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Press Release

SmartFinancial Announces Results for the Second Quarter 2020

Company Release - 7/21/2020 5:00 PM ET

KNOXVILLE, Tenn., July 21, 2020 (GLOBE NEWSWIRE) -- SmartFinancial, Inc. ("SmartFinancial" or the "Company"; NASDAQ: SMBK), today announced net income of $6.2 million, or $0.41 per diluted common share, for the second quarter of 2020, compared to net income of $2.7 million, or $0.19 per diluted common share for the first quarter of 2020.  Operating earnings (Non-GAAP), which excludes securities gains, merger related and restructuring expenses and non-operating items, totaled $7.3 million, or $0.48 per diluted common share, in the second quarter of 2020, compared to $4.3 million, or $0.30 per diluted common share, in the first quarter of 2020.

Highlights for the Second Quarter of 2020

  • Net income of $6.2 million and operating earnings of $7.3 million (Non-GAAP)
  • Diluted earnings per share increased 115.8% for the quarter and diluted operating earnings per share (Non-GAAP) increased 60.0% for the quarter
  • Total assets grew to over $3 billion
  • Completed the integration of Progressive Financial Group (“PFG”)
  • Tangible book value (Non-GAAP) per share of $16.90, a 6.6% year-over-year increase
  • Originated approximately 2,800 Paycheck Protection Program (“PPP”) loans totaling $292.8 million 

Billy Carroll, President & CEO, stated: "We are extremely pleased to report another very solid quarter.  While finalizing our Progressive Financial Group integration and conversion, we reported outstanding increases in revenue, in particular our non-interest income performance.  Our team also continues to focus on our tremendous asset quality and have worked with many new and existing clients to secure PPP funding, creating a number of great opportunities for our bank.  The outlook for our company remains very strong."

SmartFinancial's Chairman, Miller Welborn, concluded: “We have closed another great quarter for our company. Our team has continued to successfully execute our Strategic Plan. We have strengthened our Balance Sheet, served our clients and our shareholders well and continued to increase the book value of our stock.”

Net Interest Income and Net Interest Margin

Net interest income increased $3.1 million to $25.7 million for the second quarter of 2020, compared to $22.6 million for the first quarter of 2020, primarily attributable to the full quarter effects of the Company’s March 1, 2020 acquisition of PFG (the “PFG Acquisition”) and participation in the PPP. Average earning assets increased $532.0 million, which reflects a $376.1 million increase in average loans, a $21.1 million increase in securities and a $134.8 million increase in other earning assets. Average interest-bearing liabilities increased $353.8 million, driven by an increase of $168.5 million in average interest-bearing deposits and an increase of $185.2 million in borrowings.

The tax equivalent net interest margin was 3.63% for the second quarter of 2020, compared to 3.90% for the first quarter of 2020. The tax equivalent net interest margin was impacted by a 61 basis point decline in the average yield on interest-earning assets offset by a 43 basis point decline in the rate on interest-bearing liabilities over the last quarter. The tax equivalent net interest margin, less discount accretion was 3.50% for the second quarter of 2020, a decrease from 3.58% for the first quarter of 2020.

The tax equivalent average yield on interest-earning assets was 4.22% for the second quarter of 2020, a decrease from 4.83% for the first quarter of 2020. The yield on average loans was 4.87% for the second quarter of 2020, compared to 5.35% for the first quarter of 2020. Offsetting the effects of the Federal Reserve rate cuts included in yield on average loans for the second quarter of 2020 was $1.9 million of PPP fee accretion and $888 thousand of discount accretion on acquired loans, compared to $1.8 million of discount accretion recognized in the first quarter of 2020. Additionally, increases in liquidity positions negatively impacted the net interest margin with lower yields earned on the excess cash position.

The yield on interest-bearing liabilities decreased to 0.77% for the second quarter of 2020 from 1.20% for the first quarter of 2020. The cost of average interest-bearing deposits was 0.71% for the second quarter of 2020 compared to 1.10% for the first quarter of 2020, a decrease of 39 basis points. This decrease was a result of the Company’s efforts deployed to reduce deposit rates in reaction to the Federal Reserve rate cuts.

