SmartFinancial Announces Results for the Fourth Quarter 2020

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KNOXVILLE, Tenn., Jan. 19, 2021 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $9.0 million, or $0.59 per diluted common share, for the fourth quarter of 2020, compared to net income of $6.4 million, or $0.42 per diluted common share for the third quarter of 2020. Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $9.2 million, or $0.61 per diluted common share, in the fourth quarter of 2020, compared to $6.6 million, or $0.44 per diluted common share, in the third quarter of 2020.

Highlights for the Fourth Quarter of 2020

  • Net income of $9.0 million and operating earnings of $9.2 million (Non-GAAP)

  • Operating noninterest income (Non-GAAP) increased $381 thousand or 36.9% annualized quarter-over-quarter

  • Tangible book value per share (Non-GAAP) of $17.92, a 15.1% annualized quarter-over-quarter increase

  • Deposits increased by $153.2 million or 23.1% annualized from September 30, 2020

  • Paid off $237.8 million in borrowings from the Federal Reserve Bank Paycheck Protection Program Liquidity Facility (“PPPLF”)

  • COVID loan modifications declined to 0.7% of total loans

Billy Carroll, President & CEO, stated: "We are extremely pleased with our results for the quarter and for the year. The year was unprecedented on several fronts, but our energetic, entrepreneurial team rose to the occasion and posted very sound results. Our continued focus on diversification of revenue and work on efficiency gains are being seen in our metrics, and that, coupled with our solid credit quality, keeps us very excited about our future.”

SmartFinancial's Chairman, Miller Welborn, concluded: “The fourth quarter of 2020 and the entire year of 2020 exceeded our expectations. Our Board could not be happier or prouder of the entire team for the incredible effort and execution of our Strategic Plan. This COVID pandemic has affected a tremendous number of people and the SmartBank team continues to help our clients and the communities we serve.”

Net Interest Income and Net Interest Margin

Net interest income increased $463 thousand to $26.5 million for the fourth quarter of 2020 or approximately 1.8% when compared to $26.0 million for the third quarter of 2020, mainly attributable to a reduction in the cost of interest-bearing liabilities. Average earning assets totaled $3.0 billion, a decrease of $106.9 million, primarily driven by a decrease in cash and cash equivalents used to pay off $237.8 million in borrowings related to PPPLF funding. Average interest-bearing liabilities decreased $139.4 million, primarily as a result of the PPPLF pay off, and was offset by an increase of $80.1 million in average interest-bearing deposits.

The tax equivalent net interest margin was 3.57% for the fourth quarter of 2020, compared to 3.39% for the third quarter of 2020. The tax equivalent net interest margin was positively impacted by a 13 basis point increase in the average yield on interest-earning assets and a 5 basis point decline in the rate on interest-bearing liabilities over the prior quarter. Lower market interest rates continue to negatively impact earning asset yields, but these declines have been largely mitigated by a lower cost of funds. The primary drivers of the yield increase on interest-earning assets during the fourth quarter of 2020 was an increase in total loan fees of $748 thousand which was offset by a $192 thousand decline in discount accretion. The increase in loan fees during the quarter is attributable to $2.2 million of the Paycheck Protection Program (“PPP”) fee accretion and $1.3 million of other loan fees compared to $1.8 million of PPP fee accretion, and $905 thousand of other loan fees recognized in the third quarter of 2020. Accretion income on acquired loans for the quarter totaled $768 thousand compared to $960 thousand recognized in the third quarter of 2020. The Company continues to carry excess liquidity on the balance sheet that resulted from significant deposit growth during the second and third quarters and continued muted loan growth. The lower cost of deposits realized during the current quarter was attributable to the maturing and repricing of time deposits and the payoff of the PPPLF borrowing, which further contributed to the increase in the tax equivalent net interest margin.

The yield on interest-bearing liabilities decreased to 0.60% for the fourth quarter of 2020 when compared to 0.65% for the third quarter of 2020. The cost of average interest-bearing deposits was 0.50% for the fourth quarter of 2020 compared to 0.59% for the third quarter of 2020, a decrease of 9 basis points. The lower cost of average deposits was attributable to the maturing and repricing of time deposits, with average costs decreasing 18 basis points. The cost of total deposits for the fourth quarter of 2020 was 0.38%.

