SMARTFINANCIAL, INC. COMPLETES ACQUISITION OF FOOTHILLS BANCORP, INC.
On November 1st, SmartFinancial, Inc., Knoxville, Tennessee (“SmartFinancial”) (Nasdaq: SMBK), parent company of SmartBank, announced the completion of its previously-announced acquisition of Foothills Bancorp, Inc., Maryville, Tennessee (“Foothills Bancorp”), and Foothills Bancorp’s wholly owned bank subsidiary, Foothills Bank & Trust. Effective November 1, 2018, Foothills Bancorp has been merged with and into SmartFinancial, and Foothills Bank & Trust has been merged with and into SmartBank. Based on financial data as of September 30, 2018, the combined company has total consolidated assets of approximately $2.3 billion. This marks SmartFinancial’s third acquisition in the last 12 months. For the full release, click here.      

SmartFinancial Announces Record Earnings with Third Quarter 2018 Net Income of $4.3 million – Net Operating Earnings (Non-GAAP) of $5.0 million for the quarter

Posted by | October 24, 2018 | News | No Comments

Performance Highlights 

  • Return on average assets of 0.85 percent and net operating return on average assets (non-GAAP) of 0.98 percent.
  • Yield on earning assets, taxable equivalent, of 5.03 percent, an increase of 0.33 percentage points from a year ago.
  • Noninterest expense to average assets of 2.90 percent, a decrease of 0.44 percentage points from a year ago.
  • Completed subordinated debt offering of $40 million during the quarter.

KNOXVILLE, TN – October 23, 2018 – SmartFinancial, Inc. (“SmartFinancial”; NASDAQ: SMBK), today announced net income of $4.3 million for the third quarter of 2018, compared to $1.7 million a year ago.  Diluted net income per share was $0.34 for the third quarter of 2018, compared to $0.20 during the third quarter of 2017. Net operating earnings (Non-GAAP), which excludes securities gains and merger expenses, totaled $5.0 million in the third quarter of 2018 compared to $1.8 million in the third quarter of 2017.

Billy Carroll, President & CEO, stated:  “I am pleased to report a very solid quarter with record earnings for SmartFinancial.  As we execute on our growth strategy, we continue to make strides on building a very solid foundation for our company.  We had another successful conversion, as we integrated and rebranded the middle Tennessee and northern Alabama offices of Tennessee Bancshares , Inc. while planning for our upcoming acquisition of east Tennessee-based Foothills Bancorp, Inc.  Also highlighting this quarter was our successful $40 million subordinated debt raise that positions the company for our next phase of growth.”

SmartFinancial’s Chairman, Miller Welborn, concluded: “I am excited about our continued growth and accomplishments this quarter.  Also, being assigned an investment grade BBB senior unsecured debt rating and BBB- subordinated debt rating from the Kroll Bond Rating Agency during the quarter is an accolade we are extremely proud to obtain. We also have all necessary approvals for the acquisition of Foothills Bancorp, Inc. and anticipate a closing of November 1.”

Third Quarter 2018 compared to Second Quarter 2018 

Net income was $4.3 million for the third quarter of 2018, compared to $3.9 million in the prior quarter.  Diluted net income per share was $0.34 for the third quarter of 2018, compared to $0.32 during the second quarter of 2018. Net operating earnings (non-GAAP), which is net income excluding securities gains and merger expenses, totaled $5.0 million in the third quarter of 2018 compared to $4.8 million in the previous quarter.

Net interest income to average assets of 3.70 percent for the quarter decreased from 4.03 percent in the second quarter of 2018,  primarily due to lower accretion on acquired loans.  Net interest income totaled $18.9 million in the third quarter of 2018, compared to $19.5 million in the second quarter of 2018. Net interest margin, taxable equivalent, decreased from 4.54 percent in the second quarter of 2018 to 4.11 percent in the third quarter of 2018 as a result of lower accretion income on acquired loans and higher deposit costs.