Provision for Loan Loss and Credit Quality

Provision for loan losses was $2.9 million in the second quarter of 2020, compared to $3.2 million in the first quarter of 2020.  At June 30, 2020, the allowance for loan losses was $16.3 million.  The allowance for loan losses to total loans was 0.67% as of June 30, 2020, compared to 0.63% as of March 31, 2020.  For the Company’s originated loans, the allowance for loan losses to originated loans, less PPP loans, was 0.89% as of June 30, 2020, compared to 0.77% as of March 31, 2020.  The remaining discounts on the acquired loan portfolio totaled $16.2 million, or 3.40% of acquired loans as of June 30, 2020.  The elevated provision for loan losses was due to the continued economic conditions facing the U.S. economy related to the challenges being faced with the worldwide COVID-19 pandemic.

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 0.16% as of June 30, 2020, an increase of two basis points from the 0.14% reported in the first 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 0.28% as of June 30, 2020, as compared to 0.31% as of March 31, 2020. 

Noninterest Income

Noninterest income increased $693 thousand to $3.5 million for the second quarter of 2020 compared to $2.8 million for the first quarter of 2020.  During the second quarter of 2020, the primary components of the changes in noninterest income were as follows:

  • Increase in mortgage banking income of $347 thousand, as volume increased during the second quarter;
  • Increase in insurance commissions income of $204 thousand, due to a full quarter of revenue from the PFG Acquisition;
  • Increase in interchange and debit card transaction fees of $232 thousand, related to a full quarter of activity from the PFG Acquisition; and
  • Decrease in investment services income of $74 thousand.

Noninterest Expense

Noninterest expense was $18.8 million for the second and first quarters of 2020.  Even though noninterest expense remained constant between the second and first quarters of 2020, the primary changes within noninterest expense were as follows:

  • Salaries and employee benefits increased $351 thousand. The increase is attributable to the full quarter of salaries and benefits from the PFG Acquisition, annual salary increases, and other employee benefit accruals.  These increases were offset by deferred salary cost related to the origination of PPP loans; and
  • Decrease of $619 thousand in merger related and restructuring expenses relating to the PFG Acquisition.

Income Tax Expense

Income tax expense was $1.4 million for the second quarter of 2020, an increase of $763 thousand, compared to $664 thousand for the first quarter of 2020.

For the second quarter of 2020, the effective tax rate was 18.8% compared to 19.6% for the first quarter of 2020.

Balance Sheet Trends

Total assets at June 30, 2020, were $3.27 billion compared with $2.45 billion at December 31, 2019.  The increase of $816.9 million is primarily attributable to assets acquired from the PFG Acquisition of approximately $307.2 million, increase in cash and cash equivalents of $215.5 million and the origination of $292.8 million of PPP loans.

Total liabilities increased to $2.92 billion at June 30, 2020 from $2.14 billion at December 31, 2019.  The increase of $786.1 million was primarily from deposit growth of $220.5 million, acquired deposits from the PFG Acquisition in the amount of $272.0 million, and an increase in borrowings of $287.2 million.

Shareholders' equity at June 30, 2020, totaled $343.5 million, an increase of $30.7 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 $8.9 million for the six months ended June 30, 2020 and a net change in accumulated other comprehensive income of $424 thousand, which was offset by the repurchase of the Company's common stock of $2.1 million and $1.5 million of dividends paid. Tangible book value per share (Non-GAAP) was $16.90 at June 30, 2020, an increase from $16.82 at December 31, 2019.  Tangible common equity (Non-GAAP) as a percentage of tangible assets (Non-GAAP) was 8.09% at June 30, 2020, compared with 9.93% at December 31, 2019.

Conference Call Information

SmartFinancial issued this earnings release for the second quarter of 2020 on Tuesday, July 21, 2020, and will host a conference call on Wednesday, July 22, 2020, at 10:00 a.m. ET.  To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 5925756.  A replay of the conference call will be available through July 22, 2021, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10146072.  Conference call materials (earnings release & conference call presentation) 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 36 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 CarrollRon Gorczynski
President & CEOExecutive 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, (xiv) tax equivalent net interest margin, (xv) tax equivalent yield in earning 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, 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.  Tax equivalent net interest margin is the annualized net interest income plus tax equivalent income divided by average interest earning assets. Tax equivalent yield in earning assets is the annualized interest income plus tax equivalent income divided by average interest earning 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 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; (6) 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 except share and per share data)
      