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

Three Months Ended

Dec

Sep

Increase

Selected Interest Rates and Yields

2020

2020

(Decrease)

Yield on loans

4.72

%

4.71

%

0.01

%

Yield on earning assets, FTE

4.01

%

3.88

%

0.13

%

Cost of interest-bearing deposits

0.50

%

0.59

%

(0.09

)

%

Cost of total deposits

0.38

%

0.44

%

(0.06

)

%

Cost of interest-bearing liabilities

0.60

%

0.65

%

(0.05

)

%

Net interest margin, FTE

3.57

%

3.39

%

0.18

%

Provision for Loan Loss and Credit Quality

There was no provision for loan losses during the fourth quarter of 2020, compared to $2.6 million in the third quarter of 2020. At December 31, 2020, the allowance for loan losses was $18.3 million. The allowance for loan losses to total loans was 0.77% as of December 31, 2020, compared to 0.78% as of September 30, 2020. For the Company’s originated loans, the allowance for loan losses to originated loans, less PPP loans, was 0.96% as of December 31, 2020, compared to 1.00% as of September 31, 2020. The remaining discounts on the acquired loan portfolio totaled $14.5 million, or 3.76% of acquired loans as of December 31, 2020. During the quarter, the Company added a qualitative factor to the loan loss model, which is based upon the average number of COVID cases within our footprint.

As of December 31, 2020, the Company had COIVD related modified loans totaling $17.2 million, or 0.7%, of the loan portfolio, as compared to $232.5 million or 9.7%, of the loan portfolio on September 30, 2020.

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

Three Months Ended

Dec

Sep

Provision for Loan Losses Rollforward

2020

2020

Change

Beginning balance

$

18,817

$

16,254

$

2,563

Charge-offs

(520

)

(174

)

(346

)

Recoveries

49

103

(54

)

Net charge-offs

(471

)

(71

)

(400

)

Provision

-

2,634

(2,634

)

Ending balance

$

18,346

$

18,817

$

(471

)

Allowance for loan losses to total loans, gross

0.77

%

0.78

%

(0.01

)

%

The Company is not required to implement the provisions of the CECL accounting standard until January 1, 2023 and is continuing to account for the allowance for loan losses under the incurred loss model.

Nonperforming loans as a percentage of total loans was 0.24% as of December 31, 2020, an increase of fifteen basis points from the 0.09% reported in the third quarter of 2020. Total nonperforming assets (which include nonaccrual loans, loans past due 90 days or more and still accruing, and other real estate owned) as a percentage of total assets was 0.31% as of December 31, 2020, as compared to 0.18% as of September 30, 2020.

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

Three Months Ended

Dec

Sep

Increase

Credit Quality

2020

2020

(Decrease)

Nonaccrual loans

$

5,633

$

2,248

$

3,385

Loans past due 90 days or more and still accruing

149

-

149

Total nonperforming loans

5,782

2,248

3,534

Other real estate owned

4,619

3,932

687

Total nonperforming assets

$

10,401

$

6,180

$

4,221

Nonperforming loans to total loans, gross

0.24

%

0.09

%

0.15

%

Nonperforming assets to total assets

0.31

%

0.18

%

0.13

%

Noninterest Income

Noninterest income increased $855 thousand to $5.0 million for the fourth quarter of 2020 compared to $4.1 million for the third quarter of 2020. During the fourth quarter of 2020, the primary components of the changes in noninterest income were as follows:

  • Increase in service charges on deposit accounts of $140 thousand, primarily related to increased transaction volume;

  • Increase in mortgage banking income of $302 thousand, continued to experience high volume during the quarter;

  • Increase in other income of $476 thousand, related to $465 thousand of previously reserved funds from a dissolved loan program from the Alabama Department of Economic and Community Affairs (“ADECA”). These funds were placed in reserves for potential future losses. During the fourth quarter of 2020, these specific loans paid-off and the reserve was no longer required; and

  • Decrease in interchange and debit card transaction fees of $108 thousand, due to a one-time credit of $130 thousand from vendor reported during the third quarter of 2020.

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

Three Months Ended

Dec

Sep

Increase

Noninterest Income

2020

2020

(Decrease)

Service charges on deposit accounts

$

1,032

$

892

$

140

Gain (loss) on sale of securities, net

-

(9

)

9

Mortgage banking income

1,331

1,029

302

Investment services

407

359

48

Insurance commissions

548

560

(12

)

Interchange and debit card transaction fees

760

868

(108

)

Other

898

422

476

Total noninterest income

$

4,976

$

4,121

$

855

Noninterest Expense

Noninterest expense was $20.0 million for the fourth quarter of 2020 compared to $19.2 million for the third quarter of 2020. During the fourth quarter of 2020, the primary components of the changes in noninterest expense were as follows:

  • Salaries and employee benefits increased $484 thousand, increase is primarily attributable to year-end employee incentive accrual adjustments and various other employee benefit related accruals;

  • Professional services increased $192 thousand, due to increased volume of services performed;

  • Amortization of intangibles increased $169 thousand, increase is from a cumulative adjustment for the amortization of intangible assets (client list and trademark) related to the insurance company purchased in the acquisition of Progressive Financial Group (“PFG”);

  • Merger related and restructuring expense increased $412 thousand, primarily related from the consolidation and termination of two leased properties;

  • FDIC insurance decreased $237 thousand, the decrease was related to an elevated third quarter expense due to an accrual adjustment; and

  • Other real estate and loan related expenses decreased $127 thousand, primarily attributable to decreased activity in loan related activity.