Provision for loan losses was $302 thousand in the third quarter of 2018, compared to $617 thousand in the second quarter of 2018.  The decrease in provision for loan losses was due to slower growth of the organic loan portfolio during the period.  The allowance for loan losses and leases  (“ALLL”) was $7.2 million, or 0.45 percent of total loans as of September 30, 2018, compared to $7.1 million, or 0.45 percent of total loans, as of June 30, 2018.

Nonperforming loans as a percentage of total loans was 0.16 percent as of September 30, 2018, which was an increase from 0.11 percent in the prior quarter.  Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.27 percent as of September 30, 2018, compared to 0.25 percent as of June 30, 2018.

Noninterest income to average assets of 0.36 percent for the period increased slightly from 0.33 percent in the second quarter of 2018.  Noninterest income totaled $1.9 million in the third quarter of 2018, compared to $1.6 million in the second quarter of 2018, primarily due to higher gains on sale of loans and other assets.

Noninterest expense to average assets of 2.90 percent for the quarter decreased from 3.15 percent in the second quarter of 2018.  Noninterest expense totaled $14.8 million in the third quarter of 2018, a decrease of $0.5 million from the second quarter of 2018, primarily due to lower merger expenses.  Income tax expense was $1.3 million in the third quarter of 2018 compared to $1.3 million in the second quarter of 2018.  The company’s effective tax rate decreased to 23.2 percent in the third quarter of 2018 compared to 24.8 percent in the second quarter of 2018, due to lower nondeductible merger expenses and an increase in exercised options with associated tax benefits.

Third Quarter 2018 compared to Third Quarter 2017 

Net income totaled $4.3 million in the third quarter of 2018, or $0.34 per diluted share, compared to $1.7 million, or $0.20 per diluted share, in the third quarter of 2017.  Net operating earnings (non-GAAP), which excludes securities gains and merger expenses, totaled $5.0 million in the third quarter of 2018 compared to $1.8 million in the third quarter of 2017.

Net interest income to average assets of 3.70 percent for the quarter decreased from 3.81 percent in the third quarter of 2017.  Net interest income totaled $18.9 million in the third quarter of 2018, compared to $10.9 million in the third quarter of 2017.  Net interest income was positively impacted compared to the prior year due to increases in loan and securities balances and increases in the yields of the loan and securities portfolios.  Net interest margin, taxable equivalent, decreased from 4.17 percent in the third quarter of 2017 to 4.11 percent in the third quarter of 2018 as a result of increases on the cost of deposits.

Provision for loan losses was $302 thousand in the third quarter of 2018, compared to $30 thousand in the third quarter of 2017. The increase in provision for loan losses was due to faster growth of the organic loan portfolio during the period. The ALLL was $7.2 million, or 0.45 percent of total loans as of September 30, 2018, compared to $5.4 million, or 0.62 percent of total loans, as of September 30, 2017.

Nonperforming loans as a percentage of total loans was 0.16 percent as of September 30, 2018, an increase from 0.15 percent in the prior year.  Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and foreclosed assets) as a percentage of total assets was 0.27 percent as of September 30, 2018, compared to 0.37 percent as of September 30, 2017.

Noninterest income to average assets of 0.36 percent for the quarter decreased from 0.43 percent in the third quarter of 2017. Noninterest income totaled $1.9 million in the third quarter of 2018, compared to $1.2 million in the third quarter of 2017.

Noninterest expense to average assets of 2.90 percent for the quarter decreased from 3.34 percent in the third quarter of 2017.  Noninterest expense totaled $14.8 million in the third quarter of 2018, compared to $9.6 million in the third quarter of 2017.  The increases in noninterest expense over the prior year in salaries and employee benefits and occupancy expense were primarily due to the acquisitions of Capstone Bancshares, Inc. in the fourth quarter of 2017 and Tennessee Bancshares, Inc. in the second quarter of 2018.  The company’s effective tax rate was 23.2 percent in the third quarter of 2018 compared to 34.4 percent in the third quarter of 2017, primarily due to the decrease in the federal tax rate for 2018.