 As of and for The  As of and for The 
 Three Months Ended   Six Months Ended  
 Jun Mar Dec Sep Jun  Jun Jun 
 2020 2020 2019 2019 2019  2020 2019 
Selected Performance Ratios (Annualized):                      
Return on average assets  0.79%  0.43%  1.12%  1.01%  1.56%   0.63%  1.21%
Return on average shareholders' equity  7.31%  3.33%  8.65%  7.80%  12.34%   5.41%  9.59%
Return on average tangible common equity¹  9.80%  4.41%  11.55%  10.52%  16.78%   7.23%  13.14%
Noninterest income / average assets  0.45%  0.44%  0.47%  0.37%  1.44%   0.45%  0.88%
Noninterest expense / average assets  2.41%  2.96%  2.68%  2.48%  2.88%   2.66%  2.82%
Efficiency ratio  64.28%  74.02%  67.04%  63.03%  57.53%   68.81%  62.39%
                       
Operating Selected Performance Ratios (Annualized):                      
Operating return on average assets1  0.93%  0.67%  1.08%  1.02%  0.96%   0.82%  0.97%
Operating PTPP return on average assets1  1.53%  1.37%  1.31%  1.47%  1.33%   1.46%  1.38%
Operating return on average shareholders' equity1  8.58%  5.22%  8.34%  7.87%  7.58%   7.00%  7.69%
Operating return on average tangible common equity1  11.51%  6.90%  11.12%  10.61%  10.31%   9.36%  10.54%
Operating efficiency ratio1  58.95%  65.46%  64.95%  62.42%  65.56%   61.98%  64.91%
Operating noninterest income / average assets1  0.45%  0.44%  0.35%  0.37%  0.34%   0.45%  0.32%
Operating noninterest expense / average assets1  2.23%  2.63%  2.56%  2.47%  2.57%   2.41%  2.59%
                       
Selected Interest Rates and Yields:                      
Yield on loans  4.87%  5.35%  5.36%  5.48%  5.53%   5.09%  5.58%
Yield on earning assets, FTE  4.22%  4.83%  4.92%  5.05%  5.17%   4.50%  5.23%
Cost of interest-bearing deposits  0.71%  1.10%  1.29%  1.37%  1.42%   0.90%  1.37%
Cost of total deposits  0.54%  0.91%  1.06%  1.13%  1.18%   0.71%  1.14%
Cost of interest-bearing liabilities  0.77%  1.20%  1.39%  1.47%  1.54%   0.97%  1.49%
Net interest margin, FTE  3.63%  3.90%  3.84%  3.91%  3.94%   3.75%  4.04%
                       
Per Common Share:                      
Net income, basic$ 0.41 $ 0.19 $ 0.48 $ 0.43 $ 0.65  $ 0.60 $ 0.99 
Net income, diluted  0.41   0.19   0.48   0.42   0.65    0.60   0.99 
Operating earnings, basic¹  0.48   0.30   0.46   0.43   0.40    0.78   0.80 
Operating earnings, diluted¹  0.48   0.30   0.46   0.43   0.40    0.78   0.79 
Book value  22.57   22.09   22.33   21.93   21.47    22.57   21.47 
Tangible book value¹  16.90   16.40   16.82   16.37   15.86    16.90   15.86 
Common shares outstanding  15,216,932   15,221,990   14,008,233   13,957,973   13,953,209    15,216,932   13,953,209 

1See reconciliation of Non-GAAP measures

 
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
                
 As of and for The Three Months Ended  
 Jun Mar Dec Sep Jun 
 2020 2020 2019 2019 2019 
Composition of Loans:               
Commercial real estate               
owner occupied$ 464,073 $ 473,398 $ 429,269 $ 422,363 $ 415,502 
non-owner occupied  552,958   535,637   476,038   468,099   464,160 
Commercial real estate, total  1,017,031   1,009,035   905,307   890,462   879,662 
Commercial & industrial  637,450   377,173   337,075   341,207   334,258 
Construction & land development  279,216   253,445   227,626   219,751   204,731 
Consumer real estate  459,861   482,728   417,481   402,463   402,270 
Consumer and other  14,726   16,866   9,903   10,796   11,981 
Total loans$ 2,408,284 $ 2,139,247 $ 1,897,392 $ 1,864,679 $ 1,832,902 
                