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

Three Months Ended

Dec

Sep

Increase

Noninterest Expense

2020

2020

(Decrease)

Salaries and employee benefits

$

11,516

$

11,032

$

484

Occupancy and equipment

2,256

2,186

70

FDIC insurance

297

534

(237

)

Other real estate and loan related expenses

516

643

(127

)

Advertising and marketing

181

253

(72

)

Data processing

592

558

34

Professional services

786

594

192

Amortization of intangibles

571

402

169

Software as service contracts

590

573

17

Merger related and restructuring expenses

702

290

412

Other

1,946

2,102

(156

)

Total noninterest expense

$

19,953

$

19,167

$

786

Income Tax Expense

Income tax expense was $2.5 million for the fourth quarter of 2020, an increase of $531 thousand, compared to $2.0 million for the third quarter of 2020.

For the fourth quarter of 2020, the effective tax rate was 21.7% compared to 23.5% for the third quarter of 2020. The lower effective tax rate during the fourth quarter of 2020 was primarily from tax benefits associated with a program the State of Tennessee manages for Community Investment loans.

Balance Sheet Trends

Total assets at December 31, 2020, were $3.30 billion compared with $2.45 billion at December 31, 2019. The increase of $855.8 million is primarily attributable to assets acquired from the acquisition of PFG of approximately $308.2 million, increase in cash and cash equivalents of $241.8 million and the net originations of $288.9 million of PPP loans.

Total liabilities increased to $2.95 billion at December 31, 2020 from $2.14 billion at December 31, 2019. The increase of $811.4 million was primarily from organic deposit growth of $486.0 million, acquired deposits from the acquisition of PFG in the amount of $272.0 million, and an increase in borrowings of $49.6 million.

Shareholders' equity at December 31, 2020, totaled $357.2 million, an increase of $44.4 million, from December 31, 2019. The increase in shareholders' equity was primarily from the issuance of common stock for the acquisition of PFG of $24.5 million, net income of $24.3 million for the year ended December 31, 2020 and a net change in accumulated other comprehensive income of $2.0 million, which was offset by the repurchase of the Company's common stock of $4.3 million and $3.0 million of dividends paid. Tangible book value per share (Non-GAAP) was $17.92 at December 31, 2020, an increase from $16.82 at December 31, 2019. Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 8.41% at December 31, 2020, compared with 9.93% at December 31, 2019.

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

Dec

Dec

Increase

Selected Balance Sheet Information

2020

2019

(Decrease)

Total assets

$

3,304,949

$

2,449,123

$

855,826

Total liabilities

2,947,781

2,136,376

811,405

Total equity

357,168

312,747

44,421

Securities available-for-sale, at fair value

215,634

178,348

37,286

Loans

2,382,243

1,897,392

484,851

Deposits

2,805,215

2,047,214

758,001

Borrowings

81,199

31,623

49,576

Conference Call Information

SmartFinancial issued this earnings release for the fourth quarter of 2020 on Tuesday, January 19, 2021, and will host a conference call on Wednesday, January 20, 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, 0205038. A replay of the conference call will be available through January 20, 2022, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10151327. Conference call materials will be published on the Company’s webpage located at http://www.smartfinancialinc.com/CorporateProfile, at 9:00 am ET prior to the conference call.

About SmartFinancial, Inc.

SmartFinancial, Inc., based in Knoxville, Tennessee, is the bank holding company for SmartBank. SmartBank is a full-service commercial bank founded in 2007, with 35 branches across East and Middle Tennessee, Alabama, and the Florida Panhandle. Recruiting the best people, delivering exceptional client service, strategic branching, and a disciplined approach to lending have contributed to SmartBank’s success. More information about SmartFinancial can be found on its website: www.smartfinancialinc.com.

Source

SmartFinancial, Inc.

Investor Contacts

Billy Carroll

Ron Gorczynski

President & CEO

Executive Vice President, Chief Financial Officer

(865) 868-0613 billy.carroll@smartbank.com

(865) 437-5724 ron.gorczynski@smartbank.com

Media Contact

Kelley Fowler

Senior Vice President, Public Relations & Marketing

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

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 income (x) operating noninterest expense, (xi) tangible common equity, (xii) average tangible common equity, (xiii) tangible book value; and ratios derived therefrom, in its analysis of the company's performance. Operating earnings excludes the following from net income: securities gains and losses, expenses related to the termination of an Alabama Department of Economic and Community Affairs (“ADECA”) loan program, merger termination fee of $6.4 million in the second quarter of 2019, merger related and restructuring expenses. 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 divided 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, expenses related to the termination of the ADECA loan program and the merger termination fee of $6.4 million in the second quarter of 2019. Operating pre-tax pre-provision income is net interest expense 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. Management believes that Non-GAAP financial measures provide additional useful information that allows investors to evaluate the ongoing performance of the company and provide meaningful comparisons to its peers. Management believes these non-GAAP financial measures also enhance investors' ability to compare period-to-period financial results and allow investors and company management to view our operating results excluding the impact of items that are not reflective of the underlying operating performance. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider SmartFinancial's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

