      2.03 %    123,895      1,813    1.95 %
Tax-exempt securities      89,244      1,339      2.01 %    81,604      1,486    2.43 %
Federal funds sold and other earning assets      584,970      1,074      0.25 %    296,449      1,206    0.54 %
Total interest-earning assets      3,332,786      92,900      3.73 %    2,760,432      88,223    4.27 %
Noninterest-earning assets      295,074                  248,293            
Total assets   $  3,627,860               $  3,008,725            
                                     
Liabilities and Stockholders’ Equity:                                    
Interest-bearing demand deposits   $  698,148      974      0.19 % $  451,074      782    0.23 %
Money market and savings deposits      1,112,342      2,580      0.31 %    749,316      2,707    0.48 %
Time deposits      517,566      3,179      0.82 %    667,303      7,527    1.51 %
Total interest-bearing deposits      2,328,056      6,733      0.39 %    1,867,693      11,016    0.79 %
Borrowings3      81,177      360      0.59 %    203,202      674    0.44 %
Subordinated debt      39,650      1,823      6.15 %    39,290      1,751    5.95 %
Total interest-bearing liabilities      2,448,883      8,916      0.49 %    2,110,185      13,441    0.85 %
Noninterest-bearing deposits      782,960                  537,860            
Other liabilities      21,553                  23,826            
Total liabilities      3,253,396                  2,671,871            
Shareholders’ equity      374,464                  336,854            
Total liabilities and shareholders’ equity   $  3,627,860               $  3,008,725            
                                     
Net interest income, taxable equivalent         $  83,984               $  74,782      
Interest rate spread                  3.24 %              3.42 %
Tax equivalent net interest margin                  3.37 %              3.62 %
                                     
Percentage of average interest-earning assets to average interest-bearing liabilities                  136.09 %              130.81 %
Percentage of average equity to average assets                  10.32 %              11.20 %

 

1 Taxable equivalent

2 Includes average balance of $235,027 and $169,617 in PPP loans for the six months ended September 30, 2021, and 2020, respectively.

3 Includes average balance of $115,734 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the nine months ended September 30, 2020.  No PPPLF funding was used for the nine months ended September 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  
    Sep   Jun   Mar   Dec   Sep  
    2021   2021   2021   2020   2020  
Composition of Loans and Leases:                                
Commercial real estate:                                
owner occupied   $  560,671   $  492,750   $  477,293   $  463,771   $  467,569  
non-owner occupied      752,576      669,741      593,348      549,205      563,082  
Commercial real estate, total      1,313,247      1,162,491      1,070,641      1,012,976      1,030,651  
Commercial & industrial      469,739      496,114      686,010      634,446      644,498  
Construction & land development      326,374      300,704      285,973      278,075      275,172  
Consumer real estate      478,161      444,640      432,486      443,930      440,310  
Leases      53,396      53,038      —      —      —  
Consumer and other      11,746      11,331      12,019      12,816      13,426  
Total loans and leases   $  2,652,663   $  2,468,318   $  2,487,129   $  2,382,243   $  2,404,057  
                                 
Asset Quality and Additional Loan Data:                                
Nonperforming loans and leases   $  3,567   $  3,758   $  6,234   $  5,782   $  2,248  
Other real estate owned      2,415      2,499      3,946      4,619      3,932  
Other repossessed assets      77      199      —      —      —  
Total nonperforming assets   $  6,059   $  6,456   $  10,180   $  10,401   $  6,180  
Restructured loans and leases not included in nonperforming loans and leases   $  212   $  219   $  250   $  257   $  8  
Net charge-offs to average loans and leases (annualized)      0.03 %    0.01 %    0.01 %    0.08 %    0.01 %
Allowance for loan and leases losses to loans and leases      0.73 %    0.74 %    0.74 %    0.77 %    0.78 %
Nonperforming loans and leases to total loans and leases, gross      0.13 %    0.15 %    0.25 %    0.24 %    0.09 %
Nonperforming assets to total assets      0.14 %    0.18 %    0.29 %    0.31 %    0.18 %
Acquired loan and lease fair value discount balance   $  13,001   $  12,982   $  12,951   $  14,467   $  15,141  
Accretion income on acquired loans and leases      1,760      761      1,636      768      960  
PPP net fees deferred balance      3,783      6,651      7,351      4,190      6,348  
PPP net fees recognized      2,873      2,132      2,398      2,157      1,812  
                                 