Asset Quality and Additional Loan Data:               
Nonperforming loans$ 3,776 $ 3,069 $ 3,350 $ 3,166 $ 2,838 
Other real estate owned  5,524   5,894   1,757   1,561   1,814 
Total nonperforming assets$ 9,300 $ 8,963 $ 5,107 $ 4,727 $ 4,652 
Restructured loans not included in nonperforming loans$ 9 $ 9 $ 61 $ 61 $ 62 
Net charge-offs to average loans (annualized)  —  —  0.01  0.01  —%
Allowance for loan losses to loans  0.67  0.63  0.54  0.53  0.50%
Nonperforming loans to total loans, gross  0.16  0.14  0.18  0.17  0.15%
Nonperforming assets to total assets  0.28  0.31  0.21  0.20  0.19%
Acquired loan fair value discount balance$ 16,187 $ 17,237 $ 15,348 $ 16,784 $ 18,571 
Accretion income on acquired loans  888   1,841   1,375   1,246   1,374 
PPP net fees deferred balance  8,582   —   —   —   — 
PPP net fees recognized  1,909   —   —   —   — 
                
Capital Ratios:               
Equity to Assets  10.52  11.70  12.77  12.80  12.53%
Tangible common equity to tangible assets (Non-GAAP)1  8.09  8.96  9.93  9.88  9.57%
                
SmartFinancial, Inc.2               
Tier 1 leverage  8.83  10.28  10.34  10.02  9.92%
Common equity Tier 1  10.92  10.87  11.61  11.54  11.21%
Tier 1 capital  10.92  10.87  11.61  11.54  11.21%
Total capital  13.25  13.13  14.02  13.98  13.65%
                
SmartBank Estimated3             
Tier 1 leverage  9.82  11.42  11.41  11.22  10.92%
Common equity Tier 1  12.14  12.05  12.81  12.71  12.37%
Tier 1 risk-based capital  12.14  12.05  12.81  12.71  12.37%
Total risk-based capital  12.82  12.62  13.31  13.19  12.82%

1Total common equity less intangibles divided by total assets less intangibles.  See reconciliation of Non-GAAP measures.
2All periods presented are estimated.
3Current 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)
               
 Ending Balances
 Jun Mar Dec Sep Jun
 2020 2020 2019 2019 2019
Assets:              
Cash and cash equivalents$ 399,467  $ 309,089  $ 183,971  $ 170,934  $ 199,534 
Securities available-for-sale, at fair value  219,631    201,002    178,348    171,507    174,114 
Other investments  14,829    14,113    12,913    12,913    12,905 
Loans held for sale  6,330    6,045    5,856    3,068    4,087 
Loans  2,408,284    2,139,247    1,897,392    1,864,679    1,832,902 
Less: Allowance for loan losses  (16,254)   (13,431)   (10,243)   (9,792)   (9,097)
Loans, net  2,392,030    2,125,816    1,887,149    1,854,887    1,823,805 
Premises and equipment, net  73,868    73,801    59,433    58,386    56,589 
Other real estate owned  5,524    5,894    1,757    1,561    1,814 
Goodwill and core deposit intangibles, net  86,327    86,503    77,193    77,534    78,348 
Bank owned life insurance  30,853    30,671    24,949    24,796    24,695 
Other assets  37,126    20,781    17,554    14,899    15,366 
Total assets$ 3,265,985  $ 2,873,715  $ 2,449,123  $ 2,390,485  $ 2,391,257 
Liabilities:              
Deposits:              
Noninterest-bearing demand$ 645,650  $ 431,781  $ 364,155  $ 365,024  $ 357,220 
Interest-bearing demand  479,212    444,141    380,234    351,474    333,705 
Money market and savings  762,246    730,392    623,284    634,934    648,132 
Time deposits  652,581    735,616    679,541    646,641    673,243 
Total deposits  2,539,689    2,341,930    2,047,214    1,998,073    2,012,300 
Borrowings  318,855    131,603    31,623    29,828    23,679 
Subordinated debt  39,304    39,283    39,261    39,240    39,219 
Other liabilities  24,649    24,699    18,278    17,304    16,448 
Total liabilities  2,922,497    2,537,515    2,136,376    2,084,445    2,091,646 
Shareholders' Equity:              
Common stock  15,217    15,222    14,008    13,958    13,953 
Additional paid-in capital  254,396    254,356    232,732    232,573    232,386 
Retained earnings  73,283    67,869    65,839    59,806    53,843 
Accumulated other comprehensive income (loss)  592    (1,247)   168    (297)   (571)
Total shareholders' equity  343,488    336,200    312,747    306,040    299,611 
Total liabilities & shareholders' equity$ 3,265,985  $ 2,873,715  $ 2,449,123  $ 2,390,485  $ 2,391,257 