This news release may contain statements that are based on management’s current estimates or expectations of future events or future results, and that may be deemed to constitute forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding the potential effects of the COVID-19 pandemic on the Company’s business and financial results and conditions, are not historical in nature and can generally be identified by such words as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “may,” “estimate,” and similar expressions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results of SmartFinancial to differ materially from future results expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others, (1) 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 completed acquisition of PFG; (7) the risk that the anticipated benefits from the completed acquisition of PFG 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

Dec

Sep

Jun

Mar

Dec

2020

2020

2020

2020

2019

Assets:

Cash and cash equivalents

$

481,719

$

541,815

$

399,467

$

309,089

$

183,971

Securities available-for-sale, at fair value

215,634

214,634

219,631

201,002

178,348

Other investments

14,794

14,829

14,829

14,113

12,913

Loans held for sale

11,721

11,292

6,330

6,045

5,856

Loans

2,382,243

2,404,057

2,408,284

2,139,247

1,897,392

Less: Allowance for loan losses

(18,346

)

(18,817

)

(16,254

)

(13,431

)

(10,243

)

Loans, net

2,363,897

2,385,240

2,392,030

2,125,816

1,887,149

Premises and equipment, net

72,682

73,934

73,868

73,801

59,433

Other real estate owned

4,619

3,932

5,524

5,894

1,757

Goodwill and core deposit intangibles, net

86,471

86,710

86,327

86,503

77,193

Bank owned life insurance

31,215

31,034

30,853

30,671

24,949

Other assets

22,197

24,168

37,126

20,781

17,554

Total assets

$

3,304,949

$

3,387,588

$

3,265,985

$

2,873,715

$

2,449,123

Liabilities:

Deposits:

Noninterest-bearing demand

$

685,957

$

669,733

$

645,650

$

431,781

$

364,155

Interest-bearing demand

649,129

534,128

479,212

444,141

380,234

Money market and savings

919,631

871,098

762,246

730,392

623,284

Time deposits

550,498

577,064

652,581

735,616

679,541

Total deposits

2,805,215

2,652,023

2,539,689

2,341,930

2,047,214

Borrowings

81,199

319,391

318,855

131,603

31,623

Subordinated debt

39,346

39,325

39,304

39,283

39,261

Other liabilities

22,021

27,060

24,649

24,699

18,278

Total liabilities

2,947,781

3,037,799

2,922,497

2,537,515

2,136,376

Shareholders' Equity:

Common stock

15,107

15,233

15,217

15,222

14,008

Additional paid-in capital

252,693

254,626

254,396

254,356

232,732

Retained earnings

87,185

78,918

73,283

67,869

65,839

Accumulated other comprehensive income (loss)

2,183

1,012

592

(1,247

)

168

Total shareholders' equity

357,168

349,789

343,488

336,200

312,747

Total liabilities & shareholders' equity

$

3,304,949

$

3,387,588

$

3,265,985

$

2,873,715

$

2,449,123


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands except share and per share data)

Three Months Ended

Year Ended

Dec

Sep

Jun

Mar

Dec

Dec

Dec

2020

2020

2020

2020

2019

2020

2019

Interest income:

Loans, including fees

$

28,594

$

28,621

$

28,663

$

26,434

$

25,398

$

112,312

$

101,002

Securities available-for-sale:

Taxable

609

546

589

679

698

2,423

3,289

Tax-exempt

306

364

416

283

345

1,369

1,518

Federal funds sold and other earning assets

303

327

277

602

587

1,509

2,646

Total interest income

29,812

29,858

29,945

27,998

27,028

117,613

108,455

Interest expense:

Deposits

2,580

2,897

3,366

4,754

5,271

13,597

21,915

Borrowings

142

334

249

89

70

816

319

Subordinated debt

584

584

584

584

584

2,334

2,341

Total interest expense

3,306

3,815

4,199

5,427

5,924

16,747

24,575

Net interest income

26,506

26,043

25,746

22,571

21,104

100,866

83,880

Provision for loan losses

2,634

2,850

3,200

685

8,683

2,599

Net interest income after provision for loan losses

26,506

23,409

22,896

19,371

20,419

92,183

81,281

Noninterest income:

Service charges on deposit accounts

1,032

892

709

770

773

3,403

2,902

Gain (loss) on sale of securities, net

(9

)