Conference Call Information 

SmartFinancial plans to issue its earnings release for the third quarter of 2018 on Tuesday, October 23, 2018, and will host a conference call on Wednesday, October 24, 2018 at 10:00 a.m. ET.  To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 2373912.  A replay of the conference call will be available through October 24, 2019, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10125644.  Conference call materials (earnings release & conference call presentation will be published on the company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile ), 9:00 am EDT prior to the morning of 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 25 branches across Tennessee, Alabama, and the Florida Panhandle.  Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com. 

Source

SmartFinancial, Inc. 

Investor Contacts

Billy Carroll                                                                                          Ron Gorczynski

President & CEO                                                                                 Executive Vice President, Chief Administrative Officer

(865) 868-0613   billy.carroll@smartbank.com                            (865) 437-5724   ron.gorczynski@smartbank.com

 

Media Contact

Kelley Fowler

Senior Vice President, Public Relations & Marketing

(865) 868-0611    kelley.fowler@smartbank.com

 

Non-GAAP Financial Matters

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. SmartFinancial management uses several non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) operating efficiency ratio; (iii) tangible common equity; and (iv) net operating return on average assets, in its analysis of the company’s performance. Net operating earnings available to common shareholders excludes the following from net income available to common shareholders: securities gains and losses, merger related expenses, and the effect of the December, 2017 tax law change on deferred tax assets, and the income tax effect of adjustments. The operating efficiency ratio excludes securities gains and losses and merger related expenses from the efficiency ratio.  Tangible common equity excludes goodwill and other intangible assets. Net operating return on average assets is annualized net operating income divided by GAAP total average assets. Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. 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

Certain of the statements made in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements, including statements regarding the intent, belief, or current expectations of SmartFinancial’s management regarding the company’s strategic direction, prospects, or future results or the benefits of the proposed merger with Foothills Bancorp, Inc.  (the “Foothills merger”), are subject to numerous risks and uncertainties. Such risks and uncertainties include, among others, (1) the risk that the cost savings and revenue synergies anticipated in connection with the Foothills merger may not be realized or may take longer than anticipated to be realized, (2) disruption from the Foothills merger with customers, suppliers, or employee or other business relationships, (3) the occurrence of any event, change, or other circumstances that could give rise to the termination of the merger agreement with Foothills Bancorp, (4) the risk of successful integration of our business with that of Foothills Bancorp, (5) the amount of costs, fees, expenses, and charges related to the Foothills merger, (6) our ability to successfully integrate the businesses acquired as part of previous mergers with that of SmartBank, (7) reputational risk and the reaction of our customers and Foothills Bancorp’s customers to the Foothills merger, (8) the failure of the conditions to closing of the Foothills merger to be satisfied, (9) the risk that the integration of our merger partner’s business into our operations will be materially delayed or will be more costly or difficult than expected, (10) the possibility that the Foothills merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (11) the dilution caused by SmartFinancial’s issuance of additional shares of its common stock in the Foothills merger, (12) changes in management’s plans for the future, (13) prevailing economic and political conditions, particularly in our market areas, (14) credit risk associated with our lending activities, (15) changes in interest rates, loan demand, real estate values, and competition, (16) changes in accounting principles, policies, or guidelines, (17) changes in applicable laws, rules, or regulations, and (18) other competitive, economic, political, and market factors affecting our business, operations, pricing, products, and services. Certain additional factors which could affect the forward-looking statements can be found in SmartFinancial’s 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 SEC and available on the SEC’s website (www.sec.gov). SmartFinancial disclaims any obligation to update or revise any forward-looking statements contained in this press release, which speak only as of the date hereof, whether as a result of new information, future events, or otherwise.