 
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands, except share and per share data)
                      
 Three Months Ended   Six Months Ended
 Jun Mar Dec Sep Jun  Jun Jun
 2020 2020 2019 2019 2019  2020 2019
Interest income:                     
Loans, including fees$ 28,663 $ 26,434 $ 25,398 $ 25,515  $ 25,278  $ 55,097 $ 50,253
Securities available-for-sale:                     
Taxable  589   679   698   748    871    1,268   1,842
Tax-exempt  416   283   345   338    411    699   836
Federal funds sold and other earning assets  277   602   587   743    743    879   1,315
Total interest income  29,945   27,998   27,028   27,344    27,303    57,943   54,246
Interest expense:                     
Deposits  3,366   4,754   5,271   5,605    5,788    8,120   11,039
Borrowings  249   89   70   15    123    339   235
Subordinated debt  584   584   584   584    590    1,167   1,173
Total interest expense  4,199   5,427   5,924   6,204    6,501    9,626   12,447
Net interest income  25,746   22,571   21,104   21,140    20,802    48,317   41,799
Provision for loan losses  2,850   3,200   685   724    393    6,049   1,190
Net interest income after provision for loan losses  22,896   19,371   20,419   20,416    20,409    42,268   40,609
Noninterest income:                     
Service charges on deposit accounts  709   770   773   767    707    1,479   1,361
Gain on sale of securities, net  16   —   —   1    33    16   33
Mortgage banking  931   584   374   518    392    1,515   674
Investment services  363   437   261   260    255    801   424
Insurance commissions  473   269   —   —    —    742   —
Interchange and debit card transaction fees  508   276   163   148    143    784   318
Merger termination fee  —   —   —   —    6,400    —   6,400
Other  511   482   1,269   502    486    993   904
Total noninterest income  3,511   2,818   2,840   2,196    8,416    6,330   10,114
Noninterest expense:                     
Salaries and employee benefits  10,357   10,006   10,278   9,072    8,984    20,363   17,382
Occupancy and equipment  1,996   1,911   1,749   1,635    1,658    3,906   3,298
FDIC insurance  180   180   —   (219)   180    360   359
Other real estate and loan related expense  346   545   253   335    242    892   732
Advertising and marketing  202   198   166   263    259    400   554
Data processing  594   538   530   273    577    1,132   1,192
Professional services  868   711   652   573    489    1,578   1,151
Amortization of intangibles  405   362   340   341    342    767   686
Software as service contracts  561   470   500   560    568    1,031   1,136
Merger related and restructuring expenses  1,477   2,096   427   73    1,796    3,573   2,719
Other  1,820   1,776   1,157   1,802    1,714    3,598   3,179
Total noninterest expense  18,806   18,793   16,052   14,708    16,809    37,600   32,388
Income before income taxes  7,601   3,396   7,206   7,904    12,016    10,998   18,335
Income tax expense  1,427   664   473   1,941    2,895    2,091   4,483
Net income$ 6,174 $ 2,732 $ 6,733 $ 5,963  $ 9,121  $ 8,907 $ 13,852
Earnings per common share:                     
Basic$ 0.41 $ 0.19 $ 0.48 $ 0.43  $ 0.65  $ 0.60 $ 0.99
Diluted$ 0.41 $ 0.19 $ 0.48 $ 0.42  $ 0.65  $ 0.60 $ 0.99
Weighted average common shares outstanding:                     
Basic  15,152,768   14,395,103   13,965,877   13,955,859    13,951,643    14,773,935   13,946,856
Diluted  15,202,335   14,479,679   14,066,269   14,053,432    14,046,500    14,842,486   14,036,790


 
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS
                         
 Three Months Ended  
 June 30, 2020 March 31, 2020 June 30, 2019 
 Average    Yield/ Average    Yield/ Average    Yield/ 
 Balance Interest1 Cost1 Balance Interest1 Cost1 Balance Interest1 Cost1 
Assets:                        
Loans, including fees2$ 2,359,101 $ 28,590  4.87$ 1,982,997 $ 26,389  5.35$ 1,828,884 $ 25,233  5.53%
Loans held for sale  6,868   73  4.28  4,294   45  4.24  3,755   45  4.81
Taxable securities  122,135   589  1.94  116,837   679  2.34  136,859   871  2.55%
Tax-exempt securities  86,227   570  2.66  70,397   400  2.28  56,475   527  3.75%
Federal funds sold and other earning assets  297,696   277  0.37  165,512   602  1.46  102,253   743  2.91%
Total interest-earning assets  2,872,027   30,099  4.22  2,340,037   28,115  4.83  2,128,226   27,419  5.17%
Noninterest-earning assets  260,089        216,498        215,010      
Total assets$ 3,132,116      $ 2,556,535      $ 2,343,236      
                         