16

6

34

Mortgage banking

1,331

1,029

931

584

374

3,875

1,566

Investment services

407

359

363

437

261

1,566

946

Insurance commissions

548

560

473

269

1,850

Interchange and debit card transaction fees

760

868

508

276

163

2,413

628

Merger termination fee

6,400

Other

898

422

511

482

1,269

2,313

2,839

Total noninterest income

4,976

4,121

3,511

2,818

2,840

15,426

15,315

Noninterest expense:

Salaries and employee benefits

11,516

11,032

10,357

10,006

10,278

42,911

36,635

Occupancy and equipment

2,256

2,186

1,996

1,911

1,749

8,348

6,716

FDIC insurance

297

534

180

180

1,190

140

Other real estate and loan related expense

516

643

346

545

253

2,050

1,320

Advertising and marketing

181

253

202

198

166

834

983

Data processing

592

558

594

538

530

2,281

1,995

Professional services

786

594

868

711

652

2,958

2,375

Amortization of intangibles

571

402

405

362

340

1,740

1,368

Software as service contracts

590

573

561

470

500

2,195

2,195

Merger related and restructuring expenses

702

290

1,477

2,096

427

4,565

3,219

Other

1,946

2,102

1,820

1,776

1,157

7,647

6,205

Total noninterest expense

19,953

19,167

18,806

18,793

16,052

76,719

63,151

Income before income taxes

11,529

8,363

7,601

3,396

7,206

30,890

33,445

Income tax expense

2,499

1,968

1,427

664

473

6,558

6,897

Net income

$

9,030

$

6,395

$

6,174

$

2,732

$

6,733

$

24,332

$

26,548

Earnings per common share:

Basic

$

0.60

$

0.42

$

0.41

$

0.19

$

0.48

$

1.63

$

1.90

Diluted

$

0.59

$

0.42

$

0.41

$

0.19

$

0.48

$

1.62

$

1.89

Weighted average common shares outstanding:

Basic

15,109,298

15,160,579

15,152,768

14,395,103

13,965,877

14,955,423

13,953,497

Diluted

15,182,796

15,210,611

15,202,335

14,479,679

14,066,269

15,019,175

14,046,366


SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS

Three Months Ended

December 31, 2020

September 30, 2020

December 31, 2019

Average

Yield/

Average

Yield/

Average

Yield/

Balance

Interest1

Cost1

Balance

Interest1

Cost1

Balance

Interest1

Cost1

Assets:

Loans, including fees2

$

2,401,406

$

28,506

4.72

%

$

2,410,173

$

28,508

4.71

%

$

1,876,953

$

25,350

5.36

%

Loans held for sale

10,191

88

3.45

%

8,048

113

5.57

%

4,548

48

4.19

%

Taxable securities

119,936

609

2.02

%

132,642

546

1.64

%

116,278

698

2.38

%

Tax-exempt securities

90,200

456

2.01

%

88,129

515

2.32

%

59,048

461

3.09

%

Federal funds sold and other earning assets

349,167

303

0.35

%

438,785

327

0.30

%

133,681

587

1.74

%

Total interest-earning assets

2,970,900

29,962

4.01

%

3,077,777

30,009

3.88

%

2,190,508

27,144

4.92

%

Noninterest-earning assets

255,477

262,764

190,083

Total assets

$

3,226,377

$

3,340,541

$

2,380,591

Liabilities and Stockholders’ Equity:

Interest-bearing demand deposits

$

570,326

230

0.16

%

$

509,999

199

0.16

%

$

351,901

486

0.55

%

Money market and savings deposits

903,235

774

0.34

%

833,022

704

0.34

%

632,555

1,695

1.06

%

Time deposits

565,237

1,576

1.11

%

615,714

1,994

1.29

%

633,867

3,090

1.93

%

Total interest-bearing deposits

2,038,798

2,580

0.50

%

1,958,735

2,897

0.59

%

1,618,323

5,271

1.29

%

Borrowings3

99,777

142

0.57

%

319,265

334

0.42

%

30,870

70

0.90

%

Subordinated debt

39,332

584

5.90

%

39,311

584

5.91

%

39,248

584

5.90

%

Total interest-bearing liabilities

2,177,907

3,306

0.60

%

2,317,311

3,815

0.65

%

1,688,441

5,924

1.39

%

Noninterest-bearing deposits

670,820

649,489

363,542

Other liabilities

23,624

25,834

19,836

Total liabilities

2,872,351

2,992,634

2,071,819

Shareholders' equity

354,026

347,907

308,772

Total liabilities and shareholders' equity

$

3,226,377

$

3,340,541

$

2,380,591

Net interest income, taxable equivalent

$

26,656

$

26,194

$

21,220

Interest rate spread

3.41

%

3.22

%

3.52

%

Tax equivalent net interest margin

3.57

%

3.39

%

3.84

%

Percentage of average interest-earning assets to average interest-bearing liabilities

136.41

%

132.82

%

129.74

%

Percentage of average equity to average assets

10.97

%

10.41

%

12.97

%

1 Taxable equivalent
2 Includes average balance of $296,337 and $295,045 in PPP loans for the quarters ended December 31, 2020 and September 30, 2020, respectively.
3 Includes average balance of $18,092 and $237,780 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarters ended December 31, 2020 and September 30, 2020, respectively.