Capital Ratios:                                
Equity to Assets      9.69 %    10.22 %    10.23 %    10.81 %    10.33 %
Tangible common equity to tangible assets (Non-GAAP)1      7.47 %    7.93 %    8.00 %    8.41 %    7.97 %
                                 
SmartFinancial, Inc.2                                
Tier 1 leverage      8.36 %    8.10 %    8.55 %    8.69 %    8.78 %
Common equity Tier 1      10.85 %    10.63 %    11.29 %    11.61 %    11.33 %
Tier 1 capital      10.85 %    10.63 %    11.29 %    11.61 %    11.33 %
Total capital      12.92 %    12.80 %    13.62 %    14.07 %    13.81 %
                                 
SmartBank     Estimated3                          
Tier 1 leverage      9.20 %    8.75 %    9.33 %    9.58 %    9.74 %
Common equity Tier 1      11.95 %    11.50 %    12.31 %    12.79 %    12.57 %
Tier 1 capital      11.95 %    11.50 %    12.31 %    12.79 %    12.57 %
Total capital      12.60 %    12.19 %    13.05 %    13.57 %    13.37 %

 

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     Nine Months Ended  
  Sep   Jun   Mar   Dec   Sep     Sep   Sep  
  2021   2021   2021   2020   2020     2021   2020  
Selected Performance Ratios (Annualized):                                            
Return on average assets    0.97 %    0.98 %    1.18 %    1.11 %    0.76 %      1.04 %    0.68 %
Return on average shareholders’ equity    9.70 %    9.53 %    10.96 %    10.15 %    7.31 %      10.05 %    6.07 %
Return on average tangible common equity¹    12.84 %    12.54 %    14.41 %    13.43 %    9.72 %      13.24 %    8.10 %
Noninterest income / average assets    0.64 %    0.58 %    0.69 %    0.61 %    0.49 %      0.63 %    0.46 %
Noninterest expense / average assets    2.35 %    2.33 %    2.35 %    2.46 %    2.28 %      2.34 %    2.52 %
Efficiency ratio    63.53 %    64.91 %    60.92 %    63.38 %    63.54 %      63.14 %    66.93 %
                                             
Operating Selected Performance Ratios (Annualized):                                            
Operating return on average assets1    1.00 %    1.01 %    1.19 %    1.14 %    0.79 %      1.06 %    0.81 %
Operating PTPP return on average assets1    1.39 %    1.30 %    1.52 %    1.45 %    1.35 %      1.40 %    1.42 %
Operating return on average shareholders’ equity1    10.01 %    9.83 %    11.05 %    10.34 %    7.57 %      10.28 %    7.20 %
Operating return on average tangible common equity1    13.26 %    12.93 %    14.53 %    13.69 %    10.06 %      13.56 %    9.60 %
Operating efficiency ratio1    62.09 %    63.46 %    60.32 %    60.86 %    62.25 %      61.96 %    62.07 %
Operating noninterest income / average assets1    0.63 %    0.58 %    0.69 %    0.56 %    0.49 %      0.63 %    0.46 %
Operating noninterest expense / average assets1    2.30 %    2.29 %    2.34 %    2.37 %    2.25 %      2.31 %    2.35 %
                                             
Selected Interest Rates and Yields:                                            
Yield on loans and leases    4.95 %    4.52 %    4.67 %    4.72 %    4.71 %      4.72 %    4.95 %
Yield on earning assets, FTE    3.67 %    3.65 %    3.88 %    4.01 %    3.88 %      3.73 %    4.27 %
Cost of interest-bearing deposits    0.34 %    0.39 %    0.44 %    0.50 %    0.59 %      0.39 %    0.79 %
Cost of total deposits    0.25 %    0.29 %    0.33 %    0.38 %    0.44 %      0.29 %    0.61 %
Cost of interest-bearing liabilities    0.44 %    0.49 %    0.54 %    0.60 %    0.65 %      0.49 %    0.85 %
Net interest margin, FTE    3.35 %    3.29 %    3.48 %    3.57 %    3.39 %      3.37 %    3.62 %
                                             