Liabilities and Stockholders’ Equity:                        
Interest-bearing demand deposits$ 453,795   148  0.13$ 389,500   434  0.45$ 329,556   464  0.57%
Money market and savings deposits  748,673   614  0.33  664,983   1,389  0.84  673,502   2,272  1.35%
Time deposits  701,390   2,604  1.49  680,830   2,931  1.73  629,480   3,052  1.94%
Total interest-bearing deposits  1,903,858   3,366  0.71  1,735,313   4,754  1.10  1,632,538   5,788  1.42%
Borrowings3  237,143   249  0.42  51,921   89  0.69  23,685   123  2.08%
Subordinated debt  39,290   584  5.98  39,269   584  5.98  39,205   590  6.03%
Total interest-bearing liabilities  2,180,291   4,199  0.77  1,826,503   5,427  1.20  1,695,428   6,501  1.54%
Noninterest-bearing deposits  587,322        373,125        336,871      
Other liabilities  24,642        27,215        14,367      
Total liabilities  2,792,255        2,226,843        2,046,666      
Shareholders' equity  339,861        329,692        296,570      
Total liabilities and shareholders' equity$ 3,132,116      $ 2,556,535      $ 2,343,236      
                         
Net interest income, taxable equivalent   $ 25,900      $ 22,688      $ 20,918   
Interest rate spread       3.44       3.63       3.63
Tax equivalent net interest margin       3.63       3.90       3.94
                         
Percentage of average interest-earning assets to average interest-bearing liabilities       131.73       128.12       125.53
Percentage of average equity to average assets       10.85       12.90       12.66

1 Taxable equivalent
2 Includes average balance of $208,814 in PPP loans for the quarter ended June 30, 2020
3 Includes average balance of $108,082 in Paycheck Protection Program Liquidity Facility (“PPPLF”) funding for the quarter ended June 30, 2020

 
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
YIELD ANALYSIS
                  
 Six Months Ended
 June 30, 2020 June 30, 2019 
 Average    Yield/ Average    Yield/ 
 Balance Interest1 Cost1 Balance Interest1 Cost1 
Assets:                 
Loans, including fees2$ 2,172,158 $ 54,979   5.09$ 1,814,127 $ 50,174  5.58
Loans held for sale  5,581   118   4.26  3,284   79  4.85
Taxable securities  119,474   1,268   2.13  141,994   1,842  2.62
Tax-exempt securities  78,306   970   2.49  55,070   1,065  3.90
Federal funds sold and other earning assets  226,726   879   0.78  85,798   1,315  3.09
Total interest-earning assets  2,602,245   58,214   4.50  2,100,273   54,475  5.23
Noninterest-earning assets  238,749         213,122      
Total assets$ 2,840,994       $ 2,313,395      
                  
Liabilities and Stockholders’ Equity:                 
Interest-bearing demand deposits$ 421,288   583   0.28$ 318,091   887  0.56
Money market and savings deposits  707,003   2,003   0.57  669,067   4,302  1.30
Time deposits  693,382   5,534   1.61  633,601   5,850  1.86
Total interest-bearing deposits  1,821,673   8,120   0.90  1,620,759   11,039  1.37
Borrowings3  144,532   339   0.47  20,951   235  2.26
Subordinated debt  39,279   1,167   5.97  39,195   1,173  6.04
Total interest-bearing liabilities  2,005,484   9,626   0.97  1,680,905   12,447  1.49
Noninterest-bearing deposits  481,432         328,549      
Other liabilities  22,812         12,589      
Total liabilities  2,509,728         2,022,043      
Shareholders' equity  331,266         291,352      
Total liabilities and shareholders' equity$ 2,840,994       $ 2,313,395      
                  
Net interest income, taxable equivalent   $ 48,588       $ 42,028   
Interest rate spread        3.53       3.74
Tax equivalent net interest margin        3.75       4.04
                  
Percentage of average interest-earning assets to average interest-bearing liabilities        129.76       124.95
Percentage of average equity to average assets        11.66       12.59