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

Dec

Sep

Jun

Mar

Dec

2020

2020

2020

2020

2019

Composition of Loans:

Commercial real estate

owner occupied

$

463,771

$

467,569

$

464,073

$

473,398

$

429,269

non-owner occupied

549,205

563,082

552,958

535,637

476,038

Commercial real estate, total

1,012,976

1,030,651

1,017,031

1,009,035

905,307

Commercial & industrial

634,446

644,498

637,450

377,173

337,075

Construction & land development

278,075

275,172

279,216

253,445

227,626

Consumer real estate

443,930

440,310

459,861

482,728

417,481

Consumer and other

12,816

13,426

14,726

16,866

9,903

Total loans

$

2,382,243

$

2,404,057

$

2,408,284

$

2,139,247

$

1,897,392

Asset Quality and Additional Loan Data:

Nonperforming loans

$

5,782

$

2,248

$

3,776

$

3,069

$

3,350

Other real estate owned

4,619

3,932

5,524

5,894

1,757

Total nonperforming assets

$

10,401

$

6,180

$

9,300

$

8,963

$

5,107

Restructured loans not included in nonperforming loans

$

257

$

8

$

9

$

9

$

61

Net charge-offs to average loans (annualized)

0.08

%

0.01

%

%

%

0.01

%

Allowance for loan losses to loans

0.77

%

0.78

%

0.67

%

0.63

%

0.54

%

Nonperforming loans to total loans, gross

0.24

%

0.09

%

0.16

%

0.14

%

0.18

%

Nonperforming assets to total assets

0.31

%

0.18

%

0.28

%

0.31

%

0.21

%

Acquired loan fair value discount balance

$

14,467

$

15,141

$

16,187

$

17,237

$

15,348

Accretion income on acquired loans

768

960

888

1,841

1,375

PPP net fees deferred balance

4,190

6,348

8,582

PPP net fees recognized

2,157

1,812

1,909

Capital Ratios:

Equity to Assets

10.81

%

10.33

%

10.52

%

11.70

%

12.77

%

Tangible common equity to tangible assets (Non-GAAP)1

8.41

%

7.97

%

8.09

%

8.96

%

9.93

%

SmartFinancial, Inc.2

Tier 1 leverage

8.69

%

8.78

%

8.83

%

10.28

%

10.34

%

Common equity Tier 1

11.61

%

11.33

%

10.92

%

10.87

%

11.61

%

Tier 1 capital

11.61

%

11.33

%

10.92

%

10.87

%

11.61

%

Total capital

14.07

%

13.81

%

13.25

%

13.13

%

14.02

%

SmartBank

Estimated3

Tier 1 leverage

9.58

%

9.74

%

9.82

%

11.42

%

11.41

%

Common equity Tier 1

12.79

%

12.57

%

12.14

%

12.05

%

12.81

%

Tier 1 risk-based capital

12.79

%

12.57

%

12.14

%

12.05

%

12.81

%

Total risk-based capital

13.57

%

13.37

%

12.82

%

12.62

%

13.31

%

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

Year Ended

Dec

Sep

Jun

Mar

Dec

Dec

Dec

2020

2020

2020

2020

2019

2020

2019

Selected Performance Ratios (Annualized):

Return on average assets

1.11

%

0.76

%

0.79

%

0.43

%

1.12

%

0.79

%

1.13

%

Return on average shareholders' equity

10.15

%

7.31

%

7.31

%

3.33

%

8.65

%

7.13

%

8.89

%

Return on average tangible common equity¹

13.43

%

9.72

%

9.80

%

4.41

%

11.55

%

9.50

%

12.04

%

Noninterest income / average assets

0.61

%

0.49

%

0.45

%

0.44

%

0.47

%

0.50

%

0.65

%

Noninterest expense / average assets

2.46

%

2.28

%

2.41

%

2.96

%

2.68

%

2.50

%

2.70

%

Efficiency ratio

63.38

%

63.54

%

64.28

%

74.02

%

67.04

%

65.97

%

63.66

%

Operating Selected Performance Ratios (Annualized):