Per Common Share:                                            
Net income, basic $  0.62   $  0.59   $  0.65   $  0.60   $  0.42     $  1.85   $  1.03  
Net income, diluted    0.61      0.58      0.65      0.59      0.42        1.84      1.02  
Operating earnings, basic¹    0.64      0.60      0.65      0.61      0.44        1.90      1.22  
Operating earnings, diluted¹    0.63      0.60      0.65      0.61      0.44        1.88      1.21  
Book value    25.28      24.71      24.10      23.64      22.96        25.28      22.96  
Tangible book value¹    19.03      18.69      18.39      17.92      17.27        19.03      17.27  
Common shares outstanding    16,801,447      15,109,736      15,104,536      15,107,214      15,233,227        16,801,447      15,233,227  

 

¹See reconciliation of Non-GAAP measures

 

 

SmartFinancial, Inc. and Subsidiary

Condensed Consolidated Financial Information – (unaudited)

(dollars in thousands)

NON-GAAP RECONCILIATIONS

                                               
    Three Months Ended     Nine Months Ended  
    Sep   Jun   Mar   Dec   Sep     Sep   Sep  
    2021   2021   2021   2020   2020     2021   2020  
Operating Earnings:                                              
Net income (GAAP)   $  9,600   $  8,778   $  9,756   $  9,030   $  6,395     $  28,134   $  15,302  
Noninterest income:                                              
Securities gains (losses), net      (45)      —      —      —      9        (45)      (6)  
ADECA termination proceeds      —      —      —      (465)      —        —      —  
Noninterest expenses:                                              
Merger related and restructuring expenses      464      372      103      702      290        939      3,863  
Income taxes:                                              
Income tax effect of adjustments      (108)      (96)      (27)      (62)      (77)        (231)      (1,009)  
Operating earnings (Non-GAAP)   $  9,911   $  9,054   $  9,832   $  9,205   $  6,617     $  28,797   $  18,150  
Operating earnings per common share (Non-GAAP):                                              
Basic   $  0.64   $  0.60   $  0.65   $  0.61   $  0.44     $  1.90   $  1.22  
Diluted      0.63      0.60      0.65      0.61      0.44        1.88      1.21  
                                               
Operating Noninterest Income:                                              
Noninterest income (GAAP)   $  6,309   $  5,143   $  5,691   $  4,976   $  4,121     $  17,143   $  10,450  
Securities gains (losses), net      (45)      —      —      —      9        (45)      (6)  
ADECA termination proceeds      —      —      —      (465)      —        —      —  
Operating noninterest income (Non-GAAP)   $  6,264   $  5,143   $  5,691   $  4,511   $  4,130     $  17,098   $  10,444  
Operating noninterest income (Non-GAAP)/average assets1      0.63 %    0.58 %    0.69 %    0.56 %    0.49 %      0.63 %    0.46 %
                                               
Operating Noninterest Expense:                                              
Noninterest expense (GAAP)   $  23,309   $  20,797   $  19,464   $  19,953   $  19,167     $  63,570   $  56,766  
Merger related and restructuring expenses      (464)      (372)      (103)      (702)      (290)        (939)      (3,863)  
Operating noninterest expense (Non-GAAP)   $  22,845   $  20,425   $  19,361   $  19,251   $  18,877     $  62,631   $  52,903  
Operating noninterest expense (Non-GAAP)/average assets2      2.30 %    2.29 %    2.34 %    2.37 %    2.25 %      2.31 %    2.35 %
                                               
Operating Pre-tax Pre-provision (“PTPP”) Earnings:                                              
Net interest income (GAAP)   $  30,382   $  26,897   $  26,260   $  26,506   $  26,043     $  83,539   $  74,360  
Operating noninterest income      6,264      5,143      5,691      4,511      4,130        17,098      10,444  
Operating noninterest expense      (22,845)      (20,425)      (19,361)      (19,251)      (18,877)        (62,631)      (52,903)  
Operating PTPP earnings (Non-GAAP)   $  13,801   $  11,615   $  12,590   $  11,766   $  11,296     $  38,006   $  31,901  
                                               