1 Taxable equivalent
2 Includes average balance of $106,213 in PPP loans for the six months ended June 30, 2020
3 Includes average balance of $54,041in PPPLF funding for the six months ended June 30, 2020

 
SmartFinancial, Inc. and Subsidiary
Condensed Consolidated Financial Information - (unaudited)
(dollars in thousands)
NON-GAAP RECONCILIATIONS
                       
 Three Months Ended   Six Months Ended  
 Jun Mar Dec Sep Jun  Jun Jun 
 2020 2020 2019 2019 2019  2020 2019 
Operating Earnings:                      
Net income (GAAP)$ 6,174  $ 2,732  $ 6,733  $ 5,963  $ 9,121   $ 8,907  $ 13,852  
Noninterest income:                      
Securities gains  (16)   —    —    (1)   (33)    (16)   (33) 
ADECA termination proceeds  —    —    (720)   —    —     —    —  
Merger termination fee  —    —    —    —    (6,400)    —    (6,400) 
Noninterest expenses:                      
Salaries - prior year adjustment  —    —    603    —    —     —    —  
Merger related and restructuring expenses  1,477    2,096    427    73    1,796     3,573    2,719  
Other - prior year franchise tax true-up  —    —    (312)   —    —     —    —  
Income taxes:                      
Tax benefit - prior year amended return  —    —    (304)   —    —     —    —  
Income tax effect of adjustments  (382)   (548)   60    (19)   1,119     (931)   974  
Operating earnings (Non-GAAP)$ 7,253  $ 4,280  $ 6,487  $ 6,016  $ 5,603   $ 11,533  $ 11,112  
Operating earnings per common share (Non-GAAP):                      
Basic$ 0.48  $ 0.30  $ 0.46  $ 0.43  $ 0.40   $ 0.78  $ 0.80  
Diluted  0.48    0.30    0.46    0.43    0.40     0.78    0.79  
                       
Operating Noninterest Income:                      
Noninterest income (GAAP)$ 3,511  $ 2,818  $ 2,840  $ 2,196  $ 8,416   $ 6,330  $ 10,114  
Securities gains  (16)   —    —    (1)   (33)    (16)   (33) 
ADECA termination proceeds  —    —    (720)   —    —     —    —  
Merger termination fee  —    —    —    —    (6,400)    —    (6,400) 
Operating noninterest income (Non-GAAP)$ 3,495  $ 2,818  $ 2,120  $ 2,195  $ 1,983   $ 6,314  $ 3,681  
Operating noninterest income (Non-GAAP)/average assets1  0.45 %  0.44   0.35   0.37   0.34 %   0.45 %  0.32 %
                       
Operating Noninterest Expense:                      
Noninterest expense (GAAP)$ 18,806  $ 18,793  $ 16,052  $ 14,708  $ 16,809   $ 37,600  $ 32,388  
Salaries - prior year adjustment  —    —    (603)   —    —     —    —  
Merger related and restructuring expenses  (1,477)   (2,096)   (427)   (73)   (1,796)    (3,573)   (2,719) 
Other - prior year franchise tax true-up  —    —    312    —    —     —    —  
Operating noninterest expense (Non-GAAP)$ 17,329  $ 16,697  $ 15,334  $ 14,635  $ 15,013   $ 34,027  $ 29,669  
Operating noninterest expense (Non-GAAP)/average assets2  2.23 %  2.63   2.56   2.47   2.57 %   2.41 %  2.59 %
                       
Operating Pre-tax Pre-provision ("PTPP") Earnings:                      
Net interest income (GAAP)$ 25,746  $ 22,571  $ 21,104  $ 21,140  $ 20,802   $ 48,317  $ 41,799  
Operating noninterest income  3,495    2,818    2,120    2,195    1,983     6,314    3,681  
Operating noninterest expense  (17,329)   (16,697)   (15,334)   (14,635)   (15,013)    (34,027)   (29,669) 
Operating PTPP earnings (Non-GAAP)$ 11,912  $ 8,692  $ 7,890  $ 8,700  $ 7,772   $ 20,604  $ 15,811  
                       
Non-GAAP Return Ratios:                      
Operating return on average assets (Non-GAAP)3  0.93 %  0.67 %  1.08 %  1.02 %  0.96 %   0.82 %  0.97 %
Operating PTPP return on average assets (Non-GAAP)4  1.53 %  1.37 %