Operating return on average assets1

1.14

%

0.79

%

0.93

%

0.67

%

1.08

%

0.89

%

1.01

%

Operating PTPP return on average assets1

1.45

%

1.35

%

1.53

%

1.37

%

1.31

%

1.43

%

1.39

%

Operating return on average shareholders' equity1

10.34

%

7.57

%

8.58

%

5.22

%

8.34

%

8.02

%

7.91

%

Operating return on average tangible common equity1

13.69

%

10.06

%

11.51

%

6.90

%

11.12

%

10.67

%

10.71

%

Operating efficiency ratio1

60.86

%

62.25

%

58.95

%

65.46

%

64.95

%

61.75

%

64.29

%

Operating noninterest income / average assets1

0.56

%

0.49

%

0.45

%

0.44

%

0.35

%

0.49

%

0.35

%

Operating noninterest expense / average assets1

2.37

%

2.25

%

2.23

%

2.63

%

2.56

%

2.36

%

2.55

%

Selected Interest Rates and Yields:

Yield on loans

4.72

%

4.71

%

4.87

%

5.35

%

5.36

%

4.89

%

5.49

%

Yield on earning assets, FTE

4.01

%

3.88

%

4.22

%

4.83

%

4.92

%

4.20

%

5.10

%

Cost of interest-bearing deposits

0.50

%

0.59

%

0.71

%

1.10

%

1.29

%

0.71

%

1.35

%

Cost of total deposits

0.38

%

0.44

%

0.54

%

0.91

%

1.06

%

0.55

%

1.12

%

Cost of interest-bearing liabilities

0.60

%

0.65

%

0.77

%

1.20

%

1.39

%

0.79

%

1.46

%

Net interest margin, FTE

3.57

%

3.39

%

3.63

%

3.90

%

3.84

%

3.61

%

3.95

%

Per Common Share:

Net income, basic

$

0.60

$

0.42

$

0.41

$

0.19

$

0.48

$

1.63

$

1.90

Net income, diluted

0.59

0.42

0.41

0.19

0.48

1.62

1.89

Operating earnings, basic¹

0.61

0.44

0.48

0.30

0.46

1.83

1.69

Operating earnings, diluted¹

0.61

0.44

0.48

0.30

0.46

1.82

1.68

Book value

23.64

22.96

22.57

22.09

22.33

23.64

22.33

Tangible book value¹

17.92

17.27

16.90

16.40

16.82

17.92

16.82

Common shares outstanding

15,107,214

15,233,227

15,216,932

15,221,990

14,008,233

15,107,214

14,008,233

¹See reconciliation of Non-GAAP measures

SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS

Three Months Ended

Year Ended

Dec

Sep

Jun

Mar

Dec

Dec

Dec

2020

2020

2020

2020

2019

2020

2019

Operating Earnings:

Net income (GAAP)

$

9,030

$

6,395

$

6,174

$

2,732

$

6,733

$

24,332

$

26,548

Noninterest income:

Securities gains (losses), net

9

(16

)

(6

)

(34

)

ADECA termination proceeds

(465

)

(720

)

(465

)

(720

)

Merger termination fee

(6,400

)

Noninterest expenses:

Salaries - prior year adjustment

603

603

Merger related and restructuring expenses

702

290

1,477

2,096

427

4,565

3,219

Other - prior year franchise tax true-up

(312

)

(312

)

Income taxes:

Tax benefit - prior year amended return

(304

)

(304

)

Income tax effect of adjustments

(62

)

(77

)

(382

)

(548

)

60

(1,071

)

1,015

Operating earnings (Non-GAAP)

$

9,205

$

6,617

$

7,253

$

4,280

$

6,487

$

27,355

$

23,615

Operating earnings per common share (Non-GAAP):

Basic

$

0.61

$

0.44

$

0.48

$

0.30

$

0.46

$

1.83

$

1.69

Diluted

0.61

0.44

0.48

0.30

0.46

1.82

1.68

Operating Noninterest Income:

Noninterest income (GAAP)

$

4,976

$

4,121

$

3,511

$

2,818

$

2,840

$

15,426

$

15,315

Securities gains (losses), net

9

(16

)

(6

)

(34

)

ADECA termination proceeds

(465

)

(720

)

(465

)

(720

)

Merger termination fee

(6,400

)

Operating noninterest income (Non-GAAP)

$

4,511

$

4,130

$

3,495

$

2,818

$

2,120

$

14,955

$

8,161

Operating noninterest income (Non-GAAP)/average assets1

0.56

%

0.49

%

0.45

%

0.44

%

0.35

%

0.49

%

0.35

%

Operating Noninterest Expense:

Noninterest expense (GAAP)

$

19,953

$

19,167

$

18,806

$

18,793

$

16,052

$

76,719

$

63,151

Salaries - prior year adjustment

(603

)

(603

)

Merger related and restructuring expenses

(702

)

(290

)

(1,477

)

(2,096

)

(427

)

(4,565

)

(3,219

)