Non-GAAP Return Ratios:                                              
Operating return on average assets (Non-GAAP)3      1.00 %    1.01 %    1.19 %    1.14 %    0.79 %      1.06 %    0.81 %
Operating PTPP return on average assets (Non-GAAP)4      1.39 %    1.30 %    1.52 %    1.45 %    1.35 %      1.40 %    1.42 %
Return on average tangible common equity (Non-GAAP)5      12.84 %    12.54 %    14.41 %    13.43 %    9.72 %      13.24 %    8.10 %
Operating return on average shareholders’ equity (Non-GAAP)6      10.01 %    9.83 %    11.05 %    10.34 %    7.57 %      10.28 %    7.20 %
Operating return on average tangible common equity (Non-GAAP)7      13.26 %    12.93 %    14.53 %    13.69 %    10.06 %      13.56 %    9.60 %
                                               
Operating Efficiency Ratio:                                              
Efficiency ratio (GAAP)      63.53 %    64.91 %    60.92 %    63.38 %    63.54 %      63.14 %    66.93 %
Adjustment for taxable equivalent yields      (0.25) %    (0.30) %    (0.28) %    (0.30) %    (0.32) %      (0.28) %    (0.33) %
Adjustment for securities gains (losses)      (0.08) %    — %    — %    — %    0.02 %      (0.03) %    (0.01) %
Adjustment for merger related income and costs      (1.11) %    (1.15) %    (0.32) %    (2.22) %    (0.99) %      (0.87) %    (4.52) %
Operating efficiency ratio (Non-GAAP)      62.09 %    63.46 %    60.32 %    60.86 %    62.25 %      61.96 %    62.07 %

 

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   Nine Months Ended
    Sep   Jun   Mar   Dec   Sep   Sep   Sep
    2021   2021   2021   2020   2020   2021   2020
Tangible Common Equity:                                          
Shareholders’ equity (GAAP)   $  424,720   $  373,393   $  364,058   $  357,168   $  349,789   $  424,720   $  349,789
Less goodwill and other intangible assets      104,930      90,966      86,350      86,471      86,710      104,930      86,710
Tangible common equity (Non-GAAP)   $  319,790   $  282,427   $  277,708   $  270,697   $  263,079   $  319,790   $  263,079
                                           
Average Tangible Common Equity:                                          
Average shareholders’ equity (GAAP)   $  392,798   $  369,325   $  360,919   $  354,026   $  347,907   $  374,464   $  336,854
Less average goodwill and other intangible assets      96,250      88,551      86,424      86,561      86,206      90,445      84,361
Average tangible common equity (Non-GAAP)   $  296,548   $  280,774   $  274,495   $  267,465   $  261,701   $  284,019   $  252,493
                                           
Tangible Book Value per Common Share:                                          
Book value per common share (GAAP)   $  25.28   $  24.71   $  24.10   $  23.64   $  22.96   $  25.28   $  22.96
Adjustment due to goodwill and other intangible assets      (6.25)      (6.02)      (5.71)      (5.72)      (5.69)      (6.25)      (5.69)
Tangible book value per common share (Non-GAAP)1   $  19.03   $  18.69   $  18.39   $  17.92   $  17.27   $  19.03   $  17.27
                                           
Tangible Common Equity to Tangible Assets:                                          
Total Assets   $  4,384,031   $  3,654,356   $  3,557,203   $  3,304,949   $  3,387,588   $  4,384,031   $  3,387,588
Less goodwill and other intangibles      104,930      90,966      86,350      86,471      86,710      104,930      86,710
Tangible Assets (Non-GAAP):   $  4,279,101   $  3,563,390   $  3,470,853   $  3,218,478   $  3,300,878   $  4,279,101   $  3,300,878
Tangible common equity to tangible assets (Non-GAAP)     7.47%     7.93%     8.00%     8.41%     7.97%     7.47%     7.97%

 

 

 

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