Other - prior year franchise tax true-up

312

312

Operating noninterest expense (Non-GAAP)

$

19,251

$

18,877

$

17,329

$

16,697

$

15,334

$

72,154

$

59,641

Operating noninterest expense (Non-GAAP)/average assets2

2.37

%

2.25

%

2.23

%

2.63

%

2.56

%

2.36

%

2.55

%

Operating Pre-tax Pre-provision ("PTPP") Earnings:

Net interest income (GAAP)

$

26,506

$

26,043

$

25,746

$

22,571

$

21,104

$

100,866

$

83,880

Operating noninterest income

4,511

4,130

3,495

2,818

2,120

14,955

8,161

Operating noninterest expense

(19,251

)

(18,877

)

(17,329

)

(16,697

)

(15,334

)

(72,154

)

(59,641

)

Operating PTPP earnings (Non-GAAP)

$

11,766

$

11,296

$

11,912

$

8,692

$

7,890

$

43,667

$

32,400

Non-GAAP Return Ratios:

Operating return on average assets (Non-GAAP)3

1.14

%

0.79

%

0.93

%

0.67

%

1.08

%

0.89

%

1.01

%

Operating PTPP return on average assets (Non-GAAP)4

1.45

%

1.35

%

1.53

%

1.37

%

1.31

%

1.43

%

1.39

%

Return on average tangible common equity (Non-GAAP)5

13.43

%

9.72

%

9.80

%

4.41

%

11.55

%

9.50

%

12.04

%

Operating return on average shareholder equity (Non-GAAP)6

10.34

%

7.57

%

8.58

%

5.22

%

8.34

%

8.02

%

7.91

%

Operating return on average tangible common equity (Non-GAAP)7

13.69

%

10.06

%

11.51

%

6.90

%

11.12

%

10.67

%

10.71

%

Operating Efficiency Ratio:

Efficiency ratio (GAAP)

63.38

%

63.54

%

64.28

%

74.02

%

67.04

%

65.97

%

63.66

%

Adjustment for taxable equivalent yields

(0.30

)

%

(0.32

)

%

(0.34

)

%

(0.34

)

%

(0.33

)

%

(0.33

)

%

(0.29

)

%

Adjustment for securities gains (losses)

%

0.02

%

(0.04

)

%

%

%

(0.01

)

%

(0.02

)

%

Adjustment for merger related income and costs

(2.22

)

%

(0.99

)

%

(4.95

)

%

(8.21

)

%

(1.76

)

%

(3.88

)

%

0.94

%

Operating efficiency ratio (Non-GAAP)

60.86

%

62.25

%

58.95

%

65.46

%

64.95

%

61.75

%

64.29

%

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 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

Year Ended

Dec

Sep

Jun

Mar

Dec

Dec

Dec

2020

2020

2020

2020

2019

2020

2019

Tangible Common Equity:

Shareholders' equity (GAAP)

$

357,168

$

349,789

$

343,488

$

336,200

$

312,747

$

357,168

$

312,747

Less goodwill and other intangible assets

86,471

86,710

86,327

86,503

77,193

86,471

77,193

Tangible common equity (Non-GAAP)

$

270,697

$

263,079

$

257,161

$

249,697

$

235,554

$

270,697

$

235,554

Average Tangible Common Equity:

Average shareholders' equity (GAAP)

$

354,026

$

347,907

$

339,861

$

329,692

$

308,772

$

341,170

$

298,729

Less average goodwill and other intangible assets

86,561

86,206

86,484

80,370

77,400

84,913

78,270

Average tangible common equity (Non-GAAP)

$

267,465

$

261,701

$

253,377

$

249,322

$

231,372

$

256,257

$

220,459

Tangible Book Value per Common Share:

Book value per common share (GAAP)

$

23.64

$

22.96

$

22.57

$

22.09

$

22.33

$

23.64

$

22.33

Adjustment due to goodwill and other intangible assets

(5.72

)

(5.69

)

(5.67

)

(5.69

)

(5.51

)

(5.72

)

(5.51

)

Tangible book value per common share (Non-GAAP)1

$

17.92

$

17.27

$

16.90

$

16.40

$

16.82

$

17.92

$

16.82

Tangible Common Equity to Tangible Assets:

Total Assets

$

3,304,949

$

3,387,588

$

3,265,985

$

2,873,715

$

2,449,123

$

3,304,949

$

2,449,123

Less goodwill and other intangibles

86,471

86,710

86,327

86,503

77,193

86,471

77,193

Tangible Assets (Non-GAAP):

$

3,218,478

$

3,300,878

$

3,179,658

$

2,787,212

$

2,371,930

$

3,218,478

$

2,371,930

Tangible common equity to tangible assets (Non-GAAP)

8.41

%

7.97

%

8.09

%

8.96

%

9.93

%

8.41

%

9.93

%

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